LARISA'S HOME CARE, LLC, an Oregon limited liability company, Petitioner on Review,
Karen NICHOLS-SHIELDS, the duly appointed Personal Representative of the Estate of Isabell Prichard, Deceased, Respondent on Review.
and submitted March 3, 2017, at Willamette University College
of Law, Salem, Oregon.
review from the Court of Appeals CC C124865CV; CA
Day, Day Law & Associates, PC, Portland, argued the cause
and fled the brief for petitioner on review. Also on the
brief was Matthew Swihart.
Daraee, Luby/Daraee Law Group, PC, Tigard, argued the cause
and fled the brief for respondent on review.
Balmer, Chief Justice, and Kistler, Walters, Landau,
Nakamoto, Flynn, and Duncan, Justices. [**]
Or. 116] Case Summary:
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.
formula for unjust enrichment claims articulated in Jaqua
v. Nike, Inc., 125 Or.App. 294, 298, 865 P.2d 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 representations 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.
decision of the Court of Appeals is reversed, and the case is
remanded to the Court of Appeals for further proceedings.
Or. 117] NAKAMOTO, J.
issue presented is whether an adult foster care provider
claiming unjust enrichment may recover the reasonable value
of its services from a defendant who, through fraud, obtained
a lower rate from the provider for the services. 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 therefore 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.
facts leading to this action revolve around the Medicaid
application of decedent Isabell Prichard and the services
that Prichard received at Medicaid rates from plaintiff,
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 P.3d 526
(2013) (so noting and citing authorities).
Background on the Medicaid Program
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 U.S. 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 [362 Or. 118] (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 disabilities); ORS 410.070
(department's duties regarding same); ORS 411.060
(authority to adopt and enforce rules).
department requires an application to determine 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 person applying for Medicaid benefits must
disclose any asset transfers made within the past 60 months.
That disclosure 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).
Plaintiffs Services to Prichard at Medicaid Rates
owns two adult foster homes for the elderly. Plaintiff had
contracted with the department to provide services in a
home-like setting to patients who qualified for Medicaid. For
those patients, the rates charged would be those set by the
an elderly woman who suffered from cognitive difficulties and
dementia, became one of plaintiff's patients in June
2007. Prichard then resided and received [362 Or. 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
Medicaid rates were substantially below the rates paid by
plaintiff's non-Medicaid patients, or "private
pay" patients. For private pay patients, the rate varied
depending on the level of care. During Prichard's stay,
plaintiff 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 facility. 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
Prichard's Medicaid Application
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 completed the application form
on April 17, 2007. Gardner affirmatively 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 department approved
Prichard for Medicaid benefits.
affairs were not as represented on the form, however. Her
application form was false in its representation that there
had been no transfers in the past 60 months. In actuality,
Gardner had for years been transferring 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 transferred away over
$150, 000 of Prichard's assets.
misconduct was discovered by another of Prichard's
children: defendant Karen Nichols-Shields, who was appointed
the personal representative for Prichard's [362 Or. 120]
estate. In 2009, defendant contacted the police and reported
her brother for theft.
Gardner pleaded guilty to three counts of criminal
mistreatment in the first degree. Gardner's sentence
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
Plaintiffs Action Against Prichard's Estate
defendant, in her capacity as personal representative, denied
plaintiff Larisa's Home Care, LLC's claim against
Prichard's estate, plaintiff filed this
action. In its complaint, plaintiff sought
equitable relief for unjust enrichment. 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.
bench trial, the trial court ruled in favor of plaintiff,
concluding that there was unjust enrichment. The court
"[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 [362 Or. 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."
court also concluded that Medicaid law did not prevent
plaintiff's recovery. Accordingly, the court entered
judgment in favor of plaintiff for $48, 477.
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 P.3d 595 (2016).
Court of Appeals began with its precedent concerning the
elements of a "quasi-contractual claim of unjust
enrichment." Id. at 815 (internal quotation
marks and citation 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 P.3d 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 P.2d 442 (1993).
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 precedent 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; [362 Or. 122] 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.
the first form of unjust enrichment, the court determined
that plaintiff did not have a reasonable expectation of
payment. Prichard had been qualified for Medicaid, and
plaintiff thus was contractually obligated to charge her only
the Medicaid rate. Plaintiff's reasonable expectation 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.
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 policies 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
concluded 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
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
turning to our analysis, we note the scope of this opinion.
When we allowed review, we did so to address [362 Or. 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.
Arguments on Review
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 dispositive.
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
qualified for Medicaid benefits; she would have been
disqualified had the misrepresentations not been made.
Second, Gardner acted as Prichard's agent in making those
misrepresentations, and Prichard was legally responsible to
third parties for those misrepresentations, even though she
had not made them herself. Third, Prichard's estate was
unlawfully 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.
asserts that the Court of Appeals correctly 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, plaintiff had no
reasonable expectation of payment, and defendant should not
be expected to pay. Defendant further contends that societal
expectations have been satisfied because [362 Or. 124] 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.
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 liability for
unjust enrichment and defendant asserting that the factors
listed in Jaqua for determining an
"unjust" benefit should govern. The parties also