Northeast Health Services, LLC v. United States, No. 24-2096T (Fed. Cl. May 28, 2026) Tri-State Memorial Hospital v. United States of America, Case No. 2:25-cv-00181-TOR (E.D. Wash. May 28, 2026)

The judiciary has recently offered divergent perspectives on the causal nexus required for Employee Retention Credit (ERC) eligibility. As explored in depth elsewhere on this platform, two courts have scrutinized the operative phrase due to, debating whether an employer seeking to prove a partial suspension of operations must satisfy a permissive but-for standard of factual causation or a more rigorous requirement of proximate cause.

The two judicial opinions represent different applications of law regarding statutory interpretation and causation within the context of the Employee Retention Credit (ERC). Both courts are grappling with whether an operational disruption—a partial suspension of business—is legally attributable to a governmental mandate, but they apply distinct legal standards, particularly concerning the scope of "due to."

While both opinions acknowledge that “due to” is inherently ambiguous in common law and tax jurisprudence, their ultimate practical requirements for establishing causation stand in significant contrast.

Similarities Between the Opinions

Acknowledgment of Ambiguity: Both courts recognize the legal complexity surrounding “due to.” The Northeast Health Services (NEHS) ruling provides a detailed academic summary, citing numerous circuits that have characterized "due to" as an ambiguous phrase with definitions ranging from "sole and proximate cause" to merely "contributing cause."
Rejection of Generalized Pandemic Conditions: Both courts reject the idea that general pandemic conditions or inherent risks alone are sufficient to trigger eligibility. In both cases, the alleged suspension must be linked to a specific external mandate.

Key Differences in Causation Standards and Analysis

The primary difference lies in which standard of causation—and on what legal grounds—the court determines is required for an employer to prove liability under the Suspension Test.

The Tri-State Hospital Opinion: Emphasis on But-For Plausibility

In the Tri-State Memorial Hospital matter, the Court adopted a highly permissive causal test, explicitly relying on established civil litigation principles:

The Standard: The Judge found that "because of" has an unambiguous plain meaning, requiring only a "but-for causation requirement." This is generally considered the lowest standard of factual causation.
Implication: Under this analysis, if Plaintiff can show that the disruption would not have happened but for the government order (even if other factors contributed), they satisfy the basic causal link necessary to meet the statutory prerequisite. The Court thus ruled that Plaintiff provided "sufficient plausible facts" based on this low standard, despite the Defendant's arguments regarding proximate cause.
Focus of Failure: Since the court adopted the but-for test, its analysis focused not on whether the causation was perfect (proximate), but rather whether the factual allegations were sufficiently connected to the Proclamation 20-24.2 to be deemed plausible for litigation purposes.

The NEHS Opinion: Emphasis on Proximate Cause and Statutory Immunity

In contrast, the Northeast Health Services matter established a significantly higher and more rigid barrier to entry by focusing on statutory immunity rather than merely factual causation.

The Standard: While the court acknowledged the ambiguity of "due to" (acknowledging the debate between but-for vs. proximate cause), its decisive operational requirement was that the governmental order must have been the true and active source of the suspension. The ruling found that simply having a contributing factor was insufficient; the order had to be the direct, proximate cause.
Implication: This opinion held that if an employer's operations fall under a specific exemption provided by a governmental order—as NEHS did as an "Essential Service"—then no amount of operational disruption, regardless of how severe (and even if other courts might find general pandemic conditions contributing), can be attributed to the required qualifying government action.
Focus of Failure: The failure was not based on whether the suspension occurred, but that the governmental order lacked the statutory power or applicability necessary to mandate the change in the first place.

Conclusion: Comparison Summary

Feature	Tri-State Memorial Hospital Opinion (First Case)	NEHS Opinion (Second Case)
Legal Standard Applied	But-for Causation (Low Bar)	Proximate Cause (High Bar), coupled with statutory exemption analysis.
Interpretation of “Due To”	Interpreted as requiring only the "but-for" link ("because of").	Ruled that for eligibility, the order must be the direct source and mandate of the disruption.
Key Hurdle to Eligibility	Providing sufficient plausible facts linking suspension protocols to a governmental proclamation.	Proving that the employer was not statutorily exempted from the government order in the first place.
Outcome on Causation	The court found the link (plausibility) was strong enough, despite high scrutiny.	The court found the link was nullified because the statute granted immunity to the plaintiff’s sector.

In essence, the Tri-State court provides a useful guide for establishing a claim through factual plausibility anchored by a low causal standard (but-for). Conversely, the NEHS ruling serves as a stark warning that if an employer's industry is deemed "essential" or otherwise exempted by law from the governmental directive in question, any attempt to establish eligibility under the suspension test will likely fail, regardless of how disruptive the pandemic was.

Prepared with assistance from LM Studio google/gemma-4-26b-a4b.