The United States District Court for the Northern District of New York held that the imposition of a monetary penalty on a nursing home for noncompliance with Medicare requirements without a jury trial did not violate the Seventh Amendment to the US Constitution. NCRNC, LLC v. Kennedy, No. 1:25-cv-00607 (MAD/PJE) (N.D.N.Y. Jan. 20, 2026).
NCRNC, LLC, a nursing home licensed in New York, brought an action against Robert Kennedy as Secretary of the Department of Health and Human Services (HHS) and Mehmet Oz, as Administrator of the Centers for Medicare and Medicaid Services (CMS), seeking declaratory and injunctive relief from a monetary penalty imposed by the CMS for noncompliance with federal requirements for Medicare participation, arguing that the imposition of the penalty without a jury trial violated the Seventh Amendment (“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved . . .”). It also filed a motion for a temporary restraining order and preliminary injunction preventing CMS from collecting the monetary penalty.
In an initial decision dissolving its temporary restraining order and denying NCRNC’s request for a preliminary injunction, the federal district court determined that it did not have statutory jurisdiction of the case because the Medicare Act prescribes a review process that channels claims through the agency’s administrative review process directly to the court of appeals and supersedes federal question jurisdiction in an Article III court.
HHS and CMS then filed a motion to dismiss the complaint for lack of subject matter jurisdiction or failure to state a claim. NCRNC moved for leave to amend its complaint to allege that it was a dual Medicare and Medicaid facility.
In considering the motion to dismiss, the court noted that if the subject matter was lacking, it must dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1). Referring back to its decision denying NCRNC’s request for injunctive relief, the court agreed with HHS and CMS that it did not have statutory jurisdiction over the case because the Medicare statute required claims to be channeled through the agency directly to the court of appeals. The court determined that although the administrative law judge and Departmental Appeals Board may lack the authority to resolve NCRNC’s Seventh Amendment defense, it could obtain meaningful review of the defense in the federal court of appeals.
NCRNC argued that, in the court’s earlier decision denying its request for an injunction, the court had taken a narrow view of the constitutional right at issue. NCRNC contended that because it was constitutionally entitled to adjudication in an Article III court, the entire administrative proceeding was illegitimate: Requiring it to participate in such a proceeding would immediately deprive it of its constitutional right, causing a legal injury that was independent of any rulings the administrative law judge would make in the proceeding.
However, the court viewed NCRNC’s argument that the entire administrative appeal process was unconstitutional as an attempt to substantially expand the claim it had made in its complaint, i.e., that the imposition of the penalty without a jury trial was unconstitutional. The court declined to read allegations into NCRNC’s complaint that were not pleaded in it.
The court also rejected NCRNC’s assertion that, in its previous decision, it had not properly applied the US Supreme Court’s decision in SEC v. Jarkesy, 603 U.S. 109 (2024), in which the Court held that the Securities and Exchange Commission’s (SEC) imposition of civil penalties against an investment advisor and his firm for securities fraud triggered the right to a jury trial under the Seventh Amendment. NCRNC argued that, under Jarkesy, the denial of the protection of Article III counts as a constitutional injury regardless of whether a disputed issue of fact causes the right to a jury trial to attach. The court disagreed, holding that Jarkesy did not support NCRNC’s assertion. Rather, the court found that because there were no disputed facts for a jury to decide, NCRNC’s Seventh Amendment argument failed.
Further, the court noted that even if there had been a factual dispute, the public rights exception set forth in Jarkesy, which allows Congress to assign a matter for decision to an agency without a jury trial, consistent with the Seventh Amendment, barred the court from exercising jurisdiction. The court determined that there was no common-law counterpart to the monetary penalty the government imposed on NCRNC for its noncompliance with requirements to receive federal funding. Because the transaction was between the government and a private party that could receive public funds only if it complied with the government’s conditions to receive them, the public rights exception applied, and there was no right to a jury trial under the Seventh Amendment.
The court also rejected NCRNC’s cross-motion for leave to amend its complaint to allege its status as a dual Medicare and Medicaid facility. NCRNC, relying on Avon Nursing & Rehab. v. Becerra, 995 F.3d 305 (2d Cir. 2021), argued that federal question jurisdiction was proper with respect to its status as a Medicaid facility even if it was not proper with respect to its status as a Medicare facility. However, the court found that NCRNC’s challenge to the regulation lacked an independent basis in the Medicaid Act, which does not have the same channeling requirements as the Medicare Act. Unlike the plaintiffs in Avon, who sought to bring a pre-enforcement rulemaking challenge that did not raise a claim for benefits or involve a noncompliance determination, NCRNC had already been through the administrative review process. Moreover, a noncompliance decision was central in the present case: Whether the penalty imposed on NCRNC arose under the Medicaid Act or the Medicare Act, it would involve a noncompliance determination under either statute. The court held that even if NCRNC’s complaint were amended to allege a Medicaid claim, that claim would have a factual base identical to its Medicare claim and, thus, would be wholly intertwined with it. Therefore, the court held that NCRNC’s proposed amendment to its complaint was futile.
The court granted HHS and CMS’s motion to dismiss and denied NCRNC’s crossmotion to amend its complaint.
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