TRIAL REPORTER, SUMMER 2010,
The Medicare Secondary Payer Statute: What’s All the Fuss About?
By Annie B. Hirsch
Introduction
As many of us who handle medical malpractice and personal injury litigation know, there is an 800-pound gorilla
that figuratively sits beside us at every mediation, settlement discussion, and trial. That unsightly, overwhelming,
impossible to ignore beast is Medicare. Those of us representing injured persons are aware of, and have been coping
with, the reality of Medicare liens and their impact on our litigation practice for years. Given recent legislative
changes, defense counsel and insurers are beginning to realize that which we are already knew: Yes Virginia, there is
a Medicare lien and it comes with a reporting requirement.
Background of the Medicare Secondary Payer Statute
The Medicare Secondary Payer Statute (MSPS) exists as a recovery mechanism to ensure that Medicare recovers
payment for bills when another party is responsible. 42 U.S.C. §1395y. Historically, it has been the plaintiff’s
counsel’s obligation to report settlements to Medicare, and insure the payment of these lien obligations.
Prior to 1980 this statute only applied to Worker’s Compensation claims. In 1980, Congress added liability claims to
this statute. Compliance with this statute from 1980 through 2003 was looser, entailing the completion of a Scantron
form that provided various pieces of logistical information. This voluntary compliance was not as effective as the
government had hoped, so in December 2003 the Medicare Prescription Drug, Improvement and Modernization Act
was adopted. (Medicare Modernization Act, Pub. L. No. 108-173, 117 Stat. 2066 (2003) (codified as amended
in scattered sections of 42 U.S.C. §1395)). The statute essentially provided that no matter how a settlement
agreement or release was drafted, the plaintiff could not avoid reimbursing Medicare for the relevant lien. This Act
made it clear that plaintiffs’ attorneys had an affirmative duty to verify and resolve any conditional Medicare
payments made from the date of injury through the date of settlement.
From 2006-2007 Medicare centralized its recovery efforts through the Medicare Secondary Payer Recovery
Contractor (MSPRC). In addition to this organizational effort, Section 111 of the Medicare, Medicaid and SCHIP
Extension Act of 2007 (MMSEA) created an obligation for insurers to report to Medicare every time they
settle a case on or after July 1, 2009. After this date, when a settlement is reached, the Responsible Reporting Entity
(RRE) (which is typically the defendant’s insurance company) must determine if the injured party is entitled to
Medicare benefits. Registered RREs are given access to the Centers for Medicare and Medicaid Services
(“CMS”) online Query Access System to aid them in making this determination. If it is determined that the injured
party is entitled to these benefits, then the defendant must satisfy the notice requirement by providing approximately
50 points of data to Medicare regarding the Beneficiary and the claim through the Coordination of Benefits website.
While defendants vocalize their upset over the additional paperwork, the truly big news among RREs is the Act’s
provision for a $1,000 a day penalty should an insurance company fail to notify Medicare of a settlement, and a
double damages plus interest penalty should the Medicare lien be entirely ignored. 42 U.S.C. §1395y (b)(2)(B)(iii)
For years many of us have struggled through mediations and settlement discussions as defendant’s counsel and
insurer have minimized or disregarded our concerns pertaining to looming Medicare liens. Now that they are
on the hook monetarily, their analysis has changed. Plaintiffs’ attorneys are advised to assist defense counsel and
insurers in accurately understanding and satisfying the reporting requirement.
As is always the case, our client’s settlements are heavily influenced by the mood and perceptions of the
defendant’s insurer. In response to this new legislation, there are several myths which have begun to circulate
among ill- informed individuals. Some of these myths stem from ignorance, while others seem to be somewhat self-
serving in their propagation. The following article will provide you with the tools you need to begin to combat these
myths which, if not dispelled, have the potential for adversely affecting our client’s settlements.
Myth #1: The $1,000 a Day Penalty May be Applied to
Defendants for Infractions Beyond the Failure to Provide
Notification to Medicare
While defense counsel and insurers may object to these new obligations, we should take a step back,
breathe deeply, and realize that things have not changed so drastically. Medicare must be notified of a settlement if
the recipient is entitled to benefits. Plaintiffs’ attorneys have been providing this notification for years. Each
time we have had a claim where our client has received Medicare benefits we have endured the agonizing
correspondence battle with Medicare, in the hopes of getting a letter with a number that will allow us to begin to
determine the settlement value of a case. Now, defendants must share some of our burden, and join us in the
notification process. This dreaded $1,000 a day penalty (per beneficiary) only applies to defendants if they fail to
notify Medicare of a settlement. 42 U.S.C. §1395y (b)(8)(E)(i) Any construction or interpretation that this penalty
can be exacted on a defendant for anything other than its failure to notify Medicare is simply false.
While you are urged not to fall victim to scare tactics, or irrational demands, employed under the guise of the
avoidance of $1,000 a day penalty, this is not to say that we should not provide the basic information defendants
need to meet this requirement. Legitimate requests to which plaintiffs’ counsel should reply include:
injured party data (name, date of birth, social security number, Medicare ID number), primary plan data, policy holder
data, plaintiffs’ attorneys’ contact information, incident data (date of incident, nature, cause, location), and resolution
data (amount of settlement, date of settlement.) However, any demands made by defendants relating to the terms
of the settlement, the settlement method of payment, or the time for the issuing the settlement payment, are
separate issues and cannot be related to this penalty. For example, the new trend among Defendants is
to demand at settlement that two separate checks be issued: one made out directly to Medicare for the exact lien
amount, and the other made out to the Plaintiff for the remainder. The issuing of a separate check to Medicare is not
a requirement under the reporting statute. Furthermore, the $1,000 a day fine which could be levied on a
Defendant can only be exacted due to its failure to report the settlement, not for the Plaintiffs failure to satisfy the
lien. This fine has no connection to the method by which the lien settlement payment is rendered, or the timing of the
lien settlement payment. In short, the $1,000 a day fine has a very narrow application which cannot be stretched by
the whim of a Defendant who wishes to hold on to settlement monies for as long as possible.
On a brief side note, given that the defendant will notify Medicare of the above referenced information once a
settlement is reached, it might behoove plaintiffs to incorporate terms of the incident data as part of the settlement
discussions. If a settlement is being reached because a portion of the injury originally claimed in the suit is now being
excluded, plaintiffs should request at the time of settlement that the defendant’s notification reflect said excluded
dates of service. The closer the defendant’s account matches that of the plaintiff; the easier it will be to resolve the
lien.
Myth #2: Fines for double damages, plus interest, if Medicare’s
reimbursement claim is ignored, are penalties which are easily
and likely implemented against Defendants
This myth, in particular, is getting a lot of mileage, particularly when it comes time to issue the settlement
check. It is true, 42 U.S.C. §1395y provides for the penalty of double damages for any entity that fails to properly
reimburse Medicare.
In order to recover payment made under this title for an item or service, the United States may bring an action
against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-
party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or
otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan.
The United States may, in accordance with paragraph (3)(A) collect double damages against any such entity. 42
U.S.C. §1395y(b)(2)(B)(iii)
The threat of paying money for failure to satisfy a Medicare lien is not really new to plaintiff attorneys, as we have
been liable for payments for our clients’ Medicare liens for years. We know not to disburse funds prior to negotiating
the lien, issuing the payment, and finally receiving acknowledgment by Medicare of the satisfaction of said lien. Once
again, while we have lived with this reality, defendants are beside themselves now that they face any kind of liability
in this complex process which we have been navigating for so long.
The reality is that the practical nature of the process for satisfying a Medicare lien makes the implementation of
double damages plus interest extremely unlikely. There are a multitude of lengthy steps which must be taken in
between the settlement, the failure to pay, and the levying of the penalty before this sanction can even be sought.
First, 60 days from the date of the correspondence on Medicare’s final demand letter must lapse. Then there is a 180-
day period during which the MSPC permits payment to be rendered in full. After the passing of these first 240
days, an “intent to refer” letter (to the Treasury for collections) will be sent by the MSPC to the beneficiary. This
letter permits 60 days for the recipient to produce a response. When the Treasury receives this collection from
Medicare, it then sends a letter to the beneficiary requesting the satisfaction of the debt. If unsuccessful, it
then seeks a remedy though the Tax Refund Offset Program, whereby the Treasury seeks payment by offsetting
government benefits and/or refunds. Counsel for the defendant or the plaintiff, or the defendant himself, is not
usually a target until this final step is fully explored. This is not to say that these penalties cannot be exacted,
however, it is highly unlikely given that a conglomeration of neglectful acts by numerous irresponsible parties must
first take place.
As mentioned in the preceding section, the new party line by defense counsel and insurers (that many of us have
heard in our recent settlement discussions) is that they have to hold on to all funds until they receive a conditional
payment letter from Medicare. They then offer to either wait on disbursement until plaintiff’s counsel has negotiated
the lien, or they offer to cut two checks, one to Medicare for the full amount of the lien and one to the plaintiff for the
remainder. Should the plaintiff choose the latter, they can then seek reimbursement for overpayment of the
lien from Medicare after the lien is further negotiated. For some reason, despite the fact that we have always faced
this liability, this knowledge in it of itself is insufficient for defendants. Defendants continue to insist on holding on to
their funds (all the while accruing interest), in order to protect themselves from this unlikely penalty.
There is no compelling reason for a defendant to withhold settlement proceeds from a plaintiff. If the defendant is
truly “afraid” of this unlikely penalty, then the implementation of the following language in the settlement release
should alleviate these anxieties:
Plaintiff understands that the Medicare Secondary Payer Act (42 U.S.C. §1395y(b)) (the “Act’) applies to any
personal injury settlement involving a Medicare beneficiary. As part of the Act, Plaintiff has an obligation to verify
entitlement and resolve conditional payment, and [Defendant] has an obligation to report. Accordingly, a tort
recovery record may need to be established by Plaintiff and a reporting event may be triggered, which would be the
responsibility of the [Defendant], by and through its insurance carrier. In the case of a reportable event,
[Defendant] will comply with the Act and all applicable reporting guidance provided by the Centers for Medicare and
Medicaid Services (CMS). [Defendant] will determine whether the claim is reportable under the Act. If there is an
obligation to establish a record with CMS, Plaintiff shall provide [Defendant] information validating that a tort
recovery record has been established with CMS, and/or its recovery contractor. The parties expressly agree that
payment of settlement proceeds is not conditioned upon Plaintiff providing proof that all Medicare reimbursement
claims and obligations have been satisfied. Rather, [Defendant] agrees to forward the settlement proceeds within
the time frame agreed between the parties at the time of settlement once an executed release has been tendered
by Plaintiff. Following Plaintiff’s opening of a tort recovery record, Plaintiff's attorney agrees to: (1) hold all
settlement proceeds in a client trust account (or similar account should needs-based government benefits require
preserving) until Plaintiff obtains claims satisfaction documents from CMS and/or its recovery contractor; and
(2) provide [Defendant] with written proof of the satisfaction of any claim asserted by Medicare pursuant to the
Act prior to disbursing to Plaintiff any proceeds received in connection with this settlement. As part of this
settlement, Plaintiff agrees to indemnify, defend, and hold [Defendant] harmless against and from any such
Medicare reimbursement claims. (The author is grateful for this suggested release language provided by the
Garretson Firm Resolution Group, www.garretsonfirm.com. )
This release language is a recommendation provided by a firm who specializes in aiding other law firms in the
Medicare lien resolution process. While there is no statutory or case law support for this language, it has been used
by them in multiple settlements and has provided multiple Defendants with the assurances needed to
release funds to the Plaintiff in the face of these new issues.
Myth #3: This New Statute Requires Set-Asides for Liability
Settlements for the Purpose of Satisfying Medicare Liens
For those of you who are unfamiliar with the term “set aside,” it refers to funds from settlements or verdicts
which must be set aside to cover future medical damages. The parsing of this money relieves Medicare of its
responsibility for paying claim-related medical bills which are incurred after the settlement or verdict. Set
asides have been a regular part of worker’s compensation claims for years. Despite what defendants might tout, at
the present time there are no specific provisions, statutes, or memoranda from CMS requiring a Medicare set-aside in
liability settlements.
Section 111 of the Medicare, Medicaid & SCHIP Act of 2007 (MMSEA) is at the center of this hotly contested
debate. As previously discussed, this new statutory language strictly deals with reporting requirements. Section 111
simply completes the statutory loop which was begun on December 5, 1980, when Medicare’s conditional payment
rights were acknowledged. This loop was continued in 2003 in Section 301 of the Medicare Modernization Act
(referenced above) when enforcement provisions were placed on Medicare beneficiaries and plaintiff attorneys. Now
this loop has been closed with Section 111 which institutes a reporting obligation on self insured defendants and/or
carriers. Nowhere, in any of this, does it state that anything has changed regarding set asides and liability claims.
Medicare has made several unofficial statements addressing the issue of set-asides in liability claims during town
hall teleconferences. One such statement was that “the new statutory language changes nothing as it pertains to the
status quo with set-asides of liability or worker’s compensation claims.” (Barbara Wright, CMS' Acting Director of the
Division of Medicare Debt Management, 2/25/2010, 12:00 p.m., Town Hall Teleconference www.cms.gov, NGHP
transcripts) (Note: Complete copies of all town hall teleconference transcripts referenced in this article can be
located at www.cms.gov)
On March 16, 2010, during another Town Hall Teleconference, Wright stated the following as it pertains to set
asides in the context of liability claims:
As we’ve said on many calls, CMS has formalized processes to review proposals for workers’ compensation,
Medicare set aside amounts. It does not have the same formalized process for liability Medicare set aside
arrangements…. We have a process for an informal process on the liability side that if a plaintiff’s attorney or
insurer, etcetera, wishes to approach the appropriate CMS regional office and the regional office has the ability to
do so workload or otherwise, that they can choose to review a proposed set aside amount if they believe there is
significant dollars at issue. (03/16/2010, 12:00 p.m., Town Hall Teleconference, www.cms.gov, NGHP
Transcripts.)
On February 23, 2009, CMS released an alert which stated, "The new Section 111 requirements do not change or
eliminate any existing obligations under the MSP statutory provisions or regulations." (CMS Alert, 2/23/09,
www.cms.gov, CMS Alerts). Medicare representatives have also stated (in one of several town hall teleconferences)
that while Plaintiffs are encouraged to consider using set asides in liability settlements where there are substantial
future damages in play, for which one may easily account, there is no language requiring such actions. (03/16/2010,
12:00 p.m., Town Hall Teleconference, www.cms.gov, NGHP Transcripts)
While the statements referenced above (made during town hall teleconferences) are not considered a legally
binding authority, they can be viewed as subjective evidence that Medicare has not changed its’ stance on set-asides
in liability claims. This sentiment seems to be reflected by the absence of new statutory language, and the absence of
the issuing of formal memoranda by Medicare addressing a requirement for set-asides and liability claims. In 2001,
Medicare formally acknowledged set-asides in worker’s compensation claims in the “Patel Memorandum.” After this,
several other formal memoranda were issued by Medicare addressing set-asides in worker’s compensation claims.
No such memoranda have been issued for set-asides in liability claims.
The conundrum that continues to plague many of us is that the statutory language for set asides in worker’s
compensation claims is identical to the language pertaining to set asides in the context of liability claims:
In general, payment under this section may not be made, except as provided in subparagraph (B), with respect to
any item or service to the extent that (i) payment has been made, or can reasonably be expected to be made,
with respect to the item or service as required under paragraph (1), or (ii) payment has been made or can
reasonably be expected to be made under a workmen's compensation law or plan. 42 U.S.C. §1395y(b)(2)(A)(i)
and (ii).
This duplicative language was acknowledged by Wright during a town hall meeting where the subject of set asides
in liability claims was addressed. After touching on this linguistic similarity, she then acknowledged the practical
difference between the two types of claims. Specifically, that Medicare has a formal system for reviewing set aside in
worker’s compensation claims, while no such formal system exists for liability claims. (03/16/2010, 12:00 p.m.,
Town Hall Teleconference, www.cms.gov, NGHP Transcripts.) Once again, while not a legal authority, her statement
does reference the obvious: presumably an entity cannot detect and evaluate claims when there is no system in place
to do so.
The issue of set asides and liability claims remains somewhat muddled because Medicare representatives continue
to speak out of both sides of their mouth. They have stated in town hall teleconferences that, on the one hand, they
cannot guarantee that there will be no repercussions for Plaintiffs or Plaintiffs’ attorneys who fail to properly address
a situation where a set-aside would “make sense” in a liability claim. On the other hand, they acknowledge that there
is no formal system in place to detect such a situation. (03/16/2010, 12:00 p.m., Town Hall Teleconference,
www.cms.gov, NGHP Transcripts.) There is the distinct feeling of “proceed at your own risk.” The odds of being
caught in a situation where a set aside should have been created and was not in a liability settlement are slim, and
perhaps even unlikely, given all of the above. But no one from Medicare will say it is impossible that a Plaintiff will find
himself in such a scenario.
It seems the safest thing for Plaintiff attorneys to do is to proceed as we have in the past when it comes to set
asides and liability claims. Medicare representatives continue to communicate through town hall teleconferences and
alerts (www.cms.gov) that nothing has changed other than the new reporting requirements. Our own evaluation of
the statute shows us that there is nothing new that has been instituted that would indicate a change in Medicare’s
policy for set asides in liability claims. Our past practices regarding set-asides and liability claims in the face of the
existing, unchanged, statutory language, should provide us with some comfort in proceeding as we have in the past.
An attorney who in the past has made the decision to be cautious and have a settlement provide for a set aside
where future damages are substantial in cost, definitive in nature, and easily identifiable, should continue to do so.
This would be the course of action to be taken if one decided to heed the recommendation (but still not a
requirement) as set forth by Wright during the March 16, 2010 CMS town hall teleconference. However, barring the
scenario of substantial, definitive, easily identifiable, future damages, there is no statutory reason to even engage in a
debate regarding set asides and liability claims. Surely if such a drastic change was made, it would be found in the
statute, or mentioned by CMS in a formal oral or written format. Therefore, while the set-aside requirements for
worker’s compensation claims remain, there is still no set-aside requirement for liability claims and the new
notice requirement for defendants does nothing to change this.
Conclusion
These new reporting rules change little insofar as they reiterate the good practices in which plaintiff’s counsel
have engaged. We have always represented Medicare beneficiaries, and we have been reporting claims and
negotiating liens for years. The fact that defendants are upset that they have to fill out paperwork and
now share the same liability we have held for years, will in no way deter us from advocating on behalf of victims in
need of representation.
One attorney asserted in a recent article that these rules may have a chilling effect on the willingness of the
plaintiffs’ bar to represent Medicare recipients. That we will no longer take cases with high Medicare liens because the
lien could wipe out the recovery. First, we know that Medicare would prefer to recover something, rather than
nothing. In cases where the lien is high, we do our best to negotiate a reasonable settlement with Medicare to ensure
that it receives compensation, without the denial of recovery for our clients. Second, if defendants and their
attorneys are so concerned about our clients and their right to representation, then perhaps they should start
considering making good faith offers of settlement that can accommodate large Medicare liens, as well as compensation for our clients.
Cooperation and communication are keys in any settlement process. We should provide the defendant with the
information it needs to satisfy this new reporting requirement and we should do so early in the settlement negotiation
process. However, we should not allow this new legislation to be twisted into a mechanism by which defendants can
make unreasonable demands for the issuing, structuring, or rendering of settlement payments. After all, it is just a
notice requirement.
(MAJ TRIAL Reporter, Summer 2010, pp TBA)
TRIAL REPORTER, WINTER 2010, PP 9-14
TWOMBLY & IQBAL – THE NEW FEDERAL PLEADING STANDARD
PLAINTIFFS ATTORNEYS MUST STOP AND TAKE NOTICE OF
By Annie B. Hirsch
The litigation blogs have all been abuzz as the news has spread, and cases have been dismissed in the wake
of the United States Supreme Court’s decision in Ashcroft v Iqbal, 129 S.Ct. 1937 (2009). In this landmark case the
court held that Iqbal, a Muslim Pakistani immigrant who was arrested and detained under highly restrictive
circumstances as the result of a 9/11 investigation, could not sue two Bush administration officials for what he
recounted was the terrible abuse he suffered. The abuse alleged by Iqbal included five months of solitary
confinement while shackled at his arms and legs, strip searches, ongoing physical and verbal abuse, and denial of
medical care. The basis for the dismissal: insufficient factual evidence supporting the allegations in the Plaintiff’s
complaint. While socio-political activists relay their outrage in response to this denial of accountability and violations
of the constitution, civil litigation attorneys are weighing their options in response to the practical fallout from this
case.
The day to day reality of Iqbal is that the Supreme Court has taken the stricter pleading standard it asserted in
Bell Atlantic v Twombly, 550 U.S. 544 (2007) (an antitrust case decided while Iqbal was on appeal) and used Iqbal to
apply it to all civil cases which have been and will be filed in Federal Court. However, the Court failed to provide a
user-friendly barometer for determining how to meet this new standard, and it neglected to provide a concrete
method for its consistent application. These vagaries leave Plaintiffs attorneys with multiple crucial questions: What
is required by this new stricter pleading standard and how do we meet it? How do we do so prior to the provision of a
single piece of discovery? And what happens if a new or already filed claim falls short of this newly elaborated
standard? The following will hopefully serve as both a guide and a warning to Plaintiffs attorneys. We must carefully
draft and review our Federal complaints to ensure that we do not fall victim to the dismissal of our client’s claims due
to a mere technicality.
Conley to Twombly to Iqbal – The Modern Evolution of the Federal Pleading
Requirement and Its Application Throughout Federal Civil Litigation
In 1957 the Supreme Court held in Conley v Gibson that a Federal complaint was sufficient and should not be
dismissed unless “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims which
would entitle him to relief.” Conley v Gibson , 355 U.S. 41 at 45-46 (1957). This was the reasonable and
accepted notice-pleading standard which Plaintiffs had been held to in Federal court for forty years. However, in 2007
the Supreme Court replaced this standard of possibility with one of plausibility. In Twombly the Supreme Court held
that “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a
plaintiff's obligation to provide the "grounds" of his "entitlement to relief" requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise
a right to relief above the speculative level. The pleading must contain something more than a statement of facts
that merely creates a suspicion of a legally cognizable right of action, on the assumption that all the allegations in the
complaint are true (even if doubtful in fact.)” Bell Atlantic v Twombly, 550 U.S. at 555. In short, a Plaintiff must
allege “enough facts to state a claim to relief that is plausible on its face.” Id at 570.
After the decision in Twombly was handed down, there was an ongoing debate within the legal community as to
whether this heightened standard would be limited to antitrust cases. From 2007 to 2009 the courts generally
assumed a more restricted application. However, all cause for question was halted when the Supreme Court handed
down its decision in Iqbal, making it unequivocally clear that the reach of this standard of plausibility had spread
beyond the narrow scope of antitrust cases and been extended to all civil cases which had been, or would ever
be, filed in a Federal court.
The majority opinion in Iqbal set forth a two pronged test for determining the sufficiency of factual evidence in a
complaint. When determining whether or not to grant a Defendant’s 12(b)(6) motion, a court must first identify
those assertions in the complaint which are factual as opposed to those which are merely conclusory in nature. Once
these facts have been identified, the court must then evaluate the factual assertions in order to determine whether
they are sufficient to form the basis of a claim for relief. Id at 1949-1950. If the factual assertions are found to be
insufficient, the claim is dismissed without prejudice. If the statute of limitations has run, then the Plaintiff’s claim
may be barred.
While many of us in the legal profession at times revel in multi-pronged tests, tests which often provide us with a
sense of guidance and security when filing our claims, this one cannot be said to possess such qualities. Distinguishing
between factual evidence and mere conclusions is a difficult subjective assessment for which the Iqbal court provides
little guidance. For instance, the Plaintiff in Iqbal had listed numerous occurrences in his complaint as to what abuses
he had allegedly endured and where and when he had endured each offense. However, the Court rejected
these factual accounts as substantive evidence due to its assertion that there were other “obvious” explanations for
these abuses. As such, the factual evidence listed in the complaint was deemed insufficient. Beyond just recounting
the abuse itself, the Court asserted that Mr. Iqbal needed to provide factual support that demonstrated the complicity
of the offending officers.
It is easy to see how this sort of requirement can quickly stifle a Plaintiff. This decision now requires Plaintiffs not
only to present detailed, often unavailable, factual evidence of a wrongdoing, but furthermore (when warranted) we
must produce factual evidence demonstrating the frame of mind of the wrongdoer. And to further complicate
matters, alll of this must be done prior to the exchange of a single piece of discovery. It appears that while the
Plaintiff’s responsibilities in the litigation process have become increasingly burdensome, those of the Defendant
have lightened to the point where the mere recognition of an obligation, or restriction, has become a task unto itself.
Proponents of the Iqbal decision have argued that this case merely clarifies, and only slightly heightens, the
requirements of the pre-existing standard. These proponents have alleged that the jump from a standard of
possibility to plausibility is not so great as to inhibit meritorious claims. However, the reality is that Defense
attorneys throughout the country are filing countless motions to dismiss in Federal cases by alleging insufficiency of
factual evidence in complaints. Remarkably, a search of Lexis shows that within the past six months, Iqbal has been
cited 3,146 times. This is not to infer that all of the motions to dismiss by Defense counsel have been or will be
successful, but it does demonstrate that this decision has provided the Defense with a new type of ammunition that
they have not hesitated to use. We must be equally diligent in educating ourselves and fortifying our claims so that
they are deemed by the courts as trial worthy and not unsubstantiated refuse to be casually dismissed.
In What Types of Cases Will We Most Likely Run Into This Issue?
As Plaintiffs attorneys there are four types of claims where we can anticipate the emergence of this pleading
issue: 1.Medical Malpractice Claims, 2. Product Liability Claims, 3. Loss of Consortium Claims, and 4. Claims for
Wrongful Termination Under the False Claims Act. For those who regularly litigate in Federal Court, you are probably
already well versed in the application of this new pleading standard. However, for those of you who have not faced a
12(b)(6) motion since May of 2009, or for those just beginning to engage in more regular appearances in
the Federal system, the following will provide you with a fundamental understanding of what you can expect to see
and a few basic strategies to combat these attacks and preserve your client’s claims.
A. Medical Malpractice Claims
Medical malpractice claims tend to be state claims and therefore, heard in state courts. However,as we know,
there are occasions where we end up in federal court (usually due to diversity jurisdiction.) Because we tend to think
of these claims as substantively state law driven, we tend to forget that the Federal Rules of Civil Procedure are still
applied. As such, we can now expect a pleading standard beyond that of just “notice” in our medical malpractice
claims that end up in federal courts.
The most foreseeable danger that we will encounter in these federally filed medical malpractice claims will be
dismissal due to our bad-habit use of template complaints. While this may suffice in state court, this will surely result
in the dismissal of the claim when filed in the corresponding federal jurisdiction. Specific factual details supporting
each element of the medical malpractice claim are now mandated to survive a 12(b)(6) motion. Gone are the days of
filing while waiting for records, or picking and choosing what we reveal to the Defendant during various points of
discovery. If we want to survive in Federal court, all of our cards must be on the table.
One of the severe shortcomings of this new pleading standard is that alleging intentional torts will become
increasingly difficult due to the inaccessibility of information prior to discovery. One piece of good news is that in
cases where we obtain sufficient facts during discovery which reveal evidence of intentional torts, we may still be
permitted to amend the complaint prior to trial. The U.S. District Court for the District of Maryland permitted the
amending of a complaint in order to add a count for punitive damages due to information that was revealed during the
course of a Defense witness’ deposition. Reed v. River Rd. Surgical Ctr., LLC, 2009 U.S. Dist. LEXIS 71962 The
Court ruled in favor of the Plaintiff in response to the Defendant’s 12(b)(6) motion and stated that “the Plaintiffs
have alleged sufficient facts to demonstrate Dr. Shutz was warned that training was necessary on how to use the
defibrillator, but failed to take action. The complaint alleges that the cardiac defibrillator is critical medical equipment.
These allegations are sufficient to state a claim for punitive damages.” Id at 9. It appears that if the Plaintiff: 1.
makes an immediate request to amend the complaint once the information has been revealed, 2. provides a detailed
explanation of the substance and source of the new information, and 3. demonstrates that there is no way this
information was previously available, the court may be inclined to permit this addition.
B. Product Liability Claims
Iqbal poses perhaps the greatest threat to product liability litigation because this is an area which heavily
depends on the procurement of information during the discovery process. Cases which fall within the category of
product liability have no hope of access to documentation of knowledge, intent, or negligence prior to discovery. Given
this reality it is difficult to surmise how we as Plaintiffs attorneys can overcome such an obstacle and still meet our
burden as set forth by the Supreme Court. Negligent Product liability suits will become more difficult to prosecute,
while intentional product liability suits will become nearly impossible to pursue. Claims which have their origin in public
safety are threatened by this ruling which seeks to give added protection to those undeserving of yet another
advantage.
A friend, who happens to be a product liability defense attorney, informed me that he has filed over 100 12(b)(6)
motions in just the past two months. He relayed to me that he has seen numerous complaints where Plaintiffs rely
on conclusory allegations regarding defective designs, defective manufacturing, and breaches in warranty. Plaintiffs
assert that a product is unreasonably dangerous, and therefore caused the injury, without any accompanying facts
which could possibly hope to support these complex claims. His words of wisdom, which I while gladly pass on to
all of you, is that it would be wise for us to begin reciting facts not just in the beginning of the complaint, but also
accompanying each of the counts. Along with this additional recitation, he recommended that Plaintiffs begin
referencing other comparable safe products in their complaint, thereby distinguishing the offending product as
defective. This will help clarify our claims and reinforce them to the full extent of their immediate voracity.
C. Loss of Consortium Claims
A derivative claim for loss of consortium can accompany either a medical malpractice or product liability suit in
Federal court. This derivative claim for a marital injury is rooted in a separate claim for injury caused by the tortious
act of a third party to a spouse. Deems v. Western Maryland Railway Company, 247 Md. 95, 100, 231 A.2d 514
(1967). There are two ways which a Defendant can attack the validity of a consortium claim due to insufficient
pleading. The first is by attacking the primary tort claim as insufficient, and the second is by attacking the evidentiary
support of the loss of consortium claim itself.
Because of the claim’s derivative nature, the complaint must contain sufficient allegations of the primary
wrongdoing, of causation, and that both, in turn, led to the marital loss. The Federal Courts have held that if a
Defendant attacks the sufficiency of the primary claim(s) under Iqbal and succeeds, the loss of consortium claim
will also fail. Conversely, should the primary claim(s) be deemed sufficient by the court, the consortium claim will
remain, absent the Defendant’s assertion of an independent defect. Carrigan v. K2M, Inc., 2009 U.S. Dist. LEXIS
99225. If the Defendant remembers to attack the sufficiency of the consortium claim, we can anticipate two types of
criticisms: 1. insufficient facts pertaining to the consortium injury; and 2. insufficient facts linking the marital injury to
the alleged wrongful conduct in the primary count. Therefore, we must alert the court to both the lack of
validity of the Defendant’s assertions pertaining to factual insufficiencies, and, when warranted, the Defendant’s
failure to make specific criticisms pertaining to the separate consortium claim.
D. Claims For Wrongful Termination Under the False Claims Act
Another scenario where we can anticipate encountering this type of motion is in a wrongful termination claim
as it pertains to the Federal False Claims Act (FCA). In these types of claims, we represent clients who have been
wrongfully terminated, allegedly due to retaliation as it relates to an employer’s fraudulent activities involving the
Government. The courts have held that while these types of cases involve the FCA, Federal Rule 8 (and not the
stricter Rule 9 pleading standard for allegations of fraud) applies because the allegations of fraud are secondary to
the wrongful termination claim. United States ex rel. Elms v. Accenture LLP, 2009 U.S. App. LEXIS 16291 In this
type of FCA retaliation claim (as opposed to a violation claim) the Plaintiff need only show that there were suspicions
of fraudulent activity, and that said suspicions led to his/her early termination Ante v. Office Depot Bus. Servs., 2009
U.S. Dist. LEXIS 57054 Therefore, when the court evaluates the sufficiency of these complaints, the newly delineated
standard for Federal Rule 8 is applied.
In Ante v Office Depot, the Plaintiff alleged that he was fired because he refused to comply with his uperior’s
request to alter financially related business information in preparation for a city audit. The Defendant moved for
dismissal based on the fact that the Plaintiff failed to allege sufficient facts as dictated by Iqbal. The Court held that
because the Plaintiff listed the “who, what, when and where” of the injuries, his burden had been met. The Court
further elaborated that the Defendant’s reference to Iqbal did not impact its decision in favor of the Plaintiff because
Iqbal “does not impose a "probability requirement," and the opposition has not demonstrated how the facts in this
case are implausible, defendant's own argument has not crossed that line.” Id at 18. It behooves us as litigators to
remind the court who bears the burden of demonstrating implausibility, and that (despite the Defendant’s contrary
contentions); Iqbal has not raised the burden to a level of probability.
The Impact of Iqbal: Beyond Its Literal Translation & Its Place In Our Future
Cases such as Iqbal impact the technical course of litigation, but they also impact the mindset of future
jurors: jurors who are now inundated with a 24 hour news cycle devoted to the discussion of the fabled “frivolous”
lawsuit. The irony is that decisions like this one have sought to prevent or deter this boogieman and have
only succeeded in making the acquisition of justice that much more difficult. Thus, jurors come armed with the pre-
conceived notion that the wrongfully injured are the “at-fault” party. Despite the well publicized attempts of
generously paid Defense lobbyists, the fact remains that tort litigation is one of the last lines of defense
against greedy and/or careless Defendants who put profit above the safety and well-being of the consumer. Mere
propaganda does not eliminate this intent: it only serves to mask it.
We work in a state where strict non-economic damage caps are employed under the political guise of lowering
physician malpractice premiums and medical costs. Decisions such as Waltzer enact expert report requirements with
dispositive ramifications for Plaintiffs while failing to enumerate any consequences for Defendant’s similar omissions.
What is the appropriate response to these newly elaborated Federal requirements which, when missed, result in yet
another way for a Plaintiff’s claim to be dismissed and, possibly, forever barred? Did Iqbal really clarify the terms of
pleading for a Plaintiff, or did it merely provide an outlet for conservative jurisdictions to dismiss claims based on a
complaint being subjectively “too speculative,” or “possible” as opposed to the now mandated “plausible.”
As time goes by, each citing case aids in the definition of this standard, comparing and contrasting each set of
facts to those in preceding cases. For now the best that we can do is to allow as little room for error as possible so as
to not provide the window of opportunity for these Defendants to get meritorious claims dismissed on mere
technicalities. Through the cessation of filing boiler plate complaints in Court and the continuation of diligently sharing
pleadings and filings which have been successful in response to these motions, we can help shape and define what
qualifies as “plausible” in the eyes of the Federal court system. It is our obligation, as Plaintiffs attorneys, to make
an even more concerted effort when formulating the evidentiary basis of our complaints. We must list each and every
fact we have in our possession in order to demonstrate that our clients have a right to fully access our legal system
and have their claims heard. The Defense bar has come together on this decision and used it as a platform to further
their agenda. We must do the same and respond with equal force and diligence as we file and defend our client’s right
to pursue a claim.
Trial Reporter, Winter 2010, pp 9-14
(Journal of the Maryland Association for Justice, TRIAL REPORTER)
payment for bills when another party is responsible. 42 U.S.C. §1395y. Historically, it has been the plaintiff’s
counsel’s obligation to report settlements to Medicare, and insure the payment of these lien obligations.
Prior to 1980 this statute only applied to Worker’s Compensation claims. In 1980, Congress added liability claims to
this statute. Compliance with this statute from 1980 through 2003 was looser, entailing the completion of a Scantron
form that provided various pieces of logistical information. This voluntary compliance was not as effective as the
government had hoped, so in December 2003 the Medicare Prescription Drug, Improvement and Modernization Act
was adopted. (Medicare Modernization Act, Pub. L. No. 108-173, 117 Stat. 2066 (2003) (codified as amended
in scattered sections of 42 U.S.C. §1395)). The statute essentially provided that no matter how a settlement
agreement or release was drafted, the plaintiff could not avoid reimbursing Medicare for the relevant lien. This Act
made it clear that plaintiffs’ attorneys had an affirmative duty to verify and resolve any conditional Medicare
payments made from the date of injury through the date of settlement.
From 2006-2007 Medicare centralized its recovery efforts through the Medicare Secondary Payer Recovery
Contractor (MSPRC). In addition to this organizational effort, Section 111 of the Medicare, Medicaid and SCHIP
Extension Act of 2007 (MMSEA) created an obligation for insurers to report to Medicare every time they
settle a case on or after July 1, 2009. After this date, when a settlement is reached, the Responsible Reporting Entity
(RRE) (which is typically the defendant’s insurance company) must determine if the injured party is entitled to
Medicare benefits. Registered RREs are given access to the Centers for Medicare and Medicaid Services
(“CMS”) online Query Access System to aid them in making this determination. If it is determined that the injured
party is entitled to these benefits, then the defendant must satisfy the notice requirement by providing approximately
50 points of data to Medicare regarding the Beneficiary and the claim through the Coordination of Benefits website.
While defendants vocalize their upset over the additional paperwork, the truly big news among RREs is the Act’s
provision for a $1,000 a day penalty should an insurance company fail to notify Medicare of a settlement, and a
double damages plus interest penalty should the Medicare lien be entirely ignored. 42 U.S.C. §1395y (b)(2)(B)(iii)
For years many of us have struggled through mediations and settlement discussions as defendant’s counsel and
insurer have minimized or disregarded our concerns pertaining to looming Medicare liens. Now that they are
on the hook monetarily, their analysis has changed. Plaintiffs’ attorneys are advised to assist defense counsel and
insurers in accurately understanding and satisfying the reporting requirement.
As is always the case, our client’s settlements are heavily influenced by the mood and perceptions of the
defendant’s insurer. In response to this new legislation, there are several myths which have begun to circulate
among ill- informed individuals. Some of these myths stem from ignorance, while others seem to be somewhat self-
serving in their propagation. The following article will provide you with the tools you need to begin to combat these
myths which, if not dispelled, have the potential for adversely affecting our client’s settlements.
Defendants for Infractions Beyond the Failure to Provide
Notification to Medicare
breathe deeply, and realize that things have not changed so drastically. Medicare must be notified of a settlement if
the recipient is entitled to benefits. Plaintiffs’ attorneys have been providing this notification for years. Each
time we have had a claim where our client has received Medicare benefits we have endured the agonizing
correspondence battle with Medicare, in the hopes of getting a letter with a number that will allow us to begin to
determine the settlement value of a case. Now, defendants must share some of our burden, and join us in the
notification process. This dreaded $1,000 a day penalty (per beneficiary) only applies to defendants if they fail to
notify Medicare of a settlement. 42 U.S.C. §1395y (b)(8)(E)(i) Any construction or interpretation that this penalty
can be exacted on a defendant for anything other than its failure to notify Medicare is simply false.
avoidance of $1,000 a day penalty, this is not to say that we should not provide the basic information defendants
need to meet this requirement. Legitimate requests to which plaintiffs’ counsel should reply include:
injured party data (name, date of birth, social security number, Medicare ID number), primary plan data, policy holder
data, plaintiffs’ attorneys’ contact information, incident data (date of incident, nature, cause, location), and resolution
data (amount of settlement, date of settlement.) However, any demands made by defendants relating to the terms
of the settlement, the settlement method of payment, or the time for the issuing the settlement payment, are
separate issues and cannot be related to this penalty. For example, the new trend among Defendants is
to demand at settlement that two separate checks be issued: one made out directly to Medicare for the exact lien
amount, and the other made out to the Plaintiff for the remainder. The issuing of a separate check to Medicare is not
a requirement under the reporting statute. Furthermore, the $1,000 a day fine which could be levied on a
Defendant can only be exacted due to its failure to report the settlement, not for the Plaintiffs failure to satisfy the
lien. This fine has no connection to the method by which the lien settlement payment is rendered, or the timing of the
lien settlement payment. In short, the $1,000 a day fine has a very narrow application which cannot be stretched by
the whim of a Defendant who wishes to hold on to settlement monies for as long as possible.
settlement is reached, it might behoove plaintiffs to incorporate terms of the incident data as part of the settlement
discussions. If a settlement is being reached because a portion of the injury originally claimed in the suit is now being
excluded, plaintiffs should request at the time of settlement that the defendant’s notification reflect said excluded
dates of service. The closer the defendant’s account matches that of the plaintiff; the easier it will be to resolve the
lien.
reimbursement claim is ignored, are penalties which are easily
and likely implemented against Defendants
check. It is true, 42 U.S.C. §1395y provides for the penalty of double damages for any entity that fails to properly
reimburse Medicare.
against any or all entities that are or were required or responsible (directly, as an insurer or self-insurer, as a third-
party administrator, as an employer that sponsors or contributes to a group health plan, or large group health plan, or
otherwise) to make payment with respect to the same item or service (or any portion thereof) under a primary plan.
The United States may, in accordance with paragraph (3)(A) collect double damages against any such entity. 42
U.S.C. §1395y(b)(2)(B)(iii)
been liable for payments for our clients’ Medicare liens for years. We know not to disburse funds prior to negotiating
the lien, issuing the payment, and finally receiving acknowledgment by Medicare of the satisfaction of said lien. Once
again, while we have lived with this reality, defendants are beside themselves now that they face any kind of liability
in this complex process which we have been navigating for so long.
double damages plus interest extremely unlikely. There are a multitude of lengthy steps which must be taken in
between the settlement, the failure to pay, and the levying of the penalty before this sanction can even be sought.
First, 60 days from the date of the correspondence on Medicare’s final demand letter must lapse. Then there is a 180-
day period during which the MSPC permits payment to be rendered in full. After the passing of these first 240
days, an “intent to refer” letter (to the Treasury for collections) will be sent by the MSPC to the beneficiary. This
letter permits 60 days for the recipient to produce a response. When the Treasury receives this collection from
Medicare, it then sends a letter to the beneficiary requesting the satisfaction of the debt. If unsuccessful, it
then seeks a remedy though the Tax Refund Offset Program, whereby the Treasury seeks payment by offsetting
government benefits and/or refunds. Counsel for the defendant or the plaintiff, or the defendant himself, is not
usually a target until this final step is fully explored. This is not to say that these penalties cannot be exacted,
however, it is highly unlikely given that a conglomeration of neglectful acts by numerous irresponsible parties must
first take place.
heard in our recent settlement discussions) is that they have to hold on to all funds until they receive a conditional
payment letter from Medicare. They then offer to either wait on disbursement until plaintiff’s counsel has negotiated
the lien, or they offer to cut two checks, one to Medicare for the full amount of the lien and one to the plaintiff for the
remainder. Should the plaintiff choose the latter, they can then seek reimbursement for overpayment of the
lien from Medicare after the lien is further negotiated. For some reason, despite the fact that we have always faced
this liability, this knowledge in it of itself is insufficient for defendants. Defendants continue to insist on holding on to
their funds (all the while accruing interest), in order to protect themselves from this unlikely penalty.
truly “afraid” of this unlikely penalty, then the implementation of the following language in the settlement release
should alleviate these anxieties:
personal injury settlement involving a Medicare beneficiary. As part of the Act, Plaintiff has an obligation to verify
entitlement and resolve conditional payment, and [Defendant] has an obligation to report. Accordingly, a tort
recovery record may need to be established by Plaintiff and a reporting event may be triggered, which would be the
responsibility of the [Defendant], by and through its insurance carrier. In the case of a reportable event,
[Defendant] will comply with the Act and all applicable reporting guidance provided by the Centers for Medicare and
Medicaid Services (CMS). [Defendant] will determine whether the claim is reportable under the Act. If there is an
obligation to establish a record with CMS, Plaintiff shall provide [Defendant] information validating that a tort
recovery record has been established with CMS, and/or its recovery contractor. The parties expressly agree that
payment of settlement proceeds is not conditioned upon Plaintiff providing proof that all Medicare reimbursement
claims and obligations have been satisfied. Rather, [Defendant] agrees to forward the settlement proceeds within
the time frame agreed between the parties at the time of settlement once an executed release has been tendered
by Plaintiff. Following Plaintiff’s opening of a tort recovery record, Plaintiff's attorney agrees to: (1) hold all
settlement proceeds in a client trust account (or similar account should needs-based government benefits require
preserving) until Plaintiff obtains claims satisfaction documents from CMS and/or its recovery contractor; and
(2) provide [Defendant] with written proof of the satisfaction of any claim asserted by Medicare pursuant to the
Act prior to disbursing to Plaintiff any proceeds received in connection with this settlement. As part of this
settlement, Plaintiff agrees to indemnify, defend, and hold [Defendant] harmless against and from any such
Medicare reimbursement claims. (The author is grateful for this suggested release language provided by the
Garretson Firm Resolution Group, www.garretsonfirm.com. )
Medicare lien resolution process. While there is no statutory or case law support for this language, it has been used
by them in multiple settlements and has provided multiple Defendants with the assurances needed to
release funds to the Plaintiff in the face of these new issues.
Settlements for the Purpose of Satisfying Medicare Liens
which must be set aside to cover future medical damages. The parsing of this money relieves Medicare of its
responsibility for paying claim-related medical bills which are incurred after the settlement or verdict. Set
asides have been a regular part of worker’s compensation claims for years. Despite what defendants might tout, at
the present time there are no specific provisions, statutes, or memoranda from CMS requiring a Medicare set-aside in
liability settlements.
debate. As previously discussed, this new statutory language strictly deals with reporting requirements. Section 111
simply completes the statutory loop which was begun on December 5, 1980, when Medicare’s conditional payment
rights were acknowledged. This loop was continued in 2003 in Section 301 of the Medicare Modernization Act
(referenced above) when enforcement provisions were placed on Medicare beneficiaries and plaintiff attorneys. Now
this loop has been closed with Section 111 which institutes a reporting obligation on self insured defendants and/or
carriers. Nowhere, in any of this, does it state that anything has changed regarding set asides and liability claims.
Medicare has made several unofficial statements addressing the issue of set-asides in liability claims during town
hall teleconferences. One such statement was that “the new statutory language changes nothing as it pertains to the
status quo with set-asides of liability or worker’s compensation claims.” (Barbara Wright, CMS' Acting Director of the
Division of Medicare Debt Management, 2/25/2010, 12:00 p.m., Town Hall Teleconference www.cms.gov, NGHP
transcripts) (Note: Complete copies of all town hall teleconference transcripts referenced in this article can be
located at www.cms.gov)
asides in the context of liability claims:
Medicare set aside amounts. It does not have the same formalized process for liability Medicare set aside
arrangements…. We have a process for an informal process on the liability side that if a plaintiff’s attorney or
insurer, etcetera, wishes to approach the appropriate CMS regional office and the regional office has the ability to
do so workload or otherwise, that they can choose to review a proposed set aside amount if they believe there is
significant dollars at issue. (03/16/2010, 12:00 p.m., Town Hall Teleconference, www.cms.gov, NGHP
Transcripts.)
eliminate any existing obligations under the MSP statutory provisions or regulations." (CMS Alert, 2/23/09,
www.cms.gov, CMS Alerts). Medicare representatives have also stated (in one of several town hall teleconferences)
that while Plaintiffs are encouraged to consider using set asides in liability settlements where there are substantial
future damages in play, for which one may easily account, there is no language requiring such actions. (03/16/2010,
12:00 p.m., Town Hall Teleconference, www.cms.gov, NGHP Transcripts)
While the statements referenced above (made during town hall teleconferences) are not considered a legally
binding authority, they can be viewed as subjective evidence that Medicare has not changed its’ stance on set-asides
in liability claims. This sentiment seems to be reflected by the absence of new statutory language, and the absence of
the issuing of formal memoranda by Medicare addressing a requirement for set-asides and liability claims. In 2001,
Medicare formally acknowledged set-asides in worker’s compensation claims in the “Patel Memorandum.” After this,
several other formal memoranda were issued by Medicare addressing set-asides in worker’s compensation claims.
No such memoranda have been issued for set-asides in liability claims.
compensation claims is identical to the language pertaining to set asides in the context of liability claims:
any item or service to the extent that (i) payment has been made, or can reasonably be expected to be made,
with respect to the item or service as required under paragraph (1), or (ii) payment has been made or can
reasonably be expected to be made under a workmen's compensation law or plan. 42 U.S.C. §1395y(b)(2)(A)(i)
and (ii).
in liability claims was addressed. After touching on this linguistic similarity, she then acknowledged the practical
difference between the two types of claims. Specifically, that Medicare has a formal system for reviewing set aside in
worker’s compensation claims, while no such formal system exists for liability claims. (03/16/2010, 12:00 p.m.,
Town Hall Teleconference, www.cms.gov, NGHP Transcripts.) Once again, while not a legal authority, her statement
does reference the obvious: presumably an entity cannot detect and evaluate claims when there is no system in place
to do so.
The issue of set asides and liability claims remains somewhat muddled because Medicare representatives continue
to speak out of both sides of their mouth. They have stated in town hall teleconferences that, on the one hand, they
cannot guarantee that there will be no repercussions for Plaintiffs or Plaintiffs’ attorneys who fail to properly address
a situation where a set-aside would “make sense” in a liability claim. On the other hand, they acknowledge that there
is no formal system in place to detect such a situation. (03/16/2010, 12:00 p.m., Town Hall Teleconference,
www.cms.gov, NGHP Transcripts.) There is the distinct feeling of “proceed at your own risk.” The odds of being
caught in a situation where a set aside should have been created and was not in a liability settlement are slim, and
perhaps even unlikely, given all of the above. But no one from Medicare will say it is impossible that a Plaintiff will find
himself in such a scenario.
It seems the safest thing for Plaintiff attorneys to do is to proceed as we have in the past when it comes to set
asides and liability claims. Medicare representatives continue to communicate through town hall teleconferences and
alerts (www.cms.gov) that nothing has changed other than the new reporting requirements. Our own evaluation of
the statute shows us that there is nothing new that has been instituted that would indicate a change in Medicare’s
policy for set asides in liability claims. Our past practices regarding set-asides and liability claims in the face of the
existing, unchanged, statutory language, should provide us with some comfort in proceeding as we have in the past.
where future damages are substantial in cost, definitive in nature, and easily identifiable, should continue to do so.
This would be the course of action to be taken if one decided to heed the recommendation (but still not a
requirement) as set forth by Wright during the March 16, 2010 CMS town hall teleconference. However, barring the
scenario of substantial, definitive, easily identifiable, future damages, there is no statutory reason to even engage in a
debate regarding set asides and liability claims. Surely if such a drastic change was made, it would be found in the
statute, or mentioned by CMS in a formal oral or written format. Therefore, while the set-aside requirements for
worker’s compensation claims remain, there is still no set-aside requirement for liability claims and the new
notice requirement for defendants does nothing to change this.
have engaged. We have always represented Medicare beneficiaries, and we have been reporting claims and
negotiating liens for years. The fact that defendants are upset that they have to fill out paperwork and
now share the same liability we have held for years, will in no way deter us from advocating on behalf of victims in
need of representation.
One attorney asserted in a recent article that these rules may have a chilling effect on the willingness of the
plaintiffs’ bar to represent Medicare recipients. That we will no longer take cases with high Medicare liens because the
lien could wipe out the recovery. First, we know that Medicare would prefer to recover something, rather than
nothing. In cases where the lien is high, we do our best to negotiate a reasonable settlement with Medicare to ensure
that it receives compensation, without the denial of recovery for our clients. Second, if defendants and their
attorneys are so concerned about our clients and their right to representation, then perhaps they should start
considering making good faith offers of settlement that can accommodate large Medicare liens, as well as compensation for our clients.
information it needs to satisfy this new reporting requirement and we should do so early in the settlement negotiation
process. However, we should not allow this new legislation to be twisted into a mechanism by which defendants can
make unreasonable demands for the issuing, structuring, or rendering of settlement payments. After all, it is just a
notice requirement.
PLAINTIFFS ATTORNEYS MUST STOP AND TAKE NOTICE OF
of the United States Supreme Court’s decision in Ashcroft v Iqbal, 129 S.Ct. 1937 (2009). In this landmark case the
court held that Iqbal, a Muslim Pakistani immigrant who was arrested and detained under highly restrictive
circumstances as the result of a 9/11 investigation, could not sue two Bush administration officials for what he
recounted was the terrible abuse he suffered. The abuse alleged by Iqbal included five months of solitary
confinement while shackled at his arms and legs, strip searches, ongoing physical and verbal abuse, and denial of
medical care. The basis for the dismissal: insufficient factual evidence supporting the allegations in the Plaintiff’s
complaint. While socio-political activists relay their outrage in response to this denial of accountability and violations
of the constitution, civil litigation attorneys are weighing their options in response to the practical fallout from this
case.
Bell Atlantic v Twombly, 550 U.S. 544 (2007) (an antitrust case decided while Iqbal was on appeal) and used Iqbal to
apply it to all civil cases which have been and will be filed in Federal Court. However, the Court failed to provide a
user-friendly barometer for determining how to meet this new standard, and it neglected to provide a concrete
method for its consistent application. These vagaries leave Plaintiffs attorneys with multiple crucial questions: What
is required by this new stricter pleading standard and how do we meet it? How do we do so prior to the provision of a
single piece of discovery? And what happens if a new or already filed claim falls short of this newly elaborated
standard? The following will hopefully serve as both a guide and a warning to Plaintiffs attorneys. We must carefully
draft and review our Federal complaints to ensure that we do not fall victim to the dismissal of our client’s claims due
to a mere technicality.
Requirement and Its Application Throughout Federal Civil Litigation
dismissed unless “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims which
would entitle him to relief.” Conley v Gibson , 355 U.S. 41 at 45-46 (1957). This was the reasonable and
accepted notice-pleading standard which Plaintiffs had been held to in Federal court for forty years. However, in 2007
the Supreme Court replaced this standard of possibility with one of plausibility. In Twombly the Supreme Court held
that “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a
plaintiff's obligation to provide the "grounds" of his "entitlement to relief" requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise
a right to relief above the speculative level. The pleading must contain something more than a statement of facts
that merely creates a suspicion of a legally cognizable right of action, on the assumption that all the allegations in the
complaint are true (even if doubtful in fact.)” Bell Atlantic v Twombly, 550 U.S. at 555. In short, a Plaintiff must
allege “enough facts to state a claim to relief that is plausible on its face.” Id at 570.
whether this heightened standard would be limited to antitrust cases. From 2007 to 2009 the courts generally
assumed a more restricted application. However, all cause for question was halted when the Supreme Court handed
down its decision in Iqbal, making it unequivocally clear that the reach of this standard of plausibility had spread
beyond the narrow scope of antitrust cases and been extended to all civil cases which had been, or would ever
be, filed in a Federal court.
complaint. When determining whether or not to grant a Defendant’s 12(b)(6) motion, a court must first identify
those assertions in the complaint which are factual as opposed to those which are merely conclusory in nature. Once
these facts have been identified, the court must then evaluate the factual assertions in order to determine whether
they are sufficient to form the basis of a claim for relief. Id at 1949-1950. If the factual assertions are found to be
insufficient, the claim is dismissed without prejudice. If the statute of limitations has run, then the Plaintiff’s claim
may be barred.
sense of guidance and security when filing our claims, this one cannot be said to possess such qualities. Distinguishing
between factual evidence and mere conclusions is a difficult subjective assessment for which the Iqbal court provides
little guidance. For instance, the Plaintiff in Iqbal had listed numerous occurrences in his complaint as to what abuses
he had allegedly endured and where and when he had endured each offense. However, the Court rejected
these factual accounts as substantive evidence due to its assertion that there were other “obvious” explanations for
these abuses. As such, the factual evidence listed in the complaint was deemed insufficient. Beyond just recounting
the abuse itself, the Court asserted that Mr. Iqbal needed to provide factual support that demonstrated the complicity
of the offending officers.
only to present detailed, often unavailable, factual evidence of a wrongdoing, but furthermore (when warranted) we
must produce factual evidence demonstrating the frame of mind of the wrongdoer. And to further complicate
matters, alll of this must be done prior to the exchange of a single piece of discovery. It appears that while the
Plaintiff’s responsibilities in the litigation process have become increasingly burdensome, those of the Defendant
have lightened to the point where the mere recognition of an obligation, or restriction, has become a task unto itself.
requirements of the pre-existing standard. These proponents have alleged that the jump from a standard of
possibility to plausibility is not so great as to inhibit meritorious claims. However, the reality is that Defense
attorneys throughout the country are filing countless motions to dismiss in Federal cases by alleging insufficiency of
factual evidence in complaints. Remarkably, a search of Lexis shows that within the past six months, Iqbal has been
cited 3,146 times. This is not to infer that all of the motions to dismiss by Defense counsel have been or will be
successful, but it does demonstrate that this decision has provided the Defense with a new type of ammunition that
they have not hesitated to use. We must be equally diligent in educating ourselves and fortifying our claims so that
they are deemed by the courts as trial worthy and not unsubstantiated refuse to be casually dismissed.
issue: 1.Medical Malpractice Claims, 2. Product Liability Claims, 3. Loss of Consortium Claims, and 4. Claims for
Wrongful Termination Under the False Claims Act. For those who regularly litigate in Federal Court, you are probably
already well versed in the application of this new pleading standard. However, for those of you who have not faced a
12(b)(6) motion since May of 2009, or for those just beginning to engage in more regular appearances in
the Federal system, the following will provide you with a fundamental understanding of what you can expect to see
and a few basic strategies to combat these attacks and preserve your client’s claims.
there are occasions where we end up in federal court (usually due to diversity jurisdiction.) Because we tend to think
of these claims as substantively state law driven, we tend to forget that the Federal Rules of Civil Procedure are still
applied. As such, we can now expect a pleading standard beyond that of just “notice” in our medical malpractice
claims that end up in federal courts.
dismissal due to our bad-habit use of template complaints. While this may suffice in state court, this will surely result
in the dismissal of the claim when filed in the corresponding federal jurisdiction. Specific factual details supporting
each element of the medical malpractice claim are now mandated to survive a 12(b)(6) motion. Gone are the days of
filing while waiting for records, or picking and choosing what we reveal to the Defendant during various points of
discovery. If we want to survive in Federal court, all of our cards must be on the table.
increasingly difficult due to the inaccessibility of information prior to discovery. One piece of good news is that in
cases where we obtain sufficient facts during discovery which reveal evidence of intentional torts, we may still be
permitted to amend the complaint prior to trial. The U.S. District Court for the District of Maryland permitted the
amending of a complaint in order to add a count for punitive damages due to information that was revealed during the
course of a Defense witness’ deposition. Reed v. River Rd. Surgical Ctr., LLC, 2009 U.S. Dist. LEXIS 71962 The
Court ruled in favor of the Plaintiff in response to the Defendant’s 12(b)(6) motion and stated that “the Plaintiffs
have alleged sufficient facts to demonstrate Dr. Shutz was warned that training was necessary on how to use the
defibrillator, but failed to take action. The complaint alleges that the cardiac defibrillator is critical medical equipment.
These allegations are sufficient to state a claim for punitive damages.” Id at 9. It appears that if the Plaintiff: 1.
makes an immediate request to amend the complaint once the information has been revealed, 2. provides a detailed
explanation of the substance and source of the new information, and 3. demonstrates that there is no way this
information was previously available, the court may be inclined to permit this addition.
depends on the procurement of information during the discovery process. Cases which fall within the category of
product liability have no hope of access to documentation of knowledge, intent, or negligence prior to discovery. Given
this reality it is difficult to surmise how we as Plaintiffs attorneys can overcome such an obstacle and still meet our
burden as set forth by the Supreme Court. Negligent Product liability suits will become more difficult to prosecute,
while intentional product liability suits will become nearly impossible to pursue. Claims which have their origin in public
safety are threatened by this ruling which seeks to give added protection to those undeserving of yet another
advantage.
A friend, who happens to be a product liability defense attorney, informed me that he has filed over 100 12(b)(6)
motions in just the past two months. He relayed to me that he has seen numerous complaints where Plaintiffs rely
on conclusory allegations regarding defective designs, defective manufacturing, and breaches in warranty. Plaintiffs
assert that a product is unreasonably dangerous, and therefore caused the injury, without any accompanying facts
which could possibly hope to support these complex claims. His words of wisdom, which I while gladly pass on to
all of you, is that it would be wise for us to begin reciting facts not just in the beginning of the complaint, but also
accompanying each of the counts. Along with this additional recitation, he recommended that Plaintiffs begin
referencing other comparable safe products in their complaint, thereby distinguishing the offending product as
defective. This will help clarify our claims and reinforce them to the full extent of their immediate voracity.
Federal court. This derivative claim for a marital injury is rooted in a separate claim for injury caused by the tortious
act of a third party to a spouse. Deems v. Western Maryland Railway Company, 247 Md. 95, 100, 231 A.2d 514
(1967). There are two ways which a Defendant can attack the validity of a consortium claim due to insufficient
pleading. The first is by attacking the primary tort claim as insufficient, and the second is by attacking the evidentiary
support of the loss of consortium claim itself.
wrongdoing, of causation, and that both, in turn, led to the marital loss. The Federal Courts have held that if a
Defendant attacks the sufficiency of the primary claim(s) under Iqbal and succeeds, the loss of consortium claim
will also fail. Conversely, should the primary claim(s) be deemed sufficient by the court, the consortium claim will
remain, absent the Defendant’s assertion of an independent defect. Carrigan v. K2M, Inc., 2009 U.S. Dist. LEXIS
99225. If the Defendant remembers to attack the sufficiency of the consortium claim, we can anticipate two types of
criticisms: 1. insufficient facts pertaining to the consortium injury; and 2. insufficient facts linking the marital injury to
the alleged wrongful conduct in the primary count. Therefore, we must alert the court to both the lack of
validity of the Defendant’s assertions pertaining to factual insufficiencies, and, when warranted, the Defendant’s
failure to make specific criticisms pertaining to the separate consortium claim.
as it pertains to the Federal False Claims Act (FCA). In these types of claims, we represent clients who have been
wrongfully terminated, allegedly due to retaliation as it relates to an employer’s fraudulent activities involving the
Government. The courts have held that while these types of cases involve the FCA, Federal Rule 8 (and not the
stricter Rule 9 pleading standard for allegations of fraud) applies because the allegations of fraud are secondary to
the wrongful termination claim. United States ex rel. Elms v. Accenture LLP, 2009 U.S. App. LEXIS 16291 In this
type of FCA retaliation claim (as opposed to a violation claim) the Plaintiff need only show that there were suspicions
of fraudulent activity, and that said suspicions led to his/her early termination Ante v. Office Depot Bus. Servs., 2009
U.S. Dist. LEXIS 57054 Therefore, when the court evaluates the sufficiency of these complaints, the newly delineated
standard for Federal Rule 8 is applied.
request to alter financially related business information in preparation for a city audit. The Defendant moved for
dismissal based on the fact that the Plaintiff failed to allege sufficient facts as dictated by Iqbal. The Court held that
because the Plaintiff listed the “who, what, when and where” of the injuries, his burden had been met. The Court
further elaborated that the Defendant’s reference to Iqbal did not impact its decision in favor of the Plaintiff because
Iqbal “does not impose a "probability requirement," and the opposition has not demonstrated how the facts in this
case are implausible, defendant's own argument has not crossed that line.” Id at 18. It behooves us as litigators to
remind the court who bears the burden of demonstrating implausibility, and that (despite the Defendant’s contrary
contentions); Iqbal has not raised the burden to a level of probability.
jurors: jurors who are now inundated with a 24 hour news cycle devoted to the discussion of the fabled “frivolous”
lawsuit. The irony is that decisions like this one have sought to prevent or deter this boogieman and have
only succeeded in making the acquisition of justice that much more difficult. Thus, jurors come armed with the pre-
conceived notion that the wrongfully injured are the “at-fault” party. Despite the well publicized attempts of
generously paid Defense lobbyists, the fact remains that tort litigation is one of the last lines of defense
against greedy and/or careless Defendants who put profit above the safety and well-being of the consumer. Mere
propaganda does not eliminate this intent: it only serves to mask it.
physician malpractice premiums and medical costs. Decisions such as Waltzer enact expert report requirements with
dispositive ramifications for Plaintiffs while failing to enumerate any consequences for Defendant’s similar omissions.
What is the appropriate response to these newly elaborated Federal requirements which, when missed, result in yet
another way for a Plaintiff’s claim to be dismissed and, possibly, forever barred? Did Iqbal really clarify the terms of
pleading for a Plaintiff, or did it merely provide an outlet for conservative jurisdictions to dismiss claims based on a
complaint being subjectively “too speculative,” or “possible” as opposed to the now mandated “plausible.”
As time goes by, each citing case aids in the definition of this standard, comparing and contrasting each set of
facts to those in preceding cases. For now the best that we can do is to allow as little room for error as possible so as
to not provide the window of opportunity for these Defendants to get meritorious claims dismissed on mere
technicalities. Through the cessation of filing boiler plate complaints in Court and the continuation of diligently sharing
pleadings and filings which have been successful in response to these motions, we can help shape and define what
qualifies as “plausible” in the eyes of the Federal court system. It is our obligation, as Plaintiffs attorneys, to make
an even more concerted effort when formulating the evidentiary basis of our complaints. We must list each and every
fact we have in our possession in order to demonstrate that our clients have a right to fully access our legal system
and have their claims heard. The Defense bar has come together on this decision and used it as a platform to further
their agenda. We must do the same and respond with equal force and diligence as we file and defend our client’s right
to pursue a claim.
Trial Reporter, Winter 2010, pp 9-14
(Journal of the Maryland Association for Justice, TRIAL REPORTER)
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