K W et al v. Armstrong et al

Filing 140

MEMORANDUM DECISION AND ORDER denying 136 IDHW's Motion to Modify; granting in part and denying in part 137 Plaintiff's Motion to Clarify or Modify. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

K.W., by his next friend D.W., et al.,

Case No. 1:12-cv-00022-BLW
(lead case)

Plaintiffs,
MEMORANDUM DECISION AND
ORDER

v.
RICHARD ARMSTRONG, in his official
capacity as Director of the Idaho
Department of Health and Welfare; PAUL
LEARY, in his official capacity as
Medicaid Administrator of the Idaho
Department of Health and Welfare; and the
IDAHO DEPARTMENT OF HEALTH
AND WELFARE, a department of the
State of Idaho,
Defendants.
TOBY SCHULTZ, et al.
Plaintiffs,
v.
RICHARD ARMSTRONG, et al.,
Defendants.

Case No. 3:12-CV-58-BLW

INTRODUCTION
Before the Court are cross-motions to modify or clarify the injunction previously
issued by the Court in this case. The motions are fully briefed and at issue. For the
reasons explained below, the Court will grant in part the plaintiffs’ motion and deny the
defendants’ motion.
BACKGROUND
Plaintiffs are developmentally disabled adults who qualify for benefits under
Memorandum Decision & Order – page 1

Medicaid. They are eligible for long-term institutional care but choose to live instead in
their own homes or in community settings. When their Medicaid payments were
reduced, they brought this action against the Idaho Department of Health & Welfare
(IDHW), alleging, among other things, that the notices sent by IDHW informing them of
the reductions were insufficient. The Court enjoined the reductions, and the parties
eventually agreed to the terms of a preliminary injunction that maintained the status quo
and provided plaintiffs with information regarding their budget reductions. That
injunction restored the Plaintiffs’ budgets to the levels they were at prior to July 1, 2011,
the date IDHW sent the unconstitutional budget notices. The injunction also prohibited
IDHW from reducing Plaintiffs budgets until it (1) provided Plaintiffs with notices,
approved by this Court, and (2) made available for copying specified documents it used
to calculate Plaintiffs’ budgets.
IDHW responded by filing a motion to approve the form of Notice that they sent
to each plaintiff. The Court denied the motion, holding that the Notice failed to provide
due process because it did not explain budget reductions. See Memorandum Decision
(Dkt. No. 66) at p. 8. The Notice provided by the IDHW made it very difficult for a
participant to determine why her budget had been reduced and left her unable to
effectively challenge the reduction.
In the meantime, another group of named plaintiffs filed a nearly identical case
entitled Schultz v. Armstrong, CV-12-58-BLW. On April 6, 2013, the Court ordered that
case consolidated with the present case. See Order (Dkt. No. 77). The plaintiffs then
filed (1) a motion to certify a class; (2) a motion to extend the existing preliminary
Memorandum Decision & Order – page 2

injunction to the proposed class members; and (3) a motion to file a consolidated class
action complaint. IDHW filed a second motion to approve its form of Notice.
The Court denied IDHW’s motion, finding that the proposed notice contained the
same flaws as found previously – it failed to properly notify participants of the reasons
for IDHW’s actions. The Court granted plaintiffs’ motions, certifying a class and
extending the existing preliminary injunction to all members of the class. The Court’s
decision adopted the terms of the injunction verbatim as proposed by plaintiffs.
Both sides now seek clarification or modification of the terms of the injunction.
ANALYSIS
The Court’s earlier decision held that every reduction in benefits instituted by
IDHW on or after July 1, 2011, violated the participants’ due process rights because those
reductions were not accompanied by notice that passed constitutional muster.
Consequently, the Court required IDHW to roll back those reductions and restore the
benefits those participants were entitled to prior to July 1, 2011.
The parties now inform the Court that some participants are in different
circumstances so that the restoration to pre-July 1, 2011, levels cannot be used as a onesize-fits-all remedy. For example, some participants have had nothing but increases in
their budgets since July 1, 2011.1 Obviously, restoring those participants to their pre-July

1

Even though participants in this group have not suffered any reductions, the Court included
them in the class because the denial of the right to notice that complies with the Due Process Clause is an
injury in itself, regardless of actual injury. See Memorandum Decision (Dkt. No. 130) at p. 12 (citing
Carey v. Piphus, 435 U.S. 247, 266 (1978); Walters v. Reno, 145 F.3d 1032, 1047 (9th Cir. 1998)).

Memorandum Decision & Order – page 3

1, 2011, budget levels would be a punishment, not a remedy, and contrary to the Court’s
intention. Those participants are entitled to keep their budget increases.
There are others whose budgets increased for some time and then decreased more
recently. A remedy that attempts to restore them to their pre-July 1, 2011, budget levels
would encounter two problems: (1) it could not be implemented for those participants
who only joined after July 1, 2011; and (2) it deprives them of their budget increases
since that date.2
The Court has already held that all of IDHW’s notices of budget reductions since
July 1, 2011, violated due process. Thus, any budget reduction for a class member since
July 1, 2011, must be rolled back under the injunction.3 For some, that will restore them
to their pre-July 1, 2011, budgets. For others, it will restore them to their highest budget
level since July 1, 2011. No class member is to be deprived of any budget increase since
July 1, 2011.
Plaintiffs also argue that IDHW continues to send out insufficient notices and that
the injunction should be extended to order IDHW to submit any future notices to the
Court for advance clearance. Plaintiffs’ argument is based on the experiences of three

2

The Court agrees with the plaintiffs that the class includes not only all those who were
participants as of July 1, 2011, (and have seen nothing but budget reductions), but also those who joined
later, those who have seen both budget increases and decreases, and those who have undergone
significant changes in services.
3

IDHW points out that some budgets are reduced because participants agree that they no longer
need certain services. There is no dispute that such reductions are proper and do not trigger due process
protections.

Memorandum Decision & Order – page 4

participants who suffered substantial reductions in their budgets without sufficient notice.
Each defendant was transitioning from a traditional service plan to a self-direction service
model. See Declaration of Wilkinson (Dkt. No. 138-2). It appears that shortly after
notifying the participants of their budgets for next year, IDHW realized that its
calculation errors warranted a reduction in each of those three budgets and sent notices
correcting those errors. Id. There is no dispute that the notice sent by IDHW notifying
these three participants of their reductions said nothing about the reason for those
reductions. It is not entirely clear from this limited record, however, what rights the three
participants had in their erroneous budgets – quickly corrected – for a program that none
of them had yet started. At any rate, the cases of all three participants are presently on
appeal within the agency, and no reductions will take place until the appeals are
completed. See Declaration of Evans (Dkt. No. 138-1). This appears to be a dispute that
needs to be more fully briefed and that should not be resolved as an appendage to these
cross-motions to clarify. Accordingly, the Court will deny that portion of plaintiffs’
motion.
ORDER
Pursuant to the Memorandum Decision set forth above,
NOW THEREFORE IT IS HEREBY ORDERED, that the plaintiffs’ motion to
clarify or modify (docket no. 137) is GRANTED IN PART AND DENIED IN PART. It
is granted to the extent it seeks clarification of the injunction as follows: Any budget
reduction for a class member since July 1, 2011, must be rolled back under the injunction.
For some, that will restore them to their pre-July 1, 2011, budgets. For others, it will
Memorandum Decision & Order – page 5

restore them to their highest budget level since July 1, 2011. No class member is to be
deprived of any budget increase since July 1, 2011. Plaintiffs’ motion is denied in all
other respects.
IT IS FURTHER ORDERED, that IDHW’s motion to modify (docket no. 136) is
DENIED.

DATED: April 21, 2014

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

Memorandum Decision & Order – page 6