Seventh Circuit Finds A Private Cause Of Action Under FNHRA. Will SCOTUS Grant Certiorari?

by Scott R. Shinkan

Nursing homes and insurers beware: the Seventh Circuit recently held in Talevski v. Health & Hosp. Corp., 6 F.4th 713 (7th Cir. 2021), that residents and their families can pursue claims for monetary damages under 42 U.S.C. § 1983 and the Federal Nursing Home Amendments Act of 1987 (“FNHRA”), 42 U.S.C. § 1396r. This will undoubtedly impact nursing home litigation in Indiana, Illinois, and Wisconsin, the states that comprise the Seventh Circuit. Plaintiffs in these three States, and perhaps nationwide, now have a means to use the federal courts as an end-around to important state laws, like statutory caps on damages or the availability of full attorneys’ fee awards. The owner of the nursing home, Health and Hospital Corporation of Marion County (“HHC”) filed a petition for certiorari with the Supreme Court of the United States in late November 2021, seeking reversal of the Seventh Circuit’s decision in Talevski. The petition remains pending. 

Facts

Plaintiff filed a sec. 1983 complaint for monetary damages in federal court on behalf of her disabled husband accusing his nursing home of violations of these sections of FNHRA. 

FNHRA provides comprehensive guidance to the states on the regulation and operation of nursing homes, and in return, the states receive Medicaid funding. There are two directives to nursing homes that are at issue in Talevski. First, “a nursing facility must protect and promote the rights of each resident, including . . . [t]he right to be free from physical or chemical restraints” subject to certain circumstances. 42 U.S.C. § 1396r(c)(1)(A)(ii). Second, a nursing facility “must permit each resident to remain in the facility and must not transfer or discharge the resident from the facility unless [certain criteria are met].” 42 U.S.C. § 1396r(c)(2). 

Analysis

The Decision

The Seventh Circuit reversed the decision of the Northern District of Indiana and effectively overruled federal case law in Illinois, Indiana, and Wisconsin by determining that FNHRA created private rights enforceable under sec. 1983. The Court utilized a balancing test to conclude that Congress intended these rights under FNHRA to benefit nursing home residents; that the rights they protect fall within the judiciary’s interpretive competence (i.e., “it does not take a medical review board to determine whether” rights to be free from chemical restraints or involuntary transfer have been violated); and that the rights are mandatory rather than precatory. The Court then held that these rights under FNHRA were presumptively enforceable under sec. 1983, and that the nursing home failed to rebut the presumption. 

Petition for Writ of Certiorari

HHC petitioned the Supreme Court of the Untied States for a writ of certiorari to review the Seventh Circuit’s opinion. See 2021 U.S. S. CT. BRIEFS LEXIS 4083. In asking the Supreme Court to accept the petition, HHC argued that nursing facility residents and their families should not be permitted to use sec. 1983 and FNHRA as a means of “second guessing garden-variety treatment and transfer decisions made by physicians and nursing facility administrators.” HHC argued that third-parties should not be permitted to sue for monetary damages under Spending Clause legislation unless Congress has expressly authorized it, and that right is not explicit in FNHRA.

HHC raised several important policy concerns in its petition. First, it argued that FNHRA and sec. 1983 can be used by plaintiffs to circumvent important state law, such as those damages caps in medical malpractice cases. Indiana has capped damages at $1.8M (I.C. § 34-18-14-3), and Wisconsin has a cap on noneconomic damages at $750,000 (Wis. Stat. § 893.555). Indiana also has a cap on recovery of attorneys’ fees at 32% (I.C. § 34-18-18-1). Filing suit pursuant to FNHRA and sec. 1983 arguably allows plaintiffs uncapped damages and virtually no limit on attorneys’ fee awards. HHC also argued that private rights under FNHRA threatens the quality of care in nursing facilities, which arguably will cause rapidly increasing liability insurance rates against a backdrop of chronic underfunding. 

Learning Points: Talevski likely will not be the end of the story. HHC noted in its Petition to the Supreme Court that three Justices, Thomas, J., Alito, J., and Gorsuch, J., concluded that “this Court made a mess of the issue” in a dissent of a denial of cert. in a prior case. 2021 U.S. S. CT. BRIEFS LEXIS 4083 at p. 17. While difficult to predict, it is likely that the Supreme Court will eventually reconsider or clarify the issue of the private rights of action under Spending Clause statutes like FNHRA.

Until then, we can expect an onslaught of federal litigation in states like Indiana, Wisconsin, and others with damages caps or other limitations not found in federal law. Arguably this was not anticipated by the states, nursing homes, or their liability insurers. If plaintiffs can craft a plausible argument that their rights under FNHRA were violated, they may be able to circumvent state statutory caps on damages and attorneys’ fee awards. It is likely they will attempt these lawsuits in jurisdictions outside of the Seventh Circuit, so panel counsel throughout the country will need to be prepared to distinguish the Seventh Circuit’s opinion. 

There are several other enumerated rights in FNHRA besides chemical restraints and involuntary transfer, but those were not raised by the plaintiff in Talevski. Nursing homes must be prepared for federal lawsuits based upon all the provisions of FNHRA, and panel counsel should evaluate each complaint to see whether any such violations are arguably distinguishable based on the balancing test set forth in Talevski.

Talevski also has an impact on what nursing homes may have thought of as purely administrative issues. In the past, facilities faced appeals that were handled at administrative hearings. Now, the facility must consider that it may also need to defend a lawsuit for damages, which may also be expensive in terms of defense costs, awards of attorneys’ fees, and potential future impact on insurance premium payments.

The nursing home in Talevski was owned by a government entity, so arguably the case may only apply to those government-owned nursing homes. The distinction should be raised by private nursing homes once new federal suits are filed. The impact that Talevski will have on doctors that practice in nursing homes is unclear. Doctors make the decisions on chemical restraints and transfers, and they are usually independent contractors of the facilities. There is nothing in Talevski or FNHRA that grants a private federal cause of action against those doctors, and plaintiffs typically prefer to pursue lawsuits against the facility only for various reasons. But the nursing homes will be forced to react to private federal lawsuits that in effect are second-guessing the decisions by those doctors, which may impact their relationship with the facility and the way they practice medicine.