National Comm. to Preserve Social v. Philip Morris

• Decision Date: 05 March 2009
• Docket Number: No. 08 CV 2021 (RJD).,08 CV 2021 (RJD).
• Citation: 601 F.Supp.2d 505
• Parties: NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND MEDICARE and Medicare Rights Center, and James Mokeler, on behalf of Medicare, Plaintiffs, v. PHILIP MORRIS USA INC., R.J. Reynolds Tobacco Co., individually and as successor by merger to Brown & Williamson USA, Inc., and The American Tobacco Co., Lorillard Tobacco Co., and Liggett Group, LLC, Defendants.
• Court: U.S. District Court — Eastern District of New York

601 F.Supp.2d 505

NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND MEDICARE and Medicare Rights Center, and James Mokeler, on behalf of Medicare, Plaintiffs, v. PHILIP MORRIS USA INC., R.J. Reynolds Tobacco Co., individually and as successor by merger to Brown & Williamson USA, Inc., and The American Tobacco Co., Lorillard Tobacco Co., and Liggett Group, LLC, Defendants.

No. 08 CV 2021 (RJD).

United States District Court, E.D. New York.

March 5, 2009.

Deborah B. McIlhenny, Mark B. Hutton, Hutton & Hutton Law Firm, LLC, Wichita, KS, Jonathan Watson Cuneo, Robert J. Cynkar, Cuneo, Gilbert & Laduca LLP, Washington, DC, David Buckner, Thomas Ronzetti, Kozyak Tropin & Throckmorton, Michael S. Olin, Michael S. Olin, P.A., Richard Rosenthal, The Law Offices of Richard B. Rosenthal, P.A., Miami, FL, Kevin T. Peters, Todd & Weld LLP, Boston, MA, for Plaintiffs.

Robert McCarter, Arnold & Porter, Washington, DC, Harold Keith Gordon, Michael A. Carvin, Jones, Day, Reavis & Pogue, Alan Mansfield, Stephen L. Saxl, Greenberg Traurig, LLP, Julie R. Fischer, Kasowitz, Benson, Torres & Friedman, LLP, Kent A. Yalowitz, Arnold & Porter LLP, New York, NY, for Defendants.

MEMORANDUM & ORDER

DEARIE, Chief Judge.

Plaintiffs, two taxpayer advocacy groups and a Medicare recipient diagnosed with lung cancer, bring this action under the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b) ("MSP"), against several major producers of tobacco products. Suing on behalf of Medicare, plaintiffs seek to recover expenditures made from the Medicare Trust Fund to cover the costs of treating the tobacco-related illnesses of Medicare beneficiaries. They claim that defendants committed a battery against the users of their products by exposing them to the addictive properties of nicotine without their consent. As a result, plaintiffs contend, defendants bear primary "responsibility" within the meaning of the MSP for the costs advanced by Medicare and, under the MSP, are now liable for twice that amount in damages.

Before the Court are defendants' motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) and plaintiffs' cross-motion for partial summary judgment under Federal Rule 56. For the reasons set forth below, defendants' motion to dismiss is granted, plaintiffs' cross-motion is denied, and the action is dismissed.

DISCUSSION

A. The Statute

The nature and history of the MSP have been exhaustively treated in the key authorities the parties address here (in what is apparently the fifth MSP suit brought by plaintiffs' counsel against the same defendants). Familiarity is assumed. See, e.g., Mason v. American Tobacco, 346 F.3d 36, 38-38 (2d Cir.2003), cert. denied, 541 U.S. 1057, 124 S.Ct. 2163, 158 L.Ed.2d 757 (2004); Glover v. Liggett Group, Inc., 459 F.3d 1304, 1305-08, reh'g and reh'g en banc denied, 218 Fed.Appx. 980 (11th Cir. 2006); United Seniors Ass'n v. Philip Morris USA, 2006 WL 2471977, *1-3 (D.Mass.), aff'd on other grounds, 500 F.3d 19, 21-23 (1st Cir.2007). cert, denied, ___ U.S. ___, 128 S.Ct. 1125, 169 L.Ed.2d 950 (2008); Woods v. Empire Health Choice, 2007 WL 2406876, *1-*2 (E.D.N.Y.) (examining statute's history and purpose, concludes that the MSP is not a qui tarn statute).¹ The Court also found one law review discussion of the statute particularly illuminating. See Rick Swedloff, "Can't Settle, Can't Sue: How Congress Stole Tort Remedies from Medicare Beneficiaries," 41 Akron L. Rev. 557 (2008).

The motions turn on a fairly narrow issue of statutory construction involving the term "demonstrated" and the phrase "or by other means" as used in the section of the MSP establishing the basic obligation to reimburse, and as understood in light of the provision creating the private cause of action for double damages that plaintiffs have filed. We set forth the relevant terms in context and then assess their meaning and interplay in light of the parties' competing assertions and the controlling MSP caselaw.

1. The Basic Obligation to Reimburse and Its Trigger:

Although Medicare has authority to make advance payments for the medical costs of its beneficiaries whether or not other coverage exists, see 42 U.S.C. § 1395y(b)(2)(B)(i) ("Authority to Make Conditional Payment"), the MSP establishes the basic obligation of primary carriers, if they exist, to reimburse Medicare for these conditionally advanced expenditures. The obligation to reimburse is triggered upon "demonstration" that the carrier is responsible for those payments, as follows:

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary ... if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.

42 U.S.C. § 1395y(b)(2)(B)(ii) (emphasis added).²

2. The Authorized "Means" of "Demonstrating" a Plan's Obligation:

The MSP next provides that:

[a] primary plan's responsibility for such payment may be demonstrated by a judgment, a payment conditioned upon the recipient's compromise, waiver, or release (whether or not there is an admission of liability) of payment for items or services included in a claim against the primary plan or the primary plan's insured, or by other means.

Id. (emphases added).

3. Enforcement:

Paragraph (3)(A) of this section of the statute, captioned "Enforcement-Private Cause of Action," provides:

There is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).

42 U.S.C. § 1395y(b)(3)(A) (emphases added).

B. The Parties' Statutory Arguments

The central issue is the timing of the demonstration requirement, a matter on which the statute itself is silent: specifically, must a plan's financial "responsibility" to Medicare be fully established before the MSP suit may be commenced (or, in 12(b)(6) terms, before a valid MSP claim can be stated), or may a plaintiff instead seek to establish that responsibility by litigating it within the MSP suit?

Defendants subscribe to the first view. They seek dismissal of the MSP claim because, in their view, the complaint alleges and seeks to litigate their financial responsibility to Medicare but does not, as the statute requires, "demonstrate" it. The complaint, they argue, therefore fails to state a valid claim for MSP liability because that particular brand of liability arises only when the financial "responsibility" to Medicare, once "demonstrated," is ignored.

Defendants recognize that the statute does not expressly state when the financial "responsibility" must be "demonstrated," but they emphasize that the statute does describe how. They argue that implicit in the type of "means" the statute specifies is the pre-establishment requirement on which their motion turns. As they correctly observe, each of the listed "means" (such as judgment, waiver, and release) is an existing document or instrument memorializing an established financial obligation. The phrase "or other means," defendants sensibly argue, must necessarily denote only means that are "comparable" to those listed in the statute; viz., those that are un-contested, or no longer contested, and reduced to a document or instrument reflecting a specific, established financial obligation.

Expanding the analysis to the broader context, defendants also rely on the language of the provision establishing the private cause of action, which authorizes suit only when a plan "fails to provide for primary payment (or appropriate reimbursement)." 42 U.S.C. § 1395y(b)(3)(A). Until their responsibility to pay Medicare has been demonstrated, defendants argue, they cannot be said to have "failed" to make that payment within the meaning of this section-nor, therefore, be subject to the suit for double damages that the section authorizes. As this Court understands them, defendants are advancing the simple proposition, consistent with a common-sense reading of the statutory language, that MSP liability is not synonymous with financial responsibility to Medicare, but arises only when that financial responsibility has been "demonstrated" but then not honored.

Plaintiffs do not dispute that a defendant's tort liability (and thus, its financial "responsibility" to reimburse Medicare) must be "demonstrated" before a defendant can be found liable under the MSP, but they seek to litigate that issue during and as part of their MSP suit. Their position suggests the notion that the demonstration requirement be viewed as an "element" of the MSP private cause of action that need only be pleaded to survive 12(b) (6), although plaintiffs never quite commit to framing their arguments in this fashion as a matter of law. Instead, by virtue of opposing defendants' 12(b)(6) challenge, plaintiffs can be understood to argue that, although the demonstration requirement may be a prerequisite to MSP liability, it is not a jurisdictional prerequisite to bringing an MSP suit.

Plaintiffs understandably rely on the statute's failure to state in express language when a defendant's financial responsibility must be "demonstrated," and on the apparent open-ended nature of the phrase "or by other means." Although plaintiffs have pressed the view that "other means" may include full-scale litigation, they appear to rely more heavily on a compromise position. They characterize the form of litigating they seek to employ as being essentially summary in nature because it is based on an existing judgment, and suggest that its use therefore comports with the spirit, if not the letter, of the statute. Specifically, through their motion for partial summary judgment, plaintiffs seek an order declaring defendants bound here by certain of the factual findings made in another action that, when extracted from that decision and...