Possible Class Action Gamechanger Opens High Court’s Term

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By Mary Anne Pazanowski, Matthew Loughran and Eric Topor

Oral argument on labor, class action, and arbitration issues in a case that could have a big impact on health-care industry employers kicks off the U.S. Supreme Court’s new season Oct. 2.

The court in that case will consider whether arbitration agreements that prohibit employees from pursuing class or collective actions are unlawful under the National Labor Relations Act (NLRA) and unenforceable under the Federal Arbitration Act (FAA). Health-care employers are watching the case closely because they are on the front lines of unionization efforts.

Although no health-care specific cases have been accepted for review during the coming term, several requests for review, known as petitions for certiorari, are pending. Some could be granted though none looks promising, Timothy S. Jost, a health-care policy expert and emeritus professor at Washington & Lee University Law School in Lexington, Va., told Bloomberg BNA.

History suggests most of those requests will be denied without comment. The court’s website says about 80 cases are granted review every year, but the court has heard argument in only about 70 cases per year since Chief Justice John G. Roberts Jr. has been in charge.

Leading Cases Going Into 2017 Term

For the 2017 term so far, the court has agreed to hear 32 cases for a total of 28 hours of argument, none of which involve health care directly. The court has docketed 362 paid petitions, though there are still some remaining from last term.

Not Health Care, But Important

Three casesconsolidated under the name Epic Sys. Corp. v. Lewis, U.S., No. 16-285, review granted 1/13/17, will be the first to be argued during the high court’s 2017 term. The court will consider whether the legality of arbitration agreements that prohibit employees from pursuing class or collective actions under the NLRA and whether they are barred by the FAA. Class actions are lawsuits brought by a limited number of plaintiffs on behalf of a group of people, all of whom allegedly suffered similar injuries due to the defendant’s conduct.

The National Labor Relations Board sought review after several federal appeals courts rejected its position that these class-action waiver agreements unlawfully interfere with employees’ NLRA right to engage in concerted activity. Health-care employers face the same risk of class action litigation under the Fair Pay Act, Title VII, the Fair Labor Standards Act, and other employment and discrimination laws as employers in other industries.

The decision “will have an enormous impact on the health-care industry,” especially if the court holds that the employees’ right to engage in collective action under the NLRA by filing a class action trumps the FAA, Malcolm J. Harkins III told Bloomberg BNA. Harkins, a former Proskauer Rose partner in Washington, now teaches health law at St. Louis University School of Law in St. Louis.

United Healthcare Servs. Inc. v. Riederer , U.S., No. 16-996, filed 2/13/17, presents the same class action waiver issue. It was listed for the court’s consideration at its June 8 conference, but not acted on. The court isn’t likely to do anything with this petition until it reaches its decision in the Epic Systems case.

About to Be Filed

The Epic Systems decision also will help the health-care industry “take the court’s temperature” regarding the scope of class action litigation, Stuart M. Gerson told Bloomberg BNA. Gerson, a member of Epstein Becker Green PC’s Health Care and Life Sciences practice in Washington. Gerson was acting U.S. attorney general during the early years of President William J. Clinton’s administration. Before that, he served in the administration of President George H.W. Bush’s as assistant attorney general for the Justice Department’s civil division.

The Supreme Court has been “skeptical” about class actions for the past few terms, Gerson said. The court in recent years has been narrowing the circumstances under which such litigation can proceed.

A petition “about to be filed” in a health-care case will test the extent of that skepticism, Gerson said. In Attias v. CareFirst, Inc., the U.S. Court of Appeals for the District of Columbia Circuit said victims of a health-care data breach could sue the health insurer whose negligence allegedly led to the breach.

The plaintiffs’ allegation that they face a substantial risk of identity theft due to the breach adequately stated an injury that could be remedied through court action, even though it appeared none of the plaintiffs’ data actually had been used by the hackers, the court said.

The District of Columbia Circuit Sept. 6 granted CareFirst’s motion to stop the case from going back to the federal district court for trial so that the insurer could ask the Supreme Court for review.

The petition could be granted, Gerson said, because the case raises an issue that has been getting different results in the federal appeals courts. Confusion on how concrete a plaintiff’s injury must be in order to entitle him or her to have standing to sue followed the Supreme Court’s decision in Spokeo, Inc. v. Robins, he said.

In Spokeo, the Supreme Court held that plaintiffs alleging statutory violations must show concrete—but not necessarily tangible—injury to access the federal courts. The court didn’t, however, define what it meant by concrete.

Disagreements among the federal appeals courts, known as circuit splits, are a leading reason for the Supreme Court to grant review.

Reproductive Rights

Among the already filed review requests are three cases testing the lawfulness of a California law requiring right-to-life medical clinics to post notices that they don’t provide abortions. The requests have been consolidated for the court’s consideration at its first conference on Sept. 25.

Grants and denials from that conference will be announced Sept. 28 and Oct. 2.

A group of religiously affiliated pregnancy crisis centers in California is asking the Supreme Court to determine the constitutionality of the state’s Reproductive Freedom, Accountability, Comprehensive Care and Transparency Act, which requires them to notify potential patients about the availability of low-cost abortion services. The state law also requires the centers to post a notice that they don’t provide or make referrals for birth control services or abortions. Additionally, the law requires unlicensed centers to inform their patients of that fact ( National Institute of Family & Life Advocates v. Becerra, U.S., No. 16-1140, filed 3/20/17; A Woman’s Friend Pregnancy Resource Clinic v. Becerra, U.S., No. 16-1146, filed 3/20/17; and Livingwell Medical Clinic, Inc. v. Becerra, U.S., No. 16-1153, filed 3/20/17).

The centers brought four challenges, one in each of the four federal trial courts in California. In each case, the plaintiffs alleged the law inhibited freedom of speech and free exercise of religion, in violation of the U.S. Constitution’s First Amendment.

The U.S. Court of Appeals for the Ninth Circuit on the same day in October 2016 upheld three decisions by the Northern (Oakland), Eastern (Sacramento) and Southern (San Diego) District Courts in California that refused to block the law’s enforcement.

The U.S. District Court for the Central District of California in July 2016 similarly denied a fourth attempt to block the law’s enforcement. The Ninth Circuit upheld that decision in June 2017.

The first three review requests originally were scheduled for the Supreme Court’s consideration at its June 22, 2017, conference. However, the court relisted the cases for the Sept. 25 conference.

The fourth challenge hasn’t been scheduled for conference. California Attorney General Xavier Becerra (D) has until Oct. 10, 2017, to respond to the center’s review request ( Mountain Right to Life, Inc. v. Becerra, U.S., No. 17-211, filed 8/4/17).

Arbitration: Medical Malpractice

The Supreme Court nearly every term for the last few years has strengthened the FAA, a law intended to encourage people to submit claims to a neutral arbitrator rather than file them in court. Arbitration agreements are standard in the nursing home industry, often are included in health-care employment agreements, and are making their way into doctor-patient contracts.

In addition to the Epic Systems cases, the court this term has two petitions involving arbitration issues. The first seeks review of a North Carolina Supreme Court decision ( Bryant v. King, U.S., No. 16-1329, filed 4/27/17). The state supreme court held an arbitration agreement between a doctor and patient invalid because the doctor violated a fiduciary relationship when he didn’t fully disclose the agreement’s terms to the patient. The case has been set for the Sept. 25 conference.

A Florida doctor is seeking review of a Florida Supreme Court decision that she said erroneously invalidated a patient’s arbitration agreement because it contained terms that differed from those contained in a state law governing voluntary pre-suit arbitration of medical malpractice claims ( Hernandez v. Crespo, U.S., No. 16-1458, filed 5/26/17).

The patient argued against review in an Aug. 22 response brief, saying the doctor misstated the state supreme court’s holding. The doctor failed to raise the arbitration argument until after the Florida Supreme Court issued its decision, the patient said.

False Claims Act

A handful of petitions are seeking review of lower court decisions construing the False Claims Act. None of these directly involve health-care entities, though ultimately they could have an impact on health-care fraud cases.

Government defense contractor Triple Canopy asked the Supreme Court to rule that specific false representations to the government are needed to incur FCA liability ( Triple Canopy, Inc. v. United States, No. 17-247, filed 8/16/17). The U.S. Court of Appeals for the Fourth Circuit ruled that allegations of specific misrepresentations aren’t necessary to state a claim under the FCA. There is, however, an emerging circuit split over the scope of FCA liability, thanks in part to the Supreme Court’s decision in Universal Health Servs., Inc. v. United States ex rel. Escobar, that material misrepresentations concerning goods or services billed to the government trigger FCA liability. The response brief is due Oct. 16.

A circuit split over the FCA’s first-to-file bar also is up for possible Supreme Court review ( United States ex rel. Hayes v. Allstate Ins. Co., U.S., No. 17-27, filed 6/29/17). The whistle-blower in this action alleged that insurance companies are dodging their obligations under the Medicare Secondary Payer Act. Settling the circuit split over whether triggering the first-to-file bar deprives a court of jurisdiction to hear an FCA case would be a significant development for future whistle-blower lawsuits. The case has been distributed for conference on Sept. 25.

The scope of liability under the FCA’s reverse false claims provision could be further clarified if the court accepts a petition over an alleged failure to pay customs duties on pipe fittings ( Victaulic Co. v. United States ex rel. Customs Fraud Investigations, LLC, U.S., No. 16-1398, filed 5/23/17). The defendant asked the court to decide whether the mere “opportunity for fraud” can trigger a reverse FCA violation, which would be a significant widening of potential liability. The petition will be considered at the Sept. 25 conference.

The Supreme Court also has been asked to determine the extent of knowledge an FCA defendant must possess about an obligation to return property to the government—in this case real property—in order to state a valid reverse FCA claim ( United States ex rel. Harper v. Muskingum Watershed Conservancy Dist., U.S., No. 16-1278, filed 4/21/17). The petitioner whistle-blower’s appeal to the high court specifically asks what level of inferred knowledge about an obligation to repay the government will trigger liability. The case is set for the Sept. 25 conference.

The FCA contains two separate statute of limitations provisions, one for six years and one for a maximum of 10 years. The Supreme Court could weigh in on whether the longer period applies to cases in which the government declines to intervene ( United States ex rel. Jackson v. Univ. of N. Tex., U.S., No. 16-1098, filed 3/10/17). A decision allowing private whistle-blowers to take advantage of the 10-year period could increase the number of FCA cases that health-care providers may face, as more whistle-blowers pursue FCA litigation without the help of government intervention. This case has been distributed for the Sept. 25 conference.

Peer Review

A case that involves the scope of the Patient Safety and Quality Improvement Act peer review privilege should be of interest to hospitals ( Southern Baptist Hospital of Florida, Inc. v. Charles, U.S., No. 16-1446, filed 5/31/17). State courts, notably Florida and Kentucky, have split over whether records that state laws require hospitals to maintain are patient safety work product protected from disclosure under the federal law. The Florida Supreme Court said they were not, and the hospital sought review.

Several provider groups, including the American Hospital Association, have urged the high court to grant review, but patient safety experts told Bloomberg BNA they don’t expect the petition to be granted because the underlying case has been settled, and no response brief has been filed. It is set for conference on Sept. 25.

Employment Issues

Another interesting employment law question is pending against a health-care employer. The issue in Evans v. Georgia Regional Hospital, U.S., docket no. unavailable, filed 9/7/17, is whether Title VII of the Civil Rights Act of 1964’s prohibition against employment discrimination because of sex includes discrimination because of sexual orientation. Lambda Legal, a public interest firm that advocates for lesbian, gay, bisexual, and transgender rights filed the petition Sept. 7.

The plaintiff alleged she was forced out of her job as a hospital security guard because she is a lesbian. Timothy Jost said this is a case to watch, because a case pending in the U.S. District Court for the Northern District of Texas, Franciscan Alliance, Inc. v. Price, N.D. Tex., No. 7:16-cv-108, concerns related allegations: whether the Affordable Care Act’s anti-discrimination provision, Section 1557, prohibits discrimination based on sexual orientation.

More First Amendment

David Daleiden, whose group, the Center for Medical Progress, has made several undercover films allegedly showing shady practices by abortion providers, is seeking Supreme Court review of a trial court ruling that blocked him from releasing videotapes made at a National Abortion Federation (NAF) convention ( Daleiden v. National Abortion Federation, U.S., No. 17-202, filed 8/3/17).

The NAF sued Daleiden and CMP alleging breach of contract and other causes of action, saying CMP members gained entry to the convention by posing as journalists. The CMP members surreptitiously filmed the meeting despite agreeing to a contract that barred the practice.

The petitioners argued that the trial court’s preliminary injunction is a prior restraint in violation of the First Amendment. Daleiden and attorneys representing him in a criminal case recently were assessed contempt sanctions for inserting in a brief a link to a YouTube channel carrying the videos.

Several outside groups, including some state attorneys general, filed petitions urging the high court to grant review. The NAF’s response was due Sept. 6.

Percolating Cases

Jost told Bloomberg BNA there are several other cases percolating up through the trial and appellate courts that could prompt review requests, but he doubts any will make it to the high court this year. For example, the U.S. Court of Appeals for the Third Circuit Aug. 4 said in Real Alternatives, Inc. v. Secretary Dep’t of Health & Human Servs. that secular anti-abortion groups with no religious affiliation must provide their employees with insurance plans that cover contraceptives, as required by the ACA.

The plaintiffs haven’t filed a request for rehearing in the appeals court, and the decision could be mooted by new Health and Human Services Department regulations governing the contraceptive mandate before a review petition could be filed in the Supreme Court.

Also possibly headed to the Supreme Court is a decision by the U.S. Court of Appeals for the Eighth Circuit. The appeals court held in Does v. Gillespiethat the Medicaid Act’s free choice of provider provision didn’t create a right for Medicaid beneficiaries to sue under the federal civil rights law to demand that a state continue paying Planned Parenthood affiliates for services rendered to them.

The ruling conflicts with decisions by several other federal appeals courts, a chief reason the Supreme Court could decide to grant review. The plaintiffs, however, are seeking a rehearing by the three-judge panel that decided the case or a rehearing by all Eighth Circuit judges, thereby delaying any potential Supreme Court review.

To contact the reporters on this story: Mary Anne Pazanowski in Washington at mpazanowski@bna.com; Matthew Loughran in Washington at mloughran@bna.com; Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Peyton M. Sturges at PSturges@bna.com

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