Supreme Court hears arguments on securities fraud, Medicaid

Supreme Court hears arguments on securities fraud, Medicaid

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[JURIST] The US Supreme Court [official website] heard oral arguments Tuesday in two cases [JURIST report]. In Gabelli v. Securities and Exchange Commission [transcript, PDF] the court heard arguments on the statute of limitations under 28 USC § 2462 [text] and whether it begins tolling when the government can first bring an action against a penalty. The attorney for the Gabelli Global Growth Fund (GGGF) argued that since the SEC is not attempting to recoup for a victim, the government should be forced to acknowledge the violation when it occurs. “[I]t doesn’t concern a common law fraud claim; it doesn’t concern a claim where there’s even any element of deception that’s required. It’s a breach of fiduciary duty. What the [International Assets Advisory] says is that the government can sue when the violation occurs.” The SEC argued the contrary, although the Justices were incredulous that there had never been a case where the government had exceed the 5-year limitation in 28 USC § 2462. Justice Stephen Breyer asked for examples. “And until 2004 I haven’t found a single case in which the government ever tried to assert the discovery rule where what they were seeking was a civil penalty, not to try to make themselves whole where they are a victim, with one exception, a case called Maillard in the 19th century where they did make that assertion. They were struck down by the district court, and the attorney general in his opinion said: The district court’s absolutely right; of course, the government cannot effectively abolish the statute of limitations where what they’re trying to do is to gather something that’s so close to a criminal case. […] I’d say for 200 years there is no case. The only case, as far as I have been able to discover, which is why I am asking, is that what created the problem of recent vintage is that the Seventh Circuit, I guess, or a couple of other circuits decided that this discovery rule did apply to an effort by the government to assert a civil penalty. That’s what created the problem. Before that there was no problem; it was clear the government couldn’t do it.”

In Delia v. EMA [transcript, PDF] the court heard arguments on whether NC Gen. Stat. § 108A-57 is preempted by the Medicaid Act’s anti-lien provision, 42 USC §§ 1396a(a)(25), 1396k(a) [texts], as it was understood in Arkansas Department of Health & Human Services v. Ahlborn [opinion text]. States have a right to recover Medicaid benefits. The North Carolina statute automatically takes a one-third interest in any settlement or judgment from a tort as reimbursement, unless that would exceed one-third of what a person has received in Medicaid benefits. However, one-third of minor EMA’s tort recovery is much greater than the Medicaid funds she has used. An attorney for the Department of Heath and Human Services for North Carolina [official website] argued that the statute gives the state a right to tort proceeds before the plaintiff has them, thus overriding a jury verdict or stipulation between parties. The attorney for EMA argued that since the statute ignores the facts of an individual case by applying a set proportion to a settlement, it violates Ahlborn.