Twenty Years After Bowen v. Massachusetts- Damages or Restitution: When Does It Still Matter? When Should It?

• Author: Nora J. Pasman-Green; Alexis Derrossett
• Position: Professor of Law, Thomas M. Cooley Law School. J.D. Wayne State University Law School, 1977; B.S. University of Michigan 1973.; J.D. Thomas M. Cooley Law School, 2008; B.A. Purdue University, 2005.
• Pages: 749-781

Page 749

"One consequence of the Bowen case has been to create a sort of cottage industry among lawyers attempting to craft suits, ultimately seeking money from the Government, as suits for declaratory or injunctive relief without mentioning the money."¹

I Introduction

In 1988, the United States Supreme Court handed down a decision in Bowen v. Massachusetts,² which dealt with how the characterization of monetary relief as either restitution or damages determined whether the United States Court of Claims³ or the United States District Court had jurisdiction to hear the claim. Twenty years later, courts throughout the country continue to struggle with whether a claim for monetary relief constitutes restitution or damages with varying results and interesting twists.

Courts have commonly confronted this classification controversy when the following issues are at stake: (1) do the federal district courts have jurisdiction under the Administrative Procedure Act to hear the claim, or does the Court of Federal Claims have jurisdiction under the Tucker Act?; and (2) is the monetary relief sought unavailable because of its classification? In most of the cases, Bowen's authority and vitality are implicitly, if not explicitly, called into question.

This Article examines the Bowen legacy in these cases to determine whether a coherent approach to the classification of Page 750 monetary remedies has emerged and identifies when the classification of monetary remedies as either damages or restitution continues to be a meaningful distinction.

II Background

The principal question presented in Bowen was whether a federal district court had jurisdiction to review a final order of the Secretary of Health and Human Services where the Secretary had disallowed coverage for a category of expenditures under its Medicaid program.⁴ Although federal funding to a state under the Medicaid program was called "reimbursement," the payments were actually made as an advance on a quarterly basis of anticipated future expenditures. In Bowen, the Secretary of Health and Human Services initiated a compliance proceeding, and the payment advances to the State were withheld.⁵

The State filed a complaint under the Administrative Procedure Act (APA)⁶ in Federal District Court for the District of Massachusetts seeking to set aside the disallowance order and seeking declaratory and injunctive relief to prohibit the Secretary from continuing to disallow the contested category of medical assistance expenditures.⁷The district court reversed the disallowance decision on the merits, holding that the category of expenditures did in fact comply with the requirements of the Medicaid program.⁸ On appeal, the First Circuit Court of Appeals affirmed the district court holding on the Page 751 merits.⁹ The Secretary of Health and Human Services also challenged the district court's subject matter jurisdiction claiming that the United States Court of Claims had exclusive jurisdiction over the State's claim under the Tucker Act.¹⁰ The First Circuit rejected the jurisdictional challenge on the grounds that the relief requested was prospective rather than wholly retrospective in nature, explaining that the disallowance decision at issue in this case . . . represents an ongoing policy that has significant prospective effect. The structure of the Medicaid program (in which the Secretary "reimburses" the states in advance) makes it inevitable that disallowance decisions concern money past due. Yet the Secretary uses these decisions to implement important policies governing ongoing programs.¹¹

The federal government's position before the First Circuit and the Supreme Court was that the State's claim for payment could only be brought against the United States if sovereign immunity had been waived. The APA waived sovereign immunity, so the argument continued, only for actions "seeking relief other than money damages;" the State's claim was essentially for money damages. Further, the Secretary argued that even if the claim was not for money damages, and thereby was not precluded under the APA on that basis, the State had an adequate remedy in the Court of Claims.¹²

Acknowledging that Congress intended to broaden avenues for judicial review of agency action by eliminating the defense of sovereign immunity in the 1976 amendment to the APA, the Court first held that because the complaint sought declaratory and injunctive relief, the "plain language" of the amendment did not foreclose judicial review. More significantly, the Court held that the monetary aspects of the relief were not money damages. Recognizing "the fact that a judicial remedy may require one party to pay money to another is not a sufficient reason to characterize the relief as 'money damages,'"¹³ the Court determined that the State was seeking "specific relief," not damages, and that the APA exclusion should not be broadened beyond claims strictly for money damages to preclude claims for all monetary relief. Page 752

The Court's conclusion was based first on the use of the word "restitution" in the statute, and further, the recognition that recoupment of overpayments or underpayments, or reimbursement for belated pay expenses were historically considered "equitable action(s) for specific relief."¹⁴ The Court distinguished these types of payment obligations from the compensatory goal of money damages, recognizing that "[d]amages are given to the plaintiff to substitute for a suffered loss, whereas specific remedies are 'not substitute remedies at all, but attempt to give the plaintiff the very thing to which he was entitled.'"¹⁵

The Court's determination that the case was properly within the jurisdiction of the federal courts under the APA and not the Court of Claims under the Tucker Act was primarily based on its analysis of the legislative history of the 1976 amendment to the APA-the Court found that the terms "money damages" and "monetary relief" were not intended to be used interchangeably to limit APA jurisdiction.¹⁶ The Court found further congressional intent to include contested Medicaid coverage claims in the Congressional committee reports, which indicated that the amendment would allow for judicial review of the "administration of Federal grant-in-aid programs."¹⁷ Thus, "the fact that grant-inaid programs were expressly included in the list of proceedings in which the Committees wanted to be sure the sovereign-immunity defense was waived is surely strong affirmative evidence that the members did not regard judicial review of an agency's disallowance decision as an action for damages."¹⁸ Ultimately, the Court reiterated:

The State's suit to enforce the Medicaid Act, which provides that the Secretary "shall pay" certain amounts for appropriate Medicaid services, is not a suit seeking money in compensation for the damage sustained by the failure of the Federal Government to pay as mandated; rather, it is a suit seeking to enforce the statutory mandate itself, which happens to be one for the payment of money.¹⁹ Page 753

The federal obligation sought to be enforced was for the payment of money, which did not transform the nature of the relief sought into damages.²⁰

Lastly, the Court rejected the Secretary's position that the State had failed to prove that the Court of Claims was an inadequate substitute for review in the district court.²¹ Recognizing that when Congress enacted the APA it did not intend for the general grant of jurisdiction to duplicate previously established special statutory procedures, the Court nonetheless reiterated earlier holdings that any exception to avoid duplication should not be construed to defeat the central purpose of judicial review of agency action.²²Moreover, Congressional intent to codify the exhaustion of remedies requirement should not be construed to defeat the intent to broaden jurisdiction under the APA.²³ Perhaps most pertinent to the particulars of the case, the Court rejected the Court of Claims as an adequate forum because that court did not have the equitable power to grant the prospective relief necessary for resolution of the merits of the claim.²⁴ Finally, the Court found that, especially since disallowance decisions involved the State's governmental activities, the district court would be in a better position than the Court of Claims to review the complex federal-state interaction involved.²⁵ Thus, the Court adhered to the "settled and firm policy of deferring to regional courts of appeals in matters that involve the construction of state law."²⁶ This last point discussed the ongoing prospective nature of the relief necessary; however, the Court did not embrace the distinction of prospective versus retrospective relief as a means to settle the question of whether the Court of Federal Claims was an adequate forum.

Justice Scalia's dissent in Bowen was significant, particularly because he eventually held sway for the majority in two significant cases that also took up the question of whether or not the remedy sought was damages.²⁷ Justice Scalia's primary point of departure from the Bowen majority dealt with the characterization of the monetary relief sought as specific relief rather than damages as the means to remove the claim from the jurisdiction of the Court of Page 754 Claims.²⁸ Justice Scalia's position was that the State's claim was for compensatory reliance damages because the State sought to recover for the monetary loss it sustained when it expended its resources to provide services in reliance on the government's duty to reimburse it. Thus, the argument was that the State's claim was essentially one for payment of money, which was a...