Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_16-cv-01328/USCOURTS-caed-1_16-cv-01328-0/pdf.json

Nature of Suit Code: 151
Nature of Suit: Overpayments under the Medicare Act
Cause of Action: 28:1441 Petition for Removal- Action for Interpleader

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UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

CHERYL NELSON and GEICO GENERAL 

INSURANCE COMPANY,

 Plaintiffs, 

 v. 

MEDI-CAL, et al.,

 Defendants.

1:16-cv-01328-LJO-BAM

MEMORANDUM DECISION AND 

ORDER GRANTING MOTION TO 

DISMISS (Doc. 5)

I. INTRODUCTION

Plaintiffs Cheryl Nelson and Geico General Insurance Company, by and through counsel, bring

this action for interpleader of funds. Defendant United States1and its agency, the Department of Health 

and Human Services, Centers for Medicare and Medicaid Services, now moves to be dismissed from 

this action, arguing that the Court lacks jurisdiction over its Medicare repayment claim against funds 

held by Plaintiffs. Doc. 5 at 1-2. Plaintiffs have not opposed the motion. For the reasons set forth 

below, Defendant’s motion to be dismissed from this action is GRANTED.

II. BACKGROUND

Medicare, a program enacted by the U.S. federal government to provide health benefits to 

eligible persons, is administered by the Centers for Medicare and Medicaid Services, a component of the 

U.S. Department of Health and Human Services. See 42 U.S.C. §§1395-1395ccc. The Medicare 

 

1 On September 8, 2016, Defendant filed a notice of substitution for Defendant Medicare (named Medi-Care in the 

complaint) in this action on the basis that the United States is the party responsible for the Medicare program. Doc. 2 at 1-2.

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Secondary Payer Act (“MSPA”) was enacted to reduce the strain on the federal budget from increased 

Medicare claims by ensuring that Medicare payment obligations are subrogated to other payment plans, 

such as automobile or liability insurance. 42 U.S.C. § 1395y; see Zinman v. Shalala, 67 F.3d 841, 843 

(9th Cir. 1995). If the beneficiary of a conditional Medicare payment receives a settlement from a 

primary insurance plan, Medicare is entitled to reimbursement from the beneficiary for its conditional 

payment. Zinman, 67 F.3d at 843. 

Plaintiffs filed an action for interpleader of funds in Merced County Superior Court on 

November 25, 2015. Doc. 1 at 1-2. Plaintiffs seek to resolve competing claims by 12 entities, including 

Defendant, against a $100,000 motor vehicle accident insurance settlement to be paid by Plaintiffs to 

Ralph Brown. Doc. 1 at 8. Plaintiffs allege that they are unable to determine the validity of any claims 

against the settlement, the entities to which the settlement belongs, and the proportion due to each entity. 

Doc. 1 at 9. Defendant has made conditional payments totaling approximately $4,100 for medical care 

related to Mr. Brown’s accident. Doc. 5-1 at 2. Plaintiffs have not alleged that they have exhausted 

their available administrative remedies under the Medicare Act. 

On September 8, 2016, Defendant removed the case to this Court pursuant to 28 U.S.C. §§ 1441, 

1442(a), and 1444. Doc. 1 at 1. On September 15, 2016, Defendant filed a motion to dismiss with a 

supporting memorandum of points and authorities. Doc. 5. Plaintiffs did not file a response, and on 

October 11, 2016, Defendant filed a reply. Doc. 6. 

Defendant contends that it is entitled to reimbursement of payments made for Mr. Brown’s 

medical care under the MSPA. 42 U.S.C. § 1395y; Doc. 5 at 2. Defendant also argues that it should be 

dismissed from this action as the Court lacks subject-matter jurisdiction to adjudicate its claim and has 

not waived sovereign immunity. Doc. 5 at 2. The Court does not have subject-matter jurisdiction, 

Defendant argues, for two reasons. First, the MSPA does not give the Medicare program a lien against 

the insurance proceeds and therefore 28 U.S.C. § 2410, which constitutes a waiver of sovereign 

immunity and confers jurisdiction on any federal district court in an action involving property on which 

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the United States has or claims a lien or mortgage, does not apply. Doc. 5-1 at 3-4. Second, Defendant 

argues that the MSPA requires that a party exhaust its administrative remedies before a claim arising 

under the Medicare Act is subject to judicial review, and Plaintiffs have not alleged that they have 

completed exhaustion. Doc. 5-1 at 5-6. Therefore, Defendant contends, the Court lacks jurisdiction. 

Doc. 5-1 at 6. 

III. ANALYSIS

Although presenting related concepts, sovereign immunity and subject-matter jurisdiction are 

distinct issues which present independent obstacles. United States v. Park Place Associates, Ltd., 563 

F.3d 907, 923-24 (9th Cir. 2009). Even if sovereign immunity is waived, subject-matter jurisdiction 

must be conferred by statutory authority for an action against the United States to be maintained. 

Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701 (1982); 

Alvarado v. Table Mountain Rancheria, 509 F.3d 1008, 1016 (9th Cir. 2007). Conversely, the mere fact 

that a competent forum exists to hear a case does not mean that the Unites States has waived sovereign 

immunity. Park Place, 563 F.3d at 924. “[A] statute may create subject-matter jurisdiction yet not 

waive sovereign immunity.” Powelson v. United States, 150 F.3d 1104, 1105 (9th Cir. 1998).

A. Sovereign Immunity 

The United States is immune from suit unless it has unequivocally expressed its waiver of 

sovereign immunity. Tobar v. United States, 639 F.3d 1195 (9th Cir. 2011). “[W]ithout specific 

statutory consent, no suit may be brought against the United States.” United States v. Shaw, 309 U.S. 

495, 500-01 (1940). A purported waiver of sovereign immunity “is to be strictly construed, in terms of 

its scope, in favor of the sovereign.” Dep’t of the Army v. Blue Fox, Inc., 525 U.S. 255, 261 (1999). A 

suit against a federal agency which seeks relief against the sovereign is, in effect, a suit against the 

sovereign, and the principles of sovereign immunity apply to that agency. Larson v. Domestic & 

Foreign Commerce Corp., 337 U.S. 682, 687-88 (1949). The party who seeks relief carries the burden 

of showing an explicit waiver of sovereign immunity. Dunn & Black, P.S. v. United States, 492 F.3d 

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1084, 1088 (9th Cir. 2007); see also McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 

(1936) (holding that the party seeking relief “must carry throughout the litigation the burden of showing 

that he is properly in court”). 

Plaintiffs, who have the burden of showing that sovereign immunity has been waived by the 

United States, did not advance any argument regarding sovereign immunity in their complaint and did 

not respond to the motion to dismiss. Defendant argues that the federal interpleader statutes do not 

waive sovereign immunity. Doc. 5-1 at 3. Federal Rule of Civil Procedure (“Rule”) 22 permits parties 

to “be joined as defendants and required to interplead,” but is not an express waiver of sovereign 

immunity. See Rule 82 (“These rules do not extend or limit the jurisdiction of the district courts or the 

venue of actions in those courts.”); Morongo Band of Mission Indians v. California State Bd. of 

Equalization, 858 F.2d 1376, 1382 (9th Cir. 1988) (“Rule 22, however, is merely a procedural device; it 

confers no jurisdiction on the federal courts.”). Therefore, Rule 22 does not establish waiver.

Defendant also argues that sovereign immunity is not waived by 28 U.S.C. § 2410, which permits the 

United States to be named as a party in any civil action or suit in district court “of interpleader or in the 

nature of interpleader with respect to, real or personal property on which the United States has or claims 

a mortgage or other lien.” Doc. 5-1 at 3-4. The Ninth Circuit has held that § 2410 operates as an 

express waiver of sovereign immunity. Arford v. United States, 934 F.2d 229, 234 (9th Cir. 1991). 

Section 2410 does not, however, constitute a waiver of sovereign immunity here because the right of 

repayment created by the MSPA does not, by itself, establish a lien. The MSPA provides that the 

Medicare Trust Fund may be reimbursed for any conditional payment and creates a right of action for 

the United States to recover that payment. 42 U.S.C. §§ 1395y(b)(2)(ii)-(iii). These provisions permit 

the government to “bring an action against any entity which is responsible to pay primary” medical 

expenses but “does not give the government a claim against property.” Zinman v. Shalala, 835 F. Supp. 

1163, 1171 (N.D. Cal. 1993); see Thomas v. Shelton, 740 F.2d 478, 482 (7th Cir. 1984); Blue Cross and 

Blue Shield Ass’n v. Sullivan, 794 F. Supp. 1166, 1171 (D.D.C. 1992). In cases concerning tax disputes

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where the United States has a right of recovery against an entity but no lien or mortgage interest in real 

or personal property, the Ninth Circuit has held that § 2410 does not waive sovereign immunity. See, 

e.g, Dunn & Black, 492 F.3d at 1092-93 (holding that § 2410 did not waive sovereign immunity when 

the government exercised a right of setoff against a taxpayer’s money judgement which was in the hands 

of the IRS). Defendant similarly claims only a right of action against Plaintiffs as primary payers, not a 

mortgage or other lien which would trigger § 2410. Since Plaintiffs have not met their burden of 

showing that sovereign immunity has been waived, and there does not appear to be any such waiver, 

Defendant’s motion to dismiss is GRANTED. 

B. Subject-Matter Jurisdiction

The Medicare Act, including the MSPA, vests subject-matter jurisdiction in the federal courts 

only once administrative remedies are exhausted. The Medicare statute specifically incorporates the 

procedures established for judicial review of Social Security determinations found at 42 U.S.C. § 405(g). 

42 U.S.C. § 1395ff(b)(1)(A). Those procedures require that parties exhaust their administrative options

before judicial review of “the Secretary’s final decision” is proper. 42 U.S.C. § 1395ff(b)(1)(A); see

Shalala v. Illinois Council on Long Term Care, Inc., 529 U.S. 1, 15 (2000) (stating that “§405(g) 

contains the nonwaivable and nonexcusable requirement that an individual present a claim to the agency 

before raising it in court”). Section 405(h) “purports to make exclusive the judicial review method set 

forth in § 405(g).” Illinois Council, 529 U.S. at 10. Therefore, § 405(g) “is the sole avenue for judicial 

review for all ‘claim[s] arising under’ the Medicare Act.” Heckler v. Ringer, 466 U.S. 602, 615 (1984)

(quoting 42 U.S.C. § 405(h)). A claim arises under the Medicare Act if “both the standing and the 

substantive basis for the presentation” of the claims is the Medicare Act. Weinberger v. Salafi, 422 U.S. 

749, 760-61 (1975). Whether a claim involves an award of benefits or declaratory and injunctive relief 

makes no difference. Ringer, 466 U.S. at 615. 

In this action, even though the claim at issue is whether Defendant is entitled to payment from 

the settlement rather than whether Medicare is obligated to make a payment, the claim arises under the 

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Medicare Act. See Fanning v. United States, 346 F.3d 386, 399-400 (3d Cir. 2003) (holding that a claim 

concerning whether an entity is a primary plan for the purpose MSPA repayments arises under the 

Medicare Act); Walters v. Leavitt, 376 F. Supp. 2d 746, 755 (E.D. Mich. 2005) (when a party seeks “a 

determination of the amount of reimbursement that [Medicare] will seek under its subrogation rights 

created by the [MSPA]” the matter arises under the Medicare Act and triggers §405(h)). Because the 

claim here arises under the Medicare Act, § 405(g) is the sole avenue for judicial review of the claim. 

Plaintiffs have not alleged that their administrative remedies under § 405(g) are exhausted. Since there 

has been no final decision of the Secretary as to Defendant’s claim against the settlement proceeds, the 

Court lacks subject matter jurisdiction over the repayment claim at issue here. Therefore, Defendant’s 

motion to dismiss is GRANTED.

IV. CONCLUSION AND ORDER

In summary, Plaintiffs have identified no federal statute indicating that sovereign immunity has 

been waived. Rule 22 permits an interpleader action but does not waive sovereign immunity. Section 

2410 waives sovereign immunity but does not apply here. Therefore, Defendants motion to dismiss is 

GRANTED. Alternatively, Defendant’s motion to dismiss is granted because the Court lacks subject 

matter jurisdiction. The Medicare channeling provisions provide specific procedures regarding claims 

arising under the Medicare statutes. Plaintiffs have not alleged that the Secretary has issued a “final 

decision” regarding Medicare’s claims related to Mr. Brown’s accident. Accordingly, Defendant’s 

motion to dismiss for lack of subject matter jurisdiction is GRANTED. 

IT IS SO ORDERED.

Dated: November 4, 2016 /s/ Lawrence J. O’Neill _____ 

UNITED STATES CHIEF DISTRICT JUDGE

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