Federal Common Law Right of Action of Third-Party Beneficiaries to Government Contracts
Whether, in the absence of a private right of action to enforce a statute, federal courts have the federal common law authority to confer a private right of action simply because the statutory requirement sought to be enforced is embodied in a contract.
NCLC urged the Supreme Court to reverse a Ninth Circuit decision that a private plaintiff, as a third party beneficiary, may sue on a government contract when no private right of action has been conferred by the statute governing the contract. In this case, the County of Santa Clara alleges its medical clinics were overcharged by Astra USA for pharmaceuticals covered by a federal drug-discounting program. In its brief, NCLC argued that the Ninth Circuit's decision is erroneous as the Supreme Court has never used federal common law to enforce federal statutes lacking a private right of action. NCLC warned that if the decision is allowed to stand, companies that do business with the government would be exposed to burdensome and expensive litigation with the possibility of significant liability.
Previously, NCLC filed an amicus brief urging the Supreme Court to grant certiorari.
The Supreme Court reversed the Ninth Circuit's ruling that a private plaintiff, as a third party beneficiary, may sue on a government contract when no private right of action has been conferred by the statute governing the contract. The Supreme Court found that suits by 340B entities [including public hospitals, private clinics, and other health centers] to enforce ceiling-price contracts running between drug manufacturers and the Secretary of HHS are incompatible with the statutory regime.
Amicus brief supporting certiorari filed 5/20/10. Cert. granted 9/28/10. Amicus brief on merits filed 11/19/10. Moot court held 1/10/11. Decided 3/29/11.