Camp Lejeune Claims: Subrogation and Offsets

SHARIKA ROBINSON, ATTORNEY AT BLALOCK LEGAL¹

1. INTRODUCTION

Narrow in scope but wide in impact, the passage of the Honoring Our Promise to Address Comprehensive Toxics (“PACT”) Act, which included the Camp Lejeune Justice Act of 2022 (the “Camp Lejeune Justice Act” or collectively the “PACT Act”), caused much “buzz” in the legal, veteran and civilian communities and rightfully so. Many people have been severely impacted, which include terminal illness to loss of life.

Signed on August 10, 2022, by President Biden, the Camp Lejeune Justice Act provides a statutory exception to Feres v. United States, 340 U.S. 135 (1950), allowing claimants two (2) years from that date of enactment to file their claims against the United States for exposures to toxins in the water at Camp Lejeune, a United States Marine Corps Training Base in Jacksonville, NC.² The Camp Lejeune Justice Act effectively created a new statute of limitations and opened the door for the United States to be sued for the exposure to toxic chemicals.

Even though no settlement has been made, there is much anticipation related to the amounts of recovery and if the Veteran Affairs (the “VA”) will, or even can, seek subrogation for the medical services it provided to veterans and their family members pursuant to the federal Medical Care Recovery Act (“MCRA” or “FMCRA”), 42 U.S.C. § 2651, or if such settlements will be reduced by other veteran benefits. But because these actions do not involve third-party tort-feasors, the United States is precluded from subrogation under the MCRA. And, the discussion regarding reduction of benefits, depends on the nature of the injury covered and if the new recovery will result in “double recovery” from the United States’ treasury.

As such, this Article addresses the historical context of Camp Lejeune litigation and the impact of § 2651 on these claims. The Article proceeds as follows: First, Part I provides background regarding prior litigation of claims derived from exposures to toxins at Camp Lejeune and the passage of the Camp Lejeune Justice Act. Next, Part II reports the coverage of current claims, including who may file a claim and the procedure that is to be employed. Part III then discusses the structural challenges posed by the PACT Act and gives examples of potential issues that could arise pertaining to subrogation and the payout of claims to those who have successfully settled claims. Finally, Part VI discusses what one should do if the VA attempts to collect monies for medical services rendered to veterans.

2. BACKGROUND

Camp Lejeune was established in 1942. ³ Camp Lejeune water contamination resulted from waste disposal practices at ABC One-Hour Cleaners, an off-base dry cleaning firm, that resulted in volatile organic compounds in water used for everyday functions, such as drinking, bathing and swimming. In particular, the water from the Tarawa Terrance water treatment plant was contaminated. The impacted residential areas include Hadnot Point, Tarawa Terrace, Holcomb Boulevard, Courthouse Bay, Rifle Range, Onslow Beach Montford Point/Camp Johnson, and New River.

The toxins at Camp Lejeune included TCE (trichloroethylene),⁴ PCE (perchloroethylene or tetrachloroethylene), DCE (trans-1,2-dichloroethylene), vinyl chloride (VC) (a breakdown product of TCE and PCE). The water also had elevated levels of Mercury.

Water from Hadnot Point water treatment plant was contaminated primarily by TCE. The supply wells at Camp Lejeune were contaminated by “leaking underground storage tanks, industrial area spills and waste disposal sites.” ⁵ The effects of the exposure depend on “when . . . [one is] exposed . . ., [h]ow much . . . [one is] exposed to, [h]ow long . . . [one is] exposed, [h]ow . . . [one is] exposed . . ., and [w]hat . . . personal traits and habits” a person has. ⁶

December 1972 the Bureau of Medicine and Surgery (“BUMED”) Instructions for Camp Lejeune mandated regular testing of the water supply, and required that “Drinking water shall not contain impurities in concentrations which may be hazardous to the health of the consumers,” and specifically limited acceptable levels of chlorinated hydrocarbons. Reports on tests of the water supply at Camp Lejeune in October and December of 1980 and March of 1981 indicate contamination by halogenated hydrocarbons, chlorinated hydrocarbons, and organics. DCE, TCE, PCE, vinyl chloride, and benzyne were regulated as “toxic pollutants” under the Clean Water act beginning in 1978.⁷ The EPA began regulating these chemicals under the Resource Conservation and Recovery Act in 1980.⁸ The EPA began regulating these chemicals under the Safe Drinking Water Act in January 1989 (for benzene, TCE, and vinyl chloride), and July 1992 (for DCE and PCE).⁹

Those who were exposed to the toxins exhibited serious health issues, including death. Several studies have been conducted since the exposure to show the illnesses that the exposures of the toxins at Camp Lejeune caused. To name a few of contaminants that are linked to known diseases, the health effects for TCE is kidney cancer, non-hodgkin lymphoma, and cardiac defects. ¹⁰ The health effects for PCE exposure include bladder cancer. The health effects for benzene include leukemia and non-hodgkin lymphomia. The health effects for VC exposure is liver cancer. There are many other diseases that have been connected to the specific exposures to toxins at Camp Lejeune.

There is also sufficient evidence that the United States knew of the toxins and failed to provide adequate notice to those who were impacted. As such, several veterans, their family members and others who were at Camp Lejeune were subjected to several illnesses.

1. PART I: Camp Lejeune Background

1. The Historical Context of Camp Lejeune Litigation

Under the doctrine of sovereign immunity, the United States is immune from suit. ¹¹ Therefore, plaintiffs who were injured at the hands of a federal employee had no method of recovery. However, plaintiffs who suffered the same injury at the hands of a state employee, could sue and recover. The United States rectified that imbalance and distinction in 1946 with the Federal Claims Tort Act (“FTCA”). The United States consented, in the FTCA, 28 U.S.C. §§ 2671 et seq., to be sued for damages for personal injury caused by “the negligent or wrongful act or omission” of a federal employee “while acting within the scope of his employment,” provided that in the same circumstances a private employer would be liable for the acts of his employee under the local law.¹² The United States vested the federal government exclusive jurisdiction over claims filed under the FTCA, but the law of the place where the act or omission occurred must be applied.¹³ Pursuant to the FTCA, it applied to “the executive departments, the judicial and legislative branches, the military departments, independent establishments of the United States . . . .”¹⁴ The FTCA does not apply to discretionary functions. ¹⁵ The United States prescribed a two-year statute of limitations and administrative exhaustion requirement under the FTCA. Thus, prior to the enactment of the PACT Act, the Federal Torts Claims Act (“FTCA”) was the remedy by which veterans sought to hold the United States liable for its negligence.

Shortly after the enactment of the FTCA, the Supreme Court limited the United States ability to be sued under the FTCA. ¹⁶ In the landmark decision of Feres v. United States, 340 U.S. 135, 146, 71 S. Ct. 153, 95 L. Ed. 152 (1950), the Supreme Court held that the United States is not “liable under the [FTCA] for injuries to servicemen where the injuries arise out of or are in the course of activity incident to service.” ¹⁷ In considering if a claim is barred by the Feres doctrine, the court will focus on the circumstances in which the claim arose. ¹⁸ Actions that are incident to service include drinking at an officer’s club and swimming. ¹⁹ The Feres Doctrine is not an absolute bar to the injuries servicemen sustain that are caused by the United States. The Supreme Court in United States v. Brown, underscored that point. In Brown, the Supreme Court ruled that Feres is not a bar to a military person’s claim where the government commits a separate wrongful act, causing an injury after discharge. ²⁰ Viewed in the composite, a military person’s claims against the United States claim may survive if it relates to a service-related injury suffered by a veteran as a result of independent post-service negligence. ²¹

The first case related to toxic exposures at Camp Lejeune was filed in the Eastern District of North Carolina, followed by the Southern District of Florida, Northern District of Alabama, and Northern District of Georgia. ²² On February 4, 2011, the plaintiff from the Eastern District of North Carolina motioned to create a multidistrict litigation (“MDL”) under 28 U.S.C. 1407. ²³ Pursuant to a MDL, the discovery and litigation and pretrial proceedings are consolidated and transferred before one judge and jurisdiction, even though multiple actions are pending in multiple jurisdictions. The purpose of consolidation is to prevent different rulings in matters that contain the same questions of fact. The Judicial Panel on Multidistrict Litigation consolidated the cases and transferred the matter to the Northern District of Georgia and, before the Honorable Judge Owen Forrester; there were seventeen cases in the MDL and over 4,000 claimants in the administrative process before the Department of the Navy. ²⁴

Below is a discussion of the seminal cases related to Camp Lejeune Litigation: Jones v. United States of America,²⁵ Bryant v. United States of America,²⁶ and Clendening v. United States of America ²⁷. The cases are listed in their respective order of decision. Prior to consolidation and decision, Jones was decided. After consolidation to the Northern District of Georgia, Bryant was decided. After the MDL was dissolved, Clendening was decided. Each case and court addressed how the FTCA, Feres and the North Carolina Statute of limitations and repose were intertwined with Camp Lejeune litigation. The courts reached opposite outcomes that ultimately precipitated the Camp Lejeune Justice Act under the PACT Act.

1. Jones v. United States of America

Laura Jones (“Ms. Jones”) filed an action to recover for injuries she sustained while she and her husband lived on base at Camp Lejeune. ²⁸ Ms. Jones resided at Camp Lejeune from Spring 1980 to 1983 and asserted that she was exposed to DCE, TCE, and benzene. ²⁹ Ms. Jones further contended that she developed non-Hodgkin’s lymphoma in 2003 as a result of her exposure to the contaminants in the water at Camp Lejeune. ³⁰ On October 31, 2007, Ms. Jones exhausted her claim administratively, as required under the FTCA. ³¹ Ms. Jones’ claims, however, were filed outside the FTCA’s two-year statute of limitations as well as North Carolina’s ten-year statute of repose. The United States asserted that because the action for time barred and subject to the discretionary exception of the FTCA, the action should be dismissed.

The FTCA mandates that “[a] tort claim shall be forever barred unless it is presented in writing to the appropriate Federal agency within two years after such claim accrues . . . .” ³² The court applied the Supreme Court’s reasoning in United States v. Kubrick, ³³ and concluded that the statute of limitations did not begin to run until “the plaintiff knew or with reasonable diligence should have known of the injury and its cause”. ³⁴ Based on Kubrick, the Judge Boyle found Ms. Jones’ claims timely and appropriately procedurally exhausted.

The FTCA also specifically prohibits United States liability if an employee performs a discretionary function, which is a function that allows an employee to exercise use of discretion that resulted in harm.³⁵ The exception applies when an employee exercises judgment or choice in performing a duty. If an employee acts pursuant to a policy, the exception does not apply and the United States can be held liable for resulting damages.

The discretionary function and specifically water contamination of TCE and PCE in the 1970s at Camp Lejeune had been addressed by the Fifth Circuit in Snyder v. United States.³⁶ The plaintiffs then were found to be unpersuasive because TCE and PCE were not regulated in the 1970s and there was judgment or choice in disposal. ³⁷ Judge Boyle indicated that TCE and PCE were not regulated at the time of exposures, and thus, there was no policy or mandate to enforce. ³⁸ By contrast, BUMED required that Camp Lejeune to conduct regular testing of the water supply. Judge Boyle also relied on the 1982 report of Camp Lejeune that specifically describes the presence of TCE and PCE in amounts exceeding the BUMED acceptable levels for all chlorinated hydrocarbons. Furthermore, because “DCE, TCE, PCE, vinyl chloride, and benzyne were regulated as toxic pollutants under the Clean Water act beginning in 1978” there was no discretion as to whether the levels were subject to policy analysis. It was held that the discretionary exception to the FTCA’s sovereign immunity was not applicable to Ms. Jones’ Camp Lejeune litigation. ³⁹

The statute of repose is the absolute latest date at which a claim can be found. Under North Carolina law, the statute of repose for latent injuries is ten (10) years. ⁴⁰ Section 1-52(16) provides that:

Unless otherwise provided by statute, for personal injury or physical damage to claimant’s property, the cause of action, except in causes of actions referred to in G.S. 1-15(c), shall not accrue until bodily harm to the claimant or physical damage to his property becomes apparent or ought reasonably to have become apparent to the claimant, whichever event first occurs. Provided that no cause of action shall accrue more than 10 years from the last act or omission of the defendant giving rise to the cause of action.

Wilder v. Amatex Corp., ⁴¹ reasoned that North Carolina’s statute of repose applied to latent injuries, not latent diseases. Applying Wilder, the Fourth Circuit in Hyer v. Pittsburgh Corning Corp.,⁴² held that North Carolina’s statute of repose does not apply to latent diseases. In summation with the Wilder and Hyer holdings, Judge Boyle contended that it would be against public policy or reasonable rationale to require a litigant to file a claim that is not known to the person. The statute of repose was concluded not to be a bar. ⁴³

2. Bryant v. United States of America

[Background on Bryant –pull from pacer] exposed to toxic substances while on base at Camp Lejeune. Ms. Bryant contends that the United States failed to monitor and provide notice of the quality of the water supply. As a result, she suffered serious illnesses.

The United States asserted that the actions were barred by North Carolina’s statute of repose⁴⁴ and, in the alternative, that the Comprehensive Environmental Response, Compensation Liability Act (“CERCLA”), 42 U.S.C. § 9658,⁴⁵ preempted North Carolina’s statute of repose, but under either circumstance, the action was untimely. ⁴⁶

CERCLA Provides in pertinent part that:

In the case of any action brought under State law for personal injury, or property damages, which are caused or contributed to by exposure to any hazardous substance, or pollutant or contaminant, released into the environment from a facility, if the applicable limitations period for such action (as specified in the State statute of limitations or under common law) provides a commencement date which is earlier than the federally required commencement date, such period shall commence at the federally required commencement date in lieu of the date specified in such State statute.⁴⁷

CERCLA was enacted in 1980 to identify, investigate and remediate sites contaminated by hazardous substances. ⁴⁸ Because the “federally required commencement date”⁴⁹ is the date a person knew or should have known of the injury, the plain text of CERCLA reads that the statute of limitations, if applicable, would run after the expiration of North Carolina’s statute of repose and thereby preempt it. However, “Applicable limitations period” is defined as “the period specified in a statute of limitations during which a civil action referred to in subsection (a)(1) of this section may be brought.” ⁵⁰ Judge Forrester reasoned that Congress intended for CERCLA to preempt both state statute of limitations and repose. ⁵¹ Judge Forrester then certified two questions before the Eleventh Circuit: 1) whether CERCLA preempts the North Carolina statute of repose, and 2) if North Carolina statute of repose contains an exception for latent diseases. ⁵²

In the interim, and on appeal, the Supreme Court decided in CTS Corp. v. Waldburger, ⁵³ that CERCLA did not preempt North Carolina’s statute of repose. ⁵⁴ The sole issue then before the Eleventh Circuit was whether North Carolina’s statute of repose omitted latent diseases.

By then, the North Carolina General Assembly amended North Carolina’s statute of repose. ⁵⁵ The then new statute of repose specifically incorporated a new exception for groundwater claims. ⁵⁶ The then new statute of repose stated:

Unless otherwise provided by law, for personal injury or physical damage to claimant’s property, the cause of action . . . shall not accrue until bodily harm to the claimant or physical damage to his property becomes apparent or ought reasonably to have become apparent to the claimant, whichever event first occurs. Except as provided in G.S. 130A-26.3, no cause of action shall accrue more than 10 years from the last act or omission of the defendant giving rise to the cause of action.⁵⁷

North Carolina General Statutes, § 130A-26.3, provides: “The 10-year period set forth in G.S. 1-52(16) shall not be construed to bar an action for personal injury, or property damages caused or contributed to by . . . the consumption, exposure, or use of water supplied from groundwater contaminated by a hazardous substance, pollutant, or contaminant.”

Read as a collective, the statute of repose was amended to indicate that it did not apply to groundwater contaminants. In fact, the North Carolina General Assembly the new statute of repose applicable to actions “filed, arising, or pending” on or after June 20, 2014. ⁵⁸ The question then became if the amendment applied retroactively. The Eleventh Circuit engaged in a discussion as to whether the General Assembly could divest the United States of a vested right: the expiration of the statute of repose and/or if the right had vested. Ms. Bryant contended that explanations to statutes apply retroactively, and thus, the General Assembly’s clarification was instructive and applied retroactively. The Eleventh Circuit did not find the prior version of North Carolina’s statute of repose ambiguous. ⁵⁹

If a statute fails to address a particular issue, but addresses it in an amendment, it is clarifying. If the General Assembly alters an unambiguous statute, it is an amendment. It is not the Legislature’s job to determine retroactivity, it is the Judiciary’s. The Eleventh Circuit reasoned that because the General Assembly did not define that the initial statute of repose applied to latent diseases or injuries, but rather proposed a new groundwater claim exception, it was an amendment. ⁶⁰ The Eleventh Circuit remanded the case back to the district court with the direction that North Carolina’s statute of repose applies equally to latent diseases and injuries.

Ms. Bryant petitioned the Supreme Court for certiorari, which was denied on October 5, 2015. ⁶¹ While the Eleventh Circuit in Bryant found that North Carolina’s statute of repose applied to latent diseases, the Fourth Circuit in Stahle v. CTS Corp., 817 F.3d 96, 98 (4th Cir. 2016), found that it did not. In Stahle, the appellant-plaintiff was diagnosed with leukemia as a child. ⁶² Mr. Kent Stahle asserted that he was responsible for dumping toxic solvents from a plant into a water stream. ⁶³ His childhood exposure to the toxic water stream caused him to have leukemia. ⁶⁴ The district court dismissed the action, saying that the claim was barred by North Carolina’s statute of repose. The Fourth Circuit reasoned that in Hyer they directly indicated that North Carolina’s statute of repose did not apply to disease claims. ⁶⁵ The Fourth Circuit further rejected the contention that the new statute of repose displaced the Fourth Circuit’s ruling in Hyer. ⁶⁶ The Fourth Circuit stated that its decision was based on Wilder, and Wilder is not so limited as to not encompass North Carolina’s new statute of repose. ⁶⁷ The Court found that because there was no meaningful distinction between North Carolina’s two statute of reposes, its decision in Hyer was not undermined. ⁶⁸

The final decision in Bryant was followed in time by the Fourth Circuit’s decision in Stahle. At the very outset, the district court in Bryant addressed the Fourth Circuit’s decision in Stahle and concluded that it was bound by the Eleventh Circuit’s decision in Bryant. ⁶⁹ The Bryant Court then underscored and rejected that it was bound by the rules of diversity jurisdiction of a transferee court, and firmly stated that because it was a court of original jurisdiction, appointed pursuant to the MDL process, it is not bound by all of the laws of the jurisdiction in which the injury occurred, only the state laws. ⁷⁰ Bryant applied North Carolina’s ten-year statute of repose and barred the claims. ⁷¹

The Eleventh Circuit holds that under Feres, “the serviceman’s duty status was the most important criterion in determining whether an injury was incident to military service.” ⁷² The Eleventh Circuit has articulated three-factor criteria: “(1) duty status, (2) location, and (3) activity, to determine whether a service member’s injuries resulting from government negligence . . . are incident to service.” ⁷³ The Bryant district court concluded that those service members whose claims accrued while on active duty were barred by the Feres doctrine. ⁷⁴ The court dismissed the failure to warn claims, arising after discharge from service on the basis that they were barred by the discretionary function doctrine. ⁷⁵

The Eleventh Circuit says that “the discretionary function exception serves to preserve sovereign immunity for any claim that is based on a federal agency or employee’s performance or nonperformance of a discretionary task, even if, in so acting, the agency employee may have abused his discretion.” ⁷⁶ The Eleventh Circuit construes exceptions to the FTCA in favor of the United States. ⁷⁷ Bryant determined that the Safe Drinking Water Act of 1974 by the Environmental Protection Agency and BUMEDs were not directly policy directives because they did not specifically list the contaminants under after the contaminated wells were closed. ⁷⁸ And further rejected BUMEDs because while the language was mandatory, the manner in which the objective was to be achieved was discretionary. ⁷⁹ The court also rejected the Base Order 5100.13B governing the Safe Disposal of Contaminants or Hazardous Waste.

The court did not consider the intersection of Judge Boyle’s decision because the action—at that time—had been dismissed from the MDL. ⁸⁰ Ms. Bryant petition the Supreme Court for certiorari, and it was denied on June 1, 2020. ⁸¹ The remaining 4,000 claims pending before the DON were summarily dismissed. ⁸²

3. Clendening v. United States of America

Shortly after the closure of the MDL, plaintiff Ms. Carol Clendening, as representative of the estate of her husband, Mr. Gary Clendening (“Mr. Clendening”) filed an action in the Eastern District of North Carolina. ⁸³ The estate asserted that Mr. Clendening was exposed to benzene and other carcinogens that resulted in his development of waldenstrom macroglobulinemia, chronic lymphoblastic lymphoma, and adult leukemia, resulting in death, at Hadnot Point Camp Lejeune. ⁸⁴ The United States moved to dismiss the action under the Feres Doctrine. ⁸⁵

Like the Eleventh Circuit, the Fourth Circuit has three-factor criteria to determine if the activity is incident to service under Feres: “(1) the duty status of the service member; (2) the situs of the injury; and (3) the activity the service member was engaged in at the time of the injury.” ⁸⁶ The factors are fact-specific and no ridged test has been adopted by the Fourth Circuit. ⁸⁷ The Clendening district court held that all claims that were based on daily activities were outright barred by the Feres doctrine. The district court reasoned that the only claims likely to prevail were the failure-warn-claims under the discretionary function exception. ⁸⁸

The Fourth Circuit holds that the discretionary function exception failure-to-warn is a twofold analysis. First, a court must determine whether the conduct at issue involves judgment or choice. Second, a court must determine whether there is a federal statute, regulation, policy or if the decision is based on considerations of public policy. The district court held that there was no policy produced and rejected the position that BUMED was an applicable policy because it did not require reporting of findings to the public or otherwise warn the public. ⁸⁹ Judge Britt further explained that only policy-making decisions could control the United States action of whether to warn, and because no applicable policy was identified, there could absolutely be no recovery and the discretionary function exception barred the action in its totality. ⁹⁰

Ms. Clendening appealed. ⁹¹ Before the Fourth Circuit, Ms. Clendening contended that neither of her claims was barred by Feres or the discretionary functions exception. In the alternative, she requested that the Fourth Circuit overrule Feres. The Fourth Circuit reasoned that a plaintiff’s claim of exposure to toxic water at Camp Lejeune was not distinct from Feres itself, where the court crated the exception in which a veteran sued for liability after asserting that the military housed him in a building “known to be unsafe” due to a “defective heating plant” and failed to keep an adequate fire watch.⁹² The Fourth Circuit explained death as it relates to unsafe living conditions fall squarely within the four corners of Feres and preclude governmental liability. ⁹³ The Fourth Circuit declined to deny plaintiff’s request to overrule Feres. The Fourth Circuit then reasoned and affirmed the district court’s application of the discretionary exception of the FTCA to plaintiff’s only surviving failure-to-warn claim. The court held that because there is no duty to warn, there could be no mandate to warn and the act was discretionary. ⁹⁴ Plaintiff petitioned for certiorari, which was denied on November 7, 2022. ⁹⁵

Even though the Supreme Court denied certiorari, Justice Thomas drafted a dissent. ⁹⁶ In the dissent, Justice Thomas requested that the Supreme Court take plaintiff’s and Fourth Circuit’s invitation to overrule Feres. ⁹⁷ Justice Thomas has not been alone is his contention that Feres was wrongfully decided and should be overruled. ⁹⁸ Justice Thomas contends that the FTCA subjects the United States to suit upon the negligence of governmental employees and that there is nothing in the FTCA that bars suits based on their military status, alone. ⁹⁹

2. Synthesis of Seminal Cases

Jones EDNC, Bryant NDGA, Stahle CA4 disagreed with part of Bryant and CA11 as it relates to statute of repose. Clendening EDNC disagreed with Jones –. Option was congress.

These cases involve the difficult intersection of law and the alignment of the desire to do what is right. Each court had a difficult task and was presented with very complicated issues of fact and law. Neither the judges nor jurisdictions seemed to completely agree on all of the issues presented in the cases.

These seminal decisions depict how complicated and nuanced the intersection of state law to federal law can be and underscore the need for a certification process.

The Supreme Court of North Carolina itself has sent mixed signals about the scope of § 1-52(16). Compare Dunn v. Pac. Emp’rs Ins. Co., 332 N.C. 129, 418 S.E.2d 645, 647-48 (1992) (holding that, in an action based on the decedent’s death from cancer based on exposure to hazardous chemicals, § 1-52(16) would be the proper statute of limitations for the underlying claim for bodily injury), and Wilder, 336 S.E.2d at 69 (suggesting that “the statute of limitations contained in the first clause of G.S. 1-52(16)” “govern[s] all negligence claims”), with Boudreau v. Baughman, 322 N.C. 331, 368 S.E.2d 849, 853 n. 2 (1988) (suggesting that § 1-52(16) was “intended to apply to plaintiffs with latent injuries,” and is “inapplicable” to claimants who are “aware of [their] injury as soon as it occur[s]”), and Misenheimer [v. Burris], 637 S.E.2d [173], 175-76[, 360 N.C. 620 (2006)] (explaining that latent injury claims remain subject to the statute of repose in § 1-52(16)); see also Ante at 109-10.

And outside of North Carolina’s borders, after the publication of this decision, four circuits will have addressed this state law question, all with different views of the statute’s scope. Compare In re Dow Corning Corp., 778 F.3d 545, 552 (6th Cir. 2015) (“The Fourth Circuit has [*1330] consistently applied th[e] ‘disease exception,’ first announced by the North Carolina Supreme Court in Wilder v. Amatex, to diseases incurred from exposure to harmful products”), and Bryant v. United States, 768 F.3d 1378, 1381 (11th Cir. 2014) (holding that the statute of repose in § 1-52(16) unambiguously applies to disease claims), and Klein v. DePuy, Inc., 506 F.3d 553, 559 (7th Cir. 2007) (in holding that “§ 1-52(16) is not limited to latent injury claims,” relying on Dunn and Wilder, rejecting Hyer, and ignoring Misenheimer)

3. The Enactment of the PACT Act

Unfortunately, by the time the association was proven between the chemicals and the cancers and other health issues, the prevailing legal authority was that the statute of limitations and repose had lapsed and all claims for injury were barred under North Carolina law. And, under Feres, military personnel and their families were prohibited to bring claims against the federal government of health conditions and related to their time in the military service.

Because the Feres doctrine, provides that the United States is not liable under the Federal Tort Claims Act for injuries to members of the military, sustained while on active duty and not on furlough, in many instances, the Feres doctrine was used as a means to thwart the recovery of veterans who had been exposed to dangerous conditions while on active duty. This was the case, despite the fact that, in 1982, the Marine Corp discovered that these dangerous chemicals were in the drinking, bathing and swimming water at Camp Lejeune. In some cases, the water had 3,000 times the safe limit of these chemicals.

Most of the contaminated wells were removed from service in February 1985. The maximum level of TEC detected in the water at Camp Lejeune, however, was 1,400 parts per billion (“ppb”). The current level of TEC in drinking water is 5 ppb. This multiplier provides insight as to just how dangerous the water was at Camp Lejeune.

However, an estimate of over a million men, women and children either veterans, spouses, or contractors were exposed to the harmful chemicals in the water supply. Fleeing from the courts, plaintiffs set their sights on apprising Congress to take corrective action to provide a remedy for the losses sustained at Camp Lejeune. After these rulings, Congress took bold measures to provide legal remedies and relief to families of victims who were impacted at Camp Lejeune.

2. PART II: What is the Camp Lejeune Justice Act

Codified at Section 804 of the PACT Act, the Camp Lejeune Justice Act was a direct response to its prior litigation; it creates an exception to the Feres doctrine and statute of repose. The PACT Act extends to 23 specific conditions. ¹⁰⁰ The list includes 11 respiratory related conditions, along with several forms of cancer, including reproductive cancers, melanoma, pancreatic cancer, kidney cancer, brain cancers such as glioblastoma, respiratory cancer of any type, gastrointestinal cancer of any type, and lymphoma cancer of any type. ¹⁰¹

The Camp Lejeune Justice Act extends to who was exposed to the toxins at Camp Lejeune. These toxic chemicals are known to cause cancers and other health problems. A qualifying individual must have been exposed for thirty (30) days or more between August 1, 1953, and December 31, 1987, and have a qualifying condition. Exposure need not be consecutive for thirty (30) days, but must total thirty (30) days.

As a qualifying measure, applicants are first required to file an administrative claim before the Department of the Navy (“DON”) before filing an action in federal court. The DON has six (6) months to evaluate the claim before it can be filed in federal court. If a claim is filed prior to exhaustion, it will be procedurally default. In addition, there is no need to submit medical documentation at the time of filing a claim with the DON. In fact, the DON’s preference is that no medical documentation be submitted at filing. The DON is working in conjunction with medical archive to streamline medical requests through a designated portal.

The Eastern District of North Carolina has exclusive jurisdiction and venue over the Camp Lejeune claims. However, the Eastern District of North Carolina has directed that if “a plaintiff does not reside within the Eastern District of North Carolina, the case should be filed in the Southern Division” of the Eastern District of North Carolina ¹⁰² The Eastern District of North Carolina has required that claims be filed as: “The Cause of Action should be 804 (Camp Lejeune Justice Act of 2022) and the Nature of Suit should be 360 (P.I. : Other).” ¹⁰³

At this point, there are a few cases that have been filed, absent exhaustion or re-exhaustion of Camp Lejeune claims. The exhaustion requirement of the Camp Lejeune Justice Act appears to be a provision borrowed from the 1966 Amendment of the FTCA that requires that one first file an action administratively before proceeding in federal court. ¹⁰⁴ The issue before the district court was if a previously exhausted claim need be refiled under the PACT Act. The district courts that have decided the issue concluded that earlier refiled claims must be exhausted pursuant to the PACT Act and dismissed the claims.

3. ANALYSIS

3. PART III: MCRA Historical Context and Application to Camp Lejeune

Properly filing a successful claim, is one part of the process. How to collect, and more importantly, how much one will walk away with, is another part of the process.

The concept of subrogation allows a person to be substituted in place of another and to have all rights and obligations against a third party.¹⁰⁵ The primary purpose of subrogation is to obtain reimbursement to the person who advanced payment—the subrogee—for the payments made by that person with respect to a legal claim. Subrogation can result in a deduction and reduced amount of recovery of a settlement. ¹⁰⁶ Subrogation is a legal concept that can either be based on statutory, conventional or equitable concepts. Under the law, “statutory subrogation” is based on a statute, “conventional subrogation” arises from an express agreement of the parties, “equitable subrogation” rests not on contract but on principles equity. Furthermore, this Court has held that equitable subrogation is a “remedy [which] is highly favored and liberally applied.” ¹⁰⁷

The United States is statutorily required to provide medical care to military personnel. Section 1074(a)(1) states that members of a uniformed service “are entitled to medical and dental care in any facility of any uniformed service.” ¹⁰⁸ The MCRA was enacted to provide the United States with a remedy to collect when a third-party injures a veteran.

1. 42 U.S.C.A. § 2651

The federal government enacted the MCRA, 42 U.S.C. § 2651, to particularly provide the VA with the right to subrogation. The MCRA allows the United States to recover from a tort-feasor the reasonable value of care furnished to an injured soldier or veteran. 42 U.S.C. § 2651(a) limits the United States right to recovery; it cannot recover from itself. Section 2651(a) provides in pertinent part:

In any case in which the United States is authorized or required by law to furnish or pay for hospital, medical, surgical, or dental care and treatment (including prostheses and medical appliances) to a person who is injured or suffers a disease, after the effective date of this Act, under circumstances creating a tort liability upon some third person (other than or in addition to the United States and except employers of seamen treated under the provisions of section 322 of the Act of July 1, 1944 (58 Stat. 696), as amended (42 U.S.C. 249)) to pay damages therefor, the United States shall have a right to recover (independent of the rights of the injured or diseased person) from said third person, or that person’s insurer, the reasonable value of the care and treatment so furnished, to be furnished, paid for, or to be paid for and shall, as to this right be subrogated to any right or claim that the injured or diseased person, his guardian, personal representative, estate, dependents, or survivors has against such third person to the extent of the reasonable value of the care and treatment so furnished, to be furnished, paid for, or to be paid for.¹⁰⁹

As such, the United States’ reach under the MCRA is not absolute, and more importantly, not applicable to Camp Lejeune claims.

1. Background of 42 U.S.C. § 2651

By way of background, § 2651 was enacted by the Congress, following the Supreme Court’s decision in United States v. Standard Oil Co. of Cal.,¹¹⁰ which pointed out that if subrogation by the VA for the recovery of medical care and costs were to be possible, congressional action would be necessary. ¹¹¹ “The FMCRA’s primary purpose was to enable the government to recoup some of the millions of dollars it expends annually providing medical care to military personnel whose injuries are the result of the tortious conduct of third parties.” ¹¹²

In Standard Oil, the United States sought to recover the cost of hospitalization and pay expended by the VA as the result of an injury of a soldier hit by a truck negligently operated by a civilian defendant. The Supreme Court denied recovery, saying that it was the obligation of congressional authority to provide the United States the right to collect from the harm effectuated on a service member, not the judicial system. Indeed, the Supreme Court framed the government’s claim as “not one for subrogation,” but “rather for an independent liability owing directly to itself as for deprivation of the soldier’s services and indemnity for losses caused in discharging its duty to care for him consequent upon the injuries inflicted by [the defendant].” ¹¹³

The Bill as first introduced only gave the United States a derivative right to collect. ¹¹⁴ The Bill has since been amended to emphasis that the United States has a direct right to subrogation. ¹¹⁵ This means that the United States has been enabled to recoup dollars that it expands annually providing medical care to veterans and others who are injured by the tortious conduct of third parties. Furthermore, the Bill prevents insurance companies and others from being unjustly enriched by failures to be held accountable for medical expenses.

However, subrogation is not an automatic process. A federal court does not have jurisdiction under Section 2651 unless the United States is a party plaintiff. ¹¹⁶ If the United States wishes to be made part of the action, it must intervene or file its own action. ¹¹⁷

2. A textual Reading of 42 U.S.C. § 2651

The statutory text of “under circumstances creating a tort liability upon some third person [] other than or in addition to the United States” is the text that limits subrogation to third-party actors other than the United States.

“The starting point in statutory interpretation is the language of the statute itself.” ¹¹⁸ Generally speaking, “[a] degree of ambiguity arises from Congress’s use of the word under, for as the Court recognizes, the word under is a chameleon, having many dictionary definitions and no uniform, consistent meaning.” ¹¹⁹ Under has been interpreted to mean, “in accordance with” or “in compliance with”. ¹²⁰ The Supreme Court in Ardestani v. INS, ¹²¹ held that “[t]he word ‘under’ has many dictionary definitions and must draw its meaning from its context.” Under is followed by “third person”. The United States is the drafter of the provision and logic would dictate that it is not a third person. To be sure that there was no doubt, Congress went on to explain that third person is defined as other than the United States. Thus, because the United States is not a third-party tortfeasor, there can be no subrogation Under the PACT Act.

Circuit Courts have also interpreted § 2651 and come to the conclusion that the United States may only recovery from a third party. The statutory text of “under circumstances creating a tort liability upon some third person” has been flatly interpreted by the Eighth Circuit to mean that the statute only applies to the United States’ right of recovery to situations to a negligent third person under state law. ¹²² The Third Circuit is also in agreement that the MCRA does not give the United States an independent right of recovery against a veteran who utilized medical services and care. ¹²³

The United States’ ability to recover from third parties is also limited. In United States v. Jackson, ¹²⁴ a serviceman was injured in an automobile accident. The United States sought to recover against the insurer of the serviceman. The Court held that the United States could not recover from the insurer of the serviceman because the insurer was neither the tortfeasor nor the insurer of the tortfeasor. The United States’ right to subrogation is not one that is broad and unchecked; it is a right that is contingent on a statutory provision that has been maintained by its own statutory framework and limitations.

2. Judicial Interpretation of 42 U.S.C. § 2651

Since its enactment, no circuit has interpreted 42 U.S.C. § 2651 to allow the United States to seek subrogation against a claimant when the United States is the tort-feasor and the claimant is the veteran.

The First Circuit has ruled that 42 U.S.C. § 2651 provides the United States a right of recovery from a third person. ¹²⁵ A district court in the Second Circuit holds that “[u]nder the MCRA, the government may recover against third-party tortfeasors expenses for medical care that the government provided to persons injured by those third parties.”¹²⁶ The Fourth Circuit, likewise, holds that United States may only recover if the injury is caused by third-party. ¹²⁷ The Fifth Circuit holds that if the United States were allowed to collect from a veteran based on the harm it caused, it would “defray the expense” of the care. ¹²⁸ The Sixth Circuit reasons that the primary purpose of the FMRCA is to allow the United States to recoup for military care for injuries caused by third parties. ¹²⁹ Along the same line, the Seventh Circuit quoted from the statute itself to underscore that the United States can only recover for third-party injuries. ¹³⁰

The Ninth Circuit has unabashedly stated that no court has extended the statute beyond third parties. ¹³¹ The Tenth Circuit underscored that 42 U.S.C. § 2651 allows the United States to collect from third-party tortfeasors. ¹³²

4. PART IV: Preclusion of MCRA to Camp Lejeune Claimants

For several reasons listed below, the VA cannot seek subrogation from veterans. Most importantly, the VA is statutorily prohibited from seeking subrogation claims against the United States and the Camp Lejeune Justice Act claims are claims against the United States. In addition, the text of Camp Lejeune Justice Act does not allow the United States to offset for medical care and services provided. Finally, the VA itself has announced that it will not seek subrogation based on Camp Lejeune Justice Act claims. It is precluded from acting divergent to its publicized statement.

1. Application of 42 U.S.C.A. § 2651 to Camp Lejeune Claims

There are three groups of people who may recover under the Camp Lejeune Justice Act. The first group of individuals are the veterans themselves who were subjected to the toxins. The second group of individuals are the family members of the veterans who were stationed at Camp Lejeune with the veteran. The third group of people who may recover are contractors who performed work at Camp Lejeune and were impacted by the toxins. The application of the MCRA to the first to groups of people is direct. However, the analysis can become complicated in terms of the MCRA application to contractors who received free treatment at a veteran hospital.

1. Claims Made by Active Veterans Against the United States

Of particular importance is the Fourth Circuit’s decision in United States v. Brooks.¹³³ There, the Fourth Circuit held that it is “perfectly clear that in making the award of damages to plaintiff nothing should be included on account of hospital or medical expenses which the government has paid or on account of loss of earning power for the period for which he has drawn army pay.” ¹³⁴ Similar to Brooks, Camp Lejeune claimants are to sue the United States, not a third-party tort-feasor. Thus, the United States has no right to subrogation from settlement funds of the value of services provided.

The Fourth Circuit’s decision in Brooks, was further solidified by the Fourth Circuit’s decision in United States v. Maryland. ¹³⁵ There, the Fourth Circuit supported the VA’s right to exercise its right to subrogation from a third-party. Thus, as in the circumstance of Camp Lejeune claimants, the VA has no right to subrogation.

2. Claims Made by Active Veterans’ Family Members Against the United States

10 U.S.C. § 1095 provides that the United States may collect from a third-party payor health charges provided to a covered beneficiary. ¹³⁶ Section 1095(a)(1) states in pertinent part:

In the case of a person who is a covered beneficiary, the United States shall have the right to collect from a third-party payer reasonable charges for health care services incurred by the United States on behalf of such person through a facility of the uniformed services to the extent that the person would be eligible to receive reimbursement or indemnification from the third-party payer if the person were to incur such charges on the person’s own behalf. If the insurance, medical service, or health plan of that payer includes a requirement for a deductible or copayment by the beneficiary of the plan, then the amount that the United States may collect from the third-party payer is a reasonable charge for the care provided less the appropriate deductible or copayment amount.

By way of integration or application of Section 1095, the United States could seek recovery under the MCRA. The MCRA opens with “[i]n any case in which the United States is authorized or required by law to furnish or pay for hospital, medical, surgical, or dental care and treatment . . . .” ¹³⁷ This opening provision

For the reasons stated at supra, _____, the Camp Lejeune Justice Act claims are claims against the United States and are not subject to subrogation.

This rule is illustrated in Brooks.

3. Claims Made by Contractors Who Were Veterans Against the United States

The Camp Lejeune Justice Act also lends itself to recovery to those who were contracted to provide services at Camp Lejeune, exposed to the toxic water and have a qualifying illness. By definition, those who were exposed in the context of employment and were also veterans, may have a claim under worker’s compensation. Because there is an intersection of employment-related injuries and subrogation, the United States could have potentially asserted a claim, not against the veteran directly, but potentially could have sought recovery from the employer’s insurer.

The MCRA, alone, does not extend a right of the government’s recovery for services and medical treatment provided by the VA for injuries sustained by a veteran who sustained an injury and has coverage under workmen’s compensation.¹³⁸ The United States only has the right to recover against employer or workmen’s compensation carrier for value of hospital and medical services furnished by Veterans Administration to veteran for injuries sustained in course of employment where veteran has assigned to government his rights against workmen’s compensation carrier. ¹³⁹

However, where a claim has been assigned to the government pursuant to treatment at the VA, the VA could have a basis to contend that it has a right to recover from the insurer.

The Fifth Circuit address this precise issue in United States v. Bender Welding & Mach. Co. ¹⁴⁰ There, a veteran employee was injured at work and treated by the VA. The VA billed the veteran and the veteran assigned the right to recover medical expenses to the VA. The Fifth Circuit ruled the VA could recover the value of its services under worker’s compensation.

At least one jurisdiction (insert Georgia case) has held that the statute of limitations is not a bar to the VA’s right to collect under the MCRA. ¹⁴¹

2. The VA’s Publication That it Will Not Seek Subrogation is Binding

The “Office of General Counsel” at the VA’s website prominently states:

VA’s Federal Medical Care Recovery Program ensures that when a Veteran is injured, the responsible party pays for the injured Veteran’s medical care instead of the American taxpayers. Money recovered by this program helps each VA medical facility provide the excellent medical care and services that each Veteran deserves by supplementing funds appropriated to VA by Congress. . . . CAMP LEJEUNE JUSTICE ACT CLAIMAINTS: Please note that claims arising under the recently-passed Camp Lejeune Justice Act (“CLJA”) are claims against the United States. VA is statutorily prohibited from asserting a claim against the United States. 42 U.S.C. § 2651(a). As such, VA will not be generating billing for any CLJA cases.

This statement describes that the purpose of the VA’s FMCRA is to ensure that when a veteran is treated at the VA and injured by some third party, the VA can collect from the responsible party instead of placing the financial responsibility on taxpayers. The language further states that because claims based on the Camp Lejeune Justice Act, are claims against the United States, the VA is “statutorily prohibited” from asserting a subrogation claim against the United States under the FMCRA. As such, the Office of General Counsel, explicitly stated that it will “not be . . . billing for any” Camp Lejeune Justice Act cases. The statement on the VA’s website is binding and enforceable.

At the outset, it is important to note that the Camp Lejeune Justice Act is silent as it relates to if the substantive law of the jurisdiction in which the judicial district is located governs. By contrast, the FTCA specially provides that an action must proceed based in “accordance with the law of the place where the act or omission occurred”. ¹⁴² This concept has been recently reinforced by the Fourth Circuit in Simms v. United States. ¹⁴³ Thus, one must look to the principles articulated in Erie Railroad Co. v. Tompkins¹⁴⁴ and the Rules of Decision Act, which collectively establish that federal courts do not have the authority to displace state law.¹⁴⁵

Therefore, the laws of the federal judicial district in which the court is located. Here, North Carolina law is applicable—despite the illness may have materialized in other jurisdictions—because the harm, water toxicity, derived at Camp Lejeune in North Carolina. A couple arguments that may be made under North Carolina law to hold the VA to its word that it will not seek subrogation are promissory estoppel and waiver, which are affirmative defenses that must be pleaded with particularity. ¹⁴⁶ Under North Carolina law, such theories are not affirmative relief, but rather defenses that would shield a claimant were the United States attempt to make a claim for subrogation for medical services from a claimant. ¹⁴⁷

1. Estoppel

The North Carolina Supreme Court holds that promissory and equitable estoppel¹⁴⁸ is a remedy available when one acts in reliance of a promise but does not provide consideration:

Promissory estoppel is now recognized as a species of consideration, but however atypical in other respects, this kind of estoppel is analogous to the principle on which the more classical or ordinary estoppel is based in that it is required to make it effectual that the promisee in reliance upon the promise has been placed in a changed condition or position where detriment could only be avoided by enforcement of the promise. ¹⁴⁹

Equitable estoppel is defined as “the effect of the voluntary conduct of a party whereby he is absolutely precluded . . . from asserting rights which might perhaps have otherwise existed . . . as against another person who in good faith relied upon such conduct.” ¹⁵⁰ Indeed, equitable estoppel when a party by actions, representations or silence induces a person to reasonably rely on those beliefs to the person’s detriment. There need be no fraud, bad faith, or intent to mislead or deceive a person. ¹⁵¹

The Supreme Court of North Carolina has held that an employer who paid some of an employee’s medical bills was not precluded from asserting the defense of failure to comply with the statute of limitations when the employee failed to file a claim within the timeframe required by statute. ¹⁵² By contrast, subsequently, the North Carolina Court of Appeals held that an employee who relied on his employer—and was informed by his employer—that it would take care of the worker’s compensation paperwork, was equitably estopped from asserting the statute of limitations as a defense. ¹⁵³ More recently, the Supreme Court of North Carolina held that a claimant who completed forms with an employer’s human resource department that were later lost, could reply on estoppel to prevent the employer’s invocation of the defense of statute of limitations. ¹⁵⁴

The Supreme Court of North Carolina has also held that a plaintiff who insured its commercial vehicles with a defendant, and defendant altered the policies without providing the plaintiff notice, was not allowed to deny the claim because the plaintiff was entitled to rely on the doctrine of equitable estoppel. ¹⁵⁵ The North Carolina Court of Appeals held that insurer was estopped from denying liability under the policy when the agent, without the knowledge of the insured, insert false answers to procure coverage. ¹⁵⁶

2. Waiver

If the VA had a right to subrogation, it is now waived under North Carolina law. North Carolina Court of Appeals holds that “[t]he essential elements of waiver are the existence at the time of the alleged waiver of a right, advantage or benefit, the knowledge, actual or constructive, of the existence thereof, and an intention to relinquish such right, advantage or benefit.” ¹⁵⁷ Thus, “[i]n order to prove a waiver by estoppel defendant need not prove all elements of an equitable estoppel, for which proof of actual misrepresentation is essential; neither need he prove consideration to support the waiver. Rather, he need only prove an express or implied promise . . . to waive the . . . provision and defendant’s detrimental reliance on that promise.” ¹⁵⁸ In other words, “[w]aiver sometimes has the characteristics of estoppel and sometimes of contract, but it is always based upon an express or implied agreement. There must always be an intention to relinquish a right, advantage, or benefit. The intention to waive may be expressed or implied from acts or conduct that naturally lead the other party to believe that the right has been intentionally given up.” ¹⁵⁹ The waiver concept in rooted in the idea that a party cannot change positions as to a material matter in the litigation. ¹⁶⁰ Any right can be waived unless it is forbidden by law. ¹⁶¹ Subrogation is not one that is required by law. The MCLA provides that “the United States shall have a right to recover”. ¹⁶² Thus, because there is no language that the United States “must” recover, the right to recovery can be legally waived. And, in fact, has been waived by its public relinquishment of subrogation.

5. PART V: Subrogation of Other Benefits

The VA cannot under any circumstance seek subrogation from a claimant for the care that it provided to the claimant. However, Section 804(e)(2) of the PACT Act has a subrogation provision that at first glance, purports to allow the United States to seek subrogation under the Camp Lejeune Justice Act for other benefits provided to a claimant. As discussed below, there are many nuisances to the United States’ right to offset an award for benefits provided when the United States is both the beneficiary and tortfeasor.

1. Section 804(e)(2) entitled “Subrogation for Health and Disability Benefits Relating to Water Exposure”

Section 804(e)(2) provides that an award under the PACT Act will be offset by any award a claimant has received for the same illness due to exposure at Camp Lejeune:

Any award made to an individual, or legal representative of an individual, under this section shall be offset by the amount of any disability award, payment, or benefit provided to the individual, or legal representative–(A) under–(i) any program under the laws administered by the Secretary of Veterans Affairs; (ii) the Medicare program under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.); or (iii) the Medicaid program under title XIX of the Social Security Act (42 U.S.C. 1396 et seq.); and (B) in connection with health care or a disability relating to exposure to the water at Camp Lejeune.

When interpreting a statute, a court must first start with the unambiguous text. Citation. If the text is unambiguous, the Fourth Circuit will enforce the terms as drafted. Citation.

While this statute has not been the subject of interpretation, the title itself—defines that the scope of subrogation is limited to benefits related to water exposure. Furthermore, a plain reading of the text of the statute requires offset of an award based on the receipt of benefits that have been provided in connection with exposures to water at Camp Lejeune.

Thus, there will be no offset of an award if a veteran is receiving benefits for Post-Traumatic Stress Disorder (“PTSD”), but was diagnosed and received an award for leukemia.

2. Judicial Interpretation of Offset of Social Security Benefits, Medicare and Medicaid or Other Benefits Paid by the United States

Similar to the text of Section 804, courts hold that social security and other benefits do not offset an award unless those benefits are directly linked to the injury caused by a tort-feasor.

The Fourth Circuit opened the door to what would offset an award when the United States is both the tort-feasor and benefit provider. ¹⁶³ There, the Fourth Circuit articulated what is now known as the collateral source doctrine when the United States is both the tort-feasor and benefit provider. The collateral source doctrine, as a general rule, bars a tort-feasor from deducting, from the amount of the corresponding indemnity, the compensation or benefits which the prejudiced party may have received from a third person or entity, this is, from a source not related with the defendant, denominated collateral source rule.¹⁶⁴ Restatement (Second) of Torts provides in pertinent part that “[p]ayments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable.”¹⁶⁵ “A payment made by a tortfeasor or by a person acting for him to a person whom he has injured is credited against his tort liability, as are payments made by another who is, or believes he is, subject to the same tort liability.” ¹⁶⁶

If the United States is both the tortfeasor and benefit provider, the application of the collateral source doctrine is modified. ¹⁶⁷ In the circumstance in which the United States is on both ends, courts look at both the character of the benefits received and the source of those benefits. If the benefit is in the nature of a fringe benefit, as opposed to an effort to offset its liability, it is generally considered collateral and not deducted from an award. ¹⁶⁸ Likewise, where the benefits are paid out of a special fund or designated government benefits program, rather than general government revenues from the department of the treasury, courts generally decline to deduct them from a damages award. This is particularly true when the plaintiff has contributed to the special fund.¹⁶⁹

Indeed, the Fourth Circuit focus is to determine if an award will result in double payment from the department of the treasury.¹⁷⁰ As an example, the Fourth Circuit refused to reduce an award of a claimant based upon the payment of a life insurance that was provided by the United States because it was paid for by the veteran. The Fourth Circuit further explained the collateral source doctrine in United States v. Price.¹⁷¹ There, the Fourth Circuit articulated that the broad rule seems to be that if a plaintiff receives payments from a tortfeasor to specifically compensate for injury from the tortfeasor, it is inequitable to require the tortfeasor to pay twice for the same injury. However, if the compensation comes from a collateral source, it should not be offset against the injured party.¹⁷² In Price, the court concluded that payments made by the United States under the Civil Service Retirement Act were collateral to injury the United States caused and thus not eligible to reduce the balance of the award.¹⁷³

The same, if not more, is true for the Third Circuit. Based on the Fourth Circuit’s decisions, ¹⁷⁴ the Third Circuit indicated that its primary focus is whether an award would result in “double-payment out of the general treasury by the United States” for the same injury. ¹⁷⁵ The Third Circuit holds that Social Security Benefits should not be deducted from an award in states that recognize the collateral source rule because the payments are contributions from an employee and employer and not solely out of the treasury. ¹⁷⁶ The Third Circuit is firm that it will not allow a claimant’s award to be reduced based on payments of funds from sources other than the United States’ treasury even if provided to mitigate the same injury. More importantly, the Third Circuit, entertained that it will allow a veteran to actually increase the payment of an award based on the value of services provided by the VA, if, and only if, the recovery is to be sourced from an entity other than the United States. In doing so, the Third Circuit has announced and expanded its application of the collateral source rule. In the Third Circuit a veteran may be allowed to recover for the value of medical services provided by the VA from an entity other than the United States.¹⁷⁷

Like the Fourth and Third Circuits, other jurisdictions, which include the Ninth and Tenth Circuits, also hold that a claimant may receive benefits directly from the United States which, because of their nature, are not considered double compensation for the same injury but deemed collateral. ¹⁷⁸

Reading the courts’ holdings leads to the conclusion: The VA’s right to subrogation and or decrease of an award is not solely based on the source. Rather, the focus of the inquiry is whether the subsequent award will result in double payment to a veteran out of the United States’ treasury. ¹⁷⁹

Many courts have concluded that Social Security disability benefits and funds from other similar government programs do not offset tort liability.¹⁸⁰ The Eastern District of North Carolina is among those courts to have recognized no offset. ¹⁸¹ Other courts in the Fourth Circuit do not offset Social Security disability benefits. ¹⁸²

Likewise, courts hold that Medicare payments are also a collateral source, because like Social Security disability benefits, they were paid out of a “special fund that is separate and distinct from general government revenues” and to which plaintiff had contributed.¹⁸³ The same rule is applicable to Medicaid benefits. ¹⁸⁴ This is true for district courts in the Fourth Circuit. ¹⁸⁵ This, however, does not imply that Medicare and Medicaid will not have a lien on medical expenses. [] Furthermore, Civil Service Retirement benefits are not deductible.¹⁸⁶ National Service Life Insurance Policy benefits also not deductible. ¹⁸⁷ Thus, it is reasonable to conclude that there will be very minimal deductions in awards under the Camp Lejeune Justice Act.

6. PART VI: How Will Other Veteran Benefits be Impacted After Receiving an Award?

An important and practical concern that arises in personal injury settlements is what impact will a windfall of funds have on a person’s life and benefits received from the United States. [More here]

1. Social Security Benefits

There are two types of Social Security. Social Security Disability (“SSD” or “SSDI”) and Social Security Supplemental Income (“SSI”) benefits. Social Security Disability benefits are broken into three categories: Retirement, Disability and Survivor. Retirement benefits can be paid once a person reaches sixty-two (62) to seventy (70) years old. Disability benefits are paid to those who can’t work because they have a medical condition that’s expected to last at least one year or result in death before retirement. Survivors benefits are paid to widows, widowers, and to the dependents of eligible workers.

Individuals who receive Social Security Disability have met eligibility requirements by paying into the social security system and being classified as disabled by the Social Security Administration’s standards. A personal injury settlement will not affect SSD benefits. Social Security benefits will continue. ¹⁸⁸

Supplemental Income is a federally funded supplemental income program that provides financial assistance to low-income disabled, adults and children. SSI is considered a “needs-based” government benefit. As such, one of the main eligibility requirements for Supplemental Security Income is an asset or resource test. SSI considers “income” anything a person receives that can be used for food or shelter but there are exclusions. ¹⁸⁹ The maximum income varies by state, but it relatively low. To be eligible for SSI, a person must not have more than $2,000 in assets and a couple no more than $3,000. The Social Security Administration considers any money as a resource in the month after it was received. Accepting a cash settlement that exceeds the statutory threshold would likely disrupt SSI eligibility.

There are some exceptions. Supplemental Nutrition Assistance Program benefits do not count as income. Income tax refunds do not count as income. And Agent Orange settlement payments do not count as income. ¹⁹⁰ Thus, there is some room to assert a claim that Camp Lejeune Settlements, likewise, should not count as income.

Nevertheless, please see the discussion below at infra, ______, to understand how best to protect SSI benefits.

2. Medicare and Medicaid

Under the Medicare Act, the federal government reimburses hospitals for supplying medical services to the elderly and disabled. ¹⁹¹ Settlements do not impact Medicare eligibility but any settlement must be reported to Medicare within 60 days for any recovery related to personal injury claims to with it has paid medical bills. Medicare has a lien to the claims related to the treatment received for the settled injury.

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396, et seq. provides for the establishment of Medicaid, which makes federal financial assistance available to states that provide medical services to needy individuals in accordance with the Medicaid Act. There are strict income limits. Typically, the benefits will discontinue for a period of time in the event a claimant receives a lump sum payment. ¹⁹² Though not considered income, lump sum payments must be reported.

Most of the courts analyze Medicaid benefits in conjunction with other need-based programs. Until 1981, a recipient of a need-based benefit could receive a lump sum payment and not be disqualified if the funds had been depleted. ¹⁹³ The Omnibus Budget Reconciliation Act of 1981, required that a lump sum of money be deemed “income” to the recipient. ¹⁹⁴

Under the lump-sum rule, recipients who receive personal settlements of a claim in an amount in excess of the monthly income limit allowed by the state, is to be excluded from the program for a time equal to the time the money should have lasted under the state’s need standard. ¹⁹⁵ The rule is applicable irrespective of how the funds are used and where the funds are derived. The United States Supreme Court upheld the termination of a family’s benefits received from a lump-sum Social Security disability payment that was used to keep the family from foreclosure. ¹⁹⁶ The only criteria is that the money falls in the possession of a person or family who is a need-based benefit recipient. ¹⁹⁷

The Fourth Circuit holds that termination from

Similar to Medicare, settlements must be reported to Medicaid. ¹⁹⁸

7. CONCLUSION

If the VA were to attempt to seek subrogation from a veteran for the United States’ payments under the Camp Lejeune Justice Act, it would be an uphill battle. Neither the historical context of the Camp Lejeune Just Act, law, nor primary purpose of the FMCRA is consistent with the idea that a veteran must repay the United States for medical services it provided due to a harm that the United States caused. Such a result would be nonsensical. Nevertheless, that does not mean that a veteran can dip into the federal treasury twice—for the same harm. There may be certain limitations to benefits that have been paid. But rest assured that subrogation from a veteran for the provision of medical care and services, is not one of them.

Carroll v. United States, 625 F. Supp. 1, 8 (D. Md. 1982) (“Overton v. United States, 619 F.2d 1299 (8th Cir. 1980), is not to the contrary. In that case, the Eighth Circuit distinguished Smith and held in a swine flu case brought under the FTCA that the government was entitled to a set-off for Medicare payments because the plaintiff had not made any contributions to the funds from which the Medicare payments were derived.”).