Homestyle Direct, LLC v. Department of Human Services, 263 P.3d 1118

HOMESTYLE DIRECT, LLC, an Idaho company, was authorized by DHS to prepare and package meals for Oregon Medicaid recipients.
In 2008 DHS published new Nutrition Program Standards, detailing minimum hot meals, nutrition education, temperature checks, and delivery-welfare monitoring.
Petitioner signed the provider enrollment agreement in late 2008, agreeing to meet the new standards as a condition of renewal and payment.
Petitioner admitted it had not been delivering the required number of hot meals, nutrition content, driver training, or temperature monitoring prior to signing.
In April 2009 DHS revoked petitioner's Medicaid provider number for breach of the provider agreement.
The ALJ held the agreement could be enforced despite the standards' invalidity as rules, and DHS issued a final order revoking the provider number; Petitioner sought judicial review.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are the Nutrition Program Standards valid rules requiring APA promulgation?	Petitioner argues the standards are unpromulgated rules and thus invalid.	DHS contends Coats allows enforcement of the contract despite invalid rules.	Standards are invalid for lack of APA promulgation.
May DHS enforce an unpromulgated rule by embedding it in a contract?	Petitioner asserts enforcement via contract is improper when the rule is invalid.	DHS relies on Coats to permit enforcement of contract terms that mirror invalid rules.	DHS cannot enforce unpromulgated standards by contract.

Coats v. ODOT, 334 Or. 587 (2002) (invalid rule enforcement cannot bypass APA; rule validity at issue in enforcement)
Minor v. AFSD, 105 Or.App. 178 (1991) (rule validity and applicability linked to contested cases)
Hay v. Dep't of Transportation, 301 Or. 129 (1986) (Hay exception rejected for challenging rule validity via contract actions)
McCleery v. Board of Chiropractic Examiners, 132 Or.App. 14 (1994) (administrative actions and rule validity considerations in review)