Larisa's Home Care, LLC v. Nichols-Shields

No. 58 October 26, 2017 115

IN THE SUPREME COURT OF THE

STATE OF OREGON

LARISA’S HOME CARE, LLC,

an Oregon limited liability company,

Petitioner on Review,

v.

Karen NICHOLS-SHIELDS,

the duly appointed Personal Representative

of the Estate of Isabell Prichard, Deceased,

Respondent on Review.

(CC C124865CV; CA A154950; SC S064120)

On review from the Court of Appeals.*

Argued and submitted March 3, 2017, at Willamette

University College of Law, Salem, Oregon.

Ross Day, Day Law & Associates, PC, Portland, argued

the cause and filed the brief for petitioner on review. Also on

the brief was Matthew Swihart.

Hafez Daraee, Luby/Daraee Law Group, PC, Tigard, argued

the cause and filed the brief for respondent on review.

Before Balmer, Chief Justice, and Kistler, Walters, Landau,

Nakamoto, Flynn, and Duncan, Justices.**

NAKAMOTO, J.

The decision of the Court of Appeals is reversed, and

the case is remanded to the Court of Appeals for further

proceedings.

______________

**  Appeal from Washington County Circuit Court, Janelle F. Wipper, Judge.

277 Or App 811, 372 P3d 595 (2016).

**  Baldwin, J., retired March 31, 2017, and did not participate in the decision

of this case. Brewer, J., retired June 30, 2017, and did not participate in the deci-

sion of this case.

116 Larisa’s Home Care, LLC v. Nichols-Shields

Case Summary: Plaintiff, owner of an adult foster care facility, brought an

action for unjust enrichment against personal representative of decedent’s estate.

Plaintiff had charged decedent Medicaid rates for her care, rather than higher

“private pay” rates; however, she had been qualified for Medicaid based on false

representations in her application. Plaintiff contended that decedent’s estate

had been unjustly enriched because decedent should have paid the “private pay”

rates. Trial court agreed and entered judgment for plaintiff, but Court of Appeals

reversed, concluding there was no unjust enrichment. Held: (1) formula for unjust

enrichment claims articulated in Jaqua v. Nike, Inc., 125 Or App 294, 298, 865

P2d 442 (1993) was unhelpful as an all-purpose statement of the elements and

ill-suited to the circumstances of this case; (2) unjust enrichment is available

when party obtains benefit from another by fraud; (3) but for the false represen-

tations in her application, decedent would have been disqualified from receiving

Medicaid benefits; (4) decedent’s estate was legally responsible to third parties

for the false representations made by decedent’s son while exercising decedent’s

power of attorney; (5) matter should be remanded to Court of Appeals for it to

consider Medicaid-specific question that it had not reached.

The decision of the Court of Appeals is reversed, and the case is remanded to

the Court of Appeals for further proceedings.

Cite as 362 Or 115 (2017) 117

NAKAMOTO, J.

The issue presented is whether an adult foster care

provider claiming unjust enrichment may recover the rea-

sonable value of its services from a defendant who, through

fraud, obtained a lower rate from the provider for the ser-

vices. We conclude that, generally, a defendant who obtains

discounted services as a result of fraud is unjustly enriched

to the extent of the reasonable value of the services. We there-

fore reverse the contrary holding by the Court of Appeals.

Because the fraud here occurred in the context of a person

being certified as eligible for Medicaid benefits, however, we

remand for the Court of Appeals to consider whether certain

provisions of Medicaid law may specifically prohibit plaintiff

from recovering in this action.

I. BACKGROUND

The facts leading to this action revolve around the

Medicaid application of decedent Isabell Prichard and the

services that Prichard received at Medicaid rates from plain-

tiff, Larisa’s Home Care, LLC, during the last months of her

life. Because the trial court ultimately granted judgment

for plaintiff, we set out the facts and all inferences in the

light most favorable to that party. See James v. Clackamas

County, 353 Or 431, 433-34, 299 P3d 526 (2013) (so noting

and citing authorities).1

A.  Background on the Medicaid Program

For context, we begin with some background on the

Medicaid program. Medicaid “is a cooperative endeavor in

which the Federal Government provides financial assistance

to participating States to aid them in furnishing health care

to needy persons.” Harris v. McRae, 448 US 297, 308, 100

S Ct 2671, 65 L Ed 2d 784 (1980). Although the Medicaid

program is partly financed by the federal government, each

state administers its own program. 42 CFR § 430.0. To do so,

each state creates its own “state plan.” See 42 USC § 1396a

(setting out requirements for state plans); 42 CFR § 430.10

1

The Court of Appeals declined to exercise its discretion under ORS 19.415(3)

to determine the facts de novo in this equitable action. Larisa’s Home Care, LLC

v. Nichols-Shields, 277 Or App 811, 813 n 2, 372 P3d 595 (2016).

118 Larisa’s Home Care, LLC v. Nichols-Shields

(describing state plans). Oregon’s state plan is administered

by the Department of Human Services (department). See

ORS 409.010(2)(b) (department is responsible for programs

and services relating to elderly and persons with disabil-

ities); ORS 410.070 (department’s duties regarding same);

ORS 411.060 (authority to adopt and enforce rules).2

The department requires an application to deter-

mine a person’s eligibility for Medicaid benefits. See OAR

461-115-0700 (requiring that “all eligibility factors must

be verified at initial application”). As relevant here, a per-

son applying for Medicaid benefits must disclose any asset

transfers made within the past 60 months. That disclo-

sure permits the department to determine whether those

transfers disqualify the person from receiving benefits for

a period of time. If the applicant has made transfers within

the 60 months preceding the application for benefits, and

if those transfers were “in whole or in part for the purpose

of establishing or maintaining eligibility for benefits,” then

the person will be disqualified from receiving benefits for a

period of time. OAR 461-140-0210(2), (5). The length of the

disqualification period depends on the amount transferred:

the greater the amount, the more months the person will

have to wait to receive benefits. See OAR 461-140-0296(2)

(as applicable here, disqualification period in months is

determined by dividing amount transferred by $5,360).

B.  Plaintiff’s Services to Prichard at Medicaid Rates

Plaintiff owns two adult foster homes for the elderly.

Plaintiff had contracted with the department to provide ser-

vices in a home-like setting to patients who qualified for

Medicaid. For those patients, the rates charged would be

those set by the department.

Prichard, an elderly woman who suffered from cog-

nitive difficulties and dementia, became one of plaintiff’s

patients in June 2007. Prichard then resided and received

2

Except as otherwise noted, all references to sections of the Oregon Revised

Statutes are to current versions of those statutes, which have not been modified

since 2007 in any way dispositive as to the issues presented here. By contrast,

and except as otherwise noted, all references to rules for Oregon’s state plan are

to the versions of the Oregon Administrative Rules in effect on April 17, 2007, the

date that Prichard applied for Medicaid.

Cite as 362 Or 115 (2017) 119

care in one of plaintiff’s adult foster homes until her death

in November 2008. Because Prichard had been approved to

receive Medicaid benefits, plaintiff charged Prichard the

rate for Medicaid-qualified patients: approximately $2,000

per month, with approximately $1,200 of that being paid by

the department.

Plaintiff’s Medicaid rates were substantially below

the rates paid by plaintiff’s non-Medicaid patients, or “pri-

vate pay” patients. For private pay patients, the rate varied

depending on the level of care. During Prichard’s stay, plain-

tiff charged private pay patients $4,000 per month for Level 2

care, and for more intensive Level 3 care, plaintiff charged

private pay patients $5,700 per month. Prichard received

Level 2 and Level 3 care during her stay in plaintiff’s facil-

ity. If Prichard had not been approved for Medicaid benefits

and had instead been a private pay patient, she would have

paid plaintiff over $48,000 more for her care.

C.  Prichard’s Medicaid Application

Prichard’s application for Medicaid benefits, as with

her other affairs, was handled by her son, Richard Gardner.

Prichard had given Gardner a power of attorney to act on

her behalf back in 2004. Exercising his authority to apply

for Medicaid benefits on behalf of Prichard, Gardner com-

pleted the application form on April 17, 2007. Gardner affir-

matively represented on Prichard’s application that she had

not given away or transferred any cash or other property to

anyone in the preceding 60 months. As a result, the depart-

ment approved Prichard for Medicaid benefits.

Prichard’s affairs were not as represented on the

form, however. Her application form was false in its repre-

sentation that there had been no transfers in the past 60

months. In actuality, Gardner had for years been trans-

ferring Prichard’s assets, mostly to himself (or using those

funds for his personal benefit). In the 60 months before

Prichard’s application for Medicaid, Gardner had trans-

ferred away over $150,000 of Prichard’s assets.

Gardner’s misconduct was discovered by another of

Prichard’s children: defendant Karen Nichols-Shields, who

was appointed the personal representative for Prichard’s

120 Larisa’s Home Care, LLC v. Nichols-Shields

estate. In 2009, defendant contacted the police and reported

her brother for theft.

Ultimately, Gardner pleaded guilty to three counts

of criminal mistreatment in the first degree.3 Gardner’s sen-

tence included an obligation to pay a compensatory fine to

Prichard’s estate in the amount of $195,710.11. Gardner has

complied with that obligation and paid the estate. Thus, the

amount that Gardner took from Prichard was restored to

Prichard’s estate.

D.  Plaintiff’s Action Against Prichard’s Estate

After defendant, in her capacity as personal repre-

sentative, denied plaintiff Larisa’s Home Care, LLC’s claim

against Prichard’s estate, plaintiff filed this action.4 In its

complaint, plaintiff sought equitable relief for unjust enrich-

ment. Essentially, plaintiff asserted that Prichard had been

qualified for Medicaid through fraud and that Prichard

should have been charged as a private pay patient. It sought

restitution from the estate for the difference between the

amount Prichard would have paid as a private pay patient

and the amount that plaintiff actually received for Prichard’s

care at plaintiff’s adult foster home.

After a bench trial, the trial court ruled in favor of

plaintiff, concluding that there was unjust enrichment. The

court explained:

“[A]s a whole, there is no reason why, as we look at this

case as a[n] equitable one and fundamental fairness, that

because of that fraud, the fraud on the applications, the

3

Criminal mistreatment in the first degree is defined in ORS 163.205. One

of the ways in which a person commits the crime is when, “in violation of a legal

duty to provide care for a dependent person or elderly person,” or having under-

taken that care, the person “intentionally or knowingly”:

“Hides the dependent person’s or elderly person’s money or property

or takes the money or property for, or appropriates the money or property

to, any use or purpose not in the due and lawful execution of the person’s

responsibility[.]”

ORS 163.205(1)(b)(D).

4

The Court of Appeals correctly noted that an action against Prichard’s

estate is properly brought against its personal representative, defendant. Larisa’s

Home Care, LLC v. Nichols-Shields, 277 Or App 811, 814 n 4, 372 P3d 595 (2016);

see ORS 115.305 (“All causes of action or suit, by one person against another,

survive * * * against the personal representative of the latter.”).

Cite as 362 Or 115 (2017) 121

fraud on all the paperwork that was presented, that the

estate of Ms. Prichard should not now be basically paying

[the] debt.

“[The estate] cannot now benefit from all that has come

before to this particular point. It would be unfair for the

plaintiff to be left holding the bag * * * and for the estate to

now benefit from the fraud.”

The court also concluded that Medicaid law did not prevent

plaintiff’s recovery. Accordingly, the court entered judgment

in favor of plaintiff for $48,477.

Defendant appealed to the Court of Appeals. She

presented two arguments, broadly speaking: (1) there was

no unjust enrichment; and (2) regardless, Medicaid-related

law (statutes, rules, and the terms of plaintiff’s contract

with the department) prohibited plaintiff from recovering

from defendant. Without reaching the Medicaid issues, the

Court of Appeals agreed with defendant that there was no

unjust enrichment. Larisa’s Home Care, LLC v. Nichols-

Shields, 277 Or App 811, 372 P3d 595 (2016).

The Court of Appeals began with its precedent con-

cerning the elements of a “quasi-contractual claim of unjust

enrichment.” Id. at 815 (internal quotation marks and cita-

tion omitted). The elements that the Court of Appeals has

long used are “ ‘(1) a benefit conferred, (2) awareness by the

recipient that she has received the benefit, and (3) it would

be unjust to allow the recipient to retain the benefit without

requiring her to pay for it.’ ” Id. The court quoted its decision

in Cron v. Zimmer, 255 Or App 114, 130, 296 P3d 567 (2013),

which in turn had restated the elements that the court first

articulated in Jaqua v. Nike, Inc., 125 Or App 294, 298, 865

P2d 442 (1993).

The Court of Appeals also relied on Jaqua for the

legal standard used in determining when it is “unjust” for

the defendant to retain the benefit. Larisa’s Home Care,

LLC, 277 Or App at 816. The court explained that its prece-

dent required plaintiff to prove at least one of the following

circumstances:

“ ‘(1) the plaintiff had a reasonable expectation of payment;

(2) the defendant should reasonably have expected to pay;

122 Larisa’s Home Care, LLC v. Nichols-Shields

or (3) society’s reasonable expectations of security of person

and property would be defeated by non-payment.’ ”

Id. (quoting Jaqua, 125 Or App at 298). None of those three

forms of unjust enrichment, the court concluded, were

proved in this case.

As to the first form of unjust enrichment, the court

determined that plaintiff did not have a reasonable expecta-

tion of payment. Prichard had been qualified for Medicaid,

and plaintiff thus was contractually obligated to charge

her only the Medicaid rate. Plaintiff’s reasonable expecta-

tion was to receive the Medicaid rate payment and nothing

more. Larisa’s Home Care, LLC, 277 Or App at 816-18. As for

defendant’s expectation to pay, the second form, the Court of

Appeals held that there was no evidence in the record that

would permit a finding that Prichard reasonably should

have expected to pay the private pay rate. Id. at 818.

Finally, as to the third form of unjust enrichment,

the Court of Appeals held that societal expectations would

not be defeated by the estate’s nonpayment. The court

based that holding on two different conclusions. First, the

court derived from Medicaid law certain underlying poli-

cies that, it concluded, reflected a societal expectation that

Medicaid providers would not seek to recover funds beyond

what Medicaid allowed. Id. at 818-19 (for example, ORS

443.739(16), a “bill of rights” for residents of adult foster

homes, states that a provider “may not solicit, accept or

receive money or property from a resident other than the

amount agreed to for services”). Second, the court con-

cluded that the wrongdoer was Gardner, not Prichard, who

was blameless, and that therefore her estate should not be

required to pay for Gardner’s wrongdoing. Id. at 819-20.

Having concluded that plaintiff had failed to adduce

sufficient evidence that Prichard’s estate had been unjustly

enriched in any of the three ways reflected in its case law,

the Court of Appeals reversed the judgment of the trial

court. Id. at 820. Plaintiff then sought review in this court.

II. ANALYSIS

Before turning to our analysis, we note the scope of

this opinion. When we allowed review, we did so to address

Cite as 362 Or 115 (2017) 123

the unjust enrichment question only, not the issues of

Medicaid law that the Court of Appeals did not reach due

to its holding. As we will explain, we conclude that plaintiff

did show that Prichard’s estate has been unjustly enriched.

We therefore remand for the Court of Appeals to address

in the first instance whether certain provisions of Medicaid

law may nevertheless prohibit recovery.

A.  Arguments on Review

On review and throughout the litigation, plaintiff

has offered several different theories of misconduct—not

just by Gardner, but by defendant as well—that it claims

would justify its recovery on its claim of unjust enrichment.

We find it necessary to address only one, because it is dis-

positive. That theory, based on fraud, can be broken down

into three components: First, the false representations on

Prichard’s Medicaid form caused her to be wrongfully qual-

ified for Medicaid benefits; she would have been disquali-

fied had the misrepresentations not been made. Second,

Gardner acted as Prichard’s agent in making those misrep-

resentations, and Prichard was legally responsible to third

parties for those misrepresentations, even though she had

not made them herself. Third, Prichard’s estate was unlaw-

fully enriched by those false representations, and so it is

subject to restitution. In sum, plaintiff argues, because of

fraud, plaintiff charged Prichard a lower rate and the estate

now has nearly $50,000 more money than it would have had,

but for the fraud. Arguing that fraud is a recognized basis

for a claim of unjust enrichment, plaintiff asserts that the

Court of Appeals erred in holding that there was no unjust

enrichment here.

Defendant asserts that the Court of Appeals cor-

rectly identified and analyzed the three circumstances

from Jaqua in which a benefit or enrichment is considered

“unjust.” In support, she argues that Gardner’s transfers

would not disqualify Prichard from receiving Medicaid

benefits and that Prichard was innocent of, and not liable

for, Gardner’s misconduct. Thus, defendant asserts, plain-

tiff had no reasonable expectation of payment, and defen-

dant should not be expected to pay. Defendant further con-

tends that societal expectations have been satisfied because

124 Larisa’s Home Care, LLC v. Nichols-Shields

the department has never changed its determination that

Prichard was eligible for Medicaid benefits; the department

was reimbursed from the estate for Medicaid benefits it

provided to Prichard; and the department paid plaintiff for

Prichard’s care at Medicaid rates.

Thus, the parties initially square off over the legal

standards that govern a claim of unjust enrichment, with

plaintiff asserting that fraud is sufficient to establish liabil-

ity for unjust enrichment and defendant asserting that the

factors listed in Jaqua for determining an “unjust” benefit

should govern. The parties also dispute whether, under any

theory of unjust enrichment, plaintiff proved its claim.

B.  Restitution and Unjust Enrichment Generally

Before addressing the legal standards governing

plaintiff’s claim of unjust enrichment, we observe that, for

several reasons, restitution and unjust enrichment have

been notoriously difficult to conceptualize and to summa-

rize. That background helps to explain this court’s histori-

cal case-by-case approach to restitution cases.

One difficulty is the current state of development of

the law of restitution and unjust enrichment. The concept of

restitution and unjust enrichment as a single area of the law

was largely the creation of the American Law Institute with

its publication of the first Restatement of Restitution in 1937.

See Andrew Kull, Rationalizing Restitution, 83 Cal L Rev

1191, 1192 (1995) (attributing the “modern law of restitution”

to the first Restatement, “in the sense that the law of con-

tracts and the law of torts were invented by the nineteenth-

century treatise writers”); Peter Birks, Unjust Enrichment

and Wrongful Enrichment, 79 Tex L Rev 1767, 1768 (2001)

(agreeing about importance of first Restatement).

Though the concepts of restitution and unjust

enrichment long predated the first Restatement, they were

not treated as a coherent whole. Instead, they were a col-

lection of individualized forms of action and remedies. See

Restatement (Third) of Restitution and Unjust Enrichment,

Reporter’s Introductory Memorandum, xv (Discussion Draft

2000) (prior state of law was “a miscellaneous assortment

(part legal, part equitable) of forms of action and remedial

Cite as 362 Or 115 (2017) 125

devices, familiar in some of their particularized applica-

tions but never described or understood as parts of a coher-

ent whole”); Birks, 79 Tex L Rev at 1768 (“the fragments [of

pre-Restatement law] had acquired a life of their own, mov-

ing ever further apart”). The drafters of the first Restatement

themselves noted in a contemporary law review article that

the law at that time was “scattered through many sections

of the digests and in treatises on apparently diverse sub-

jects.” Warren A. Seavey & Austin W. Scott, Restitution, 54

LQ Rev 29, 29 (1938). The purpose of the first Restatement

was to identify the underlying principles of an area of law

that “has never been dealt with as a unit and because of this

has never received adequate treatment.” Id.

It is safe to say that the law of restitution remains a

work in progress, with some principles recognized but with

some theoretical underpinnings yet to be settled. Indeed,

despite attempts by scholars to articulate basic legal prin-

ciples governing restitution and unjust enrichment in the

ensuing 80 years since the first Restatement, at least one

foundational principle remains the subject of disagreement.

Professor Kull has explained that, while the “modern con-

sensus puts unjust enrichment at the heart of liability in

restitution,” it is unclear whether restitution includes any-

thing else. 83 Cal L Rev at 1193-94; see Restatement (Third)

of Restitution and Unjust Enrichment § 1 comment a (2010)

(“Restatement (3d) Restitution”) (noting disagreements

among authorities). Professor Birks explains that, at “the

beginning of the twenty-first century, a schism divides the

scholars who write on the modem law of restitution,” with

some who think that “restitution and unjust enrichment

are different names for the same area of law,” while others

maintain that a right to restitution “may be triggered by

one of a number of distinct causative events,” including at

least “wrongs and unjust enrichment.” 79 Tex L Rev at 1769-

70. The current Restatement sums it up: “It is by no means

obvious, as a theoretical matter, how ‘unjust enrichment’

should best be defined; whether it constitutes a rule of deci-

sion, a unifying theme, or something in between; or what

role the principle would ideally play in our legal system.”

Restatement (3d) Restitution § 1 comment a, at 4. The cur-

rent status of the law of restitution may be analogous to tort

126 Larisa’s Home Care, LLC v. Nichols-Shields

and contract law in the nineteenth century, when treatise

writers were first defining those areas of the law. Kull, 83

Cal L Rev at 1194-95.

Another difficulty with this area of law is the ter-

minology itself, which can give rise to disordered thinking

about the concepts. Professor Kull has noted “[t]he linguistic

confusion that bedevils the law of restitution—necessitating

laborious definitions before anyone can understand what

you are talking about.” 83 Cal L Rev at 1191-92. As a legal

term, “restitution,” for example, is broader than the ordi-

nary meaning might suggest. It is not limited to those cir-

cumstances in which a defendant must give back something

that had previously belonged to the plaintiff; it may also

sometimes require a defendant to give to the plaintiff some-

thing the plaintiff never had. Restatement (3d) Restitution

§ 1 comment a; see George E. Palmer, 1 Law of Restitution

§ 1.1, 4 (1978) (“The term [‘restitution’] is not wholly apt

since it suggests restoration to the successful party of some

benefit obtained from him.”).

As a term, “unjust enrichment” also can be mis-

leading, suggesting that liability turns on vague notions of

injustice. The traditional definition is that coined by Lord

Mansfield: whether a party, “upon the circumstances of the

case, is obliged by the ties of natural justice and equity to

refund the money.” Moses v. Macferlan, 2 Burr 1005, 1012,

97 Eng Rep 676, 681 (KB 1760), quoted in Restatement (3d)

Restitution § 1 comment b, at 4. Yet “natural justice and

equity” is a standard that provides little guidance for individ-

ual decisions and has been criticized as “an open-ended and

potentially unprincipled charter of liability.” Restatement

(3d) Restitution § 1 comment b, at 5. In actuality, the ques-

tion of when enrichment is unjust does not turn on whether

one has been unjustly enriched in some abstract sense of

moral judgment; the law of restitution has developed with

greater specificity based on articulated legal standards:

“In reality, the law of restitution is very far from impos-

ing liability for every instance of what might plausibly be

called unjust enrichment. The law’s potential for interven-

tion in transactions that might be challenged as inequi-

table is narrower, more predictable, and more objectively

Cite as 362 Or 115 (2017) 127

determined than the unconstrained implications of the

words ‘unjust enrichment.’ ”

Restatement (3d) Restitution § 1 comment b, at 5. See also

Dan B. Dobbs, 1 Dobbs Law of Remedies § 4.1(1), 552 (2d

ed 1993) (noting that the “substantive question” for unjust

enrichment is “whether the defendant is unjustly enriched

by legal standards” (emphasis added)); Michael Traynor, The

Restatement (Third) of Restitution & Unjust Enrichment:

Some Introductory Suggestions, 68 Wash & Lee L Rev 899,

900-01 (2011) (“The enrichment must be ‘unjustified’ under

the law, not simply ‘unjust’ because you as a judge, scholar,

or lawyer might think so.” (Footnote omitted.)).

C.  Approach by Oregon Courts to Unjust Enrichment Cases

In keeping with the state of restitution and unjust

enrichment as a developing area of the law, this court rec-

ognized several years ago that our case law has addressed

unjust enrichment in a practical way, by matching the cir-

cumstances presented in the case to those patterns already

recognized in the case law, without explaining an overarch-

ing doctrine. In Tupper v. Roan, 349 Or 211, 220, 243 P3d 50

(2010), the court stated:

“Although our cases refer to a substantive ‘doctrine’ of

unjust enrichment, none provide any really comprehen-

sive exposition of that doctrine. Instead, the cases sim-

ply describe the kinds of actions and circumstances that

would constitute unjust enrichment warranting imposition

of a constructive trust, and then observe that the concept

extends to other similar acts and circumstances.”

In Tupper, the plaintiff was seeking to impose a constructive

trust on a named beneficiary’s life insurance proceeds when

the deceased was required by court order, but failed, to name

the plaintiff as a beneficiary of his life insurance. Id. at 213.

The court undertook the task of identifying the elements

needed to prove an unjust enrichment claim in those and

similar circumstances and did not attempt to state elements

that would more widely apply. See id. at 223.

As Tupper indicates, the approach taken in this

court’s unjust enrichment cases can be described as incre-

mental rule development on a case-by-case basis, based on

128 Larisa’s Home Care, LLC v. Nichols-Shields

recognized grounds for imposing liability. See Suitter v.

Thompson et ux, 225 Or 614, 625, 358 P2d 267 (1961) (quoting

equity treatise for proposition that constructive trust would

be imposed in various identified situations “or under any

other similar circumstances” (internal quotation marks and

citation omitted)). In that respect, the open-ended nature of

unjust enrichment reflects the nature of equity itself. See

Teachers’ Ret. Fund Ass’n v. Pirie, 150 Or 435, 445, 46 P2d

105 (1935) (“[H]uman ingenuity and human affairs can not

create a condition which the long arm of the court of equity

can not reach if injustice or wrong would otherwise result.”).

That incremental approach accords with the approach

advocated by various commentators who assert that courts

should determine whether any particular enrichment is

unjust by examining whether the case type matches already

recognized forms of unjust enrichment. E.g., Palmer, 1 Law

of Restitution § 1.7 at 41 (“the usual approach is to search

for some particularized reason or ground for finding that

the retention of the enrichment would be unjust”). The

Restatement (3d) Restitution is organized for that approach.

It contains a statement of four general principles, see id.

§§ 1-4, and then 44 sections addressing the types of circum-

stances in which liability in restitution is recognized. Those

include, for example, benefits conferred by mistake, §§ 5-12;

cases involving defective consent or authority on the part

of the transferor, §§ 13-19; and benefits acquired by tort or

other breach of duty, §§ 40-48. The reporters for the first

Restatement of Restitution offered an observation in their

law review article that may serve to explain rule develop-

ment in this area of the law: “It requires an extensive set

of individual rules to spell out what is meant by ‘unjust,’

especially since we are met with the fact that in certain

situations, due in part to historical accident, a person who

has obviously benefited another is not entitled to recover.”

Seavey & Scott, 54 LQ Rev at 36.

As earlier noted, the Court of Appeals used, and

defendant supports, a formulation of unjust enrichment first

articulated in Jaqua to apply to any claim of unjust enrich-

ment based on quasi-contract, i.e., an “obligation implied in

law” that accomplishes “substantial justice by preventing

unjust enrichment,” Derenco v. Benj. Franklin Fed. Sav. and

Cite as 362 Or 115 (2017) 129

Loan, 281 Or 533, 557, 577 P2d 477, cert den, 439 US 1051

(1978). See also Arthur Linton Corbin, 1 Corbin on Contracts

§ 19, 46 (1963) (quasi-contract “is created by the law for rea-

sons of justice, without any expression of assent and some-

times even against a clear expression of dissent”). This case

presents a quasi-contract theory of recovery.5

Although plaintiff’s claim of unjust enrichment is

based on quasi-contract, we conclude that the Court of Appeals

should not have applied the formulation of unjust enrich-

ment used in Jaqua, including its set of factors for deter-

mining when enrichment is unjust. As we will explain, the

formula in Jaqua is unhelpful as an all-purpose statement

of the elements of a claim of unjust enrichment, and it is also

ill-suited to the circumstances of this case.

Under Jaqua, an unjust enrichment claim based

on quasi-contract requires a showing of three elements:

“a benefit conferred, awareness by the recipient that a benefit

has been received and, under the circumstances, it would be

unjust to allow retention of the benefit without requiring the

recipient to pay for it.” 125 Or App at 298. Those elements

derived from the 1992 supplement to 3 Corbin on Contracts

§ 561 (1963). See Jaqua, 125 Or App at 298 (so noting). We

note that the description of the elements of an unjust enrich-

ment claim were not in section 561 of the original bound

volume of Corbin on Contracts, nor were they incorporated

into the 2002 interim edition or the 2010 revised edition.

However, another contract law treatise recites a similar trio

of elements based on holdings from a variety of courts:

“Three elements must be established in order that a

plaintiff may succeed in a claim based on unjust enrich-

ment. These elements are:

“(1)  a benefit conferred on the defendant by the

plaintiff;

5

A quasi-contract or obligation implied in law is distinct from an implied-in-

fact contract. In an implied-in-fact contract, the parties’ agreement is inferred, in

whole or in part, from their conduct. Restatement (Second) of Contracts § 4 com-

ment a (1979). This court has explained that a contract implied in fact can arise

“where the natural and just interpretation of the acts of the parties warrants

such conclusion.” Owen v. Bradley, 231 Or 94, 103, 371 P2d 966 (1962). Plaintiff

does not contend that, by virtue of conduct, Prichard through her agent agreed to

pay for services at the private-pay rate and so must be held to her bargain.

130 Larisa’s Home Care, LLC v. Nichols-Shields

“(2)  an appreciation or knowledge by the defendant of

the benefit; and

“(3)  the acceptance or retention by the defendant of the

benefit under such circumstances as to make it inequitable

for the defendant to retain the benefit without payment of

its value.”

Richard A. Lord, 26 Williston on Contracts § 68:5, 62 (4th ed

2003) (footnote omitted).

The formula noted in Jaqua and in Williston on

Contracts was roundly criticized in the Restatement (3d)

Restitution. “Formulas of this kind are not helpful, and

they can lead to serious errors. They lend a specious preci-

sion to an analysis that may be simple or complicated but

which at any rate is not susceptible of this form of state-

ment.” Id. § 1 comment d, at 8. As a former president of

the American Law Institute noted, “The Reporter wisely

advises you to avoid the temptation of formulaic checklists,

which if you are not careful, could turn into formulaic jury

instructions that advance neither comprehension nor clar-

ity.” Traynor, 68 Wash & Lee L Rev at 901-02 (footnote

omitted).6

The Restatement (3d) Restitution specifically takes

issue with both the second and third elements in the for-

mula. It provides the following critique of the second

element—the recipient’s awareness of the benefit:

“If the requirement is taken to mean that a defendant can-

not be liable in restitution for benefits of which the defen-

dant was unaware—or for benefits that the defendant

attempted to refuse—it is plainly incorrect. If it refers to

defensive limitations on a liability based on unjust enrich-

ment, it is both redundant (in light of the third element)

and an awkward summary of several features of the law of

restitution that protect the defendant’s economic liberty.”

Restatement (3d) Restitution § 1 comment d, at 8. We agree

that an element that requires awareness by the recipient

6

For essentially that reason, the Court of Appeals itself recently questioned

the three Jaqua elements of an unjust enrichment claim. See Cumming v. Nipping,

285 Or App 233, 238-39, 395 P3d 298 (2017) (noting criticism by Restatement (3d)

Restitution).

Cite as 362 Or 115 (2017) 131

that a benefit has been received does not accurately apply to

all unjust enrichment claims. An unjust enrichment claim

based on mistake, for example, can allow imposition of lia-

bility by operation of law, regardless of such awareness. See

McKay v. Horseshoe Lake Hop Harv., 260 Or 612, 613-14, 491

P2d 1180 (1971) (in plaintiffs’ action to recover possession

of land, allowing defendant to recover in unjust enrichment

for improvements it had made to plaintiffs’ real property,

even though both plaintiffs and defendant had mistakenly

believed that defendant occupied land under 99-year lease);

Stirewalt v. Chilcott, 236 Or 128, 134, 387 P2d 351 (1963)

(finding unjust enrichment and imposing constructive trust

when deed mistakenly conveyed more land to defendant

buyers than buyers and sellers had intended; court rejected

assertion that question was whether defendant buyers had

known of sellers’ mistake).

According to the Restatement (3d) Restitution, the

third element is overbroad because it “incorporates the whole

of the question presented, making the rest of the formula

superfluous.” Restatement (3d) Restitution § 1 comment d,

at 8. That criticism of the third element, standing alone, is

valid. However, the Court of Appeals has historically added

three factors, any one of which permits the determination

that enrichment is unjust:

“

‘(1)  the plaintiff had a reasonable expectation of

payment;

“ ‘(2)  the defendant should reasonably have expected

to pay; or

“ ‘(3)  society’s reasonable expectations of security of

person and property would be defeated by non-payment.’ ”

Jaqua, 125 Or App at 298 (quoting 1 Corbin, Contracts § 19A

(Supp 1992)).

The discussion above explains why those factors

are substantively incorrect. The factors added by the Jaqua

court would substitute entirely for any reference to estab-

lished categories of unjust enrichment, and they are under-

inclusive of all the circumstances in which a plaintiff may

establish an unjust enrichment. Moreover, the unadorned

factors are vague, as this action illustrates.

132 Larisa’s Home Care, LLC v. Nichols-Shields

In part, the parties argued over the application of

the first and third Jaqua factors. By its terms, the third

factor based on societal expectations is subject to wide-rang-

ing interpretations. Plaintiff’s arguments concerning that

factor focus on the ill effects of requiring it to bear the cost

of what amounts to Medicaid fraud: it would encourage fur-

ther fraud, an issue of vital importance to healthcare and

long-term care facilities as well as patients and Oregon

taxpayers. But the Court of Appeals looked at provisions of

Medicaid law to conclude that they reflected societal expec-

tations that apply generally, regardless of fraud: a care facil-

ity cannot exploit residents by extracting payments beyond

Medicaid rates when the residents are deemed Medicaid-

eligible. The court concluded that allowing recovery in this

action would defeat those expectations. Larisa’s Home Care,

LLC, 277 Or App at 818-19.

Even the first factor—whether plaintiff had a rea-

sonable expectation of payment—leads to very different

interpretations in its application. The Court of Appeals con-

cluded that, for plaintiff to have a reasonable expectation of

receiving the private-pay rate of payment under the first fac-

tor, plaintiff had to prove that the state had determined that

Prichard was not Medicaid-eligible. Id. at 817. Otherwise,

the court concluded, plaintiff could only reasonably expect

to be paid in accordance with the terms of its contract with

the state. Id. Thus, the Court of Appeals viewed the first

factor as applying regardless of the fraud and plaintiff’s lack

of knowledge concerning that state of affairs when plain-

tiff accepted Prichard as a Medicaid resident pursuant to

its contract with the state. Plaintiff, on other hand, argues

that, under the proper view of that factor, plaintiff can rea-

sonably expect its residents to pay at the rate that they are

properly—not fraudulently—qualified to pay.

Accordingly, we conclude that the formula for unjust

enrichment in Jaqua is inadequate to the task, and we

reject it. In lieu of applying the formula in Jaqua, Oregon

courts should examine the established legal categories of

unjust enrichment as reflected in Oregon case law and other

authorities to determine whether any particular enrichment

is unjust.

Cite as 362 Or 115 (2017) 133

D.  Legal Standards Applicable in this Case

As we noted at the outset, at least one of plain-

tiff’s allegations in this action falls squarely within the

categories recognized by Oregon case law and treatises to

involve unjust enrichment: plaintiff alleges that Prichard’s

estate has been benefited by fraud. “A conclusion that one

party has obtained benefits from another by fraud is * * *

one of the most recognizable sources of unjust enrichment.”

Restatement (3d) Restitution § 13 comment a, at 166.

Specifically, plaintiff alleges that the particular fraud

here involved false representations on Prichard’s Medicaid

form that led to Prichard being charged only Medicaid rates.

The Restatement states the general rule regarding transfers

induced by fraud as follows:

“A transfer induced by fraud or material misrepresen-

tation is subject to rescission and restitution. The trans-

feree is liable in restitution as necessary to avoid unjust

enrichment.”

Id. § 13(1).

The comments to section 13 include an illustration

analogous to the facts at issue here—a person who obtained

services by falsely claiming to be indigent:

“County appoints public defender to represent Defendant

charged with burglary, relying on Defendant’s affidavit of

indigence. It transpires that Defendant owns substantial

property. County is entitled to recover from Defendant the

reasonable value of the services provided.”

Restatement § 13 comment c, illustration 4, at 168.

Case law accords with that conclusion. This court

itself addressed a case very similar to this one, where a per-

son had obtained benefits by falsely claiming impoverish-

ment, and the provider of the benefits subsequently sought

to recover from the person’s estate under a theory of unjust

enrichment.

In In re Anderson’s Estate, 157 Or 365, 71 P2d 1013

(1937), a former employee of a bank, Joseph Anderson, had

asked his former employer for money. Anderson told the

134 Larisa’s Home Care, LLC v. Nichols-Shields

bank that he was destitute, but his representations were

false; he actually had substantial savings. Id. at 369-70.

The bank, not knowing of Anderson’s deceit, gratuitously

paid Anderson $25 per month until his death, for a total of

$2,500. Id. at 368-69.

Anderson’s fraud was discovered after he died, and

the bank sought to recover the amounts it had paid from

Anderson’s estate. This court agreed that the estate had

been unjustly enriched:

“It is plain and uncontroverted that Joseph Anderson

obtained the payment of the sum of $2,500 upon different

dates by means of false representations and deceit and that

the bank paid the money in ignorance of the facts, of which

they had no means of ascertaining the truth. Under such

circumstances the bank is entitled to recover the money

paid, with interest[.] Likewise where a donor has been

induced through misrepresentation, fraud and deceit, exer-

cised by the donee to make a gift, the donor may recover

on the principle that no one shall be allowed to obtain any

benefit arising from his own fraud or wrongful act[.]”

Id. at 374-75 (citations omitted).

Other jurisdictions have held similarly. In Old Men’s

Home, Inc. v. Lee’s Estate, 191 Miss 669, 4 So 2d 235 (1941),

a charitable home had taken care of Lee based on Lee’s false

representations that he was destitute, when unknown to

the home, Lee had some $5,000 in the bank. The Supreme

Court of Mississippi upheld the home’s claim against Lee’s

estate for the value of its services. 191 Miss at 681, 4 So 2d

at 236. See also Jones v. Stearns, 97 Vt 37, 122 A 116 (1923)

(allowing couple to recover value of support they had ren-

dered to decedent, based on decedent’s false representation

that she was destitute); Eggers v. Anderson, 63 NJ Eq 264,

272-73, 49 A 578, 582 (NJ 1901) (allegations would support

equitable relief requiring executor “to pay out of the estate

such sum as will recompense [a charitable group] for the

money and property which they were induced to furnish to

and for Mrs. Stager because of her fraudulent pretence of

poverty”).

In short, both the Restatement (3d) Restitution and

our case law are in accord that a person—and his or her

Cite as 362 Or 115 (2017) 135

estate—have been unjustly enriched if the person obtains

benefits by making false representations about his or her

financial state. Accordingly, we turn to whether the par-

ticular facts of this case fall within that category of unjust

enrichment.

E.  Application

Defendant contends that plaintiff’s case fails at

two points. First, she essentially challenges causation:

She asserts that the false representations on Prichard’s

Medicaid application would not have disqualified her from

Medicaid. If Prichard would have qualified for Medicaid

benefits without regard to whether the form disclosed the

numerous transfers of her assets, then there could be no

enrichment at all. Plaintiff would have been required to

charge Prichard only the Medicaid rate. Second, defendant

argues that the false representations were by Gardner, not

Prichard, and Prichard should not be held responsible for

those misrepresentations.

Before we turn to the specifics of defendant’s

causation argument, we provide a brief overview of the rele-

vant disqualification law. As noted, the Medicaid application

filled out by Gardner required the disclosure of all transfers

made within the previous 60 months. Generally, transfers

are disqualifying if they are “made in whole or in part for the

purpose of establishing or maintaining eligibility for bene-

fits.” OAR 461-140-0210(2). Many transfers are not disqual-

ifying, however; a second rule, OAR 461-140-0220, identifies

those nondisqualifying transfers. For example, a transfer is

not disqualifying if the asset is “sold or traded” “for com-

pensation equal to or greater than fair market value.” OAR

461-140-0220(2)(a).

Defendant does not dispute that the undisclosed trans-

fers here were generally disqualifying as transfers made in

whole or in part to establish eligibility for benefits.7 Both

sides also either agree or assume that—if the undisclosed

transfers were disqualifying—then the disqualification period

7

In particular, the evidence shows that substantial sums were transferred

to defendant and the other children at defendant’s suggestion and explicitly for

the purpose of establishing Prichard’s eligibility for Medicaid benefits.

136 Larisa’s Home Care, LLC v. Nichols-Shields

would have extended through the remainder of Prichard’s

life and covered the entirety of her stay at plaintiff’s facility.

Defendant instead asserts that the undisclosed

transfers here were not disqualifying, because they fell

under an exception to the general rule. Under OAR 461-

140-0220(7), a transfer is not disqualifying if the “client

was a victim of fraud * * *, and legal steps have been taken

to recover the asset.” Prichard was the victim of Gardner’s

fraud in making the transfers, and legal steps have now

been taken—successfully—to recover those transfers. Thus,

defendant maintains, Prichard would not have been dis-

qualified from receiving Medicaid, so Prichard correctly

paid only Medicaid rates while at plaintiff’s facility.

Defendant’s argument fails to recognize, however,

that the disqualification rules are written to address the

situation at a specific point in time: they are forward look-

ing. They presume that an applicant has just applied for

Medicaid, and they set out the method that the department

will use to determine how far into the future an applicant

will be disqualified from benefits (if at all). Thus, OAR 461-

140-0296(2) explains how to calculate the length of the dis-

qualification period, starting with the “initial month”—the

month that the applicant is “first * * * eligible for a program

benefit,” OAR 461-001-0000(31).

The time-dependent nature of the rules is even more

clearly illustrated in OAR 461-140-0300(2), which provides

that “the disqualification ends if the transfer that caused

the disqualification is rescinded.” The fact that rescission

merely causes the disqualification to “end” at that time does

not match defendant’s position, which would imply that

rescission would retroactively qualify the applicant for ben-

efits for months that have already passed.

When we examine the facts as they existed on

April 17, 2007—the date Prichard applied for Medicaid—we

see that no steps had been taken to recover any of Gardner’s

wrongful transfers. Thus, the requirements of OAR 461-

140-0220(7) had not been met. If the transfers had been dis-

closed on the form, then Prichard would have been disqual-

ified from receiving Medicaid benefits while she stayed at

plaintiff’s facility. The false representations on the Medicaid

Cite as 362 Or 115 (2017) 137

form thus enabled Prichard to pay the discounted Medicaid

rates, when she otherwise would have had to pay the higher

private-pay rates.

We turn, then, to defendant’s second argument:

Was Prichard legally responsible for Gardner’s false repre-

sentations? Defendant asserts that she was not. Under stan-

dard agency principles, however, we conclude that Gardner

acted as Prichard’s agent when he filled out the Medicaid

application for her. As to third parties, Prichard was legally

responsible for Gardner’s false representations.

Defendant’s argument turns on Prichard’s incapac-

ity. Defendant admits that Prichard, through her power of

attorney, had given Gardner authority to act as her agent.

Defendant notes, however, that Prichard had become incom-

petent by the time Gardner filled out the Medicaid appli-

cation form. Defendant maintains that Prichard’s incompe-

tency had terminated Gardner’s agency.

We disagree. Prichard’s power of attorney expressly

stated that Gardner’s authority to act would apply “regardless

of my subsequent disability or incompetence.” Such a provi-

sion is lawful and valid. When Gardner filled out Prichard’s

Medicaid application, ORS 127.005(1)(c) (2005) provided

that, unless the principal’s written designation stated other-

wise, the “powers of the attorney-in-fact or agent shall be

exercisable by the attorney in-fact or agent on behalf of the

principal notwithstanding the later disability or incompe-

tence of the principal at law.” See also Restatement (Third)

of Agency § 3.08(2) (2005) (“Restatement (3d) Agency”) (“A

written instrument may make an agent’s actual authority

effective upon a principal’s loss of capacity, or confer it irre-

vocably regardless of such loss.”). Defendant cites no author-

ity to the contrary. Thus, Prichard’s incompetence did not

end Gardner’s agency.

Gardner filled out the Medicaid form as Prichard’s

agent. In doing so, Gardner made a misrepresentation on

Prichard’s behalf and for the purpose of getting her Medicaid

benefits. He represented on the form that Prichard had

made no transfers, knowing that that representation was

false. Because Gardner made a false representation while

138 Larisa’s Home Care, LLC v. Nichols-Shields

acting as Prichard’s agent and on her behalf, Prichard is

liable for the fraud.

“A principal is liable to third persons for frauds, deceits,

concealments, torts and omissions of duty of his agent,

when acting in the course of his employment, although the

principal did not authorize or justify or participate in, or

indeed know of such misconduct, or even if he forbade the

acts or disapproved of them.”

White v. Gordon et al., 130 Or 139, 143, 279 P 289 (1929)

(internal quotation marks and citation omitted)). See

Barnes v. Eastern & Western Lbr. Co., 205 Or 553, 588, 287

P2d 929 (1955) (“[A] principal, who commits to an agent a

duty, in the performance of which the agent will be required

to make representations, is liable for misrepresentations

made by [the agent] in the discharge of the duty which

he employed in his efforts to serve his principal.”); ORS

127.005(2) (2005) (“All acts done by the attorney-in-fact or

agent under the power of attorney during any period of dis-

ability or incompetence of the principal at law shall have

the same effect and shall inure to the benefit of and bind

the principal as though the principal were not disabled or

incompetent.”); Restatement (3d) Agency § 7.08 (“A princi-

pal is subject to vicarious liability for a tort committed by

an agent in dealing or communicating with a third party

on or purportedly on behalf of the principal when actions

taken by the agent with apparent authority constitute the

tort[.]”).

The Court of Appeals noted that Prichard was

Gardner’s victim. That statement is certainly true, insofar

as Gardner misappropriated Prichard’s assets. Gardner was

convicted of committing a crime against Prichard, and we

do not question that Prichard’s estate could have obtained a

verdict in an appropriate civil action against Gardner. But

an agent’s actions may make a principal liable to a third

party, even if the agent’s actions are themselves a breach

of the agent’s duty to the principal. See Restatement (3d)

Agency § 2.01 comment f, at 85 (noting that agent’s actions

may make principal liable to third party, even though agent

is liable to principal for having breached duty). The issue

concerns third-party liability—whether Prichard is liable to

Cite as 362 Or 115 (2017) 139

plaintiff as principal for the misrepresentation of her agent,

not whether Gardner is liable to Prichard for breaching his

duties to her as principal. From the perspective of third par-

ties such as plaintiff, Prichard is liable for false representa-

tions by her agent, Gardner.8

The facts in this case thus support a determination

of unjust enrichment. Prichard (through Gardner) made

false representations specifically for the purpose of obtain-

ing Medicaid benefits. Plaintiff provided valuable care

to Prichard at a substantially discounted rate, precisely

because of those false representations. Prichard’s estate is

substantially larger because Prichard did not have to pay

plaintiff the private-pay rates. It would be unjust and ineq-

uitable for Prichard’s beneficiaries to retain the benefits

that Prichard had gained through the misrepresentation.

We conclude that the Court of Appeals erred in holding that

there was no unjust enrichment. Accordingly, we reverse

that determination.

8

The Restatement (3d) Restitution suggests that Prichard’s estate might be

subject to restitution even if Gardner was not her agent and Gardner’s fraud was

not attributable to her:

“A transfer induced by fraud or material misrepresentation is subject

to restitution, whether the representation is made by the transferee or by a

third party.”

Id. § 13 comment g, at 171 (emphasis added). The Restatement then offers the

following example:

“13.  Corporation pays $45 million in bonuses to its President, based on

its reported net income during a five-year period. It is subsequently revealed

that Corporation’s net income for the period was artificially inflated, in conse-

quence of an accounting fraud perpetrated by certain officers and directors.

(Corporation was actually operating at a loss.) Corporation has a claim in

restitution against President to recover $45 million plus interest. Restitution

from President does not depend on proof that President participated in the

fraud, or that President had notice that earnings were overstated.”

Id. § 13 comment g, illustration 13, at 172 (emphasis added). See also Tupper, 349

Or at 224 (noting in constructive trust context that prior decisions by this court

suggest that unjust enrichment may be found even when recipient is innocent).

The Restatement does indicate that the innocence of the recipient can affect

the results of the case. An innocent recipient may be entirely protected against

restitution by affirmative defenses. See id. § 13 comment g, at 171. The recipi-

ent’s innocence may also limit the amount of restitution. See id. § 50 (setting out

principles for determining amount of restitution where recipient was innocent).

In this case, however, we need not decide whether an innocent recipient would be

subject to restitution, because Prichard was liable as principal for the misrepre-

sentations of her agent, Gardner.

140 Larisa’s Home Care, LLC v. Nichols-Shields

III.  MEDICAID-SPECIFIC ARGUMENTS

Subject to defendant’s arguments specific to the

Medicaid context, plaintiff is entitled to restitution. We

address one of those arguments and remand the case to the

Court of Appeals for its determination as to the second of

those arguments.

Before the Court of Appeals, defendant first asserted

that plaintiff’s action is an improper collateral attack on the

department’s exclusive right under ORS 410.070(1) to make

Medicaid eligibility decisions.9 Based solely on the citation

to ORS 410.070, she contends on review that the depart-

ment’s original decision to qualify Prichard for Medicaid is

legally binding on plaintiff in this action, unless and until

the department itself overturns it or plaintiff successfully

challenges it in an unspecified administrative proceeding

brought against the department.

In essence, defendant contends that, in light of the

department’s charge to administer Medicaid in Oregon,

plaintiff cannot invoke the assistance of an Oregon court

of equity. We reject that contention and agree with plain-

tiff’s arguments in the Court of Appeals. First, ORS

410.070 does not contain a provision barring equitable

actions by Medicaid service providers. Furthermore, given

9

In part, ORS 410.070(1) provides:

“(1)  The Department of Human Services shall:

“(a)  Serve as the central state agency with primary responsibility for the

planning, coordination, development and evaluation of policy, programs and

services for elderly persons and persons with disabilities in Oregon.

“* * * * *

“(e) Receive and disburse all federal and state funds allocated to the

department and * * * enter into contracts with private entities for the purpose

of providing or contracting for case management services for long term care

insurance for the benefit of elderly persons and persons with disabilities in

this state.

“* * * * *

“(k)  Conduct regulatory functions with regard to program operation, by

adopting rules for providing social services, including protective services,

to elderly persons and persons with disabilities who need services that the

department or area agencies are authorized to provide and rules for standard

rate setting and quality assurance.”

Cite as 362 Or 115 (2017) 141

ORS 411.630,10 which establishes that it is unlawful for

recipients of public assistance to use fraud to obtain bene-

fits, there is no reason to infer from ORS 410.070 that, when

a recipient commits fraud against a Medicaid service pro-

vider, the provider is barred from recovering from the fraud

feasor in equity.

Defendant’s second Medicaid-specific argument in

the Court of Appeals was that plaintiff is barred from recov-

ering because of plaintiff’s contract with the department and

Medicaid law concerning acceptance of payment for services.

Specifically, defendant cited ORS 443.739(16) (adult foster

care resident has a right to be “free from financial exploita-

tion” and provider “may not solicit, accept or receive money

or property from a resident other than the amount agreed

to for services”) and OAR 411-050-0435(1)(d) (“The rate of

compensation established by the [department] is considered

10

ORS 411.630 provides:

“(1)  A person may not knowingly obtain or attempt to obtain, for the ben-

efit of the person or of another person, any public assistance or medical assis-

tance to which the person or other person is not entitled under state law by

means of:

“(a)  Any false representation or fraudulent device, or

“(b)  Failure to immediately notify the Department of Human Services

or the Oregon Health Authority, if required, of the receipt or possession of

property or income, or of any other change of circumstances, which directly

affects the eligibility for, or the amount of, the assistance.

“(2)  A person may not transfer, conceal or dispose of any money or prop-

erty with the intent:

“(a)  To enable the person to meet or appear to meet any requirement of

eligibility prescribed by state law or by rule of the department or the author-

ity for any type of public assistance or medical assistance; or

“(b)  Except as to a conveyance by the person to create a tenancy by the

entirety, to hinder or prevent the department or the authority from recover-

ing any part of any claim it may have against the person or the estate of the

person.

“(3)  A person may not knowingly aid or abet any person to violate any

provision of this section.

“(4)  A person may not receive, possess or conceal any money or property of

an applicant for or recipient of any type of public assistance or medical assis-

tance with the intent to enable the applicant or recipient to meet or appear

to meet any requirement of eligibility referred to in subsection (2)(a) of this

section or, except as to a conveyance by the applicant or recipient to create a

tenancy by the entirety, with the intent to hinder or prevent the department

or the authority from recovering any part of any claim it may have against

the applicant or recipient or the estate of the applicant or recipient.”

142 Larisa’s Home Care, LLC v. Nichols-Shields

payment in full and licensees must not accept additional

funds or in-kind payment[.]”). Defendant also noted that

the contract between plaintiff and the department provided

that plaintiff agreed to accept the “rate authorized by [the

department] plus the established room and board payment

as payment in full, and will not charge the client any addi-

tional amounts for these services.” Defendant contended

that plaintiff both agreed to and was required to accept pay-

ment at the Medicaid rates as “payment in full.”

The Court of Appeals did not reach that conten-

tion in its opinion. Although defendant briefly reasserts

her argument in this court, she does not flesh out why her

reading of the statute and the rule is correct in the context

of a recipient’s fraudulent receipt of the Medicaid rate, and

plaintiff did not address it in its briefing in this court. That

Medicaid-specific issue may well involve consideration of

federal law, and it has not been briefed on elementary mat-

ters of statutory and rule construction. Under those circum-

stances, we decline to decide the issue as a matter of initial

impression. We remand to the Court of Appeals so that it

may consider that Medicaid-specific argument in the first

instance.

The decision of the Court of Appeals is reversed,

and the case is remanded to the Court of Appeals for further

proceedings.