It was a big day for equity.  In Armstrong v. Exceptional Child Center, decided yesterday, the Court concluded that Medicaid providers do not have a cause of action to challenge a state’s reimbursement rates.  While the decision on the merits was closely divided, the Court’s opinions also found a certain amount of common ground about the foundations of the alleged federal cause of action.

A plaintiff who wishes to sue in federal court needs – in addition to standing, jurisdiction, and a claim on the merits – a “cause of action.”  This is the specific legal authority to bring suit on a given issue.  In a series of cases stretching back decades, the Court has made it relatively difficult to find a cause of action to enforce a federal statute, unless Congress has expressly provided one.  On the other hand, when plaintiffs seek to enforce the Constitution by getting an injunction, the Court has found such causes of action much more readily. 

This was a preemption case that arose at the intersection of those cases.  The core of the providers’ complaint was that Idaho was not complying with a federal statute governing Medicaid reimbursements.  But the providers conceded that there was no statutory cause of action to enforce those requirements.  From one perspective, that might seem to doom their claim.

On the other hand, preemption is partly a creature of the Constitution’s Supremacy Clause, which makes federal statutes “the supreme law of the land … anything in the … laws of any State to the contrary notwithstanding.”  So the providers argued that they should be allowed to seek an injunction to enforce the Supremacy Clause under the seemingly more permissive standard for constitutional injunctions.  They also pointed out that the Court has heard many preemption cases in the past that were premised on the availability of such relief.

The Court rejected the availability of a cause of action by a five-to-four vote, but the opinions collectively found common ground about the legal foundations of enforcement suits.  The Supremacy Clause itself does not contain an implied right of action, agreed the Court and the dissent.  It provides a rule of decision, but the right to sue must come from elsewhere.

On the other hand, the opinions agreed, there generally is an “elsewhere.”  As the majority opinion put it: “The ability to sue to enjoin unconstitutional actions by state and federal officers is the creation of courts of equity, and reflects a long history of judicial review of illegal executive action, tracing back to England.”  Equity, said the Court, is the source of cases like Ex Parte Young, now the leading precedent permitting suits seeking constitutional injunctions against state or federal officials.

Finally, both sides agreed that these equitable causes of action can be foreclosed by Congress.  But when and how?  That’s the point that ultimately divided the majority and the dissent.

Justice Antonin Scalia’s opinion for the Court concluded that the Medicaid Act had implicitly precluded recourse to equity because of the statute’s own administrative remedy and the “judicially unadministrable nature” of the statutory text.  That portion of the opinion was joined by the three other Justices who had dissented in Douglas v. Independent Living Center, the Court’s previous encounter with the question, as well as by Justice Stephen Breyer.  (The final section of the opinion, which Justice Breyer did not join, explained why the Act itself did not create a cause of action, which the providers had conceded it did not.)

Justice Breyer wrote a concurring opinion, rejecting “a simple, fixed legal formula,” and expanding on the two factors listed by the majority opinion – the complexity of the statutory standard and the possible adequacy of administrative enforcement.  Justice Breyer also referred to “the history of ratemaking,” and concluded that the history “demonstrates that administrative agencies are far better suited to this task than judges.”

Justice Sonia Sotomayor’s dissent, joined by Justices Ruth Bader Ginsburg, Elena Kagan, and Anthony Kennedy, argued that the equitable cause of action ought to be available in this case.  She argued that the administrative remedy was too limited to supplant it, and that the statutory standard, though “fairly broad,” was similar to another part of the Medicaid Act that had been thought enforceable.  But the dissent’s points of disagreement seemed case-specific rather than foundational.

The opinions also declined to engage some other big questions.  For instance, what is the legal source of this equitable cause of action, and how does it interact with the rules of federal jurisdiction?  What is the relationship, if any, between the equitable cause of action to get an injunction under the Constitution and the far more controversial cause of action for damages recognized in the Court’s cases?  But those questions can definitely await a future case.

The result, then, was an important but narrow victory for states and others who hoped to limit review under the act.  (The United States took the states’ side of the suit, though former officials of the department of Health and Human Services filed an amicus brief on the providers’ side.)  And because the Court has rarely found an equitable cause of action to be foreclosed by statute, that victory may prove an important precedent in other cases.  But it does not unsettle the general practice of equitable causes of action.

 Plain English:   In this case, the Court concluded that Medicaid providers cannot sue the state for paying them too little under the Medicaid Act.  Instead, it is the federal government that is supposed to enforce the broadly worded reimbursement provisions.  At the same time, the Court did not imperil the ability of other plaintiffs, in other situations, to seek injunctions against state officials who are violating federal law.

Posted in Armstrong v. Exceptional Child Center, Featured, Merits Cases

Recommended Citation: William Baude, Foreclosing equitable relief under Medicaid Act, SCOTUSblog (Apr. 1, 2015, 9:53 AM), http://www.scotusblog.com/2015/04/foreclosing-equitable-relief-under-medicaid-act/