Manning v. Utilities Mutual Ins. Co.

• Decision Date: 01 August 2000
• Docket Number: Docket No. 00-9219
• Citation: 254 F.3d 387
• Parties: (2nd Cir. 2001) ROBERT MANNING, On behalf of himself and on behalf of Blue Cross of California, National Heritage Insurance Company, Empire Medicare Services and DN Cigna/Medicare, Plaintiff-Appellant, v. UTILITIES MUTUAL INSURANCE CO., INC.; NIAGARA MOHWAK POWER CO.; JOHN DOE, name is fictitious; RICHARD ROE, Defendants-Appellees
• Court: U.S. Court of Appeals — Second Circuit

Page 387

254 F.3d 387 (2nd Cir. 2001)

ROBERT MANNING, On behalf of himself and on behalf of Blue Cross of California, National Heritage Insurance Company, Empire Medicare Services and DN Cigna/Medicare, Plaintiff-Appellant, v. UTILITIES MUTUAL INSURANCE CO., INC.; NIAGARA MOHWAK POWER CO.; JOHN DOE, name is fictitious; RICHARD ROE, Defendants-Appellees.

Docket No. 00-9219

August Term, 2000

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: April 6, 2001

Decided: June 20, 2001

Appellant Robert Manning appeals from a judgment of the District Court for the Southern District of New York (Casey, J.), dated August 31, 2000, denying plaintiff's motion for reconsideration of the court's September 30, 1999 memorandum and order dismissing the plaintiff's fraud claim and granting defendant's motion for reconsideration, dismissing plaintiff's claim under the Medicaid Secondary Payer Act. Affirmed in part, reversed in part, vacated and remanded for further proceedings. [Copyrighted Material Omitted] KENNETH F. MCCALLION, Goodkind, Labaton, Rudoff & Sucharow, New York, NY (Rajan Sharma, on the brief), for Appellant Robert Manning.

KENNETH PASQUALE, Stroock & Stroock & Lavan LLP, New York, NY (Heidi Balk, on the brief), for Appellee Niagara Mohawk Power Co..

STUART C. LEVENE, Ford, Marrin, Esposito, Witmeyer & Gleser, LLP, New York, NY (David A. Beke, on the brief), for Appellee Utilities Mutual Insurance Co..

Before: KEARSE, CABRANES & KATZMANN, Circuit Judges.

KATZMANN, Circuit Judge:

I. INTRODUCTION

Plaintiff-Appellant Robert Manning ("Manning" or "plaintiff") appeals from a judgment of the District Court for the Southern District of New York (Casey, J.), dated August 31, 2000, denying plaintiff's motion for reconsideration of the court's September 30, 1999 memorandum and order dismissing the plaintiff's fraud claim and granting defendant's motion for reconsideration, dismissing plaintiff's claim under the Medicaid Secondary Payer Act ("MSP"). For the reasons stated below, we affirm the decision to dismiss plaintiff's fraud claim, but reverse the decision to dismiss plaintiff's claim under the MSP. We hold that the six-year statute of limitations applicable to private rights of action under the False Claims Act should be applied to private rights of action under the MSP, and therefore plaintiff's MSP claim is not time barred. We further hold that plaintiff should be permitted an opportunity to amend his complaint to allege more sufficiently a claim for bad faith refusal to pay insurance benefits. Therefore, we vacate the judgment and remand the case for further proceedings consistent with this opinion.

II. FACTS & PROCEDURAL HISTORY¹

On February 27, 1962, Manning, a 25-year-old father of two, was rendered a quadriplegic when he fell from a utility pole in upstate New York while working for Defendant Niagara Mohawk Power Co. ("NMP"). NMP used as its workers' compensation carrier the Utilities Mutual Insurance Co. ("UMI") (collectively "defendants"). From 1962 until 1968, UMI paid plaintiff workers' compensation benefits, which included a weekly stipend and plaintiff's medical expenses and the costs of around-the-clock nursing care. In 1968, plaintiff obtained a judgment against New York Telephone Company, from whose utility pole he had fallen, and recovered a net sum of approximately $388,000. As allowed by New York State Workers' Compensation Law ("WCL"), UMI both received a lien for the workers' compensation benefits already provided and stopped paying benefits while plaintiff's expenses were covered by the recovery from New York Telephone Company.

In 1973, having exhausted his recovery from New York Telephone Company, plaintiff requested that defendants resume his benefits under the WCL. Defendants refused, asserting that plaintiff had not established that his 1968 recovery had been exhausted. When plaintiff became financially unable to pay for his medical costs, Medicare, a health insurance program sponsored mainly by the federal government, began to cover some of his medical expenses. According to plaintiff's Amended Complaint, the defendants knew that his tort recovery had been depleted, and the failure to resume his benefits for the next 24 years was in bad faith and designed to perpetrate a fraud against plaintiff and the Medicare system.

In order to obtain resumption of his workers' compensation benefits, plaintiff initiated litigation in 1979 before the New York State Workers' Compensation Board ("WCB"). Despite being ordered several times by the WCB to resume paying benefits to the plaintiff, defendants continued to litigate the case, appealing to the New York State appellate courts on three occasions. See Manning v. Niagara Mohawk Power Corp., 501 N.Y.S.2d 218 (3d Dep't 1986); Manning v. Niagara Mohawk Power Corp., 603 N.Y.S. 2d 214 (3d Dep't 1993); Manning v. Niagara Mohawk Power Corp., 650 N.Y.S. 2d 431 (3d Dep't 1996). Defendants lost each appeal, yet continued to deny plaintiff benefits. The New York Attorney General's office became involved in the case in 1997, writing several letters to the defendants which informed them of their legal duty to resume paying plaintiff benefits.

In July 1997, just two months after Manning's case was profiled in The New York Times as the longest running dispute before the WCB, the parties settled the dispute by stipulation, with $1.9 million being paid to the plaintiff. Under the stipulation, plaintiff released all claims within the exclusive jurisdiction of the WCB. However, plaintiff expressly reserved the right to litigate claims pursuant to federal or state law that were not within the WCB's exclusive jurisdiction.

On July 7, 1998, plaintiff filed the complaint giving rise to this appeal in the Southern District of New York, and soon thereafter filed an Amended Complaint. Count One of the Amended Complaint seeks damages of two times $876,321, the cost of plaintiff's medical care since 1992, which plaintiff alleges should have been paid by defendants but instead was paid by Medicare. Plaintiff asserts that he is entitled to these damages pursuant to the MSP, 42 U.S.C. § 1395y(b) (2000). Count Two of plaintiff's Amended Complaint demands compensatory and punitive damages of at least $10 million for defendants' bad faith failure to pay for his medical expenses in a timely manner. The Amended Complaint alleges that defendants' fraudulent refusal to pay for his medical costs caused him physical harm, emotional distress, and resulted in his receiving inferior health care. Soon after the Amended Complaint was filed, defendants each separately submitted motions to dismiss and for summary judgment. With regard to plaintiff's MSP claim, defendants asserted it was time barred.

Ruling on defendants' motions, the district court dismissed plaintiff's fraud claim for failure to plead reliance on a material misrepresentation by defendants. However, the court denied defendants' motion to dismiss plaintiff's MSP claim, finding that the claim was timely under the applicable three-year statute of limitations. See Manning v. Utilities Mut. Ins. Co., No. 98 Civ. 4790 (RCC), 1999 WL 782569 (S.D.N.Y. Sept. 30, 1999) ("Manning I"). Both parties moved for reconsideration, and the district court ruled for the defendants on both issues, affirming the dismissal of the fraud claim and dismissing plaintiff's MSP claim as time-barred. See Manning v. Utilities Mut. Ins. Co., No. 98 Civ. 4790 (RCC), 2000 WL 1234591 (S.D.N.Y. Aug. 31, 2000) ("Manning II").

III. STANDARD OF REVIEW

As noted, defendants submitted motions seeking dismissal of the Amended Complaint under both Rule 12(b) and Rule 56 of the Federal Rules of Civil Procedure. As we discuss below in section IV(B)(1) of this opinion, we view the district court's decision as one dismissing plaintiff's fraud claim under Rule 12(b)(6). We review de novo decisions on both motions to dismiss and motions for summary judgment. See Tarshis v. Riese Org., 211 F.3d 30, 35 (2d Cir. 2000) (motion to dismiss); Howley v. Town of Stratford, 217 F.3d 141, 151 (2d Cir. 2000) (motion for summary judgment).

IV. DISCUSSION

A. The district court's decision to dismiss plaintiff's MSP claim on statute-of-limitations grounds is reversed.

On motion for reconsideration, the district court dismissed plaintiff's claim under the MSP. Before proceeding with our review of that decision, a short background of the MSP is warranted. The MSP designates certain insurers, such as employers and the employers' workers' compensation carriers, as primary payers for medical services, and relegates Medicare to the role of secondary payer. See 42 U.S.C. § 1395y(b)(2)(A). Thus, Medicare will not pay for expenses that should be covered by the primary payers; if Medicare pays, it will be subject to a right of recoupment from the primary payer. See id. § 1395(b)(2)(B). To encourage compliance with these requirements, Congress has authorized a private cause of action and double damages against entities designated as primary payers that fail to pay for medical costs for which they were responsible, which are borne in fact by Medicare. See id. § 1395y(b)(3)(A).² The statute also provides for a cause of action for the government to recover the money paid by Medicare; alternatively, the government is subrogated to the right of the private citizen for the recovery of such funds. See id. § 1395y(b)(2)(B)(ii) & (iii).³

Plaintiff's Amended Complaint seeks damages of two times $876,321 in medical costs he alleges should have been assumed by defendants but instead was paid by Medicare. As noted, the district court dismissed this claim on statute-of-limitations grounds. See Manning II, 2000 WL 1234591, at *2-*3. Federal courts must establish the appropriate statute of limitations for private actions brought under the MSP, as Congress has not specified which limitations period applies. See United Paperworkers Int'l Union v. Specialty Paperboard, Inc., 999 F.2d 51, 52-53...