Larisa's Home Care, LLC v. Nichols-Shields, S064120

Background

Larisa’s Home Care (provider) admitted Isabell Prichard to an adult foster home and charged Medicaid rates (~$2,000/mo) instead of higher private-pay rates ($4,000–$5,700/mo).
Prichard’s son, Richard Gardner (power of attorney), falsely represented on a 2007 Medicaid application that she had made no disqualifying asset transfers in the prior 60 months; in fact he had taken >$150,000.
Because of the false application, the Department approved Prichard for Medicaid; plaintiff received Medicaid payments and charged Medicaid rates for her care. Had Medicaid been denied, plaintiff would have charged private-pay rates and received ~ $48,477 more.
Gardner was later criminally convicted and ordered to repay funds to Prichard’s estate; those funds were restored to the estate. The estate (through personal representative Nichols-Shields) denied plaintiff’s claim for the unpaid private-pay differential.
Trial court awarded plaintiff restitution for unjust enrichment; the Oregon Court of Appeals reversed, applying a three-factor Jaqua test and finding no unjust enrichment. The Oregon Supreme Court granted review of the unjust-enrichment question.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether unjust enrichment is available where defendant obtained discounted services by fraud	Fraud-induced qualification for Medicaid made the estate unjustly enriched; restitution for the private-pay differential is appropriate	Jaqua factors control; because provider contracted to accept Medicaid rates and the state approved eligibility, there is no reasonable expectation to recover more	Court: Fraud-induced benefits fall within recognized unjust-enrichment categories; unjust enrichment exists where fraud caused receipt of discounted services — Court of Appeals reversed
Whether Prichard (the estate) is liable for Gardner’s misrepresentations	Gardner acted as Prichard’s agent under power of attorney; principal is liable to third parties for agent’s fraud	Prichard was incompetent when application was made, terminating agency and insulating estate	Court: Power-of-attorney language and ORS allow agency despite subsequent incompetence; Prichard is liable for agent’s fraud
Causation: Would disclosure of transfers have disqualified Prichard from Medicaid for the relevant period?	Yes — at application time no recovery steps had been taken, so transfers were disqualifying and would have produced a long disqualification period covering the stay	Argues transfers fall under fraud-victim exception because assets were later recovered, so applicant would not be disqualified	Court: At the time of application no recovery had occurred; the rules are forward-looking — the false application caused qualification and the discounted rates
Whether Medicaid law or provider contract bars plaintiff’s restitution claim	Plaintiff may seek equitable restitution despite Medicaid administration; but Medicaid-specific statutes/rules and contract terms may affect recovery amount or availability	Provider’s contract and Medicaid rules limit providers to department rates and bar charging residents extra; such provisions may preclude recovery	Court: Rejected broad preclusion argument; remanded to Court of Appeals to consider Medicaid-specific statutory, regulatory, and contract-based bars or limits in first instance

Key Cases Cited

Jaqua v. Nike, Inc., 125 Or App 294 (Or. Ct. App. 1993) (articulated a three-factor unjust-enrichment formulation later criticized)
Larisa’s Home Care, LLC v. Nichols-Shields, 277 Or App 811 (Or. Ct. App. 2016) (Court of Appeals reversed trial judgment applying Jaqua factors)
Tupper v. Roan, 349 Or 211 (Or. 2010) (described incremental, category-based approach to unjust enrichment)
In re Anderson’s Estate, 157 Or 365 (Or. 1937) (estate liable where decedent obtained benefits by false claims of destitution)