D.C. Circuit Rejects Scalia, Thomas Views on Enforcement of Spending Clause Legislation

In a footnote in a Medicaid opinion, the D.C. Circuit rejected Justices Scalia’s and Thomas’s view that Spending Clause legislation such as Medicaid may only be enforced by private parties if there is an explicit private cause of action.

Plaintiffs, drug manufacturers, were claiming that drug rebate requirements in Michigan’s Medicaid program violated and were preempted by the federal Medicaid statute under the Supremacy Clause. Although the court ultimately upheld summary judgment against the plaintiffs, in footnote 3 at the outset of the opinion, the court rejected Michigan’s argument that the plaintiffs did not have private right of action for injunctive relief. Michigan had claimed that Spending Clause legislation is like a contract between the federal and state governments, and thus is enforceable by third parties –- i.e., Medicaid beneficiaries or providers – only if the “contract” gives them explicit third party beneficiary rights through an explicit private cause of action. See PhRMA v. Walsh, 123 S.Ct. 1855, 1878 (2003) (Scalia, J., concurring in the judgment); id. (Thomas, J. concurring in the judgment). This argument would invalidate implied causes of action, § 1983 causes of action, and preemption challenges for the vast reaches of legislation enacted under the Spending Clause.

The D.C. Circuit (Henderson, Rogers and Williams), however, noted that in the Supreme Court's opinion in Walsh, “[b]y addressing the merits of the parties’ arguments without mention of any jurisdictional flaw, the remaining seven Justices appear to have sub silentio found no flaw. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94-102 .... (1998) (federal courts must ensure they have jurisdiction before considering merits)."