Diversicare v. Kentucky Cabinet for Health and Family Services
MEMORANDUM OPINION & ORDER: IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Complaint, For Judgment on the Pleadings or for Summary Judgment DE 15 be SUSTAINED. Signed by Judge Henry R. Wilhoit, Jr on 10/27/17.(KSS)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
Civil Action No. 16-141-HRW
DIVERSICARE d/b/a SOUTH SHORE
NURSING AND REHABILITATION
CENTER, As Authorized Representative of
MEMORANDUM OPINION AND ORDER
VICKIE YATES BROWN GLISSON,
in her official capacity as the Secretary of the
KENTUCKY CABINET FOR HEALTH
AND FAMILY SERVICES,
This matter is before the Court Defendant's Motion to Dismiss Complaint, For Judgment
on the Pleadings or for Summary Judgment [Docket No. 15]. The matter has been fully briefed
by the parties [Docket Nos. 15, 16 and 17]. For the reasons set forth herein, the Court finds that
it lacks subject matter jurisdiction over this matter and, therefore, dismissal is warranted.
This civil action arises from Plaintiff Diversicare d/b/a South Shore Nursing and
Rehabilitation Center's ("South Shore") efforts to obtain reimbursement from Medicare for the
nursing home care it provided to Wilma Fryer.
It generally alleges that Defendant Vickie Yates
Brown Glisson, as the Secretmy for the Kentucky Cabinet for Health and Family Services
("CHFS") failed to comply with its obligation to secure Medicaid benefits for residents in longterm care facilities. Specifically, it claims that Defendant's alleged failure to comply with both
Kentucky and Federal law to determine Medicaid benefits to Plaintiff while receiving care at a
skilled nursing facility is a violation of the Federal Medicaid Act at 42 U.S.C. § 1396a (a)(l 7)(b)
(1988); 20 CFR § 416.1201(a)(l); the Due Process Clause of the Fourteenth Amendment to the
United States Constitution; the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12131 et
seq., the Rehabilitation Act of 1973, 29 U.S.C. § 794a, et seq.
The salient facts of this case are not in dispute. Plaintiff is a limited liability with its
principal place of business, a nursing home, in South Shore, Kentucky. [First Amended
Complaint, Docket No. 11, iJ7].
On March 11, 2014, Wilma F1yer became a resident of South Shore. She was admitted
with diagnoses of dementia, weakness and other life limiting medical conditions. At the time of
her admission, Ms. F1yer was incapacitated and during her admission became insolvent and
unable to pay for her skilled nursing care. Id. at ii 11.
Her application for Medicaid benefits was submitted in May of2014. Id. at iJ 12. Ms.
Fryer and her son, Jerry Coffee attempted to obtain the documentation needed for the application.
At the time of Ms. Fryer's application, however, Mr. Coffee did not possess Power of
Attorney or Guardianship authority, and as such, he was unable to obtain the bank records,
insurance verifications or any other documents that the Depmtment of Community Based
Services (DCBS), a Department within CHFS, required to process Ms. F1yer's application for
benefits. At that time, verifications were inaccessible by Ms. Fryer due to her medical condition,
and unavailable to anyone acting on her behalf. Id. at iJ 13.
Subsequently, Mr. Coffee petitioned for Guardianship and obtained appointment as
Guardian on July 25, 2014. Id. at ii 14.
On September 23, 2014, South Shore's business manager, Joe Staley applied for long
term Medicaid benefits on behalf of Ms. F1yer, triggering the need for a resource assessment.
CHFS 's local Family Supp01i workers requested South Shore produce various records needed to
verify her eligibility. On September 24, 2014, Ms. Staley faxed 11 pages of records to CHFS
consisting of Ms. Fryer's bank statement from a closed joint bank account Ms. F1yer had with her
son, and documentation about the payoff history of the mortgage loan showing the net proceeds
Ms. Fryer received when her home was sold. But CHFS also needed additional bank records to
verify the net proceeds from the sale was deposited into Ms. Fryer's savings account and then
spent down for her nursing home care, until she reached the $2000 nonexempt asset eligibility
A CHFS employee named Amanda Woods testified at the administrative hearing she sent
multiple Request for Information ("RFI") forms to Ms. Staley. Ms. Woods testified she deferred
taking action on Ms. F1yer's Medicaid application to give her representatives more time to obtain
the records. Fryer's son gathered documents and emailed them to Ms. Staley at South Shore. He
later told a Kentucky probate court it was not his fault if South Shore did not forward them.
Ms. Fryer passed away on October 23, 2014. Id. atiJ 21. At the time of her death, her
Medicaid application was still pending.
On November 24, 2014, Wilma F1yer's children petitioned a Kentucky probate comi to
dispense with administration because her only assets were a 1999 Jeep Grand Cherokee valued at
$500, and $1,395 remaining in her checking account. The probate court granted the motion.
Ms. Woods sent three "we need information" letters sent to the Fryer's to let them know
she could not complete the resource assessment but giving them more time. The initial deadline
was October 23, 2014, later extended to November 10, and then December 4, 2014 for South
Shore and Ms. Fiyer's family to furnish CHFS with the needed financial documentation. [Docket
On December 9, 2014, after the last deadline lapsed, Ms. Woods notified South Shore
Ms. Fryer's Medicaid application was denied for lack of complete documentation. Id. at iJ 25 and
Docket No. 15-4.
On January 7, 2015, South Shore appealed the denial Ms. Flyer's application for
Medicaid benefits, on her behalf. [Docket No. 15-5).
On February 13, 2015, South Shore petitioned the Kentucky Greenup County probate
court for appointment as Ms. Fryer's "authorized Medicaid representative" in an attempt to
obtain retroactive Medicaid benefits to pay for Ms. Fryer's outstanding debt for nursing home
care, which it represented was approximately $30,000. [Docket No. 15-7).
Over the objection of one of Wilma Fryer's sons, the Greenup County District Court,
Probate Division, ordering that South Shore:
shall act as the Authorized Medicaid Representative for Wilma J.
Fryer and is authorized to take such actions as are necessary to
qualify the decedent, Wilma J. Fryer, for Medicaid benefits due
during her lifetime or otherwise appeal any previous denial of
Docket No. 15-8.
Notably, the probate court order did not open an estate or appoint South Shore as
CHFS 's Administrative Hearings Division scheduled Ms. F1yer's "fair hearing" for
Febrnary 17, 2016. Two days before the administrative hearing, South Shore submitted
additional savings account records of the decedent. During the hearing, South Shore's counsel
asked the CHFS witness, Amanda Woods, why Ms. Fryer's application was denied. Ms. Woods
testified that despite the extensions granted, the critical savings account documentation was not
provided until after the denial letter. She was unable to complete the resource assessment needed
to determine eligibility without the missing records. [Transcript of Hearing, Docket No. 15-10,
The CHFS Hearing Officer issued his recommended decision on May 5, 2016. He found
from the weight of the evidence that South Shore failed to establish its agent produced Ms.
F1yer's savings and loan records needed to determine eligibility prior to denial, despite numerous
extensions. So he upheld the agency's decision denying any retroactive benefits. [Docket No. 1511].
South Shore filed exceptions, arguing that CHFS should have retroactively approved Ms.
F1yer incomplete application for Medicaid benefit based on the belatedly produced evidence at
the hearing. [Docket No. 15-21).
The Kentucky Appeal Board for Public Assistance rejected Plaintiffs exceptions and
adopted the CHFS Hearing Officer's final order on September 30, 2016, as the final agency
decision. [Docket No.; 15-22].
On October 31, 2016, South Shore petitioned for judicial review to the Commonwealth of
Kentucky Greenup Circuit Court, pursuant to KRS Chapter 13B, Kentucky's Administrative
Appeals Act. [Doc # 1-1, Page ID # 5-17]. CHFS removed the case to this Court based on federal
removal jurisdiction. [Doc# I, Page ID# 1-4]. South Shore filed its First Amended Complaint
on March 13, 2017 [Doc# 11, Page ID# 43-67]. Ostensibly acting on behalf of Wilma Flyer,
deceased, South Shore asserts federal claims based on CHFS's alleged violation of the
Americans with Disabilities Act of 1990 ("ADA"), see 42 U.S.C. §§ 12101 el seq. (Count Four);
violation of Section 504 of the Rehabilitation Act of 1973, see 29 U.S.C. § 794 (Count Five);
violation of 42 U.S.C. § 1983, the federal Civil Rights Act; based on alleged violations of the
federal Medicaid Act; and alleged violations of decedent's Due Process and Equal Protection
rights from the U.S. Constitution, Fourteenth Amendment (Counts Two, Three and Six). South
Shore also seeks declaratmy relief (Count One), and tempora1y and permanent injunctive relief
(Count Seven) for retrospective payment of Ms. Fryer's nursing home debt to South Shore.
Defendant seeks dismissal or, in the alternative, judgment as a matter of law. Defendant
first challenges South Shore's standing to bring retrospective federal civil rights claims seeking
damages on behalf of a deceased resident denied Medicaid benefits after her death.
Standing is the "threshold" question in every federal case. Warth v. Seldin, 422 U.S. 490,
498 ( 1975). Without proper standing, subject matter jurisdiction does not exist.
Standing is the determination of whether a specific person is the proper party to bring a
matter to the court for adjudication. The Supreme Court has declared that "[i]n essence the
question of standing is whether the litigant is entitled to have the court decide the merits of the
dispute or of particular issues." Id.
The burden of establishing standing rests upon plaintiff. Lujan v. Defenders of Wildlife,
504 U.S. 555, 561-562 (1992). However, at the pleading stage, general factual allegations of
injury resulting from defendant's conduct may suffice. Id. Standing is determined as of when
plaintiffs file their complaint. Javitch v. Transamerica Occidental Life Ins. Co., 408 F.Supp.2d
531, 533 (N.D.Ohio 2006) (citing Senter v. General Motors Co17J., 532 F.2d 511, 518 (6th Cir.)).
The United States Supreme Court has identified three constitutional standing
requirements which a plaintiff must allege: 1) he or she has suffered or imminently will suffer
and injury; 2) the injury is fairly traceable to the defendant's conduct; and 3) a favorable federal
comt decision is likely to redress the injury. Lzljan, 504 U.S. at 560-561.
The Supreme Court has also identified three prudential standing principles which require
a party to: 1) generally assert only his or her own rights, not claims of third parties; 2) not allege
generalized grievances more suitable for legislative or executive resolution; 3) raise a claim
within the zone of interest protected by the statute or constitutional provision in question. Warth
v. Seldin, 422 U.S. at 499.
Where a defendant challenges a plaintiffs standing to bring suit, the Court should first
consider whether it has subject matter jurisdiction pursuant to Rule 12(b)(1) before it considers
the substantive merits ofa pleading pursuant to Rule 12(b)(6). Bell v. Hood, 327 U.S. 678, 682
(1946). See also, Coal Operators and Assoc. Inc., v. Babbitt, 291 F.3d 912 (6 1" Cir. 2002).
Plaintiff has the burden of proving jurisdiction in order to survive the Rule 12(b)(l) motion and
must plead the elements of standing with specificity. Coal Operators, 291 F.3d at 916. A Rule
l 2(b )( 1) motion can either attack the claim of jurisdiction on its face or attack the factual basis
for jurisdiction. DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6 1" Cir. 2004). Where there is a facial
challenge to standing, the Court must consider all of the allegations in the complaint as true. Id.
Where there is a factual challenge to standing, the Court may consider evidence outside the
pleadings to resolve factual disputes and must weigh the evidence. Id.
It is a "fundamental restriction on [federal court] authority" that "[i]n the ordinaiy course,
a litigant must assert his or her own legal rights and interests, and cannot rest a claim to relief on
the legal rights or interests of third parties." Powers v. Ohio, 499 U.S. 400 (1991).
South Shore has no standing to file suit to assert any of Wilma Fryer's federal claims.
When this action was filed, Ms. Fryer was already deceased. If decedent had any cause of action
prior to her death, South Shore would have needed a valid appointment or power of attorney or
assignment of right to act on her behalf executed by her legal guardian, because, according to the
Amended Complaint, decedent had been adjudged legally incompetent. If South Shore had, in
fact, obtained such authorization, it wold not have been necessary to seek an Order from the
probate court with regard to pursing an appeal for Medicaid benefits.
After Ms. Fryer died, only an administrator of her estate could bring a federal claim on
her behalf, not South Shore. Under Kentucky law, any surviving right of action under 42 U.S.C.
§ 1983, the ADA, or the Rehabilitation Act belonged to the duly appointed representative of Ms.
Fryer's estate, not South Shore. South Shore is not the administrator of Ms. Fryer's estate. South
Shore is, at best, a creditor. There are no Kentucky statutes that allow a creditor of an estate to
sue directly on behalf of a deceased debtor.
Moreover, the probate order which Plaintiff insists provides the requisite standing in this
lawsuit, docs not authorize South Shore to act in place of the personal representative of the
Wilma F1yer Estate, or sue on behalf of her estate asserting personal injury claims under the
federal Civil Rights Act, the Americans with Disabilities Act or the federal Rehabilitation Act.
Plaintiff also argues that it has "associational standing" to assert federal personal injury
claims and seek damages on behalf of the Wilma Fryer. This argument lacks merit.
An association has standing to bring suit on behalf of its members when its members
would otherwise have standing to sue in their own right, the interests at stake are germane to the
organization's purpose and neither the claim asserted or the reliefrequires participation by
individual members in the lawsuit. Hunt v. Washington State Apple Advertising Co111111ission,
432 U.S. 333 (1972).
Associational standing is "reserved for organizations that 'express the collective views
and protect the[ ] collective interests' of their members." Fleck & Associates, Inc. v. Phoenix,
City of, an Arizona Mun. Corp., 471 F.3d 1100, 1106 (9th Cir. 2006). Such is not the case here.
South Shore is a for profit nursing home corporation. South Shore not a voluntmy trade
organization or association It was not formed to advocate for its residents.
Rather, its residents
are akin to customers. Ms. Frye was such a customer, who died with an unpaid bill and no assets
in her estate to pay. See Fednav, Ltd. v. Chester, 547 F.3d 607, 616 (6th Cir. 2008)(holding
shipping port company lacked associational standing to sue on behalf of its clients).
Nor does the fact when designated to do so, nursing homes may apply for Medicaid
benefits for a resident bestow standing upon Plaintiff. Even assuming this power includes
deceased residents, this does not confer blanket standing. Federal courts determine standing on a
claim-by-claim basis. "[S]tanding is not dispensed in gross." Price v. Medicaid Director, 838
F.3d 739, 746 (6th Cir. 2016), quoting Fednav, Ltd. v. Chester, 547 F.3d 607, 614 (6th Cir.
2008). Standing to apply for benefits cmmot be expanded to include standing to assert vicarious
federal personal injury claims.
South Shore has not met its burden to establish associational standing to represent Wilma
F1yer or her Estate, in whose interest it purports to represent, asserting federal personal injmy
claims. Therefore, this Court lacks subject matter jurisdiction.
Accordingly, IT IS HEREBY ORDERED that Defendant's Motion to Dismiss
Complaint, For Judgment on the Pleadings or for Summaiy Judgment [Docket No. 15] be
J1 J'::y of October, 2017.
Hem:y_R. Wilhoit, Jr.
United States District Judge
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