Wicomico Nursing Home et al v. Malhotra et al

Filing 37

MEMORANDUM OPINION. Signed by Judge Richard D. Bennett on 8/7/2017. (krs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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WICOMICO NURSING HOME,
as assignee and/or authorized representative of
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Margaret Smith, Peggy Outten, Ruby Bounds,
Shirley Hackett, Carol Snyder, and William Soil, et al., *
Plaintiffs,

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v.

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Civil Action No.: RDB-16-1078

LOURDES R. PADILLA,
in her Official Capacity as Secretary of the
Maryland Department of Human Services,

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and

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DENNIS R. SCHRADER,
in his Official Capacity as Secretary of the
Maryland Department of Health,

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Defendants.1
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MEMORANDUM OPINION
This is the third of three similar actions filed in this Court over the past three years
based on the allegedly unlawful processing of Medicaid benefit applications by the
Secretaries of the Maryland Department of Human Services (“MDHS”) and the Maryland
Department of Health (“MDH”). See Oakview SNF LLC v. Malhotra, et al., RDB-14-2966;
Lorien Life Center Baltimore County Inc., et al v. Malhotra, et al., MJG-15-2865. In the instant case,

Defendants Lourdes R. Padilla and Dennis R. Schrader, in their official capacities as Secretary of the
Maryland Department of Human Services and Secretary of the Maryland Department of Health, respectively,
are substituted for named defendants Sam Malhotra and Van Mitchell, their predecessors in those positions.
See ECF No. 31-1 at 4, n. 1.

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plaintiffs Wicomico Nursing Home (“Wicomico”), Oakview SNF, LLC d/b/a Oakview
Rehabilitation and Nursing Center (“Oakview”),2 Anchorage Nursing, LLC d/b/a
Anchorage Rehabilitation and Nursing Center (“Anchorage”), and Brooke Grove
Foundation (“Brooke Grove”) (collectively, “plaintiffs” or the “Facilities”), as assignees
and/or authorized representatives of eleven (11) of their current and former residents,3 have
filed a putative class action complaint against defendants Lourdes R. Padilla (“Padilla”) and
Dennis R. Schrader (“Schrader”) (collectively “defendants” or the “Secretary Defendants”),
in their official capacities as Secretary of the Maryland Department of Human Services
(“MDHS”) and Secretary of the Maryland Department of Health (“MDH”), respectively.
In their Amended Complaint, plaintiffs allege that defendants have violated federal
law by failing to timely issue Medicaid eligibility determinations as required under the federal
Medicaid Act, 42 U.S.C. §§ 1396(a)(8) and 1396(a)(1), and its implementing regulations, 42
C.F.R. § 435.912 and 42 C.F.R. § 435.930. (ECF No. 30 at 2.) Plaintiffs also allege that the
“systematic unjustified delays in processing of Medicaid applications at [MDHS] and
[MDH]…constitutes unlawful discrimination” in violation of the Americans with Disabilities
Act (“ADA”), 42 U.S.C. § 12101, et seq. (Id.) In addition, plaintiffs allege that defendants
violated the residents’ Due Process rights under the Fourteenth Amendment to the United
States Constitution by permitting these systematic delays to continue and by issuing certain
misleading and confusing communications to the residents during the processing of their
2

Plaintiff Oakview was also a party to the RDB-14-2966 and MJG-15-2865 cases.

The six current residents named in the First Amended Complaint are: Cheryl Hart, Peggy Outten, Shirley
Hackett, Carol Snyder, William Soil, and Benjamin Winder. (ECF No. 30 at ¶¶ 5-15.) All six current
residents have been granted and are receiving Medicaid benefits. (ECF Nos. 31-2, 31-3.) The five former
residents named in the First Amended Complaint are all deceased: Margaret Smith, Ruby Bounds, Frances
Johnson, Eloise Roberson, and Mary Imhoff. (ECF No. 30 at ¶¶ 5-15.)

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applications for benefits. (Id.) Through this action, plaintiffs seek declaratory and injunctive
relief, as well as money damages for expenses previously incurred by the residents while they
awaited determinations on their applications for Medicaid benefits.
Now pending before this Court is defendants’ Motion to Dismiss, or in the
Alternative, for Summary Judgment (“Defendants’ Motion”). (ECF No. 31.) In support of
their Motion, defendants assert that they are entitled to state sovereign immunity under the
Eleventh Amendment to the United States Constitution and, thus, that this Court is without
subject matter jurisdiction over this action. (ECF No. 31-1 at 16-19.) Defendants also raise
several defenses under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
The parties’ submissions have been reviewed, and no hearing is necessary. See Loc.
R. 105.6 (D. Md. 2016). For the reasons stated below, Defendants’ Motion to Dismiss for
Lack of Subject Matter Jurisdiction is GRANTED, and this case is DISMISSED.
BACKGROUND
As noted above, within the past three years, plaintiffs’ counsel, the law firm of
Schutjer Bogar, LLC a/k/a sb2, Inc., has litigated in this Court two strikingly similar actions
based on MDHS and MDH’s allegedly unlawful processing of Medicaid benefit applications.
Oakview SNF LLC v. Malhotra, et al., RDB-14-2966; Lorien Life Center Baltimore County Inc., et al
v. Malhotra, et al., MJG-15-2865. In addition to the similar nature of the allegations made,
plaintiff Oakview previously sought relief on behalf of resident Cheryl Hart in the RDB-142966 case. The undersigned dismissed the Oakview case on May 8, 2015 following a hearing
at which several of the arguments again raised in this case were addressed. (RDB-14-2966,
ECF No. 36.) Similarly, Judge Garbis of this Court dismissed the Lorien case by written
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Memorandum and Order (MJG-15-2865, ECF No. 21) dated April 28, 2016—that is, only
two weeks after the instant case was filed—which explained that the retrospective relief
sought by plaintiffs placed their claims outside of the Ex Parte Young, 209 U.S. 123, 28 S.Ct.
441 (1908), exception to the doctrine of state sovereign immunity. Lorien Life Ctr. Baltimore
Cty., Inc. v. Malhotra, MJG-15-2865, 2016 WL 1696451, at *2 (D. Md. Apr. 28, 2016).
Relevant to the instant case, Judge Garbis expressly rebuffed plaintiffs’ argument that the
relief sought was prospective, as all the residents identified there were either already
receiving Medicaid benefits, or were deceased. Lorien, 2016 WL 1696451, at *2.4 No appeal
was taken in either case.
In the case now before this Court, the Facilities again allege that the Secretary
Defendants failed to “comply with their obligation to process and approve Medicaid
applications for residents in a long-term care facility pursuant to federal law.” (ECF No. 30
at 2.) As noted above, the Facilities allege that defendants’ delays in rendering Medicaid
eligibility determinations violate the Medicaid Act, the Americans with Disabilities Act, and
the Residents’ Due Process rights under the Fourteenth Amendment. See supra, at 2; ECF
No. 30 at 2-3.
Pertinent to this Court’s analysis is the status of each of the residents on whose
behalf the Facilities have filed suit. The table below indicates the name of each resident, the
name of the facility where he/she resides (or resided), and, for the living residents, the date
on which he/she began receiving Medicaid long-term care benefits:
Notably, and despite defense counsel’s having advised plaintiffs’ counsel of the prior cases—to the extent
such advice was even necessary given plaintiffs’ firm’s involvement in the prior actions—plaintiffs’ counsel
makes no reference to the prior actions in their pleadings or briefs, nor tries to distinguish those cases from
that now before this Court. (ECF Nos. 31-4, 31-5.)

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4

Resident Name

Facility

Cheryl Hart
Oakview
Margaret Smith
Wicomico
Peggy Outten
Wicomico
Ruby Bounds
Wicomico
Shirley Hackett
Wicomico
Carol Snyder
Wicomico
William Soil
Wicomico
Benjamin Winder
Anchorage
Frances Johnson
Anchorage
Eloise Roberson Brooke Grove
Mary Imhoff
Brooke Grove

Effective Date of Benefits

Reference

June 2014
[Deceased]
March 2016
[Deceased]
October 2015
January 2016
October 2015
October 2012
[Deceased]
[Deceased]
[Deceased]

(ECF No. 31-3 at ¶ 11)
(ECF No. 30 at ¶ 6)
(ECF No. 31-2 at ¶ 10)
(ECF No. 30 at ¶ 8)
(ECF No. 31-2 at ¶ 8)
(ECF No. 31-2 at ¶ 7)
(ECF No. 31-2 at ¶ 11)
(ECF No. 31-2 at ¶ 9)
(ECF No. 30 at ¶ 13)
(ECF No. 30 at ¶ 14)
(ECF No. 30 at ¶ 15)

As this table reflects, all of the residents whom the Facilities allege were harmed by
defendants’ conduct are currently receiving Medicaid long-term care benefits, or are
deceased.
Plaintiffs’ original Complaint was filed in this Court on April 11, 2016. (ECF No. 1.)
Defendants then filed a Motion for a More Definite Statement on June 10, 2016. (ECF No.
5.) Plaintiffs opposed defendants’ motion, but filed a first, and, later, a second Motion for
Leave to File an Amended Complaint. (ECF Nos. 14, 27.) Plaintiffs were permitted to file
the now-governing First Amended Complaint, and the Motion for More Definite Statement
was withdrawn. (ECF No. 29.) Defendants then filed the now-pending Motion to Dismiss.
(ECF No. 31.) This Motion is fully ripe for this Court’s resolution.
STANDARDS OF REVIEW
I.

Motion to Dismiss for Lack of Subject Matter Jurisdiction
As this Court explained in Dennard v. Towson University, “[a]n assertion of

governmental immunity is properly addressed under Rule 12(b)(1) of the Federal Rules of
Civil Procedure, which allows defendants to challenge an action for lack of subject matter
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jurisdiction.” Dennard v. Towson Univ., 62 F. Supp. 3d 446, 449 (D. Md. 2014) (citing Smith v.
WMATA, 290 F.3d 201, 205 (4th Cir. 2002)). See also Lorien, 2016 WL 1696451, at *2.
“When a governmental entity challenges jurisdiction under Rule 12(b)(1), the plaintiff bears
the burden of proving that subject matter jurisdiction exists. The district court is to ‘regard
the pleadings’ allegations as mere evidence on the issue, and may consider evidence outside
the pleadings without converting the proceeding to one for summary judgment.’” Dennard,
62 F. Supp. 3d at 449 (quoting Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945
F.2d 765, 768 (4th Cir. 1991)). “The district court should only grant the Rule 12(b)(1)
motion to dismiss ‘if the material jurisdictional facts are not in dispute and the moving party
is entitled to prevail as a matter of law.’” Id. (quoting Evans v. B.F. Perkins Co., 166 F.3d 642,
647 (4th Cir. 1999)).
II.

Motion to Dismiss For Failure to State a Claim
Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes the dismissal of a

complaint if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P.
12(b)(6). The purpose of Rule 12(b)(6) is “to test the sufficiency of a complaint and not to
resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”
Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006). “Although a motion
pursuant to Rule 12(b)(6) invites an inquiry into the legal sufficiency of the complaint, not an
analysis of potential defenses to the claims set forth therein, dismissal nevertheless is
appropriate when the face of the complaint clearly reveals the existence of a meritorious
affirmative defense.” Brockington v. Boykins, 637 F.3d 503, 506 (4th Cir. 2011).

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In reviewing a Rule 12(b)(6) motion, the court “must accept as true all of the factual
allegations contained in the complaint” and must “draw all reasonable inferences in favor of
the plaintiff.” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir.
2011) (internal citations omitted); see Semenova v. Maryland Transit Admin., 845 F.3d 564, 567
(4th Cir. 2017).
Under limited exceptions, a court may consider documents beyond the complaint
without converting the motion to dismiss to one for summary judgment. Goldfarb v. Mayor
& City Council of Baltimore, 791 F.3d 500, 508 (4th Cir. 2015). “Consideration of a document
attached to a motion to dismiss ordinarily is permitted only when the document is integral to
and explicitly relied on in the complaint, and when the plaintiffs do not challenge the
document’s authenticity.” Zak v. Chelsea Therapeutics Int’l, Ltd., 780 F.3d 597, 606–07 (4th Cir.
2015) (internal quotations omitted). Nor does a court “convert a motion to dismiss to a
motion for summary judgment when it takes judicial notice of public records… [or] of
adjudicative facts under Federal Rule of Evidence 201.” Goldfarb, 791 F.3d at 506.
ANALYSIS
I.

The Facilities Do Not Seek Prospective Injunctive Relief; They May Not
Avail Themselves of the Ex Parte Young Exception to State Sovereign
Immunity
In support of their Motion to Dismiss pursuant to Rule 12(b)(1) of the Federal Rules

of Civil Procedure, the Secretary Defendants argue that this suit is barred by the State of
Maryland’s sovereign immunity. (ECF No. 31-1 at 16.) Because defendants Padilla and
Schrader are sued in their official capacities as Secretary of the Maryland Department of
Human Services and Secretary of the Maryland Department of Health, respectively, they
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argue, they are entitled to immunity under the Eleventh Amendment to the United States
Constitution. (Id. at 17.) While defendants recognize that “state officials may be sued in
federal court for injunctive relief” under the doctrine set forth in Ex Parte Young and its
progeny, they properly note that Young’s “exception to immunity permits only prospective,
not retrospective, relief.” (Id.) (citing Ex Parte Young, 209 U.S. at 159, 28 S.Ct. 441 (1908).)
In opposition to Defendants’ Motion, the Facilities rely on the Young exception to
state sovereign immunity and, as they must, seek to frame the relief they seek as prospective
in nature. (ECF No. 33 at 8-9.) Specifically, the Facilities assert that “Defendants are
currently violating sections of the Federal Medicaid Act and its implementing
regulations…for persons who are eligible and require nursing facility services.” (Id. at 8.)
They further state that, “[i]n the matter before this Court, nowhere have Plaintiffs sought a
fixed amount of damages for past liability. Plaintiffs are clear that they are seeking to enjoin
Defendant from continued violations of the Federal Medicaid Act.” (Id. at 9.)
The Eleventh Amendment provides that, “[t]he Judicial power of the United States
shall not be construed to extend to any suit in law or equity, commenced or prosecuted
against one of the United States by Citizens of another State, or by Citizens or Subjects of
any Foreign State.” U.S. Const. amend. XI. “The Eleventh Amendment immunizes states,
state agencies, state instrumentalities, and state officials sued in their official capacities from
suit by private parties in federal court.” Windsor v. Bd. of Educ. of Prince George’s Cty., TDC-142287, 2016 WL 4939294, at *10 (D. Md. Sept. 13, 2016). See Pennhurst State Sch. & Hosp. v.
Halderman, 465 U.S. 89, 98 (1984); Bland v. Roberts, 730 F.3d 368, 389-91 (4th Cir. 2013).

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The immunity from suit accorded to state officials is not absolute. Plaintiffs here rely
on the exception to state sovereign immunity first established Ex Parte Young, 209 U.S. at
159, 28 S.Ct. 441 (1908), which allows “private citizens, in proper cases, to petition a federal
court to enjoin State officials in their official capacities from engaging in future conduct that
would violate the Constitution or a federal statute.” Antrican v. Odom, 290 F.3d 178, 184 (4th
Cir. 2002). As the United States Court of Appeals for the Fourth Circuit has explained:
This exception to sovereign immunity is based on the notion, often referred to
as “a fiction,” that a State officer who acts in violation of the Constitution is
“stripped of his official or representative character and is subjected in his
person to the consequences of his individual conduct.” Ex Parte Young, 209
U.S. at 160, 28 S.Ct. 441. A State officer acting in violation of federal law thus
loses “the ‘cloak’ of State immunity,” Bragg v. West Virginia Coal Ass’n, 248
F.3d 275, 292 (4th Cir. 2001), cert. denied, 534 U.S. 1113, 122 S.Ct. 920, 151
L.Ed.2d 885 (2002), because in such a situation, “[t]he State has no power to
impart to [the official] any immunity from responsibility to the supreme
authority of the United States.” Ex Parte Young, 209 U.S. at 160, 28 S.Ct. 441.
Id. at 184. Following Young, the Supreme Court has clarified that “a federal court’s remedial
power, consistent with the Eleventh Amendment, is necessarily limited to prospective
injunctive relief…and may not include a retroactive award which requires the payment of
funds from the state treasury.” Edelman v. Jordan, 415 U.S. 651, 677, 94 S. Ct. 1347, 1362
(1974).
Notwithstanding the Facilities’ assertion that they are seeking prospective relief, they
are unable to demonstrate how the relief sought in this suit on behalf of these residents can be
characterized as “prospective” so as to fall within the Young exception. There is, of course,
no prospective relief available to the deceased residents. See Nordwall v. PHC-LAS Cruces, Inc.,
960 F. Supp. 2d 1200, 1245, n. 25 (D.N.M. 2013). And the other residents for whom the

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Facilities have filed suit are already receiving Medicaid long-term care benefits.5 See Table,
supra, at 5. While the Facilities may have an interest in compelling the Secretary Defendants
to process Medicaid long-term care applications more quickly and more predictably, they do
not meet their burden to show that the relief which these residents seek is prospective in
nature.
The First Amended Complaint itself makes clear the retrospective nature of the relief
sought by the Facilities. Among the injunctive relief sought in the First Amended Complaint
is an “Order requiring the Defendant [sic] to automatically approve the [residents]’ Medicaid
benefits.” (ECF No. 30 at ¶ 131.) Given the status of each of the residents, the desired
order would be, at best, moot.6 Similarly, no fewer than three paragraphs of the First
Amended Complaint seek compensatory and emotional distress damages for defendants’
allegedly unlawful conduct. (Id. at ¶¶ 116, 122, 127.) If, as the Facilities assert, the target of
their suit were only prospective relief, it is unclear how they would be entitled to damages or
the proper measure thereof. As defendants aptly note, “all that Plaintiffs could possibly seek
is retroactive benefit payments rather than a prospective remedy”—relief which is
expressly prohibited under Edelman. (ECF No. 31-1 at 18) (emphasis added.)
In sum, as the relief which the Facilities seek is not prospective in nature, they are
unable to avail themselves of the Young exception, and the Secretary Defendants are entitled

The status of all of the residents distinguishes this action from the supplemental authority submitted by
plaintiffs. (ECF No. 35) (citing Doctors Nursing & Rehab. Ctr., LLC v. Norwood, 2017 WL 2461544 (N.D. Ill.
June 7, 2017).) In Norwood, the court explained that the patient plaintiffs “fall into two groups: (1) those who
are awaiting Medicaid eligibility determinations and (2) those who, despite receiving approval, are still
awaiting Medicaid benefits.” Norwood, 2017 WL 2461544, at *1. The residents here, by contrast, already are
receiving Medicaid benefits or are deceased.

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See ECF No. 31-1 at 19.

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to state sovereign immunity under the Eleventh Amendment. Accordingly, Defendants’
Motion to Dismiss for Lack of Subject Matter Jurisdiction must be GRANTED.
Even if the Facilities Were Able to Avail Themselves of the Ex Parte Young
Exception, They Fail To State A Plausible Claim That The Residents’ Due
Process Rights Were Violated

II.

Defendants argue that even if they were not entitled to state sovereign immunity, the
Facilities have not alleged a plausible claim that the residents’ due process rights were
violated. (ECF No. 31-1 at 23-24.) Specifically, the Secretary Defendants argue that, “[e]ven
assuming that there were delays in the processing of the Residents’ Medicaid applications,
the Residents nonetheless had the opportunity to pursue appeals of the denials of their
applications or to seek redress through the [state] administrative appeals process for undue
delay in the processing of those applications.” (Id. at 24.) Plaintiffs argue in opposition that
defendants’ confusing and arbitrary processing of the residents’ Medicaid applications
deprived them of the opportunity to avail themselves of the appropriate state administrative
processes. (ECF No. 33 at 14.)
A plaintiff alleging a procedural due process violation must show that he/she was
deprived of a protected liberty or property interest without proper notice. The Supreme
Court has explained that “[t]he notice must be of such nature as reasonably to convey the
required information, and it must afford a reasonable time for those interested to make their
appearance. But if with due regard for the practicalities and peculiarities of the case these
conditions are reasonably met the constitutional requirements are satisfied.” Mullane v. Cent.
Hanover Bank & Tr. Co., 339 U.S. 306, 314–15, 70 S. Ct. 652, 657 (1950) (internal citations
omitted).

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Pertinent to the instant case, Maryland law accords Medicaid benefit applicants the
opportunity for a fair hearing before an Administrative Law Judge (“ALJ”) if:
(1) A Program applicant claims their application for Program eligibility is
denied;
…
(3) A Program applicant claims their application for Program eligibility, or any
part thereof, is not acted upon within 30 days from the date of
application or 60 days from the date of application in the case of
determination of disability;
(4) A Program recipient asserts their claim for Program services has been
erroneously denied or is not acted upon with reasonable promptness;
(5) A Program recipient asserts that the Program has acted erroneously…
Md. Code Regs. 10.01.04.02(A) (emphasis added). Thus, while the Facilities challenge the
manner in which defendants processed the residents’ applications, it cannot be said that a
meaningful opportunity to challenge defendants’ actions was unavailable to the residents so
as to give rise to a possible due process violation. To the contrary, the First Amended
Complaint alleges that four of the residents—Margaret Smith, Shirley Hackett, Carol Snyder,
and William Soil—did avail themselves of the state administrative process.7 (ECF No. 30 at
¶¶ 6, 9, 10, 11.) The fact that these residents (or the other residents who did not file
administrative appeals) did not seek further relief through the state administrative and
judicial processes does not give rise to a procedural due process claim in federal court. Thus,
even if plaintiffs’ First Amended Complaint were properly before this Court—which it is
not—they fail to state a plausible claim that their due process rights were violated.8

7 The Complaint does not indicate whether any of these individuals pursued further relief in a Maryland
Circuit Court. (ECF No. 30 at ¶¶ 6-15.) It appears, however, that it was unnecessary for any of the residents
to pursue further relief on account of (1) death or (2) the granting of the relief sought. See Table, supra, at 5.

As the residents’ claims were not fully litigated through the state administrative and judicial processes,
defendants’ arguments that this action is barred as res judicata or based on the Rooker-Feldman doctrine are not
entirely persuasive. (ECF No. 31-1 at 19-23.) See Rooker v. Fidelity Trust Co., 263 U.S. 413, 415–16, 44 S.Ct.
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CONCLUSION
For the reasons stated above, Defendants’ Motion to Dismiss for Lack of Subject
Matter Jurisdiction (ECF No. 31) is GRANTED, and this case is DISMISSED.
A separate Order follows.
Dated: August 7, 2017

____/s/_________________
Richard D. Bennett
United States District Judge

149 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482–86, 103 S.Ct. 1303 (1983).
Indeed, “[t]he Supreme Court has noted that the Rooker–Feldman doctrine ‘is confined to cases of the kind
from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused
by state-court judgments rendered before the district court proceedings commenced and inviting district
court review and rejection of those judgments.’” Altenburg v. Caliber Home Loans, Inc., RDB-16-3374, 2017 WL
2733803, at *7 (D. Md. June 26, 2017) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284,
125 S. Ct. 1517, 1521–22 (2005)).

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