Homestyle Direct, LLC v. DHS

The validity of an administrative rule is irrelevant if the agency seeks to enforce the obligation as a contract term.

This case arose from a Department of Human Services (DHS) contested-case proceeding where a contract to provide home delivered meals to medicaid clients was revoked because the contractor, Homestyle Direct, failed to comply with DHS food standards. Homestyle Direct argued that the food standards in the contract were not enforceable because they should have been enforced as administrative rules. DHS argued that whether the standards could have been enforced as rules was irrelevant to the enforceability of the contract. The Court of Appeals held that DHS could not enforce those rules as terms of a contract. The terms of the contract in dispute were in the form of new standards issued by DHS to Home Delivered Meal Program (HDM) providers, which stated "by signing the provider enrollment form, providers agree to meet the [HDM] standards." The Supreme Court, Citing, Coats v. ODOT, found that "the validity or invalidity of a rule as a rule is irrelevant if the agency seeks to enforce the obligation as a contract term." The Supreme Court held that the HDM provider agreement was an enforceable contract and DHS can enforce compliance with the standards provided in the HDM provider agreement. Decision of the Court of Appeals reversed. Final order of the Department of Human Services is affirmed.