Degnan et al v. Sebelius et al

Filing 30

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,
Plaintiffs,
ORDER

v.
Kathleen Sebelius, Secretary
of the Department of Health
and Human Services, and
Michael Astrue, Commissioner
of the Social Security
Administration,
Defendants.

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
Administration (SSA).

Based on a review of the file, record and

proceedings herein, and for the following reasons, the court grants
the motion.

BACKGROUND
This

Medicare-benefits

miscalculation

of Medicare

dispute
Part

arises

B

(Part

out

B)

of

an

premiums

alleged
owed

by

plaintiffs Charles Degnan, Kenneth McCardle, Virginia Belford and
Dale Erlandson.

Part B is “a voluntary insurance program to

provide medical insurance benefits ... for aged and disabled
individuals who elect to enroll under [the] program.”
§ 1395j.

42 U.S.C.

The program is “financed from premium payments by

enrollees together with contributions from funds appropriated by
the Federal Government.”

Id.

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
class-action
calculation.

challenging

the

Part

B

late-enrollee

premium

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.

Thereafter, the

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.

2

After

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.
On
putative

October

15,

2012,

class-action

Medicare Act.

plaintiffs

complaint,

Degnan alleges that

Second Am. Compl. ¶ 11.
filed

alleging

a

a

second

violation

amended
of

the

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

dismiss.

DISCUSSION
I.

Standard of Review
A court must dismiss an action over which it lacks subject-

matter jurisdiction.

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

3

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.
II.

Subject-Matter Jurisdiction
Defendants argue that the court does not have subject-matter

jurisdiction, as plaintiffs have not exhausted their administrative
remedies.1

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).
lacks

subject-matter

present[s]
exhaust[s]
Secretary.”

a

claim

the

jurisdiction
for

benefits

administrative

Under § 405(g), the court
until

to

the

remedies

“the

claimant

Secretary
prescribed

...

and

then

by

the

Titus v. Sullivan, 4 F.3d 590, 592 (8th Cir. 1993)

(citation omitted).
Defendants argue that, even if plaintiffs have presented
their claims to the Secretary, they have not exhausted their

1

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
warranted.
4

administrative

remedies.

In

order

to

establish

exhaustion,

§ 405(g) generally requires a “final decision of the Commissioner
of Social Security made after a hearing to which [the plaintiff]
was a party.”
final

decision

Here, no plaintiff alleges that they received a
from

the

Commissioner

or

that

they

had

an

administrative hearing.2
Instead, plaintiffs argue that the administrative exhaustion
requirement should be waived. “[W]aiver of administrative remedies
is

the

exception

to

the

exceptional circumstances.
85 (8th Cir. 1992).

rule,”

and

occurs

only

in

Schoolcraft v. Sullivan, 971 F.2d 81,

The burden is on the claimant to establish

that waiver is proper.
administrative

general

Titus, 4 F.3d at 592.

exhaustion

to

be

waived,

“[I]n order for

claimants

must

show

(1) [that] their claims to the district court are collateral to
their claim of benefits; (2) that irreparable injury will follow
[if exhaustion

is

not

otherwise be futile.”

waived];

and

(3)

that

exhaustion

will

Id. (citation omitted).

2

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.
5

A.

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
determination process.

See Clarinda Home Health v. Shalala, 100

F.3d 526, 531 (8th Cir. 1996) (describing the collateral factor as
examining

whether

constitutional

“the

claim

litigant

collateral

...

raises

his

substantive

to

a

colorable
claim

of

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.”).

In the

present action, plaintiffs seek “compensatory damages for any and
all overcharges to their Part B premiums.”
Prayer for

Relief.

Such

a

claim,

Second Am. Compl. at

however,

is

“inextricably

intertwined with [plaintiffs’] claims for benefits.”
Ringer,

466

omitted).

U.S.

602,

614

(1984)

(internal

Heckler v.

quotation

marks

As a result, plaintiffs cannot demonstrate that their

claim is collateral to their claim for benefits.

Therefore, even

if plaintiffs could establish futility and irreparable harm, waiver
of administrative exhaustion is not warranted.
B.

Equitable Considerations

Plaintiffs next argue that, even if they cannot establish
waiver

under

the

three-factor

test,

6

requiring

administrative

exhaustion
exhaustion.

would

nevertheless

contradict

the

purposes

of

See Bowen v. City of New York, 476 U.S. 467, 484

(1986) (“The ultimate decision of whether to waive exhaustion
should

not

be

made

solely

by

mechanical

application

of

the

[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
judicial review.”

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
omitted).

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.”

7

Id. (internal

citation marks omitted).

As a result, the court finds that a

consideration of equitable factors does not warrant an exception to
the exhaustion doctrine.
III.

Therefore, dismissal is warranted.

Mandamus
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
nondiscretionary duty.”

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.

As a

result, they have not exhausted all avenues of relief, and mandamus
is not proper.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that the
motion to dismiss [ECF No. 22] is granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated:

July 31, 2013
s/David S. Doty
David S. Doty, Judge
United States District Court

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