Tri-State Memorial Hospital v. United States, No. 2:25-cv-00181-TOR (E.D. Wash.), Answer to First Amended Complaint (ECF No. 40), June 11, 2026
Summary
The United States' Answer to First Amended Complaint, ECF No. 40, filed June 11, 2026 in Tri-State Memorial Hospital v. United States of America, Case No. 2:25-cv-00181-TOR, in the U.S. District Court for the Eastern District of Washington. The answer responds paragraph by paragraph to the hospital's complaint about Employee Retention Credit (ERC) refunds under the CARES Act, admitting some paragraphs, denying others and stating lack of sufficient information on others. For example, it admits that Tri-State applied for an ERC refund and denies that the IRS engaged in a lengthy delay. It invokes equitable recoupment to offset any recovery and asks for judgment for the United States and costs. The signature block carries /s/ Charles J. Butler.
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Cite this document
“Tri-State Memorial Hospital v. United States, No. 2:25-cv-00181-TOR (E.D. Wash.), Answer to First Amended Complaint (ECF No. 40), June 11, 2026.”
Original at storage.courtlistener.com. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/tri-state-memorial-hospital-v-united-states-no-2-25-cv-00181-tor-e-d-w-114b116fd9/
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1 BRETT SHUMATE
Assistant Attorney General
2
3 JOSHUA WU
Deputy Assistant Attorney General
4 Tax Litigation Branch
5 CHARLES J. BUTLER
Assistant Director
6 Tax Litigation Branch
7 Civil Division, Department of Justice
P.O. Box 683
8 Washington, DC 20044
(202) 514-6062
9 Charles.J.Butler@usdoj.gov
10
Counsel for the United States
11
12
UNITED STATES DISTRICT COURT
13
EASTERN DISTRICT OF WASHINGTON
14
15
TRI-STATE MEMORIAL HOSPITAL, Case No. 2:25-cv-00181-TOR
16
Plaintiff,
17
UNITED STATES’ ANSWER TO
18 v. FIRST AMENDED COMPLAINT
19
UNITED STATES OF AMERICA,
20
Defendant.
21
22
23
24 The United States responds to Plaintiff Tri-State Memorial Hospital’s First
25 Amended Complaint as follows:
26
27 Complaint Paragraph 1: In March 2020, the federal government enacted the
28 CARES Act to aid businesses and individuals in response to the unprecedented
ANSWER TO FIRST AMENDED COMPLAINT 1
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1 public health crisis caused by the COVID-19 pandemic. The CARES Act was
2 passed with large bipartisan support in Congress and was signed into law by
3 President Trump.
4 Answer: Admits.
5
6 Complaint Paragraph 2: The CARES Act created the Employee Retention Credit
7 (“ERC”) for employers who continued to pay qualified wages to their employees
8 during 2020 and 2021. The statute created a tax credit against applicable
9 employment taxes for each calendar quarter in which a business was eligible. See
10 CARES Act § 2301(a); I.R.C. § 3134(a).
11 Answer: Admits.
12 Footnote 1: See the Coronavirus Aid, Relief, and Economic Security Act, Pub. L.
13 No. 116-136, 134 Stat. 281 (2020), as amended by § 206 and § 207 of the
14 Taxpayer Certainty and Disaster Tax Relief Act (hereinafter the “Relief Act”),
15 enacted as Division EE of the Consolidated Appropriations Act of 2021 Pub. L.
16 No. 116-260, 134 Stat. 3038 (2020) (hereinafter, “Consolidated Appropriations
17 Act”), and American Rescue Plan Act of 2021, Pub. L. No. 117-2, 135 Stat. 8
18 (2021) (codified at I.R.C. § 3134) (hereinafter, “American Rescue Plan Act”)
19 (providing extensions through January 1, 2022).
20 Answer: Footnote 1 consists of citations to statutes and does not require a
21 response.
22
23 Complaint Paragraph 3: According to the United States Department of the
24 Treasury, the department to which the Internal Revenue Service (“IRS”) belongs,
25 the CARES Act and the Coronavirus Response and Consolidated Appropriations
26 Act of 2021 “provided fast and direct economic assistance for American workers,
27 families, small businesses, and industries.”
28
ANSWER TO FIRST AMENDED COMPLAINT 2
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1 Answer: The United States admits that the IRS is a bureau of the Department of
2 Treasury. The United States lacks sufficient information to admit or deny the
3 remaining allegations in paragraph 3.
4 Footnote 2: U.S. Dep’t of the Treasury, About the CARES Act and the Consol.
5 Appropriations Act, (last visited Aug. 19, 2024),
6 https://home.treasury.gov/policyissues/coronavirus/about-the-cares
7 act#:~:text=U.S.%20Department%20of%20the%20Treasury,-
8 Search&text=The%20Coronavirus%20Aid%2C%20Relief%2C%20and,%2C%20s
9 mall%20businesses%2C%20and%20industries.
10 Answer: Footnote 2 appears to cite a webpage that no longer exists and does not
11 require a response.
12
13 Complaint Paragraph 4: Tri-State qualified for the ERC under the text of the
14 CARES Act and applied for a refund with the IRS. After a lengthy delay, the IRS
15 has failed to process Plaintiff’s claims for an ERC refund.
16 Answer: The United States admits that Tri-State applied for an ERC refund and
17 denies that the IRS engaged in a lengthy delay. The United States lacks sufficient
18 information to admit or deny the remaining allegations in paragraph 4.
19
20 Complaint Paragraph 5: Tri-State brings this lawsuit to obtain the credits it is
21 entitled to receive under the CARES Act.
22 Answer: The United States admits that Tri-State brings this suit to obtain ERCs.
23 The United States otherwise lacks sufficient information to admit or deny the
24 allegations in paragraph 5.
25
26 Complaint Paragraph 6: The Court has subject matter jurisdiction under 28
27 U.S.C. §§ 1331, 1340 and 1346, I.R.C. § 7422, and 5 U.S.C. §§ 702, 704, and 706.
28
ANSWER TO FIRST AMENDED COMPLAINT 3
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1 Answer: The United States admits that, if Tri-State duly filed claims for refund
2 with the IRS and otherwise met jurisdictional prerequisites, the Court has
3 jurisdiction under 28 U.S.C. §§ 1340 and 1346(a)(1). The United States otherwise
4 denies the allegations in paragraph 6.
5
6 Complaint Paragraph 7: Venue is proper under 28 U.S.C. § 1391(e)(1) and
7 § 1402 because Tri-State maintains its principal place of business and/or principal
8 office in this district in Clarkston, Washington and a substantial part of the events
9 giving rise to this action occurred in this district.
10 Answer: Admits.
11
12 Complaint Paragraph 8: Tri-State is a nonprofit corporation organized in the
13 State of Washington with its principal place of business in Clarkston, Washington.
14 Tri-State Memorial Hospital was originally incorporated on November 6, 1947, as
15 Asotin County Memorial Hospital, Inc. Tri-State Health operates as a not-for-profit
16 healthcare provider, delivering a broad spectrum of medical services, including
17 primary and specialty care, surgical procedures, outpatient services, and wellness
18 initiatives. Tri-State’s mission is to provide high quality healthcare throughout the
19 Clarkston community and beyond.
20 Answer: The United States lacks sufficient information to admit or deny the
21 allegations in paragraph 8.
22
23 Complaint Paragraph 9: The United States of America is the Defendant.
24 Answer: Admits.
25
26 Complaint Paragraph 10: In the beginning of 2020, COVID-19 swept through
27 the United States and the federal, state, and local governments issued historically
28 unprecedented orders to stem the spread of the disease. They issued lockdowns,
ANSWER TO FIRST AMENDED COMPLAINT 4
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1 required businesses to use Personal Protective Equipment (PPE), restricted group
2 gatherings, added restrictions on health care providers, and forced business
3 closures. Those orders had an expected side effect—they exacerbated the already
4 substantial disruptions to the economy from the pandemic.
5 Answer: The United States lacks sufficient information to admit or deny the
6 allegations in paragraph 10.
7
8 Complaint Paragraph 11: Congress swiftly acted to mitigate the economic fallout
9 from widespread business impairments and job losses stemming from COVID-19
10 and government orders. In March 2020, Congress enacted the CARES Act.
11 Answer: The United States admits that in March 2020, Congress enacted the
12 CARES Act. The United States lacks sufficient information to admit or deny the
13 remaining allegations in paragraph 11.
14
15 Complaint Paragraph 12: The CARES Act provided sweeping economic
16 support. As articulated by several members of Congress, one of the primary goals
17 of the CARES Act was to provide billions in assistance to businesses so they could
18 keep workers on their payrolls. Along with the ERC, the CARES Act authorized
19 direct payments to households and businesses on expedited timelines through
20 emergency measures such as the Paycheck Protection Program (PPP) and
21 Economic Impact Payments. See CARES Act §§ 1102, 6428.
22 Answer: The United States lacks sufficient information to admit or deny the
23 allegations in the first sentence of paragraph 12. The United States admits the
24 remaining allegations in paragraph 12.
25 Footnote 3: See, e.g., 166 Cong. Rec. S1897 (2020) (Sen. Collins explaining that
26 the sponsoring Senators “kept in mind the common goal of protecting those
27 employees . . . who are at risk of being laid off because of the cashflow problems
28 of their employers” and had the “joint vision . . . to help small businesses and their
ANSWER TO FIRST AMENDED COMPLAINT 5
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1 employees make it through to the other side of this crisis by providing cashflow
2 assistance quickly to employers who agree to keep their workers on the payroll”);
3 166 Cong. Rec. E347 (2020) (Rep. Adams explaining that she supported the
4 CARES Act “because it provides billions in assistance to our number one job
5 creators, our small businesses, as they look to make payroll and keep their workers
6 employed”); 166 Cong. Rec. E343 (2020) (Rep. Crist voicing his support of the
7 CARES Act because it “provides over $350 billion for small businesses on Main
8 Street in grants, forgivable loans, and tax credits so they can make payroll and pay
9 monthly bills to keep their businesses afloat”).
10 Answer: Footnote 3 appears to quote from the Congressional Record and does not
11 require a response.
12
13 Complaint Paragraph 13: The ERC program was a significant part of the
14 CARES Act and central to accomplishing the Act’s goal of encouraging businesses
15 to keep workers on their payrolls. The ERC program created a tax credit for
16 employers who were adversely affected by COVID-19 but nonetheless continued
17 to pay qualified wages, including some health plan expenses, to their employees.
18 See CARES Act § 2301; I.R.C. § 3134(c)(3); FS-2020-05 (May 2020). By helping
19 businesses maintain their employees, the ERC program also sought to lower
20 enrollments in public assistance programs—like Unemployment Insurance and
21 Medicaid—by people who might lose their jobs.
22 Answer: The United States lacks sufficient information to admit or deny the
23 allegations in the first and third sentences of paragraph 13. The United States
24 admits the allegations in the second sentence.
25 Footnote 4: See also U.S. Dep’t of the Treasury, Emp. Retention Tax Credit: What
26 You Need to Know, (last visited Aug. 19, 2024),
27 https://home.treasury.gov/system/files/136/Employee-Retention-Tax-Credit.pdf.
28 Answer: Footnote 4 cites a link to a document and does not require a response.
ANSWER TO FIRST AMENDED COMPLAINT 6
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1 Complaint Paragraph 14: To ensure the program’s effectiveness, Congress made
2 the ERC program widely available. Congress amended the CARES Act to require
3 the IRS to conduct a public information campaign about the program in
4 coordination with the Small Business Administration to encourage businesses to
5 participate. See Relief Act § 207(i) (requiring government “outreach” to businesses
6 by giving “notice about the credit allowed under this section and the requirements
7 for eligibility to claim the credit”). It amended the Act to retroactively remove
8 certain categorical bars on ERC eligibility for qualifying quarters in 2020. See
9 Relief Act § 206. It also amended the CARES Act to relax the program’s eligibility
10 requirements and increase the amount of the credit for qualifying quarters in 2021.
11 See Relief Act § 207(b), (d).
12 Answer: The United States lacks sufficient information to admit or deny the
13 allegations in the first sentence of paragraph 14. The United States admits the
14 remaining allegations in paragraph 14.
15 Footnote 5: See also U.S. Dep’t of the Treasury, Treasury Encourages Bus.
16 Impacted by COVID-19 to Use Emp. Retention Credit (Mar. 31, 2020),
17 https://home.treasury.gov/news/press-releases/sm962.
18 Answer: Footnote 5 cites a Treasury press release and does not require a response.
19 Footnote 6: See also IRS Notice 2021-20(II.)(A.) (Mar. 1, 2021) (“Section 206 of
20 the Relief Act amended section 2301 of the CARES Act to permit an employer that
21 received a PPP loan to be eligible to claim an employee retention credit under
22 section 2301 of the CARES Act . . . , effective retroactive to the original effective
23 date of the CARES Act.”).
24 Answer: Footnote 6 cites to a Treasury press release and does not require a
25 response.
26
27
28
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1 Complaint Paragraph 15: The original CARES Act, signed into law in March
2 2020, provided a tax credit equal to 50% of qualified wages paid to employees, up
3 to a maximum of $10,000 per employee of qualified wages for the year 2020.
4 Answer: Admits.
5
6 Complaint Paragraph 16: In late 2020, the CARES Act was amended to raise the
7 credit and extend its duration. The amendment allowed eligible employers to claim
8 70% of the qualified wages paid with a cap of $10,000 per employee of qualified
9 wages for each calendar quarter. Relief Act § 207(b); see also I.R.C. § 3134(a),
10 (b)(1)(A). This increased credit was extended to the first and second quarters of
11 2021, and eventually through the third quarter of 2021. Relief Act § 207(a);
12 American Rescue Plan Act (providing further relief of 70% of a cap of $10,000 for
13 the third and fourth quarters of 2021).
14 Answer: Admits.
15
16 Complaint Paragraph 17: In sum, an eligible employer could claim a 2020 credit
17 up to $5,000 per employee for the year, and, for 2021, the employer could claim a
18 credit up to $7,000 per employee per quarter.
19 Answer: Admits.
20
21 Complaint Paragraph 18: Unless otherwise excepted, qualified wages are wages
22 and compensation (subject to Social Security and Medicare taxes) paid by an
23 eligible employer to eligible employees and include the eligible employer’s
24 qualified health plan expenses that were properly allocable to such wages.
25 Answer: The United States admits that CARES Act § 2301(c)(5)(A) provides that
26 “wages” generally means wages as defined in 26 U.S.C. § 3121(a) and
27 compensation as defined in 26 U.S.C. § 3231(e). In addition, CARES Act
28 § 2301(c)(5)(A) provides that “wages” include amounts paid by an eligible
ANSWER TO FIRST AMENDED COMPLAINT 8
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1 employer to provide and maintain a group health plan (as defined in 26 U.S.C.
2 § 5000(b)(1)), but only to the extent that the amounts are excluded from the gross
3 income of employees by reason of 26 U.S.C. § 106(a). The United States otherwise
4 denies the allegations in paragraph 18.
5
6 Complaint Paragraph 19: The ERC was terminated for most employers in the
7 fourth quarter of 2021 by the Infrastructure Investment and Jobs Act
8 (“Infrastructure Act”). See IR-2021-242 (Dec. 6, 2021). Under the Infrastructure
9 Act, only a recovery startup business may claim the ERC in the fourth quarter of
10 2021. Id.
11 Answer: Admits.
12
13 Complaint Paragraph 20: The ERC was available to businesses of many sizes,
14 but an eligible business generally had to meet one of two criteria for a given
15 quarter in 2020 or 2021: (1) a statutorily defined decline in the business’s gross
16 receipts when comparing an applicable quarter in 2020 or 2021 with the same
17 quarter in 2019, or (2) the business was fully or partially suspended due to a
18 governmental order during an applicable quarter in 2020 or 2021.
19 Answer: Admits.
20
21 Complaint Paragraph 21: A business qualifies as an “eligible employer” if it
22 suffered a statutorily required reduction in gross receipts in 2020 and 2021, as
23 compared to 2019. CARES Act § 2301(c)(2)(B); I.R.C. § 3134(c)(2)(A)(ii)(II).
24 Answer: Admits.
25
26 Complaint Paragraph 22: A qualifying quarter for 2020 is a quarter where the
27 business’s gross receipts were 50% less than the same quarter in 2019. CARES Act
28 § 2301(c)(2)(B).
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1 Answer: Admits.
2
3 Complaint Paragraph 23: A qualifying quarter for 2021 is a quarter when the
4 business’s gross receipts were 20% less than the same quarter in 2019. Relief Act §
5 207(d); I.R.C. § 3134(c)(2)(A).
6 Answer: Admits.
7
8 Complaint Paragraph 24: A business also qualifies as an “eligible employer” if it
9 “is fully or partially suspended during the calendar quarter due to orders from an
10 appropriate governmental authority limiting commerce, travel, or group meetings
11 (for commercial, social, religious, or other purposes) due to the coronavirus disease
12 of 2019 (COVID-19).” CARES Act § 2301(c)(2)(A)(i); I.R.C. §
13 3134(c)(2)(A)(ii)(I).
14 Answer: Admits.
15
16 Complaint Paragraph 25: The text of the CARES Act does not require anything
17 additional for a business to qualify as an eligible employer under the suspension
18 criteria.
19 Answer: Denies.
20
21 Complaint Paragraph 26: In March 2021—roughly a year after Congress passed
22 the CARES Act—the IRS published a 102-page guidance document titled “Notice
23 2021-20” that addressed the full-or-partial-suspension test. See IRS Notice 2021-
24 20 (Mar. 1, 2021).
25 Answer: Admits.
26
27 Complaint Paragraph 27: The IRS did not follow the Administrative Procedure
28 Act’s (“APA”) mandatory notice-and-comment process when issuing Notice 2021-
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1 20. Notice 2021-20 imposes several arbitrary and capricious requirements not
2 found in either the text of the CARES Act or I.R.C. § 3134.
3 Answer: Denies.
4
5 Complaint Paragraph 28: Nonetheless, Notice 2021-20 acknowledges several
6 ways in which a business can qualify for the ERC under the suspension test. Notice
7 2021-20 states that a business is partially suspended if “more than a nominal
8 portion of its business operations are suspended by a governmental order.” IRS
9 Notice 2021-20(III.)(C.), Q&A #11.7 A business may be partially suspended “as a
10 result of the inability to obtain critical goods or materials from its suppliers
11 because they were required to suspend operations.” Id. at Q&A #12. A business
12 can also be partially suspended if government orders required the business to make
13 modifications that have “more than a nominal effect on business operations.” Id. at
14 Q&A #17.
15 Answer: The United States admits that Notice 2021-20 provides advice on how a
16 business can qualify for the ERC under the suspension test. The United States
17 admits that paragraph 28 takes partial quotes from Notice 2021-20. The United
18 States otherwise denies the allegations in paragraph 28.
19 Footnote 7: Notice 2021-20 arbitrarily defines “a nominal portion” of a business’s
20 operations as that portion of a business in which either “(i) the gross receipts from
21 that portion of the business operations is not less than 10 percent of the total gross
22 receipts . . . , or (ii) the hours of service performed by employees in that portion of
23 the business is not less than 10 percent of the total number of hours of service
24 performed by all employees in the employer’s business.” IRS Notice 2021-
25 20(III.)(C.), Q&A #11. The statutory text does not impose a “nominal portion”
26 requirement, nor does it impose a numerical threshold.
27 Answer: The United States admits that footnote 7 partially quotes from a portion
28 of Notice 2021-20 in which the IRS explains what it believes constitutes more than
ANSWER TO FIRST AMENDED COMPLAINT 11
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1 a nominal portion of business operations for purposes of the ERC. The United
2 States otherwise denies the allegations in footnote 7.
3
4 Complaint Paragraph 29: The IRS has decided not to follow the plain text of the
5 CARES Act or its Notice 2021-20.
6 Answer: Denies.
7
8 Complaint Paragraph 30: In September 2023, the IRS unilaterally announced it
9 was suspending its review and processing of new ERC claims. See IR-2023-169
10 (Sept. 14, 2023). “During the ERC review period, the IRS continued to process
11 claims received prior to September 2023. The agency processed 28,000 claims
12 worth $2.2 billion and disallowed more than 14,000 claims worth more than $1
13 billion.” IR-2024-169 (June 20, 2024). The IRS originally suggested its
14 moratorium would end, and processing would resume, at the beginning of 2024.
15 The IRS did not end the moratorium in 2024. The IRS partially lifted the
16 moratorium for cases filed before January 31, 2024, yet the IRS continues to refuse
17 to adhere to the statute.
18 Answer: The United States admits that in September 2023, the IRS announced a
19 moratorium on processing new ERC claims. The United States admits that on
20 August 8, 2024, it lifted the moratorium for cases filed before January 31, 2024.
21 And the United States admits that paragraph 30 quotes from IR-2024-169. The
22 United States otherwise denies the allegation in Paragraph 30.
23
24 Complaint Paragraph 31: The IRS has claimed that it continues to process claims
25 filed before the moratorium began on September 14, 2023, but it has done so “at a
26 greatly reduced speed . . . .” IR-2023-169 (Sept. 14, 2023). In practice, the IRS has
27 processed relatively few ERC claims since the moratorium began. The IRS has
28
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1 intentionally stalled the ERC program to such an extent that it has effectively
2 suspended the program altogether.
3 Answer: The United States admits that paragraph 31 quotes a few words from IR-
4 2023-169. The United States otherwise denies the allegations in paragraph 31.
5
6 Complaint Paragraph 32: Tri-State qualifies for the ERC under the CARES Act
7 because it partially suspended its business due to government orders in the first,
8 second, and third quarters of 2021.
9 Answer: The United States lacks sufficient information to admit or deny the
10 allegations in paragraph 32.
11
12 Complaint Paragraph 33: During the pandemic, numerous state government
13 orders partially suspended Tri-State’s business operations. The government orders
14 significantly affected Tri-State’s operations by requiring Tri-State to isolate
15 COVID-19 patients and cancel non-urgent procedures, reserve beds for COVID
16 patients, reduce Tri-State’s usable space due to social distancing and barricade
17 requirements, limit Tri-State’s available personnel through quarantine periods and
18 COVID-19 protocols, and divert resources to vaccinate first responders, healthcare
19 professionals, at-risk individuals, and the general community against COVID-19.
20 Answer: The United States lacks sufficient information to admit or deny the
21 allegations in paragraph 33.
22
23 Complaint Paragraph 34: On November 25, 2020, the Governor of the State of
24 Washington, Jay Inslee, issued Proclamation 20-24.2 that imposed numerous
25 restrictions from November 2020 to January 2022 on healthcare facilities.
26 Proclamation 20-24.2 required Tri-State to comply with (1) over 30 separate
27 requirements contained within the order itself, (2) guidance issued by the
28 Washington Department of Health (“DOH”) and the Washington Department of
ANSWER TO FIRST AMENDED COMPLAINT 13
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1 Labor & Industries (“L&I”), and (3) guidance from the CDC regarding infection
2 prevention and control, risk assessment and work restrictions for healthcare
3 personnel potentially exposed to COVID-19, and the criteria for healthcare
4 workers to return to work.
5 Answer: The United States admits that on November 25, 2020, Governor Inslee
6 issued Proclamation 20-24.2. The United States lacks sufficient information to
7 admit or deny the remaining allegations in paragraph 34.
8
9 Complaint Paragraph 35: Proclamation 20-24.2 required Tri-State to develop
10 and maintain an “expansion and contraction of care plan” responsive to the
11 community’s COVID-19 assessment. Based on the proclamation, one of the
12 following three phases would apply to the Hospital based on COVID assessments:
13 Conventional Care Phase, Contingency Care Phase, or Crisis Care Phase. The
14 Contingency Care Phase required the Hospital to ensure it had a COVID-19 surge
15 capacity of 20 percent to continue providing “all appropriate clinical care” plus
16 sufficient PPE. The Crisis Care Phase prohibited the Hospital from providing non-
17 urgent care with limited exceptions for vaccinations and preventative care.
18 Answer: The United States lacks sufficient information to admit or deny the
19 allegations in paragraph 35.
20
21 Complaint Paragraph 36: To determine what Phase the hospital was operating in,
22 Tri-State had to comply with the following monitoring and reporting obligations
23 required by Proclamation 20-24.2:
24 a. continuously monitor the COVID-19 status in the communities Tri-State serves;
25 b. continuously monitor capacity in the health care system to ensure there are
26 sufficient resources, including ventilators, beds, PPE, blood and blood products,
27 pharmaceuticals, and trained staff available to combat any potential surges of
28 COVID-19;
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1 c. continuously monitor the supply of PPE and maintain sufficient access to PPE;
2 and
3 d. submit accurate and complete data, as required by any DOH guidelines, to the
4 WA HEALTH data reporting system to allow for a state-wide common operating
5 perspective on resource availability.
6 If Tri-State failed to comply with these requirements, Proclamation 20-24.2
7 prohibited it from performing any non-urgent services, procedures, or surgeries.
8 Answer: The United States lacks sufficient information to admit or deny the
9 allegations in paragraph 36.
10
11 Complaint Paragraph 37: The monitoring and reporting requirements burdened
12 Tri-State’s operations with significant additional work. For example, the Director
13 of Care Transition and Patient Flow at Tri-State reviewed COVID-19 trackers and
14 charts daily to collect COVID-19 data and submit it.
15 Answer: The United States lacks sufficient information to admit or deny the
16 allegations in paragraph 37.
17
18 Complaint Paragraph 38: Tri-State diverted significant personnel hours to
19 monitoring the number of available beds, assessing staffing levels to determine
20 whether the Hospital fell within the Contingency Care or Crisis Care Phase, and
21 securing and counting various supplies for COVID patients.
22 Answer: The United States lacks sufficient information to admit or deny the
23 allegations in paragraph 38.
24
25 Complaint Paragraph 39: At times throughout 2021, Tri-State was unable to
26 maintain sufficient surge capacity and PPE in the Contingency Care Phase, so it
27 was forced to suspend non-urgent procedures. While “non-urgent,” these
28 procedures are neither medically insignificant to patients nor operationally
ANSWER TO FIRST AMENDED COMPLAINT 15
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1 insignificant to Tri-State. For example, Tri-State cancelled surgeries like total knee
2 and hip replacements, knee and hip repairs, hernia repairs, transurethral resections
3 of the prostate, and hysterectomies. This constituted a partial suspension of Tri-
4 State’s business operations.
5 Answer: The United States lacks sufficient information to admit or deny the
6 allegations in paragraph 39.
7
8 Complaint Paragraph 40: Even when Tri-State was able to perform non-urgent
9 procedures, its operations were still partially suspended.
10 Answer: The United States lacks sufficient information to admit or deny the
11 allegations in paragraph 40.
12
13 Complaint Paragraph 41: Due to surges in COVID-19 infection rates, Tri-State
14 refrained from scheduling or cancelled non-urgent procedures during 2021. From
15 January through September of 2021, Tri-State cancelled over 20 non-urgent
16 procedures in compliance with Proclamation 20-24.2 due to lack of sufficient beds
17 or staffing. Canceling procedures like these disrupted the daily work of Tri-State’s
18 staff and physicians. Tri-State accordingly tried to avoid cancellations and preempt
19 these disruptions to begin with. Tri-State personnel analyzed Tri-State’s COVID-
20 19 infection rates, remaining space (which could be limited by reserves for surge
21 capacity), supplies, and available staff to determine the number, if any, of non-
22 urgent procedures to schedule. Tri-State was forced to materially limit the number
23 of non-essential procedures it scheduled in 2021. These modifications constituted a
24 partial suspension because they affected “more than nominal portions of the
25 business operations.” See IRS Notice 2021-20 (“For example, an employer that
26 maintains both essential and non-essential business operations, each of which are
27 more than nominal portions of the business operations, may be considered to have
28 a partial suspension of its operations if a governmental order restricts the
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1 operations of the non-essential portion of the business, even if the essential portion
2 of the business is unaffected.”).
3 Answer: The United States lacks sufficient information to admit or deny the
4 allegations in paragraph 41.
5
6 Complaint Paragraph 42: Despite Tri-State’s planning, cancellations were
7 inevitable due to unanticipated positive COVID-19 tests or because a patient
8 experienced COVID-19 symptoms before their appointment or surgery. Tri-State
9 cancelled these non-urgent procedures and appointments in compliance with the
10 CDC’s Interim Infection Prevention and Control Recommendations for Healthcare
11 Personnel During the Coronavirus Disease 2019 (COVID-19) Pandemic
12 (“Infection Control Recommendations”) requirement that the Hospital reschedule
13 patients who exhibited symptoms of or tested positive for COVID-19 within 10
14 days of their scheduled appointment or procedure. When this happened, it was
15 often not possible for the Hospital to schedule another patient in the patient’s
16 place. Each cancelled procedure or appointment that Tri-State was unable to fill
17 represented one less non-urgent patient the Hospital was able to treat that day.
18 Answer: The United States lacks sufficient information to admit or deny the
19 allegations in paragraph 42.
20
21 Complaint Paragraph 43: Tri-State’s non-essential procedures constituted “more
22 than nominal portions” of its operations. For example, Tri-State’s inability to
23 perform non-urgent medical care without interruption during 2021 resulted in a
24 negative budget variance of approximately $4,600,000 from its anticipated in-
25 patient revenue. Tri-State’s forecasted in-patient revenue for 2021 was already a
26 pessimistic estimate based on the negative financial impact caused by COVID-19
27 government orders in 2020. The negative variance of $4,600,000 represents a
28 variance from its already suppressed forecast. Proclamation 20-24.2 partially
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1 suspended Tri-State’s operations by preventing the Hospital from performing non-
2 urgent procedures during portions of 2021 and requiring the Hospital to divert
3 extensive personnel hours, including overtime hours and travel personnel hours, to
4 comply with the requirements of Proclamation 20-24.2 and other orders.
5 Answer: The United States lacks sufficient information to admit or deny the
6 allegations in paragraph 43.
7
8 Complaint Paragraph 44: Proclamation 20-24.2 required Tri-State to “[u]pdate
9 [its] infection prevention policies and procedures” to reflect the CDC’s Infection
10 Control Recommendations. In turn, the CDC’s Infection Control
11 Recommendations required facilities to “screen and triage everyone entering a
12 healthcare facility for signs and symptoms of COVID-19” by implementing the
13 following procedures:
14 a. limit and monitor points of entry to the facility,
15 b. assess everyone entering the facility of symptoms of COVID-19 or exposure to
16 anyone with a confirmed COVID-19 infection,
17 c. properly manage anyone with a suspected or confirmed COVID-19 infection or
18 who was exposed to a person with a suspected or confirmed COVID-19 infection,
19 d. isolate patients in an exam room with the door closed, and
20 e. maintain at least 6 feet of distance between patients waiting for care.
21 Answer: The United States lacks sufficient information to admit or deny the
22 allegations in paragraph 44.
23
24 Complaint Paragraph 45: To comply with Proclamation 20-24.2 and the CDC’s
25 Infection Control Recommendations, Tri-State implemented COVID-19
26 procedures. These procedures and their corresponding effects constituted a partial
27 suspension of Tri-State’s business and affected more than nominal portions of Tri-
28 State’s operations.
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1 Answer: The United States lacks sufficient information to admit or deny the
2 allegations in paragraph 45.
3
4 Complaint Paragraph 46: Consistent with the CDC’s Infection Control
5 Recommendations, Tri-State’s policy required it to “screen and triage” everyone
6 entering its facility for “signs and symptoms of COVID-19.” As a part of this
7 process, Tri-State (1) limited and monitored its entrances; (2) established and
8 implemented COVID-19 screening procedures for all persons entering the
9 Hospital; and (3) restricted or isolated anyone with a suspected COVID-19
10 infection. Tri-State positioned its trained screeners at designated entrances within
11 the Hospital. Tri-State’s screening procedures required Hospital personnel to ask
12 all persons presenting at Tri-State about the following topics:
13 a. Contact within the past 14 days with anyone infected with COVID-19
14 or displaying COVID-19 like symptoms;
15 b. Positive test for COVID-19 within the past 10 days;
16 c. Direction from medical professional to monitor or quarantine due to potential
17 COVID-19 infection; and
18 d. New symptoms from list of symptoms associated with COVID-19.
19 Answer: The United States lacks sufficient information to admit or deny the
20 allegations in paragraph 46.
21 Footnote 8: Tri-State’s Guidance For Severe Acute Respiratory Syndromes,
22 SARS-CoV-1 and SARS-CoV-2, Middle East Respiratory Syndrome (MERS-
23 CoV), and COVID-19 (“COVID-19 Guidance”) updated on January 6, 2021
24 Answer: The United States lacks sufficient information to admit or deny the
25 allegations in footnote 8.
26 Footnote 9: Per Tri-State’s July 2021 updated screening guidance, fully vaccinated
27 persons who were asymptomatic did not have to quarantine after COVID-19
28 exposure.
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1 Answer: The United States lacks sufficient information to admit or deny the
2 allegations in footnote 9.
3
4 Complaint Paragraph 47: As for hospital patients: if a patient responded “yes” to
5 questions about the above topics, Tri-State quarantined the patient alone in a closed
6 room, and Hospital personnel initiated a series of isolation procedures. The single
7 room limitation reduced Tri-State’s room capacity because it could not place
8 another patient into the room, even if the room normally accommodated two
9 patients.
10 Answer: The United States lacks sufficient information to admit or deny the
11 allegations in paragraph 47.
12
13 Complaint Paragraph 48: The screening itself, in addition to the questionnaire,
14 was time-consuming. For much of 2021, Tri-State took each patient’s temperature,
15 tested the patient for COVID-19, and reported any positive results to the state of
16 residence for the patient.
17 Answer: The United States lacks sufficient information to admit or deny the
18 allegations in paragraph 48.
19
20 Complaint Paragraph 49: When possible, Tri-State tried to screen patients by
21 phone before their arrival. Tri-State personnel instructed patients with
22 appointments to call ahead and inform the Hospital if they had any COVID-19
23 symptoms. Tri-State personnel also called patients the day before their
24 appointments to confirm the patient did not have any new COVID-19 symptoms
25 and rescheduled appointments for any patients with COVID-19 symptoms who
26 were seeking routine medical care or elective medical procedures. In certain cases,
27 Tri-State tested patients multiple times for COVID-19 within a 24-hour period to
28 determine appropriate isolation procedures.
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1 Answer: The United States lacks sufficient information to admit or deny the
2 allegations in paragraph 49.
3
4 Complaint Paragraph 50: As for non-patient hospital guests: if a visitor
5 responded “yes” to the COVID-19 screening questions, she was denied entry to
6 Tri-State facilities. No visitors were allowed for COVID-19 positive patients
7 except under certain circumstances, including the hospitalization of a minor child,
8 end-of-life care, and visitation essential to a patient’s emotional health and well-
9 being. Tri-State maintained a log-book of all visitors who entered patient rooms.
10 Answer: The United States lacks sufficient information to admit or deny the
11 allegations in paragraph 50.
12
13 Complaint Paragraph 51: Tri-State’s screening of visitors and its corresponding
14 review of exceptions, which were performed to comply with CDC guidelines, led
15 to massive administrative problems. Tri-State only granted visitor exceptions after
16 discussions with Infection Control and Public Health personnel. Given their
17 obvious importance to patients and their families, these decisions—determining
18 when a patient was in end-of-life care and who could visit them—required
19 extensive personnel time. And unsurprisingly, disagreements arose from these
20 decisions—further disrupting operations.
21 Answer: The United States lacks sufficient information to admit or deny the
22 allegations in paragraph 51.
23
24 Complaint Paragraph 52: The disruptive and time-intensive nature of these CDC
25 testing and screening procedures is demonstrated by the fact that Tri-State was
26 forced to hire extra staffing to implement them. Tri-State had to require existing
27 staff to work overtime and double time, hire dedicated screeners, and hire travel
28 health workers. Tri-State spent approximately $240,000 on COVID-19 screeners
ANSWER TO FIRST AMENDED COMPLAINT 21
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1 from January 2021 to June 2021 and a substantial portion of the over $1,000,000 it
2 paid to traveling staff in 2021 to comply with the requirements imposed on the
3 Hospital by Proclamation 20-24.2.
4 Answer: The United States lacks sufficient information to admit or deny the
5 allegations in paragraph 52.
6
7 Complaint Paragraph 53: Tri-State had to perform a large volume of COVID-19
8 tests to comply with the CDC’s Infection Control Recommendations. To conduct
9 these tests, Tri-State had to change its Minor Care Center (like an urgent care
10 facility) into a COVID-19 testing facility. Tri-State also used the Minor Care
11 Center for its vaccine clinic as discussed in the Vaccination Clinic and Vaccine
12 Mandate subsection. The required changes to the Minor Care Center created
13 significant demands on personnel that were far more than nominal. In 2021, the
14 Minor Care Center had an increase in overtime and double time hours by 190%
15 compared with 2019.
16 Answer: The United States lacks sufficient information to admit or deny the
17 allegations in paragraph 53.
18
19 Complaint Paragraph 54: As a result of having to create a COVID testing and
20 vaccine clinic, the Hospital had to make the minor care practice use the same
21 facility as its family practice department. Combining the minor care and family
22 practice departments reduced the number of patients either department was able to
23 see on a daily basis. The change also created collateral personnel demands on the
24 family practice department. In 2021, the family practice department had an
25 increase of 308% in overtime and double time hours as compared to 2019.
26 Answer: The United States lacks sufficient information to admit or deny the
27 allegations in paragraph 54.
28
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1 Complaint Paragraph 55: To limit the spread of COVID-19 within the Hospital,
2 Proclamation 20-24.2 and the CDC’s Infection Control Recommendations required
3 Tri-State to implement a combination of various forms of physical distancing,
4 barriers, and testing. Proclamation 20-24.2 required hospitals to “maintain strict
5 physical distancing in patient scheduling, check-in processes, positioning, and
6 movement within a facility . . . [and] [s]et up waiting rooms and patient care areas
7 to facilitate patients, visitors, and staff to maintain at least six feet of distance
8 between them[,] . . . space out appointments, and consider scheduling or spatially
9 separating well visits from sick visits.”
10 Answer: The United States lacks sufficient information to admit or deny the
11 allegations in paragraph 55.
12
13 Complaint Paragraph 56: To comply with these requirements, Tri-State erected
14 physical barriers and enforced social distancing within the waiting rooms for its
15 Emergency, Radiology, Medical Surgical Nursing, and Minor Care departments.
16 Tri-State both replaced and added barriers throughout 2021 to protect staff as
17 masking requirements changed based on vaccination status.
18 Answer: The United States lacks sufficient information to admit or deny the
19 allegations in paragraph 56.
20
21 Complaint Paragraph 57: To ensure patients and visitors adhered to social
22 distancing requirements, Tri-State removed up to 50% of the chairs in all of its
23 waiting rooms. These isolation protocols correspondingly limited the number of
24 patients each waiting room could accommodate, which, in turn, limited the number
25 of patients each department could treat per day. Tri-State would not schedule more
26 patients for a department than its waiting room could accommodate. To prevent the
27 patients from overflowing into hallways in violation of Proclamation 20-24.2, Tri-
28
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1 State reduced the number of patients sent per day to any department with a waiting
2 room by up to 50%.
3 Answer: The United States lacks sufficient information to admit or deny the
4 allegations in paragraph 57.
5
6 Complaint Paragraph 58: Both individually and collectively, these screening,
7 quarantine, and social distancing procedures required by Proclamation 20-24.2
8 caused a partial suspension of Tri-State’s business.
9 Answer: The United States lacks sufficient information to admit or deny the
10 allegations in paragraph 58.
11
12 Complaint Paragraph 59: Unlike other businesses, Tri-State had a duty to treat
13 patients with active COVID-19 infections. To minimize the risk of COVID-19
14 spreading from infected patients to Hospital personnel, the CDC’s Infection
15 Control protocol required Tri-State to place COVID-19 patients in single-person
16 rooms, limit visitors to the facility, prevent visitors of COVID-19 patients from
17 going to locations other than the patient’s room within the facility, use dedicated
18 medical equipment for patients with suspected or confirmed COVID-19 infections,
19 vacate rooms of discharged COVID-19 patients until air changes removed
20 infectious particles, perform specialized cleaning and disinfection procedures for
21 surfaces and reusable equipment exposed to infected patients, and exclude
22 personnel with high-risk exposure to COVID-19 from the workplace for 14 days.
23 These requirements reduced the number of Tri-State’s rooms that it could use to
24 treat patients and contributed to staffing shortages, which was a suspension of its
25 operations.
26 Answer: The United States lacks sufficient information to admit or deny the
27 allegations in paragraph 59.
28
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1 Footnote 10: CDC required a 14-day quarantine period for high-risk exposures in
2 its “Interim U.S. Guidance for Risk Assessment and Work Restrictions for
3 Healthcare Personnel with Potential Exposure to COVID-19.” Proclamation 20-
4 24.2 required Tri-State to follow this CDC guidance.
5 Answer: The United States lacks sufficient information to admit or deny the
6 allegations in footnote 10.
7
8 Complaint Paragraph 60: To comply with the cleaning requirements, Tri-State
9 implemented disinfection protocols in its COVID-19 Guidance, requiring the
10 nursing department to complete “daily cleans” to minimize the number of staff in
11 hospital inpatient rooms. Environmental Services performed a “terminal clean” of
12 hospital rooms after discharging a patient. Tri-State also treated laundry, food
13 service, and medical waste in compliance with its isolation protocols, including
14 specially labeling all laundry service bags and biohazard waste containers.
15 COVID-19 cleaning and disinfection protocols imposed additional burdens on the
16 Environmental Services staff, which had 1,273 overtime and double time hours in
17 2021, a 193% increase from 2019, and travel personnel time.
18 Answer: The United States lacks sufficient information to admit or deny the
19 allegations in paragraph 60.
20 Footnote 11: Based on a revision to Tri-State’s COVID-19 Guidance,
21 Environmental Services eventually took over this cleaning task.
22 Answer: The United States lacks sufficient information to admit or deny the
23 allegations in footnote 11.
24
25 Complaint Paragraph 61: As required by Proclamation 20-24.2, Tri-State
26 followed CDC guidance when transporting COVID-19 patients within the facility
27 or out of the facility. When transporting a COVID-19 patient within the Hospital,
28 both patient and transporter had to wear all necessary personal protective
ANSWER TO FIRST AMENDED COMPLAINT 25
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1 equipment. These intra-Hospital transport procedures increased patient transport
2 time, which limited the number of patients the Hospital could transport to a
3 particular department within a day. For example, these transport procedures
4 significantly limited the number of patients Tri-State could schedule per day for an
5 MRI or CT Scan. When transferring COVID-19 patients to another facility, Tri-
6 State had to notify the receiving facility and all entities involved in the transport
7 that the patient had or potentially had COVID-19. When appropriate, Tri-State
8 utilized the Lewiston (Idaho) Fire Department to help transfer a COVID-19 patient
9 in an isolation pod. If the fire department was not available, Tri-State had to
10 communicate all isolation and personal protective equipment needs to the
11 transporting facility. These transport and transfer protocols between facilities
12 increased the time it took for Tri-State to clear patients from its beds.
13 Answer: The United States lacks sufficient information to admit or deny the
14 allegations in paragraph 61.
15 Footnote 12: The CDC’s Infection Control Recommendations publication, directly
16 referenced by Proclamation 20-24.2, directs healthcare professional to refer to the
17 CDC’s “COVID-19 website” for the transport of COVID-19 patients.
18 Answer: The United States lacks sufficient information to admit or deny the
19 allegations in footnote 12.
20 Footnote 13: Given the burden of these procedures, Tri-State tried to minimize
21 transporting patients when possible by performing certain procedures, such as
22 chest x-rays, within patient rooms.
23 Answer: The United States lacks sufficient information to admit or deny the
24 allegations in footnote 13.
25
26 Complaint Paragraph 62: To minimize the spread of COVID-19 amongst Tri-
27 State personnel and comply with the CDC’s Infection Control Recommendations,
28 Hospital workers had to report any potential COVID-19 exposures of health care
ANSWER TO FIRST AMENDED COMPLAINT 26
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1 workers by calling Tri-State’s Employee Health Department. All Tri-State
2 healthcare workers had to sign monthly attestations regarding any illnesses or
3 travel, and all, except for surgeons, were screened upon entry to the facility. Each
4 month, Tri-State personnel had to obtain and file these attestations. Tri-State had to
5 devote substantial time to obtaining monthly attestations. In addition to
6 attestations, Tri-State reported any personnel illnesses or exposures to the
7 appropriate Tri-State supervisor and instructed the worker not to return to work
8 until released by the Employee Health Department. During the first three quarters
9 of 2021, Tri-State sent approximately 100 internal notifications of personnel
10 illnesses or exposures. At a minimum, these reports represented approximately 100
11 days when a Tri-State personnel member was unable to work due to exposure
12 protocols, which were created to comply with the governmental orders.
13 Answer: The United States lacks sufficient information to admit or deny the
14 allegations in paragraph 62.
15
16 Complaint Paragraph 63: Different departments implemented their own
17 screening and reporting requirements. For example, surgeons were screened when
18 they entered the surgical department.
19 Answer: The United States lacks sufficient information to admit or deny the
20 allegations in paragraph 63.
21
22 Complaint Paragraph 64: Tri-State’s operations were partially suspended
23 because Tri-State was forced to significantly modify more than nominal portions of
24 its operations to comply with the cleaning and disinfection, patient transport, and
25 reporting duties imposed by Proclamation 20-24.2. Tri-State had to restrict
26 available beds. It had to slow room turnover for disinfection, which meant fewer
27 rooms were available. It had to devote numerous additional personnel hours and
28 overtime hours as well as hiring travel healthcare workers to adhere to these
ANSWER TO FIRST AMENDED COMPLAINT 27
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1 protocols. In 2021, Tri-State’s employes worked 23,234 overtime and double time
2 hours, which represented a 20 percent increase from 2019. In addition, Tri-State
3 spent a substantial portion of the $1,000,000 paid to traveling staff in 2021 to
4 satisfy the requirements of Proclamation 20-24.2 and the CDC’s Infection Control
5 Recommendations.
6 Answer: The United States lacks sufficient information to admit or deny the
7 allegations in paragraph 64.
8
9 Complaint Paragraph 65: Proclamation 20-24.2 conditioned Tri-State’s ability to
10 perform nonurgent procedures on the distribution of an “effective [COVID-19]
11 vaccine.” Complying with this mandate forced Tri-State to partially suspend its
12 operations.
13 Answer: The United States lacks sufficient information to admit or deny the
14 allegations in paragraph 65.
15
16 Complaint Paragraph 66: COVID vaccinations themselves diverted Tri-State
17 from its normal operations. Consistent with Proclamation 20-24.2’s directive, Tri-
18 State used the Minor Care Center within the Hospital to open a vaccination clinic
19 in December 2020. As discussed earlier, Tri-State had to transform the Minor Care
20 Center into a COVID-19 testing center and vaccination clinic, forcing the Minor
21 Care department to move into the Family Practice department. This relocation
22 reduced the number of patients the Minor Care and Family Practice departments
23 could treat and created logistical issues requiring significant amounts of staff
24 overtime and double time hours.
25 Answer: The United States lacks sufficient information to admit or deny the
26 allegations in paragraph 66.
27
28
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1 Complaint Paragraph 67: Tri-State was actively vaccinating healthcare workers,
2 first responders, and other persons included by the CDC in “Phase 1A.” By
3 January 12, 2021, Tri-State had delivered approximately 500 COVID-19 vaccines.
4 Tri-State personnel monitored patients for at least 15 minutes after they received a
5 COVID-19 vaccination to ensure their safety. Tri-State also started a vaccination
6 hotline to help individuals determine their COVID-19 vaccine eligibility and place
7 them on Tri-State’s vaccine waitlist. To comply with CDC guidelines, Tri-State
8 had to divert considerable resources and personnel to screen individuals for
9 vaccine eligibility and properly store and administer the COVID-19 vaccines.
10 Answer: The United States lacks sufficient information to admit or deny the
11 allegations in paragraph 67.
12
13 Complaint Paragraph 68: In August 2021, Governor Jay Inslee issued
14 Proclamation 21-14.1, expanding the State of Washington’s COVID-19 vaccine
15 mandate to healthcare providers. The mandate required all healthcare providers to
16 be fully vaccinated against COVID-19 and provide their employers with proof of
17 their vaccination status by October 18, 2021, only two months after 21-14.1 issued.
18 To comply with 21-14.1, Tri-State made efforts to ensure every person engaged in
19 work for it was fully vaccinated against COVID-19 and devoted personnel to
20 obtain documentation of “full vaccination against COVID-19” from every Tri-
21 State worker. These vaccination requirements coupled with the short compliance
22 timeline further strained Tri-State’s already taxed resources and caused Tri-State to
23 divert resources from other departments of the Hospital causing more than a
24 nominal effect on its business operations.
25 Answer: The United States admits that in August 2021, Governor Inslee issued
26 Proclamation 21-14.1. The United States otherwise lacks sufficient information to
27 admit or deny the allegations in paragraph 68.
28
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1 Complaint Paragraph 69: The government orders issued by federal and state
2 entities—including Proclamation 20-24.2 and Proclamation 21-14.1—caused a
3 partial suspension of the Hospital and its operations. The orders led to the
4 cancellation of non-urgent procedures, a reduction in scheduling non-urgent
5 procedures, the loss of beds and space for patients (and visitors), staffing shortages,
6 the loss of the Minor Care Center facility, and the substantial interruption of
7 normal operations.
8 Answer: The United States lacks sufficient information to admit or deny the
9 allegations in paragraph 69.
10
11 Complaint Paragraph 70: Tri-State incorporates by reference the allegations in
12 Paragraphs 1 to 69 as if fully set forth herein.
13 Answer: Paragraph 70 requires no response.
14
15 Complaint Paragraph 71: Tri-State is entitled to a tax refund for the first, second,
16 and third quarters of 2021 under the government-order suspension test of the
17 CARES Act.
18 Answer: The United States lacks sufficient information to admit or deny the
19 allegations in paragraph 71.
20
21 Complaint Paragraph 72: Tri-State is an eligible employer for the first, second,
22 and third quarters of 2021 because it “was carrying on a trade or business” during
23 those quarters and its operation during each quarter was “partially suspended” “due
24 to orders from an appropriate governmental authority requiring healthcare facilities
25 to follow restrictive infection prevention protocols due to the coronavirus disease
26 2019 (COVID-19).” 26 U.S.C. § 3134(c)(2)(A).
27 Answer: The United States lacks sufficient information to admit or deny the
28 allegations in paragraph 72.
ANSWER TO FIRST AMENDED COMPLAINT 30
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1
2 Complaint Paragraph 73: For determining Tri-State’s qualified wages, Tri-State
3 and its wholly owned subsidiaries, Evergreen Estates Retirement & Assisted
4 Living Community, L.L.C. (“Evergreen”), Vannvei, L.L.C (“Vannvei”), and
5 Aquavia, L.L.C. (“Aquavia”) constitute a single employer. See 26 U.S.C. §
6 3134(d). During 2019, Tri-State, Evergreen, Vannvei, and Aquavia collectively
7 employed not greater than 500 employees. Consistent with the IRS’s guidance, Tri-
8 State, Evergreen, Vannvei, and Aquavia deemed an employee as “full-time” for a
9 calendar month if he or she employed “130 hours of service” for the month.
10 Because Tri-State, Evergreen, Vannvei, and Aquavia together employed “not
11 greater than 500 employees,” qualified wages are those “wages paid by such
12 eligible employer with respect to an employee during any period” for which they
13 were fully or partially suspended. 26 U.S.C. § 3134(c)(3)(A)(ii)(I).
14 Answer: The United States lacks sufficient information to admit or deny the
15 allegations in paragraph 73.
16
17 Complaint Paragraph 74: As Tri-State reported in its Forms 941-X, Tri-State’s
18 qualified wages for Q1, Q2, and Q3 2021 were $5,302,244, $5,731,721, and
19 $5,439,366, respectively.
20 Answer: The United States lacks sufficient information to admit or deny the
21 allegations in paragraph 74.
22
23 Complaint Paragraph 75: None of Tri-State’s qualifying wages were paid with
24 payroll costs from the Paycheck Protection Program (PPP) loan forgiveness.
25 Answer: The United States lacks sufficient information to admit or deny the
26 allegations in paragraph 75.
27
28
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1 Complaint Paragraph 76: Tri-State made timely and proper claims for the ERC
2 with the IRS. The following list shows when Tri-State filed its Forms 941-X with
3 the IRS for each qualifying quarter and the ERC it claimed for each quarter:
4 a. The 941-X for Q1 of 2021 was filed on January 31, 2024, and it claimed an ERC
5 in the amount of $3,711,570.80 for that quarter.
6 b. The 941-X for Q2 of 2021 was filed on January 31, 2024, and it claimed an ERC
7 in the amount of $4,012,204.70 for that quarter.
8 c. The 941-X for Q3 of 2021 was filed on January 31, 2024, and it claimed an ERC
9 in the amount of $3,807,556.20 for that quarter.
10 Answer: The United States lacks sufficient information to admit or deny the
11 allegations in paragraph 76.
12
13 Complaint Paragraph 77: Under 26 U.S.C. §§ 7422 and 6532, a taxpayer may
14 commence a refund suit for the recovery of income taxes in federal court after a
15 claim for refund has been filed with the Secretary and six months has elapsed
16 without decision.
17 Answer: The United States admits that under 26 U.S.C. § 6532, no suit under
18 § 7422(a) may begin before the expiration of six months from the date of filing the
19 administrative claim required the IRS renders a decision within that time, nor after
20 the expiration of two years from the date of the IRS mailing by certified mail or
21 registered a notice of the disallowance of the part of the claim to which the suit
22 relates.
23
24 Complaint Paragraph 78: It has been sixteen months since Tri-State filed its
25 refund claims with the Internal Revenue Service (“IRS”). But the IRS has failed to
26 process Tri-State’s valid ERC claims and so, not provided the required refund.
27 Answer: The United States lacks sufficient information to admit or deny the
28 allegations in paragraph 78.
ANSWER TO FIRST AMENDED COMPLAINT 32
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1 Complaint Paragraph 79: Under 26 U.S.C. § 6611, the United States owes
2 interest on the refund due to Tri-State “from the date of the overpayment to a date
3 (to be determined by the Secretary) preceding the date of the refund check by not
4 more than 30 days.” I.R.C. § 6611(b)(2).
5 Answer: The United States admits that, if it owes a tax refund, it would owe
6 interest from the date of the overpayment to a date (to be determined by the
7 Secretary) preceding the date of the refund check by not more than 30 days.
8
9 Complaint Paragraph 80: Tri-State overpaid its taxes and is entitled to the
10 corresponding interest on its overpayment.
11 Answer: The United States lacks sufficient information to admit or deny the
12 allegations in paragraph 80.
13
14 Complaint Paragraph 81: Tri-State incorporates and realleges paragraphs 1
15 through 56 above.
16 Answer: Paragraph 81 requires no response.
17
18 Complaint Paragraph 82: Under 26 U.S.C. § 7430(c)(4)(B), the United States
19 must pay litigation and administrative costs because its position is not
20 “substantially justified.” The IRS created a self-imposed moratorium on processing
21 ERC claims, and, as a result, has refused to process straightforward claims like
22 those belonging to Plaintiff.
23 Answer: Denies.
24
25 Complaint Paragraph 83: Tri-State prays for the following relief:
26 a. A tax refund in the amounts of $11,531,331.70 for Tri-State’s Employee
27 Retention Credit for the following taxable period: Q1, Q2, and Q3 of 2021;
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1 b. The interest owed under 26 U.S.C. § 6611 on Tri-State’s $11,531,331.70 tax
2 overpayment;
3 c. Award reasonable attorneys’ fees and costs, as allowed by law;
4 d. Award pre-judgment and post-judgment interest, as allowed by law; and
5 e. Award such further relief as the Court may deem just and proper.
6 Answer: Paragraph 83 states the relief Tri-States seeks and requires no response.
7
8 AFFIRMATIVE DEFENSES
9 FIRST DEFENSE
10 Tri-State is not entitled to the ERC for periods in which it continued to
11 receive or maintain its usual funding for employee salaries.
12
13 SECOND DEFENSE
14 To the extent Tri-State claims the ERC based on wages reported as payroll
15 costs to obtain Paycheck Protection Program loan forgiveness, it is not entitled to
16 the ERC.
17
18 THIRD DEFENSE
19 If the First Amended Complaint makes claims based on any grounds not
20 asserted in a claim for refund filed with the IRS, the Court lacks jurisdiction under
21 26 U.S.C. § 7422(a) to hear such claims and should dismiss them.
22
23 FOURTH DEFENSE
24 If the Court determines that Tri-State has made an overpayment of tax, the
25 United States is entitled, pursuant to 26 U.S.C. § 6402, to reduce any such
26 overpayment based on any additional tax liabilities that Tri-State owes, whether or
27 not previously assessed or alleged.
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1 FIFTH DEFENSE
2 If Tri-State establishes that it is entitled to any portion of the ERC claimed, it
3 would not be entitled to deduct, for purposes of income tax for the periods at issue,
4 the amount of wages paid to employees equal to such ERC. Under the doctrine of
5 equitable recoupment, if Tri-State recovers any of the ERC claimed, the amount
6 recovered should be offset by such wages paid to employees.
7
8 DENIAL OF LIABILITY
9 The United States denies every other allegation in the First Amended
10 Complaint that it has not specifically admitted in this answer.
11
12 WHEREFORE, the United States respectfully requests judgment as follows:
13 A. Denial of the relief the First Amended Complaint seeks and entry of
14 judgment in favor of the United States and against Tri-State; and
15 B. An award to the United States of costs and other relief the Court deems
16 proper.
17
18
Dated June 11, 2026 BRETT SHUMATE
19 Assistant Attorney General
20
JOSHUA WU
21 Deputy Assistant Attorney General
22 Tax Litigation Branch
23 /s/ Charles J. Butler
24 CHARLES J. BUTLER
Tax Litigation Branch
25 Civil Division, Department of Justice
26
Counsel for the United States of America
27
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1 CERTIFICATE OF SERVICE
2 I certify that on June 11, 2026, I filed the foregoing using the Court’s
3 CM/ECF system, which will provide notice to all parties that have appeared.
4
5
/s/ Charles J. Butler
6 CHARLES J. BUTLER
7 Tax Litigation Branch
Civil Division, Department of Justice
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