Degnan et al v. Sebelius et al
ORDER granting 22 Motion to Dismiss for Lack of Jurisdiction (Written Opinion). Signed by Senior Judge David S. Doty on 7/31/2013. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-1869(DSD/TNL)
Charles Degnan, Kenneth
McCardle, Virginia Belford,
and Dale Erlandson, individually
and on behalf of a class,
Kathleen Sebelius, Secretary
of the Department of Health
and Human Services, and
Michael Astrue, Commissioner
of the Social Security
Douglas M. Weems, Esq. and Spencer, Fane, Britt & Browne,
LLP, 1000 Walnut, Suite 1400, Kansas City, MO 64106,
counsel for plaintiffs.
Frederich A.P. Siekert, Esq., Assistant U.S. Attorney,
300 South Fourth Street, Suite 600, Minneapolis, MN
55415, counsel for defendants.
This matter is before the court upon the motion to dismiss by
defendants Kathleen Sebelius, in her official capacity as Secretary
of Health and Human Services, and Carolyn W. Colvin, in her
official capacity as Acting Commissioner of the Social Security
Based on a review of the file, record and
proceedings herein, and for the following reasons, the court grants
plaintiffs Charles Degnan, Kenneth McCardle, Virginia Belford and
Part B is “a voluntary insurance program to
provide medical insurance benefits ... for aged and disabled
individuals who elect to enroll under [the] program.”
The program is “financed from premium payments by
enrollees together with contributions from funds appropriated by
the Federal Government.”
Plaintiffs, as late enrollees to
Part B, must pay an increased premium.
Second Am. Compl. ¶¶ 4, 34;
see 42 U.S.C. § 1395r(b).
In a separate lawsuit in 2009, Degnan brought a putative
See Degnan v. Sebelius, 658 F. Supp. 2d 969 (D. Minn.
2009) (Montgomery, J.) [hereinafter Degnan I].
In Degnan I, the
court determined that the SSA’s calculation of late-enrollment
premiums conflicted with the plain language of the Medicare Act.
Id. at 986.
The court limited its holding to Degnan, however, and
declined to award classwide relief.
Id. at 988.
SSA recalculated Degnan’s Part B premiums for 2004 through 2010 and
issued a refund of $759.70.
Siekert Decl. Ex. 1.
In the present suit, Degnan asserts that his Part B premiums
for 2011 and 2012 reverted to the pre-Degnan I methodology.
plaintiffs filed suit in the instant matter, defendants conceded
that Degnan’s premiums were incorrectly calculated and adjusted his
2011 and 2012 premiums.
Siekert Decl. Ex. 2.
the new calculation remains incorrect.
Degnan alleges that
Second Am. Compl. ¶ 11.
Specifically, plaintiffs argue that the calculation
of their late enrollment penalty conflicts with the statutory
language of § 1395r(f) of the Medicare Act.
Defendants move to
Standard of Review
A court must dismiss an action over which it lacks subject-
Fed. R. Civ. P. 12(h)(3).
In a facial
challenge under Rule 12(b)(1), the court accepts the factual
allegations in the pleadings as true and views the facts in the
light most favorable to the nonmoving party.
See Hastings v.
Wilson, 516 F.3d 1055, 1058 (8th Cir. 2008); see also Osborn v.
United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990) (“[T]he nonmoving party receives the same protections [for facial attacks
under Rule 12(b)(1)] as it would defending against a motion brought
under Rule 12(b)(6).” (citation omitted)).
As a result, the court
limits its inquiry to the pleadings, matters of public record and
materials necessarily embraced by the pleadings.
See Porous Media
Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (listing
materials court may consider in a 12(b)(6) challenge); Osborn, 918
F.2d at 729 n.6.
Defendants argue that the court does not have subject-matter
jurisdiction, as plaintiffs have not exhausted their administrative
Section 405(g) of Title 42 “is the sole avenue for
judicial review for all claims arising under the Medicare Act.”
Anderson v. Sullivan, 959 F.2d 690, 693 (8th Cir. 1992) (citation
and internal quotation marks omitted).
Under § 405(g), the court
Titus v. Sullivan, 4 F.3d 590, 592 (8th Cir. 1993)
Defendants argue that, even if plaintiffs have presented
their claims to the Secretary, they have not exhausted their
Defendants also argue that Degnan’s claim is moot.
Specifically, defendants argue that, since being alerted of its
miscalculation upon the filing of the instant action, the SSA has
complied with the court order in Degnan I and is now correctly
calculating Degnan’s benefits. Plaintiffs respond that the case is
not moot because the benefits are still being incorrectly
calculated and that several mootness exceptions apply. See Second
Am. Compl. ¶ 11. The court need not reach this argument, however,
as it determines that waiver of the exhaustion requirement is not
§ 405(g) generally requires a “final decision of the Commissioner
of Social Security made after a hearing to which [the plaintiff]
was a party.”
Here, no plaintiff alleges that they received a
Instead, plaintiffs argue that the administrative exhaustion
requirement should be waived. “[W]aiver of administrative remedies
85 (8th Cir. 1992).
Schoolcraft v. Sullivan, 971 F.2d 81,
The burden is on the claimant to establish
that waiver is proper.
Titus, 4 F.3d at 592.
“[I]n order for
(1) [that] their claims to the district court are collateral to
their claim of benefits; (2) that irreparable injury will follow
otherwise be futile.”
Id. (citation omitted).
Degnan exhausted his administrative remedies prior to filing
suit in Degnan I. In the present matter, however, Degnan does not
seek to directly enforce the previous judgment, but rather
introduces new allegations - that the premium calculations from
December 2010 to present are incorrect. And although Degnan sought
reconsideration of the 2011 and 2012 calculations, see Siekert
Decl. Ex. 3, he did not request a hearing or receive a final
decision from the Commissioner. As a result, Degnan cannot satisfy
the exhaustion requirement.
Collateral to a Claim for Benefits
A claim is collateral to benefits if it seeks to challenge
something other than the amount of benefits, such as the procedure
by which eligibility is determined or the constitutionality of the
See Clarinda Home Health v. Shalala, 100
F.3d 526, 531 (8th Cir. 1996) (describing the collateral factor as
entitlement” (citations and internal quotation marks omitted));
Schoolcraft, 971 F.2d at 86 (waiving exhaustion requirement when
“the class ... challenge[s] the Secretary’s failure to ensure that
uniform standards are applied at all levels of review.”).
present action, plaintiffs seek “compensatory damages for any and
all overcharges to their Part B premiums.”
Second Am. Compl. at
intertwined with [plaintiffs’] claims for benefits.”
As a result, plaintiffs cannot demonstrate that their
claim is collateral to their claim for benefits.
if plaintiffs could establish futility and irreparable harm, waiver
of administrative exhaustion is not warranted.
Plaintiffs next argue that, even if they cannot establish
See Bowen v. City of New York, 476 U.S. 467, 484
(1986) (“The ultimate decision of whether to waive exhaustion
[exhaustion] factors, but should also be guided by the policies
underlying the exhaustion requirement.”).
Exhaustion is generally
required “in order [to allow] the agency [to] function efficiently
and so that it may have an opportunity to correct its own errors,
to afford the parties and the courts the benefit of its experience
and expertise, and to compile a record which is adequate for
Schoolcraft, 971 F.2d at 87 (citations and
internal quotation marks omitted).
Despite these considerations, plaintiffs argue that exhaustion
should be excused, as their claims are entirely legal, do not
depend on individual fact determinations and require no development
of an administrative record.
The exhaustion requirement, however,
makes no distinction between “the general legal versus the factspecific nature of the challenge.” Shalala v. Ill. Council on Long
Term Care, Inc., 529 U.S. 1, 13 (2000) (internal quotation marks
Moreover, channeling claims through the administrative
process allows “the agency greater opportunity to apply, interpret,
or revise policies, regulations, or statutes without possibly
premature interference by different individual courts applying
ripeness and exhaustion exceptions case by case.”
citation marks omitted).
As a result, the court finds that a
consideration of equitable factors does not warrant an exception to
the exhaustion doctrine.
Therefore, dismissal is warranted.
Plaintiffs next argue that mandamus jurisdiction under 28
U.S.C. § 1361 is proper.
Mandamus, however, “is intended to
provide a remedy for a plaintiff only if he has exhausted all other
avenues of relief and only if the defendant owes him a clear
Heckler v. Ringer, 466 U.S. 602, 616
(1984) (citations omitted).
In this case, plaintiffs retain an
opportunity to pursue administrative relief from the SSA.
result, they have not exhausted all avenues of relief, and mandamus
is not proper.
Accordingly, based on the above, IT IS HEREBY ORDERED that the
motion to dismiss [ECF No. 22] is granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.
July 31, 2013
s/David S. Doty
David S. Doty, Judge
United States District Court
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