Category: Supreme Court

Supreme Court Set to Decide Whether NLRA Preempts State Law Claims for Property Damage Caused During Strikes

The U.S. Supreme Court’s upcoming term will include review of whether the National Labor Relations Act (the “Act”) preempts state court lawsuits for property damage caused during strikes, which could have significant implications for employers and unions.

Factual Background

The case – Glacier Northwest Inc. v. International Brotherhood of Teamsters Local Union No. 174 – began over five years ago when the Union in Washington State representing the Employer’s truck drivers went on strike.  The Union timed their strike to coincide with the scheduled delivery of ready-mix concrete, and at least 16 drivers left trucks that were full of mixed concrete, forcing the Employer to rush to empty the trucks before it hardened and caused damage.  The Employer was able to do so, but incurred considerable additional expenses and, because it dumped the concrete in order to avoid truck damage, lost its product.

Employer Brings State Law Suit for Property Damage

After the incident, the Employer sued the Union under Washington State law for intentional destruction of property.  The Union argued that the suit was preempted by the Supreme Court’s decision in San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959) (“Garmon”).  In Garmon, the Supreme Court held that, although the Act does not expressly preempt state law, it impliedly preempts claims based on conduct that is “arguably or actually protected by or prohibited by the Act.”  The Supreme Court held in Garmon that conduct is “arguably protected” when it is not “plainly contrary” to the Act or has not been rejected by the courts or the National Labor Relations Board (the “Board”).

State Court Holdings

The Washington State trial court dismissed the Employer’s suit for property damage because strikes are protected by the Act.  The Washington Court of Appeals reversed, holding that intentional destruction of property during a strike was not activity protected by the Act, and thus, not preempted under Garmon.

Finally, the Washington Supreme Court reversed again, holding that the Act impliedly preempts the state law tort claim because the intentional destruction of property that occurred incidental to a work stoppage was at least arguably protected, and the Board would be better-suited to make an ultimate determination on this legal issue.

Question Before the Supreme Court

The Supreme Court will now determine whether the National Labor Relations Act bars state law tort claims against a union for intentionally destroying an employer’s property in the course of a labor dispute.

Under Garmon, the Act does not preempt suits regarding unlawful conduct that is plainly contrary to the NLRA, and the Employer argues that the strike at issue here was plainly unprotected because of the intentional destruction of property.  In other words, the conduct is not even arguably protected by the Act such that the Act would preempt – it was, rather, plainly unprotected conduct, and thus, the proper subject of a lawsuit.  The Employer also cited the “local feeling” exception to Garmon, which creates an exception to preemption where the States may have a greater interest in acting, such as in the case of property damage or violence.

The Union argued in opposition to the Employer’s certiorari petition that the Employer merely challenged the Washington Supreme Court’s conclusion that the conduct was arguably protected by the Act, and not its reasoning.  Moreover, whether or not the conduct was protected should be decided by the Board, which is better-suited to decide the matter.

Takeaway

Employers should gain much greater clarity into whether they can seek relief from such conduct via a damages lawsuit.  If the Court finds that such conduct is not preempted and may be litigated in state court, such a ruling could go far in protecting employers’ interests in contentious labor disputes and potentially shift the balance of power towards employers during these disputes.

Article By Michael J. Lebowich, Joshua S. Fox, and Thomas B. Fiascone of Proskauer Rose LLP

For more labor and employment legal news, click here to visit the National Law Review.

© 2022 Proskauer Rose LLP.

Name, Image and Likeness: What Higher Education Institutions Need to Know for Legal Compliance

More than a year has passed since the NCAA v. Alston ruling and roll-out of the NCAA Name, Image and Likeness Interim Policy. What processes should institutions have in place, and what situations should they be on the lookout for at this point in the NIL game? While institutions cannot provide compensation to student-athletes or potential student-athletes in exchange for use of a student’s NIL, below are items counsel at higher institutions should have on their radar.

Review and Approval of NIL Agreements

The NCAA Interim Policy does not require student-athletes to disclose NIL agreements and/or opportunities to their institutions. In the State of Michigan, however, pursuant to House Bill 5217, beginning December 31, 2022, student-athletes must disclose proposed NIL opportunities or agreements to the institution at least seven days prior to committing to the opportunity or contract. For the institution, this means there needs to be a process in place by which student-athletes submit opportunities or agreements to the institution and the institution does a timely and thorough review of the submission. The institutional representative reviewing the submissions must be knowledgeable of the institution’s active contractual obligations and only sign off on the student-athlete’s potential NIL opportunity or contract once confident there is no conflict with an existing institutional contract. This is most likely to come up in agreements with exclusivity terms, such as sports apparel and campus-wide pouring rights agreements. If there is a conflict, the institution needs to articulate the specific conflict to the student-athlete so they can negotiate a revision, which is then subject to additional review and potential approval by the institution.

Institutions are the Regulating Bodies

Institutions in states that require submission of NIL opportunities by student-athletes need to pay close attention when reviewing submissions because the NCAA has placed most of the NIL regulatory burden on institutions. Specifically, institutions are obligated to report potential violations of NCAA policy. Among other potential violations, institutions must report possible abuses on the prohibition of pay-for-play and improper inducements of potential student-athletes and current student-athletes. Essentially, in addition to spotting potential conflicts between NIL agreements and current institution agreements, institutions need to review NIL agreements to determine if a student-athlete is being compensated for athletic achievement and/or for their enrollment or continued enrollment at a particular institution. Any indication that the student-athlete’s NIL agreement will be void if they no longer participate on an athletic team requires the institution to complete due diligence and determine the appropriateness of the arrangement in light of the NIL policy. Institutions are ultimately responsible for certifying the eligibility of student-athletes, and the presence of the previously mentioned terms place the agreement in direct violation of the language in the NIL Interim Policy and corresponding NCAA guidance.

Institutional Staff Members

It is in the best interest of institutions to train their staff members on appropriate interactions with boosters because the NCAA holds institutions responsible for the “impermissible recruiting activities engaged in by a representative of athletics interest (i.e., a booster).” Staff members need to understand the actions they are permitted to take and conversations they are permitted to have, as failure to do so could land them deep in the gray area of NIL.

  • An institutional staff member cannot directly or indirectly communicate with a potential student-athlete on behalf of a booster or NIL entity.
  • An institutional staff member cannot enter into agreements with an NIL entity to secure NIL deals between the entity and potential student-athletes.
  • An institutional staff member cannot “organize, facilitate or arrange” a meeting or any conversations between an NIL entity and a potential student-athlete, which includes transfer students coming from other institutions.

Financial Aid

Institutions should ensure they are not influencing how a student-athlete uses their compensation. Specifically, institutions should not direct student-athletes to use their NIL compensation for financial aid. Student-athletes’ financial aid is not impacted by compensation they would receive from NIL agreements. Financial aid limitations exclude compensation which also extends to NIL compensation. However, if a student receives NIL compensation, this may impact need-based financial aid.

FERPA

Many public institutions have made the argument that FERPA precludes them from disclosing NIL agreements without a release executed by the student-athlete. If a copy of an NIL agreement or summary of an NIL opportunity is provided to the institution by the student-athlete, this becomes a record of the university per the definition of FERPA and is likely part of the student-athlete’s educational record. There may be a particular circumstance in which a FERPA exception would apply to a request, but there is no broad FERPA exception that would apply in this situation. Institutions might find it strategic to include their stance on FERPA in an NIL policy to ensure all requests for NIL agreements are handled consistently.

International Students

International students can receive NIL compensation but with some caveats. In its documentation, the NCAA directs international student-athletes to their institution’s Designated School Official for “guidance related to maintaining their immigration status and tax implications.” As a result, institutions should make sure the individual(s) is/are well equipped to provide answers regarding NIL from international students.

Five Steps to Become a Well-Organized and Compliant Institution

  1. Have an NIL policy and procedures that are followed consistently and made available to student-athletes for reference and consultation;
  2. Have a process in place to review NIL agreements between the institution’s student-athletes and outside entities or individuals (if located in a state that requires student-athletes to make such disclosures);
  3. Have trained its staff (especially athletics staff) on what actions can and cannot be taken in relation to student-athletes’ NIL opportunities;
  4. Have trained its student-athletes on available resources; and
  5. Have a team of institutional staff members ready to pivot if additional laws are enacted by their state, if additional guidance is provided by the NCAA or if federal legislation is enacted.

Article By Richard T. Hewlett and Jessica E. Visser of Varnum LLP

For more entertainment, art, and sports legal news, click here to visit the National Law Review.

© 2022 Varnum LLP

EMTALA in the Post-Dobbs World

The Emergency Medical Treatment and Labor Act (EMTALA) requires hospitals with emergency departments and participating in Centers for Medicare and Medicaid Services (CMS) programs to provide medical screening, treatment and transfer for patients with emergency medical conditions (EMCs) or women in labor.1 EMTALA, which was enacted in 1986 to address concerns about patient dumping, went unnoticed for many years, but has garnered heightened attention as a result of the COVID-19 pandemic, and more recently, the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization (Dobbs).2

EMTALA is a federal law and expressly preempts state laws with which it directly conflicts. After the Dobbs decision was officially published in June, a number of states implemented laws that prohibited or restricted access to reproductive care. Many of these laws include potential civil sanctions and criminal liability for healthcare providers offering or performing these services regardless of the circumstances, including emergency situations. The Biden Administration, in contrast, has taken action to preserve access to reproductive care through a number of executive and federal agency actions. These actions are intended by the federal government to apply in all states, including those states where restrictions have been put in place. Following this activity, litigation between the federal government and several states has ensued to address potential conflicts between federal laws requiring the provision of access and state laws that prohibit or restrict access to reproductive health services. A summary of the current EMTALA landscape is set forth below.

EMTALA Requirements

Under EMTALA, hospitals with emergency departments (EDs) must provide a medical screening examination to any individual who comes to the ED, regardless of insurance status. EMTALA prohibits hospitals with EDs from refusing to examine or treat individuals with an EMC. Upon provision of a medical screening examination, hospitals must provide necessary stabilizing treatment for EMCs and labor within the hospital’s capability. If the hospital is unable to properly treat or stabilize the patient, the hospital must provide an appropriate transfer to another medical facility.

Under EMTALA, an EMC includes “a medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that the absence of immediate medical attention could reasonably be expected to result in:

(i) placing the health of the individual (or, with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy,

(ii) serious impairment to bodily functions, or

(iii) serious dysfunction of any bodily organ or part…”3

Many common pregnancy-related complications, such as preeclampsia or ectopic pregnancies, qualify as EMCs. However, certain state anti-abortion laws prohibit or criminalize abortions regardless of the existence of an EMC under federal law, which creates a potential conflict when an abortion is necessary to stabilize an EMC under EMTALA. As a result of this friction between state and federal law, EMTALA has received renewed attention at a federal and state level in recent months.

Executive Order on Protecting Access to Reproductive Healthcare Services

On July 8, 2022, after the Dobbs decision was officially issued, President Biden issued Executive Order 14076 (Executive Order), which directed the Department of Health and Human Services (HHS) to submit a report identifying steps to ensure all patients, including pregnant women and women experiencing pregnancy loss, receive the full protections offered by EMTALA. The Executive Order also directed HHS to consider updates to guidance on obligations under EMTALA.

CMS Memorandum and HHS Letter to Healthcare Providers

On July 11, 2022, in response to the Executive Order, CMS published a memorandum to State Survey Agency Directors to restate existing guidance for hospital staff and physicians in light of new state laws that prohibit or restrict access to abortion (Memorandum). The Memorandum reinforced CMS’ view that:

  • EMTALA mandates that all patients who come to a EDs and request examination or treatment must receive an appropriate medical screening examination, stabilizing treatment, and transfer regardless of any state law restrictions about specific procedures,

  • Only physicians and qualified medical personnel may make the determination of an EMC,

  • Hospitals should ensure that all staff who interact with patients presenting to the ED are aware of the hospital’s obligations under EMTALA,

  • Hospitals may not cite state law or practice as the basis for transfer,

  • Physicians’ professional and legal duties under EMTALA preempt any conflicting state law or mandate,

  • If a physician believes that abortion is the stabilizing treatment necessary to resolve an EMC, the physician must provide that treatment, and

  • State law is preempted by EMTALA when it prohibits abortion and does not include an exception for the life and health of the pregnant person or has a more restrictive definition of EMC.

The Memorandum also clarified that pregnant patients may experience EMCs including, but not limited to, ectopic pregnancy, complications of pregnancy loss, or emergent hypertensive disorders, such as preeclampsia with severe features and that stabilizing treatment encompasses both medical and surgical interventions, such as methrotrexate therapy or dilation and curettage.

The Secretary of HHS also published on July 11, 2022 a letter to healthcare providers reminding them of their obligation to provide stabilizing medical treatment to their pregnant patients in accordance with EMTALA, regardless of the state in which the provider practices (Letter). The Letter also reiterated that:

  • any state laws or mandates which employ a more restrictive definition of EMC are preempted by EMTALA statute, and

  • the course of necessary stabilizing treatment is under the physician’s or other qualified medical personnel’s purview.

The State of Texas Sues the Biden Administration

On July 14, 2022, the Texas Attorney General brought suit against HHS and CMS to challenge the Memorandum and Letter relating to federal law obligations for pregnant patients.4 The complaint alleged that EMTALA does not preempt state law when state law prohibits abortion and does not include an exception for the life of the pregnant person or draws the exception more narrowly than the definition of EMC under EMTALA. Specifically, Texas sought to enforce a state statute, the Human Life Protection Act, which would ban and criminalize abortions unless a woman “has a life-threatening physical condition arising from pregnancy that places her ‘at risk of death or poses a serious risk of substantial impairment of a major bodily function unless the abortion is performed”(emphasis added).5 The complaint also alleged that EMTALA does not require a healthcare provider to perform an abortion if it is the stabilizing treatment necessary to resolve an EMC. On August 23, 2022, the United States District Court for the Northern District of Texas (Lubbock Division) blocked enforcement of the Memorandum and Letter in the State of Texas on the basis that federal guidance did not preempt state law, exceeded the authority of EMTALA, and was issued without a proper notice and comment period. The Court found that, because EMTALA is silent regarding abortion and “how stabilizing treatments must be provided when a doctor’s duties to a pregnant woman and her unborn child possibly conflict,” “there is no direct conflict” between federal and Texas law with the end result that “EMTALA leaves it to the states”.6

The Biden Administration Sues the State of Idaho

On August 2, 2022, the Department of Justice (DOJ) sued the State of Idaho, alleging violation of EMTALA. Under Idaho’s proposed abortion law, which was slated to go into effect on August 25th, the performance of all abortions are criminalized regardless of the reason for which they may be performed including to prevent the death of the pregnant woman.7 Instead, the law permits physicians to raise two affirmative defenses to avoid criminal liability:

(i) The physician determined, in h/her good faith medical judgment and based on the facts known to the physician at the time, that the abortion was necessary to prevent the death of the pregnant woman, and

(ii) Prior to the performance of the abortion, the pregnant woman reported the act of rape or incest to a law enforcement agency and provided a copy of such report to the physician.8

The DOJ’s complaint alleged that  Idaho’s law does not provide a defense when the health of the pregnant patient is at stake, which is considered to fall within the definition of an EMC under EMTALA. In addition, the DOJ asserted that the fear of criminal prosecution may lead providers to avoid performing abortions even when it is a medically necessary treatment to prevent severe risk to the patient’s health. On August 24, 2022, the United States District Court for the District of Idaho found that Idaho’s law conflicted with EMTALA and granted the federal government a preliminary injunction blocking the enforcement of Idaho’s proposed abortion law.9 In contrast to the Northern District of Texas Court’s interpretation of the conflict between state law and EMTALA, the District Court of Idaho noted that found that Idaho’s criminal abortion statute deterred abortions given that it provided for an affirmative defense rather than an exception for the provision of emergency care and, therefore, obstructed EMTALA’s purpose.10

Looking to the Future

While EMTALA has been in place for decades, its applications in the post-Dobbs world continue to evolve and will be at the forefront in states with abortion restrictions, particularly where the scope of federal law obligations to provide stabilizing treatment for conditions that threaten the health of the pregnant patient conflict with state law exceptions or affirmative defenses.

The law, policy and regulatory climate surrounding the Dobbs decision is complex and quickly developing. The information included in this article is current as of writing, but it does not address all potential legal issues or jurisdictional differences, and the information presented may no longer be current. Readers should consult counsel regarding their specific situation.

FOOTNOTES

1 42 U.S.C. §1395dd.

2 For additional information regarding the Dobbs decision, please refer to the following resources: Supreme Court Decision in Dobbs v. Jackson Women’s Health Organization Overturns 50 Years of Precedent on Abortion Laws and Rights | Healthcare Law Blog (sheppardhealthlaw.com), WHLC Dobbs Series Part 1 Where are we now?: Sheppard Mullin Webinar.

3 42 U.S.C. §1395dd(e)(1).

4 State of Tex. v. Becerra, et al., No. 5:22-cv-185 (N.D. Tex. Jul. 14, 2022).

5 Tex. Health & Safety Code § 170A.

6 State of Tex. v. Becerra, et al., No. 5:22-cv-185 (N.D. Tex. Jul. 14, 2022), Memorandum Opinion and Order at 49.

7 Idaho Code § 18-622.

8  Idaho Code § 18-622(3).

9 U.S. v. Idaho, No. 1:22-cv-00329-BLW.

10 U.S. v. Idaho, No. 1:22-cv-00329-BLW, Memorandum Decision and Order at 26-31.

Article By Amy J. Dilcher and Arushi Pandya of Sheppard, Mullin, Richter & Hampton LLP

For more health and health law legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

The Supreme Court Is Poised to Weigh in on a False Claims Act Circuit Split

Three pending petitions for writ of certiorari have asked the U.S. Supreme Court to resolve a split among the federal courts of appeals as to the pleading standard for False Claims Act (“FCA”) whistleblower claims.

The FCA creates a right of action whereby either the government or private individuals can bring lawsuits against actors who have defrauded the government. 31 U.S.C. §§ 3729 et seq. Under the FCA, a private citizen can act as a “relator” and bring an action on behalf of the government in what is known as a qui tam suit. The government can elect to intervene, which means participate, in the suit; if it does not, the relator can continue to litigate the case without the direct participation of the government. 31 U.S.C. § 3730. Private individuals can receive a portion of the action’s proceeds or settlement amount. 31 U.S.C. § 3730(d).

The petitions ask the Court to clarify the level of particularity required under Federal Rule of Civil Procedure 9(b) (“Rule 9(b)”) to plead a claim under the FCA. Rule 9(b) requires plaintiffs alleging “fraud or mistake” to “state with particularity the circumstances constituting fraud or mistake.”

Johnson v. Bethany Hospice and Palliative Care LLC, Case No. 21-462

In their petition for a writ of certiorari, the petitioners in Johnson asked the Supreme Court to take up the issue of whether Rule 9(b) requires FCA plaintiffs “who plead a fraudulent scheme with particularity to also plead specific details of false claims.” The Eleventh Circuit earlier affirmed the district court’s dismissal of an FCA claim based on the plaintiffs’ failure to plead “specific details about the submission of an actual false claim” to the government. Estate of Helmly v. Bethany Hospice & Palliative Care of Coastal Georgia, LLC, 853 F. App’x 496, 502-03 (11th Cir. 2021).

In particular, the relators alleged that several doctors purchased ownership interests in Bethany Hospice and Palliative Care, LLC (“Bethany Hospice”) and were allocated kickbacks for patient referrals through a combination of salary, dividends, and/or bonus payments.  Id. at 498. Among other allegations, the complaint alleged that both the relators had access to Bethany Hospice’s billing systems, and, based on their review of those systems and conversations with other employees, were able to confirm that Bethany Hospital submitted false claims for Medicare and Medicaid reimbursement to the government.  Id. at 502.

The Eleventh Circuit held that the allegations were “insufficient” under Rule 9(b)’s heightened pleading standard for fraud cases.  Id. Even though the relators alleged direct knowledge of Bethany Hospice’s billing and patient records, their failure to provide “specific details” regarding the dates of the claims, the frequency with which Bethany Hospice submitted those claims, the amounts of the claims, or the patients whose treatment formed the basis of the claims defeated their FCA claim.  Id. In addition, the relators did not personally participate or directly witness the submission of any false claims.  Id. The Eleventh Circuit also found unpersuasive the relators’ argument that Bethany Hospice derived nearly all its business from Medicare patients, therefore making it plausible that it had submitted false claims to the government.  Id. “Whether a defendant bills the government for some or most of its services,” the Eleventh Circuit stated, “the burden remains on a relator alleging the submission of a false claim to allege specific details about false claims to establish the indicia of reliability necessary under Rule 9(b).”  Id. (internal quotation marks omitted). Because the relators did not do so here, the Eleventh Circuit affirmed the dismissal of the case.

United States ex rel. Owsley v. Fazzi Associates, Inc., Case No. 21-936

The Sixth Circuit took a similarly hardline approach in United States ex rel. Owsley v. Fazzi Associates, Inc., 16 F.4th 192 (6th Cir. 2021), ruling in favor of a strict interpretation of Rule 9(b).  The petition for a writ of certiorari in Owsley asks the Court to take up the same question as in Johnson.

In Owsley, the relator alleged that her employer used fraudulently altered data to make its patient populations seem sicker than they actually were in order to increase Medicare payments received from the government.  Id. at 195. The complaint “describe[d] in detail, a fraudulent scheme,” and alleged “personal knowledge of the billing practices employed in the fraudulent scheme.”  Id. at 196 (internal quotation marks omitted). But the Sixth Circuit ruled that these allegations were not enough under Rule 9(b). Instead, to bring a viable FCA claim, a relator’s complaint must identify “at least one false claim with specificity.”  Id. (internal quotation marks omitted). A relator can do that in one of two ways: first, by identifying a representative claim actually submitted to the government; or second, by alleging facts “based on personal knowledge of billing practices” that support a strong inference that the defendant submitted “particular identified claims” to the government.  Id. (emphasis in original). Here, though the relator alleged specific instances of fraudulent data – such as upcoding a patient with a leg ulcer to include a malignant cancer diagnosis – she did not identify particular claims submitted to the government.  Id. at 197. “[T]he touchstone is whether the complaint provides the defendant with notice of a specific representative claim that the plaintiff thinks was fraudulent.”  Id. The Owsley relator, the court held, failed to meet that critical touchstone.

Molina Healthcare v. Prose, Case No. 21-1145

The Seventh Circuit adopted a more flexible pleading standard in United States v. Molina Healthcare of Illinois, Inc., 17 F.4th 732 (7th Cir. 2021). As in Johnson and Owsley, the petition for a writ of certiorari asks the Court to weigh in on the Rule 9(b) standard under the FCA. It also presents an additional question about the requirements for an FCA claim under the implied false certification theory.

In Molina Healthcare, the relator brought an FCA claim against Molina Healthcare (“Molina”) for violating certain requirements of its Medicaid contract. The relator alleged that Molina, which had previously subcontracted with another entity for the provision of certain nursing home services, continued to collect payment for those services from the government even though it no longer provided them. Molina Healthcare, 17 F.4th at 736. Molina Healthcare received fixed payments from the government for different categories of patients. It received the highest per capita payment for patients in nursing facilities: $3,180.30.  Id. at 737-38. The relator alleged that Molina Healthcare knowingly continued to collect this rate from the government when it no longer provided a key service to nursing home patients.  Id.

The relator brought an FCA claim against Molina based on three theories of liability: (1) factual falsity (i.e., presenting a facially false claim to the government); (2) fraud in the inducement (i.e., misrepresenting compliance with a payment condition “in order to induce the government to enter the contract”); and (3) implied false certification (i.e., presenting a false claim with the “omission of key facts” instead of “affirmative misrepresentations”).  Id. at 740-741.

The Seventh Circuit held that the relator’s allegations satisfied Rule 9(b)’s pleading requirement under all three theories. First, as to factual falsity, the Court found that the relator provided sufficient information as to the “when, where, how, and to whom” Molina made the allegedly false representations.  Id. at 741. Though the relator did not have access to the defendant’s files, the information he provided “support[ed] the inference” that Molina had submitted false claims to the government.  Id. Second, as to fraud in the inducement, the Seventh Circuit found that the relator’s “precise allegations” regarding “the beneficiaries, the time period, the mechanism for fraud, and the financial consequences” again satisfied Rule 9(b)’s standard.  Id. at 741. The complaint also included details about Molina’s chief operating officer’s statements that indicated that Molina “never intended to perform the promised act that induced the government to enter the contract.”  Id. at 741-42.  Third, as to the implied false certification theory, the court found that the plaintiff adequately alleged that Molina knowingly omitted key material facts while submitting claims to the government.  Id. at 743-44.

The Supreme Court Invites Comment from the Solicitor General

Facing what appears to be a major circuit split, the Supreme Court invited the Solicitor General to file a brief “expressing the views of the United States” in Johnson in January 2022 and in Owsley in May 2022.

The Supreme Court invites the Solicitor General to comment on only a handful of the approximately 7,000 to 8,000 petitions for writ of certiorari that the Court receives in a year. In the 2021 Term, for example, the Solicitor General filed what it calls a “Petition Stage Amicus Brief” in only 19 cases. Four Justices must vote to issue an invitation to the Solicitor General.

The Solicitor General’s view on whether the Court should grant certiorari has often been extremely influential. In the 2007 Term, for example, the Court denied certiorari in every case in which the Solicitor General recommended that approach. By contrast, it granted certiorari in 11 out of the 12 cases in which the Solicitor General recommended a grant. More recent data confirm that the Solicitor General’s recommendations as to whether the Court should grant certiorari remain highly influential. One study found that between May 2016 and May 2017, the Supreme Court followed the Solicitor General’s recommended approach in 23 cases (85%). At the same time, even the act of requesting the views of the Solicitor General dramatically increases the chances that the Court will take up a case. For example, between the 1998 Term and 2004 Term, one study found that the Court was 37 times more likely to grant certiorari in cases where it had invited the Solicitor General to file an amicus brief.

The Solicitor General Urges the Court to Decline Review

On May 24, 2022, the Solicitor General filed its brief in Johnson; it has yet to comment on Owsley. The Solicitor General’s amicus brief in Johnson urges the Court to deny certiorari. The Solicitor General notes that certiorari might be warranted if the courts of appeals applied a rigid, per se rule that required relators to plead “specific details of false claims.” But instead, the brief argues that the courts of appeals have “largely converged” on an approach to FCA pleading requirements that allows relators “either to identify specific false claims or to plead other sufficiently reliable indicia” to support a “strong inference” that the defendant submitted false claims to the government. According to the Solicitor General, the “divergent outcomes” among the circuit courts are merely the result of those courts’ application of a “fact-intensive standard” to various distinct allegations.

The petitioners in Johnson filed a supplemental brief in response to the Solicitor General’s views. They argue that the Solicitor General misinterpreted the Eleventh Circuit’s pleading standard, which effectively requires a relator to allege specific details about false claims to survive a motion to dismiss. In other words, the petitioners argue that in the Eleventh Circuit, the Solicitor General’s “purported” rule that a relator can either allege details about specific false claims or identify reliable indica that false claims were presented are “one and the same.”

Though the Court did not invite the Solicitor General to comment in Molina Healthcare, the petitioners in that case also filed a supplemental brief in response to the Solicitor General’s amicus in Johnson. “Everyone but the Solicitor General agrees that the circuits are hopelessly divided over whether Rule 9(b) requires a relator to plead details of false claims,” the brief argues. The brief notes that the Third, Fifth, Seventh, Ninth, Tenth, and D.C. Circuits do not require plaintiffs to plead specific details of actual false claims; by contrast, the First, Second, Fourth, Sixth, Eighth, and Eleventh Circuits require relators to plead specific details. Accordingly, the brief urges the Supreme Court to resolve the “widely acknowledged circuit split” over Rule 9(b)’s pleading standards.

The Solicitor General has a history of urging the Court to reject certiorari in FCA cases. According to the petitioners’ supplemental brief in Molina Healthcare, since the 1996 Term, the Solicitor General has recommended against review in eleven out of the twelve FCA cases in which the Court invited the Solicitor General’s views. Still, the Court granted certiorari in three of the cases in which the Solicitor General recommended against review.

Given the Supreme Court’s apparent interest in the FCA pleading standard – as evidenced by its calls for the Solicitor General’s views in Johnson and Owsley – there is a chance that it will grant certiorari in at least one of the three cases pending before it. Depending on when the Solicitor General weighs in, the Court may decide to grant certiorari in the fall of 2022.

Any Supreme Court decision that clarifies the pleading standard for FCA cases will likely affect a relator’s ability to successfully litigate qui tam actions in which the government does not intervene more than in cases in which the government does intervene. When a relator files a qui tam action, the government investigates the alleged fraud. If it intervenes in that action, it can file a complaint to include evidence it has discovered in that investigation, allowing it to meet the more stringent version of the Rule 9(b) pleading standard. Relators, however, often do not have access to the same evidence that the government does, such as specific claims data, making it far harder for a relator to meet the more stringent version of pleading standard.

Until the Supreme Court decides to weigh in, qui tam relators will continue to have an easier time satisfying the requirements of Rule 9(b) in those circuits with relaxed pleading standards. In the meantime, and whether the Court takes one of these petitions or not, any FCA whistleblower should seek legal counsel to help her identify the type of factual information that would meet the pleading requirements of the courts that apply a strict pleading requirement.

Article By Kayla Morin of Katz Banks Kumin LLP

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Supreme Court’s Decision In Famous Hale & Norcross Mining Case

Having read Professor Stephen Bainbridge‘s post about the origins of the judicial doctrine that directors must act on an informed basis, I passed along a reference to the California Supreme Court’s in Fox v. Hale & Norcross Silver Mining Co.,  108 Cal. 369, 41 P. 308 (1895).   The Hale and Norcross mine was a famous silver and gold mine in Nevada’s Comstock mining district.  Samuel Clemens (aka Mark Twain), who had worked in Virginia City, Nevada, even bought shares in the mine on margin, as he related in Chapter 15 of his autobiography:

“One day I got a tip from Mr. Camp, a bold man who was always making big fortunes in ingenious speculations and losing them again in the course of six months by other speculative ingenuities. Camp told me to buy some shares in the Hale and Norcross. I bought fifty shares at three hundred dollars a share. I bought on a margin, and put up twenty per cent. It exhausted my funds. I wrote Orion [his brother and the first and only Secretary of the Nevada Territory] and offered him half, and asked him to send his share of the money. I waited and waited. He wrote and said he was going to attend to it. The stock went along up pretty briskly. It went higher and higher. It reached a thousand dollars a share. It climbed to two thousand, then to three thousand; then to twice that figure. The money did not come, but I was not disturbed. By and by that stock took a turn and began to gallop down. Then I wrote urgently. Orion answered that he had sent the money long ago–said he had sent it to the Occidental Hotel. I inquired for it. They said it was not there. To cut a long story short, that stock went on down until it fell below the price I had paid for it. Then it began to eat up the margin, and when at last I got out I was very badly crippled.”

Samuel Clemens disappointing investment predated by a number of years the litigation that resulted in the California Supreme Court’s opinion.

The Hale and Norcross mine was located in Nevada, but the corporation that owned it was incorporated in California.  That is why the shareholders sued the directors in the Golden, rather than the Silver, state.  The Supreme Court’s decision was big news.  The day after the decision was issued, The San Francisco Call published this lengthy article that not only described the case, but also published the decision itself and a drawing of the plaintiff, M.W. Fox.

Article By Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP

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What Employers Need to Know in a Post-Dobbs Landscape

On June 24, 2022, in Dobbs v. Jackson Women’s Health Organization, the United States Supreme Court overturned both Roe v. Wade and Planned Parenthood v. Casey and held the access to abortion is not a right protected by the United States Constitution. This article analyzes several employment law issues employers may face following the Dobbs decision.

Federal Law

The Pregnancy Discrimination Act (PDA) prohibits employment discrimination “on the basis of pregnancy, childbirth, or related medical conditions.” In construing the PDA’s reference to “childbirth”, federal courts around the country have held the PDA prevents employers from taking adverse employment actions (including firing, demotion, or preventing the opportunity for advancement) because of an employee’s decision to have an abortion as well as an employee’s contemplation of an abortion. The PDA also prohibits adverse employment actions based upon an employee’s decision not to have an abortion. So, for example, an employer would violate the PDA if it pressured an employee to have, or not to have, an abortion in order to keep her job or be considered for a promotion.

State Law

Several states have implemented “trigger laws,” which impose restrictions or categorical bans on abortion following Dobbs. In addition, states such as Texas have enacted laws that allow individuals to file civil actions against entities that “knowingly engage in conduct that aids or abets the performance or inducement of an abortion, including paying for or reimbursing the cost of an abortion through insurance or otherwise.” Relying on that law, Texas legislators have already threatened at least two high profile employers for implementing policies which reimburse travel costs for abortion care unavailable in an employee’s home state. Although the Texas statute is currently being challenged in court, its text provides for statutory damages “in an amount of not less than $10,000” for “each abortion . . . induced.”

Although the issue has not been litigated yet, courts will likely have to decide how the PDA’s protections interact with a state’s anti-abortion laws.

Employer Handbook Policies and Procedures

The Dobbs decision may also impact workplace morale and productivity. Accordingly, employers should consider reviewing their handbooks as well as policies and procedures, with human resources and managers to ensure requisite familiarity with the employer’s social media policy, dress code, code of conduct, and how the employer handles confidential health information. Employers should be prepared for increased public expression from the workforce—including social media posts, discussions with other employees and third parties, and wearing clothing or other accessories reflecting strong opinions. Human resources should also be prepared for an increase in leave requests and employee resignations.

Travel Benefits for Employees Seeking Reproductive Care

In the wake of Dobbs, many businesses in states where access to abortion will be prohibited or highly restricted are considering—or have already implemented—benefit or employee expense plan amendments that would cover travel and lodging for out-of-state abortions. Ultimately, the legal and regulatory future for such plans remains unclear; especially in states where abortion laws are the most restrictive and contain “aiding and abetting” liability.

At a high level, employers seeking to enact such benefit or expense plans may find some comfort in a statement contained in Justice Kavanaugh’s concurrence in Dobbs. Specifically, Justice Kavanaugh wrote:

  • Some of the other abortion related legal questions raised by today’s decision are not especially difficult as a constitutional matter. For example, may a State bar a resident of that State from traveling to another State to obtain an abortion? In my view, the answer is no based on the constitutional right to interstate travel.

Thus, it appears that outright travel bans or similar prohibitive restrictions would face significant legal challenges, and could be declared void.

At this early stage in the post-Roe era, there appear to be several ‘paths’ emerging for employers seeking to provide travel benefits. Each comes with its own set of potential issues and considerations that employers, in conjunction with their counsel and benefit providers, should evaluate carefully. Below is a brief discussion of some of the travel-reimbursement plans employers have begun to implement or consider in the wake of Dobbs:

  1. Travel and lodging benefits under existing group health plans.
    • Assuming the plans are self-funded and subject to ERISA, they must also comply with other applicable rules such as HIPAA and the ACA.
    • Such benefits may not be available under non-ERISA plans in states restricting abortion access.
    • Generally would be limited to individuals enrolled in the employer’s plan.
  2. Travel and lodging benefits under Health Reimbursement Arrangements (HRA’s).
    • An HRA is a type of health savings account offering tax-free reimbursement up to a fixed amount each year.
    • HRA’s are generally subject to ERISA and cannot reimburse above the very minimal IRS limits (Section 213), such as mileage (.18 cents) and lodging ($50/per day).
    • Should be integrated with other coverage or qualify as an “Excepted Benefit HRA” or else it may violate certain ACA rules that prohibit lifetime annual dollar limits for certain benefits.
  3. Employee Assistance Programs (EAP’s).
    • EAP’s are voluntary benefit programs some employers use to allow employees access to certain types of care without accruing co-pays, deductibles, or out of pocket costs. Historically, EAP’s have been predominately used for mental health benefits such as therapy or substance abuse counseling.
    • In certain circumstances, EAP’s are exempt from the ACA. To be an “excepted benefit,” the EAP:
      • Cannot provide significant benefits in the nature of medical care or treatment;
      • Cannot be coordinated with benefits under another group health plan;
      • Cannot charge a premium for participation; and
      • Cannot require cost sharing for offered services.
    • The first of the above requirements (significant benefits of a medical nature) is highly subjective and may create risk for employers because it is difficult to determine whether a benefit is “significant.” Accordingly, it may be difficult to locate a third-party vendor or provider that would administer travel and lodging benefits through an EAP.
  4. Travel and lodging benefits to employees as taxable reimbursements.
    • Taxable reimbursements—up to a certain amount annually—for travel to obtain abortion or other medical care not available in the employee’s place of residence.
    • Some employers are requiring only receipts for lodging, but are not requesting substantiation of the employee’s abortion procedure. Some argue this might insulate an employer from liability in states with statutes prohibiting “aiding or abetting” an abortion, on the grounds that the employer does not know what the employee is using the benefit for. Ultimately, whether that is true remains largely untested and unclear.
    • Likely more costly for the employer, because the benefit is broader in scope. In addition, employers may run the risk that a payroll reimbursement of this kind could qualify as setting up a “new medical plan,” thereby raising compliance and other related issues.

Additionally, employer travel-and-lodging benefits of this type present innumerable other questions and issues. Such questions should include:

  1. Is the employer’s benefit plan subject to ERISA?
    • ERISA is the federal law applicable to qualifying employee benefits plans, including employer-sponsored group health plans. Plans subject to ERISA must also comply with HIPAA, the ACA, and other applicable rules and regulations. So-called self-funded employer plans are subject to ERISA.
    • With some exceptions, ERISA preempts or blocks the implementation of state laws that ”relate to” the ERISA plan.
    • However, ERISA does not:
      • Preempt a state law that regulates insurance companies operating in the state; or
      • Preempt state criminal laws of general applicability.
    • If a plan is self-insured and subject to ERISA it may not be required to comply with state laws related to abortion services based on ERISA preemption.
    • However, the impact of new and untested civil and/or criminal penalties remains unclear.
  2. What procedures does the plan cover?
    • In this environment—especially in states with the most restrictive abortion laws—employers should have a firm understanding of what specific type of abortion procedures the plan covers.
  3. Specific or “general” travel stipends?
    • As noted above, some companies are choosing to provide travel/lodging stipends and benefits to access abortion care in jurisdictions where the procedure is lawful.
    • Some employers are making this travel stipend more general—i.e., not requiring the stipend be used for abortion, or otherwise naming abortion in the benefit program. As an example, a policy that provides a stiped for an employee to “travel to receive medical care that is unavailable within 100 miles of the employee’s place of residence.”
    • Note that out-of-plan reimbursements to employees are likely taxable as wages. Some employees may choose to gross up such stipends to compensate.
  4. What about privacy concerns?
    • Employers should think carefully about how to provide any benefits or stipends while protecting employee privacy, not violating HIPAA, and—where applicable—not running afoul of so-called ‘aiding and abetting’ legislation.
    • To that end, as noted above, some companies are requiring only that employees provide travel receipts—not documentation of the underlying procedure—to qualify for the benefit, reimbursement, or stipend.
    • Of course, without any verification, there is always the potential for abuse—or otherwise using the program for something well beyond its core intent, such as travel, elective plastic surgery, etc. However, some employers may evaluate the risk of abuse as worth the potential lessening of privacy and other concerns.

Protected Activity

Employers must also be aware that certain speech in the workplace—including speech about abortion—may be legally protected. Although the First Amendment generally does not extend to private companies, the National Labor Relations Act (NLRA) prohibits retaliation against employees who discuss the terms and conditions of employment, commonly referred to as “protected concerted activity.” Thus, employees (1) discussing or advocating for an employer to provide benefits to women seeking reproductive and abortion-related healthcare services, (2) advocating for the employer to take a certain public stance on the issue, or (3) protesting the employer’s public position on the issue, may constitute protected activity under the NLRA.

Contacts and Next Steps

Employment law issues will continue to arise and evolve in the coming months following the Dobbs decision. The EEOC, DOL, and HHS may provide further guidance on how Dobbs impacts employment laws such as the Family and Medical Leave Act (FMLA), Americans with Disabilities Act (ADA), and PDA. Employers should consult with legal counsel concerning these developments.

Article By Denise E. Giraudo, Stephen E. Fox, Jonathan E. Clark, and Dan Syed of Sheppard, Mullin, Richter & Hampton LLP

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Supreme Court Signals Move Away from Judicial Deference to Administrative Agencies

KEY TAKEAWAYS

In a unanimous decision on June 15, 2022, the Court in American Hospital Association v. Becerra[2] examined a Medicare reimbursement formula reduction that affected certain hospitals. While rejecting the DHHS agency interpretation of the reimbursement statute, the Court made no mention of Chevron deference even though the parties extensively briefed this doctrine. Instead, the Court focused solely on the relevant language of the statute. In particular, the Court held that the “text and structure” of the statute demonstrated that the Medicare reimbursement cut was not consistent with the statute.

In a 5-4 decision a few weeks later, the Court in Becerra v. Empire Health Foundation[3] again made no mention of Chevron deference even though the majority noted that the underlying statute’s “ordinary meaning … [did] not exactly leap off the page.” Despite its initial conclusion that the ordinary meaning of the statutory language was unclear, the Court continued its recent pattern of (a) choosing to not apply Chevron deference directly and (b) instead performing textural and structural analysis of its own. Based on this statutory analysis, the Court in Empire Health concluded that the statute was “surprisingly clear” if read as technical provisions for specialists and that the language of the statute supported the agency’s implementing regulation.

Finally, in West Virginia v. EPA,[4] the Supreme Court in a 6-3 decision again refused to give any deference to the EPA’s interpretation of a Clean Air Act provision which the EPA claimed as the statutory basis to regulate greenhouse gas emissions by power plants. The Court concluded that the EPA had violated the “Major Questions” Doctrine when the EPA used this provision to regulate carbon emissions. Under the “Major Questions” Doctrine, an agency cannot make decisions of vast economic and political significance without Congress expressly giving the agency the power to do so. Since the EPA’s effort to regulate greenhouse gases by making industry-wide changes was a decision of “vast economic and political significance,” the Court concluded that the EPA lacked the authority to do so in light of the overall nature and structure of the statute. Thus, even though there was some textual support for the EPA’s position, the Court again refused to defer to the agency and its interpretation of a statute.

Read together, these three decisions show an increased skepticism by the Court of agency interpretations of statutes and signal that going forward, the federal courts will more closely scrutinize administrative agency decisions in general. Businesses that have, to date, relied on an administrative agency interpretation may need to reassess their reliance if the interpretation relies on a broad or strained reading of a statute. Conversely, businesses currently restrained by agency interpretations which were shown deference by courts may now have an opening to challenge those interpretations.

FOOTNOTES

[1] Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[2] Am. Hosp. Ass’n v. Becerra, 142 S. Ct. 1896 (2022).

[3] Becerra v. Empire Health Found., for Valley Hosp. Med. Ctr., 142 S. Ct. 2354 (2022).

[4] W. Virginia v. Env’t Prot. Agency, 142 S. Ct. 2587 (2022).

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The FTC Seemingly Thumbs Its Nose at the Supreme Court

Despite the Supreme Court’s recent 6-3 ruling in West Virginia v. EPA that regulatory agencies must have “clear congressional authorization” to make rules pertaining to “major questions” that are of “great political significance” and would affect “a significant portion of the American economy,” and the import of that ruling to the area of noncompete regulation, the Federal Trade Commission (FTC) and National Labor Relations Board (NLRB) announced yesterday that they are teaming up to address certain issues affecting the labor market, including the regulation of noncompetes.

In a Memorandum of Understanding (MOU) issued on July 19, 2022, the FTC and NRLB shared their shared view that:

continued and enhanced coordination and cooperation concerning issues of common regulatory interest will help to protect workers against unfair methods of competition, unfair or deceptive acts or practices, and unfair labor practices. Issues of common regulatory interest include labor market developments relating to the “gig economy” and other alternative work arrangements; claims and disclosures about earnings and costs associated with gig and other work; the imposition of one-sided and restrictive contract provisions, such as noncompete and nondisclosure provisions; the extent and impact of labor market concentration; the impact of algorithmic decision making on workers; the ability of workers to act collectively; and the classification and treatment of workers. (Emphasis added.)

Accordingly, the purpose of the MOU is “to facilitate (a) information sharing and cross-agency consultations on an ad hoc basis for official law enforcement purposes, in a manner consistent with and permitted by the laws and regulations that govern the [FTC and NLRB], (b) cross-agency training to educate each [agency] about the laws and regulations enforced by the other [agency], and (c) coordinated outreach and education as appropriate.”

This follows the Biden Administration’s July 9, 2021 Executive Order in which it “encourage[d]” the FTC to “consider” exercising its statutory rulemaking authority under the FTC Act “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” Nothing concrete has yet come of that Executive Order, although the MOU perhaps represents the next stage of the FTC’s “consider[ation]” of the issue. As we previously reported, FTC Chairwoman Lina Khan recently told the Wall Street Journal that regulating noncompetes “falls squarely in [the FTC’s] wheelhouse,” and she has never been shy about sharing her view that noncompetes should be banned nationwide and that the FTC has the authority to do so. This view does not appear to have changed despite the Supreme Court’s decision in West Virginia v. EPA.

Only time will tell what, if any, action the FTC takes with respect to regulating noncompetes, but if it does take steps to ban or otherwise limit noncompetes nationwide under Section 5 of the FTC Act, there will no doubt be litigation challenging those regulations. And you can bet that the Supreme Court’s decision in West Virginia v. EPA will be front and center in any such challenge. Indeed, according to Law360, U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley said that the MOU shows Chairwoman Khan’s vision for the FTC “goes well beyond what is provided in law and what was envisioned by Congress.” Chairwoman Khan does not seem too perturbed by the prospect of challenges to the FTC’s authority in this regard, however, and seems intent on moving forward despite the Supreme Court’s admonition.

Article By Erik W. Weibust and Stuart M. Gerson of Epstein Becker & Green, P.C.

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U.S. Supreme Court Agrees with HHS Payment Methodology for Disproportionate Share Hospitals

The fight about how Medicare compensates disproportionate share hospitals (“DSH”) is one of the longest-running reimbursement disputes of recent years, and it has generated copious work for judges around the country.  In a 5-4 decision, the U.S. Supreme Court settled one piece of the conflict:  the counting of “Medicare-entitled” patients in the Medicare fraction of the “disproportionate-patient percentage.”  Becerra v. Empire Health Found., 597 U.S. ___ (2022) (slip op.).  The Supreme Court concluded that the proper calculation, under the statute, counts “individuals ‘entitled to [Medicare] benefits[,]’ . . . regardless of whether they are receiving Medicare payments” for certain services.  Id. (slip op., at 18) (emphasis added).

DSH payments are made to hospitals with a large low-income patient mix.  “The mark-up reflects that low-income individuals are often more expensive to treat than higher income ones, even for the same medical conditions.”  Id. (slip op., at 3).  The federal government thus gives hospitals a financial boost for treating a “disproportionate share” of the indigent population.

The DHS payment depends on a hospital’s “disproportionate-patient percentage,” which is basically the sum of two fractions: the Medicare fraction, which reflects what portion of the Medicare patients were low-income; and the Medicaid fraction, which reflects what portion of the non-Medicare patients were on Medicaid.  Historically, HHS calculated the Medicare fraction by including only patients actually receiving certain Medicare benefits for their care.  In 2004, however, HHS changed course and issued a new rule.  It counted, in the Medicare fraction, all patients who were eligible for Medicare benefits generally (essentially, over 65 or disabled), even if particular benefits were not actually being paid.  For most providers, that change resulted in a pay cut.

The new rule sparked several lawsuits.  Hospitals challenged HHS’s policy based on the authorizing statutory language.  These hospitals essentially argued in favor of the old methodology.  Appeals led to a circuit split, with the Sixth and D.C. Circuits agreeing with HHS, and the Ninth Circuit ruling that HHS had misread the statute.

The Supreme Court has now resolved the issue.  The majority opinion, authored by Justice Kagan, sided with HHS.  The majority concluded that, based on the statutory language, “individuals ‘entitled to [Medicare] benefits’ are all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.”  Id. (slip op., at 18).  The majority also explained that if “entitlement to benefits” bore the meaning suggested by the hospital, “Medicare beneficiaries would lose important rights and protections . . . [and a] patient could lose his ability to enroll in other Medicare programs whenever he lacked a right to [certain] payments for hospital care.”  Id. (slip op., at 11).

Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Gorsuch and Alito.  The dissent argued that those lacking certain Medicare coverage should be excluded from HHS’s formula, based on “the most fundamental principle of statutory interpretation: Read the statute.”  Id. (Kavanaugh, J., dissenting) (slip op., at 2).  According to the dissent, the majority’s ruling will also restrict hospitals’ ability to provide care to underprivileged communities.  “HHS’s misreading of the statute has significant real-world effects: It financially harms hospitals that serve low-income patients, thereby hamstringing those hospitals’ ability to provide needed care to low-income communities.”  Id. (slip op., at 4).

There was one point of agreement among the majority and dissenting justices: the complexity of the statutory language for DSH payments.  Echoing the thoughts often held by healthcare advisors, Justice Kagan found the statutory formula to be “a mouthful” and “a lot to digest.”  Id. (majority opinion) (slip op., at 4).  And in his dissent, Justice Kavanaugh called the statute “mind-numbingly complex,” and resorted to an interpretation that he found “straightforward and commonsensical”: that patients cannot be “simultaneously entitled and disentitled” to Medicare benefits.  Id. (Kavanaugh, J., dissenting) (slip op., at 1, 3).

Article By Jeffrey DeBeer and Keith Bradley of Squire Patton Boggs (US) LLP

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Five Administrative Law Takeaways From Recent Supreme Court Decisions

The US Supreme Court’s decisions of late have been consequential. While headline-grabbing decisions deal with religious liberties, privacy, and gun control, the Court’s impact on administrative law will have major consequences as well. Administrative law decisions stemmed from cases involving how the executive shaped policy related to climate change, health care, immigration, and public health. Administrative actions are tied together by procedural rules derived from the constitutional separation of powers and the federal Administrative Procedure Act (APA).

Below, we discuss five major trends derived from this term’s decisions related to administrative law and the separation of powers:

  1. The “major questions doctrine,” and how it can limit executive-branch authority;
  2. How spending can be used to shape behavior in situations where executive-branch authority might otherwise be limited;
  3. The fate of “Chevron deference” – i.e., the judiciary’s willingness to defer to the executive branch’s interpretations of statutes agencies are tasked to administer;
  4. What discretion executive agencies have to change policies, and what steps they need to defend such changes; and
  5. When the Supreme Court will intervene in cases that are moot or which otherwise lower court decision-making might simplify the Court’s resolution of involved issues.

Major Questions Doctrine

The facts that would support a “major questions” analysis of executive actions became clearer with this term’s decisions. The doctrine drove decisions in major cases related to climate change and public health – NFIB v. OSHA, dealing with the federal vaccine mandate, and West Virginia v. EPA, which addressed greenhouse gas regulations. In sum, the Court says that administrative actions with significant economic and political impact require a close look at authorizing legislation to determine if Congress has authorized the action taken.

Some background on these cases. NFIB v. OSHA – decided first – grappled with whether OSHA exceeded its authority when it sought to require certain employers and their employees to receive a COVID-19 vaccine or be subject to frequent testing requirements. (We discussed this case individually in-depth here.) OSHA based its mandate on its authority to relate workplace hazards. Because the vaccine mandate for businesses with over 100 employees would impact roughly 84 million Americans, the Supreme Court accepted that it was a “major question” that involved “great economic and political significance” and therefore was subject to the major questions doctrine. Accordingly, the executive branch was required to point to specific authority supporting the mandate. Because the executive branch could not point to where Congress gave them the power to enforce a vaccine mandate, the Court overturned it.

This decision either reaffirmed the importance of checks and balances or demonstrated that the “major questions doctrine” could be used to prevent the executive branch from flexibly using “old” public health law to address novel issues associated with an airborne pandemic.

The “major questions doctrine” appeared next in West Virginia v. EPA, which we discussed here. To address the issue of climate change, US Environmental Protection Agency (EPA) developed the Clean Power Plan to address carbon dioxide emissions from power plants that relied on owners shifting from fossil fuels to zero-emitting fuels in 2015. This required closures of fossil fuel generating stations and significant investments from the electric generation sector. After the Supreme Court stayed the Clean Power Plan, the Trump Administration proposed a different rule that mandated actions solely at the fossil fuel-fired units and, simultaneously, declared that the Clean Air Act did not authorize the far-reaching legal rationale of the Clean Power Plan.

After addressing some unique procedural issues, which we will discuss below, the Court characterized the Clean Power Plan as effectively remaking the national energy markets. Applying the major questions doctrine, the Court held that such a broad change to the energy sector required a clear congressional mandate, which was not present in the Clean Air Act. In a concurrence, Justice Gorsuch argued that deferring to agencies on matters of great economic or political significance would amount to “Permitting Congress to divest its legislative power to the Executive Branch. . .”

How Spending Can Be Used to Shape Behavior

Whereas the two decisions above illustrate limits on executive power, in Biden v. Missouri, the Supreme Court allowed the executive branch to use spending to compel COVID vaccinations of employees in certain medical establishments. A vaccine mandate in this context was consistent with past policies because Medicare and Medicaid facilities are routinely forced to follow protocols to receive funding.

Clearly, one takeaway from Biden v. Missouri is that the executive is not without power to influence private behavior, so long as spending is involved. The Court found that in the healthcare space, it would be counterintuitive for effective administration of a “facility that is supposed to make people well to make them sick with COVID-19.”

The Fate of the Chevron Doctrine

A third issue worth discussing is the fate of the “Chevron doctrine.” Our takeaway is that the “Chevron” doctrine may have little force at the Supreme Court level, even if parts of its analysis live on. We base this conclusion on the fact that both American Hospital Association v. Becerra and West Virginia v. EPA feature limited deference to the executive vis-à-vis the courts. But, neither case discusses Chevron at all. Why?

The “Chevron doctrine” has been fundamental to modern administrative law while existing in a policy-wonk backwater. The Chevron doctrine was born in the 1984 Supreme Court decision Chevron v. National Resources Defense Council. It provides federal agencies with the ability to interpret the statutes they are tasked to administer without heavy-handed court intervention. Under the traditional Chevron analysis, courts will defer to the federal agency when the relevant statute is ambiguous, and the agency’s interpretation is reasonable.

Two major cases seemed to ignore the doctrine, however:

  • In Becerra, the Court signaled some unwillingness to find statutes “ambiguous.” Becerra involved the US Department of Health and Human Services’ interpretation of the Medicare statute governing hospital reimbursement rates. While the DC Circuit Court of Appeals below found significant ambiguity in the highly technical statute, a unanimous Supreme Court disagreed and held that the plain language of the statute clearly precluded the agency’s interpretation. The fact that the Supreme Court found clarity where the DC Circuit saw ambiguity suggests that the Court has significantly raised the bar for the level of ambiguity necessary for it to adopt an agency’s interpretation.
  • Where Becerra limited the impact of Chevron based on the text of the statute, West Virginia v. EPA established an entire class of cases where Chevron will not apply based on the practical impact of the regulation. By embracing the “major questions doctrine” discussed above, the Court signaled that it will not defer to federal agencies on novel issues unless Congress clearly stated an intent to delegate to the agency. The Court focused on the sweeping impact of EPA’s proposed emissions regulations, in stark contrast to the DC Circuit’s textual analysis of the statutes at issue (and also to the Court’s own textual analysis in Becerra).

While it appears that the Chevron doctrine may currently be gathering cobwebs at the Supreme Court level, it remains to be seen what will happen at the district and appellate levels. Maybe the Chevron doctrine will continue to exist as a sorting mechanism below — scholars have noted that Chevron was far more likely to determine outcomes in the lower courts. But at the very least, the Supreme Court has given federal judges powerful tools to avoid deferring to agency interpretations where they are so inclined.

How and When Agencies Can Change Preexisting Policies

A fourth issue worth highlighting may be found in Biden v. Texas, which involves the Biden Administration’s rescission of the Trump Administration’s Remain in Mexico policy.

First, some policy background: Government agencies have broad discretion in setting and changing policies so long as they follow the appropriate procedures. Generally, these procedures are set forth in the APA, a statute that we discuss with great regularity. Under the APA, the executive’s decisions can only be justified or challenged based on the agency’s administrative record. The regulated community can sometimes request that the Court look beyond the administrative record by showing that the agency acted in bad faith or in a procedurally improper manner. The Court’s last significant decision in this area – Department of Commerce v. New York, which we summarized here – evaluated the Commerce Secretary’s attempts to add a citizenship question to the 2020 census. In Department of Commerce, extra-record discovery revealed that the Secretary planned to add the question all along and had, in fact, solicited the request for the question from the US Department of Justice (DOJ). The Supreme Court determined that the Voting Rights Act rationale was “contrived” and affirmed the lower court’s decision to bar the US Department of Commerce from asking the question.

Regarding this case: Biden v. Texas, which involved the Biden Administration’s rescission of the Trump Administration’s “Remain in Mexico” immigration program – also called the Migrant Protection Protocols (MPP) – evaluated whether the Biden Administration acted appropriately when it rescinded the program. Some background on Biden v. Texas:

  • In January 2019, the US Department of Homeland Security (DHS) began to implement MPP. Under MPP, certain non-Mexican persons arriving by land from Mexico were returned to Mexico to await the results of their immigration cases. After it took office, the Biden Administration first suspended the program and later terminated it.
  • Texas and Missouri challenged the rescission on the grounds that it violated federal immigration law as well as the APA. A Texas federal court accepted the states’ arguments on the grounds that immigration law required DHS to either detain arrivals in the US or in contiguous territory – as MPP did – and that DHS lacked the resources necessary to house arrivals in the US, so a program like MPP was required by statute. The district court entered an injunction requiring the government to “enforce and implement MPP in good faith until such a time as it has been lawfully rescinded in compliance with the APA and until such a time as the federal government has sufficient detention capacity to detain all aliens subject to mandatory detention under [immigration law] without releasing any aliens because of a lack of detention resources.”
  • On appeal, the Secretary of DHS released a second explanation for terminating MPP and sought to vacate the injunction. The appellate court affirmed the lower court’s analysis that the injunction was required and rejected DHS’s second explanation for why the program should be terminated on the grounds that it did not constitute a new or separately reviewable “final agency action,” which triggers APA review.

The Court upheld the rescission of MPP on two grounds: first, because federal immigration law used the word “may” in defining what DHS may do regarding confining persons arriving over land from Mexico. “May” gives the government discretion and establishes contiguous-territory return such as was required by MPP as a tool that the agency “has the authority, but not the duty” to use. Congress could have – but did not – construct the immigration provisions to require MPP.

Additionally, upholding the program required the Court’s consideration of DHS’s during-litigation explanation for why the program should be terminated. The Court accepted the during-litigation explanation because it constituted a wholly new explanation of why the MPP should be terminated. The during-litigation explanation explained that it “superseded” and “rescinded” the earlier termination and then offered “new reasons” that had not been included in the prior rescission. Both the pre-litigation and during-litigation memoranda were separate “final agency actions.”

Finally, because DHS did not rest on its pre-litigation MPP termination, it was permitted to provide additional justifications for its actions, so long as the agency complied with APA-imposed requirements for taking “new” actions. The Court rejected the states’ charge that there was a “significant mismatch between” the rescission and DHS’s explanation for it. DHS’s “ex-ante preference for terminating MPP – like any other feature of an administration’s policy agenda – should not be held against” its actions. Accordingly, DHS’s rescission of MPP was upheld.

An Increase in Procedurally Irregular Case Resolutions? 

A final trend we wanted to highlight is that the Supreme Court appears increasingly willing to wade into disputes at earlier procedural phases than would be typical. Historically, nearly every Supreme Court case has made it to the Court having been fully and finally resolved in lower federal courts. (To be sure, there are some exceptions – most notably the limited class of cases for which the Supreme Court has original jurisdiction, which involve mainly disputes between the states or disputes between ambassadors.) This term, the Court was increasingly willing to wade into disputes which were either arguably moot or have not yet completed their run through lower courts. Three examples:

  • Mootness. In West Virginia v. EPA, during the pendency of litigation, the Biden Administration indicated it would not enforce the regulations at issue and instead would pursue a new rulemaking. The Court found that EPA’s representation that “voluntary cessation does not moot a case” unless it is “absolutely clear that the allegedly wrongful behavior could not be expected to recur.” For the government to moot the case, it would have to suggest that it would not re-impose limitations based on generation shifting – something that it did not do.
  • No lower court finding regarding jurisdiction. In Biden v. Texas, four of the nine justices signed a dissent indicating that lower courts should review whether federal courts had “jurisdiction or authority to enjoin or restrain the operation of” certain immigration laws in light of the Court’s recent decision in Garland v. Aleman Gonzalez, which addressed similar issues. While a majority of the court favored reaching a merits decision, four members of the Court favored remanding the case to lower courts for an evaluation of how Aleman Gonzalez might alter jurisdictional issues in the case.
  • The Court’s Use of its “Shadow Docket.” In Ardoin v. Robinson, the Supreme Court, in an unsigned order with no explanation, reinstated a district voting map in Louisiana that has previously been deemed discriminatory and harmful to minority voting rights. This case was decided under what has been coined the Supreme Court’s “shadow docket” because it refers to cases decided outside normal procedural regularity: off the regular docket, without oral arguments or written briefs, and before lower courts have fully and finally decided the issue. The Court’s use of its “shadow docket” appears to be occurring with increasing frequency. As the Court is likely to remain polarized next term, we may see additional consequential decisions at the “shadow docket” phase then.

This was clearly a major term with significant decisions in many areas, including administrative law. The Court’s next arguments begin in October. We will keep an eye out for new cases relevant to administrative law.

Article By J. Michael Showalter, Samuel A. Rasche, and Rachael A. Bryan of ArentFox Schiff LLP

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