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U.S. v. PHILLIP MORRIS INC.

July 27, 2001

UNITED STATES OF AMERICA, PLAINTIFF,
v.
PHILIP MORRIS INCORPORATED, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Gladys Kessler, United States District Judge.

MEMORANDUM OPINION — ORDER # 72

I. Introduction

The United States of America ("Plaintiff" or "the Government") brought suit against nine tobacco companies and two related entities (collectively "Defendants")*fn1 to recover health care expenditures the Government has paid for or will pay for to treat tobacco-related injuries allegedly caused by Defendants' tortious conduct, and to disgorge the proceeds of that unlawful conduct. The Court previously dismissed Count One (the Medical Care Recovery Act or "MCRA" Count) and Count Two (the Medicare Secondary Payer provisions or "MSP" Count) of the Government's original complaint, United States v. Philip Morris, 116 F. Supp.2d 131 (D.D.C. 2000) ("Philip Morris" or the "Memorandum Opinion"); dismissed Defendant B.A.T. Industries p.l.c. ("BAT Ind.") for lack of personal jurisdiction, United States v. Philip Morris, 116 F. Supp.2d 116 (D.D.C. 2000); and denied the Government's request to reconsider the dismissal of BAT Ind. United States v. Philip Morris, 130 F. Supp.2d 96 (D.D.C. 2001).

The Government subsequently filed an amended complaint, which added a revised Count Two (the MSP Count).*fn2 Defendants moved to dismiss that Count pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim.*fn3 Upon consideration of Defendants' Motion, the Opposition, the Reply, and the entire record herein, Defendants' Motion to Dismiss Count Two of the Amended Complaint [#272] is granted. The Government shall not be permitted to further amend its complaint with respect to the MSP Count.

Neither this ruling nor the companion ruling on Defendants' Motion to Amend changes the current posture of the case. The parties are proceeding with extensive discovery and are preparing for trial.

II. Standard of Review

The legal standard for judging the adequacy of a complaint is well established. A "complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Davis v. Monroe County Bd. of Educ., 526 U.S. 629, 654 (1999). At the motion to dismiss stage, "the only relevant factual allegations are the plaintiffs'," and they must be presumed to be true. Ramirez de Arellano v. Weinberger, 745 F.2d 1500, 1506 (D.C. Cir. 1984), vacated on other grounds, 471 U.S. 1113 (1985); Shear v. National Rifle Ass'n of Am., 606 F.2d 1251, 1253 (D.C. Cir. 1979).

However, a court may not "accept legal conclusions cast in the form of factual allegations" or "inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint." Western Assocs. Ltd. Partnership v. Market Square Assocs., 235 F.3d 629, 634 (D.C. Cir. 2001) (citing Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994)) (internal quotations omitted); see also Papasan v. Allain, 478 U.S. 265, 286 (1986) (holding that courts "are not bound to accept as true a legal conclusion couched as a factual allegation").

III. Analysis

A. Overview of the Medicare Secondary Payer Provisions

The Medicare Secondary Payer provisions ("MSP"), a series of amendments to Medicare enacted in 1980 and further amended thereafter,*fn4 provide the Government with statutory authority to obtain reimbursement for certain Medicare expenditures. MSP essentially makes Medicare a "secondary" payer where another entity is required to pay under a "primary plan" for an individual's health care. See 42 U.S.C. § 1395y(b)(2).

Under certain circumstances, the Government may make a conditional payment "with respect to [an] item or service" provided for an injured Medicare recipient and then, if not reimbursed, may "bring an action against [the] entity which is required or responsible (directly, as a third-party administrator, or otherwise) to make payment with respect to such item or service (or any portion thereof) under a primary plan . . ." 42 U.S.C. § 1395y(b)(2)(A) and (B)(ii) (emphasis added).*fn5

A "primary plan" is defined in the statute as "a group health plan or large group health plan, . . . a workmen's compensation law or plan, an automobile or liability insurance policy or plan (including a self-insured plan) . . ." 42 U.S.C. ยง 1395y(b)(2)(A) (emphasis added). As stated in the Memorandum Opinion, it is this last ...


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