Commercial Litigation Update

In the June 2024 edition of the American Bankruptcy Institute Journal the authors of “Why State Court Receiverships Are Becoming the Norm for Smaller Companies,” write that “state court receiverships are now poised to take center stage . . . as the preferred method for addressing financial distress of small companies.” The authors assert that for smaller middle-market businesses, receiverships are rebounding in popularity due to the expense associated with bankruptcy proceedings. The authors conclude: “With the difficult choice of filing for bankruptcy increasingly becoming a nonviable alternative for smaller companies due to the cost and complexity of doing so, the spreading adoption of model receivership statutes is poised to increase receivership in popularity as a method by which companies can address underlying insolvency issues on a simplified, more cost-effective basis while retaining the best features of federal bankruptcy law.”

I agree that receiverships will increase in popularity. While the spreading adoption of model receivership statutes may increase the uniformity of receivership law and thereby make the remedy more popular, I believe several advantages of receivership proceedings are already driving an increase in the number of receivership proceedings. As mentioned in my prior article, “Receiverships provide many of the protections afforded by bankruptcy proceedings, while having the added benefit that: (a) a receivership can be commenced by a lender; (b) the costs associated with a receivership can be less than in a bankruptcy proceeding; (c) in a receivership a lender has more control over who will be operating the business and the timing of decisions related to the disposition of the lender’s collateral; and (d) recoveries can be enhanced by instituting improvements in the business operations and the pursuit of claims against third parties.”

On June 27, 2024, the U.S. Department of Justice (“DOJ”) and the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), along with other federal and state law enforcement partners, announced the annual National Health Care Fraud Enforcement Action using criminal enforcement to target a wide variety of alleged health care fraud schemes.

What Has Stayed the Same and What Has Changed?

Similar to last year’s all-encompassing “takedown,” this year’s enforcement action charged defendants with schemes related to telemedicine and laboratory fraud; diversion of controlled substances (HIV medications and prescription stimulants); addiction treatment schemes; opioids and other familiar types of health care fraud (such as home health, DME and kickbacks).  However, the “headline” this year was a $900 million case in Arizona involving medically unnecessary amniotic wound grafts.

The 2024 enforcement action charged 193 defendants who allegedly have committed over $2.75 billion in fraud. The cases were brought by 32 different U.S. Attorneys’ Offices and 11 State Attorney Generals’ Offices. Although the dollar figure at issue is slightly higher than the 2023 enforcement action, the number of defendants is strikingly higher, with almost two and a half times as many defendants charged. Similarly, the cases were brought in almost twice as many federal districts as last year, suggesting that the Fraud Section is building more partnerships with U.S. Attorney’s Offices nationwide.  

On what was the next-to-last day of the term, a 6-3 Supreme Court delivered a very lengthy opinion written by the Chief Justice, overruling 40 years of jurisprudence embodied in the Chevron doctrine that had been the bedrock of administrative law.

In Loper Bright Enterprises v. Raimondo (which also governs Relentless, Inc. v. Department of Commerce), the Court held that “the Administrative Procedure Act [APA] requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous; Accordingly, Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984) is overruled.”

Holding that Chevron deference cannot be squared with the APA, the Chief Justice traces the departure from the traditional role of the judiciary in making independent determinations of statutory meaning. Here, the question was “whether an Environmental Protection Agency (EPA) regulation was consistent with the term ‘stationary source’ as used in the Clean Air Act. In answering the question, the courts below followed Chevron’s familiar two-step approach, first discerning “whether Congress ha[d] directly spoken to the precise question at issue.” If congressional intent is clear, that ends things, but where “the statute [was] silent or ambiguous with respect to the specific issue” under consideration, the court was required to defer to the agency if it had offered “a permissible construction of the statute.”

The Supreme Court has issued its last three decisions of the 2023 term, and its summer recess has begun.

However, while the Justices and Court personnel might be at apparent rest, the future effect of today’s decisions will be significant, both immediately and for years to come.

The Court led the day, as expected, with the long-awaited decision in Trump v. United States. Given the broad scope of the remand of the case and the Court’s 6–3 conservative/liberal split, most of the headlines likely will suggest that Trump has prevailed, especially because of conservative Justices that he himself had appointed. Indeed, though most of his arguments have been rejected by the Chief Justice and those who concurred with him, the former president has gained the thing he likely most wanted: delay. There is no way conceivable, at least to this writer, that this case can be resolved before the upcoming presidential election. Whatever the ultimate resolution of the matter might be, that alone will raise a host of new questions, especially if the former president is reelected. But those are matters more immediately for the political arena, and this blog is about the law and the effects upon which the decision might have longer-term implications. So, let’s look at what the Court says the law is.

The Supreme Court’s day started with the specter of yet another leak of a reproductive rights decision having occurred.

The day ended with the Court’s actually deciding the case, providing a small bit of good news for the pro-choice side of things and representative, as was the case with the recent gun decision, of a tendency among certain Justices, e.g., Barrett and Kavanaugh, to temper earlier rulings.

It also appears that the Court won’t decide Trump v. U.S. until after tonight’s presidential campaign debate. The Loper case, revisiting the Chevron doctrine, also remains pending.

There will be decisions issuing tomorrow, the notional last day of the term, but it will surprise no one if the term is extended into July.

The Supreme Court started the day with 14 decisions yet to deliver and only reduced the number by two—neither of them the Trump immunity case nor the Loper case concerning the future of the agency deference doctrine of Chevron. There will, however, be decisions issuing both tomorrow and Friday, and perhaps an extension of the term for a day or two next week.

As for today’s activity, we start with Murthy v. Missouri, a 6–3 decision. In what might interest Court observers who have suggested cracks in what I’ve long said is an overhyped view of a unified conservative front, Justice Barrett wrote the majority opinion and was joined by two other “conservatives,” the Chief Justice and Justice Kavanaugh, along with the three liberals. The increasingly testy Justice Alito was joined by Justices Thomas and Gorsuch in dissent. The readers of this blog are most certainly aware of the controversy concerning the political and health effects of false or misleading information posted on social media platforms. Under their long-standing content-moderation policies, the platforms have acted to suppress certain categories of speech judged to be false or misleading.

New episode of our video podcast, Speaking of Litigation: Ever wondered how courtroom battles have evolved with the rise of technology?

Join us on this episode of Speaking of Litigation as Epstein Becker Green litigators Ken Kelly, Eric Moran, and Ed Yennock explore how technological advancements have reshaped the landscape of legal trials. From the days of low-tech (or no-tech) to the sophisticated digital tools we now rely on, technology has revolutionized case development, trial preparation, and presentation in the courtroom.

Whether you're a practicing lawyer or a new litigator, or simply curious about courtroom dynamics, this episode offers valuable knowledge and practical tips.

With the current term of the Supreme Court soon to end, the run of decisions in which the Justices have been unanimous or close to it is being displaced by the “tougher” ones, in which there is substantial disagreement.

That disagreement is not uniformly the product of what, to many, is the expected split among jurisprudential conservatives and liberals. Indeed, some of the matchups are decidedly less predictable. This blog has discussed the now-frequent agreement between Justices Kagan and Kavanaugh, as well as the civil liberties-based independence of Justice Gorsuch. More recently, we have seen a critical reexamination of the doctrine of originalism led by Justice Barrett, and today somewhat qualified by a Second Amendment case.

To diminish the number of frivolous lawsuits that patients file against doctors and hospitals, 28 states require that a plaintiff submit an affidavit or certificate of merit when they file a medical malpractice case. The specific requirements vary state-to-state, but generally they require the plaintiff to attach an affidavit from one or more physicians, who must affirm that they reviewed the patient’s medical records; that they believe the defendant-providers breached the applicable standard(s) of care; and that they believe the breach harmed the patient.

In this context, a question often arises: How similar must the affiant’s expertise be to the defendant’s? These requirements also vary state-to-state, but many state statutes and rules of evidence condition an expert witness’s competency to testify – or to complete an adequate affidavit of merit – upon that expert’s credentialling or practicing in a specialty that is similar to the defendant’s. For instance, a New Jersey statute specifies, in relevant part, that if the defendant is:

With a significant mass of cases left to decide and only a few weeks to issue the opinions, the U.S. Supreme Court has reduced the backlog by four today. None of them, however, resolves the future of Chevron deference or the criminal prosecution vulnerability of the former president.

Instead, the Court has given us opinions concerning retaliatory or selective arrest, malicious prosecution, and the permissible scope of expert opinion concerning the mental state of drug smugglers—all important issues in criminal jurisprudence. The Court also decided a case of importance, if only to those who earn income from American-controlled foreign businesses and those who advise them. The lineups of Justices deciding these cases also might be of interest, particularly, as we have discussed in the past, finding Justice Kavanaugh and Justice Kagan in accord.