Petition for Writ of Certiorari — Hickory Heights Health and Rehab, LLC, et al., Petitioners v. Yashika Watson, as Guardian of the Person and Estate of Zeola Ellis, III

No.

In the Supreme Court of the United States

HICKORY HEIGHTS HEALTH AND REHAB, LLC; CENTRAL

ARKANSAS NURSING CENTERS, INC.; NURSING

CONSULTANTS, INC.; AND MICHAEL MORTON,

PETITIONERS,

v.

YASHIKA WATSON, AS GUARDIAN OF THE PERSON AND

ESTATE OF ZEOLA ELLIS III.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

ARKANSAS COURT OF APPEALS, DIVISIONS IV & I

PETITION FOR A WRIT OF CERTIORARI

NICOLE L. MASIELLO

ARNOLD & PORTER

KAYE SCHOLER LLP

250 West 55th Street

New York, NY 10019

ANDREW T. TUTT

Counsel of Record

SPENCER FABER

JOHN V. HOOVER

DANIEL YABLON

ARNOLD & PORTER KAYE

SCHOLER LLP

601 Massachusetts Ave., NW

Washington, DC 20001

(202) 942-5000

andrew.tutt@arnoldporter.com

QUESTION PRESENTED

The Spending Clause grants Congress the power “to

pay the Debts and provide for the … general Welfare of

the United States.” U.S. Const., Art. I, § 8, cl. 1. That

power allows Congress to pass legislation incentivizing

certain behavior from private parties or States in

exchange for federal funds. But this Court has repeatedly

noted that the Spending Clause power is limited,

operating “much in the nature of a contract: in exchange

for federal funds, [the recipients of the funds] agree to

comply with federally imposed conditions.” Pennhurst

State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17 (1981).

Pursuant to a delegation of Spending Clause power,

the Centers for Medicare and Medicaid Services (CMS)

issued a final rule revising the requirements that longterm care facilities must meet to participate in Medicare

and Medicaid. The new rule prohibits those facilities from

requiring residents to sign pre-dispute arbitration

agreements as a condition of admission. The Arkansas

Court of Appeals held that an arbitration agreement

obtained in violation of the CMS rule is “illegal.” A divided

Arkansas Supreme Court denied review, with the

dissenting justices acknowledging that this ruling directly

conflicts with precedent in the Court of Appeals for the

Eighth Circuit stating that a Spending Clause rule only

creates a condition for the receipt of federal funds.

The questions presented are:

1. Whether legislation enacted pursuant to the

spending power makes private conduct illegal absent a

clear statement that Congress intended to do more than

place conditions on the receipt of federal funds.

2. If so, whether CMS may make the use of

arbitration agreements by recipients of federal Medicare

and Medicaid funds illegal, notwithstanding the Federal

Arbitration Act.

(i)

RELATED PROCEEDINGS

Circuit Court, Fifth Division, Pulaski County, Arkansas:

Watson v. Hickory Heights Health & Rehab, et al.,

No. 60CV-22-2068

(Ark. Cir. Ct. Feb. 17, 2023) (denying motion to

compel arbitration)

Arkansas Court of Appeals:

Hickory Heights Health & Rehab, et al. v. Watson,

No. CV-23-404

(Ark. Ct. App. Nov. 13, 2024) (affirming denial of

motion to compel arbitration)

Hickory Heights Health & Rehab, et al. v. Watson,

No. CV-23-404

(Ark. Ct. App. Feb. 26, 2025) (substituted opinion

on rehearing affirming denial of motion to compel

arbitration)

Supreme Court of Arkansas:

Hickory Heights Health & Rehab, et al. v. Watson.,

No. CV-23-404

(Ark. June 5, 2025) (denying review)

(ii)

TABLE OF CONTENTS

Page

Petition for a Writ of Certiorari ......................................... 1

Opinions Below ..................................................................... 1

Jurisdiction ........................................................................... 1

Statutory and Constitutional Provisions

Involved ................................................................................. 1

Statement of the Case.......................................................... 1

A. Legal Background .................................................. 4

B. Factual Background ............................................... 7

Reasons for Granting the Petition ................................... 12

I. The Questions Presented Are Important and

Warrant Review .......................................................... 12

II. The Court Should Resolve This Question Now ....... 22

Conclusion ........................................................................... 29

Appendix A: Arkansas Court of Appeals Substituted

Opinion on the Grant of Rehearing

(Feb. 26, 2025)............................................. 1a

Appendix B: Arkansas Court of Appeals Opinion

(Nov. 13, 2024) .......................................... 25a

Appendix C: Arkansas Supreme Court Order

(June 5, 2025) ............................................ 34a

Appendix D: Arkansas Supreme Court Opinion

Dissenting from Denial of Petition for

Review (June 5, 2025) .............................. 35a

Appendix E: Pulaski County Circuit Court Order

(Feb. 17, 2023)........................................... 39a

Appendix F: U.S. Const. Art. I, § 8, cl. 1 ...................... 42a

Appendix G: 42 C.F.R. § 483.70(n) (2019) .................... 43a

(iii)

TABLE OF AUTHORITIES

Cases

Page(s)

A.J.T. by and through A.T. v. Osseo Area

Schs. Ind. Sch. Dist. No. 279,

605 U.S. 335 (2025) .......................................................... 22

Alabama Ass’n of Realtors v. HHS,

594 U.S. 758 (2021) .................................................... 21, 25

Allied-Bruce Terminix Cos., Inc. v. Dobson,

513 U.S. 265 (1995) ...................................................... 5, 19

Am. Ins. Co. v. Cazort,

871 S.W.2d 575 (Ark. 1994) ............................................ 27

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) ........................................ 19, 20, 21, 27

Badgerow v. Walters,

596 U.S. 1 (2022) .............................................................. 22

Barnes v. Gorman,

536 U.S. 181 (2002) ...................................................... 5, 14

Biden v. Nebraska,

600 U.S. 477 (2023) .......................................................... 21

Bissonnette v. LePage Bakeries Park St., LLC,

601 U.S. 246 (2024) .................................................... 19, 22

City of Boerne v. Flores,

521 U.S. 507 (1997) .......................................................... 15

Coinbase, Inc. v. Bielski,

599 U.S. 736 (2023) .................................................... 22, 26

Coinbase, Inc. v. Suski,

602 U.S. 143 (2024) .......................................................... 22

CompuCredit Corp. v. Greenwood,

565 U.S. 95 (2012) ............................................................ 21

Cummings v. Premier Rehab Keller, P.L.L.C.,

596 U.S. 212 (2022) ......................... 4, 5, 14, 15, 16, 17, 22

(iv)

v

Cases—Continued

Page(s)

Dobbs v. Jackson Women’s Health Org.,

597 U.S. 215 (2022) .......................................................... 16

Emigrant Co. v. Cnty. of Adams,

100 U.S. 61 (1879) ............................................................ 18

Epic Sys. Corp. v. Lewis,

584 U.S. 497 (2018) ...................................................... 6, 20

FDA v. Brown & Williamson Tobacco Corp.,

529 U.S. 120 (2000) .......................................................... 21

GE Energy Power Conversion France SAS,

Corp. v. Outokumpu Stainless USA, LLC,

590 U.S. 432 (2020) .......................................................... 22

Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20 (1991) .............................................................. 6

Gonzaga Univ. v. Doe,

536 U.S. 273 (2002) ............................................................ 5

Gonzales v. Oregon,

546 U.S. 243 (2006) .......................................................... 17

Haaland v. Brackeen,

599 U.S. 255 (2023) .......................................................... 15

Health & Hosp. Corp. of Marion Cnty. v. Talevski,

599 U.S. 166 (2023) ....................... 2, 13, 14, 15, 22, 25, 27

Kindred Nursing Ctrs. Ltd. P’ship v. Clark,

581 U.S. 246 (2017) ............................................................ 6

KPMG LLP v. Cocchi,

565 U.S. 18 (2011) .............................................................. 6

Little Sisters of the Poor Saints Peter &

Paul Home v. Pennsylvania,

591 U.S. 657 (2020) .......................................................... 25

Madison Cos., LLC v. Williams,

508 S.W.3d 901 (Ark. Ct. App. 2016) ............................... 8

vi

Cases—Continued

Page(s)

Marmet Health Care Center, Inc. v. Brown,

565 U.S. 530 (2012) .......................................................... 21

McCulloch v. Maryland,

17 U.S. (4 Wheat.) 316 (1819) ......................................... 14

Medina v. Planned Parenthood S. Atl.,

145 S. Ct. 2219 (2025) ........................... 4, 5, 17, 18, 22, 23

Mitsubishi Motors Corp. v. Soler Chrysler–

Plymouth, Inc.,

473 U.S. 614 (1985) ............................................................ 6

Morgan v. Sundance, Inc.,

596 U.S. 411 (2022) .......................................................... 22

Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp.,

460 U.S. 1 (1983) ........................................................ 19, 26

Moyle v. United States,

603 U.S. 324 (2024) ..................2, 13, 14, 16, 17, 22, 25, 26

Murphy v. National Collegiate Athletic Assn.,

584 U.S. 453 (2018) .......................................................... 17

NFIB v. Sebelius,

567 U.S. 519 (2012) .............................................. 14, 15, 25

Northport Health Servs. of Ark., LLC v. HHS,

14 F.4th 856 (8th Cir. 2021) ............... 2, 11, 12, 18, 20, 21

Pennhurst State Sch. & Hosp. v. Halderman,

451 U.S. 1 (1981) ................................................ 2, 4, 14, 16

Printz v. United States,

521 U.S. 898 (1997) .......................................................... 15

Scherk v. Alberto–Culver Co.,

417 U.S. 506 (1974) ............................................................ 6

Shearson/American Express Inc. v. McMahon,

482 U.S. 220 (1987) .......................................................... 21

vii

Cases—Continued

Page(s)

Smith v. Spizzirri,

601 U.S. 472 (2024) .................................................... 22, 26

Southwest Airlines Co. v. Saxon,

596 U.S. 450 (2022) .......................................................... 22

United States v. Lopez,

514 U.S. 549 (1995) .................................................... 14, 15

Util. Air Regul. Grp. v. EPA,

573 U.S. 302 (2014) .......................................................... 21

Viking River Cruises, Inc. v. Moriana,

596 U.S. 639 (2022) ................................................ 6, 20, 22

Volt Info. Scis., Inc. v. Bd. of Trs. of Leland

Stanford Junior Univ.,

489 U.S. 468 (1989) ........................................................ 5, 6

West Virginia v. EPA,

597 U.S. 697 (2022) .......................................................... 23

Yee v. City of Escondido,

503 U.S. 519 (1992) .......................................................... 18

Constitutional Provisions

U.S. Const., Art. I, § 8 .......................................................... 4

U.S. Const., Art. VI, cl. 2 ................................................... 16

Statutes

9 U.S.C. § 2................................................................ 6, 20, 21

42 U.S.C. § 1395i-3 ............................................................... 7

42 U.S.C. § 1396r .................................................................. 7

Regulations

42 C.F.R. § 483.70(n)(1) (2024) ............................................ 8

81 Fed. Reg. 68,688 (Oct. 4, 2016) ................................... 6, 7

82 Fed. Reg. 26,649 (June 8, 2017) ..................................... 7

84 Fed. Reg. 34,718 (July 18, 2019) .............................. 7, 12

viii

Other Authorities

Page(s)

2 J. Story, Commentaries on the Constitution

of the United States § 904, 906 (1833) ........................... 23

17A Am. Jur. 2d Contracts § 223 (Jan. 2025) ................. 10

Ark. R. App. P.-Civ. 2(a)(12) ............................................... 8

D. Engdahl, The Basis of the Spending

Power, 18 Seattle U. L. Rev. 215 (1995) ....................... 15

The Federalist No. 45 (C. Rossiter ed. 1961) .................. 14

Flower Foods v. Brock, No. 24-935 (cert.

granted Oct. 20, 2025) ..................................................... 22

H. Friendly, Federal Jurisdiction: A General

View 120 (1973) ................................................................ 26

HHS TAGGS, “A Closer Look at HHS Total

Assistance,”

https://taggs.hhs.gov/TotalAssist .................................. 24

HHS TAGGS, “Grants by OPDIV,”

https://taggs.hhs.gov/ReportsGrants/Grant

sByOPDIV ....................................................................... 24

Imre Stephen Szalai, The Prevalence of

Consumer Arbitration Agreements by

America's Top Companies, 42 UC Davis L.

Rev. 233 (2019) ................................................................. 27

P. Hamburger, Purchasing Submission 132

(2021) ................................................................................ 15

R. Natelson, The General Welfare Clause

and the Public Trust: An Essay in

Original Understanding, 52 Kan. L. Rev. 1

(2003) ................................................................................ 15

T. Sky, To Provide for the General Welfare

67 (2003)............................................................................ 15

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The order of the Circuit Court, Fifth Division, Pulaski

County (Pet. App. 39a-41a) is available at 2023 WL

12011732 (Ark. Cir. Ct. Feb. 17, 2023). The original

decision of the Court of Appeals of Arkansas, Division IV,

(Pet. App. 25a-33a) is available at 701 S.W.3d 34, 2024

Ark. App. 563 (2024). The substituted opinion of the Court

of Appeals of Arkansas, Divisions IV and I, on the grant

of rehearing (Pet. App. 1a-24a) is available at 707 S.W.3d

499, 2025 Ark. App. 133 (2025). The order of the Supreme

Court of Arkansas (Pet. App. 34a) denying review is

unreported, but an opinion dissenting from the denial of

the petition for review (Pet. App. 35a-38a) is available at

711 S.W.3d 793, 2025 Ark. 111 (2025).

JURISDICTION

The Supreme Court of Arkansas entered a final

decision denying review in this case on June 5, 2025.

Pet. App. 34a. Justice Kavanaugh extended the time to

file a petition for certiorari to November 2, 2025. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1257(a).

STATUTORY AND CONSTITUTIONAL

PROVISIONS INVOLVED

Relevant statutory and constitutional provisions are

reproduced in the Appendix (Pet. App. 42a-44a).

STATEMENT OF THE CASE

This case presents two significant questions of

national importance. First, whether legislation enacted

pursuant to the spending power makes private conduct

illegal absent a clear statement that Congress intended to

do more than place conditions on the receipt of federal

funds. Second, if mine-run Spending Clause legislation

can make private conduct illegal, whether the Federal

(1)

2

Arbitration Act preempts the Centers for Medicare and

Medicaid Services (CMS) rule prohibiting long-term care

facilities from entering into binding pre-dispute

arbitration agreements. Arkansas state courts and the

Court of Appeals for the Eighth Circuit are squarely split

on the answer to the first question, with two justices on

the Arkansas Supreme Court noting that it has been

“le[ft] to the United States Supreme Court to rectify th[e]

clear error” in the decision below. Pet. App. 38a. (Bronni,

J., dissenting from the denial of review).

Congress’s spending power has long been understood

to function differently from its other constitutional

powers. See, e.g., Moyle v. United States, 603 U.S. 324, 355

(2024) (Alito, J., dissenting) (“[W]hen Congress relies on

its authority to attach conditions to the receipt of federal

funds, special rules apply.”) (citing Health & Hosp. Corp.

of Marion Cnty. v. Talevski, 599 U.S. 166, 201 (2023)

(Thomas, J., dissenting)). Specifically, “legislation

enacted pursuant to the spending power is much in the

nature of a contract: in return for federal funds, [a party]

agree[s] to comply with federally imposed conditions.”

Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1,

17 (1981).

The Eighth Circuit held that CMS’s rule prohibiting

long-term care facilities from entering into binding predispute arbitration agreements—a rule promulgated

pursuant to Spending Clause power—operated in this

manner: The rule “does not invalidate or render

unenforceable any arbitration agreement,” and instead

“establishes the conditions for receipt of federal funding

through the Medicare and Medicaid programs.”

Northport Health Servs. of Ark., LLC v. HHS, 14 F.4th

856, 868 (8th Cir. 2021). The Arkansas Court of Appeals,

however, found that the arbitration agreements contrary

to the CMS rule were “illegal” and unenforceable.

Pet. App. 11a. As Justice Bronni noted in his dissent from

3

the Arkansas Supreme Court’s denial of review, the

decision “contravenes [the general rule favoring

arbitration,]

invalidates

countless

arbitration

agreements[,] … misapplies federal law[,] and creates a

circuit split that, absent [the Arkansas Supreme Court’s]

correction, is likely to be resolved by the United States

Supreme Court.” Pet. App. 35a.

The Court should grant certiorari and reverse. This

case readily satisfies the traditional criteria for granting

review. There is a clear conflict between a federal circuit

court and a State high court located within that circuit.

The questions presented were dispositive below, where

the only issue on review was whether the arbitration

agreement was enforceable. And the questions presented

are of great legal and practical significance. This Court

has, multiple times over the past few terms, been faced

with questions that touch upon Congress’s Spending

Clause power, but there has not yet been a suitable vehicle

to resolve this recurrent and exceptionally important

question that cuts to the heart of American federalism.

Every day, States and private parties must decide

whether they want to accept federal funds and comply

with conditions on those funds. If the decision below is

correct, however, Spending Clause legislation would

operate as another—essentially unlimited—font of

federal regulatory power, allowing Congress and federal

agencies to prohibit private conduct and preempt State

law in areas traditionally reserved to State authority. The

Constitution does not allow the Spending Clause to

operate in such a manner. This Court’s review of the

meaning of the Spending Clause is imperative, and this

issue is ripe for review. The Court should grant certiorari

and reverse.

4

A.

Legal Background

1. The Spending Power

Article I, Section 8, Clause 1 grants Congress the

“Power To . . . provide for the . . . general Welfare of the

United States.” Pet. App. 42a. Under this clause,

“Congress may raise and ‘appropriat[e] . . . money’ to

advance the ‘general welfare.’” Medina v. Planned

Parenthood S. Atl., 145 S. Ct. 2219, 2231 (2025). However,

“[u]nlike other enumerated powers, this provision does

not expressly endow Congress with the power to regulate

conduct.” Id. at 2230. “[I]f it did, the ‘enumeration of

specific powers’ elsewhere in Article I would be rendered

largely pointless.” Id. at 2231.

Rather than speaking directly to the lawfulness of

activity, when it exercises spending power, Congress

simply places conditions on federal funding. These

agreements take on “the nature of a contract” rather than

working a change in substantive law governing private

conduct—“in return for federal funds, the [recipients]

agree to comply with federally imposed conditions.”

Cummings v. Premier Rehab Keller, P.L.L.C., 596 U.S.

212, 216 (2022) quoting Pennhurst, 451 U.S. at 17).

Legislation enacted under the spending power “operates

based on consent,” id. at 219, rather than by “‘impos[ing]

congressional policy’ on regulated parties ‘involuntarily,’”

id. “The legitimacy of Congress’ power to legislate under

the spending power thus rests on whether the [recipient]

voluntarily and knowingly accepts the terms of the

‘contract.’” Pennhurst, 451 U.S. at 17. Consenting to

Congress’ conditions most often obligates a funding

recipient to the government rather than to third parties.

The “typical remedy” for a recipient’s breach is “action by

the Federal Government to terminate funds to the”

recipient rather than a private cause of action. Pennhurst,

451 U.S. at 28.

5

Third parties may enforce congressionally imposed

conditions only when the legislation unambiguously

creates rights such that “the [recipient] voluntarily and

knowingly accepts the” additional obligations as “terms of

th[e] ‘contract’” with the government. Cummings, 596

U.S. at 219 (quoting Barnes v. Gorman, 536 U.S. 181, 186

(2002)). The grantee must receive “clear and

unambiguous notice that, if it accepts federal funds, it may

face private suits asserting an individual right.” Medina,

145 S. Ct. at 2235. Congress can therefore expressly

create rights and remedies through its spending power

based on recipients’ consent to abide by them. See

Cummings, 596 U.S. at 218 (discussing Title VI, Title IX,

the Rehabilitation Act, and the Affordable Care Act). And

in “atypical case[s],” Congress may use “clear[] and

unambiguous[] . . . terms” with “‘an unmistakable focus’

on individuals like the plaintiff,” Medina, 145 S. Ct. at

2229, to “create new rights enforceable under [42 U.S.C.]

§ 1983,” Gonzaga Univ. v. Doe, 536 U.S. 273, 290 (2002).

This Court has never construed this consent-driven

model to render a recipient’s conduct substantively

unlawful. Indeed, the Court recently confirmed that laws

passed via the spending power do not “regulate conduct.”

Medina, 145 S. Ct. at 2230. A recipient simply agrees—as

a matter of contract—to the government’s terms and

occasionally that others may hale them into court to

enforce those terms.

2. The Federal Arbitration Act

“[T]he basic purpose of the Federal Arbitration Act

is to overcome courts’ refusals to enforce agreements to

arbitrate.” Allied-Bruce Terminix Cos., Inc. v. Dobson,

513 U.S. 265, 270 (1995) (citing Volt Info. Scis., Inc. v. Bd.

of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 474

(1989)). The Act states that a contract provision to

arbitrate controversies “shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or in

6

equity for the revocation of any contract or as otherwise

provided” within the Act. 9 U.S.C. § 2. The FAA’s

mandate is simple: It places agreements to arbitrate

“upon the same footing as other contracts,” Volt, 489 U.S.

at 474 (quoting Scherk v. Alberto–Culver Co., 417 U.S. 506,

511 (1974)), and establishes “a sort of ‘equal-treatment’

rule for arbitration contracts,” Epic Sys. Corp. v. Lewis,

584 U.S. 497, 507 (2018) (quoting Kindred Nursing Ctrs.

Ltd. P’ship v. Clark, 581 U.S. 246, 251 (2017)). “A court

may invalidate an arbitration agreement based on

‘generally applicable contract defenses’ like fraud or

unconscionability,” but it may not invalidate an

agreement based on legal rules that apply only to

arbitration. Viking River Cruises, Inc. v. Moriana, 596

U.S. 639, 650 (2022).

The FAA “reflects an ‘emphatic federal policy in

favor of arbitral dispute resolution.’” KPMG LLP v.

Cocchi, 565 U.S. 18, 21 (2011) (quoting Mitsubishi Motors

Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 631

(1985)). As a result, this Court has explained that other

statutory regimes do not displace the FAA unless

Congress makes that intention “clear and manifest.” Epic

Sys. Corp., 584 U.S. at 511; see also Mitsubishi Motors,

473 U.S. at 628; Gilmer v. Interstate/Johnson Lane Corp.,

500 U.S. 20, 26 (1991).

3. CMS Long-Term Care Arbitration Rules

On October 4, 2016, CMS published a final rule

prohibiting long-term care facilities from entering into

pre-dispute arbitration agreements with residents under

any circumstances. See Medicare and Medicaid

Programs; Reform of Requirements for Long-Term Care

Facilities, 81 Fed. Reg. 68,688, 68,867 (Oct. 4, 2016).

Commenters argued that the FAA precluded CMS’s

regulation, and that the agency lacked the authority to

issue it. See id. at 68,790. The agency disagreed, asserting

that because the FAA “does not prescribe circumstances

7

in which arbitration agreements must be used, it does not

impinge on federal agencies’ rights to issue regulations

regulating the conditions of adoption of such

agreements.” Id. at 68,791. CMS relied on its power to

establish “requirements relating to the health and safety

of residents,” 42 U.S.C. § 1396r(d)(4); see id. § 1395i-3, as

well as the Secretary’s prerogative to establish “other

right[s]” that nursing facilities must protect, see 42 U.S.C.

§ 1396r(c)(1)(A)(xi); id. § 1395i-3(c)(1)(A)(xi).

In June 2017, CMS proposed abandoning its

prohibition on arbitration agreements, suggesting instead

a less burdensome rule that would require facilities to

ensure the resident understands the arbitration

agreement. See Medicare and Medicaid Programs;

Revision of Requirements for Long-Term Care Facilities:

Arbitration Agreements, 82 Fed. Reg. 26,649, 26,653

(June 8, 2017). The agency, however, all but reenacted the

same arbitration ban it had disavowed, effectively

prohibiting the use of arbitration agreements in longterm care facilities. The final rule reverted back to a

severe limitation on facilities’ power to enter into

arbitration agreements, prohibiting them from requiring

residents to sign pre-dispute arbitration agreements as a

condition of admission or as a requirement to continue to

receive care. See Medicare and Medicaid Programs;

Revision of Requirements for Long-Term Care Facilities:

Arbitration Agreements, 84 Fed. Reg. 34,718, 34,735 (July

18, 2019) (“Revised CMS Rule”). CMS also regulated the

contents of the agreements, mandating certain

arbitrators, a “convenient” venue, and a resident’s right

to rescind. See id. at 34,735-36.

B. Factual Background

1. In February 2021, Yashika Watson, as guardian of

the person and estate of her father, Zeola Ellis III,

executed an arbitration agreement with petitioner

Hickory Heights as a condition on Ellis’s admission to

8

Hickory Heights’ facility. Pet. App. 2a. By signing the

arbitration agreement, Watson, on behalf of Ellis, agreed

that any legal disagreements would be submitted to

binding arbitration. Id. But, in March 2022, when Watson

believed Hickory Heights had committed wrongdoing

against her father, she brought suit against Hickory

Heights in Arkansas state court. Id. Hickory Heights

timely answered, raising the existence of the arbitration

agreement as a defense, and then moved to compel

arbitration. Pet. App. 2a-3a. Watson opposed the motion,

arguing that the arbitration agreement violated federal

law because it was obtained as a condition to her father’s

admission to Hickory Heights. Pet. App. 3a. Specifically,

she argued that “the provisions of 42 C.F.R. § 483.70(n)(1)

(2024), which was in effect when the arbitration

agreement was executed, rendered the arbitration

agreement illegal,” contesting that the arbitration

agreement “flagrantly violated the law.” Id. She also

argued that the agreement was against public policy,

unconscionable, and unenforceable. Id.

2. The circuit court held a hearing on the motion to

compel arbitration. Id. One week later, the court entered

an order finding that “arbitration agreements that are a

condition of admission are unlawful,” and “because the

arbitration agreement violates a federal regulation, it is

illegal and unenforceable.” Pet. App. 4a. The circuit court

thus denied the motion to compel arbitration, and Hickory

Heights timely appealed.1

3. The Arkansas Court of Appeals, Division IV

affirmed. Pet. App. 25a-33a. The court recognized that the

FAA “expressly govern[ed] the arbitration agreement at

It is undisputed that, under Arkansas law, a motion to compel

arbitration is an immediately appealable order. See Pet. App. 4a

(citing Ark. R. App. P.-Civ. 2(a)(12); Madison Cos., LLC v.

Williams, 508 S.W.3d 901 (Ark. Ct. App. 2016)).

1

9

issue in this case,” and that there is a “liberal federal

policy favoring arbitration.” Pet. App. 28a (citations

omitted). It then explained that the question of whether a

dispute should be submitted to arbitration is a matter of

contract interpretation, meaning an arbitration

agreement is generally valid if all five essential elements

of a contract are present. Pet. App. 29a. Those elements

are (1) competent parties, (2) subject matter, (3) legal

consideration, (4) mutual agreement, and (5) mutual

obligations. Id. But even where such elements are

satisfied, an arbitration agreement could still be

invalidated by generally applicable contract defenses. Id.

Here, Watson had argued that the arbitration agreement

violated the Revised CMS Rule. Pet. App. 30a.

The Court of Appeals explained that the Eighth

Circuit had already heard a challenge to the Revised CMS

Rule, Northport, that examined CMS’s “authority to

promulgate the regulation at issue and its authority—or

lack thereof—pursuant to such a regulation to unilaterally

cancel contracts made between two other parties.”

Pet. App. 31a. And, while the Northport court

“acknowledged that CMS could not cancel a contract by

regulatory fiat, it held that such a contract would remain

subject to generally applicable contract defenses.”

Pet. App. 31a-32a. Under Arkansas law, “illegality of a

contract is an affirmative defense.” Pet. App. 32a

(brackets omitted).

The Court of Appeals thus concluded that “a valid

arbitration agreement does not exist because it is in

violation of a federal regulation prohibiting Hickory

Heights from requiring an applicant to sign an[]

arbitration agreement as a condition of admission to its

facility.” Id. In other words, the Court of Appeals

concluded that the arbitration agreement was invalid

because violating the Revised CMS Rule is unlawful.

10

4. Hickory Heights filed a timely petition for

rehearing. On February 26, 2025, the Court of Appeals,

Divisions IV & I, granted the petition for rehearing and

issued a divided substituted opinion. Pet. App. 1a-24a. In

its substituted opinion, the court reaffirmed its original

opinion’s holding that “arbitration agreements that are a

condition of admission are unlawful” under CMS’s rule

and “because the arbitration agreement violates a federal

regulation, it is illegal and unenforceable.” Pet. App. 10a.

The court quoted a treatise for the proposition that “[a]s

a general rule, an illegal contract is unenforceable; in this

regard, a contract which violates or contravenes a

constitution, statute, or regulation may be illegal, invalid,

unenforceable, or void.” Id. (quoting 17A Am. Jur. 2d

Contracts § 223 (Jan. 2025)). On that ground the court

“h[e]ld that the court did not err in finding the mandatory

arbitration

agreement

herein

unenforceable.”

Pet. App. 11a.

The court also affirmed the circuit court’s finding that

the arbitration agreement was unconscionable, finding

the agreement unconscionable in large part because the

Revised CMS Rule prohibits such agreements.

Pet. App. 13a.

Finally, in a footnote, the court adopted the Eighth

Circuit’s finding that the Revised CMS Rule does not

violate the FAA. Pet. App. 12a n.2.2

5. Judge Thyer, joined by Judge Abramson,

dissented. Pet. App. 17a-24a. Judge Thyer noted that the

majority interpreted Northport to mean CMS could

“unilaterally cancel contracts made between two other

Judge Hixson, joined by Judges Virden and Murphy, joined the

majority opinion, but concurred separately to express additional

concern about whether long-term care residents can be “forced” to

resolve their disputes by arbitration as a condition of admission.

Pet. App. 14a-15a (Hixson, J., concurring).

2

11

parties,” and that “interpretation of Northport misses the

mark and completely ignores the opinion’s import to the

case at hand.” Pet. App. 18a. Rather, she explained that

Northport “expressly holds that the Revised Rule does

not render an arbitration agreement illegal and

unenforceable, even if signing such an agreement is made

a condition of admission.” Pet. App. 20a. The Revised

CMS Rule “does not interfere with the enforceability of a

private agreement in a court of law.” Id. She aptly noted

that “Northport’s true holding [is] that an arbitration

agreement as a condition of admission is ‘nonetheless …

enforceable,” unless a generally applicable contract

defense applies.” Pet. App. 21a (quoting Northport, 14

F.4th at 868). Judge Thyer explained that the majority

had misapplied blackletter Arkansas unconscionability

law in its quest to hold this arbitration agreement

unconscionable. Pet. App. 22a-24a.

6. The Arkansas Supreme Court denied review, with

Justices Wood, Webb, and Bronni noting that they would

grant the petition. Pet. App. 34a. Justice Bronni authored

a dissent joined by Justice Wood, observing that “[t]he

court of appeals’ opinion contravenes” Arkansas law’s

principle of strongly favoring arbitration “and invalidates

countless arbitration agreements. Worse, it badly

misapplies federal law and creates a circuit split that,

absent this court’s correction, is likely to be resolved by

the United States Supreme Court.” Pet. App. 35a.

Justice Bronni explained that the Revised CMS Rule

“isn’t a generally applicable rule governing the

relationship between long-term care facilities and

residents; it’s a spending provision that outlines the

requirements that long-term care facilities must follow ‘to

participate in the Medicare and Medicaid programs.’”

Pet. App. 36a (quoting Medicare and Medicaid Programs;

Revision of Requirements for Long Term Care Facilities:

Arbitration Agreements, 84 Fed. Reg. 34,718, 34,718 (July

12

18, 2019)). Thus, Justice Bronni explained, “by definition,

it ‘does not purport to regulate’ or invalidate ‘any

arbitration agreement’ between the resident and the

facility.” Id. After all, CMS lacks the power to invalidate

valid contracts; it “may only enforce [the Revised Rule]

via its general power to penalize long-term care facilities.”

Id.

Justice Bronni continued that the opinion was “not

just bad law; it also create[d] a clear split with the Eighth

Circuit.” Pet. App. 37a. Northport clearly held that the

Revised CMS Rule “‘does not invalidate or render

unenforceable any arbitration agreement’ but simply

‘establishes the conditions for receipt of federal funding

through the Medicare and Medicaid programs.’” Id.

(quoting Northport, 14 F.4th at 868). Further, Justice

Bronni observed that the circuit court’s “reliance on

CMS’s historical account—that these agreements have

‘long been considered a predatory practice that takes

advantage of the elderly population’—shows that even its

purported state-law unconscionability analysis was really

just an erroneous federal analysis.” Pet. App. 38a. He

then concluded that “[t]he court of appeals’ analysis of

federal law is wrong and creates a clear circuit split. We

have a duty to correct that analysis and end the resulting

split. It’s unfortunate that the majority disagrees, leaving

it to the United States Supreme Court to rectify that clear

error.” Id.

REASONS FOR GRANTING THE PETITION

I.

THE QUESTIONS PRESENTED ARE IMPORTANT

AND WARRANT REVIEW

The decision below “badly misapplies federal law and

creates a circuit split.” Pet. App. 35a. The Arkansas Court

of Appeals’ holding that CMS’s Rule makes arbitration

agreements that violate it “illegal” and “unenforceable,”

creates a direct recognized split with the Eight Circuit,

13

the federal Circuit in which Arkansas sits. It also

fundamentally misunderstands the nature of Spending

Clause legislation, transforming Congress’s spending

power into an unfettered license to regulate private

conduct in areas traditionally reserved to State authority.

This Court should grant certiorari to restore the proper,

and properly limited, understanding of the Spending

Clause and correct this latest state-court effort to thwart

federal arbitration policy.3

A. The Arkansas Court of Appeals erred in its

resolution of a vitally important constitutional question

that at least six members of this Court have indicated

warrants the Court’s attention. See Moyle, 603 U.S. at 336

(Barrett, J., joined by Roberts, C.J., and Kavanaugh, J.,

concurring); id. at 355-56 (Alito, J., joined by Thomas and

Gorsuch, JJ., dissenting). The Spending Clause confers on

Congress “only a power to spend, not a power to impose

binding requirements with the force of federal law.” Id. at

357 (Alito, J., joined by Thomas and Gorsuch, JJ.,

dissenting) (quoting Talevski, 599 U.S. at 212 (Thomas, J.,

dissenting)). Yet, accepting an affirmative contract

defense of “[i]llegality,” the court below held that federal

spending regulations rendered an otherwise lawful

arbitration agreement between private parties void.

Pet. App. 10a (alteration in original); see also

Pet. App. 35a (observing that “Arkansas law ‘strongly

favors arbitration’” (cleaned up)). That decision conflicts

with this Court’s precedent and would transform the

Spending Clause into an unlimited font of federal power.

“The potential implications” for the balance of State and

Moreover, if grant conditions like those CMS imposed indeed

operate to render private contracts unenforceable, as the Court of

Appeals held, then CMS’s rule contravenes the Federal Arbitration

Act.

3

14

federal power “are far-reaching.” Moyle, 603 U.S. at 357

(Alito, J., joined by Thomas and Gorsuch, JJ., dissenting).

“The Federal Government ‘is acknowledged by all to

be one of enumerated powers.’” NFIB v. Sebelius, 567

U.S. 519, 534 (2012) (quoting McCulloch v. Maryland, 17

U.S. (4 Wheat.) 316, 405 (1819)). While the powers of the

federal government “are few and defined,” “[t]hose which

are to remain in the State governments are numerous and

indefinite.” United States v. Lopez, 514 U.S. 549, 552

(1995) (quoting The Federalist No. 45, at 292-93 (C.

Rossiter ed. 1961)). “The Framers thus ensured that

powers which ‘in the ordinary course of affairs, concern

the lives, liberties, and properties of the people’ were held

by governments more local and more accountable than a

distant federal bureaucracy.” NFIB, 567 U.S. at 536

(quoting The Federalist No. 45, at 293 (J. Madison)).

Congress’s power to spend, like its enumerated

regulatory powers, comes with limits. As this Court has

repeatedly held, spending legislation “is much in the

nature of a contract: in return for federal funds, the

[recipients] agree to comply with federally imposed

conditions.” Cummings, 596 U.S. at 216 (alteration in

original) (quoting Pennhurst, 451 U.S. at 17). Congress’s

power to place conditions on the receipt of federal funds

“rests not on its sovereign authority to enact binding laws,

but on ‘whether the recipient voluntarily and knowingly

accepts the terms of that contract.’” Id. at 219 (cleaned

up) (quoting Barnes, 536 U.S. at 186). “The Clause

certainly is not an independent grant of regulatory power

to legislate for the general welfare, as the history of the

Constitution’s framing and ratification makes clear.”

Talevski, 599 U.S. at 207 (Thomas, J., dissenting).

To read Congress’s spending power to permit

regulation of primary conduct would upend our

constitutional structure. “Article I gives Congress a series

of enumerated powers, not a series of blank checks.”

15

Haaland v. Brackeen, 599 U.S. 255, 276 (2023). To protect

liberty and the inherent sovereignty of the States, those

powers are carefully circumscribed. See, e.g., Printz v.

United States, 521 U.S. 898 (1997); Lopez, 514 U.S. 549; cf.

City of Boerne v. Flores, 521 U.S. 507 (1997). But the

spending power, if it allowed Congress to declare private

conduct illegal, would eclipse each of Congress’s

enumerated powers. See Talevski, 599 U.S. at 213-14

(Thomas, J., dissenting).

That is not the Constitution the Framers wrote and

the People ratified. As Justice Thomas carefully explained

in his dissenting opinion in Talevski, the Constitutional

Convention rejected language that would provide

Congress a general regulatory power to legislate for the

general welfare, akin to the police power this Court has

held is reserved to the States. See id. at 206-08; see also

R. Natelson, The General Welfare Clause and the Public

Trust: An Essay in Original Understanding, 52 Kan. L.

Rev. 1, 23-29 (2003). A scholarly consensus accordingly

recognizes that the spending power does not carry with it

the “power to regulate.” T. Sky, To Provide for the

General Welfare 67 (2003); see, e.g., P. Hamburger,

Purchasing Submission 132 (2021); Natelson, supra, at

23-29; D. Engdahl, The Basis of the Spending Power, 18

Seattle U. L. Rev. 215, 222 (1995). “Respecting this

limitation is critical to ensuring that Spending Clause

legislation does not undermine the status of the States as

independent sovereigns in our federal system.” NFIB,

567 U.S. at 577 (opinion of Roberts, C.J.).

Three recent Spending Clause cases underscore the

Arkansas Court of Appeals’ error and the necessity of this

Court’s review.

1.a. In Cummings, this Court reiterated that the

prescriptive force of spending legislation derives solely

from the consent of funding recipients. “Unlike ordinary

legislation, which ‘imposes congressional policy’ on

16

regulated parties ‘involuntarily,’ Spending Clause

legislation operates based on consent: ‘in return for

federal funds, the [recipients] agree to comply with

federally imposed conditions.’” Cummings, 596 U.S. at

219 (alteration in original) (quoting Pennhurst, 451 U.S.

at 16). For that reason, the Court held, Congress may

authorize private remedies under the Spending Clause

only when it does so “unambiguously.” Id. (quoting

Pennhurst, 451 U.S. at 17). “Only then can we be

confident that the recipient ‘exercise[d its] choice

knowingly, cognizant of the consequences of [its]

participation’ in the federal program.” Id. (alteration in

original) (quoting Pennhurst, 451 U.S. at 17). That is,

spending legislation imposes on funding recipients only

the consequences Congress clearly sets as terms of the

bargain. That a funding recipient contravenes the

conditions attached to its funding does not subject it to

other common-law or statutory remedies available for

regulatory violations.

b. Moyle concerned the preemptive force of Spending

Clause legislation; that is, whether conditions on federal

funding operate as “the Laws of the United States”

supreme over State police-power regulation. U.S. Const.,

Art. VI, cl. 2. In the government’s view in that case, a

condition that hospitals accepting Medicare funds provide

emergency care was “federal ‘Law[]’ entitled to full

preemptive force under the Supremacy Clause.” Br. for

Resp. at 45, Moyle v. United States, Nos. 23-726, 23-727

(U.S. Mar. 21, 2024) (quoting U.S. Const., Art. VI, cl. 2).

Thus, it claimed, such conditions not only regulated the

hospitals which accepted federal funding, but also barred

States from legislating in an area reserved to “the people

and the democratic process.” Dobbs v. Jackson Women’s

Health Org., 597 U.S. 215, 269 (2022); see id. at 338

(Kavanaugh, J., concurring).

17

Because the lower courts had yet to pass on this

“difficult and consequential argument,” the Court

dismissed the petition as improvidently granted. Moyle,

603 U.S. at 336 (Barrett, J., joined by Roberts, C.J., and

Kavanaugh, J., concurring). But six Justices recognized

the issue as one of significant “importance.” Id. at 337; see

id. at 357 (Alito, J., joined by Thomas and Gorsuch, JJ.,

dissenting) (“The potential implications of permitting

preemption here are far-reaching.”). “The Government's

interpretation purport[ed] to limit Idaho’s choices about

what conduct to criminalize,” despite the fact that “Idaho

never ‘agree[d]’ to be bound by EMTALA.” Id. at 356-57

(Alito, J., joined by Thomas and Gorsuch, JJ., dissenting)

(second alteration in original) (quoting Cummings, 596

U.S. at 219). As the dissenting Justices observed, reading

Spending Clause legislation to operate as generally

applicable, prescriptive law would mark a radical

intrusion into “area[s] traditionally left to state control.”

Id. at 356. “[T]he background principles of our federal

system also belie the notion that Congress would use such

an obscure grant of authority to regulate areas

traditionally supervised by the States’ police power.” Id.

(alteration in original) (quoting Gonzales v. Oregon, 546

U.S. 243, 274 (2006)). But the Arkansas Court of Appeals

read spending regulations to do just that. In its view,

conditions on federal funding rendered private contracts

otherwise

lawful

in

Arkansas

“illegal”

and

“unenforceable.” Pet. App. 10a-11a (citation omitted).

c. Most recently, in Medina v. Planned Parenthood,

145 S. Ct. at 2229-30, the Court held that conditions on

federal funding typically create no privately enforceable

rights. “Unlike other enumerated powers,” the Court

explained, the Spending Clause “does not expressly

endow Congress with the power to regulate conduct” or

“‘the power to issue direct orders to the governments of

the States.’” Id. (quoting Murphy v. National Collegiate

18

Athletic Assn., 584 U.S. 453, 471 (2018)). That is so

because “federal grants” operate “not as commands but

as contracts.” Id. at 2231. “[A]s a rule, ‘Congress alone has

the power to enforce’ the conditions it attaches to its

grants”—by terminating federal funding. Id. (quoting

Emigrant Co. v. Cnty. of Adams, 100 U.S. 61, 69 (1879)).

Grant conditions do not, as the Arkansas Court of Appeals

concluded, of their own force make private conduct illegal

or void contracts entered into among private parties.

2. The decision also squarely conflicts with the Eighth

Circuit’s holding, in Northport. Northport held that

because CMS’s regulation is an exercise of delegated

Spending Clause power it does not render private conduct

illegal. The Eighth Circuit in Northport thus expressly

held that CMS’s rule “does not invalidate or render

unenforceable any arbitration agreement,” upholding the

rule on that ground. 14 F.4th at 868. The decision below is

in open conflict with Northport. See Pet. App. 37a (“The

court of appeals’ opinion is not just bad law; it also creates

a clear split with the Eighth Circuit.”). Contra the Eighth

Circuit, the court below concluded that the CMS rule does

make arbitration agreements “illegal and unenforceable.”

Pet. App. 10a (citation omitted). Yet it found that rule

valid despite reading it to do precisely what the Eighth

Circuit held “would violate the FAA.” Northport, 14 F.4th

at 868; see Pet. App. 9a.

As a result, there is now disuniformity in the

enforceability of arbitration agreements not only based on

where those agreements are executed, but also in what

forum they are challenged. An arbitration agreement

between a long-term care facility and a resident in Iowa

will stand; one in Arkansas, at least in state court, will fall.

Worse still, an Arkansas arbitration agreement would

survive in federal court under Northport, but the same

agreement would be unenforceable in a state court across

the street. See Yee v. City of Escondido, 503 U.S. 519, 538

19

(1992) (When a “conflict is between two courts whose

jurisdiction includes” a single state, “[f]orum shopping is

. . . of particular concern.”). Such a regime is untenable

and directly thwarts the FAA’s policy favoring a “uniform

standard” under which arbitration agreements must be

enforced as written. Allied-Bruce Terminix Companies,

513 U.S. at 282 (O’Connor, J., concurring).

***

The decision below reflects deep confusion about—

and misunderstanding of—the legal effect of federal

spending legislation. As this Court’s recent spending

decisions reflect, that question is recurring and critically

important. Parties accepting federal funds, and those who

contract with them, need to know where they stand. The

risks to liberty and State sovereignty are greater still

when federal bureaucrats take it upon themselves,

without a clear statement from Congress, to impose

further limitations on private contracting under the

auspices of Congress’s spending power. Simply put,

Congress lacks the power to regulate primary conduct

through the Spending Clause. An agency promulgating

regulations under a spending statute lacks that power

twice over. The Arkansas Court of Appeals decision

ascribing that authority to federal regulators was

erroneous and warrants this Court’s review.

B. This Court’s intervention is all the more essential

given the decision below’s subversion of the strong and

“liberal federal policy favoring arbitration agreements.”

AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346

(2011) (quoting Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24 (1983)). Enacted in 1925 “to

override the longstanding refusal of courts to enforce

arbitration agreements,” Bissonnette v. LePage Bakeries

Park St., LLC, 601 U.S. 246, 253 (2024), the FAA protects

individual freedom to contract by “affording parties

discretion” to design alternative dispute-resolution

20

processes. Concepcion, 563 U.S. at 344. In so doing, the

FAA “allow[s] for efficient, streamlined procedures

tailored to the type of dispute.” Id. Arbitration offers

“quicker, more informal, and often cheaper resolutions for

everyone involved.” Epic Sys. Corp., 584 U.S. at 505.

By its terms, the FAA makes arbitration agreements

“‘valid, irrevocable, and enforceable’ as written.”

Concepcion, 563 U.S. at 344 (quoting 9 U.S.C. § 2). For

that reason, the Eighth Circuit upheld CMS’s rule only

because, as merely a condition on federal funding, it “d[id]

not invalidate or render unenforceable any arbitration

agreement.” Northport, 14 F.4th at 868.

But under the Arkansas Court of Appeals’ decision,

CMS’s rule does make arbitration agreements “illegal,

invalid, unenforceable, [and] void,” Pet. App. 10a (citation

omitted), a result the FAA forbids. If that conclusion were

correct, Congress could not have given CMS authority to

issue the rule under the Social Security Act. See

Northport, 14 F.4th at 868. This Court has repeatedly

“rejected efforts to conjure conflicts between the

Arbitration Act and other federal statutes.” Epic Sys.

Corp., 584 U.S. at 516. The FAA’s arbitration mandate

prevails unless Congress’s contrary intention is “clear and

manifest.” Id. at 510. Opponents of arbitration cannot

have it both ways: Either the rule has no bearing on the

enforceability of arbitration agreements or it conflicts

with federal law.

This Court has repeatedly intervened to stop Statesanctioned end-runs around the FAA’s clear command,

and the Arkansas Court of Appeals’ attempt to smuggle

such a loophole into the CMS rule warrants the same

treatment here. In Concepcion, for example, this Court

held that the Act preempted state-law “unconscionability”

doctrines foreclosing class arbitration. 563 U.S. at 340. In

Viking River Cruises, Inc. v. Moriana, 596 U.S. 639, 662

(2022), this Court abrogated a judicially crafted rule

21

barring arbitration of California individual privateattorney-general claims. And in Marmet Health Care

Center, Inc. v. Brown, 565 U.S. 530, 532 (2012), this Court

held the FAA preempted a West Virgina “public policy”

exception to the Act for personal injury suits. While “an

agreement to arbitrate a dispute may be invalidated by

generally applicable contract defenses,” federal law does

not permit a rule that invalidates arbitration agreements

because they are arbitration agreements, as the decision

below read the Revised CMS Rule to do here. Northport,

14 F.4th at 867 (quoting Concepcion, 563 U.S. at 339); see

also CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98

(2012) (FAA’s mandate may be overridden only “by a

contrary

congressional

command”

(quoting

Shearson/American Express Inc. v. McMahon, 482 U.S.

220, 226 (1987))).

The notion that Congress would have authorized

CMS to eviscerate the FAA for an entire industry is all

the more unlikely in light of the principle that “[w]e expect

Congress to speak clearly if it wishes to assign to an

agency decisions of vast ‘economic and political

significance.’” Util. Air Regul. Grp. v. EPA, 573 U.S. 302,

324 (2014) (quoting FDA v. Brown & Williamson Tobacco

Corp., 529 U.S. 120, 160 (2000)); see, e.g., Biden v.

Nebraska, 600 U.S. 477, 502 (2023). And here CMS’s rule

“intrudes into an area that is the particular domain of

state law,” Alabama Ass’n of Realtors v. HHS, 594 U.S.

758, 764 (2021)—private contracts between long-term

care facilities and their residents. Under the Arkansas

Court of Appeals’ decision, open-ended spending

legislation sub silentio authorizes CMS, by rule, to declare

such private contracts “illegal” and “unenforceable”

notwithstanding the FAA’s requirement that they be

“valid, irrevocable, and enforceable” as written. 9 U.S.C.

§ 2. That extraordinary claim of authority for federal

22

agencies acting under the auspices of Congress’s

spending power warrants this Court’s intervention.

II. THE COURT SHOULD RESOLVE THIS QUESTION

NOW

This case presents significant questions of national

importance and constitutional interpretation, on topics

that repeatedly come before this Court. In the past five

years, this Court has decided nine cases that related, at

least in part, to the FAA,4 with one more case on the

docket this term.5 And in the past three years, at least five

cases have prompted members of this Court to express

concerns about the Spending Clause’s proper scope.6 The

prevalence of these two issues on this Court’s docket

highlights that both the spending power and FAA raise

profound questions of national importance. This case lies

at the intersection of both questions, and review is needed

to ensure the statute and constitutional provision are

given their intended meaning and scope.

The decision below is so egregious and implicates

issues of such importance that two justices of the

Arkansas Supreme Court called on this Court to grant

review. They noted that the decision below “is likely to be

See Coinbase, Inc. v. Suski, 602 U.S. 143 (2024); Smith v.

Spizzirri, 601 U.S. 472 (2024); Bissonnette v. LePage Bakeries Park

St., LLC, 601 U.S. 246 (2024); Coinbase, Inc. v. Bielski, 599 U.S. 736

(2023); Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022);

Southwest Airlines Co. v. Saxon, 596 U.S. 450 (2022); Morgan v.

Sundance, Inc., 596 U.S. 411 (2022); Badgerow v. Walters, 596 U.S.

1 (2022); GE Energy Power Conversion France SAS, Corp. v.

Outokumpu Stainless USA, LLC, 590 U.S. 432 (2020).

4

See Flower Foods v. Brock, No. 24-935 (cert. granted Oct. 20,

2025).

5

Medina, 145 S. Ct. 2219; A.J.T. by and through A.T. v. Osseo

Area Schs. Ind. Sch. Dist. No. 279, 605 U.S. 335 (2025) (Thomas, J.,

concurring); Moyle, 603 U.S. 324; Talevski, 599 U.S. 166;

Cummings v. Premier Rehab Keller, P.L.L.C., 596 U.S. 212 (2022).

6

23

resolved by the United States Supreme Court.”

Pet. App. 35a (Bronni, J., joined by Wood, J., dissenting

from the denial of review). Despite the Court of Appeals’

clear misapplications of federal statutory and

constitutional law, the Supreme Court of Arkansas has

“le[ft] it to the United States Supreme Court to rectify

that clear error.” Pet. App. 38a. The Court should accept

the invitation from Justices Bronni and Wood, and review

the decision below to provide much needed clarity

regarding both the FAA and the Spending Clause.

A.1. The Court of Appeals’ misinterpretation of the

Spending Clause greatly expands the power of Congress

and agencies that claim delegated rulemaking authority,

at the expense of State sovereignty. As this Court has

noted, “nothing in Article I, section eight, clause one

endows Congress with a power to regulate, for if it did,

the ‘enumeration of specific powers’ elsewhere in Article

I would be rendered largely pointless, and the Nation

would trade a limited federal government for ‘an

unlimited’ one.” Medina, 145 S. Ct. at 2231 (quoting 2 J.

Story, Commentaries on the Constitution of the United

States § 904, 906, pp. 367, 369 (1833)). The decision below

and the mistaken constitutional principles on which it

rests exacerbate the “explosive growth of the

administrative state.” West Virginia v. EPA, 597 U.S.

697, 741 (2022) (Gorsuch, J., concurring).

The rule announced below would radically expand

agencies’ lawmaking power whenever they dispense

federal funds. Funding conditions could be recast as

direct prohibitions: The Department of Education, for

example, could declare it “illegal” under Title IX for

federally funded colleges to let students accused of

misconduct present defense witnesses; the Department of

Transportation could void airline carriage contracts

unless airlines accept pets of any size; and the

Department of Agriculture could invalidate sales by

24

recipients of Federal Crop Insurance Corporation funds

if prices exceed “market” levels. A State that lowers its

drinking age to eighteen would not merely forfeit highway

money; it would violate federal law. Even the National

Endowment of the Arts could outlaw conduct simply by

attaching grant conditions. In short, under the decision

below, any agency that writes checks would also wield

sovereign lawmaking authority—without a clear

congressional command.

That outcome would be disastrous for the

constitutional balance of powers and for regulated parties

alike. Declaring conduct “illegal” carries sweeping

consequences: It exposes individuals and institutions to

civil and even criminal penalties, nullifies contracts,

invites private lawsuits, and triggers enforcement actions

by federal and state authorities. The result would collapse

the distinction between conditional spending and

regulatory power, transforming grant conditions into

nationwide mandates. Businesses, States, and private

citizens would be left to guess which grant condition or

agency policy might next become a source of federal

“illegality,” eroding predictability, undermining state

sovereignty, and vastly expanding the reach of the

administrative state beyond constitutional bounds.

The potential reach is staggering. In 2025, the

Department of Health and Human Services provided

more than $1.9 trillion in financial assistance across

twelve sub-agencies.7 Under the Arkansas court’s

interpretation of the Constitution, each of these entities

can proscribe conduct with the force of law merely by

HHS TAGGS, “A Closer Look at HHS Total Assistance,”

available at https://taggs.hhs.gov/TotalAssist (last visited Oct. 15,

2025). Twelve HHS sub-agencies award grants. HHS TAGGS,

“Grants

by

OPDIV,”

available

at

https://taggs.hhs.gov/ReportsGrants/GrantsByOPDIV (last visited

Oct. 15, 2025).

7

25

placing conditions on grants. HRSA could make it illegal

for employers to request an exemption to the Affordable

Care Act’s contraceptive coverage mandate. Contra Little

Sisters of the Poor Saints Peter & Paul Home v.

Pennsylvania, 591 U.S. 657 (2020). And the CDC would

have the ability to enact an eviction moratorium in any

county that receives federal funds, preempting State law

to the contrary. Contra Alabama Ass’n of Realtors, 594

U.S. 758. The administrative leviathan would find in every

federal dollar a new domain to rule.

Such a broad, unfettered view of Congress’s spending

power would upend the way the Spending Clause was

understood “[f]or nearly all of our Nation’s history.”

Talevski, 599 U.S. at 196 (Thomas, J., dissenting). Federal

grants are so prevalent that the rule below goes beyond

putting a “gun to the head” of States and regulated

parties. NFIB, 567 U.S. at 581. It holds them hostage,

powerless to the whims of any agency with spending

authority. Only this Court’s intervention can lower the

gun the administrative state has trained on States and

private citizens alike and restore the Constitution’s

intended limits on unchecked federal power.

2. The rule announced below puts American

federalism at risk. It upsets the Constitution’s careful

balance between state and federal power. It is critical that

“Spending Clause statutes can[not] preempt the laws of

non-consenting States.” Moyle, 603 U.S. at 358 (Alito, J.,

joined by Thomas and Gorsuch, JJ., dissenting); see also

id. at 357 (“States cannot be bound by terms that they

never accepted, so it is hard to see how a third party’s

agreement with the Federal Government can deprive a

State of the ability to enforce its … laws.”). At a minimum,

Spending Clause legislation must be “unambiguously

clear,” before it may “intrude on an area traditionally left

to state control,” id. at 356. In this case, the Arkansas

courts declined to apply arbitration agreements that

26

would be valid and binding under Arkansas law because

they believed Spending Clause legislation rendered those

agreements federally “illegal.” That misunderstands the

nature of Spending Clause legislation in our federalist

system. This Court should grant certiorari to clarify

whether Congress may use the Spending Clause to render

conduct that is permissible under state law illegal. The

answer to that question has profound implications for the

balance of State and federal power, and the authority of

federal regulators who seek to achieve through spending

conditions what the Constitution bars Congress from

achieving through direct regulation. See id. at 356-57

(Alito, J., joined by Thomas and Gorsuch, JJ., dissenting).

B.1. This Court should also grant certiorari to decide

the Federal Arbitration Act question. Congress enacted

the FAA to protect the freedom of businesses and

individuals to contract for these more efficient disputeresolution procedures. There are “many … benefits of

arbitration (efficiency, less expense, less intrusive

discovery, and the like),” and those benefits are

“irretrievably lost” when courts deny a motion to compel

arbitration despite the existence of a valid arbitration

agreement. Coinbase, Inc. v. Bielski, 599 U.S. 736, 743

(2023). If CMS can invalidate otherwise valid binding

arbitration agreements, parties may be “forced to settle

to avoid the [trial] court proceedings (including discovery

and trial) that they contracted to avoid through

arbitration.” Id. This creates the potential for “coercion,”

as “liability can lead to what Judge Friendly called

‘blackmail settlements.’” Id. (quoting H. Friendly,

Federal Jurisdiction: A General View 120 (1973)).

This Court has recognized time and again that

Congress’s chief objective in enacting the FAA was “to

move the parties to an arbitrable dispute out of court and

into arbitration as quickly and easily as possible.” Smith

v. Spizzirri, 601 U.S. 472, 478 (2024) (quoting Moses H.

27

Cone Mem. Hosp., 460 U.S. at 22). Arkansas has made this

same policy choice, strongly favoring both arbitration as

a whole and expeditiously moving parties from litigation

to arbitration. See Pet. App. 35a (“Arkansas law ‘strongly

favor[s]’ arbitration.”) (modification in original); Am. Ins.

Co. v. Cazort, 871 S.W.2d 575, 578 (Ark. 1994). The

decision below thus offends both federal and state policies

regarding arbitration. The longer this Court waits to

review this question, the more that the strong federal

policy favoring arbitration will be undermined, at the

expense of contracting parties and State law permitting

those agreements.

2. The enforceability of arbitration agreements is a

question of exceptional importance. As of 2019, more than

80% of Fortune 100 companies included arbitration

provisions in their consumer contracts. Imre Stephen

Szalai, The Prevalence of Consumer Arbitration

Agreements by America’s Top Companies, 42 U.C. Davis

L. Rev. 233, 234 (2019). And more than 60% of online retail

e-commerce sales are covered by arbitration agreements,

which ensure uniformity in dispute resolution with

customers around the globe. Id. Meanwhile, federal

spending programs are ubiquitous, touching practically

every sector of American business and life. See Talevski,

599 U.S. at 198-99 (Thomas, J., dissenting). To say that

federal regulators, in imposing conditions on federal

grants, may declare arbitration agreements “illegal,

invalid, unenforceable, [and] void,” Pet. App. 10a, is to

make the FAA contingent on bureaucratic caprice. That

result contravenes our constitutional structure and

defeats Congress’s enacted policy to permit the “efficient,

streamlined procedures” that arbitration provides.

Concepcion, 563 U.S. at 344. If allowed to stand, the

decision below would have far-reaching ramifications for

private contracting.

28

C. This case is an ideal vehicle to decide this critical

question. The questions presented were clearly decided

and dispositive below, creating a clean vehicle for review.

While the Court of Appeals also found the arbitration

agreement to be unconscionable, that determination

relied on the Revised CMS Rule and, thus, does not

present an independent and adequate state ground for

affirmance nor a basis for denying certiorari.

Pet. App. 13a. As Justices Bronni and Wood noted, the

“purported state-law unconscionability analysis was

really just an erroneous federal analysis.” Pet. App. 38a.

The state law question is neither adequate, as it cannot

support the decision on its own, nor independent, as it is

dependent on federal law.

Further, the issue is fully developed and the split is

entrenched. The Arkansas Court of Appeals and Supreme

Court examined and discussed the Eighth Circuit’s

decision in Northport, yet arrived at a different result. See

Pet. App. 35a (recognizing that the decision below

“creates a … split that, absent [the Arkansas Supreme

Court’s] correction, is likely to be resolved by the United

States Supreme Court.”). Even with full recognition of the

other side of the issue, the Arkansas Court of Appeals

expressly split from the Eighth Circuit. Further

percolation would serve no benefit.

This case presents the Court an opportunity to fully

answer and resolve an important and recurring question

about the fundamental governmental structure created

by the Constitution. Legislation enacted pursuant to the

Spending Clause is akin to a contract—providing the

recipient with the knowing and voluntary choice to accept

a benefit in exchange for behaving a certain way and risk

withdrawal for breaching the agreement. Spending

Clause legislation does not affect the legality of private

conduct or contracts. The decision below came to the

wrong conclusion, giving Congress and federal agencies

29

more power than the Constitution allows. Only this Court

can “rectify that clear error.” See Pet. App. 38a.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

NICOLE L. MASIELLO

ARNOLD & PORTER

KAYE SCHOLER LLP

250 West 55th Street

New York, NY 10019

OCTOBER 2025

ANDREW T. TUTT

Counsel of Record

SPENCER FABER

JOHN V. HOOVER

DANIEL YABLON

ARNOLD & PORTER KAYE

SCHOLER LLP

601 Massachusetts Ave., NW

Washington, DC 20001

(202) 942-5000

andrew.tutt@arnoldporter.com