In an opinion and order issued today, U.S. District Judge Michael Mills of the Northern District of Mississippi issued a preliminary injunction blocking enforcement of the CMS rule barring the use of predispute arbitration agreements by nursing homes that participate in the Medicare and Medicaid programs. The court did not definitively hold the rule unlawful, but found it likely enough that he will ultimately do so that the rule should be blocked pending final adjudication of the challenge to its legality. The opinion can be found here, though how long this link will remain available is uncertain.
The order granting a preliminary injunction is appealable. CMS has not yet issued a press release commenting on the decision and is unlikely in any event to say immediately whether it will appeal.
The challengers presumably chose their forum carefully when they brought suit and are undoubtedly happy with the result of the opening battle in the litigation over the rule. Even so, it is striking that Judge Mills expressed particularly strong sympathy for the objectives of the rule even while enjoining it and finding it unlikely to be legally sustainable. He concluded his opinion as follows:
"This case places this court in the undesirable position of preliminarily enjoining a Rule which it believes to be based upon sound public policy. As discussed in section I of this order, this court believes that nursing home arbitration litigation suffers from fundamental defects originating in the mental competency issue, rendering it an inefficient and wasteful form of litigation. This court believes that Congress might reasonably consider this inefficiency, as well as the extreme stress many nursing home residents and their families are under during the admissions process, as sufficient reason to decide that arbitration and the nursing home admissions process do not belong together. Nevertheless, Congress did not enact the Rule in this case; a federal agency did, and therein lies the rub. As sympathetic as this court may be to the public policy considerations which motivated the Rule, it is unwilling to play a role in countenancing the incremental “creep” of federal agency authority beyond that envisioned by the U.S. Constitution. While this court does not exclude the possibility that CMS could, in the future, make a sufficiently strong showing that it had the authority to enact the Rule it did, it seems unlikely, based on the administrative record in this case, that it will be held to have done so here. Moreover, given that the enactment of the Rule raises serious legal questions extending well beyond the arbitration issue, this court concludes that the balance of harms and the public interest support holding it in abeyance until the doubts regarding its legality can be definitively resolved by the courts."
