WILLIAMS v. CONNOLLY et al
Filing
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OPINION. Signed by Judge Robert B. Kugler on 11/15/2017. (tf, )
NOT FOR PUBLICATION
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
Elizabeth WILLIAMS,
Plaintiff,
v.
Elizabeth CONNOLLY, et al.,
Defendants.
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Civil No. 17-1631 (RBK/AMD)
OPINION
KUGLER, United States District Judge:
This matter comes before the Court upon Defendants’ Motion to Dismiss (Doc. No. 9),
Plaintiff’s Opposition (Doc. No. 11), and Defendants’ Reply thereto (Doc. No. 17). Plaintiff
Elizabeth D. Williams has sued Defendants Elizabeth Connolly, Commissioner of the New Jersey
Department of Human Services; Meghan Davey, Director of the New Jersey Division of Medical
Assistance and Health Services; and Sara E. Maloney, Deputy Director of the Cape May County
Board of Social Services. All have been sued in their official capacities. Plaintiff alleges the State
of New Jersey has applied a policy in a state agency’s Medicaid hearing that has deprived her of
her federal statutory and constitutional rights. Because Plaintiff’s claims are barred by the Eleventh
Amendment, and because the declaratory relief she also seeks is not tied to any cognizable
injunctive or damages claims, Defendants’ Motion to Dismiss is GRANTED.
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I.
FACTS AND BACKGROUND
Plaintiff’s Illness and the Transfer of Her Home.
In 2011, John C. Davis, Sr., started to notice that his elderly mother, the plaintiff in this
matter, was not taking care of herself. Plaintiff had been hoarding items in her home, eating
unhealthily with a tell-tale preference for sugar, and, most worrisomely, episodically wandering
from her home when she should have been sleeping. Recognizing that the streets of Philadelphia
were no place for an 87-year-old parent to be at night, Mr. Davis brought his mother to live with
him at his home in New Jersey in January 2012. In his sixties, semi-retired and usually working
from home, Mr. Davis and his spouse took care of his mom. Plaintiff could not shop, drive, cook,
or pay bills. She could not clean herself, or bathe, or change her diapers, or cut or eat her food. Mr.
Davis hired female caregivers to bathe and dress his mom on four out of five weekdays, and he
and his wife took the other days, including weekends.
Not long after moving in with her son, Plaintiff was diagnosed with Alzheimer’s disease.
According to her primary care physician, she was “totally dependent” on her son’s care. Plaintiff
claims Mr. Davis provided near-constant care for her during this time, approximately 133 of the
168 hours of the week, or 79.16% of the week. Presumably, though, Mr. Davis dedicated at least
some of his claimed daily five hours of free time to work and sleep.
After nearly three years of living with Mr. Davis and his family, Plaintiff was admitted to
the Shore Memorial Hospital, complaining of pain in her neck and hips. She was diagnosed with
leg and neck fractures, and was hospitalized for a few days. She then entered a nursing home. She
is now wheelchair bound, and Plaintiff has lived in the nursing home since October 31, 2014.
What brings Plaintiff to court today is a Medicaid exemption for a piece of property. On
February 13, 2012, Mr. Davis—who has, and had, power of attorney over his mother—sold his
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mother his home, the property 3 Gladwyn Drive, Ocean View, New Jersey, for $379,122, a value
based on the tax assessment of $389,700. (Compl. Exs. H, M at 4-5.) To purchase the property,
Plaintiff liquidated several security or investment instruments:
DWS Investment Account .....................................................................$123,460.58
Cash..........................................................................................................$15,011.99
Federated Investment Account ................................................................$86,141.15
Vanguard IRA ..........................................................................................$49,918.88
Series EE Savings Bonds .........................................................................$93,884.00
Total .......................................................................................................$368,416.60
(Compl. Ex. J at 2.) A few years later, on December 19, 2014, Plaintiff, who by all accounts
appears to be severely disabled, deeded the Ocean View home back to her son for $1.00. (Compl.
Ex. I.)
Medicaid
To understand the effects of this transfer, some background information is helpful. The
Medicaid Act is a cooperative federal-state program that is jointly financed with federal and state
funds. Wilder v. Virginia Hospital Ass'n, 496 U.S. 498, 501 (1990). Medicaid covers individuals
who are blind, disabled, or 65 or older if they are financially qualified, 42 U.S.C. § 1396a(10), and
qualifying individuals are entitled to funding for long-term care in “nursing facility services.” 42
U.S.C. §§ 1396d(a), 1396p(c)(1)(C)(i)(I). For an individual to be eligible for Medicaid benefits, a
person's income and resources must fall below a certain limit, with certain exceptions. Johnson v.
Guhl, 91 F. Supp. 2d 754, 760 (D.N.J. 2000). Section 1396p(c)(1)(A) of the federal Medicaid
statute provides that “[i]f an institutionalized individual . . . disposes of assets for less than fair
market value” by a “look-back date,” “the individual is ineligible for medical assistance” for a set
of services, including long-term nursing care. As relevant here, the “look-back date” is defined by
the Act as a date that is 60 months before (1) the date an individual became institutionalized and
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applied for Medicaid, or (2) the date when a non-institutionalized individual applies for Medicaid
or (if later) disposes of assets for less than fair market value. 42 U.S.C. § 1396p(c)(1)(A)-(B).
When an individual seeks benefits for an institutional level of care, transfers of resources
are scrutinized. N.J. Admin. Code 10:71-4.10. “If an individual . . . (including any person acting
with power of attorney or as a guardian for such individual) has sold, given away, or otherwise
transferred any assets,” a transfer penalty of ineligibility is assessed. N.J. Admin. Code 10:714.10(c). An individual who transfers or disposes of resources for less than fair market value during
or after the start of the sixty-month look-back period before the individual becomes
institutionalized, or who applies for Medicaid once institutionalized, is penalized for making the
transfer. 42 U.S.C. § 1396p(c)(1); N.J. Admin. Code 10:71-4.10(m)(1). The transfer penalty is
designed to penalize individuals who use Medicaid benefits when they could use the transferred
resources instead. W.T. v. Div. of Med. Assistance & Health Servs., 391 N.J. Super. 25, 37, 916
A.2d 1066, 1074 (App. Div. 2007) (“Transfers of resources within the stated time frame are
presumed to be improperly motivated to obtain Medicaid eligibility, a presumption which can be
rebutted by proofs ‘that the assets were transferred exclusively (that is, solely) for some other
purpose’ than Medicaid qualifications.”) (citing N.J. Admin. Code 10:71–4.10(j)).
There are limited exceptions to the transfer penalty rules, including, as relevant here, the
“caregiver” exemption. The federal Medicaid statute, 42 U.S.C. § 1396p(c)(2), provides that an
individual may not be subject to the transfer penalty rules when “the assets transferred were a
home and title to the home was transferred to . . . a son or daughter” who was residing in that
individual’s home for a period of at least two years immediately before the date the individual
became institutionalized. New Jersey’s Medicaid provisions closely track the federal statute,
adopting essentially the same exemption:
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(d) An individual shall not be ineligible for an institutional level of care because of
the transfer of his or her equity interest in a home which serves . . . as the
individual’s principal place of residence and the title to the home was transferred
to . . .
4. A son or daughter . . . who was residing in the individual’s home for a period of
at least two years immediately before the date the individual becomes an
institutionalized individual and who has provided care to such individual which
permitted the individual to reside at home rather than in an institution or facility.
i. . . . the care provided by the son or daughter shall have been essential to the health
and safety of the individual and shall have consisted of activities such as, but not
limited to, supervision of medication, monitoring of nutritional status, and insuring
the safety of the individual.
N.J. Admin. Code 10:71-4.10(d).
Importantly, the “care provided by the individual’s son or daughter” must exceed “normal
personal support activities” like routine transportation or shopping. It must also involve treatment
of someone whose physical or mental condition requires “special attention and care.” N.J. Admin.
Code 10:71-4.10(d)(4). The “receipt of Medicaid benefits is not automatic . . . proof must be
forthcoming specifically establishing each requirement of the exception to obtain its application.”
M.K. v. Div. of Med. Assistance & Health Servs., 2016 WL 2759273, at *7 (N.J. Super. Ct. App.
Div. May 13, 2016).
The Hearings
On March 10, 2015, Plaintiff filed for Medicaid assistance, seeking eligibility effective
March 1, 2015. On August 24, 2015, the Cape May County Social Services – Medicaid Unit, the
county welfare agency (“CWA”), granted this application, granting her Medicaid assistance, to be
effective July 2, 2018. Plaintiff was found to meet the Nursing Home Medicaid Guidelines for
eligibility. However, a penalty had been applied for 1,219 days at a daily rate of $332.59, “due to
a transfer of resources” that the CWA did not elaborate on. This sum totaled $405,318.38. Plaintiff
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followed up, and asked what the basis for this penalty was. A caseworker provided this breakdown
of the transfer penalty calculation by email:
DWS Investment Account .....................................................................$123,460.58
Granddaughter..........................................................................................$10,000.00
Federated ..................................................................................................$86,141.15
Vanguard IRA ..........................................................................................$49,918.88
Bonds .....................................................................................................$120,578.00
[Certificate of Deposit] ............................................................................$15,219.77
Total Penalty ..........................................................................................$405,318.38
(Compl. Ex. J at 3.) This led to a December 24, 2015 hearing on whether this notice was sufficient
under Goldberg v. Kelly, 397 U.S. 254 (1970), which requires a state to provide timely and
adequate notice to Medicaid applicants. Administrative Law Judge W. Todd Miller held that notice
about the penalty was insufficient because neither the original CWA notice nor the clarifying email
mentioned the transfer of Plaintiff’s home to her son. The ALJ ordered the CWA to supply Plaintiff
with a revised notice detailing which transactions resulted in the penalty, as well as an explanation
for why the caregiver exemptions did not apply.
The CWA sent Plaintiff a new notice of eligibility. The CWA stated, as before, that a
penalty was imposed for the transfer of resources. But this time, the CWA explained the caregiver
exemption did not apply when the house was transferred back to Plaintiff’s son for a dollar, for
two reasons:
The son has not provided full time care that exceeded normal personal support
activities to the Applicant which permitted the Applicant to reside at home rather
than in an institution or facility, and furthermore, Applicant paid for her own
caregiving and
The Applicant has failed to provide adequate documentation as to her physical or
mental condition that required special attention and care for the required two (2)
year period in producing medical records/ADL clinical verification.
(Compl. Ex. K.)
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On March 31, 2016, ALJ Miller held that Plaintiff was eligible for the caregiver exemption.
(Compl. Ex. M.) He imposed no penalty for the October 2014 sale of her home to her son, although
he did impose a transfer penalty of $26,196.38 of uncompensated value related to other
transactions. The ALJ noted that the Supreme Court of New Jersey had held that “property transfer
should not be viewed with skepticism and disapproval merely because it may precede Medicaid
eligibility,” H.K. v. Dep’t of Servs., Div. of Med. Assistance & Health Servs., 184 N.J. 367, 379-80
(2004), and that “so long as the law allows competent persons to engage in Medicaid planning,
incompetent persons, though their guardians, should have the same right.” In re Keri, 181 N.J. 50,
69 (2004).
The ALJ held that the purchase price of the Ocean View home was very close to market
value. He noted that Plaintiff had lived in the home she purchased from her son for two years and
six months, in excess of the two-year requirement imposed by the caregiver exemption. CWA had
apparently accused Mr. Davis of fraud and a conflict of interest by selling his house to his
demented mother and then buying it back for a dollar. The ALJ thought differently, and held that
because Plaintiff’s son was lawfully permitted to execute the 2012 and 2014 transactions pursuant
to his power of attorney, his actions and motives should not have been impugned. (Compl. Ex. M
at 16-17.) Furthermore, the ALJ held that Mr. Davis provided the level of care necessary for the
caregiver exemption; he did “not have to be a 24/7 indentured servant to qualify for the caregiver
exemption.” (Id. at 18.) The fact that Mr. Davis sold his own home—which he continued to live
in—to his demented mother, who then deeded it back to him before entering publicly-funded
nursing care, did not prevent the ALJ from finding it was within the caregiver exception.
This, though, was not the end of the matter. Director of the Division of Medical Assistance
and Health Services Meghan Davey reviewed the case and adopted in part and reversed in part
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ALJ Miller’s March 31, 2016 decision. See Final Agency Decision, E.W. v. Div. of Med. Assistance
and Health Servs., OAL Dkt. No. HMA 14667-2015. Director Davey, a defendant in this action,
upheld ALJ Miller’s imposition of the $29,196.38 transfer penalty relating to other transactions.
Director Davey disagreed, however, with ALJ Miller’s finding that the home transfer fell within
the caregiver exemption. She noted that the purpose of the caregiver exemption is to compensate
a child who kept her parent out of a nursing facility for at least two years, which she disagreed had
happened here. Director Davey noted that Plaintiff had paid for aides and for her granddaughter to
tend to her at least 35 hours a week and that her 2012 tax returns had reported having spent $15,800
for caregiving, and $19,058 in 2014 (2013 was unavailable). She found that Plaintiff “cannot be
the funding source of the care that kept her from entering a nursing facility during the time that
her son is claiming he was the provider of such care.” (See Compl. Ex. N at 6.)
Director Davey also expressed other doubts that led to her conclusion that the exemption
did not apply. Although Mr. Davis claimed to have taken care of his mother 133 of 168 hours a
week, Plaintiff had paid for 35 hours of care herself, and there was an open question about how
Mr. Davis could provide constant care when he had apparently claimed a Homestead Exemption
in his Florida home, a status that would require a homeowner to “in good faith make . . . [the
Florida property his or her] permanent home.” Fla. Stat. § 196.031. A permanent home in Florida,
Director Davey reasoned, implicated less-than-constant care at home in New Jersey. Director
Davey also questioned whether Plaintiff actually did receive fair market value for her home. She
purchased a home from her son, who had already occupied the abode along with her daughter-inlaw and great-grandson. Her son continued to use the home as his business address. He used it rent
free. Plaintiff paid off her son’s mortgage, paid off the real estate taxes, and permitted the family
to remain in the home. (Compl. Ex. N at 7.) For these reasons, on March 31, 2016, Director Davey
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held that the penalty for transferring assets would be $405,218.38, affirming the original
determination.
Plaintiff has since presented an email she alleges evinces a policy misinterpreting or
misapplying the caregiver exemption. (Opp’n Br. Ex. B.) This April 8, 2016 email sets forth what
we term the New Policy. Among its pertinent provisions are that an eligibility determining agency
would (a) evaluate “proof that an institutional level of care was needed by the Medicaid applicant
at least 24 months prior to the date of institutionalization”; (b) evaluate “proof that the care
provided by the caregiver child exceeded normal personal support activities and permitted the
Medicaid applicant to stay in their home for more than 24 months when they would have otherwise
needed long term level of care”; and (c) evaluate “the entire situation as a whole, ensuring that the
nursing facility level of care was needed, that the caregiver child was living in the home and that
the caregiver child really did provide necessary hands on care that exceeded support activities like
shopping, bill paying and regular visiting.” (Opp’n Br. Ex. B.)
Unsatisfied with the Final Agency Decision, Plaintiff declined to appeal to the Superior
Court of New Jersey and filed this § 1983 action instead. She alleges her rights, as statutorily
embodied in 42 U.S.C. §§ 1396a(a)(8), (a)(10), (a)(1)(C)(i)(III), (a)(18) and (c)(2)(A)(iv), have
been violated. She alleges that the New Policy, manifest in the email and its purported application
in the Final Agency Decision, is invalid under the Supremacy Clause. She also alleges violations
of the Due Process and Equal Protection clauses of the Fourteenth Amendment. As remedies, she
seeks declaratory relief to the effect that the New Policy violates Plaintiff’s rights under the
Medicaid Act and the Constitution. She also seeks to enjoin Defendants from “interpreting” State
and Federal Medicaid a certain way, and to enjoin Defendants to redetermine Plaintiff’s Medicaid
application so as to grant an exemption for the home transfer.
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Defendants now move for dismissal under Federal Rules of Civil Procedure 12(b)(1) and
12(b)(6), asserting a wide range of defenses. They argue the Court must abstain from hearing the
action, that Plaintiff has failed to exhaust her state remedies; that Plaintiff is barred by res judicata
from the prior agency determinations, or else by issue preclusion; that the Defendants are immune
to suit; and that Plaintiff has no private right of action. They also make several arguments disputing
the alleged violations of the Fourteenth Amendment.
II.
LEGAL STANDARD
Rule 12(b)(1)
Defendants have not articulated on what basis this Court should dismiss under Rule
12(b)(1), though we presume they raise the issue in their arguments for abstention. While not
strictly a question of subject-matter jurisdiction, such arguments may be raised under Rule
12(b)(1). See Wright & Miller, 5B Fed. Prac. & Proc. Civ. § 1350 (3d ed.). That said, a motion to
dismiss under Fed. R. Civ. P. 12(b)(1) must be granted if the court lacks subject-matter jurisdiction
over a claim. In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235,
243 (3d Cir. 2012). On a motion under Rule 12(b)(1), it is the plaintiff who bears the burden of
establishing subject-matter jurisdiction. Gould Elec., Inc. v. United States, 220 F.3d 169, 178 (3d
Cir. 2000).
A district court may treat a party's motion to dismiss for lack of subject-matter jurisdiction
under Rule 12(b)(1) as either a facial or factual challenge to the court's jurisdiction. Gould Elecs.,
220 F.3d at 176. “In reviewing a facial attack, the court must only consider the allegations of the
complaint and documents referenced therein and attached thereto, in the light most favorable to
the plaintiff.” Id. (citing PBGC v. White, 998 F.2d 1192, 1196 (3d Cir. 1993)). By contrast, “[i]n
reviewing a factual attack, the court may consider evidence outside the pleadings.” Id. (citing
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Gotha v. United States, 115 F.3d 176, 178–79 (3d Cir. 1997)); see United States ex rel. Atkinson
v. Pa. Shipbuilding Co., 473 F.3d 506, 514 (3d Cir. 2007). A district court has “substantial
authority” to “weigh the evidence and satisfy itself as to the existence of its power to hear the
case.” Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). “[N]o
presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material
facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.”
Id.
Rule 12(b)(6)
When considering a motion to dismiss a complaint for failure to state a claim, Fed. R. Civ.
P. 12(b)(6), the Court must accept all well-pleaded allegations in the complaint as true and view
them in the light most favorable to the non-moving party. A motion to dismiss may be granted
only if the plaintiff has failed to set forth fair notice of what the claim is and the grounds upon
which it rests that make such a claim plausible on its face. Bell Atlantic Corp. v. Twombly, 550
U.S. 544 (2007). Although Rule 8 does not require “detailed factual allegations,” it requires “more
than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citing Twombly, 550 U.S. at 555).
In reviewing the sufficiency of a complaint, the Court must “tak[e] note of the elements
[the] plaintiff must plead to state a claim. Second, it should identify allegations that, because they
are no more than conclusions, are not entitled to the assumption of truth. Finally, [w]hen there are
well-pleaded factual allegations, [the] court should assume their veracity and then determine
whether they plausibly give rise to an entitlement to relief.” Connelly v. Lane Const. Corp., 809
F.3d 780, 787 (3d Cir. 2016) (alterations in original) (internal citations and quotation marks
omitted).
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III.
DISCUSSION
Younger Abstention and the Exhaustion of Remedies
We begin with the threshold question of whether this Court can hear this case. Defendants
have asked this Court to abstain from hearing the case under Younger v. Harris, 401 U.S. 37
(1971), pointing to the appeal Plaintiff could have made to the Superior Court of New Jersey with
regard to the March 31, 2016 Final Agency Decision. We will not linger long on this question.
“Abstention is not in order simply because a pending state-court proceeding involves the same
subject matter.” Sprint Commc'ns, Inc. v. Jacobs, 134 S. Ct. 584, 588 (2013). Federal jurisdiction
is “virtually unflagging,” and abstention is “exceptional.” Id. Younger abstention is appropriate
only where federal litigation could interfere with (1) state criminal prosecutions, (2) civil
enforcement actions akin to criminal proceedings, or (3) civil proceedings necessary to enforce
certain orders essential to judicial functions, like contempt proceedings. Id.; see Juidice v. Vail,
430 U.S. 327 (1977).
These exceptions “define Younger’s scope,” Jacobs, 134 S. Ct. at 591, and they do not
justify abstention here. Plaintiff alleges violations of federal and constitutional rights by
Defendants. But there is no pending criminal proceeding, no pending proceeding akin to a criminal
proceeding, and no apparent reason why hearing it would interfere with “essential” judicial
functions. See Dultz v. Velez, 726 F. Supp. 2d 480, 495 (D.N.J. 2010) (“I conclude, instead, that
the administrative proceedings[,] to the extent denied applications can be viewed as proceedings[,]
in this case are remedial in nature and, therefore, do not form the predicate for abstention under
Younger.”). Abstention is inappropriate here because another court simply hasn’t heard this § 1983
action yet and an appeal to state court was never filed. Even if an appeal had been filed, though,
Jacobs reversed the Eight Circuit for holding that abstention was proper when there were parallel
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proceedings on a set of facts involving significant state interests. We thus find Younger is
inapplicable, and do not abstain from hearing this case.
We note, furthermore, that Defendants wrongly conflate the analytically distinct doctrines
of Younger abstention and the exhaustion of administrative remedies. To the extent they argue for
the latter, Defendants appear to say Plaintiff cannot bring her 28 U.S.C. § 1983 action in federal
court because she has not exhausted her state remedies when she declined to appeal the matter in
state court. The Supreme Court settled this question long ago. “[I]t is no answer that the State has
a law which if enforced would give relief. The federal remedy is supplementary to the state remedy,
and the latter need not be first sought and refused before the federal one is invoked.” Monroe v.
Pape, 365 U.S. 167, 183 (1961). See also Roach v. Morse, 440 F.3d 53, 57 (2d Cir. 2006) (“a
congressional requirement that states establish administrative review procedures does not imply
that § 1983 plaintiffs need exhaust them.”). Simply put, there is no exhaustion-of-remedies
requirement for the claims Plaintiff brings under § 1983.
Preclusion
Defendants also argue that the March 31, 2016 Final Agency Decision by Director Davey
has issue preclusive effect on this case such that the entire case cannot be heard in federal court.
That’s a bold statement, particularly because issue preclusion concerns, as befits the doctrine,
issues. Defendants point to B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1303
(2015), a case about the Trademark Trial and Appeal Board’s preclusive effects on subsequent
federal civil litigation, for the proposition that “when an administrative agency is acting in a
judicial capacity and resolves disputed issues of fact properly before it which the parties have had
an adequate opportunity to litigate, the courts have not hesitated to apply res judicata to enforce
repose.” See also Restatement (Second) of Judgments § 27 (1980). As to state agency
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determinations, the Third Circuit has ruled on this as well, noting that “unless a federal statute
specifically indicates that state agency decisions should not be considered conclusive . . . factual
findings of state agencies should be given the same preclusive effect that they would be accorded
in the courts of that state.” Crossroads Cogeneration Corp. v. Orange & Rockland Utilities, Inc.,
159 F.3d 129, 135 (3d Cir. 1998). Under 28 U.S.C. § 1738, if New Jersey courts would give
preclusive effect to this determination, so too must this Court as to the same issue, at least as to
questions of fact.
Defendants, though, get ahead of themselves. First, all of the authority Defendants cite
speaks to the preclusive effects of state agency findings of fact, not findings of law, and so are not
germane to whether a § 1983 cause of action is precluded. But more importantly, Plaintiff does
not come to this Court asking for a second application of the law to facts, even if, in substance, she
requests that as a remedy. She comes instead to challenge the state policy that she believes led to
the Final Agency Decision, alleging violations of various federal and constitutional rights. Under
the Restatement (Second) of Judgments § 27 (1982), “[w]hen an issue of fact or law is actually
litigated and determined by a valid and final judgment, and the determination is essential to the
judgment, the determination is conclusive in a subsequent action between the parties, whether on
the same or a different claim.” See also Jewish Home of E. Pennsylvania v. Centers for Medicare
& Medicaid Servs., 469 F. App'x 99, 104 (3d Cir. 2012) (citing same). Plaintiff’s alleged
constitutional and federal violations have neither been actually litigated nor determined by a valid
and final judgment. Plaintiff’s claim is thus not issue precluded, and definitely not res judicata.
Sovereign Immunity
Ordinarily, “states—and, by extension, state agencies and departments and officials when
the state is the real party in interest—[are] generally immune from suit by private parties in federal
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court” pursuant to the Eleventh Amendment. Pennsylvania Fed'n of Sportsmen's Clubs, Inc. v.
Hess, 297 F.3d 310, 323 (3d Cir. 2002). See also Regents of the Univ. of California v. Doe, 515
U.S. 425, 431 (1997) (“it is the entity’s potential legal liability, rather than its ability or inability
to require a third party to reimburse it, or to discharge the liability in the first instance[,] that is
relevant.”). A driving purpose of Eleventh Amendment immunity is to protect the state treasury
from private parties. Edelman v. Jordan, 415 U.S. 651, 663 (1974) (“a suit by private parties
seeking to impose a liability which must be paid from public funds in the state treasury is barred
by the Eleventh Amendment.”). This immunity, however, is not absolute, and is subject to three
exceptions: “(1) congressional abrogation, (2) waiver by the state, and (3) suits against individual
state officers for prospective injunctive and declaratory relief to end an ongoing violation of federal
law.” Hess, 297 F.3d at 323 (citation omitted).
The third exception—and the only one that arguably applies here—is the doctrine of Ex
parte Young, 209 U.S. 123 (1908). As the Third Circuit has explained,
the theory behind Young is that a suit to halt the enforcement of a state law in
conflict with the federal constitution is an action against the individual officer
charged with that enforcement and ceases to be an action against the state to which
sovereign immunity extends; the officer is stripped of his official or representative
character and becomes subject to the consequences of his individual conduct.
Hess, 297 F.3d at 323 (citing Ex parte Young, 209 U.S. at 159–60; Pennhurst State Sch. and Hosp.
v. Halderman, 465 U.S. 89, 103 (1984) (explanatory parenthetical omitted)). Simply put, Ex parte
Young holds state officials “responsible to the supreme authority of the United States,” and will
apply if the alleged violation involves the United States Constitution or a federal statute. Id. at
323–24 (citing Balgowan v. New Jersey, 115 F.3d 214, 218 (3d Cir. 1997) (holding that suit for
declaratory relief against state officer under Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq., is
permissible)); Pennhurst, 405 U.S. at 105. “In determining whether the doctrine of Ex parte Young
avoids an Eleventh Amendment bar to suit, a court need only conduct a straightforward inquiry
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into whether the complaint alleges an ongoing violation of federal law and seeks relief properly
characterized as prospective.” Verizon Maryland, Inc. v. Pub. Serv. Comm'n of Maryland, 535 U.S.
635, 645 (2002) (internal quotation marks and citation omitted).
Injunctive relief against a state must be prospective, not retroactive. Under Edelman v.
Jordan, 415 U.S. 651, 677 (1974) and its progeny, a federal court may hear suits “against state
officials that seek prospective relief to end an ongoing violation of federal law.” Christ the King
Manor, Inc. v. Sec'y U.S. Dep't of Health & Human Servs., 730 F.3d 291, 318 (3d Cir. 2013).
“Plaintiffs may not be awarded damages or other forms of retroactive relief.” Id. Moreover, this
“bar on retroactive relief includes forms of equitable relief that are functionally equivalent to
damage awards,” and “relief that essentially serves to compensate a party injured in the past by
the action of a state official, even though styled as something else, is barred by the Eleventh
Amendment.” Id. at 319. How the requested relief is labeled is “of no importance,” and a court is
to undergo a functional analysis of what is requested. Id. (citing Blanciak v. Allegheny Ludlum
Corp., 77 F.3d 690, 697-98 (3d Cir. 1996)). In short, when an action “is in essence one for the
recovery of money from the state, the state is the real, substantial party in interest and is entitled
to invoke its sovereign immunity from suit even though individual officers are nominal
defendants.” Edelman, 415 U.S. at 663 (quoting Ford Motor Co. v. Dep't of Treasury, 323 U.S.
459, 464 (1945)).
Plaintiff has sued three defendants, all in their official capacities, and plainly invokes Ex
parte Young. Defendants, in turn, invoke sovereign immunity. The complaint alleges the New
Policy violates Plaintiff’s rights, and seeks declaratory relief that is prospective and therefore not
subject to Eleventh Amendment immunity. But Plaintiff also requests two items of relief that are
described as injunctive. First, she requests that the Court enjoin Defendants from “interpreting”
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the caregiver child statute to require only one caregiver who must be unemployed for two years
prior to an applicant’s institutionalization. (Compl. at 19.) The first item, concerning prospective
cessation of “interpretation,” is properly regarded, despite Plaintiff’s choice of words, as
declaratory—if this Court were to decide on the caregiver exemption, that would be the law, and
Defendants would apply it perforce. But the second item is indeed injunctive relief. Plaintiff
requests that the Court order Defendants to “re-determine” Plaintiff’s Medicaid application in
accordance with 42 U.S.C. § 1396p(c)(2)(A)(iv) and grant “the eligibility and exemption of the
home transfer from the transfer of asset rules without imposing a transfer penalty.” (Id.) This
requires closer scrutiny under Edelman.
Edelman’s facts are worth recounting because they involve a state agency determination
similar to the one before us here. The plaintiffs had sued Edelman, the Illinois Commissioner of
the Department of Public Welfare, for the state’s failure to comply with recently-promulgated
regulations of the U.S. Department of Health, Education, and Welfare that set the standard for
processing welfare applications. Id. at 655-56. This failure to apply the HEW regulations had the
effect of depriving some applicants of a few months of benefits, and class action litigation soon
followed. Id. The plaintiffs sought an injunction requiring the state to comply with the HEW
regulations, as well as an injunction requiring the state to release and remit back payments that
were improperly withheld. Id. The district court granted both injunctions, and required the State
of Illinois to “release and remit” retroactive benefits. Id. at 656.
The Supreme Court held it was improper to order the payment of retroactive benefits. “The
funds to satisfy the award in this case must inevitably come from the general revenues of the State
of Illinois, and thus the award resembles far more closely the monetary award against the State
itself . . . than it does the prospective injunctive relief awarded in Ex parte Young.” Id. at 665. Only
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where prospective relief has an “ancillary effect on the state treasury” are such payments allowed.
Id. at 668. The Court specifically disapproved of payments made “as a form of compensation to
those whose applications were processed on a slower time schedule at a time when petitioner was
under no court-imposed obligation to conform to a different standard.” Id. In short, Edelman held
that a federal court may order future compliance with federal law, even if that imposes serious
costs, but may not rectify past failures by compelling a state to “release and remit” withheld
benefits.
Plaintiff has attempted to characterize the New Policy as “an ongoing violation of federal
law,” Verizon Maryland, 535 U.S. at 645, for she is still burdened by the June 28, 2016 Final
Agency Decision that affirmed a transfer penalty of $405,218.38. We recognize that Plaintiff’s
eligibility for Medicaid does not begin until July 2, 2018, and that she requests we order her
benefits to begin earlier. However, Plaintiff has not challenged her pending receipt of Medicaid
benefits, but rather the delay on the receipt of benefits and the transfer penalty. It is true that in a
certain sense the withheld benefits in Edelman could be characterized as an “ongoing violation of
federal law,” in that the occurrence of any event, big or small, penalty or not, always echoes on
into the future. But that metaphysical difficulty did not stop the Court in Edelman from finding
that an injunction to remit the withheld welfare benefits was retroactive. What made relief
“retroactive” in Edelman was that the challenged action was no longer in-progress, not that its
consequences continued. Thus, if the remittances in Edelman were remedies redressing past
actions, and those remedies were subject to the bar on retroactive relief, so too is this previouslyimposed penalty. The Eleventh Amendment “does not permit judgments against state officers
declaring that they violated federal law in the past,” Puerto Rico Aqueduct & Sewer Auth. v.
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Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993), and so the penalty cannot be challenged in this
Court.
Furthermore, an injunction ordering Defendants to “re-determine” the penalty is essentially
a judgment that the State of New Jersey assume the costs of the transfer penalty, an act that impacts
New Jersey’s treasury directly and is thus a form of equitable relief that is “functionally equivalent
to damage awards.” Christ the King Manor, 730 F.3d at 319. This is also barred by the Eleventh
Amendment. See also Gage v. New York State Dep't of Health, 204 F. Supp. 2d 399, 402 (N.D.N.Y.
2002) (finding challenge to state Medicaid transfer penalty calculations involved retroactive relief
and was subject to Eleventh Amendment immunity ); In re Kish, 212 B.R. 808, 811 (D.N.J. 1997)
(finding sovereign immunity in challenge to penalties imposed by state agency). This, we note,
effectively closes off what arguments are available for the few months between now and the
beginning of Plaintiff’s receipt of Medicaid benefits. This Court cannot require the State of New
Jersey to pay benefits it previously determined it would not pay.
Finally, one way of interpreting Plaintiff’s request is that this Court order Defendants to
reconsider the Final Agency Decision, not vacate the penalty. But this approach does not work
either. Were this Court to order Defendants to “think again,” Defendants could still reach the same
conclusion, making this Court’s mandate merely advisory. That is not constitutionally permissible;
this Court cannot give relief that is “not of a judicial nature.” See Hayburn’s Case, 2 U.S. (2 Dall.)
409, 411 (1792). Federal district courts make judgments, not recommendations, and lack the
jurisdiction to act otherwise. Thus the only way to characterize Plaintiff’s request to enjoin a “redetermination” is as a request to reverse the penalty itself, which is, as noted, retroactive relief that
will directly affect the state treasury. It therefore follows that this Court must dismiss the complaint
to the extent it seeks retroactive relief from the transfer penalty.
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Justiciability of Declaratory Relief
There remains the question of whether this Court can entertain an action for declaratory
relief when Plaintiff’s interest in the litigation is the alleged harm from the Final Agency Decision,
a past event for which no retroactive relief can be granted. What remains of Plaintiff’s potential
remedies is declaratory relief, and “a plaintiff must demonstrate standing separately for each form
of relief sought.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167,
185 (2000). See also Los Angeles v. Lyons, 461 U.S. 95, 109 (1983) (notwithstanding the fact that
plaintiff had standing to pursue damages, he lacked standing to pursue injunctive relief); Lewis v.
Casey, 518 U.S. 343, 358 n.6 (1996) (“[S]tanding is not dispensed in gross.”).
The Declaratory Judgment Act, 28 U.S.C. § 2201, “does not extend the jurisdiction of the
federal courts.” Medtronic, Inc. v. Mirowski Family Ventures, LLC, 134 S. Ct. 843, 848 (2014)
(quotations omitted) (citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671 (1950)).
Rather, “federal courts, when determining declaratory judgment jurisdiction, often look to ‘the
character of the threatened action.’” Id. (citing Public Serv. Comm’n of Utah v. Wycoff Co., 344
U.S. 237, 248 (1952)). Put differently, federal courts evaluating a declaratory judgment action
must look at whether there is an underlying “coercive action” that Congress authorized the federal
courts to hear. See Medtronic, 134 S. Ct. at 848. See also Michigan Corr. Org. v. Michigan Dep't
of Corr., 774 F.3d 895, 902 (6th Cir. 2014). If an underlying damages action or injunction is
unavailable to a plaintiff, a declaratory judgment action is improper. Id. We must therefore
determine whether there is a coercive action still available to Plaintiff.
Plaintiff has elected to bring this suit alone, not as part of a class, and how the consequences
of this policy allegedly affect other individuals is not relevant to this controversy. Cf. Sosna v.
Iowa, 419 U.S. 393, 401 (1975) (finding that the resolution of the claims of a class action’s named
20
plaintiff did not render the class’s claims non-justiciable). To have a viable claim, Plaintiff must
have “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the
defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v.
Robins, 136 S. Ct. 1540, 1547 (2016). With a finding of sovereign immunity, there is no longer a
redressable controversy here if no injunctive relief or damages are available. There is no injury the
Court can redress. A declaratory judgment action will not lie without some underlying coercive
action available, and none is available here. Plaintiff’s other claims are therefore dismissed.
IV.
CONCLUSION
For the reasons herein, Defendants’ motion to dismiss is GRANTED. An order follows.
Dated:
11/15/2017
s/ Robert B. Kugler
ROBERT B. KUGLER
United States District Judge
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