Wilhoite v. Missouri Department of Social Services
ORDER granting in part and denying in part Plaintiffs' motion for sanctions, Doc. 286 . Signed by Judge Nanette Laughrey on 5/28/2015. (Hatting, Elizabeth)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MISSOURI
RAMONA DENISE WILHOITE,
individually and on behalf of all
others similarly situated,
MISSOURI DEPARTMENT OF
SOCIAL SERVICES, by and through
its director, Ronald J. Levy, et al.,
Rene Dampier, et al.,
Case No. 2:10-cv-03026-NKL
Pending before the Court is Plaintiffs’ motion for sanctions, Doc. 286.1 Plaintiffs
request that the Court impose sanctions on Defendant Missouri Department of Social
Services (“DSS”). For the following reasons, the motion is granted in part and denied in
This case was filed in January 2010 to address DSS’ practice of asserting liens on
third-party personal injury settlements obtained by Medicaid recipients. The Court
Intervenors join in Plaintiffs’ motion. “Plaintiffs” as used throughout this order will
refer to both Plaintiffs and Intervenors.
approved the parties’ settlement agreement in November 2013.
administration of the settlement agreement has been ongoing.
On December 9, 2014, the Court held a teleconference to address Plaintiffs’
motion for an order compelling DSS to issue checks to remaining unpaid class members.
[Doc. 279]. According to Plaintiffs, class members’ settlement checks were not being
timely issued under the terms of the settlement agreement. They requested that the Court
enter an order compelling DSS to issue payment to the remaining class members on or
before December 15, 2014. Throughout the December 9 teleconference, DSS represented
that there was no way to speed up the payment of refunds due under the settlement
agreement. DSS stated that while a mechanism existed to issue checks outside of DSS’
bi-weekly payment schedule, to avail oneself of that procedure, one would have to be a
registered vendor with the state.
As none of the class members were pre-existing
vendors, DSS stated that it would take longer to issue the checks through this alternate
system than through DSS’ general process. Based on that representation, the Court
denied the motion to expedite payment.
Subsequently, Plaintiffs filed this motion for sanctions, requesting monetary
sanctions in the amount of $53,416.99, $967.50 in attorneys’ fees incurred by class
counsel relating to the motion for order to expedite payment, and $4,267.50 in attorneys’
fees incurred in relation to the motion for sanctions. Plaintiffs state that documents
produced to counsel by the State of Missouri pursuant to a Sunshine Request reveal that
state agencies may request checks outside of the bi-weekly issuance schedule through the
SAM II Financial System. [Doc. 286-1]. They state that there are additional procedures
in place to request that emergency manual checks be issued. Id. Plaintiffs contend in
light of this information that DSS’ representations during the December 9, 2014
teleconference were unjustified and warrant sanctions under Federal Rule of Civil
Procedure 11 or, alternatively, pursuant to the Court’s inherent power to punish persons
who abuse the judicial process.
Federal Rule of Civil Procedure 11 provides that a court may impose sanctions for
representations made in “a pleading, written motion, or other paper – whether by signing,
filing, submitting, or later advocating it.” Fed. R. Civ. P. 11(b). Though DSS made
written filings in conjunction with the teleconference on December 9, none of the filings
addressed DSS’ ability to issue checks to claimants in an expedited manner. Therefore,
Rule 11 does not address the situation before the Court and Plaintiffs’ motion must be
pursued according to their alternative theory, that the Court should impose sanctions on
DSS according to its inherent power to punish persons who abuse the judicial process.
See Chambers v. NASCO, Inc., 501 U.S. 32, 41 (1991) (“Rule 11 . . . governs only papers
wiled with a court.”).
Federal courts have inherent power “to fashion an appropriate sanctions for
conduct which abuses the judicial process.” Id. at 44-45. “These powers are governed
not by rule or statute but by the control necessarily vested in courts to manage their own
affairs so as to achieve the orderly and expeditious disposition of cases.” Id. at 43
(quotations omitted). District courts are accorded substantial deference to determine
whether sanctions are appropriate. Willhite v. Collins, 459 F.3d 866, 869 (8th Cir. 2006);
American Builders & Contractors Supply Co., Inc. v. Roofers Mart, Inc., 2012 WL
2992627, at *2 (E.D. Mo. July 20, 2012). However, courts must be careful to exercise
their inherent powers with restraint and discretion, an essential element of which is
imposing appropriate sanctions for misconduct. Plaintiffs’ Paycol Steering Committee v.
Bayer Corp., 419 F.3d 794, 802 (8th Cir. 2005) (quoting Chambers, 501 U.S. at 44-45).
The facts surrounding Plaintiffs’ motion are undisputed by the parties.2 Prior to
the December 9 teleconference, counsel for DSS conferred with Jennifer Tidball. Ms.
Tidball is DSS Deputy Director and former Director of DSS’ Division of Finance and
Administrative Services. Ms. Tidball informed counsel that she did not believe that DSS
had an internal mechanism to expedite payment in this situation. [Doc. 292-2]. During
the teleconference, DSS repeatedly represented to the Court that no procedure existed for
DSS to expedite the issuance of class members’ checks without risking additional
payment delays. During the conference, the Court acknowledged surprise that no method
existed to immediately issue checks, but the Court expressly relied on counsel’s
unequivocal representation that no such method existed. It is now clear that DSS had
access to procedures to expedite checks, contrary to counsel’s representation to the Court.
DSS contends that the representations made to the Court during the December 9
teleconference were in good faith and based on the knowledge available to DSS at the
time of the hearing. Counsel argues that because DSS had only three and a half business
Additionally, neither party has requested a hearing on the motion. In light of the
agreement between the parties regarding the facts surrounding the motion and the lack of
request for a hearing, the Court has resolved the motion based on parties’ briefing.
hours to prepare for the teleconference, its inquiry into available payment methods and
counsel’s representations to the Court were reasonable.
While the Court understands the time constraints defense counsel and DSS faced
in preparing for the teleconference, they did not seek additional time to obtain accurate
information and they did not in any way qualify the representation made to the Court
such as saying “given the limited time we have this is the best we can do for now,” or “
we are not sure but we don’t think there is an alternative.” Had they so qualified their
representation, a further investigation would have been ordered.
counsel, on behalf of DSS, stated unequivocally that no alternative payment system
existed that could speed up the payment of the settlement.
Given the facially
questionable nature of the representation, the ability of Plaintiffs to find the alternative
payment system information by a Sunshine request, and DSS’ failure to explain how they
could not find the information in their own system, the Court concludes, at a minimum,
that the statements made were not reasonably based on readily available information.
Specifically, Ms. Tidball, as the director of DSS, had extensive experience with the
administration and finances of DSS and had full access to any information she did not
personally know. If she was unsure of the scope of options available to DSS to issue
emergency payments, she had an obligation to investigate those options and not merely
represent to counsel that DSS was incapable of expediting payment.
Even if that
investigation could not be completed prior to the teleconference, DSS had an obligation
to inform the Court that they were not sure what options were available because of the
limited time DSS had to prepare for the teleconference.
At a minimum, the Department failed to make a reasonable effort to supply
accurate information, but nonetheless made the representation unequivocally, insisting
that nothing more could be done.
Sanctions do not exist exclusively to deter
inappropriate attorney conduct, but may be imposed in response to the party’s actions.
See Fed. R. Civ. P. 11(c) (“[T]he court may impose an appropriate sanction on any
attorney, law firm, or party that violated the rule or is responsible for the violation.”); see
also Business Guides Inc. v. Chromatic Comm. Enterprises, Inc., 498 U.S. 533, 549
(1991) (“Quite often it is the client, not the attorney, who is better positioned to
investigate the facts supporting a paper or pleading.”).
The Court is particularly concerned about DSS’ cavalier approach here, given that
this lawsuit arose out of DSS’ failure to comply with Arkansas Department of Health and
Social Services v. Ahlborn, 547 U.S. 268 (2006). As indicated in the Court’s earlier order
[Doc. 182], Missouri imposed liens on third party personal injury settlements obtained by
Medicaid recipients, without regard for the settlement amount that was allocated to
medical expenses. A virtually identical system in Arkansas was struck down by the
Supreme Court in Ahlborn which affirmed the Eighth Circuit’s finding that such a system
violated federal law. Although DSS was aware of the Ahlborn opinions, there is evidence
it took no action to change its system because its administrators were too busy.
DSS’ failure to provide accurate information to the Court, was particularly
egregious because Defendants were on notice from Plaintiffs’ motion that at least one of
the class members was facing significant hardships as a result of the payment timeline, as
she was relying on the settlement check to prevent foreclosure on her home. [Doc. 279,
p. 2]. During the teleconference, Plaintiffs also mentioned that a number of the class
members were counting on the money from the settlement to afford modest holiday
celebrations. While a four day delay in payment may often be insignificant to some, in
this case it certainly was not, particularly given the age of the case and settlement.
In denying Plaintiffs’ motion to expedite during the December 9, 2014
teleconference, the Court noted that it “denied Plaintiffs’ motion to expedite payment
based on Defendants’ representation that an attempt to speed up payment could result in
further delayed payments.” [Doc. 282]. The Court’s order was specifically premised on
DSS’ representation that expedited payment would be impossible and risk further delays.
This misrepresentation justifies monetary sanctions.
Plaintiffs request sanctions in the amount of one-third of the total amount of
outstanding refunds on December 9, 2014, to be distributed to four divisions of legal aid
services around the state. According to Plaintiffs, this formula justifies an award of
$53,416.99. “[T]he cornerstone of imposing a monetary sanction . . . should be the
selection of an amount no greater than sufficient to deter future misconduct by the party.”
Plaintiffs’ Baycol Steering Committee v. Bayer Corp., 419 F.3d 794, 808 (8th Cir. 2005)
Plaintiffs contend that as of December 9, 2014, 130 claimants remained unpaid
with outstanding claims totaling $161,896.66. DSS states that the only lien refunds and
checks outstanding as of December 9 consisted of those owed to 94 class members who
were to receive $50 or $175 settlements, and seven additional claimants: Tamara
Simmons, Kathleen Laramie, Debbie Bradley, Jennie Burdge, Angeline Infante, Esther
McCune, and Robert Montgomery.
[Doc. 292, p. 2 n.1].
The outstanding claims
identified by DSS amounted to approximately $60,000. Id. DSS identified these same
claimants in its suggestions in opposition to Plaintiffs’ motion to expedite. [Doc. 281].
In its briefing, Plaintiffs did not identify any additional class members who had not
received payment as of December 9. Because Plaintiffs did not respond to DSS’ claim
that only 101 claims remained outstanding as of December 9, the Court will assume
Defendants’ facts concerning the number of claims outstanding.
Taking all factors into account, including but not exclusively the amount of claims
outstanding at the time of the December 9 phone conference, the Court concludes that a
sanction of $30,000 is appropriate. Given the budget of DSS and its substantial control
over facts frequently relevant to litigation in the federal courts,
consequence is necessary to ensure that similar misconduct is not repeated. The $30,000
is to be distributed to the four divisions of Missouri legal aid services in proportion to the
percentage of class members residing within the geographical boundaries of each.3
Hopefully this modest amount will be sufficient to prevent future misconduct by DSS in
the federal courts.
Plaintiffs may also recover reasonable attorneys’ fees expended in relation to the
motion for order to expedite payment and motion for sanctions.
See Chambers v.
Missouri legal aid services represents low-income and elderly Missouri citizens. This
client base overlaps significantly with Plaintiffs, all of whom were Medicaid recipients.
Therefore, the Court concludes that awarding the money to Missouri legal aid services
constitutes “the next best use for indirect class benefit . . . consistent with the nature of
the underlying action and with judicial function.” In re BankAmerica Corp. Securities
Litigation, 775 F.3d 1060, 1067 (8th Cir. 2015) (quotations omitted) (describing how
District Courts are to allocate cy pres distributions).
NASCO, Inc., 501 U.S. 32, 45 (1991) (“Indeed, ‘[t]here are ample grounds for
recognizing … that in narrowly defined circumstances federal courts have inherent power
to assess attorney’s fees against counsel.’” (quoting Roadway Express, Inc. v. Piper, 447
U.S. 752, 765 (1980))). Defendants are ordered to pay Plaintiffs $5,235 in attorneys’
For the reasons set forth above, Plaintiffs’ motion for sanctions is granted in part
and denied in part. DSS is ordered to pay Plaintiffs $5,235 in attorneys’ fees, and
$30,000 to be distributed to Missouri legal aid services as described above.
s/ Nanette K. Laughrey
NANETTE K. LAUGHREY
United States District Judge
Dated: May 28, 2015
Jefferson City, Missouri
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