REED et al v. MINOTT et al

Filing 49

ENTRY ON MOTION TO VACATE INJUNCTION: The motions are fully briefed and the Court, being duly advised, GRANTS the State's motion [dkt. no. 42] and DENIES the joint motion of the Plaintiffs and the USA [dkt. no. 38] for the reasons set forth b elow. The Plaintiffs' motion for leave to file a surreply [dkt. no. 47] is GRANTED; the Clerk is directed to file the surreply [found at dkt. no. 47-1] and the Court has considered it in making this ruling. For the reasons set forth above, the injunction in this case is hereby VACATED in its entirety ***SEE ENTRY FOR ADDITIONAL INFORMATION***. Signed by Judge William T. Lawrence on 11/7/2014. (DW)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
BRENDA REED, et al.,
Plaintiffs,
vs.
DEBRA MINOTT, in her official
Capacity as Secretary of the Indiana
Family and Social Services
Administration; and KATHLEEN
SEBELIUS, in her official capacity as
Secretary of the Department of Health
and Human Services,
Defendants.

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ENTRY ON MOTION TO VACATE INJUNCTION
This cause is before the Court on the joint motion of the Plaintiffs and Defendant
Kathleen Sebelius, who is a defendant by virtue of her position as Secretary of the Department of
Health and Human Services (hereinafter referred to as “the USA”), seeking to modify the
injunction that was entered in this case in March 1986, and the motion of Defendant Debra
Minott, who is a defendant by virtue of her position as Secretary of the Indiana Family and
Social Services Administration (hereinafter referred to as “the State”), seeking to vacate the
injunction in its entirety. The motions are fully briefed and the Court, being duly advised,
GRANTS the State’s motion [dkt. no. 42] and DENIES the joint motion of the Plaintiffs and the
USA [dkt. no. 38] for the reasons set forth below. The Plaintiffs’ motion for leave to file a
surreply [dkt. no. 47] is GRANTED; the Clerk is directed to file the surreply [found at dkt. no.
47-1] and the Court has considered it in making this ruling.

BACKGROUND
This class action suit was filed in 1985 against Indiana and federal officials and was
prompted by what the Seventh Circuit later referred to as “the Secretary of Health and Human
Services’ misinterpretation of Section 2640 of the Deficit Reduction Act of 1984.” Reed v.
Blinzinger, 816 F.2d 296, 297 (7th Cir. 1987). Specifically, § 2640, which was codified at 42
U.S.C. § 602(a)(38) (1984) 1, changed the eligibility requirements for Aid to Families with
Dependent Children (“AFDC”) benefits, providing that the income of an AFDC applicant’s
siblings residing in the applicant’s household was to be counted as the applicant’s income for
purposes of determining the applicant’s eligibility for AFDC benefits. This change resulted in
some individuals who were previously eligible for AFDC benefits losing their eligibility.
One way individuals became eligible for Medicaid was by receiving AFDC. Under the
State’s reading of § 2640, if such an individual became ineligible for AFDC benefits under the
new standard set forth in § 2640—that is, once the income of his or her sibling(s) was
considered—the individual also became ineligible for Medicaid and the State thus terminated the
individual’s Medicaid benefits. This suit was filed to challenge that practice.
The Plaintiffs argued that the State’s practice was prohibited by 42 C.F.R. § 435.113,
which provided at the time that a state “must provide Medicaid to individuals who would be
eligible for AFDC except for an eligibility requirement used in that program that is specifically
prohibited under title XIX.” Pursuant to 42 U.S.C. § 1396a(a)(17)(D), the consideration of
sibling income was one such specifically prohibited eligibility requirement.
Judge Steckler certified a class in this case consisting of “families who have had or will
have their Medicaid eligibility terminated because they are no longer eligible for [AFDC]

1

This provision was repealed in 1996.
2

benefits based on the new filing requirements under § 2640.” He then ruled in favor the
Plaintiffs, rejecting the Defendants’ argument that § 2640 modified 42 U.S.C. § 1396a(a)(17)(D)
and superseded the regulations implementing it. Judge Steckler entered judgment enjoining the
Defendants and their successors in office from “enforcing the policy and practice of denying
Medicaid assistance to plaintiffs and members of the plaintiff class because of the consideration
of income of siblings.” The judgment was affirmed by the Seventh Circuit in 1987.
DISCUSSION
In September 2013, the USA filed a motion seeking relief from the court’s judgment
based upon changes in the law contained in certain provisions of the Patient Protection and
Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act (hereinafter
referred to collectively as “the ACA”). All of the parties in this case agree that the ACA has
changed the rules applicable to Medicaid eligibility determinations such that the Defendants
cannot comply with both the ACA and the injunction; accordingly, they all agree that the current
injunction cannot remain in place. As previously noted, the Plaintiffs and the USA have jointly
moved to modify the injunction; the State has moved to vacate it.
The issue before the Court, then, is whether the injunction should be vacated altogether or
simply modified. 2 The Court’s inquiry is governed by Federal Rule of Civil Procedure 60(b)(5),
which “permits a party to obtain relief from a judgment or order if, among other things,
‘applying [the judgment or order] prospectively is no longer equitable.’” Horne v. Flores, 557
U.S. 433, 447 (2009).
Rule 60(b)(5) may not be used to challenge the legal conclusions on which a prior
judgment or order rests, but the Rule provides a means by which a party can ask a
court to modify or vacate a judgment or order if “a significant change either in
2

The Court finds that it is not necessary or appropriate to require the State to provide
notice to the class before resolving these motions.
3

factual conditions or in law” renders continued enforcement “detrimental to the
public interest.” Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 384, 112
S.Ct. 748, 116 L.Ed.2d 867 (1992). The party seeking relief bears the burden of
establishing that changed circumstances warrant relief, but once a party carries
this burden, a court abuses its discretion when it refuses to modify an injunction
or consent decree in light of such changes.
Id. (some citations omitted).
The State argues that changed circumstances in the law have rendered the injunction
moot. The Court agrees. The particular “policy and practice” that Judge Steckler enjoined was
the denial of Medicaid to individuals who would have been eligible for AFDC benefits but-for
the consideration of sibling income. That is the only conduct that was prohibited by the
injunction. There is no dispute that there has been a change in the applicable law—the new
provisions of the ACA—that makes it inappropriate to enjoin that conduct because it is no longer
a violation of federal law. In other words, sibling income is no longer “an eligibility requirement
used in [AFDC] 3 that is specifically prohibited under title XIX.” Therefore the injunction must
be vacated.
The Plaintiffs argue that the injunction should not be vacated, but rather modified,
because even under the ACA there are some instances in which it is not permissible to consider
sibling income in determining eligibility for Medicaid. Specifically, 42 U.S.C. §
1396a(e)(14)(D) sets forth several categories of individuals to whom the new income eligibility
provisions do not apply. Therefore, the Plaintiffs and the USA have agreed that the injunction
should be modified to read as follows:

3

The AFDC program was replaced by a new program, the Temporary Assistance for
Needy Families (“TANF”) program, pursuant to the Personal Responsibility and Work
Opportunity Reconciliation Act, which was enacted in 1996. At no time did the State move to
vacate the injunction on the basis that AFDC no longer existed. The Court need not determine
whether that change would be an appropriate basis for vacating the injunction at this time, and
therefore will simply use “AFDC” to refer both to AFDC and its successor, TANF.
4

Except as set forth immediately below, effective immediately the injunction shall
no longer apply to eligibility determinations for any applicant or beneficiary
whose income and resources are subject to the requirements of 42 U.S.C. §
1396a(e)(14)(A), (B), and (C).
In the case of determining ongoing eligibility for beneficiaries determined eligible
for Medicaid coverage to begin on or before December 31, 2013, the injunction
shall remain in full force and effect until March 31, 2014 or the next regularly
scheduled renewal of eligibility for such individual, whichever is later, at which
point the injunction shall no longer apply to eligibility determinations for any
applicant or beneficiary whose income and resources are subject to the
requirements of 42 U.S.C. § 1396a(e)(14)(A), (B), and (C).
The injunction shall remain in full force and effect as it relates to those
individuals specified in 42 U.S.C. § 1396a(e)(14)(D).
The problem with the Plaintiffs’ argument is that it treats the injunction in this case as if
it enjoins the State from considering sibling income when determining Medicaid eligibility for
any individual. 4 It does not. This case only involved the consideration of sibling income as to
the class and the injunction applies only to that class—that is, those individuals who would be
eligible for AFDC benefits but for the consideration of sibling income. As to those individuals,
everyone agrees the relevant law has changed. The other individuals the Plaintiffs are concerned
about—people who qualify for Medicaid, if at all, on a basis that is not related to their eligibility
for AFDC—were not in the Plaintiff class and therefore never fell under the protection of the
injunction. It would be wholly improper to modify the injunction to change that fact now.
Accordingly, the Court will vacate the injunction. 5

4

In fact, in their response to the motion to vacate the Plaintiffs quote the injunction as
“enjoining the defendants, in pertinent part, ‘from enforcing the policy and practice of denying
Medicaid assistance . . . because of the consideration of income of siblings.’” Response at 2.
The ellipses utilized by the Plaintiffs leave out an essential qualifier in the language of the
injunction—the injunction only applied to the practice of denying benefits “to plaintiffs and
members of plaintiff class.”
5
The Court recognizes the fact that some individuals will not be subject to the relevant
ACA provisions until as late as March 31, 2015. That does not make it necessary to modify,
rather than vacate, the injunction. Vacating the injunction does not give the State permission to
5

CONCLUSION
For the reasons set forth above, the injunction in this case is hereby VACATED in its
entirety.
SO ORDERED: 11/07/14
_______________________________
Hon. William T. Lawrence, Judge
United States District Court
Southern District of Indiana

Copies to all counsel of record via electronic notification

violate the law; it simply recognizes that the statutory provisions that were the basis for the
Plaintiff’s lawsuit and which made the injunction appropriate no longer exist.
6