United Airlines v. Nemoto – Medicare Set Aside Contingencies Can Cause Settlements to Fail or Not

Posted date in Jason D. Lazarus, J.D., LL.M., MSCC Medicare Secondary Payer Act, Medicare Set Asides, MSP Compliance

In United Airlines v. Nemoto, a letter which seemingly created contingencies to a settlement was rejected by the First District court of appeal and a binding settlement was enforceable.  The case was settled on 9/25/08.  However, post settlement the claimant attorney sent a letter to the employer/carrier which stated the following:

“This is to confirm today's settlement discussions which resulted in the following agreement: $130,000 to settle with Mr. Nemoto and my firm, not to include any past due fees to Mr. Fisher. Mr. Nemoto will retire for medical reasons and will not seek re-employment with United Airlines. No vested Employee benefits will be affected by this settlement. Employee believes no MSA [Medicare Set–Aside] is necessary as he has no intention of becoming a Medicare recipient. The [E/C] is already in the process of obtaining an MSA allocation. Therefore, this settlement is not final until the parties have reviewed and approved any MSA requirement and my client and I have approved of all language in all settlement documents that United requires Mr. Nemoto to sign. The settlement documents must be filed with the Judge by November 30, 2008. Medical benefits remain available to Mr. Nemoto until JCC approval. Please be advised, that should the settlement documents not be submitted to the Judge by November 30, 2008, we will proceed to the Judge for a ruling on the pending Petitions. Mr. Nemoto wants to make it clear that if the judge has not been provided with the settlement documents for approval by November 30, 2008, THERE WILL BE NO FURTHER NEGOTIATIONS.” (Emphasis added).

The majority held that the foregoing language didn’t “objectively create any contingencies” in the settlement.  Accordingly, the Judge of Compensation Claims decision rejecting the employer/carrier’s argument that a settlement had been reached was quashed.  The dissent argued there was a contingency evidenced by the plain language of the letter quoted above which indicated the settlement would not be final until the claimant’s attorney had reviewed and approved any MSA requirement.

Given the issues now being dealt with in liability settlements, parties should be very careful about how they word agreements to settle cases when it comes to Medicare Set Asides.  Contingencies should be very clearly stated and a mediation agreements should be crafted to give parties the flexibility to deal with the ever changing issues that arise with Medicare Set Asides.