Heckler v. Cmty. Health Servs. - 467 U.S. 51, 104 S. Ct. 2218 (1984)

Rule:

Estoppel is an equitable doctrine invoked to avoid injustice in particular cases. While a hallmark of the doctrine is its flexible application, certain principles are tolerably clear. If one person makes a definite misrepresentation of fact to another person having reason to believe that the other will rely upon it and the other in reasonable reliance upon it does an act the first person is not entitled to regain property or its value that the other acquired by the act, if the other in reliance upon the misrepresentation and before discovery of the truth has so changed his position that it would be unjust to deprive him of that which he thus acquired. Thus, the party claiming the estoppel must have relied on its adversary's conduct in such a manner as to change his position for the worse, and that reliance must have been reasonable in that the party claiming the estoppel did not know nor should it have known that its adversary's conduct was misleading.

Facts:

The Health and Human Services Provider Reimbursement Review Board determined that a nonprofit provider of health care services had received and expended federal funds to which it was not entitled. Petitioner Heckler, Secretary of Health and Human Services sought to recover federal funds paid to respondent Community Health Services of Crawford County, Inc., Et Al., home health care provider under a contract in which respondent received reimbursement through a fiscal intermediary for services provided to individuals eligible for Medicare benefits. Under the Medicare program, grants received by a provider to pay operating costs had to be subtracted from reasonable costs, for which the provider could receive reimbursement. After respondent began receiving grants for salaries and benefits for certain employees, they sought advice from the fiscal intermediary to determine if the salaries for which it was receiving grant money were reimbursable costs. The district court entered summary judgment in favor of the government. The court of appeals reversed, holding that petitioner was estopped from recovering the overpayments on the ground that a fiscal intermediary had erroneously advised respondent that CETA grants did not have to be offset against reimbursable Medicare costs. Petitioner appealed. 

Issue:

Was the petitioner estopped from recovering federal funds?

Answer:

No. The judgment of the lower court that petitioner was estopped from bringing reimbursement claim was reversed and remanded.

Conclusion:

The court reversed the lower court’s decision and held that petitioner was not estopped from asserting a claim for reimbursement of excess money paid because respondent should not have been induced to rely on the erroneous oral advice of petitioner's agent that the funds were reimbursable. Where respondent had not lost any legal right, or suffered any adverse change in its status, the court held that there was nothing to warrant prohibiting petitioner's recovery of the money.