ESTATE OF FOSTER BY FOSTER v. Shalala

• Decision Date: 31 May 1996
• Docket Number: No. C 95-3014-MWB.,C 95-3014-MWB.
• Citation: 926 F. Supp. 850
• Parties: ESTATE OF Mildred Foster, By Its Executor, William A. FOSTER; William A. Foster; John T. Foster; Janice M. Kelly; James M. Foster; and Dale R. Foster, Plaintiffs, v. Donna E. SHALALA, Secretary of the United States Department of Health and Human Services, Defendant.
• Court: U.S. District Court — Northern District of Iowa

926 F. Supp. 850

ESTATE OF Mildred Foster, By Its Executor, William A. FOSTER; William A. Foster; John T. Foster; Janice M. Kelly; James M. Foster; and Dale R. Foster, Plaintiffs, v. Donna E. SHALALA, Secretary of the United States Department of Health and Human Services, Defendant.

No. C 95-3014-MWB.

United States District Court, N.D. Iowa, Central Division.

May 31, 1996.

Richard H. Doyle of Michael J. Galligan Law Firm, Des Moines, Iowa, for plaintiffs.

Michael R. Fry, Assistant Regional Counsel, Region VII, Department of Health and Human Services, and Donna K. Webb, Assistant United States Attorney, Sioux City, for defendant.

AMENDED MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFFS' COMPLAINT FOR DECLARATORY JUDGMENT AND RULING ON MOTION TO RECONSIDER

                                               TABLE OF CONTENTS
                  I. INTRODUCTION ................................................... 853
                      A. Procedural Background ...................................... 853
                      B. Findings Of Fact ........................................... 854
                      C. Arguments Of The Parties ................................... 855
                 II. LEGAL ANALYSIS ................................................. 858
                      A. Standards For Declaratory Judgments ........................ 858
                      B. The Legal Basis For Declaration Of Rights .................. 860
                          1. Preemption ............................................. 860
                          2. Whose property is the settlement? ...................... 863
                III. CONCLUSION ..................................................... 866
                

BENNETT, District Judge.

The present declaratory judgment action confronts the court with a statutory maelstrom as the court examines the question of whether Medicare is entitled to be reimbursed for medical expenses it paid out of a settlement in a medical malpractice case. The circle created by the statutes in question runs as follows: under a federal statute, Medicare is entitled to reimbursement of conditional payments for medical expenses made under a reasonable expectation that the medical malpractice liability insurer would ultimately pay those expenses; however, an Iowa statute precludes such an expectation, because it prohibits any recovery against the liability insurer for losses for medical expenses replaced by an insurer or government plan; however, Medicare only replaced the losses, because of its reasonable expectation that the liability insurer would pay them, so Medicare is entitled to reimbursement of its conditional payments; and so the cycle starts again. One way to avoid this Charybdis is to confront the Scylla of federal preemption of state law,¹ which would seem to suggest that Medicare is entitled to reimbursement from the settlement, which Medicare asserts could have encompassed medical expenses, even though the plaintiffs assert that the settlement encompasses only loss of consortium claims of the Medicare beneficiary's children. The court believes that it can chart a course between these hazards that leads to a just and equitable declaration of the rights of the parties.

This ruling, however, is the court's second attempt to chart such a course. The court filed a previous opinion in this matter, granting declaratory judgment in plaintiffs' favor. See Foster v. Shalala, 1996 WL 203062 (N.D.Iowa April 24, 1996) (Withdrawn). However, plaintiffs moved to reconsider that ruling, and were joined in one of their criticisms by the defendant. Upon the review of the April 24, 1996, ruling prompted by plaintiffs' motion to reconsider, the court finds that this declaratory judgment action could be more narrowly decided. Therefore the prior opinion is hereby withdrawn.

In these circumstances, the court finds the comments of Judge Edwards of the District of Columbia Circuit Court of Appeals particularly appropriate:

I often have been struck by Justice Stewart's concurring statement in Boys Markets, Inc. v. Retail Clerks Union, Local 770, 398 U.S. 235, 90 S.Ct. 1583, 26 L.Ed.2d 199 (1970), a case in which the Court reconsidered and overruled an earlier decision. Justice Stewart remarked that, "in these circumstances the temptation is strong to embark upon a lengthy personal apologia." Id. at 255, 90 S.Ct. at 1595. This remark has special poignancy for me now, because it underscores the distress felt by a judge who, in grappling with a very difficult legal issue, concludes that he has made a mistake of judgment. Once discovered, confessing error is relatively easy. What is difficult is accepting the realization that, despite your best efforts, you may still fall prey to an error of judgment. Like Justice Stewart, I will take refuge in an aphorism of Justice Frankfurter:

Wisdom too often never comes, and so one ought not to reject it merely because it comes late.

Henslee v. Union Planters Nat. Bank & Trust Co., 335 U.S. 595, 600, 69 S.Ct. at 290, 293, 93 L.Ed. 259 (1949) (Frankfurter, J., dissenting).

Moldea v. New York Times Co., 22 F.3d 310, 311 (D.C.Cir.1994), cert. denied, ___ U.S. ___, 115 S.Ct. 202, 130 L.Ed.2d 133 (1994). The present ruling, the court believes, is a more properly tailored resolution of the declaratory judgment action, even if it was late in coming.

I. INTRODUCTION

The estate of Mildred Foster, by its executor, William A. Foster, as well as Mildred Foster's five children, William A. Foster, John T. Foster, Janice M. Kelly, James M. Foster, and Dale R. Foster (collectively, "the Fosters"), have brought the present declaratory judgment action pursuant to 28 U.S.C. § 2201(a). The defendant is Donna E. Shalala, as Secretary of the United States Department of Health and Human Services, but, because the issue is whether the United States is entitled to reimbursement of Medicare benefits paid, the defendant will be referred to hereinafter as "Medicare." The complaint seeks a declaration that Medicare has no right or interest in proceeds of a tentative settlement of an underlying medical malpractice action in state court brought by the Fosters against certain medical providers following Mildred Foster's death in 1991. The court's disposition of this matter begins with the procedural and factual background to the parties' legal dispute.

A. Procedural Background

The complaint for declaratory judgment in this action was filed on January 11, 1995, in the United States District Court for the Southern District of Iowa, Central Division. However, by order of United States District Judge Harold D. Vietor, dated February 1, 1995, the case was transferred to this district. The complaint for declaratory judgment alleges that Medicare paid a substantial portion of the medical expenses incurred by Mildred Foster prior to her death and following allegedly negligent medical treatment that gave rise to the state court action. It further alleges that the tentative settlement of the state court malpractice action is conditioned on a determination that Medicare is not entitled to reimbursement from the settlement of any expenses it paid for Mildred Foster. The complaint therefore asks the court to declare and adjudge that Medicare is not entitled to any of the proceeds of the tentative settlement of the medical malpractice lawsuit in state court. The state court proceedings have been continued pending this court's disposition of the declaratory judgment action. Medicare filed its answer to the complaint for declaratory judgment on March 22, 1995, denying that the Fosters are entitled to the declaratory relief they seek.

A briefing schedule was established by the Clerk of Court on March 22, 1995, with which the parties have complied. The Fosters filed their Brief and Argument on April 21, 1995. Medicare's brief was filed on June 13, 1995, and the Fosters' reply brief followed on June 29, 1995. A number of circumstances prevented the court from hearing this matter until April 19, 1996.

The parties appeared telephonically through counsel at the hearing on April 19, 1996. The plaintiffs were represented by Richard H. Doyle of the Michael J. Galligan Law Firm in Des Moines, Iowa. The defendant was represented by Michael R. Fry, Assistant Regional Counsel, Region VII, Department of Health and Human Services, and Donna K. Webb, Assistant United States Attorney, of Sioux City. The court found the briefs of both parties, as well as their oral presentations, to be of unusually good quality and assistance.

The court originally ruled on the request for declaratory judgment on April 24, 1996. See Foster v. Shalala, 1996 WL 203062 (N.D.Iowa April 24, 1996) (Withdrawn). On May 6, 1996, the last day to do so, the Fosters filed a motion denominated "Plaintiffs' Motion to Reconsider," identified as made pursuant to Fed.R.Civ.P. 59(e), challenging conclusions in that ruling. Although the motion cites no standards for a motion to reconsider,² cites no authority contrary to that relied upon by the court, and is not accompanied by any brief, it nonetheless asserts that the court's ruling has "inequitable" results the Fosters assert surely were not intended by the court. On May 16, 1996, Medicare filed a response to the Fosters' motion to reconsider in which Medicare joined in one of the Fosters' criticisms. The court finds that its prior ruling must be withdrawn, but not on the grounds urged by the parties. Instead, the court concludes that its prior ruling may properly be reconsidered and amended pursuant to Fed. R.Civ.P. 59(e) to decide this declaratory judgment action more narrowly. The prior ruling is hereby withdrawn, and the present amended ruling starts from scratch, addressing only those legal questions that must be resolved to declare the rights of the parties in the circumstances presented.

The following findings of fact place the arguments of the parties made at the hearing and in their briefs in the necessary context.

B. Findings Of Fact

On April 23, 1991, Mildred Foster underwent a laparoscopic cholecystectomy, a form of gall bladder surgery, at the North Iowa...