Vasquez v. Lyon et al
Filing
30
ORDER Granting in Part and Denying in Part Defendants' 20 Motion to Dismiss, Dismissing Plaintiff MV and Counts IV and V of Plaintiff's 17 Amended Complaint, and Denying as Moot 24 29 Motions for Leave to File Supplemental Papers. Signed by District Judge Thomas L. Ludington. (Sian, M)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
MV, by her parent and next friend,
MELINDA VASQUEZ, and
UNITED STATES SOCIETY FOR
AUGMENTATIVE AND ALTERNATIVE
COMMUNICATION, INC.,
Case No. 15-cv-13065
Plaintiffs,
Honorable Thomas L. Ludington
v.
NICK LYON, Director, Michigan Department of
Health and Human Services, in his official capacity,
CHRIS PRIEST, Medicaid Director, Medical Services
Administration, Michigan Department of Health and
Human Services, in his official capacity, and
MICHIGAN DEPARTMENT OF HEALTH AND
HUMAN SERVICES,
Defendants.
______
/
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
MOTION TO DISMISS, DISMISSING PLAINTIFF MV AND COUNTS IV AND V
OF PLAINTIFFS’ AMENDED COMPLAINT, AND DENYING
AS MOOT MOTIONS FOR LEAVE TO FILE SUPPLEMENTAL PAPERS
Plaintiffs MV, a minor, and the United States Society for Augmentative and Alternative
Communication, Inc. (USSAAC) brought suit under 42 U.S.C. § 1983 against Nick Lyon, the
director of the Michigan Department of Health and Human Services, Chris Priest, the Medicaid
Director at the Medical Services Administration, and the Michigan Department of Health and
Human Services on August 28, 2015. ECF No. 1. MV alleges that Michigan Medicaid’s criteria
for coverage of Speech Generating Devices (SGDs) violates the Medicaid Act, 42 U.S.C. §
1396a et seq., the Rehabilitation Act, 29 U.S.C. § 794, and the Americans with Disabilities Act
(ADA), 42 U.S.C. § 12131.
On May 11, 2016, Defendants filed a motion to dismiss (alternatively labeled a motion
for summary judgment).1 ECF No. 20. For the following reasons, Defendants’ motion to dismiss
will be granted in part and denied in part.
I.
Plaintiff MV is a twelve-year-old girl with Down syndrome and Type 1 diabetes. Am.
Compl. at 3, 11, ECF No. 17. Although MV has received speech therapy, her speech is often
unintelligible. Id. at 11. Dr. Ann Ratcliff, a speech-language pathologist specialist, has evaluated
MV and determined that MV cannot satisfy her daily communicative needs through oral
communication. Id. at 12. Dr. Ratcliff recommended that MV receive a Speech Generating
Device (SGD), which are commonly prescribed for individuals struggling with speech
intelligibility. Id. SGDs enable users to “generate messages by manually selecting picture
symbols or photographs.” Id. at 13. Plaintiffs allege that a SGD is especially important for her
wellbeing because her Type 1 diabetes requires frequent and effective communication to be
safely managed. Id.
Plaintiff USSAAC is a nonprofit corporation which advocates for the rights of individuals
with severe speech impairment. Id. at 4. MV is a member of USSAAC. Id. Plaintiffs allege that
USSAAC’s Advocacy Director has spent “approximately 100 to 150 hours” assisting Michigan
Medicaid beneficiaries under the age of twenty-one who were denied SGDs because the devices
were not needed for rehabilitative or prosthetic purposes. Id. Thus, Plaintiffs allege that the
1
The distinction between a motion to dismiss and a motion for summary judgment is not insignificant. When
considering a motion to dismiss, a court must accept all factual allegations in the pleadings as true in determining
whether the plaintiff has pleaded a cognizable legal claim. See Ashcroft v. Iqbal, 556 U.S. 662, 678, (2009). When
considering a motion for summary judgment, a court must examine the evidence presented by the parties in
determining whether there is any genuine dispute over material facts. See Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). As discussed below, courts have discretion over whether to convert a motion to dismiss to a motion for
summary judgment. Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478, 487 (6th Cir.2009). However, attaching
extraneous evidence to briefs contesting a motion to dismiss generally serves only to confuse the issues presented in
the motion to dismiss.
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Michigan Department of Health and Human Services has evinced a pattern of denying Michigan
Medicaid beneficiaries coverage of SGDs when the devices are not needed for rehabilitative or
prosthetic purposes.
Defendant Nick Lyon is the Director of the Michigan Department of Health and Human
Services, which is the agency that administers and implements Michigan’s Medicaid program.
Id. at 5. Lyon is responsible for assuring that Michigan’s Medicaid program conforms with the
requirements of the Medicaid Act. Id. Plaintiffs are suing Lyon in his official capacity. Id.
Plaintiffs are also suing the Michigan Department of Health and Human Services.
Defendant Chris Priest is the Medicaid Director of the Medical Services Administration,
which is a division of the Michigan Department of Health and Human Services. Id. The Medical
Services Administration provides healthcare coverage for Michigan residents who are eligible
for Medicaid. Id. at 6. Plaintiffs are suing Priest in his official capacity. Id.
B.
Defendants are jointly responsible for administering Michigan’s Medicaid program,
which pays for services provided to eligible individuals through contracts with health care
providers and managed care organizations. Def. Mot. Dismiss at 2, ECF No. 20. These providers
are bound by published Medicaid policies and manuals regarding eligibility for services. Id.
(citing Rutherford v. Dep't of Soc. Servs., 483 N.W.2d 410, 413 (1991)). Michigan is required to
provide “early and periodic screening, diagnostic, and treatment services” for all eligible
beneficiaries under twenty-one. Am. Compl. at 7 (citing 42 U.S.C. § 1396a(a)(43)). These
mandatory benefits are referred to as EPSDT services. Id. If the individual is a “categorically
needy beneficiary,” the EPSDT provisions require the state to cover any corrective or
ameliorative treatment that falls within one of Medicaid’s mandatory or optional benefit
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categories, regardless of whether that treatment is covered by Michigan’s Medicaid plan. Id.
(citing § 1396d(r)(5)).
Plaintiffs allege, and Defendants do not contest, that SGDs fall within several mandatory
Medicaid benefit categories for categorically needy beneficiaries under age twenty-one,
including “home health care services.” Id. at 9 (citing § 1396(a)(10)(D)). Unlike the EPSDT
provisions, Michigan’s Medicaid plan restricts coverage of SGDs to situations where the device
is needed to serve a rehabilitative or prosthetic purpose. Id. at 10. The Michigan Medicaid plan
does not cover SGDs when needed for “habilitative” purposes. Def. Mot. Dismiss at 3.
Rehabilitative and prosthetic treatments and devices are meant to restore an individual to a
previous level of functioning or correct a physical deformity, while habilitative treatments and
devices simply enable an individual to function in his or her living environment. Id. Thus, if a
“categorically needy beneficiary” under the age of twenty-one needs a SGD for habilitative
purposes, that individual is entitled to receive the SGD only under the EPSDT, not under
Michigan’s Medicaid plan.
C.
Plaintiffs allege, and Defendants do not contest, that MV is a categorically needy
Michigan Medicaid beneficiary. Am. Compl. at 3. Because the SGD will help MV communicate
effectively for the first time, instead of restoring her to a previous level of communicative ability,
MV needs the SGD for a habilitative purpose. Plaintiffs further allege that they contacted
HealthPlus, the managed care organization supplying Medicaid services to MV, on July 8, 2013,
requesting prior approval for a SGD. Id. at 14. HealthPlus denied MV’s prior approval request,
concluding that MV was not entitled to the SGD under Michigan’s Medicaid plan because she
was not requesting the device for a rehabilitative or prosthetic purpose. Id. HealthPlus did not
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analyze whether MV was entitled to the SGD, notwithstanding the Michigan Medicaid plan,
under the EPSDT.
On November 5, 2014, MV again requested prior approval for a SGD from HealthPlus.
Id. On November 8, 2014, HealthPlus denied the request by again relying on Michigan
Medicaid’s requirement that the device be used for rehabilitative or prosthetic purposes. Id. at
15. MV then requested a Medicaid fair hearing regarding whether she was entitled to receive the
SGD. Id. Administrative Law Judge William D. Bond held the hearing on May 1, 2015 and
issued a decision affirming HealthPlus’s denial of prior approval on June 12, 2015. ALJ Bond
also relied solely on Michigan Medicaid’s coverage criteria for SGDs.
Defendants admit that the EPSDT required coverage for the SGD in MV’s case and that
MV was wrongfully denied the SGD. Def. Mot. Dismiss at 4. Prior to serving the complaint in
this action, Plaintiff’s counsel informed the Defendants of the basis for the complaint. Id. The
Defendants began working with Molina, the managed care organization which had succeeded
HealthPlus in serving MV, to secure a SGD for MV. Id. at 5. On November 16, 2015, MV
received her SGD. Id. Despite receiving the device, MV has proceeded with her suit.
II.
A pleading fails to state a claim under Rule 12(b)(6) if it does not contain allegations that
support recovery under any recognizable legal theory. Ashcroft v. Iqbal, 556 U.S. 662, 678,
(2009). In considering a Rule 12(b)(6) motion, the Court construes the pleading in the nonmovant’s favor and accepts the allegations of facts therein as true. See Lambert, 517 F.3d at 439.
The pleader need not have provided “detailed factual allegations” to survive dismissal, but the
“obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell
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Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In essence, the pleading “must contain
sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face”
and “the tenet that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678-79 (quotations and citation omitted).
III.
Defendants make four arguments in their motion to dismiss. First, Defendants argue that
both Plaintiffs lack standing to sue and that Plaintiffs’ claims are now moot. Second, Defendants
argue that Plaintiffs’ complaint is barred by res judicata. Third, Defendants argue that Plaintiffs’
suit is barred by Michigan’s sovereign immunity as guaranteed by the Eleventh Amendment.
Fourth, Defendants argue that Plaintiffs fail to state a claim on which relief can be based.
A.
As an initial matter, both parties have attached multiple exhibits to their briefs supporting
and opposing the motion to dismiss. Additionally, Plaintiffs have filed a motion for leave to file a
supplemental declaration and brief which includes an updated declaration by Plaintiffs’ counsel
regarding Michigan Medicaid’s ongoing denial of SGDs for habilitative purposes.
A court faced with a Rule 12(b)(6) motion must typically limit its consideration to the
pleadings or convert it to a motion for summary judgment under Federal Rule of Civil Procedure
12(d). Tackett v. M & G Polymers, USA, L.L.C., 561 F.3d 478, 487 (6th Cir.2009). Conversion
to a motion for summary judgment, however, “‘should be exercised with great caution and
attention to the parties’ procedural rights.’” Id. (quoting 5C Charles Alan Wright & Arthur R.
Miller § 1366). A court has discretion regarding whether to convert a motion to dismiss to a
motion for summary judgment. Jones v. City of Cincinnati, 521 F.3d 555, 561–62 (6th Cir.
2008). The Sixth Circuit has held that “documents that a defendant attaches to a motion to
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dismiss are considered part of the pleadings if they are referred to in the plaintiff’s complaint and
are central to her claim.” Weiner v. Klais and Co., Inc., 108 F.3d 86, 88 (6th Cir. 1997).
In addition to the general rule—that a document must be referred to in the complaint and
central to the claim—the Sixth Circuit has permitted courts to take judicial notice of some
documents of public record. Passa v. City of Columbus, 123 F. App’x 694, 697 (6th Cir. 2005).
For example, a court may take judicial notice of other court proceedings, including transcripts.
Buck v. Thomas M. Cooley Law Sch., 597 F.3d 812, 816 (6th Cir. 2010). However, taking
judicial notice of documents has been limited to allow only “the use of such documents . . . for
the fact of the documents’ existence, and not for the truth of the matters asserted therein.” Passa,
123 F. App’x at 697 (collecting cases).
Indeed, judicial notice of public records should only be taken for those records “whose
existence or contents prove facts whose accuracy cannot reasonably be questioned.” Id. That is,
the Court “must only take judicial notice of facts which are not subject to reasonable dispute.”
Id. “When considering public documents in the context of a motion to dismiss, a court may not
accept a document to decide facts that are in dispute.” In re Cardinal Health Inc. Sec. Litig., 426
F. Supp. 2d 688, 713 (S.D. Ohio 2006).
The Court declines to convert Defendants’ motion to dismiss into a motion for summary
judgment. The briefing by both parties primarily contests legal issues. Accordingly, the Court
can properly review the motion to dismiss by considering only the pleadings. Because the
supplemental declaration which Plaintiffs move for leave to file was not referred to in the
complaint, the supplemental declaration cannot be considered in addressing the motion to
dismiss. Plaintiffs’ motion for leave to file a supplemental declaration and brief, ECF No. 24,
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and Defendants’ motion for leave to file a brief in response to Plaintiffs’ motion, ECF No. 29,
will be denied.2
B.
Because jurisdictional issues involving standing and mootness are a “threshold question
in every federal case,” Defendants’ argument that Plaintiffs lack standing will be addressed first.
Miller v. City of Cincinnati, 622 F.3d 524, 531 (6th Cir. 2010) (quoting Planned Parenthood
Ass'n v. City of Cincinnati, 822 F.2d 1390, 1394 (6th Cir.1987)).
Art. III, § 2 of the U.S. Constitution limits federal court jurisdiction to “Cases” and
“Controversies.” The Supreme Court has interpreted Art. III, § 2 as creating the doctrine of
standing, which provides that federal jurisdiction exists only if the dispute is one “which [is]
appropriately resolved through the judicial process.” Whitmore v. Arkansas, 495 U.S. 149, 155
(1990). For standing to exist, three elements must be satisfied: injury in fact, causation, and
redressability. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61(1992). Injury in fact exists when
the plaintiff has suffered “an invasion of a legally protected interest” that is both “concrete and
particularized” and “actual or imminent,” not “conjectural or hypothetical.” Id. at 560 (citations
omitted). Causation exists if the injury is one “that fairly can be traced to the challenged action of
the defendant.” Simon v. E. Kentucky Welfare Rights Org., 426 U.S. 26, 41 (1976). The
redressability requirement is satisfied if the plaintiff’s injury is “likely to be redressed by a
favorable decision.” Id. at 38.
i.
2
The Court takes judicial notice of the fact that Plaintiffs’ supplemental declaration provides further support for
Plaintiffs’ theory that the wrongful denials of SGDs to Michigan Medicaid recipients continue. But Plaintiffs’
complaint already alleges a pattern of wrongful denials. See Am. Compl. at 4. Because, under the standard of review
for a 12(b)(6) motion, the allegations in the plaintiff’s complaint are accepted as true, Plaintiffs’ supplemental
declaration would not change the Court’s analysis even if considered.
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Defendants argue that MV did not have standing when she filed the suit. Yet, at the time
the suit was filed, MV had been denied funding for a device which Defendants admit she was
entitled to under the Medicaid Act. See Def. Mot. Dismiss at 4–5. This is a cognizable injury.
Further, the injury was caused by the Defendants’ failure to properly apply the Medicaid
provisions and a decision by this Court directing Defendants to provide MV the device she was
entitled to would have redressed her injury.
Defendants also allege that MV’s claims are moot. Mootness is “‘the doctrine of standing
set in a time frame: The requisite personal interest that must exist at the commencement of the
litigation (standing) must continue throughout its existence (mootness).’” Friends of the Earth,
Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 190 (2000) (quoting Arizonans for
Official English v. Arizona, 520 U.S. 43, 68, n.22 (1997)). “[A] federal court has no authority ‘to
give opinions upon moot questions or abstract propositions, or to declare principles or rules of
law which cannot affect the matter in issue in the case before it.’” Church of Scientology of
California v. United States, 506 U.S. 9, 12 (1992) (quoting Mills v. Green, 159 U.S. 651, 653
(1895)). “The test for mootness is whether the relief sought would, if granted, make a difference
to the legal interests of the parties.” Coal. for Gov't Procurement v. Fed. Prison Indus., Inc., 365
F.3d 435, 458 (6th Cir. 2004) (quotation marks omitted). “[T]he party asserting mootness bears
the heavy burden of persuading’ the court that the challenged conduct cannot reasonably be
expected to start up again.” League of Women Voters of Ohio v. Brunner, 548 F.3d 463, 473 (6th
Cir. 2008). A defendant cannot meet that burden through “voluntary cessation of a challenged
practice” alone. Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167,
189 (2000). A defendant may moot a case through voluntary conduct “if subsequent events made
it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to
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recur.” Id. (quoting United States v. Concentrated Phosphate Export Assn., 393 U.S. 199, 203
(1968)).
Courts are more likely to find that wrongful behavior will not recur when the suit
involves government defendants who have ceased illegal conduct. See Mosley v. Hairston, 920
F.2d 409, 415 (6th Cir. 1990); 13C Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure, § 3533.7 (3d ed.). “[S]elf-correction” of “allegedly illegal conduct of
government officials” can provide “a secure foundation for dismissal based on mootness as long
as it appears genuine.” Ragsdale v. Turnock, 841 F.2d 1358, 1365 (7th Cir. 1988).
However, if the issue is one which is “capable of repetition, yet evading review, the case
will not be dismissed even if the plaintiff’s harm has been redressed. Weinstein v. Bradford, 423
U.S. 147, 148 (U.S. 1975). A claim is “capable of repetition, yet evading review” if: “(1) the
challenged action was in its duration too short to be fully litigated prior to its cessation or
expiration, and (2) there was a reasonable expectation that the same complaining party would be
subjected to the same action again.” Id. at 149. Often, the second element exists when the
plaintiff has suffered the same injury multiple times. See Olmstead v. L.C. ex rel. Zimring, 527
U.S. 581, 594 n.6 (1999) (case not moot because there had been multiple improper institutional
placements of the same plaintiffs); Doe v. Wooten, 747 F.3d 1317, 1324 (11th Cir. 2014) (“[T]he
fact that Mr. Doe has been transferred repeatedly over a period of years supports a finding of
likely recurrence.”).
Here, Defendants argue that MV’s claims were mooted when she received her SGD.
Plaintiffs respond by alleging that MV will need to replace her SGD and that Defendants apply
the same analysis to requests for repair and replacement as they do initial requests. See Am.
Compl. at 11. Defendants dismiss MV’s suggestion that she might later be denied coverage again
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as “pure speculation.” Def. Mot. Dismiss. at 16. Plaintiffs allege that several USSAAC members
have been wrongfully denied SGDs. Because allegations of fact are construed as true at the
motion to dismiss stage, Plaintiffs’ allegation that Defendants chronically apply the wrong
section of Medicaid policy must be accepted as true. However, Plaintiffs have not alleged a
concrete possibility that MV will need to repair or replace the SGD in the future. Further,
Defendants have admitted that MV is entitled to SGD coverage, and there is no reason to believe
that she will be wrongfully denied a second time, even if she needs to replace or repair the SGD.
Defendants’ demonstrated intention of ensuring that MV receives the coverage to which she is
entitled “appears genuine.” Ragsdale, 841 F.2d at 1365. They have carried their burden of
showing that the wrongful denial will not recur as to MV. Accordingly, MV will be dismissed
because her claims are moot.
ii.
In contrast, USSAAC does have standing. Associations may have standing to sue
independently of their members. Am. Canoe Ass’n, Inc. v. City of Louisa Water & Sewer
Comm’n, 389 F.3d 536, 544 (6th Cir. 2004). The same three-element test under Art. III is applied
to associations. Id. An association can establish a sufficiently concrete injury by alleging a
“‘purportedly illegal act [that] increases the resources the group must devote to programs
independent of its suit challenging the action.’” Hous. Opportunities Made Equal, Inc. v.
Cincinnati Enquirer, 943 F.2d 644, 646 (6th Cir. 1991) (quoting Spann v. Colonial Vill., Inc.,
899 F.2d 24, 27 (D.C. Cir. 1990)). See also Havens Realty Corp. v. Coleman, 455 U.S. 363, 379
(1982) (finding that a “consequent drain on the organization’s resources” constituted a sufficient
injury for standing).
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Associations can also bring actions on behalf of their members, via the doctrine of thirdparty standing, if: “(1) the organization’s ‘members would otherwise have standing to sue in
their own right’; (2) ‘the interests it seeks to protect are germane to the organization’s purpose’;
and (3) ‘neither the claim asserted nor the relief requested requires the participation of individual
members in the lawsuit.’” Friends of Tims Ford v. Tennessee Valley Auth., 585 F.3d 955, 967
(6th Cir. 2009) (quoting Hunt v. Washington State Apple Advert. Comm’n, 432 U.S. 333, 343
(U.S. 1977)).
Here, USSAAC has alleged that it has devoted significant time over the past three years
assisting minors who were wrongfully denied SGDs by Michigan Medicaid. Am. Compl. at 4.
USSAAC anticipates that these wrongful denials will continue and that it will consequently need
to continue devoting resources to their redress, instead of other areas of advocacy. Id. This is
sufficient to establish USSAAC’s standing to sue. See Hooker v. Weathers, 990 F.2d 913, 915
(6th Cir. 1993) (finding that a single investigation of the defendants by the organization was
sufficient devotion of resources to establish standing); Zynda v. Arwood, No. 15-11449, 2016
WL 1223352, at *7 (E.D. Mich. Mar. 29, 2016) (finding that a legal aid organization had
standing in its own right to challenge erroneous unemployment fraud findings because the
wronged individuals were being referred to the organization). Because USSAAC has direct
standing, there is no need to analyze whether USSAAC could bring suit on behalf of its members
via third-party standing.
USSAAC’s claims are also not moot. Defendants assert that the case is moot because
they have admitted that SGDs should be covered under the EPSDT and redressed MV’s
wrongful denial. But Plaintiffs allege that the risk of ongoing harm stems from a chronic
misreading of the Medicaid guidelines and that Defendants have not taken steps to stop the
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wrongful denials at the initial stage of consideration. Defendants’ willingness to correct wrongful
denials after the fact does not resolve the obscurity in the Medicaid manual causing the wrongful
denials in the first place and thus is insufficient to moot the case. See Cleveland Branch,
N.A.A.C.P. v. City of Parma, OH, 263 F.3d 513, 533 (6th Cir. 2001) (finding case was not
mooted because defendant’s “interim actions” had not “completely eradicated” its allegedly
discriminatory conduct); Doe, 747 F.3d at 1326 (finding case was not mooted because
government had failed to unambiguously terminate the challenged conduct). The right to
coverage of SGDs should not effectively rely on administrative or judicial review. Because
Defendants have not made any changes in their Medicaid policies, USSAAC will likely need to
continue devoting resources to resolving wrongful denials of SGDs to minors. Accordingly,
USSAAC has standing to bring this suit. Because Defendants’ actions have not mooted
USSAAC’s alleged injury, Defendants’ other arguments to dismiss will be considered.
C.
Defendants next argue that Plaintiffs’ claims are barred by res judicata.3 Defendants do
not appear to argue that issue preclusion bars Plaintiffs’ suit.4 Accordingly, the only dispute
between the parties is whether Plaintiffs’ decision to not appeal the ALJ’s decision bars Plaintiffs
from now bringing federal claims in federal court that were not raised before the ALJ.
If the full faith and credit statute, 28 U.S.C. § 1738, applies, federal courts must apply the
preclusion law of the state in which judgment was rendered. Marrese v. Am. Acad. of
3
“The doctrine of claim preclusion, sometimes referred to as res judicata, mandates that if an action results in a
judgment on the merits, that judgment operates as an absolute bar to any subsequent action on the same cause
between the same parties, with respect both to every matter that was actually litigated in the first case, as well as to
every ground of recovery that might have been presented.” Black v. Ryder/P.I.E. Nationwide, Inc., 15 F.3d 573, 582
(6th Cir. 1994).
4
“Issue preclusion, often referred to as collateral estoppel, ‘precludes relitigation of issues of fact or law actually
litigated and decided in a prior action between the same parties and necessary to the judgment, even if decided as
part of a different claim or cause of action.’” Georgia-Pac. Consumer Prod. LP v. Four-U-Packaging, Inc., 701 F.3d
1093, 1098 (6th Cir. 2012) (quoting Gargallo v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 918 F.2d 658, 661
(6th Cir.1990)).
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Orthopaedic Surgeons, 470 U.S. 373, 380 (1985). However, § 1738 is not applicable to
unreviewed state administrative decisions. Univ. of Tennessee v. Elliott, 478 U.S. 788, 794
(1986). When there is no governing statute, federal common-law rules of preclusion apply. Id. In
Elliot, the Supreme Court held that unreviewed state agency factual findings must be given issue
preclusive effect in subsequent suits under 42 U.S.C. § 1983. Id. at 799. Neither the Supreme
Court nor the Sixth Circuit has ruled on the issue presented in this case: whether unreviewed
state agency decisions should be given claim preclusive effect in subsequent § 1983 suits. If the
answer is yes, then Plaintiffs’ claims are barred to the extent Michigan claim preclusion law
would bar them. If the answer is no, Plaintiffs’ claims are not barred by claim preclusion.
The Fourth, Fifth, and Eleventh Circuits have all held that unreviewed state agency
decisions should not be given claim preclusive effect in subsequent § 1983 suits. See Dionne v.
Mayor & City Council of Baltimore, 40 F.3d 677, 685 (4th Cir. 1994); Frazier v. King, 873 F.2d
820, 824 (5th Cir. 1989); Gjellum v. City of Birmingham, 829 F.2d 1056, 1065 (11th Cir. 1987).
In Dionne, the Fourth Circuit reasoned that because claims preclusion “is the much more drastic
doctrine” compared to issue preclusion, Elliot’s rationale should not necessarily be extended. 40
F.3d at 683. The court further reasoned that, under traditional rules of res judicata, claim
preclusion is applied only when the claimant had a “fair opportunity” to advance all its claims
involving the transaction in a “single unitary proceeding.” Id. Administrative proceedings
typically provide “limited substantive and remedial scope,” and therefore would not trigger claim
preclusion. Id. The Dionne court also reasoned that the state court system was an insufficient
alternative forum because, if the plaintiff had brought his § 1983 suit there, it would likely have
been dismissed for failure to exhaust administrative remedies. Id. Further, the Dionne court
explained that creating a rule of claim preclusion would increase the burden on federal courts
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because it would disincentivize individuals from seeking administrative remedies, for fear they
would lose the chance to sue in federal court. Id. at 684. Finally, the Fourth Circuit noted that §
1983 was enacted to provide individuals a federal forum for protection of federal rights. Id.
(citing Monroe v. Pape, 365 U.S. 167, 180, 81 S. Ct. 473, 480 (1961)).
In Gjellum, the Eleventh Circuit likewise emphasized the importance of providing a full
adjudication of federal rights and the “limitations of state agencies” in providing that full
adjudication. 829 F.2d at 1065. The court also relied on the fact that “claim preclusion, unlike
issue preclusion, does not create a risk of inconsistent results in this context” because the federal
court would not be disregarding any issues actually litigated and decided by the administrative
agency. Id. Finally, the Gjellum court concluded that not granting unreviewed state
administrative decisions preclusive effect would conserve judicial resources. Id. at 1070.
Likewise, the Fifth Circuit’s decision in Frazier emphasized that importance of protecting
federal rights and the “practical effect of encouraging plaintiffs to seek administrative remedies
before turning to the federal courts.” 873 F.2d at 824.
Although the Sixth Circuit has not ruled on this issue, several Sixth Circuit decisions
suggest that it would adopt the same approach followed by the Fourth, Fifth, and Eleventh
Circuits. In Peterson v. Johnson, the Sixth Circuit cited Elliot in giving preclusive effect to
factual determinations made by the state administrative agency. 714 F.3d 905, 918 (6th Cir.
2013). But the court further asserted that “[h]ad the hearing officer purported to make a legal
conclusion regarding Peterson’s federal constitutional rights, our analysis would necessarily be
different and we could not likely be so deferential.” Id. (emphasis in original). As the Dionne
court noted, claim preclusion is even more drastic than issue preclusion, and if the Peterson court
was unwilling to simply accept state administrative legal findings, it seems unlikely that it would
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have been willing to allow state administrative proceedings to preclude later presentment of
federal claims never litigated in the administrative proceeding. Additionally, in Barnes v.
McDowell, the Sixth Circuit allowed a plaintiff to assert a § 1983 claim after a state
administrative proceeding without even analyzing whether the plaintiff was precluded by failing
to raise the § 1983 claim during the state administrative and judicial proceedings. 848 F.2d 725,
731 (6th Cir. 1988).
The few federal court decisions which contradict the stance taken by the Fourth, Fifth,
and Eleventh Circuits are not persuasive. In Plough By & Through Plough v. W. Des Moines
Cmty. Sch. Dist., the Eighth Circuit appeared to adopt the position that an unreviewed
administrative decision should be given “the same preclusive effect as the state courts would.”
70 F.3d 512, 516 (8th Cir. 1995). However, the claim preclusion analysis in Plough is purely
dicta, lessening the decision’s persuasive value. Id. at 516–17 (“Although issue preclusion
adequately disposes of Plough’s case, claim preclusion does so as well.”). Further, the Plough
decision does not discuss the contradictory decisions issued by the other Circuits or address the
legal and policy-based arguments which persuaded those courts.
The decision in Pappas v. Dazzo also gave claim preclusive effect to an unreviewed
administrative decision. No. 12-12952, 2013 WL 2146711, at *2–3 (E.D. Mich. May 15, 2013).
There, the court held that res judicata barred a party from litigating issues and claims in federal
court that could have been raised in the administrative proceeding. Id. at 3. In so holding, the
court applied Michigan preclusion law. Id. However, the Pappas decision did not address the
disagreement among the circuits over whether state preclusion law should be applied in this
context.
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The approach adopted by the Fourth, Fifth, and Eleventh Circuits is consistent with Sixth
Circuit precedent and supported by well-reasoned legal and policy-based arguments.
Accordingly, it will be adopted here. The approach ensures that suits alleging federal rights
under § 1983 will have a forum and does not incentivize claimants to bypass administrative
remedies in favor of going directly to federal court. As the Sixth Circuit implicitly recognized in
Peterson, state administrative proceedings are often inadequate forums for full protection of
federal rights. See 714 F.3d at 918 (“Had the hearing officer purported to make a legal
conclusion regarding Peterson’s federal constitutional rights, our analysis would necessarily be
different and we could not likely be so deferential.”) (emphasis in original). For that reason,
allowing an unreviewed state administrative decision to bar a plaintiff from later bringing a §
1983 claim which the administrative agency did not hear would violate both the purpose behind
§ 1983 and traditional principles of res judicata. Accordingly, Plaintiffs’ claims are not barred
under the doctrine of res judicata.
D.
Defendants next argue that Plaintiffs’ claim for damages under Section 504 of the
Rehabilitation Act of 1973, 29 U.S.C. § 794, is barred by the Eleventh Amendment. The first
question is whether Congress abrogated the States’ sovereign immunity by passing the
Rehabilitation Act. Congress can abrogate state sovereign immunity by “unequivocally
express[ing] its intent to abrogate the immunity . . . and . . . “act[ing] pursuant to a valid exercise
of power.” Seminole Tribe of Florida v. Florida, 517 U.S. 44, 55 (1996) (citations omitted).
Congress has clearly evinced the intent to abrogate state sovereign immunity under the
Rehabilitation Act. See 42 U.S.C.A. § 2000d-7. Further, Congress abrogated state sovereign
immunity via § 504 pursuant to a valid exercise of power. Congress can abrogate state sovereign
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immunity through statutes which protect against violations of the Fourteenth Amendment, like
the Equal Protection Clause. See Clark v. State of Cal., 123 F.3d 1267, 1270 (9th Cir. 1997). The
disabled are protected from discrimination by the Equal Protection Clause, see City of Cleburne
v. Cleburne Living Ctr., 473 U.S. 432 450 (1985), and the Rehabilitation Act was enacted to
protect the disabled against discrimination. See Clark, 123 F.3d at 1270. The Rehabilitation Act
was validly enacted under the Fourteenth Amendment. Id. Accordingly, the Eleventh
Amendment does not bar Plaintiffs’ claim for damages under § 504.
E.
Defendants also argue that Plaintiffs fail to state a claim under § 504 of the Rehabilitation
Act and Title II of the ADA.
The elements of a cause of action under Section 504 are as follows: (1) The
plaintiff is a “handicapped person” under the Act; (2) The plaintiff is “otherwise
qualified” for participation in the program; (3) The plaintiff is being excluded
from participation in, being denied the benefits of, or being subjected to
discrimination under the program solely by reason of his handicap; and (4) The
relevant program or activity is receiving Federal financial assistance.
Doherty v. S. Coll. of Optometry, 862 F.2d 570, 573 (6th Cir. 1988).
Similarly, Title II of the ADA provides that “no qualified individual with a disability
shall, by reason of such disability, be excluded from participation in or be denied the benefits of
the services, programs, or activities of a public entity, or be subjected to discrimination by any
such entity.” 42 U.S.C.A. § 12132. Section 504 and Title II of the ADA “share the same
substantive standard,” Jones v. Potter, 488 F.3d 397, 403 (2007), with the exception of the level
of discriminatory intent necessary. See Lewis v. Humboldt Acquisition Corp., 681 F.3d 312, 314
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(6th Cir. 2012).5 Defendants argue that Plaintiffs have not alleged that the individuals identified
in Plaintiffs’ complaint were wrongfully denied SGDs “by reason of” their handicaps.
The “central purpose” of § 504 is to ensure that “handicapped individuals receive
‘evenhanded treatment’ in relation to nonhandicapped individuals.” Traynor v. Turnage, 485
U.S. 535, 548 (1988) (quoting Alexander v. Choate, 469 U.S. 287, 304 (1985)). The Act does not
require that a “benefit extended to one category of handicapped persons also be extended to all
other categories of handicapped persons.” Id.at 549. At best, Plaintiffs allege that Defendants are
discriminating against disabled individuals who need SGDs for habilitative purposes in favor of
disabled individuals who need SGDs for rehabilitative or prosthetic purposes. See Am. Compl. at
22. Plaintiffs have not alleged that Defendants are discriminating against disabled individuals in
favor of nondisabled individuals. Thus, Plaintiffs’ allegations are insufficient to state a claim
under § 504. See also P.C. v. McLaughlin, 913 F.2d 1033, 1041 (2d Cir. 1990) (dismissing a
claim under § 504 because plaintiff only argued that his needs were not as adequately met as
other disabled individuals).
Additionally, both § 504 and Title II of the ADA require a showing that the alleged
discrimination occurred “because of” the plaintiff’s disability. Both Acts thus require a showing
of intentional discrimination. See Lewis, 681 F.3d at 315. Plaintiffs have not alleged that the
wrongful denials of SGDs stemmed from any intentional discrimination on the part of
Defendants. Rather, Plaintiffs only allege that the healthcare provider and ALJ improperly relied
solely on Michigan Medicaid’s coverage criteria, which does not cover SGDs for habilitative
purposes for claimants under the age of twenty-one. See Am. Compl. at 14–15. There is no
allegation that this misapplication was intentional. Plaintiffs allege only that Defendants’
5
Although the level of discriminatory intent that plaintiff must prove differs between § 504 and Title II of the ADA,
Plaintiffs’ allegations of discrimination here are insufficient to meet either requirement.
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procedures are resulting in healthcare providers having a lack of knowledge about the EPSDT
provision, which results in wrongful denials. Defendants’ chronic lack of knowledge of the
Medicaid manual is insufficient to establish intentional discrimination under either § 504 or Title
II of the ADA. See Anderson v. City of Blue Ash, 798 F.3d 338, 359 (6th Cir. 2015) (holding that
even if the city’s procedures for complying with ADA regulations were inadequate and thus had
a negative impact on disabled citizens generally, that did “not support the inference that the
City’s actions were motivated by” the plaintiff’s disability); Thompson v. Williamson Cty., 219
F.3d 555, 558 (6th Cir. 2000) (plaintiff’s claim under the ADA failed as a matter of law because
plaintiff was denied access to medical service due to his violent behavior, not his disability);
Sandison v. Michigan High Sch. Athletic Ass’n, Inc., 64 F.3d 1026, 1032–37 (6th Cir. 1995)
(holding that there was no showing of discrimination under either § 504 or Title II of the ADA
because plaintiff’s denial of participation in the program was due to his age, not his disability).
Although Defendants concede that these denials are improper, Plaintiffs have failed to allege that
the denials are occurring “because of” the claimants’ disability.
Plaintiffs have not alleged that the wrongful denials of SGDs stemmed from intentional
discrimination on the basis of the claimants’ disability. Accordingly, Plaintiffs’ claims under §
504 and Title II of the ADA will be dismissed for failure to state a claim.
F.
Defendants finally argue, in general terms, that Plaintiffs’ remaining claims should be
dismissed because Medicaid policy actually does require SGDs to be provided for habilitative
purposes to claimants under the age of twenty-one. This argument misconstrues Plaintiffs’
allegations. Plaintiffs allege that, notwithstanding the legal requirement that Michigan Medicaid
cover SGDs in this context, healthcare providers and ALJs are frequently and mistakenly
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denying claims. Alleged “noncompliance” with the EPSDT can be challenged under § 1983.
Westside Mothers v. Haveman, 289 F.3d 852, 863 (6th Cir. 2002) (finding a private cause of
action under § 1983 for alleged violations of the EPSDT). Plaintiffs’ allegations of chronic
noncompliance with the EPSDT requirement that SGDs be provided to claimants under the age
of twenty-one for habilitative purposes state a valid claim under § 1983.
IV.
Accordingly, it is ORDERED that Defendants’ Motion to Dismiss, ECF No. 20, is
GRANTED IN PART AND DENIED IN PART.
It is further ORDERED that Plaintiff MV be DISMISSED for lack of standing.
It is further ORDERED that Counts Four and Five of Plaintiffs’ Amended Complaint,
ECF No. 17, be DISMISSED with prejudice for failure to state a claim.
It is further ORDERED that Plaintiffs’ Motion for Leave to File a Supplemental
Declaration (ECF No. 24) is DENIED as moot.
It is further ORDERED that Defendants’ Motion to File a Supplemental Brief in
Response to Plaintiffs’ Motion to File a Supplemental Declaration, ECF No. 29, is DENIED as
moot.
Dated: August 31, 2016
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
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PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on August 31, 2016.
s/Michael A. Sian
MICHAEL A. SIAN, Case Manager
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