Notice & Comment

Suing and settling, Part 2.

In a January memo to Senator Rubio, the Congressional Research Service laid out an argument for why the Obama administration can’t use the Judgment Fund to settle risk corridor lawsuits. (For prior coverage, see my posts here.) I think CRS is mistaken, and it’s worth explaining why—even if it means getting deep into the weeds of appropriations law.

In the memo, CRS rightly observes that the Judgment Fund is available only if payment is “not otherwise provided for.” CRS believes that payment is “otherwise provided” for the risk corridor program because Congress has already appropriated money for it—specifically, by allowing CMS to dip into “user fees” to make risk corridor payments. Because the “user fees” appropriation is available for the risk corridor program, CRS believes that the Judgment Fund is unavailable—even if the user fees are insufficient to pay the court judgments.

Here’s where I think CRS gets it wrong. (In its defense, the Second Circuit made the same mistake in dicta in a case that CRS relies on heavily.) Payment isn’t “otherwise provided for” within the meaning of the Judgment Fund just because Congress has appropriated money for the program in question. Instead, the Judgment Fund is unavailable only if Congress has designated an alternative source of funds to pay judgments arising from litigation.

From time to time, Congress does designate funds other than the Judgment Fund to pay court judgments. But cases in which payment is “otherwise provided for” tend to involve specific, unusual programs where litigation is routine and a program-specific source of funds is available to pay the inevitable judgments. Think here of tax refund cases, condemnation suits, and cases where an agency operates a revolving fund.

For cases like that, a program-specific appropriations statute can sometimes be read to reflect Congress’s intent that money judgments should come out of that appropriation, not the Judgment Fund. But not any old appropriations statute will do. A memo from the Office of Legal Counsel, starting on p. 152, offers an example of how “specific and express” a statute has to be before Congress will be understood to have “otherwise provided for” the payment of money damages.

Here, there’s no hint in any law that Congress meant money judgments involving the risk corridor program to be paid from anywhere other than the Judgment Fund. User fees aren’t earmarked for litigation; they can only be used to discharge CMS’s general “responsibilities.” The money is for funding agency operations, not paying damages.

Indeed, if a general appropriation were sufficient to displace the Judgment Fund, then the fund would be pretty useless. Every entitlement program has some source of appropriated funds, suggesting that the Judgment Fund would be unavailable in every lawsuit involving an entitlement. And that would give the lie to the general rule that a failure to appropriate the money to pay an entitlement “is unlikely to prevent recovery by way of a lawsuit.”

In other words, there’s nothing unseemly or illegal about settling these cases out of the Judgment Fund. To the contrary, settling is the responsible thing to do.


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