SAINT ANTHONY HOSPITAL, Plaintiff-Appellant, v. THERESA A. EAGLESON, in her official capacity as Director of the Illinois Department of Healthcare and Family Services, Defendant-Appellee, and MERIDIAN HEALTH PLAN OF ILLINOIS, INC., et al., Intervening Defendants-Appellees.
No. 21-2325
United States Court of Appeals, Seventh Circuit
July 5, 2022
Before WOOD, HAMILTON, and BRENNAN, Circuit Judges.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.
No. 1:20-cv-02561 — Steven Charles Seeger, Judge.
ARGUED FEBRUARY 15, 2022 — DECIDED JULY 5, 2022
Saint Anthony contends in this lawsuit that Illinois officials owe it a duty under the federal Medicaid Act to remedy the late and short payments. In a thoughtful opinion, the district court dismissed the suit for failure to state a claim for relief. Saint Anthony Hospital v. Eagleson, 548 F. Supp. 3d 721 (N.D. Ill. 2021). We see the case differently, however, especially at the pleadings stage. We conclude that Saint Anthony has alleged a viable claim for relief under
The State has tools available to remedy systemic slow payment problems—problems alleged to be so serious that they threaten the viability of a major hospital and even of the managed-care Medicaid program as administered in Illinois. If Saint Anthony
I. Factual and Procedural Background
In reviewing the grant of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, we
A. The Illinois Medicaid Program
The federal Medicaid Act established a cooperative arrangement between the federal government and states to provide medical services to poor residents.
making medical assistance available … to all [eligible] individuals.” We have held that the provision confers private rights to individuals enforceable under section 1983. See Miller v. Whitburn, 10 F.3d 1315, 1319–20 (7th Cir. 1993); accord, Bontrager v. Indiana Family & Social Services Admin., 697 F.3d 604, 607 (7th Cir. 2012) (reaffirming Miller’s rights analysis after Blessing and Gonzaga). In Miller, we found it significant that the State was required to provide medical assistance to all eligible individuals. The same is true here, but with respect to timely payments to providers that do not
At bottom,
2. Factor Two: Administration
Blessing factor two requires a plaintiff to show that “the right assertedly protected by the statute is not so vague and amorphous that its enforcement would strain judicial competence.” Talevski, 6 F.4th at 719. HFS does not appear to contest whether
3. Factor Three: Obligation
The third Blessing factor asks whether
In a typical private right dispute, the emphasis is on the second question. See, e.g., BT Bourbonnais Care, 866 F.3d at 822.
We do not read
with a view to their place in the overall statutory scheme.”). And to the extent possible, we must “ensure that the statutory scheme is coherent and consistent.” Ali v. Federal Bureau of Prisons, 552 U.S. 214, 222 (2008).
Interpreting
The statute also imposes reporting and oversight responsibilities on states. For example,
to gather performance data and to understand how the system is functioning.
The Medicaid Act further specifies actions a state can take when an MCO underperforms. See
In such a case, if an MCO has “repeatedly failed to meet the requirements” of its contract with the State and the requirements in
Federal Medicaid regulations add to the State’s responsibilities here. For instance,
system for all managed care programs.”
These responsibilities support the conclusion that Congress intended for states to try to ensure that the right to timely payment in
HFS counters, and the partial dissenting opinion agrees, that the duty imposed by
view, if Congress wanted to impose the significant duty on states that Saint Anthony advocates, it should have done so more explicitly.
We appreciate the point, but we think Congress spoke sufficiently clearly here. The clear-statement rule explains that “States cannot knowingly accept conditions of which they are ‘unaware’ or which they are ‘unable to ascertain.’” Arlington Central School District Board of Education v. Murphy, 548 U.S. 291, 296 (2006),
HFS also argues that
highlights a key issue in this appeal and one that helps explain our disagreement with the district court and the partial dissent.
Saint Anthony requested several forms of relief in its complaint. One of those was canceling a contract with an MCO that fails to pay on time after State intervention. HFS argues that forcing it to cancel a contract with an MCO because it did not meet the 30/90 pay schedule would infringe on the State’s discretion to decide when it will terminate such a contract, which is expressly preserved by the statute. See
We are inclined to agree with HFS that a district court could not force the State to cancel a contract with an MCO. Canceling a contract with any one of the seven MCOs in Illinois might well cause a “massive disruption” to the State’s Medicaid program. Appellee’s Br. at 28. HFS and only HFS has the discretion to decide when and why it will invite that type of disruption.
facts might convince us otherwise, but that question about a worst-case scenario can be addressed if and when it actually arises and matters.
Continuing with the theme of assuming the worst, HFS and the partial dissent also argue that reading this duty into
These two limits on remedies in a
We draw helpful guidance on these issues of potential equitable relief from O.B. v. Norwood, 838 F.3d 837 (7th Cir. 2016). There, we affirmed a preliminary injunction against
Illinois officials in a suit brought by Medicaid beneficiaries who sought to enforce different sections of the Medicaid Act requiring the State to find nurses to provide home nursing for children enrolled in Medicaid. HFS argued in O.B. that it had no obligation to find nurses (or to act at all). We rejected that argument:
Certainly the defenses thus far advanced by HFS are weak. The primary defense is that nothing in the Medicaid statute “required [HFS] to ensure that Plaintiffs would receive medical care from nurses in their homes.” But it was HFS that decided that home nursing was the proper treatment for O.B., the other named plaintiffs, and the other members of the class.
Id. at 840 (alteration in original).
We recognized in O.B. the difficulties state officials faced in providing the needed nurses. There was no guarantee that compliance with the injunction would solve the plaintiffs’ problems. In affirming the preliminary injunction, though, we explained that the injunction “should be understood simply as a first cut: as insisting that the State do something rather than nothing to provide in-home nursing care for these children.” Id. at 842; see also id. at 844 (Easterbrook, J., concurring) (“All a district court can do in a situation such as this is require [the State] to start trying.”). If Saint Anthony can prove its claims of systemic delay and/or underpayment, the same is true here. The State decided to switch to a Medicaid program dominated by managed care. The State cannot now claim it has no obligation to ensure that Medicaid providers serving patients under that program receive timely payment. O.B. instructs that where HFS has a duty, a district court may order
it to do something when that duty is not being met, at the first cut. The court may then need to supervise the effects of the injunction and the State’s response and adjust the court’s orders as circumstance and equity may require. The district court should not let the perfect become the enemy of the good, nor should the possibility that a first cut at an injunction might not work sufficiently justify a denial of any relief at all.
To be clear, we are not suggesting that an injunction ordering the State officials literally to do only “something” would be sufficient. Federal Rule of Civil Procedure 65(d)(1) requires an injunction to “describe in reasonable detail … the act or acts restrained or required.” At the same time, we have often recognized that district courts have substantial equitable discretion in crafting injunctions so that they are both understandable by those enjoined and effective to accomplish their purposes. Eli Lilly & Co. v. Arla Foods, Inc., 893 F.3d 375, 384–85 (7th Cir. 2018); H-D Michigan, LLC v. Hellenic Duty Free Shops S.A., 694 F.3d 827, 843 (7th Cir. 2012), citing Russian Media Group, LLC v. Cable America, Inc., 598 F.3d 302, 307 (7th Cir. 2010). If Saint Anthony can prove systemic failures by MCOs to comply with the 30/90 payment schedule with reasonably transparent payment information, we would expect the district court to explore with the parties what steps the State officials could reasonably be expected to take to correct those systemic failures before framing an appropriate and effective injunction. And if such an injunction later needed to be modified based on experience, the district court would have ample power to do so at the request of a party or on its own motion.
O.B. also makes clear that a district court can craft injunctive relief within its equitable powers and discretion even in circumstances where some more drastic remedial measures
may be off the table. See O.B., 838 F.3d at 844 (Easterbrook, J., concurring) (identifying certain forms of relief that were off limits while also instructing the district judge to try different things and to “keep tabs on what is happening and adjust the injunction as appropriate” to secure relief for plaintiffs); accord, Rizzo v. Goode, 423 U.S. 362, 376–77 (1976) (“Once a right and a violation have been shown, the scope of a district court’s equitable powers to remedy past wrongs is broad, for breadth and flexibility are inherent in equitable remedies.” (internal quotations and citation omitted)). Federal Rule of Civil Procedure 54(c) offers relevant guidance here, providing that any final judgment other than a default judgment “should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.” The converse is also true, of course. If a party demands relief in its pleadings that is not available, such a demand does not poison the well to defeat relief to which the party is otherwise entitled. If Saint Anthony succeeds on the merits of its claims, we believe the district court here will be able to craft a remedy to push the State toward complying with its duty to provide for timely and transparent payments to Saint Anthony.
We recognize that part of the rationale for adopting the managed-care model was to ease the State’s administrative burden. Measures that would force HFS to take a more aggressive oversight role could reduce some of the administrative benefits the State hoped to gain by the switch to managed care. As we have explained, however, the Medicaid Act permits states to shift major Medicaid duties to MCOs but does not allow States to wash their hands of effective oversight. On the contrary, the Medicaid Act shows that Congress recognized the troubling financial incentives inherent in a managed-care system and the need for effective oversight. Recall
that the Medicaid Act requires the State to audit and inspect MCO books and records, to perform annual external reviews of payment timeliness, and to implement sanctions if an MCO is underperforming.
Saint Anthony alleges here that HFS is falling far short on those oversight and monitoring duties. HFS cannot avoid those duties altogether on the theory that Saint Anthony also asked for certain remedies that might not be available in this
The partial dissent also criticizes our focus on systemic failures and judicial relief to address such failures, arguing that
“Corrective Action Plan,” and reported that a few months after adopting such a plan, CountyCare “significantly reduced the number of outstanding claims that [were] older than 90 days.” Id. ¶¶ 17–21. We need not and should not adopt a mathematical definition of “systemic” failures at the pleadings stage. That problem can await further factual development. (To use a metaphor often used in the law, a person can usually tell the difference between being in mountains, in foothills, or on a plain even if there are no sharp boundaries between mountains, foothills, and plains.)
For these reasons, we conclude that
4. Alternative Remedial Scheme
Since
If the MCOs are failing to abide by the contractual terms, says HFS, Saint Anthony should just enforce its own contracts
with them. And providers like Saint Anthony are “in the best position” to “enforce their right to timely payment directly under their contracts with MCOs.” Appellee’s Br. at 29. As HFS sees the matter, there is no need to permit
A contractual remedy may offer some prospect of relief to a provider like Saint Anthony. But HFS has not convinced us that “allowing [
There is good reason to doubt that contractual remedies alone can vindicate the provider’s right to prompt payment. Saint Anthony files many thousands of Medicaid claims each year. If most claims are not paid on time, Saint Anthony’s option under the contract is to sue the MCO and/or to submit each claim for arbitration. Many other Medicaid providers across Illinois might need to do the same with each of the seven MCOs. That avenue represents a claim-by-claim adjudication on the individual provider-MCO level, across many thousands of claims, all in their own arbitrations. It’s not immediately obvious that this dispute-resolution system would even be manageable, let alone superior to a systemic solution implemented by HFS. At the very least, we are not persuaded
that Congress, implicitly through the contractual model, created “a comprehensive enforcement scheme that is incompatible with individual enforcement under [
For these reasons, we conclude that
We emphasize that this decision is based on the pleadings. This is a hard case with high stakes for the State, Medicaid providers, and Medicaid beneficiaries. We also recognize the potential magnitude of the case and the challenges it may present to the district court. If it turns out that resolving this dispute would actually require the district court to analyze each late claim, effectively taking on the role of the State’s Medicaid claims processors, or that effective relief could come only by canceling a contract with an MCO, then we may face a different situation. But we do not know at this point what direction the course of this litigation will take. HFS has not convinced us that we must decide whether Saint Anthony has alleged a viable claim today by assuming only the worst-case scenarios will emerge down the line. If Saint Anthony can support its factual allegations about systematically late and inadequate payments, we believe the district court could exercise its equitable discretion to fashion effective relief. The corrective action plan that HFS demanded from CountyCare may provide a starting point, adaptable to the circumstances of different MCOs.
III. Additional Issues
We have three issues left to discuss: Saint Anthony’s claim in Count Two under
A. Count Two
Unlike Saint Anthony’s claim under
Recall that the first Blessing factor requires Congress to have intended the plaintiff to be the beneficiary of the provision in question. Blessing, 520 U.S. at 340.
beneficiaries of
Saint Anthony asserts that “individuals” could also include providers. It argues that dictionary definitions of “individual” include a “single … thing, as opposed to a group,” which includes a single provider. Appellant’s Br. at 39, quoting Individual, Black’s Law Dictionary (11th ed. 2019). Medical assistance is also defined in the statute to include “payment.”
The argument is not convincing. For one, interpreting “individual” to include a “hospital” is a long stretch of the language. Saint Anthony’s argument is also inconsistent with other parts of
Given this statutory evidence, Congress did not speak “with a clear voice” and manifest an “unambiguous[]” intent to confer rights to providers like Saint Anthony under
B. Saint Anthony’s Motion to Supplement the Complaint
While the motion to dismiss was pending, Saint Anthony moved to supplement its complaint with a claim for deprivation of property without due process of law. Saint Anthony alleged HFS violated its due process rights in two ways, both related to payment transparency: (1) by failing
As a preliminary matter, there is an academic question whether this request should be construed as a motion to supplement under Federal Rule of Civil Procedure 15(d) or a motion to amend under Rule 15(a). Saint Anthony’s motion sought to add allegations concerning both post-complaint events (most appropriate as a 15(d) supplement) and some pre-complaint events that came to light in discovery (most appropriate under 15(a)). The distinction between 15(a)
amendments and 15(d) supplements is not important here. District courts have essentially the same responsibilities and discretion to grant or deny motions under either subsection. See Glatt v. Chicago Park District, 87 F.3d 190, 194 (7th Cir. 1996) (“[T]he standard is the same.”); see also 6A Wright & Miller, Federal Practice and Procedure § 1504 (3d ed.) (explaining that a lack of formal distinction between the two is “of no consequence,” and that leave should be freely granted when doing so will promote economic and speedy disposition of entire controversy and will not cause undue delay or unfair prejudice to other parties).
Ordinarily, “a plaintiff whose original complaint has been dismissed under Rule 12(b)(6) should be given at least one opportunity to try to amend her complaint before the entire action is dismissed. We have said this repeatedly.” Runnion ex rel. Runnion v. Girl Scouts of Greater Chicago & Northwest Indiana, 786 F.3d 510, 519 (7th Cir. 2015) (collecting cases). The decision to deny the plaintiff such an opportunity “will be reviewed rigorously on appeal.” id. “Unless it is certain from the face of the complaint that any amendment would be futile or otherwise unwarranted, the district court should grant leave to amend after granting a motion to dismiss.” id. at 519–20, quoting Barry Aviation Inc. v. Land O’Lakes Municipal Airport Commission, 377 F.3d 682, 687 (7th Cir. 2004). Reasons for denying leave to amend include “futility, undue delay, prejudice, or bad faith.” Kreg Therapeutics, Inc. v. VitalGo, Inc., 919 F.3d 405, 417 (7th Cir. 2019).
The district court used a procedure here that ran a high risk of error. Saint Anthony requested leave to add the due process claim after minimal discovery and before the court ruled on the pending motion to dismiss. The court entered a
alleged problems with the remittances in its original complaint, as HFS acknowledges. The new claim added issues related to the fee-for-service aspects of Illinois Medicaid, but that fact alone was not reason enough to deny leave so early in the life of a case and before discovery was in full swing. Courts should not be surprised, and should not respond rigidly, when discovery in a complex case turns up evidence to support a new theory for relief or defense.
In addition, by denying the motion to amend or supplement, the district court put Saint Anthony at risk of serious and unfair prejudice. To the extent the district court might have thought that the due process claim should be presented in a separate lawsuit, Saint Anthony could face serious problems with claim preclusion. See Arrigo v. Link, 836 F.3d 787, 798–80 (7th Cir. 2016).6
At this stage of the proceedings, the only arguable ground for denying Saint Anthony’s request to supplement its complaint would have been futility on the merits. The district court did say that it “ha[d] doubts about the legal sufficiency of Saint Anthony’s proposed new claim.” As noted above, the denial of a plaintiff’s first attempt at leave to amend or supplement “will be reviewed rigorously on appeal.” Runnion v. Girl Scouts of Greater Chi. & N. Ind., 786 F.3d 510, 519 (7th Cir. 2015). Doubts on the merits do not show futility. See, e.g., id. at 519–20; Bausch v. Stryker Corp., 630 F.3d 546, 562 (7th Cir. 2010) (“Generally, if a district court dismisses for failure to state a claim, the court should give the party one opportunity to try to cure the problem,
C. Arbitration?
The remaining issue is whether we should stay the case in favor of arbitration, as the intervening MCOs request. A necessary aspect of Saint Anthony’s claim against HFS is showing that the MCOs systematically miss the 30/90 pay schedule. The MCOs dispute that allegation, however. They argue that under the contracts, each allegedly late claim presents a factual dispute that must be resolved in arbitration before Saint Anthony’s case against HFS can proceed on the merits.
the second court to conclude the first court adequately preserved the claim. One could understand why such assurances from HFS, including its post-argument letter promising to forgo a claim preclusion defense in a separate lawsuit, might provide Saint Anthony limited comfort, especially since the district court’s stated rationale was based at least in part on a supposed lack of merit.
The district court did not address this issue, and we decline to do so here as well. Both HFS and the MCOs have their distinct obligations to ensure timely payment for providers. While factual issues related to the MCOs appear intertwined with Saint Anthony’s claim against HFS, they do not foreclose Saint Anthony’s section 1983 action. Faced with chronic late payments, Saint Anthony is entitled to seek relief against HFS as well as against the MCOs.
* * *
To sum up, Saint Anthony has alleged a viable right under
BRENNAN, Circuit Judge, concurring in part and dissenting in part.
BRENNAN, Circuit Judge, concurring in part and dissenting in part.
I join my colleagues in concluding that
I
Saint Anthony is a hospital in Chicago serving impoverished patients that relies heavily on Medicaid for its funding. Saint Anthony maintains that it has not received timely Medicaid payments from multiple managed care organizations (“MCOs”). Rather than pursue any claims against the MCOs directly through arbitration or litigation as provided for in the Hospital’s contracts,1 Saint Anthony has attempted to bypass the MCOs altogether by suing Illinois under
Section
A contract under section
1396b(m) of this title with a medicaid managed care organization shall provide that the organization shall make payment to health care providers … on a timely basis consistent with the claims payment procedures described in section1396a(a)(37)(A) of this title, unless the health care provider and the organization agree to an alternate payment schedule.
The parties substantially disagree about
healthcare providers include payment schedules that conform to
Before determining the extent of a state’s duty under
1295706 (U.S. May 2, 2022)
With this legal backdrop, consider the text of
Rather, its text describes the contract provision that must be included—for timely payments consistent with deadlines set out in a different statute—not the State’s ongoing enforcement duty. This is not surprising given that
Review of the Medicaid Act as a whole confirms this reading of
“necessary” as a “final draconian remedy” if other remedial measures prove ineffective.4
In addition to lacking a textual basis in
Aware of these problems, the majority opinion endorses a third reading of
But the majority opinion’s interpretation is even further removed from the text of
must always ensure timely payment is incorrect, its reading at least acknowledges that the statutory text contains no limiting principle—that is, states either have a privately enforceable duty to ensure prompt payment, or they do not. By contrast, the majority opinion introduces a new standard under which victims of the worst MCO offenders may pursue federal claims, but disputes not deemed “systemic”—presumably about a comparatively small number of untimely payments—are not actionable. There is no textual basis for such a conditional duty under
Instead of grounding its interpretation in the text of
When the majority opinion does turn to the actual language of the statute, tellingly, it looks only to unrelated provisions in the Medicaid Act, rather than “start[ing] with the specific statutory language in dispute”—here, the text of
This rationale proves too little. State oversight of MCOs serves a wide array of purposes, any one of which could plausibly explain Congress’s imposition of managerial responsibilities. For example, as the majority opinion highlights, these oversight measures recently served to unearth an MCO’s misallocation of funds. But the imposition of reporting and oversight responsibilities does not show that Congress imposed a privately enforceable duty on states to guarantee healthcare providers are timely paid. The majority opinion’s rationale also proves too much. If Congress’s only purpose in authorizing state audits and oversight was to require states to guarantee timely payments by MCOs to healthcare providers, why is that purpose limited to systemic MCO noncompliance? No reason is offered for limiting the state’s mandatory enforcement duties to only the widest or worst offenders.
As a final measure, the majority opinion notes that elsewhere in the Medicaid Act,
Overall, the majority opinion passes over the actual language of
proper use of the [whole act] canon to say that since the overall purpose of the statute is to achieve x, any interpretation of the text that limits the achieving of x must be disfavored.” SCALIA & GARNER, supra, at 168. “[N]o legislation pursues its purposes at all costs.” Rodriguez v. United States, 480 U.S. 522, 525–26 (1987) (per curiam). The majority opinion suggests Congress’s chosen tools for ensuring prompt payment—private suits and arbitration by healthcare providers against MCOs, along with discretionary enforcement by states—are inadequate. See e.g., Majority Op. at 24, 27 (referencing
Paradoxically, the attempt to limit this holding to systemic MCO noncompliance, designed to alleviate the burden on district courts, will add to it. Now courts will have to make preliminary determinations on whether healthcare providers have pleaded “systemic” failures by MCOs to determine if claims are actionable. That determination must be made without statutory or judicial guidance, because “systemic” remains undefined both as a metric (for example, total number of unpaid claims, or a percentage of such claims) and the point at which that numeric threshold is crossed.
The majority opinion suggests this determination is intuitive, as evidenced by a solitary instance of the State acting
tell the difference between minor problems and systemic ones.” As an initial matter, if Saint Anthony’s allegations of State inaction in the face of rampant untimeliness by MCOs are true, this case proves the State cannot intuit the difference between “systemic” and “minor” failures. Even more, before the majority opinion, labels like “systemic” and “minor” were without legal significance. So, an example of the State acting against an MCO does not show that the State—much less district courts—can determine which MCOs are systemically underperforming, and which are not. Tens of thousands of untimely payments might signal a “systemic” problem while a handful of unpaid claims might not, but between these extremes lies a vast expanse of undefined terrain.
District courts are also promised that they will not need to “adjudicate issues at the claim-by-claim level”—a task my colleagues concede “would strain judicial resources and seem to conflict with the arbitration clauses in the contracts between the MCOs and Saint Anthony.” But a district court can hardly decide if an MCO has systemically underperformed if it does not examine claims for untimely payment on the merits, and then determine whether the “systemic” threshold has been reached. And a district court cannot decide whether the payment schedule even applies to a group of payment claims without reaching the requisite question of whether the disputed claims are clean. Moreover, without inspecting whether individual claims are being paid on time, a district court has no metric by which to gauge the effectiveness of, or a State’s compliance with, injunctions designed to ensure timely payment. Pointing to O.B. v. Norwood, 838 F.3d 837 (7th Cir. 2017), the majority opinion insists that all the district court must do is require the State to do “something.” But my colleagues recognize that such a remedy is appropriate only
“[i]f Saint Anthony can prove its claims of systemic delay and/or underpayment,” which necessarily involves adjudicating the underlying claims on the merits.6
In sum, the majority opinion’s interpretation of
the majority opinion concludes exists here.7 Nor has any other federal circuit ever recognized a state’s privately enforceable duty to guarantee timely payment under
II
I also part ways with my colleagues on whether the district court abused its discretion in denying Saint Anthony’s motion to supplement its complaint.
Federal Rule of Civil Procedure 15(d), which governs motions to supplement pleadings, provides in relevant part that “[o]n motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented.”
On appeal Saint Anthony points to Rule 15(a), which governs a motion to amend pleadings. Rule 15(a) includes the familiar language that courts “should freely give leave when justice so requires.”
expressly filed a motion to supplement under Rule 15(d).8 That the Hospital could have filed a motion under Rule 15(a) is not relevant. Rule 15(d) does not
The difference between Rule 15(a) and Rule 15(d) is substantive.9 A supplemental complaint filed under Rule 15(d) is to embrace only events that have happened since the original complaint; that is, to “bring[] the case up to date.” 6A
Saint Anthony also added a new claim in its supplemental complaint. The original complaint alleged statutory violations for the State’s failure to ensure timely payments from MCOs. The supplemental complaint alleged violation of the Fourteenth Amendment’s Due Process Clause and requested
transparency in the calculations and variables used in making payments under the managed care program and Illinois’s separate fee-for-service program—the latter of which was not previously part of this action.
Given this case’s subject matter, scope, and procedural posture, the district court was well within its discretion to decide against a massive increase in the scale of this litigation. Saint Anthony’s original complaint was limited to the State’s managed care program—an enormous undertaking itself. The supplemental complaint, filed nine months later after the parties had engaged in expedited discovery, added a new due process count which, as the district court correctly observed, would have entailed “whole new frontiers of discovery.” That characterization is modest. The case would have expanded to include the Hospital’s claim involving, for the first time, the $7 billion Medicaid fee-for-service program.10 When a proposed supplemental complaint seeks to add a claim that will unduly delay and alter the scope of litigation, a district court may deny leave to supplemental the complaint. See Clean Water Action v. Pruitt, 315 F. Supp. 3d 72, 84–85 (D.D.C. 2018).
For my colleagues, if the district court’s decision denying the motion to supplement is affirmed, “Saint Anthony could face serious problems with claim preclusion.” But shortly after oral argument in our court, the State submitted a post-argument memorandum in which it stated:
[I]f the Court affirms the district court’s orders denying [Saint Anthony] leave to file its proposed supplemental complaint and [Saint Anthony] seeks to assert that additional claim in a separate action,
[the State] will not assert, and accordingly waives, the defense of claim preclusion as to the additional claim alleged in plaintiff-appellant’s proposed supplemental complaint.11
So, Saint Anthony would have been able to assert its additional claim against the State in a separate case. The State affirmatively waived any argument to the contrary.
As the district court reasoned and concluded—a decision that warrants deference under our standard of review—allowing this supplementation would not promote the economic and speedy disposition of the controversy between the parties and would cause undue delay. A reasonable person could take the view that the Hospital’s motion to supplement, coming when it did, expanding the litigation to the scale that it would, and including facts Saint Anthony previously knew, should be denied. Therefore, I cannot join my colleagues in their conclusion that the district court abused its discretion in denying that motion.
For these reasons, I respectfully concur in part and dissent in part.