By 
For many of us, witnessing a wrong committed against another invokes a compulsion to take action. We feel obligated to intervene when we see a child being bullied by another. We feel obligated to prevent injustices, abuses, and maltreatment of others – particularly when it involves our most vulnerable populations. Sometimes we are successful in our efforts, while in other situations we do not have the authority to commence a counterattack.
Unfortunately, there are occasions where a seemingly well-intentioned deed has an underlying motive. The U.S. Court of Appeals for the Seventh Circuit was presented with such a scenario where Plaintiff advocated for the rights of elderly Medicaid recipients, but their success would subsequently benefit their underlying interest – their own business client.
The Court Wasn’t Buying It
The U.S. Court of Appeals for the Seventh Circuit was not fooled when a party, Plaintiff, brought suit for a seemingly noble cause, whilst possibly having a clandestine motive. Although this revelation was not a legally decisive factor in the case, the court certainly took note of the cloaked prerogative of the plaintiff. The court upheld the district court’s dismissal of the case for lack of standing.
Background
In Illinois, Medicaid benefits are administered by the Department of Healthcare and Family Services (HFS). HFS then pays a flat rate per patient to Medicaid managed care organizations (MCOs). MCOs are health plans with a particular network of plan-approved doctors and hospitals. These MCOs then pay their providers for the services they convey upon the Medicaid beneficiaries.
Plaintiff in this case is a consulting organization for various long-term care and assisted living facilities within the state. The organization provides business and financial assistance to their clients. Plaintiff brought the suit, not on behalf of its clients, but rather for the benefit of the residents living at their client’s facilities. Plaintiff’s claim was that the delay of payment by HFS and the MCOs to plaintiff’s clients presented a grave risk to the residents of discharge – jeopardizing their health, safety, and residential security.
Plaintiff’s Standing
First, standing requires an injury to the plaintiff, caused by the defendant, that could be redressed by a decision in the plaintiff’s favor. A plaintiff without injury does not have standing – with exceptions.
A plaintiff without standing of their own may only bring suit on behalf of another in certain circumstances. Third parties may file suit on behalf of another when that party is a guardian or next friend to, or has certain agency relationships with, the injured person. This concept is not to be confused with third-party standing, where an injured plaintiff has certain requisite conditions necessary to invoke the rights of an injured non-party.
Here, Plaintiff was not personally injured, nor did Plaintiff fall under any of the exceptions to the bar on third party claims. Instead, Plaintiff suggested that standing for the claim had been established through an ostensibly novel interpretation of a particular Medicaid regulation.
The Agency Argument
Plaintiff alleges that they are Authorized Representatives under Medicaid regulations and, as such, are afforded the right to sue on behalf of the residents. Prior to filing suit, Plaintiff acquired forms from residents conferring the authority to act on their behalf for the purposes of resolving the non-payment claims. 42 C.F.R. § 435.923(b)(4) states that applicants and beneficiaries may authorize a representative to act on their behalf in all matters, not named in the preceding sections, with the agency.
The district court dismissed the claim for lack of standing because “the regulation cited by plaintiffs does not permit authorized representatives to bring civil lawsuits on behalf of Medicaid beneficiaries…” The court of appeals agreed.
Regulatory Dissection
The appellate court dissected the broader meaning of the regulation, consulted the rulemaking comments, and explored the plain text of the regulation and determined that “matters with the agency” only related to documentation production for and communication with the agency – not litigation.
Section (b)(4) was preceded by three other ways in which representatives were authorized to act; each was related to clerical acts and communications. Thus, (4) must also be read in conjunction with the others – not read in a way that holistically deviates from the plain meaning of its brethren.
Further, (a)(1) of the regulation outlines the requirement that agencies accept the actions of such authorized representatives when the representative is assisting with “the individual’s application and renewal of eligibility and other ongoing communications with the agency.” When the section (b)(4) is read abreast section (a)(1), one can see that the two provisions are complimentary in that the expectations and permissible actions of both are essentially mirrored. Those expectations and permissible actions appear to relate only to documentation and communication. Including, or in essence adding, litigation into the permissible acts by representatives would be inharmonious with the sister provision ruling agency action.
Even the “purpose” section of the principal regulation bears no indication that litigation was an envisioned by-product of any of the following sections. The court emphasizes the words with and against; explaining that the regulation does not indicate any action was permitted against the agency – only with.
Even if it were determined that Plaintiff was permitted to sue on behalf of the residents, the regulation cited by Plaintiff was regarding eligibility, and since the residents are all already deemed eligible for Medicaid, the representation under this regulation would be moot.
Had the Stars Aligned
Had Plaintiff succeeded in showing that their representation included litigation against the agency, they still would have been hard-pressed to show that the residents had standing. The court deemed resident standing was also unfounded, as the residents have not been evicted, nor have there been threats of discharge. While the element of injury can also be satisfied when it can be shown that injury is “certainly impending,” hypothetical future injury is not enough to satisfy the element. Moreover, the court noted that eviction in this scenario would ultimately violate federal law. In the end though, the court left a deeper analysis of the issue of resident standing for another case, only touching on the basics here.
The Moral of the Story
While legal professionals are expected to look at the law in creative ways that could benefit our clients, we must also remember that our creativity should not go against the logical flow of the legal product we seek to shift in our favor. Here, Plaintiff sought to establish an unprecedented ability for an uninjured third-party to sue on behalf of a group that could, possibly, maybe, someday, suffer a harm, when no other legally recognized relationship existed between the two. When put so tersely, it only makes sense that the courts came to the conclusion that the case be dismissed for lack of standing.
