On November 8, 2022, the Supreme Court heard arguments in an Indiana case asking the Court to overturn decades of precedent allowing third-party beneficiaries of federally funded programs like Medicaid from suing in federal court to protect their rights. Health and Hospital Corporation of Marion County v. Talevski, 21-806.
Gorgi Talevski was placed in an Indiana nursing home owned by Health and Hospital Corporation (HHC) due to his dementia, where he acted in a physically and sexually aggressive manner toward female staff and other residents. Mr. Talevski’s family disagreed with the psychotropic drugs doctors prescribed to control his behavior and hired a private neurologist, who had the drugs removed. The nursing home tried to discharge Mr. Talevski to an all-male facility more than two hours away, and then to a facility an hour away.
Mr. Talevski’s family filed a complaint under 42 U.S.C. §1983, alleging violations of the Federal Nursing Home Reform Act’s (FNHRA) transfer and medication provisions.
The district court dismissed the action, finding the FNHRA does not grant a private right action that can be enforced under §1983. The Seventh Circuit reversed, finding that Mr. Talevski was asserting a violation of a federal right found in the FNHRA that prohibits the use of chemical restraints for purposes of discipline or convenience, and prohibits transfer or discharge of nursing home residents except in limited circumstances. 6 F4th 714.
The Supreme Court granted review to consider two questions:
First: Should the Court re-examine its holding that Spending Clause legislation gives rise to privately enforceable rights under §1983?
Second: Assuming Spending Clause statutes give rise to private rights under §1983, do the transfer and medication rules under FNHRA do so?
Petitioner HHC argues that state and local governments did not anticipate the cost of private lawsuits when they agreed to accept federal Medicaid funding, since Spending Clause legislation is “in the nature of a contract” between the federal government and states. In 1871, when §1983 was enacted, third-party beneficiaries did not have a right to enforce contracts under common law. Congress, therefore, could not have meant for third-party beneficiaries to have a private right to enforce any benefit under a federal statute like FNHRA, enacted a century later in 1987.
HHC also argues that if the Court declines to overturn its decades-old precedent articulated in Wilder v. Virginia Hospital Association, 496 U.S. 498 (1990) that federal statutory rights may be enforced through §1983, the Court should reverse the finding that FNHRA gives rise to private rights of actions. FNHRA requires nursing homes to provide prescribed facilities and care for nursing home residents, but does not create rights for the residents themselves. The remedies expressly provided by FNHRA for failure to comply with the statute are denial of Medicaid payment, civil penalties, state appointment of temporary management, or closure of the facility.
Mr. Talevski argues that HHC has not shown that the precedent established in Wilder should be overturned. The Third and Ninth Circuits have previously found FNHRA confers private rights protected by §1983 and the Supreme Court has never questioned the premise that Spending Clause legislation can create federal rights.
Mr. Talevski also argues that FNHRA grants a private right against chemical restraint and transfer, based on the statute’s plain language, by ordering that a nursing home “must protect” the right of each resident to be free from chemical restraints and “must” permit each resident to remain in the facility instead of being transferred or discharged. FNHRA confers a private right of action by expressly stating in its saving clause the remedies under the Act do not limit other remedies available under federal law.
The Court appeared reluctant to overturn the precedent established in Wilder.
Three liberal justices aggressively challenged HHC’s argument.
Justice Elena Kagan said that while FNHRA is a big statute that says many things, “one of those things it does say to every nursing home facility [is that it] has to ensure that individual rights are respected and lays out in considerable detail what those rights are and say it’s your job to see that those rights are fulfilled.”
Justice Sonia Sotomayor said, “And if I have a right under the law to a certain thing that … the government has contracted with a provider to give me, 1983 says I can go to court.”
Chief Justice John Roberts and Justice Brett Kavanaugh didn’t appear to question whether a Spending Clause law like Medicaid is enforceable in federal court, but rather spent time asking whether FNHRA rules involved in the present case should be enforced through an alternative method instead of §1983.
Justice Clarence Thomas appeared to be the most concerned of the justices about the Court’s precedent conferring a private right on nursing home residents as third-party beneficiaries of the FNHRA contract between the federal government and the state. “But is the beneficiary here a party to that contract? That’s … the rub.”
Justice Samuel Alito wanted to know why the Savings Clause in FNHRA didn’t apply, as it “says the remedies provided under the subsection are in addition to those otherwise available [under] federal law and shall not be construed as limiting such other remedies.”
Justice Amy Coney Barrett said she couldn’t “see the connecting dots” in the historical argument HHC was making about the common law when §1983 was enacted and was surprised by the focus on the third-party beneficiary argument.
Justice Neil Gorsuch did not ask questions or make any statements during argument.
With the precedent in Wilder and the apparent leanings of the justices demonstrated during oral argument, it appears the Court will continue the private right of third-party beneficiaries of Spending Clause laws to use §1983 to protect their rights when the Court renders its expected opinion before the end of its term in Summer 2023.