Commercial Litigation Update

The U.S. Supreme Court’s ruling in American Hospital Association (“AHA”) v. Becerra (2022) sent shockwaves through the 340B drug pricing program when it held that CMS’ reduction of reimbursement for drugs purchased under the 340B program was not permitted by law. The Supreme Court chose not to address potential remedies and remanded the case back to the D.C. District Court for further proceedings on how to correct the underpayments. Instead of vacating the unlawful reimbursement rates, the District Court decided to remand without vacatur, allowing HHS the opportunity to remediate its underpayments.^[1] AHA v. Becerra (2023).

In response, the Centers for Medicare & Medicaid Services (CMS) issued a 2023 Final Rule mandating a retroactive lump-sum reimbursement to 340B participating hospitals for 340B underpayments made between 2018 and 2022. The Supreme Court’s decision, coupled with CMS’s administrative action, has led to significant contractual disputes and regulatory challenges as 340B contract hospitals seek restitution for past financial shortfalls while Medicare Advantage organizations (“MAOs”) grapple with the fiscal implications of these payment adjustments. The stakes are high, with hospitals seeking significant back payments and MAOs pushing back, arguing that their obligations are dictated by contracts, not federal rulemaking. As legal battles unfold, the question remains: Who is financially responsible for correcting these underpayments? This article analyzes these developments, focusing on the litigation between hospitals and MAOs and offering strategic contractual considerations in this shifting landscape.

[1] The court reasoned that vacatur would be highly disruptive due to the complexity of the Medicare system and potential budget neutrality concerns.

Drawing from established precepts of Massachusetts law that a judge may fill in an omitted contractual term consistent with the intent of the parties, a Massachusetts Appeals Court recently affirmed a trial court’s conclusion that the parties had agreed to commission payments for an indefinite period of time and as a result, the payments would continue for as long as the Defendant continued receiving revenue from the underlying customer.

In Prism Group, Inc. v. Slingshot Technologies Corporation, a dispute arose between Slingshot  Technologies Corp. (“Slingshot”) and Prism Group (“Prism”), a one-person sales company Slingshot engaged to procure customers for Slingshot’s business of providing secure facsimile services in the healthcare industry. In email correspondence from the establishment of two customer accounts in question, the parties agreed that Prism would receive a commission of a percentage of the revenue Slingshot received from customers Prism brought in. At issue in this dispute were two lucrative client relationships that generated $9 million and $29 million for Slingshot, respectively. Despite Prism undisputedly completing its performance under the contracts, and Slingshot originally agreeing in email correspondence to pay Prism a set percentage of the revenues generated from these clients, Slingshot reduced and ultimately stopped paying Prism any commission, despite the ongoing nature of the underlying customer relationships.

New episode of our podcast, Speaking of Litigation:  Float like a butterfly, sting like a . . . Swifty? From Muhammad Ali’s masterful prowess in the ring to Taylor Swift’s re-recorded classics, the art of counterpunching has long been portrayed in societal—as well as legal—media.

In the courtroom, a counterclaim can be used to disrupt the legal strategy of your opposition or even in anticipation of an incoming legal threat. In this episode of Speaking of Litigation, Epstein Becker Green attorneys Max Cadmus, Victoria Flinn McCurdy, and Anthony ...

Due to the large-scale shutdowns triggered by the Coronavirus pandemic (“COVID-19”), many businesses were unable to operate fully, or not at all. Litigants across the country have sought to be relieved of their obligations under contracts as a result of the pandemic-related disruptions, under legal theories including impossibility, frustration of purpose, and force majeure. As recently decided cases demonstrate, proponents of these theories have faced uphill battles.

We are pleased to present Commercial Litigation Update, the newest blog from law firm Epstein Becker Green (EBG), which will offer engaging content about emerging trends and important developments in commercial and business litigation.

Commercial Litigation Update will feature thought leadership from EBG litigation attorneys and provide insightful and practical commentary and analysis on a wide range of timely litigation issues that affect businesses. Areas of interest will include trends and developments in antitrust, contract, defamation and product disparagement ...

Imagine these scenarios:

• Your company cannot perform a contract because of the COVID-19 pandemic.
• A vendor informs you that she cannot provide your company with necessary goods because of supply chain issues caused by a governmental emergency declaration.
• A subcontractor cannot perform because its employees are self-quarantining.

These are not hypotheticals. Scenarios like these are playing out around the country. The real-world impact of the COVID-19 pandemic is colliding with contractual requirements, and there is new attention to the legal doctrines of “impossibility,” “frustration of purpose,” “impracticability, and “force majeure.”

What do they mean? In a nutshell, traditional contract law says that an unforeseeable event occurring after the contract was formed can excuse contract performance, and determining whether an event was unforeseeable will depend heavily on the specific facts and the language of the contract.