SETTLING FTCA CASES INVOLVING MAJOR INJURY: THE LANDMINES ASSOCIATED - - PDF document

SETTLING FTCA CASES INVOLVING MAJOR INJURY: THE LANDMINES ASSOCIATED WITH REVERSIONARY TRUSTS Special Needs Alliance Presentation Michael K. Livingston Davis Levin Livingston Honolulu, Hawaii Under the FTCA, the United States is liable in tort in same manner and to same extent that state law would impose liability on a private individual in similar circumstances. The United States shall be liable, respecting the provisions of this title relating to tort claims, in the same manner and to the same extent as a private individual under like circumstances, but shall not be liable for interest prior to judgment or for punitive damages. 28 U.S.C.A. § 2674 (West) The FTCA delegates settlement authority to the Attorney General or his/her designee. The Attorney General or his designee may arbitrate, compromise, or settle any claim cognizable under section 1346(b) of this title, after the commencement of an action thereon. 28 U.S.C.A. § 2677 (West) There is only limited guidance available with respect to settlement procedures and criteria under the FTCA. 4-5.230 - Torts Branch Procedures—Settlement of Federal Tort Claims Act Suits United States Attorneys responsible for the defense of FTCA or other tort litigation (e.g., Suits in Admiralty Act or Vessels Act) are currently delegated $1,000,000 in settlement authority, subject to the limitations set forth in Civil Directive No. 1-15, 28 C.F.R. Part O, Subpart y, App. If a United States Attorney seeks to settle for an amount in excess of the delegated authority, a detailed justification for the settlement must be forwarded to the Torts Branch. The responsible Director will then make a recommendation to the Assistant Attorney General (or if the proposed amount is in excess of $4,000,000 to the Associate Attorney General). Although the Torts Branch endeavors to expedite consideration of settlement proposals, opposing counsel and, if necessary, the court should be informed that immediate action cannot be guaranteed on any settlement

• proposal. It is customary to consult with the Torts Branch during settlement negotiations

when any concern arises regarding the advisability of settlement or of the amount of the

• settlement. Although authority to settle a case can be obtained in exceptional cases prior

to submission of an authorized offer from the other party(ies) to the case, this procedure is highly disfavored and should not be used unless special justification for its use is

• provided. However, the Torts Branch will provide counsel as to what amount it will

recommend to the Assistant Attorney General in advance of initiation or completion of settlement negotiations. Stipulations for admissions which are tantamount to a stipulation of liability must be approved by whatever level of authority is appropriate based on the highest reasonably predictable judgment that the court could enter predicated upon the stipulation or admission. [updated October 2015] The O’Connor Memorandum – 2008: Although the Attorney General has broad discretion in settling claims under the FTCA, that discretion is not unlimited. Currently, under the U.S. Constitution, disability is neither a suspect nor a quasi-suspect classification leading to stricter scrutiny under the Equal Protection Clause. Consequently, unlike race or gender discrimination, a charge of disability discrimination under the Equal Protection Clause will be evaluated by determining whether the governmental entity was pursuing a legitimate governmental end, and, if so, whether the action was rationally related to that end. See, e.g., City of Cleburne, Tex. v. Cleburne Living Center: Our refusal to recognize the retarded as a quasi-suspect class does not leave them entirely unprotected from invidious discrimination. To withstand equal protection review, legislation that distinguishes between the mentally retarded and others must be rationally related to a legitimate governmental purpose. This standard, we believe, affords government the latitude necessary both to pursue policies designed to assist the retarded in realizing their full potential, and to freely and efficiently engage in activities that burden the retarded in what is essentially an incidental manner. The State may not rely on a classification whose relationship to an asserted goal is so attenuated as to render the distinction arbitrary or irrational.

City of Cleburne, Tex. v. Cleburne Living Ctr., 473 U.S. 432, 446, 105 S. Ct. 3249, 3257- 58, 87 L. Ed. 2d 313 (1985). In other words, the Government can make decisions for any legitimate reason, but not for an improper reason. The Supreme Court, over one hundred years ago, recognized that the Constitution prohibits the administration of law “with an evil eye and an unequal hand, so as to practically make unjust and illegal discrimination between persons in similar circumstances.” Yick Wo v. Hopkins, 118 U.S. 356, 373–74 (1886). In Nemmers v. United States, the Seventh Circuit applied this fundamental precept to the decisions of the U.S. District court a birth injury case brought against the Government under the FTCA: But a judge may not exercise discretion after the fashion of a kahdi, withholding or handing out favors at whim. “[D]iscretionary choices are not left to a court's ‘inclination, but to its judgment; and its judgment is to be guided by sound legal principles'.” Albemarle Paper Co. v. Moody, 422 U.S. 405, 416, 95 S.Ct. 2362, 2371, 45 L.Ed.2d 280 (1975), quoting from United States v. Burr, 25 F.Cas. 30, 35 (No. 14,692d) (CC Va.1807) (Marshall, C.J.). “[D]iscretion must be judicial discretion. It must be subject to rational criteria, by which particular situations may be adjudged. ... Discretion without a criterion for its exercise is authorization of arbitrariness.” Brown v. Allen, 344 U.S. 443, 496, 73 S.Ct. 397, 441, 97 L.Ed. 469 (1953) (Frankfurter, J.). Nemmers v. United States, 795 F.2d 628, 634-35 (7th Cir. 1986). Some courts have also recognized that the United States Government has what might be viewed as an enhanced responsibility to deal fairly and equitably with citizens in connection with the settlement of claims brought under the FTCA: When the United States Government acts, as the embodiment of the collective conscience of our society, one must expect that the moral fibers of our nation— honor, integrity and commitment—will be reflected as a model to our citizens. Reed By & Through Reed v. United States, 717 F. Supp. 1511, 1517-18 (S.D. Fla. 1988) aff'd, 891 F.2d 878 (11th Cir. 1990). Similarly, the United States Supreme Court noted in Heckler v. Community Health Services, that the citizens of this nation have a legally cognizable interest “in some minimum standard of decency, honor and reliability in their dealings with the Government.” Heckler v. Community Health Services, 467 U.S. 51, 104 S. Ct. 2218, 2224, 81 L.Ed.2d 42 (1984). These minimum standards apply even when citizens are dealt decisions reached largely in secret, behind the closed doors of the DOJ.

The FTCA settlement process is a black box, and therefore almost completely immune from judicial scrutiny. There are only a few cases that deal with questions regarding the settlement process under the FTCA. In general, these cases uphold the approval process, as summarized in the Torts Branch Procedures, 4-5.230, set out above: “[T]he federal government, though not independent of the court's authority, is also not like any other litigant.” United States v. U.S. Dist. Court for N. Mariana Islands, 694 F.3d 1051, 1059 (9th Cir.2012). Indeed, it would be “highly impractical, if not physically impossible,” for the Assistant Attorney General to prepare for and appear at all settlement conferences for all cases that he possesses the authority to settle. Id.; see also In re Stone, 986 F.2d 898, 905 (5th Cir.1993) (district court abused its discretion by routinely requiring a Government representative with “ultimate settlement authority” to be present at all pretrial or settlement conferences). A.P. ex rel. Phinisee v. United States, 556 F. App'x 132, 136-37 (3d Cir. 2014). The cases make it clear that a settlement agreement reached by an Assistant United States Attorney (AUSA) negotiating directly with the plaintiffs is a conditional settlement, with an implied “condition precedent,” and does not become final until approved by the Attorney General or his/her designee. See, e.g., Ostman v. St. John's Episcopal Hosp., 918 F. Supp. 635, 644 (E.D.N.Y. 1996) (“the necessity of Government ratification [] constitute[s] an implied condition precedent to the maturation of the remaining duties under the settlement agreement.”). A “condition precedent” is defined as an act or event that must occur, unless performance of the condition is excused, before a duty to perform a promise in the agreement arises. 17B C.J.S. Contracts § 671. The promisor has an implied obligation to exercise good faith and to make a reasonable effort to see to it that the condition is fulfilled, particularly where the promisor's

• bligation is conditioned on the occurrence of a contingency whose happening is solely within

the control of the promisor. Id. A breach by the promisor of that duty to act reasonably and in good faith in connection with the performance of the condition precedent will excuse the performance of the condition. Id.; 14 Williston on Contracts § 43:16 (4th ed.). In short, there is a sound legal basis for arguing that the Attorney General or his/her designee has a duty of good faith and fair dealing in connection with the review and approval or disapproval of a conditional settlement reached by an AUSA in a FTCA case. See, e.g., A.P. ex

• rel. Phinisee v. United States, 556 F. App'x at 136-37; Ostman v. St. John's Episcopal Hosp., 918
• F. Supp. at 644; Reed By & Through Reed v. United States, 717 F. Supp. at 1515.

The Axelrad Memorandum in 2000 appears to have established policy and practice for settlement of major injury cases under the FTCA. The Axelrad Memorandum – 2000: Axelrad Memorandum – The “underlying justification and reasons for using a reversionary trust: “Underlying justification and reasons for using a reversionary trust”: First: “an essential, guaranteed fund of money for the payment of enumerated future medical costs and expenses” “avoiding a ‘windfall’ to the estate of the beneficiary” “minimizes the risk of dissipation”

Second: “financially beneficial to the government” A reversionary trust poses profound challenges in protecting the injured plaintiff

• 1. Limitations are placed on access to and use of the settlement funds:

“an essential, guaranteed fund of money to pay for enumerated future medical costs and expenses”:

• 2. Future eligibility for public assistance programs is precluded.

First rationale: “… guaranteed fund of money for the payment of enumerated future medical costs and expenses” Excerpt from the declaration of an attorney with vast experience and knowledge regarding the use of reversionary trusts with plaintiffs with special needs: In summary, I have never seen a reversionary trust that meets the needs of the

• beneficiary. This is not due to the reversion of any assets in the trust to the

government at the death of the beneficiary. It is attributable to the structure of the trust itself. The reversionary trust disallows payment of any expenses that the Department of Justice does not consider to be strictly medical expenses. The beneficiary has no access to any income or services normally available to a person with a disability because the government's reversionary trust does not qualify as a special needs trust. Therefore the beneficiary is left with a trust/settlement that is inadequate to fund his medical and care needs; that disallows payment for the most basic needs such as food, clothing and shelter; and that allows no payment for quality of life expenses. In many cases, the injured plaintiff has either no capability of self-support, or a significantly compromised ability of self-support. However, because of the way that the reversionary trust is structured, it does not qualify as a special needs trust. Therefore, the beneficiary under a reversionary trust will never be eligible for Supplemental Security Income (currently $733 per month), Medicaid, or Community Based Care services under Medicaid waiver programs. Examples of life care needs that may not qualify for payment under the terms of a reversionary trust: Miscellaneous: Food Clothing, shoes Soap, toothpaste, shaving, hair cuts Dental checkups and care Cell phone and service Laptop or computer Cable TV Recreation, movies Tutoring, skill development Vacations Funeral and burial expenses Housing In-home attendant or residential care Therapy services

Medical transportation Motor vehicle expense The specific terms of the reversionary trust sometimes may be negotiated to include some of these needs as allowable benefits. Lump sum settlement payments generally can be transferred into a special needs trust with only a short term loss of eligibility for Supplemental Security Income, Medicaid, or Community Based Care services under Medicaid waiver programs. However, if the lump sum payment is made into a reversionary trust, this option is not available. Periodic annuity payments pose an especially difficult problem, unless the periodic payments are made directly into a special needs trust. Every time an annuity payment is received by the beneficiary, the beneficiary’s eligibility for public assistance is temporarily lost. Excerpt from the declaration of an attorney with vast experience and knowledge regarding the use of reversionary trusts with plaintiffs with special needs:

• e. The proposed Reversionary Trust precludes the Protected Person from

qualifying for Medicaid. This again is designed to save money for the defendant and effectively limits the resources available to the Protected Person to the “allowable benefits” under the proposed Reversionary Trust. Because the “allowable benefits” do not include many of the Protected Person’s life care needs, and because the settlement funds are inadequate even to pay for the “allowable benefits” that the Protected Person will require, the Reversionary Trust probably would place the protected Person in a situation in which he does not have sufficient funds to provide for even his basic life care needs, and yet is ineligible for the public assistance that would be available if his settlement funds had been placed into a special needs trust. As all of the settlement funds will be locked up in the restrictive Reversionary Trust, the Protected Person would never have the

• pportunity to pursue supplemental benefits or treatments, or enjoy any

life experiences aside from a mere subsistence-level existence.

• f. Other injured parties are allowed, pursuant to 42 U.S.C. 1396(d)(4)(A),

to establish and/or fund a special needs trust to help enhance an injured party’s quality of life. The requirement of the proposed Reversionary trust deprives the protected Person of this opportunity. Some courts have recognized and embraced the role of special needs trusts in protecting the interests of an injured plaintiff: I also find that the use of a special needs trust is appropriate in this case. It is clear that Nicholas will have serious ongoing medical and educational needs for the foreseeable future which cannot be met entirely through his parents' insurance or through Medicaid.

The proposed special needs trust would pay for medical and other needs which would not

• therwise be funded through Government programs. Nicholas's physicians have stated

that there exists significant uncertainty as to whether Nicholas will be a normally functioning adult. His mother believes he will never be able to leave home to live on his

• wn and will continue to require constant monitoring throughout his lifetime. I conclude

that placing the proceeds of the recovery into a special needs trust as proposed will best protect the interests of the infant. See L.R. 17.1(c). Gerow v. United States, No. CIVA93CV1198(RSP/GJD, 1997 WL 538910, at *3 (N.D.N.Y.

• Aug. 26, 1997).

To summarize, the standard form reversionary trust only pays expenses that meet the reversionary trust’s narrow definition of “medical necessity,” despite the fact that the Government’s negligence often has left the beneficiary without the ability to earn a living. In

• ther words, the standard DOJ reversionary trust often fails to provide for the beneficiary’s most

basic life care needs, including housing, in-home attendant or residential care, therapy services, medical transportation, motor vehicle expense and miscellaneous (which includes food, clothing, haircuts, toiletries, dental care, cellular phone and service, travel, vacations, personal care products, books, cable TV, internet, recreation, tutoring and instruction, computer technology, and other costs of everyday living). Consequently, the beneficiary who is disabled from the work force often will not have these basic and quality of life items unless obtained through charity. A reversionary trust thus will often condemn the beneficiary to a mere subsistence-level existence. Example: Injured plaintiff requires 24 hour care. Settlement provides a $500,000 lump sum payment plus a lifetime stream of non-taxable annuity payments starting at $5,675/month and increasing at 3.0% compounded annually. Looking solely at the injured plaintiff’s need for lifetime 24-hour attendant care: Assume the reversionary trust allows payment for 24 hour care in the beneficiary’s home or in a licensed residential care facility. (Such a generous provision for in-home or residential assistive care is actually rare in a reversionary trust). Assume the cost of 24 hour in-home care is approximately $10,000 per month for a patient who sleeps through the night without care needs, and approximately $15,000 for a patient who requires attention overnight. Assume the cost of a group home on a private pay basis is approximately $14,000 monthly. (These figures are quite low). The trust is not adequately funded to pay for the care “allowed” under the reversionary trust without supplementation through a Medicaid waiver program. A special needs trust would allow access to Medicaid waiver funds and the in-

home care or group home would be funded by that program, allowing the trust funds to provide supplemental care. However, the reversionary trust precludes use

• f a special needs trust.

As soon as the $500,000 initial lump sum is exhausted, the monthly annuity payment will not be sufficient to provide for in-home or residential assistive care, leaving aside all the other needs of the injured plaintiff. However, the monthly annuity payment made to the reversionary trust would disqualify the injured plaintiff from receiving Supplemental Security Income or Medicaid waiver services in the community. The only option would be nursing home care utilizing long term care Medicaid assistance. To qualify for this limited assistance, the injured plaintiff would be required to spend all but $40 of the monthly annuity payment to the nursing home, leaving him insufficient funds to provide for goods and services beyond bare subsistence. Is there an inherent conflict of interest in a reversionary trust? Second rationale from Axelrad Memorandum: “financially beneficial to the government” If the Government, as Grantor of the trust, retains a reversionary interest in the trust, its interest in preserving trust assets in order to maximize its reversionary interest is pitted against the interests of the beneficiary in receiving appropriate care. This conflict of interest is exacerbated by the fact that the beneficiary’s life expectancy is likely to be affected substantially by the quality of care he receives, and by the fact that the Government has a significant continuing role in the administration of the reversionary trust. In other words, the Government’s reversionary interest is best served by minimizing the expenditures of trust funds, which will have the secondary effect of shortening (and decreasing the quality of) the beneficiary’s life. This patent conflict of interest was explicitly recognized in Dutra ex rel. Commencement Bay Guardianship Servs. v. United States, a FTCA case tried in the Western District of Washington: In the medical reversionary trust described by the Government, the United States would be grantor and Jose Dutra would be beneficiary. The trust would be administered by a trustee selected by the Government. Upon the death of Jose Dutra, the administrator would return the residue to the Government. The apparent conflict of an administrator doing what is best for the beneficiary while, at the same time, preserving trust assets for the Government which would recover in the event of premature death of the beneficiary has never been dealt with to this Court's satisfaction. Dutra ex rel. Commencement Bay Guardianship Servs. v. United States, No. C04-5025 RBL, 2006 WL 3030295, at *1 (W.D. Wash. Oct. 20, 2006).

Declaration of an attorney with vast experience and knowledge regarding the use of reversionary trusts with plaintiffs with special needs:

• d. The proposed Reversionary Trust will result in a trustee with divided loyalties

between the Protected Person’s on-going medical needs and the defendant’s interests in recouping residual funds at the Protected Person’s death. This is due to the restrictive terms of the Reversionary Trust concerning allowable benefits and the benefit approval process, as well as the fact that defendant remains actively involved in and has continuing powers and obligations with respect to the Reversionary trust (as described in paragraph 10, below). It is therefore unclear to whom fiduciary duties are owed and appears that the proposed Reversionary Trust is designed to save money for the defendant tortfeasor at the expense of the victim. This attorney concluded that, “the use of the Reversionary Trust is both unnecessary to protect the interests of the defendant and is directly contrary to the best interests of the Protected Person.” The Government’s justification for seeking a court-imposed reversionary trust in FTCA cases in which it has been found liable often has involved the contention that there is a conflict of interest between the infant victimized by the Government’s negligence and that infant’s parents, who stand to inherit any judgment funds that are not expended during the child’s lifetime. See, Hull by Hull v. United States, 971 F.2d 1499, 1503 (10th Cir. 1992) (approving a reversionary trust where “Lee's life may be compromised because the existing trust agreement provides that the parents inherit the entire trust assets if Lee dies while in their care.”). In other words, the Government often has asked federal courts to order imposition of a reversionary trust by arguing that there is an inherent conflict of interest between the trust beneficiary and his or her heirs, and that this conflict poses a danger to the beneficiary where the heir has some degree of control over the expenditure of trust assets. It is thus ironic for the Government to insist on use of a reversionary trust in which it has substantial control over the expenditure of the beneficiary’s trust assets as well as a reversionary interest in all that remains in the trust at the time of beneficiary’s death. Although this conflict of interest seems both

• bvious and serious, only a few courts have explicitly addressed the issue:

Finally, plaintiffs argue that even if I conclude that a reversionary trust is required, the government cannot be involved in the trust without creating a conflict of interest and causing Jessica to be placed in a worse situation than she would be in under state law. I agree and will therefore require that the trustee's sole loyalty be to the beneficiary of the

• trust. I urge the parties to confer on this matter and, if possible, make a joint

recommendation to the court with respect to an appropriate trustee and the terms of the

• trust. If the parties cannot agree, I direct them to submit proposals concerning the matter.

Fonseca v. United States, 474 F. Supp. 2d 1011, 1012-13 (E.D. Wis. 2007). An additional problem: A reversionary trust requires a continuing involvement by the Government In 1972, the Third Circuit held in Frankel v. Heym, that damages in FTCA cases should be paid as lump-sum money judgments. One of the two stated reasons supporting this holding was to avoid “the continuing burden of judicial supervision that would attend a judgment creating a life trust.” Frankel v. Heym, 466 F.2d 1226, 1228-29 (3d Cir. 1972). The Tenth Circuit expressly embraced the Frankel rationale in Hull by Hull v. United States, stating “[w]e agree that courts cannot subject the Government to ongoing obligations like the continuing payments proposed in Frankel.” Hull by Hull v. United States, 971 F.2d 1499, 1505 (10th Cir. 1992); see also Hill v. United States, 81 F.3d 118, 120 (10th Cir.1996). Furthermore, the statute authorizing the Attorney General to settle FTCA cases, 28 U.S.C.A. § 2672, specifically requires that “any such award, compromise, settlement, or determination shall be final and conclusive on all officers of the Government, except when procured by means of fraud.” 28 U.S.C.A. § 2672. This statutory provision also mandates that “[t]he acceptance by the claimant of any such award, compromise, or settlement shall be final and conclusive on the claimant ….” Id. Additionally, every settlement that is submitted to the Treasury Department for payment must be certified as to its finality. 28 U.S.C. § 2414. There is simply no authority that would allow the Government to remain involved intrusively in the lives

• f plaintiffs with whom it has settled a FTCA case, just as there is no authority that would

support post-settlement attempts by the settling plaintiff to impose additional obligations on the Government related to the settled claims. Although the standard form reversionary trust does not involve an obligation by the Government to make continuing payments, it does require very substantial continuing

• bligations and involvement by the Department of Justice, as “Grantor” of the reversionary trust,

with respect to the administration of that trust. For example, the standard form reversionary trust includes a number of terms that require continuing obligations and involvements by Government, including provisions: that require prior written notice to the Government if the

principal of the trust is to be reduced by more than a designated amount in a given year; that require the administrator of the trust to render quarterly statements to the Government, with a right reserved to the Government to object to any payment from the trust estate; and that give the Government a prominent role in selection and compensation of the trust administrator, the trust attorney, and the trustee. Moreover, this substantial continuing involvement of the Government in the administration of a reversionary trust exacerbates the conflict of interest discussed above. The fact that the standard form reversionary trust requires that the Government remain substantially obligated and involved in the administration of the trust for the duration of the life

• f the trust beneficiary appears to violate the requirement that any FTCA settlement “shall be

final and conclusive on all officers of the Government” and certified as “final and conclusive” to the Treasury Department. Does the DOJ’s refusal to allow modification the reversionary trust to make it a special needs trust constitute discrimination? Federal law specifically provides for the right of disabled persons to use special needs trusts to maintain eligibility for public assistance. 42 U.S.C. § 1396p(d)(4). This statutory right has received protection from a number of courts. For example, in 2012, the Third Circuit explained the statutory scheme, which requires that special needs trusts cannot be counted as assets in determining Medicaid eligibility: In the 1993 OBRA amendments, Congress established a general rule that trusts would be counted as assets for the purpose of determining Medicaid eligibility. But Congress also excepted from that rule three types of trusts meeting certain specific requirements. Taken together, these are generally called “special needs trusts” or “supplemental needs trusts.” “A supplemental needs trust is a discretionary trust established for the benefit of a person with a severe and chronic or persistent disability and is intended to provide for expenses that assistance programs such as Medicaid do not cover.” These expenses—books, television, Internet, travel, and even such necessities as clothing and toiletries— would rarely be considered extravagant. Lewis v. Alexander, 685 F.3d 325, 333 (3d Cir. 2012), cert. denied, 133 S. Ct. 933, 184 L. Ed. 2d 724 (2013) (internal citation omitted). The Third Circuit held in Lewis v. Alexander that the Federal law exempting special needs trusts from assets counted to determine Medicaid eligibility, 42 U.S.C. § 1396p(d)(4), preempted a Pennsylvania state law that attempted to regulate special needs trusts. Id., 685 F.3d

at 331. The Lewis court emphasized that “Congress did not intend to allow additional burdens targeted specifically at special needs trusts”: Congress' intent was not merely to shelter special needs trusts from the effect of 42 U.S.C. § 1396p(d)(3). It was to shelter special needs trusts from having any impact on Medicaid eligibility. Id., 685 F.3d at 343-44. In fact, the Third Circuit held that the plaintiffs had a private cause of action under Section 1983 of the Civil Rights Act based on the claim that Pennsylvania had effectively changed the eligibility requirements for medical assistance, contrary to federal law, thereby interfering with the plaintiffs’ right to receive Medicaid. Id., 685 F.3d at 344-45. The Third Circuit decision in Lewis followed the approach taken by the Eight Circuit, but rejected the contrary approach taken by the Second and Tenth Circuits: Defendants' central argument, cutting across both the private-right-of-action and the merits sections of their brief, is that 42 U.S.C. § 1396p(d)(4) does not mandate that the States exempt special needs trusts meeting its criteria. Defendants' argument has been embraced by both the Second and Tenth Circuits. See Wong v. Doar, 571 F.3d 247 (2d Cir.2009); Keith v. Rizzuto, 212 F.3d 1190 (10th Cir.2000). Meanwhile, the Eighth Circuit suggests in a passing reference that § 1396p(d)(4) is mandatory. See Norwest Bank of N.D., N.A. v. Doth, 159 F.3d 328, 330 (8th Cir.1998). Having given careful consideration to Defendants' arguments and to the positions of our sister circuits, we conclude that 42 U.S.C. § 1396p(d)(4) imposes mandatory obligations upon the States. Lewis v. Alexander, 685 F.3d 325, 342, 343-44 (3d Cir. 2012). Beware, however, of the contrary approach taken by some courts which allow the States to enact legislation requiring that special needs trusts to be counted against eligibility for public assistance: We are compelled to conclude that § 1396p(d)(4)(A) does not require States to exempt special needs trusts from Medicaid eligibility determinations. See Keith, 212 F.3d at

• 1193. It follows that the subsection confers no binding obligation on the States to exclude

special needs trusts from Medicaid eligibility consideration. Accordingly, under the third prong of the Blessing test, we hold that § 1396p(d)(4)(A) is not enforceable through § 1983. Hobbs ex rel. Hobbs v. Zenderman, 579 F.3d 1171, 1181 (10th Cir. 2009); see also, Wong v. Doar, 571 F.3d 247 (2d Cir.2009); Keith v. Rizzuto, 212 F.3d 1190 (10th Cir.2000). In 1999, just before the date of the Axelrad Memorandum, the United States Supreme Court decided the landmark case of Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581, 119 S. Ct. 2176, 144 L. Ed. 2d 540 (1999). Olmstead involved a claim for discrimination under Title II of the Americans with Disabilities Act (ADA) by two women with mental disabilities who had been

institutionalized despite the fact that their treating physicians had recommended community- based treatment. The Supreme Court emphasized in Olmstead that “unjustified isolation ... is properly regarded as discrimination based on disability” (id. at 597, 119 S.Ct. 2176), holding that “under Title II of the ADA, States are required to provide community-based treatment for persons with mental disabilities when the State's treatment professionals determine that such placement is appropriate.” Id., at 607, 119 S.Ct. 2176. The Supreme Court reasoned as follows: Recognition that unjustified institutional isolation of persons with disabilities is a form of discrimination reflects two evident judgments. First, institutional placement of persons who can handle and benefit from community settings perpetuates unwarranted assumptions that persons so isolated are incapable or unworthy of participating in community life. … Second, confinement in an institution severely diminishes the everyday life activities of individuals, including family relations, social contacts, work options, economic independence, educational advancement, and cultural enrichment. Id., at 600-01, 119 S. Ct. 2176 (citations omitted); see also Townsend v. Quasim, 328 F.3d 511, 515, 517–18 (9th Cir.2003) (holding that requirement for the plaintiff to move to a nursing home in order to receive needed available Medicaid services violated the integration requirement of the ADA); Fisher v. Okla. Health Care Authority, 335 F.3d 1175, 1182 (10th Cir.2003) (a prescription limitation violates the ADA because it “does not allow the plaintiffs to receive services for which they are qualified unless they agree to enter a nursing home.”). The Supreme Court relied heavily in Olmstead on the Attorney General's regulations and

• pinions regarding Title II of the ADA, which included a regulation that requires public entities

to “administer services, programs and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities”: We examine first whether, as the Eleventh Circuit held, undue institutionalization qualifies as discrimination “by reason of ... disability.” The Department of Justice has consistently advocated that it does.9 Because the Department is the agency directed by Congress to issue regulations implementing Title II, see supra, at 2182–2183, its views warrant respect. We need not inquire whether the degree of deference described in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), is in

• rder; “[i]t is enough to observe that the well-reasoned views of the agencies

implementing a statute ‘constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.’” Id., at 597-98, 119 S. Ct. 2176 (citations omitted). Footnote #9 in the above quotation elaborated

• n the opinions of the Attorney General, which Olmstead viewed as “a body of experience and

informed judgment to which courts and litigants may properly resort for guidance”:

9. See Brief for United States in Halderman v. Pennhurst State School and Hospital, Nos. 78–1490, 78–1564, 78–1602 (CA3 1978), p. 45 (“[I]nstitutionalization result[ing] in separation of mentally retarded persons for no permissible reason ... is ‘discrimination,’ and a violation of Section 504 [of the Rehabilitation Act] if it is supported by federal funds.”); Brief for United States in Halderman v. Pennhurst State School and Hospital, Nos. 78–1490, 78–1564, 78– 1602 (CA3 1981), p. 27 (“Pennsylvania violates Section 504 by indiscriminately subjecting handicapped persons to [an institution] without first making an individual reasoned professional judgment as to the appropriate placement for each such person among all available alternatives.”); Brief for United States as Amicus Curiae in Helen L. v. DiDario, 46 F.3d 325, 335 (C.A.3 1994), (“Both the Section 504 coordination regulations and the rest of the ADA make clear that the unnecessary segregation of individuals with disabilities in the provision of public services is itself a form of discrimination within the meaning of those statutes.”); id., at 337–339. Id., at 598, 119 S. Ct. 2176. The example discussed above, in which the use of a reversionary trust necessarily would result in the undue institutionalization of the settling plaintiff, is not uncommon. Indeed, as discussed below, a number of disability rights organizations have identified this exact issue as a significant problem. On June 22, 2009, in celebration of the 10th anniversary of the Olmstead decision, President Obama launched the “Year of Community Living.” Several years later, a group of many of the most prominent disability rights organizations in the United States, spear-headed by VetsFirst, referenced President Obama’s embrace of Olmstead in a letter to Attorney General Holder, complaining that the use of reversionary trusts in settling FTCA cases violated federal law and the Olmstead decision: We write to request that the Department of Justice (DOJ) review its practices concerning settlement of Federal Tort Claims Act (FTCA) claims brought by individuals with disabilities who have been harmed by medical malpractice. Such settlements *** encourage the needless institutionalization of these individuals. The undersigned organizations urge this review to ensure that FTCA settlements afford individuals with disabilities the opportunity to receive services in the most integrated setting appropriate to their needs. … In settling medical malpractice cases under the FTCA, however, DOJ has used standardized stipulation and trust agreements which provide for institutional care but do not cover the services necessary for people to live in their own homes and

• communities. This practice is in violation of Section 504 of the Rehabilitation

Act and the Supreme Court’s Olmstead decision, and contrary to the President’s stated policy. This burden falls primarily upon veterans and military family members who have been catastrophically injured by Government doctors.

Letter dated August 6, 2012, from multiple disability rights organizations to Attorney General Eric Holder. The signatory organizations received no response from the Department of Justice. On May 8, 2103, a follow-up letter was sent to Attorney General Holder, enclosing a copy of the August 6, 2012 letter, reiterating the request for a review of the practices concerning settlement

• f FTCA cases, and requesting a response. Letter dated May 8, 2013, from multiple disability

rights organizations to Attorney General Eric Holder. There has been no response to this follow- up letter. A case can be made that the DOJ’s requirement that its standard form stipulation and reversionary trust be used in settling major injury FTCA cases constitutes discrimination against individuals with disabilities in violation of Section 504 of the Rehabilitation Act: No otherwise qualified individual with a disability in the United States, as defined in section 705 (20) of this title, shall, solely by reason of his or her disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service. 29 U.S.C. §701. In this regard, the requirement that a reversionary trust be utilized in settling such cases arguably constitutes a denial of the benefits of the Medicaid “program” and discrimination under an “activity conducted by any Executive agency,” in violation of Section 504 of the Rehabilitation Act. Moreover, it is troubling that the DOJ would pursue a policy that necessarily would result in the subsistence-level institutionalization of the victims of Governmental negligence, while the official position of the Attorney General is that the unnecessary segregation and institutionalization of disabled persons constitutes discrimination under federal law. If the Government has implemented a formal policy to deny to settling plaintiffs access to special needs trusts, there is also a serious question as to whether that policy would exceed the authority of the DOJ. The DOJ has never been delegated the authority to institute a broad regulatory scheme whereby it could deny injury victims the right to establish special needs trusts as allowed by right under the provisions of 42 U.S.C. § 1396p(d)(4)(A). Such public policy determinations are uniquely legislative in nature, and are well beyond the authority of the DOJ, just as some courts have held that they are beyond the authority of State legislatures. Lewis v. Alexander, 685 F.3d 325, 331, 343-45 (3d Cir. 2012) cert. denied, 133 S. Ct. 933, 184 L. Ed. 2d

724 (2013). This is especially true where such broad policy decisions are made and implemented in secret, and not through proper rule-making. The problem, however, is that the decisions, practices, and even the policies of the DOJ in connection with the FTCA settlement process are rarely disclosed and are not ordinarily

• discoverable. The DOJ can take the position in settlement negotiations that any settlement must

utilize its standard form reversionary trust, but the question of whether that requirement would be problematic depends entirely on the amount of money the DOJ is willing to pay to settlement the case, including both payments into the trust and payments outside the trust. A knowledgeable plaintiff’s attorney, when negotiating with the Government, will understand the implications of using a reversionary trust, and will insist that the settlement include sufficient funds both inside the reversionary trust and outside the reversionary trust to provide the future care the injured plaintiff will require. In those cases in which a settlement is reached, of course the injured plaintiff will not challenge (at least initially) the terms of the settlement based on a claim that it is inadequate or even discriminatory. In cases that do not settle, there will rarely be a situation in which the problems associated with use of a reversionary trust can be isolated as the sole reason a settlement was not achieved. Unfortunately, some plaintiff’s attorneys do not understand that a reversionary trust will not provide for many life care expenses that are not “medical” expenses, and will preclude the injured plaintiff’s eligibility for public assistance to meet those needs. Moreover, often the adverse consequences of using a reversionary trust to settle a major injury case will not manifest for many years. The Axelrad Memorandum does appear to set out a policy that might be subjected to a legal challenge, but there is a question as to who would have standing to challenge that policy. “An organization has standing to sue under the ADA if it meets Article III's standing requirements.” Ass'n for Disabled Americans, Inc. v. Claypool Holdings, No. IP00–0344–C–T/G, 2001 WL 1112109, at *14 (S.D.Ind. Aug. 6, 2001) (citing Innovative Health Sys., Inc. v. City of White Plains, 117 F.3d 37, 48 (2nd Cir.1997)). An

• rganization can establish standing to bring suit under two theories. The first is an
• rganizational theory which enables an organization to bring suit on its own behalf. The

second is a representational theory which allows an organization to sue on behalf of its

• members. Moseke v. Miller and Smith, Inc., 202 F.Supp.2d 492, 497 (E.D.Va.2002);

Buchanan v. Consol. Stores Corp., 125 F.Supp.2d 730, 736 (D.Md.2001); Maryland Minority Contractor's Ass'n, Inc. v. Maryland Stadium Auth., 70 F.Supp.2d 580, 587 (D.Md.1998).

An organization has standing to sue in its own right if the organization has suffered a “concrete and demonstrable injury to the organization's activities—with *770 [a] consequent drain on the organization's resources – constitut[ing] ... more than simply a setback to the organization's abstract social interests.” Havens Realty Corp. v. Coleman, 455 U.S. 363, 379, 102 S.Ct. 1114, 71 L.Ed.2d 214 (1982). Goldstein v. Costco Wholesale Corp., 278 F. Supp. 2d 766, 769-70 (E.D. Va. 2003). The recent decision by the Ninth Circuit in Int'l Longshore & Warehouse Union v. Nelson, provides a good summary of the standing requirements: First, the Union asserts organizational standing. To establish standing,

• rganizations, like individuals, must satisfy the requirements of three elements: (1)

injury-in-fact, (2) causation, and (3) redressability. La Asociacion de Trabajadores de Lake Forest v. City of Lake Forest, 624 F.3d 1083, 1088 (9th Cir.2010). “An organization suing on its own behalf can establish an injury when it suffered ‘both a diversion of its resources and a frustration of its mission.’ ” Id. (quoting Fair Hous. of Marin v. Combs, 285 F.3d 899, 905 (9th Cir.2002)). … Second, ILWU asserts claims for damages on behalf of its members. ILWU lacks associational standing to bring these claims. “[A]n association has standing to bring suit

• n behalf of its members when: [1] its members would otherwise have standing to sue in

their own right; [2] the interests it seeks to protect are germane to the organization's purpose; and [3] neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” Hunt v. Wash. State Apple Advertising Comm'n, 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). Int'l Longshore & Warehouse Union v. Nelson, 599 F. App'x 701, (Mem)-702 (9th Cir. 2015). Because of standing issues and the secrecy of the DOJ decision-making process in connection with the settlement of major injury FTCA cases, the best policy-level approach probably is for disability rights organizations and attorneys involved in protecting the interests of special needs clients to continue their lobbying efforts in both the legislative and the executive

• arenas. In particular, it seems that it is long past time for the approach set forth in the Axelrad

Memorandum to be revisited, and for the kinds of policies reflected in that memorandum to be subjected to appropriate rule-making or legislation. The concept of a reversionary interest: is “avoiding a ‘windfall’ to the estate of the beneficiary” a legitimate governmental interest? As candidly acknowledged in the Axelrad Memorandum, the Government’s primary interest in using a reversionary trust is to ensure that settlement funds earmarked for the trust beneficiary’s life care would “revert” to the Government in the event the beneficiary was to die

earlier than predicted. This would avoid what the Government views as a “windfall” to the trust beneficiary’s heirs. Philosophy of windfall concept Is it really a “windfall” when the heirs of an injured plaintiff (who have assumed the risk that the injured plaintiff will live longer than the predicted lifespan) inherit funds that had been set aside for that plaintiff’s future life care because the Government’s negligence killed him sooner than the experts predicted. Courts have handled this issue in a variety of ways: (1) Some courts simply accept the “windfall” concept without analysis. (2) Some courts reject the “windfall” concept based on a recognition that the party who bears a given risk deserves to enjoy the corresponding benefit: This risk-assumption analysis rests on a principle of fairness, namely, that the party who bears a given risk deserves to enjoy the corresponding benefit. Since courts cannot order supplemental payments for plaintiffs whose actual care expenses exceed their future care awards, granting the government a reversion in any surplus from the future care award would violate this principle of fairness. The plaintiffs would retain the risk that Heather's future care expenses may exceed the future care award, while the defendant would enjoy the benefits resulting if the future care award fortuitously exceeded the actual expenses

• incurred. Only in the latter situation, where the party enjoys a benefit without shouldering

the corresponding risk, can it be said that a true windfall has occurred. Reilly v. United States, 665 F. Supp. 976, 1018 (D.R.I. 1987) certified question answered, 547 A.2d 894 (R.I. 1988) and aff'd in part and remanded, 863 F.2d 149 (1st Cir. 1988). The Seventh Circuit’s decision in Nemmers v. United States, provides a similar perspective, but factors in the purchase of an annuity: The “reversionary trust” to which the district court referred is a device that returns to the United States, rather than to Eric's heirs, any money from the award that remains at the time of his death. The district court's theory was apparently that his parents and siblings, his likely heirs, should not benefit from his misfortune. If the award of damages is computed correctly, however, there will be just enough to last for Eric's life. The court assumed that Eric would live another 59 years. If that is a correct assumption, then the award of damages should be exactly enough to purchase an annuity that will pay Eric every year the amount necessary to cover his care and replace his income. (If the court should award damages for a reduction in the quality of life, the award also would enable Eric's guardian to purchase goods that might give Eric some of the pleasure that he is denied from other sources.) At the same time, the properly computed award induces the government to take all cost-justified precautions. If Eric dies before his time, the annuity company keeps the excess; if Eric lives longer, the annuity company loses money on him. Eric's parents or guardian must decide whether to purchase an annuity or to assume the risk that Eric will live longer than expected. If they buy an annuity, the insurer takes the risk and there is no need for a trust of any sort. If they take the risk that

Eric will outlive the expectation, and he does, then the funds awarded by the court will be gone in 59 years and they must make up the difference. If Eric dies early, then his relatives do not get a “windfall”, as the court thought; they get only compensation for assuming the risk of having to cover Eric's expenses if he outlives the income provided by the award. (We assume that Eric's relatives will bear these expenses rather than abandon him as a public charge. If abandonment is the likely outcome, there is more to the district judge's concern.) Nemmers v. United States, 795 F.2d 628, 635 (7th Cir. 1986) (3) Some courts view the question of who inherits unspent future care funds in the event

• f the plaintiff’s death earlier than expected is simply irrelevant.

The award is to compensate Lee, and Lee only. Thus, the possibility that the parents might succeed to Lee's award is not relevant. Similarly, once the amount of the award is calculated fully, but not excessively, to absolve the government of its malfeasance, the possibility of a reverter to the government is not relevant. Hull by Hull v. United States, 971 F.2d 1499, 1505 (10th Cir. 1992). The Hull by Hull decision is

• ften cited for the proposition that a reversionary trust should only be ordered by the court as

part of a FTCA judgment when the Government meets its burden of proving that a reversionary trust is in the injured plaintiff’s best interests: Thus, we hold that the district court has the inherent authority to order that Lee's damages be paid in the form of a fully reversionary trust if it concludes that is in Lee's best interest, so long as the government's obligation to Lee ceases when it pays a fixed lump sum to fund that trust. In determining whether such a trust is appropriate on remand, the court should consider what form or structure of damages best serves Lee's interests from Lee's perspective only. Thus, the court need not and should not consider whether either the government or the parents assume a risk or whether either might receive a “windfall” upon Lee's untimely death because of the presence or absence of a reverter, as the court did in Reilly, 665 F.Supp. at 1017–20. The award is to compensate Lee, and Lee only. Thus, the possibility that the parents might succeed to Lee's award is not relevant. Similarly, once the amount of the award is calculated fully, but not excessively, to absolve the government of its malfeasance, the possibility of a reverter to the government is not relevant. Both possibilities are only incidental to what must be the

• nly inquiry after the proper amount of the award has been calculated and paid: How

should it best be structured to benefit Lee? Id. Hawaii’s approach The Hawaii Supreme Court in Bynum v. Magno quoted as “persuasive” the following comments by the Supreme Court of North Carolina: The goal of the law of damages is to place an injured party in as nearly the same position as he would have been had he not been injured. … Forced dependence on

public charity because of injuries tortiously inflicted puts the injured party in a position more disadvantageous than if he were freed from his dependence. Full compensation that frees the injured party from dependence on charity is more in keeping with the compensatory goal of tort recovery .... The Plaintiff should be able to recover the cost of future medical services, since he is likely to prefer private care, and it is his “right” to have it. It may be that he will employ the free care for which he is eligible and thereby receive a “windfall,” but ... at the time of suit there is no way of knowing what he will choose to do. Bynum v. Magno, 106 Haw. 81, 94-95, 101 P.3d 1149, 1162-63 (2004), as amended (Dec. 2, 2004), quoting Cates v. Wilson, 321 N.C. 1, 7, 361 S.E.2d 734, 738 (1987) (emphasis in

• riginal).

Perhaps the most instructive teaching of the Bynum decision is found in the Supreme Court’s willingness to accept “double compensation for a part of the plaintiff’s injury” rather than risk leaving the plaintiff undercompensated for his or her loss. The Bynum Court emphasized that “there may be a double compensation for a part of the plaintiff's injury [because] it is the position of the law that a benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor.” Id., at 1154, quoting Restatement of Torts, § 920A cmt. B (emphasis added by the Bynum court). Bynum goes on to explain that “’[p]erhaps there is an element of punishment of the wrongdoer’ in the rule, [but] that ‘[p]erhaps also this is regarded as a means of helping to make the compensation more nearly compensatory to the injured party.’” Id. Calculating the value of a reversionary interest? Because settlement decisions, including decisions regarding the approval of a conditional settlement, are made outside of public view and are rarely disclosed, there is no way to know whether there are any criteria or guidelines for determining a reasonable value for the Government’s reversionary interest, assuming the Government has a legitimate reversionary interest of any kind. For example, if a revisionary annuity is used to settlement a FTCA case, how do the settling parties determine what a reasonable guaranteed term of years would be? Obviously, if an injured plaintiff has a very high “rated age” because of a severely reduced life expectancy, some of the benefit to the injured plaintiff is lost if the guaranteed term of years exceeds the duration of the plaintiff’s life expectancy as calculated by the life insurance company.

Reversionary annuities Reversionary annuities provide a way to satisfy the Government’s concern over a “windfall” without using a reversionary trust. A reversionary annuity is a structured settlement based on the purchase of an annuity (preferably from a highly rated life insurance company) in which the annuity provides nontaxable periodic payments that are guaranteed for the life of the beneficiary, however long he or she lives, or for a term of years, whichever is longer. If the beneficiary dies before the expiration of the guaranteed term of years, the remaining periodic payments are made to the Government, rather than to the beneficiary’s heirs. All of the terms of the reversionary annuity are negotiable. Also, the periodic payments can be made directly into a special needs trust, if desired, thereby preserving the beneficiary’s eligibility for public assistance. This approach has the additional benefit of shifting the risk associated with the beneficiary’s reduced life expectancy to the life insurance company. In other words, the life insurance companies asked to bid on an annuity proposal will give the beneficiary a “rated age” based on his or her reduced life expectancy, which will affect the cost of an annuity guaranteed for the duration for the beneficiary’s life, however long that is. In short, the injured plaintiff’s heirs give up the right to receive the periodic payments guaranteed for a term of years in the event the beneficiary dies before that term of years has expired. In return, the injured plaintiff receives periodic payments guaranteed for his or her life, however long that is, and the periodic payments can be made directly into a special needs trust thereby preserving the beneficiary’s eligibility for public assistance. Negotiating with the Government Many attorneys are unaware of the landmines that exist in using a reversionary trust. Hopefully, this presentation has identified most of these problem areas. The question then becomes whether it is ever possible to settle a FTCA case involving a major injury with substantial future care costs. The answer to this question is a qualified “yes.” In rare instances, the Government has agreed to settlements in major injury FTCA cases that do not involve the use of a reversionary trust. However, this is clearly an exception to standard practice. Any agreement to settle that does not involve use of the standard form DOJ

reversionary trust should include an agreement for the AUSA negotiating the settlement to obtain express approval for such an approach from the Torts Division prior to taking the case off of the trial calendar or seeking state court approval of the settlement. Both the Axelrad Memorandum and the O’Connor Memorandum contemplate such a process of preliminary approval. Indeed, the O’Connor Memo seems to mandate that the AUSA negotiating on behalf of the Government consult with the Torts Division and obtain prior approval before agreeing to any settlement that departs from DOJ standard practice. If the settling parties agree to use a reversionary trust, two considerations become paramount:

• 1. The amount of settlement funds placed into the reversionary trust and provided to the

injured plaintiff outside the reversionary trust must be carefully evaluated to ensure that the amounts are sufficient to meet the injured plaintiff’s needs for the remainder of his or her life. In this regard, only the fraction of the total settlement sum that reasonably represents the present value of f uture care costs should be placed into the reversionary

• trust. The Government should not have a reversionary interest in the fraction of the total

settlement that represents economic loss (e.g., loss of earnings capacity) and general damages (e.g., pain and suffering, emotional distress, loss of enjoyment of life and loss of consortium).

• 2. The terms of the reversionary trust should be negotiated to ensure both maximum latitude

for expenditures and a reasonable, easy and fair process for determining what expenses are allowed under the terms of the trust. Areas that are often of particular significance are: in-home assistive care; housing; transportation; technology; and recreation. If family members are able to provide some of the attendant care the injured plaintiff requires, the reversionary trust should include a provision specifically allowing the family members to be compensated for this service, which otherwise would have to be purchased. If the Government refuses in settlement negotiations to provide a gross settlement amount that is sufficient to take care of the injured plaintiff’s basic life care needs for his or her life expectancy, the only alternative is to attempt to get the Government to agree to a settlement that does not use a reversionary trust. This will allow the injured plaintiff to use a special needs trust in order to preserve his or her eligibility for public assistance, thereby providing a safety net to protect the injured plaintiff if the settlement funds prove inadequate to provide

necessary future care. And, as discussed above, a reversionary annuity provides an alternative approach that completely satisfies the Government’s desire to have a reversionary interest in the portion of the settlement funds earmarked for the injured plaintiff’s future medical care needs. Unfortunately, the Torts Division has been extremely resistant to the use of special needs trusts in settling FTCA cases involving major injuries, apparently in accord with the mandate

• f the Axelrad Memorandum. This resistance may even persist after the Government agrees

not to use a reversionary trust. In such circumstances, the best approach may be to negotiate a settlement agreement that essentially delegates to the settling plaintiffs the right to determine precisely how the settlement funds will be paid, with the further agreement that the plaintiffs’ exercise of that right is subject to the approval of the state court that has jurisdiction over the injured plaintiff. Here again, the settling plaintiffs may want to have the Torts Division’s express approval for this approach before taking the case off of the trial calendar or seeking state court approval for the settlement. An additional caveat here is that any reversionary annuity that is used as part of such a settlement probably should make the periodic payments directly into the injured plaintiff’s special needs trust, so care should be taken to ensure that the “payee” on the annuity is appropriately designated when the annuity is purchased. Because the purchase of the annuity is made through a Government approved broker, it may be necessary to work directly with that broker to ensure that the “payee” is properly designated.