June 26, 2022

Volume XII, Number 177

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June 24, 2022

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Supreme Court Discrimination Case Narrows Scope of Restitution for Individuals

Last month, in Cummings v. Premier Rehab Keller, P.L.L.C., the Supreme Court denied a petitioner’s right to emotional distress damages in a private action brought under federal anti-discrimination laws. The Petitioner, a woman who is both deaf and legally blind, alleged that when she requested an American Sign Language interpreter at Premier Rehab Keller (“Premier”), the clinic denied her request, resulting in her inability to receive treatment. She filed suit under Section 504 of the Rehabilitation Act (“Rehab Act”) and Section 1557 of the Affordable Care Act (“ACA”), two federal statutes that prohibit recipients of federal funding from discriminating in the delivery of services based on disability. The Fifth Circuit dismissed her claim, reasoning that emotional distress damages are categorically unavailable in private actions and cannot be used to enforce either the Rehab Act or the ACA. As explained below, the Supreme Court affirmed the Fifth Circuit ruling.

Narrowing Scope of Relief for Victims of Discrimination

This decision is notable because it cemented an enforcement trend for two major discrimination laws at a time when healthcare disparities are at the forefront of national discussions. The Supreme Court communicated its intent to limit enforcement in several ways. First, the decision resolved a previous split between the Fifth Circuit and the Eleventh Circuit; the latter of which ruled, in 2007, that emotional distress damages are available under the Rehab Act.[1] Second, the decision effectively narrowed the scope of restitution available under both the Rehab Act and the ACA. Third, and most notably, the decision continued the pendulum-like treatment of Section 1557 that was introduced under the Obama administration.

The Obama-era Section 1557 regulations explicitly provided a private right of action, including access to compensatory damages.[2] But the Trump Administration Section 1557 rules repealed several of those provisions—including the express statement of a private right to action.[3] In 2021, the pendulum swung back to widen scope with the Biden Administration recognizing sexual orientation and gender identity as categories protected under Section 1557 for the first time.[4] Although the Office of Civil Rights (“OCR”) has articulated its intent to interpret relief available under Section 1557 more broadly, in this ruling the judicial branch swings the pendulum back toward a narrower application of the statute.

Contract-Law Theory

Since Section 504 and Section 1557 no longer provide explicit remedies for affected individuals, enforcing courts have considerable interpretive discretion on the issue of restitution.

The entirety of the Court’s reasoning in Cummings came from the contract-law theory established in the 2002 case, Barnes v. Gorman.[5] According to this theory, laws governing federal programs operate by “conditioning an offer of federal funding on a promise to the recipient not to discriminate, in what amounts essentially to a contract between the Government and the recipient of funds.”[6] The theory holds that this implied contract is only valid if the recipient of federal funding voluntarily and knowingly accepts the terms of the contract, and that the recipient may only be considered “on notice” of liability for those remedies traditionally available in suits for breach of contract. In other words, if a Medicare/Medicaid provider is found to have discriminated in violation of the Rehab Act or the ACA, that provider can only be held liable for “traditional” contract damages. But what constitutes “traditional” contract damages?

Although Petitioner cited a provision in the Second Restatement of Contracts, asserting that traditional contract remedies do include damages for emotional distress (as long as a contractual breach is particularly likely to result in emotional disturbance instead of economic loss), the Supreme Court insisted that this exception was too obscure.  

Takeaways for Future Discrimination Cases

Today, Supreme Court is unpersuaded by legal arguments that do not align with Barnes. The dissenting opinion and multiple amicus briefs filed by civil rights groups, including the ACLU and the NAACP, emphasized the purpose of the discrimination laws, insisting that the intent behind these statutes cannot be to leave victims with no remedy at all just because damages are not monetary in nature. Given its willingness to overlook this rationale, however, the Supreme Court will require a stronger argument in order to part with Barnes.

For now, future plaintiffs can rely on traditional contract remedies, such as compensatory damages or injunctions. To force a departure from Barnes, plaintiffs must provide substantial support, both in law and fact, to persuade the Court that the defendant necessarily must have been on notice of its liability for the type of damages sought.

Until then, the Cummings decision significantly limits the options plaintiffs will have in court, as well as the leverage they will have in settlements with recipients of federal funding. Outside the formal judicial process, civil rights groups might consider using the contract-law theory to their advantage by pushing to include clearer and more comprehensive remedies in participation agreements between the government and recipients of federal funding to satisfy the notice and consent requirements.

Fortunately for program participants, OCR, no doubt energized by the current national movement for social justice, is currently developing a new set of regulations that would once again broaden the scope of Section 1557. Thus, we may see the pendulum swing once again in the direction of broader protection for victims of discrimination, led by the OCR’s current appetite for enforcement.


FOOTNOTES

[1] See Sheely v. MRI Radiology Network, P.A., 505 F.3d 1173 (11th Cir. 2007).

[2] See 81 Fed. Reg. 31375.

[3] See 85 Fed. Reg. 37160.

[4] See 86 Fed. Reg. 27984.

[5] See Barnes v. Gorman, 536 U. S. 181, 185, 187 (2002).

[6] Gebser v. Lago Vista Independent School Dist., 523 U.S. 274, 286 (1998) (emphasis added).

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 145
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About this Author

Audrey Crowell Associate Dallas Sheppard, Mullin, Richter & Hampton LLP
Associate

Audrey Crowell is an associate in the Corporate Practice Group in the firm's Dallas office and a member of the Healthcare team.

Audrey represents clients in the healthcare industry through business and transactional matters, including mergers & acquisitions and corporate governance. She also advises clients on regulatory compliance under federal and state law, including licensure and fraud and abuse compliance. Audrey earned her J.D. form Southern Methodist University Dedman School of Law in Dallas, Texas, where she graduated with honors. She was the recipient...

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Sara Helene Shanti Corporate Lawyer Sheppard Mullin Law Firm
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Sara Helene Shanti is a partner in the Corporate Practice Group in the firm's Chicago office.

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Shanti represents healthcare providers and technology companies in matters related to data privacy, healthcare regulatory compliance and mergers and acquisitions. She counsels clients on various data privacy and healthcare technology matters, including artificial intelligence, data security incidents, mobile applications, and telemedicine. Shanti’s experience includes advising clients on transferring data across multinational borders, implementing...

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