3rd Party claim against nursing home upheld

The federal district court for the eastern district of Tennessee denied the motion to dismiss of a nursing home, holding that the surviving wife of a deceased nursing home resident could bring suit under state law on the grounds that the resident was a third-party beneficiary of the nursing home’s Medicaid and Medicare contracts. Brown v. Sun Healthcare Group, Inc., 2007 WL 595601 (E.D. Tenn. Feb. 21, 2007).

The federal district court for the eastern district of Tennessee denied the motion to dismiss of a nursing home, holding that the surviving wife of a deceased nursing home resident could bring suit under state law on the grounds that the resident was a third-party beneficiary of the nursing home’s Medicaid and Medicare contracts.  Brown v. Sun Healthcare Group, Inc., 2007 WL 595601 (E.D. Tenn. Feb. 21, 2007).  The judge was nominated by Bush II.

 

The wife alleged that the negligence of the nursing home staff led to the death of her husband.  The nursing home argued that the breach of contract claim should be dismissed for failure to state a claim upon which relief can be granted.  The defendants contended that there is no private cause of action against a nursing home in the Medicaid Act and that a breach of contract claim is governed by state law, without presenting a federal question.  The wife argued that the law supports a third party breach of contract claim and that the claim invokes federal question subject matter jurisdiction. 

 

The court’s decision mostly quotes the analysis of Miree v. Dekalb County, 433 U.S. 25 (1977) by the Georgia district court in Brogdon v. National Healthcare Corp., 203 F.Supp.2d 1322 (N.D. Ga. 2000).  In Miree, the Supreme Court held that state law, not federal law, governed the third-party beneficiary claims of victims of an airline crash who sought to enforce a contract between the airport and the Federal Aviation Administration.  Brogdon was factually much more similar to Brown v. Sun Healthcare Group; Brogdon involved claims that the poor care provided to Medicaid and Medicare beneficiaries at a nursing home violated the contract between the nursing home and the Georgia Department of Community Health.  The Brogdon court concluded that the beneficiaries could bring a cause of action under state law as a third-party beneficiary of the contract between the state and the nursing home.

 

The Tennessee court was clearly persuaded by the reasoning of Brogdon.  The court quoted Brogdon as a basis for finding that the absence of an implied cause of action under the Medicaid and Medicare Acts against the nursing home does not determine whether plaintiffs may sue as third-party beneficiaries.  The court found that Congress did not intend to displace or preempt state law.  The court further stated that the only federal interest would be the advancement of the general federal policy of inducing compliance with Medicare and Medicaid participation requirements.  The court therefore rejected federal question jurisdiction.

 

Nevertheless, the court followed Brogdon in holding that the plaintiff could pursue a contract theory with a third-party beneficiary claim governed by Tennessee law.