Schultz et al v. Armstrong
Filing
17
MEMORANDUM DECISION AND ORDER granting in part and denying in part 4 Motion for TRO and Preliminary Injunction. IT IS FURTHER ORDERED, that plaintiffs shall submit a proposed preliminary injunction order identical to that issued in K.W. v. Armstrong, CV-12-22-BLW. 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
TOBY SCHULTZ, et al.,
Case No. 3:12-cv-00058-BLW
Plaintiffs,
MEMORANDUM DECISION AND
ORDER
v.
RICHARD ARMSTRONG,
Defendant.
INTRODUCTION
The Court has before it plaintiffs’ motion for a temporary restraining order and
preliminary injunction. The motion is fully briefed and at issue. For the reasons
explained below, the Court will grant the motion in part and deny it in part.
BACKGROUND
Plaintiffs Toby Schultz, Breann Mullic, and Caleb Hall are developmentally
disabled adults, represented in this action by their legal guardians. Plaintiffs are all
residents of Idaho and rely on Idaho’s Medicaid program for their treatment and care. In
their underlying claim, plaintiffs allege that Defendant Richard Armstrong, in his official
capacity as director of the Idaho Department of Health and Welfare, unlawfully reduced
Memorandum Decision and Order - 1
their 2012-2013 treatment budget without providing notice of the methodology used to
calculate their budgets, in violation of the Medicaid Act and the Due Process Clause of
the Fourteenth Amendment. The Amended Complaint proposes class certification for “a
class consisting of all Idaho residents currently receiving benefits or who received
benefits within the past two years under Idaho’s Medicaid program that are subject to
individual budget determinations made by the Idaho Department of Health and Welfare.”
See Amended Complaint (Dkt. No. 9) at ¶ 16.
The State of Idaho participates in Medicaid and is required, in order to receive
federal reimbursement, to comply with certain requirements set forth in the Medicaid Act.
42 U.S.C. §§ 1396–1396w-5. Idaho, through an application to the U.S. Department of
Health and Human Services, has applied for and received a waiver allowing qualified
disabled Medicaid applicants to opt for self-directed personal assistance services.
Plaintiffs all participate in the Idaho Developmental Disabilities Waiver (“DD Waiver”),
a program authorized by Medicaid that is intended to place the disabled in home-based
care rather in institutions.
Plaintiffs each receive services through the DD Waiver. Plaintiffs allege that
Idaho notified each of them that their treatment budgets for the 2012-2013 treatment plan
year would be significantly reduced. The budget reductions ranged from ten to fifteen
percent below plaintiffs’ 2011-2012 budgets. See Declaration of Jana Schulz (Dkt. No. 42) at ¶ 11. Pursuant to a longstanding policy, Idaho’s notice to plaintiffs informing them
of their 2012-13 budget did not disclose the method the State used to calculate their
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individual budgets or state any reason for the reductions.
Each plaintiff administratively appealed their 2012-13 treatment year budget. Ms.
Mullic’s and Mr. Hall’s appeals were denied. Mr. Schultz’s appeal was pending at the
time the Amended Complaint was filed. Ms. Mullic’s denial decision informed her that
the administrative “Hearing Officer possesses no authority to review the Department [of
Health and Welfare’s] [budget setting] methodology.” Id. at ¶ 17.
On February 8, 2012, plaintiff Toby Schulz filed this action, and plaintiffs Hall and
Mullic were added later. Pursuant to 42 U.S.C. § 1983, the complaint asserts that Idaho
Department of Health and Welfare’s (IDHW’s) unexplained reduction in Medicaid funds
violates the requirements of Medicaid and divests the recipients of a property benefit
without due process of law. The complaint also asserts that IDHW’s policy of “setting . .
. individual budgets pursuant to secret methodology” is unlawful because it is preempted
by the Medicaid Act. It requests preliminary and permanent injunctive relief.
The motion currently before the Court seeks to “enjoin Defendant Richard
Armstrong from . . . continuing any Medicaid benefit reductions occurring or that have
occurred as a result of the Idaho Department of Health and Welfare’s implementation or
use of its individualized budget setting methodology.” See TRO Motion (Dkt. No. 4) at p.
1. The Motion is related to similar litigation pending before the Court, K.W. v.
Armstrong, 1:12-cv-00022-BLW. In K.W., twelve disabled individuals, each receiving
assistance through the DD Waiver program, claim that the inadequately noticed
reductions in their treatment budgets violate the Fourteenth Amendment and federal law.
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After a hearing, on February 3, 2012, the Court entered a temporary restraining order
enjoining the reductions. See K.W. v. Armstrong, supra, TRO (Dkt. No. 31) at pp. 1-2.
The parties then stipulated to a preliminary injunction that was approved by the Court on
March 12, 2012. See K.W. v. Armstrong, supra, Preliminary Injunction (Dkt. No. 41).
The stipulated injunction prevents the defendants from reducing assistance to any of the
K.W. plaintiffs without “adequate advance notice, approved by the Court.” Id. at 2. The
injunction also obliges the defendants to make available upon request, for any participant
in the Idaho Medicaid Adult Developmental Disabilities program, a number of
documents, including unaltered copies of the State’s current and previous budget
calculating tool spreadsheets and the inquiring participants actual budget calculation
spreadsheets. Id. at 2-3.
In response to the K.W. litigation, IDHW asserts that it made permanent changes to
its policy. First, IDHW revised the form used to notify Medicaid participants when their
individual budgets are calculated. The revised notice informs recipients as follows:
If requested, the Department will provide copies of the spreadsheets for calculating
your budget for the upcoming year and prior years’ budgets and an opportunity to
inspect and copy all descriptions, reports, studies and other records concerning the
Department’s present and prior methodologies, models, tools, spreadsheets,
memoranda, training manuals, instructions and other materials . . . that are in the
custody . . . of the Department.
See Yee-Wallace Declaration (Dkt. No. 13-1) at p. 8. The form allows the recipient to
check a box to request a copy of the “Individualized Budget Calculation tool” used from
2008 onward. Id. at 9. The form also states that recipients may administratively appeal
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their challenged budget on the ground that “[y]our individualized budget amount was
calculated incorrectly based upon any issues you have with the budget calculating
methodology used to calculate your budget.” Id. at 8.
According to IDHW, as of March 5, 2012, the revised notice will be used on “a
permanent going-forward basis.” The revised notice has been or will be sent to all
participants with a pending appeal of their plan of service or budget calculation, as long
as they have not yet had an administrative hearing. Id. at 6. Apparently, a remedial
revised notice will not be sent to those participants who did not challenge their most
recent treatment plan, or who administratively appealed their treatment plan but have
already had their hearing, although those individuals will receive the revised notice with
their future budget calculations.
In the K.W. litigation, IDHW moved the Court to approve a variation of the revised
notice that will be addressed to each of the individual plaintiffs in that action. The K.W.
plaintiffs maintain that the revised notice is inadequate because, inter alia, it continues to
lack an explanation for any budget reduction, it impermissibly limits the ground on which
a participant may pursue an administrative appeal, and it is written in language that is not
understandable by the recipient. The Court has just issued a decision denying that
motion. The Court found that due process and case law required that any notice of
reduction in budget must explain why the reduction was being made. The notice
proposed by IDHW failed to contain that explanation.
With respect to the named plaintiffs in the instant action, IDHW asserts that it has
Memorandum Decision and Order - 5
sent the revised notice discussed above to each plaintiff. Mr. Hall and Ms. Mullic have
been provided a second administrative appeal, if they so choose, this time with access to
the budget calculation methodology if they so desire. Mr. Schultz’s scheduled
administrative appeal was still pending as of March 28, 2012, and the State sent him his
revised notice on February 17, 2012. Each of the named plaintiffs has had their 20112012 budget level restored pending their administrative appeal.
LEGAL STANDARD
A plaintiff seeking a preliminary injunction must establish that: 1) it is likely to
succeed on the merits; 2) it is likely to suffer irreparable harm in the absence of
preliminary relief; 3) the balance of equities tips in its favor; and 4) an injunction is in the
public interest. Reed v. Town of Gilbert, 587 F.3d 966, 973-74 (9th Cir. 2009) (citing
Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008). A preliminary
injunction is “an extraordinary remedy never awarded as of right.” Winter, 555 U.S. at
24. In each case, courts “must balance the competing claims of injury and must consider
the effect on each party of the granting or withholding of the requested relief.” Id.
(internal quotation marks omitted)
ANALYSIS
IDHW does not contest that plaintiffs, at the time they filed their motion, would
have been entitled to injunctive relief. Rather, the agency argues that its subsequent
actions have provided plaintiffs the relief requested and mooted the motion. In their
reply, plaintiffs do not contest the adequacy of IDHW’s revised notice with respect to the
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named plaintiffs. Rather, they note that IDHW has failed to reinstate the 2011-2012
treatment budget for members of the prospective class and request injunctive relief on
behalf of this prospective class. There are thus two issues before the Court: (1) whether
IDHW’s revised notice and changed policy moots the motion with respect to the named
plaintiffs, and (2) whether the Court has authority to impose an injunction for the benefit
of a putative class that has not been certified.
Relief for Named Plaintiffs
The Court first considers IDHW’s claim that its policy changes moot the named
plaintiffs’ request for a preliminary injunction. The State points out that it restored the
2011-2012 treatments budgets for each of the named plaintiffs, at least for the moment,
and that each plaintiff has received IDHW’s revised notice, and will be allowed an
administrative appeal in which they can contest the methodology and conclusion of their
Individualized Budget Calculation tool.
However, in the K.W. case, the Court denied IDHW’s motion to approve their
proposed Notice because it failed to explain the reductions in budgets. The Notices in
this case contained that same flaw. It would be anomalous to find this dispute mooted by
a notice that has been found constitutionally insufficient in a companion case.
Accordingly, the named plaintiffs are entitled to the same injunction that has been issued
in the K.W. case. The Court will therefore grant the plaintiffs’ motion as it applies to the
named plaintiffs and direct counsel to immediately submit a form of injunction identical
to that imposed in the K.W. case.
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Relief for Prospective Class
Plaintiffs note that IDHW has not extended all of the relief afforded to the named
plaintiffs to the prospective class. IDHW responds that it has provided the revised notice
to Medicaid applicants and participants from March 5, 2012, and will continued to do so
on a “going-forward basis.” This means that those participants who received their 20122013 treatment budget prior to March 5 will not receive the revised notice until the State
notifies them of their 2013-2014 treatment budget. Further, though IDHW is permitting
Ms. Mullic and Mr. Hall a second administrative appeal so that they will have the
opportunity to dispute the State’s budget methodology, the State is apparently not
offering other participants with recently concluded appeals the same opportunity. The
revised notice is being sent to DD waiver program participants with an appeal pending,
but only to those participants who have “not yet had [their] administrative hearing.” See
State’s Brief (Dkt. No. 13) at p. 6 (emphasis added). Finally, as plaintiffs emphasize, the
State has apparently not reinstated the 2011-2012 treatment budget for the members of the
prospective class.1 Plaintiffs thus contend that the Court can and should impose
1
There is some uncertainty, based on IDHW’s brief, whether the agency has
reinstated the 2011-2012 treatment budget for members of the prospective class. IDHW
observes, in a footnote, that “[i]t is notable that the Department has . . . in fact continued [the
named Plaintiffs’] prior year budgets. The Department has extended the relief outlined in this
memorandum to the Plaintiffs in this case as well as other Medicaid participants outlined herein,
regardless of the status of their benefits.” See State’s Brief (Dkt. No. 13) at 11 n.4. This
insinuates that IDHW has “continued . . . prior year budgets” for “other Medicaid participants.”
However, IDHW’s brief and attached affidavits do not clarify or offer factual support for this
statement. Plaintiffs state that “[t]o Plaintiffs’ knowledge, no [individual other than the named
Plaintiffs] who either failed to appeal a budget cut, or who had completed an unsuccessful appeal
. . . has had their prior budget restored.” See Plaintiffs’ Reply Brief (Dkt. No. 15) at p. 2.
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injunctive relief requiring the State to restore 2011-2012 treatment funding levels to all
members of the prospective class.
The Court concludes, however, that it lacks the authority to award injunctive relief
to benefit only those who are not currently party to the action. The scope of injunctive
relief must be narrowly tailored to the specific harms established by the plaintiffs.
Zepeda v. INS, 753 F.2d 719, 728 n. 1 (9th Cir. 1983). Therefore, in general, “[w]ithout a
properly certified class, a court cannot grant relief on a class-wide basis.” Id. at 728 n.1.
This limitation stems from the “general rule that a federal court may not attempt to
determine the rights of persons not before the court.” Bresgal v. Brock, 843 F.2d 1163,
1170 (9th Cir. 1987).
An exception to this general rule allows a court to extend an injunction to benefit
persons other than the named parties in a lawsuit, “if such breadth is necessary to give
prevailing parties the relief to which they are entitled.” Id. at 1170-71; see also Cachil
Dehe Band of Wintun Indians of Colusa Indian Cmty. v. California, 618 F.3d 1066, 1084
(9th Cir. 2010) (“[A]n exception to the requirement of limiting relief to the parties applies
when effective relief is otherwise unavailable”). The Ninth Circuit has applied this
exception in instances where it is impossible or extremely impracticable to tailor
injunctive relief to benefit only the named plaintiffs in a suit. For example, in Bresgal the
Circuit upheld an injunction requiring the Secretary of Labor to enforce the Migrant and
Seasonal Agricultural Worker Protection Act against forestry labor contractors
nationwide. Bresgal, 843 F.2d at 1171. Though the plaintiffs were individual migrant
Memorandum Decision and Order - 9
laborers, there was no way to order enforcement of the Act only “against those
contractors who have dealings with named plaintiffs.” Id. Similarly, the court upheld a
California-wide injunction requiring the California Highway Patrol to alter its ticketing
policy for motorcycle helmet infractions. Easyriders Freedom F.I.G.H.T. v. Hannigan,
92 F.3d 1486, 1501-02 (9th Cir. 1996). The court held that an injunction limited to the
fourteen named parties in the case would not afford them complete relief because “it is
unlikely that law enforcement officials . . . would inquire before citation into whether a
motorcyclist was among the named plaintiffs.” Id. at 1502.
Plaintiffs argue their claim fits within the Bresgal exception, but they overlook that
relief may be extended to non-parties only when it is necessary to afford the named
plaintiffs complete relief. Bresgal, 843 F.2d at 1170-71. Unlike Bresgal, a broad
injunction requiring the State to restore an unknown number of individual treatment
budgets to 2011-2012 levels is not necessary to give the named parties the full relief that
they have requested. See id. at 1170. As plaintiffs acknowledge, IDHW has afforded the
named plaintiffs individualized relief through reinstating their 2011-2012 budget and by
allowing two plaintiffs to pursue a second administrative appeal. This fact demonstrates
that relief in this case can be structured on an individual basis. And “[w]here relief can be
structured on an individual basis, it must be narrowly tailored to remedy the specific harm
shown.” Id. The Court therefore concludes that it lacks authority to issue injunctive relief
solely to benefit individuals that are not at this time parties to the suit.
In their reply brief, plaintiffs do request that the Court grant preliminary class
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certification or streamline party joinder procedures, on the theory that an expansion of the
plaintiff class will entitle plaintiffs to the requested relief. Plaintiffs’ request for this
particular relief was not properly presented to the Court. See Fed. R. Civ. P. 7(b) (request
for court order must be made by motion stating “with particularity” grounds for seeking
order); D. Idaho Local R. 7.1(b)(1) (“Each motion . . . must be accompanied by a separate
brief.”). The Court cannot certify a plaintiff class or alter joinder procedures without a
proper motion and the benefit of briefing from the parties.
CONCLUSION
With respect to the named plaintiffs, the Court will grant the motion for injunctive
relief. With respect to the putative class, the Court lacks authority to enjoin IDHW on
behalf of those not currently party to the suit. The Court will therefore grant in part and
deny in part the plaintiffs’ motion.
ORDER
In accordance with the Memorandum Decision set forth above,
NOW THEREFORE IT IS HEREBY ORDERED, that plaintiffs’ Motion for a
Temporary Restraining Order and Preliminary Injunction (docket no. 4) is GRANTED IN
PART AND DENIED IN PART. The motion is granted as to the named plaintiffs but
denied at this time as to the prospective members of the class that has not yet been
certified.
IT IS FURTHER ORDERED, that plaintiffs shall submit a proposed preliminary
injunction order identical to that issued in K.W. v. Armstrong, CV-12-22-BLW.
Memorandum Decision and Order - 11
DATED: August 2, 2012
Honorable B. Lynn Winmill
Chief U. S. District Judge
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