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Homestyle Direct, LLC v. Department of Human Services

Summarized by: 

Date Filed: 09-21-2011
Case #: A145136
Schuman, P.J. for the Court; Wollheim, J.; & Nakamoto, J.
Full Text Opinion: http://www.publications.ojd.state.or.us/A145136.pdf

Administrative Law: An agency cannot enforce its own improperly promulgated standards by putting them in a provider agreement and then enforcing a rule that allows sanctions for noncompliance with that agreement.

Homestyle Direct, LLC (Homestyle) was authorized by the Department of Human Services (DHS) to prepare packaged meals for eligible elderly or disabled persons. In a contested case hearing, DHS found that Homestyle had violated an agreement to abide by certain standards and the agency revoked petitioner’s status as an approved provider. The administrative law judge ruled in favor of DHS because the rule was enforceable as a contract, even though the rule was never properly promulgated under the Administrative Procedures Act (APA). On judicial review, Homestyle contended that the standards at issue were invalid because they had never been promulgated. DHS argued that an agency can avoid statutorily mandated rulemaking procedures and enforce the rule by incorporating it into a contract. The Court of Appeals found that the standards Homestyle allegedly violated did not comply with the APA standards found in ORS 409.050. DHS should not have circumvented the unambiguous requirement to promulgate the rules according to the APA standards. Reversed and remanded.