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Volume XIII, Number 33

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A Peaceful Resolution of Cases Concerning Arbitration, Medicaid, and Bankruptcy—All Involving Textual Analysis: SCOTUS Today

The Court has started the week with three decisions emphasizing textual readings, two of them unanimous and a third drawing Justice Kagan into the majority with the Court’s six nominal jurisprudential conservatives.

Let’s start with health care, a topic of interest to most Americans, though the ins and outs of reimbursement law, often involving state conduct under the Medicaid Act, can tend to be hyper-technical. Gallardo v. Marsteller might appear to be such a case, but seven Justices concluded that it could be resolved by sticking to the text. Ms. Gallardo was permanently disabled from injuries incurred when she was struck by a truck as she stepped off a Florida school bus. Florida, which continues to pay Ms. Gallardo’s medical expenses, had, at the time of this decision, already paid out $862,688.77. The Gallardo family sued the truck’s owner and driver and the school board that owned the bus for past medical expenses, as well as for lost future earnings and medical expenses.

That litigation was settled for $800,000, with $35,367.52 expressly dedicated to past medical expenses. The Medicaid Act requires participating states to pay for certain needy individuals’ medical costs and then to make reasonable efforts to recoup those costs from liable third parties. Florida did just that, applying its Medicaid Third-Party Liability Act as to the automatic assignment by a medical assistance beneficiary like Ms. Gallardo, and seeking $300,000 attributable to past and future medical expenses. The dispute at bar concerned whether the federal Medicaid Act permits a state to get reimbursement from settlement monies allocated for future medical care.

As noted, all the Justices, save for Justice Sotomayor, who was joined in dissent by Justice Breyer, answered that question in the affirmative. In an opinion by Justice Thomas, the Court held that the plain text of the Medicaid Act at 42 U.S.C. §1396k(a)(1)(A) provides no limitation on a beneficiary’s assignment to payments for past “medical care” already paid for by Medicaid. Indeed, the law’s grant of “any rights . . . to payment for medical care” most naturally covers not only rights to payment for past medical expenses but also rights to payment for future medical expenses. The relevant distinction is thus “between medical and nonmedical expenses,” not between past and future medical expenses.

In her dissent, Justice Sotomayor says that the Court’s holding “is inconsistent with the structure of the Medicaid program and will cause needless unfairness and disruption.” While that sentiment attracted Justice Breyer, it is unsurprising that Justice Kagan joined the majority. As I’ve often noted in this blog, Justice Kagan, while nominally liberal, is indeed a textualist. While she sometimes reaches conclusions based on text that differ from the conclusions of a conservative majority, also based on text, her textual methodology is the mainstream interpretive modality of the current Court.

In Southwest Airlines Co. v. Saxon, a unanimous Court, again per Justice Thomas (though Justice Barrett did not participate), held that airline ramp supervisors were a “class of workers engaged in foreign or interstate commerce” and therefore exempt from the Federal Arbitration Act’s (FAA’s) coverage described in 9 U. S. C. §1. In reaching this conclusion, the Court rejected arguments from both sides as to the scope of the exemption, and interpreted the language of section 1 according to its “ordinary, contemporary, common meaning.” The holding that an airline employee who works as a ramp supervisor is a “transportation worker” and therefore not required to arbitrate her wage dispute with the airline turns on whether the class of such employees is “engaged in foreign or interstate commerce” might surprise some who could point to a series of Supreme Court cases requiring arbitration under the FAA, but this case again is about text and plain meaning. Thus, looking at the relevant definition of the operative term, it was clear that cargo loading, which ramp supervisors oversee, is within foreign or interstate commerce. Critics, who claim that the Court’s majority is always pro-business, will have to reckon with this case, which is otherwise.

Justice Thomas, on the conservative side of things, wrote a unanimous opinion in the Southwest Airlines case. In Siegel v. Fitzgerald, Justice Sotomayor, perhaps the Court’s most liberal Justice, has herself written an opinion that is joined by all of her colleagues. The case concerns the United States Trustee Program, which Congress created to transfer administrative functions previously handled by bankruptcy judges to U. S. Trustees, a component of the Department of Justice. However, Congress permitted the six judicial districts in North Carolina and Alabama to opt out of the Trustee Program and appoint their own administrators. Although these administrators handle the same core functions as the U.S. Trustees, they are subject to different funding sources. Congress requires that the Trustee Program be funded in its entirety by user fees paid to the United States Trustee System Fund, largely paid by debtors who file cases under Chapter 11 of the Bankruptcy Code. 28 U. S. C. §589a(b)(5). Those debtors pay a fee in each quarter of the year that their case remains pending at a rate set by Congress and determined by the amount of disbursements the debtor’s estate made that quarter. See §1930(a). In contrast, the Administrator Program is funded by the Judiciary’s general budget.

Again, looking to text, this time that of the Constitution itself, the Court held that Congress’s enactment in 2017 of a significant fee increase that exempted debtors in two states violated the uniformity requirement of the Bankruptcy Clause. In so doing, the Court rejected the argument that the 2017 act exempting North Carolina and Alabama was not a law “on the subject of Bankruptcies” to which the uniformity requirement applies, but instead a law enacted pursuant to the Necessary and Proper Clause. However, the Court noted that nothing in the language of the Bankruptcy Clause suggests a distinction between substantive and administrative laws and that the Bankruptcy Clause’s broad language with respect to the breadth of congressional power was strictly limited by requiring uniformity.

Altogether an essentially peaceful day on the Court. Dobbs and other controversial matters are soon to come, though.

©2023 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XII, Number 158
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About this Author

Stuart Gerson, Health Care Attorney, Epstein Becker Law Firm
Member of the Firm

STUART M. GERSON is a Member of the Firm in the Litigation and Health Care & Life Sciences practices, in the firm's Washington, DC, and New York offices. Much of Mr. Gerson's practice has been centered on providing representation to clients in the health care industry (including insurers, hospitals, pharmaceutical manufacturers, managed care providers, and private equity funds, among others). He has extensive experience litigating cases involving the cybersecurity of health care information, trade secrets, and other confidential data as well as civil...

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