Six Down, 24 to Go: An Important Day for Health Care and Employment Lawyers – SCOTUS Today
On June 15, the Court decided five cases and dismissed a sixth. A case of great importance to health care lawyers, regarding the availability of judicial review of Medicare rates for pharmaceuticals, and another of great importance to labor and employment lawyers, holding that a significant portion of the California Private Attorneys General Act’s (PAGA’s) delegation of state enforcement power is preempted by federal law, lead the pack.
Let’s start with health care. American Hospital Association v. Becerra might be a surprise to some who thought that the Court would delve into the waters of Chevron deference, as did the D.C. Circuit below. Such was not the case, however. Writing for a unanimous Court, Justice Kavanaugh reviewed the fact that the federal Medicare statute lays out a formula that the Department of Health and Human Services (HHS) must employ annually to set reimbursement rates for certain outpatient prescription drugs provided by hospitals to Medicare patients. HHS is given two options. If HHS has conducted a survey of hospitals’ acquisition costs for each covered outpatient drug, the agency may set reimbursement rates based on the hospitals’ “average acquisition cost” for each drug and may “vary” the reimbursement rates “by hospital group.” But, absent a survey, HHS must set reimbursement rates based on “the average price” charged by manufacturers for the drug as “calculated and adjusted by the Secretary.” 42 U.S.C. §1395l(t)(14)(A)(iii)(II). This second option does not authorize HHS to vary reimbursement rates for different hospital groups. For the years in question, HHS did not conduct surveys, and the issue before the Court concerned whether HHS’s determinations were subject to review.
Looking only at the text of the statute and engaging in no matter of deference or interpretation, all of the Justices agreed that the Medicare statute does not preclude judicial review of HHS’s reimbursement rates. In clear language, the Kavanaugh opinion reiterates that “[j]udicial review of final agency action is traditionally available unless ‘a statute’s language or structure’ precludes it.” Moreover, absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rates only for 340B hospitals; HHS’s 2018 and 2019 reimbursement rates for 340B hospitals were therefore unlawful. Rejecting HHS’s efforts to analogize its position to various sections of the law that might have granted it final authority, the Court stuck to the narrow channel of the provision that applied to what the agency actually did and held that, given the text and structure of the statute, this is a straightforward case.
In another pending case, the Court might yet have something to say about deference to agency interpretations. However, whether involving the measurement of fish or the setting of hospital drug reimbursement rates, the tide is running against agency deference where there is no clear ambiguity in statutes or regulations. Today’s decision will no doubt encourage more administrative appeals.
Turning to labor and employment law, the Court again returns to the realm of arbitration and the reach of the Federal Arbitration Act (FAA) in the case of Viking River Cruises, Inc. v. Moriana. With only Justice Thomas dissenting but with a mélange of concurring opinions, Justice Alito authored the majority opinion, resolving the highly contentious question of whether the FAA, 9 U.S.C. §§1 et seq., preempts a rule of California law that invalidates contractual waivers of the right to assert representative claims (that is, an analog of class actions) under PAGA.
PAGA enlists employees as private attorneys general to enforce California labor law, authorizing any “aggrieved employee” to initiate an action against a former employer “on behalf of himself or herself and other current or former employees” to obtain civil penalties that previously could have been recovered only by the state. Under a holding in a California case called Iskanian v. CLS Transp. Los Angeles, LLC, 59 Cal. 4th 348, 380, a PAGA suit is a “representative action” in which the employee plaintiff sues as an “agent or proxy” of the state. In other words, it is a kind of qui tam action, but it also can be interpreted much like one would approach a class action.
Thus, California case law also interprets the statute to allow a party to unite multiple claims against an opposing party in a single action. An employee with PAGA standing may “seek any civil penalties the state can, including penalties for violations involving employees other than the PAGA litigant herself.” In a collective action brought by a disgruntled former employee of the defendant cruise line, the Court was asked to what extent, if any, PAGA’s prohibition of waivers of PAGA claims was preempted by the FAA. The Supreme Court’s majority opinion answers the question by holding that the Iskanian case’s prohibition on wholesale waivers of PAGA claims is not preempted by the FAA. But its rule that PAGA actions cannot be divided into individual and non-individual claims is preempted. Accordingly, Viking was entitled to compel arbitration of Moriana’s individual claim. But PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. And under PAGA’s standing requirement, a plaintiff has standing to maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action. Thus, Moriana lacks statutory standing to maintain her non-individual claims in court, and accordingly, her remaining claims should be dismissed.
Corporations and other organizational defendants will hail this limitation on California’s delegation of enforcement powers to private plaintiffs.
In other action, the Court decided Golan v. Saada, another unanimous opinion, this one written by Justice Sotomayor, interpreting the Hague Convention on the Civil Aspects of International Child Abduction, which requires the judicial or administrative authority of a contracting state to order a child returned to the child’s country of habitual residence if the authority finds that the child has been wrongfully removed to or retained in the contracting state. The authority “is not bound to order the return of the child” however, if the authority finds that return would expose the child to a “grave risk” of “physical or psychological harm or otherwise place the child in an intolerable situation.” U.S. courts have jurisdiction to make these determinations. As to the breadth of their discretion, the Supreme Court holds that while a court might consider the issue as it evaluates current harm, it is not categorically required to examine all possible ameliorative measures before denying a Hague Convention petition for return of a child to a foreign country once the court has found that return would expose the child to a grave risk of harm.
To me, the most interesting thing about the Court’s decision in Ysleta Del Sur Pueblo v. Texas is the way the Justices lined up. Justice Gorsuch, who wrote the opinion, is, for once, joined by Justice Barrett but also by the Court’s three liberals. The Chief Justice dissented, joined by Justices Thomas, Alito, and Kavanaugh. It is no surprise that when the case is about an Indian Nation, Justice Gorsuch likely will come out on the side of the tribe. Here, with him in the lead, the majority holds that when Congress adopted the Ysleta del Sur Pueblo and Alabama and Coushatta Indian Tribes of Texas Restoration Act, it banned as a matter of federal law on tribal lands only those gaming activities also banned in Texas. A broader federal gaming law does not apply.
In a veterans’ benefits case, George v. McDonough, we see another interesting lineup, in which Justice Barrett wrote for not only the Chief Justice and Justices Thomas, Alito, and Kavanaugh, but also Justice Kagan, with Justice Gorsuch (who often disagrees with Justice Barrett) dissenting on behalf of himself and Justices Breyer and Sotomayor. The Court held that the invalidation of a Veterans’ Administration regulation after a veteran’s benefits decision becomes final cannot support a claim for collateral relief based on clear and unmistakable error. The decision that a textual approach by all the Justices doesn’t necessarily produce a uniform view, as the dissenters read the term “clear and unmistakable error” more broadly than the majority, which finds the operative term to suggest no more than a narrow category.
Finally, the Court dismissed cert. as improvidently granted in Arizona v. City and County of San Francisco.
All in all, a busy day. But with 24 cases still to be decided, some likely to be highly contentious, there is still going to be plenty to consider before the term ends.