FLADE v. CONNOLLY et al

Filing 9

OPINION filed. Signed by Judge Anne E. Thompson on 9/23/2016. (eaj)

RECEIVED

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

SEP 23 2016
AT 8:30
WILLIAM T. WALSH
CLERK

EILEEN FLADE,
Plaintiff,
Civ. No. 16-4407

v.
OPINION
ELIZABETH CONNOLLY, ACTING
COMMISSIONER, NEW JERSEY
DEPARTMENT OF HUMAN SERVICES; and
MEGHAN DA VEY, DIRECTOR, NEW
JERSEY DEPARTMENT OF HUMAN
SERVICES, DIVISION OF MEDICAL
ASSISTANCE AND HEALTH SERVICES,
Defendants.

THOMPSON. U.S.D.J.
This matter comes before the Court upon Plaintiff Eileen Flade's ("Plaintiff') motion for
a preliminary injunction. (ECF No. 6). Defendants Elizabeth Connolly and Meghan Davey
("Defendants") oppose the motion and cross-move for dismissal. (ECF No. 7). The Court has
decided the motions based on the written submissions of the parties and without oral argument
pursuant to Local Civil Rule 78.1 (b). For the reasons stated herein, Plaintiffs motion will be
denied and Defendants' cross-motion will be denied.

BACKGROUND
Plaintiff is a Medicaid applicant currently residing in a Medicaid-certified nursing
facility. On April 12, 2016, Plaintiff applied for Medicaid benefits~ At that time, both Plaintiff

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and her husband had substantial assets available to them. On April 29, 2016, Plaintiffs husband
passed away. At the time of his death, Plaintiffs husband had assets in his name totaling
approximately $70,000. Plaintiff had less than $1,000 of assets in her own name. In his will,
Plaintiffs husband left Plaintiff the smallest share of his estate permitted by law. See N.J. Stat.
Ann.§ 3B:8-1. The will has been submitted to probate before the Surrogate of Bergen County.
Plaintiff has not attempted to claim the one-third elective share she is legally permitted to pursue
in court.
After her husband's death, Plaintiff anticipated that she would be eligible for Medicaid
benefits on May 1, 2016. On June 9, 2016, however, Plaintiffs application was denied.
Defendants, acting through the Bergen County Board of Social Services, found that all of her late
husband's assets were available to Plaintiff, thereby putting her over the resource limit of $2,000
for Medicaid eligibility. See N.J. Admin. Code§ 10:71-4.S(c). Plaintiff now fears being
discharged from her nursing facility due to non-payment. On July 20, 2016, Plaintiff filed a
complaint under 42 U.S.C. § 1983 for violations of the federal Medicaid Act. (ECF No. 1). On
August 2, 2016, Plaintiff filed the present motion for a preliminary injunction to enjoin
Defendants from treating the assets of her late husband's estate as a resource that she has access
to for her own care. (ECF No. 6). Defendants opposed her motion, and cross-moved to dismiss
Plaintiffs complaint. (ECF No. 7). These motions are presently before the Court.

LEGAL STANDARDS
A. Preliminary Injunction
The grant or denial of a preliminary injunction is within the discretion of the Court. See

American Exp. Travel Related Services, Inc. v. Sidamon-Eristoff, 669 F.3d 359, 366 (3d Cir.
2012). The primary purpose of preliminary injunctive relief is "maintenance of the status quo

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until a decision on the merits of a case is rendered." Acierno v. New Castle County, 40 F .3d 645,
64 7 (3d Cir. 1994). The decision to issue a preliminary injunction order is governed by a fourfactor test, wherein Plaintiff must demonstrate:
(1) that [she is] reasonably likely to prevail eventually in the litigation and (2) that
[she is] likely to suffer irreparable injury without relief. If these two threshold
showings are made the District Court then considers, to the extent relevant, (3)
whether an injunction would harm the [defendants] more than denying relief would
harm the plaintiffl] and (4) whether granting relief would serve the public interest.
K.A. ex rel. Ayers v. Pocono Mountain Sch. Dist., 710 F.3d 99, 105 (3d Cir. 2013) (quoting
Tenafly Eruv Ass 'n v. Borough of Tenafly, 309 F .3d 144, 157 (3d Cir. 2002)).

B. Motion to Dismiss
A motion under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a
complaint. Kost v. Kozakiewicz, 1 F .3d 176, 183 (3d Cir. 1993). The defendant bears the burden
of showing that no claim has been presented. Hedges v. United States, 404 F .3d 744, 750 (3d
Cir. 2005). When considering a Rule 12(b)(6) motion, a district court should conduct a threepart analysis. See Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). "First, the court must
'take note of the elements a plaintiff must plead to state a claim."' Id. (quoting Ashcroft v. Iqbal,
56 U.S. 662, 675 (2009)). Second, the court must accept as true all of a plaintiffs well-pleaded
factual allegations and construe the complaint in the light most favorable to the plaintiff. Fowler
v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009); see also Connelly v. Lane Const.
Corp., No. 14-3792, 2016 WL 106159 (3d Cir. Jan. 11, 2016). However, the court may

disregard any conclusory legal allegations. Fowler, 578 F.3d at 203. Finally, the court must
determine whether the "facts are sufficient to show that plaintiff has a 'plausible claim for
relief."' Id. at 211 (quoting Iqbal, 556 U.S. at 679). If the complaint does not demonstrate more

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than a "mere possibility of misconduct," the complaint must be dismissed. See Gelman v. State

Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009) (quoting Iqbal, 556 U.S. at 679).
DISCUSSION
The Court will first address Plaintiffs motion for a preliminary injunction. The first
factor in the Court's preliminary injunction analysis is whether Plaintiff is likely to prevail in her
litigation. K.A. ex rel. Ayers, 710 F.3d at 105. Plaintiff has demonstrated a reasonable
probability of success. To qualify for Medicaid, Plaintiffs resources must be under $2,000. See
N.J. Admin. Code§ 10:71-4.5(c). Defendants do not dispute Plaintiffs assertion that she only
has $637 in her own name. (Pl.'s Br. at 3, ECF No. 6-1). The Court finds that Plaintiff currently
does not have access to her late husband's assets, and therefore it appears that she is currently
under the $2,000 resource limit for Medicaid. See 20 C.F.R. § 416.1201(a) (defining "resources"
as any liquid assets or property that an individual or spouse owns and could convert to cash to
use for her support); N.J. Admin. Code§ 10:71-4.4(b)(6)(i) (excluding property in probate from
the definition of"resources"). Defendants argue that even if Plaintiffs late husband's resources
were not counted as resources that she could use for her support, Plaintiff would still be denied
benefits because she made substantial cash gifts during Medicaid's five-year lookback period. 1
(Defs.' Br. at 15, ECF No. 7-1). However, such gifts made during the five-year lookback period
would only result in the imposition of a penalty period, which would disqualify Plaintiff from
receiving benefits for a certain period of time. Gifts made during the five-year lookback period
would not result in an outright denial of benefits. See Frugard, 2010 WL 1462944, at *1, *5; see

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The lookback period "is a time period during which the applicant has their assets scrutinized to
ensure that they did not dispose of or transfer assets for less than fair market value in order to
qualify for Medicaid." Frugardv. Velez, No. 08-5119, 2010 WL 1462944, at *1, *5 (D.N.J.
Apr. 9, 2010); see also 42 U.S.C. § 1396p(c)(l)(B)(i).
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also 42 U.S.C. § 1396p(c)(l). Therefore, Plaintiff has shown that she is reasonably likely to
succeed on the merits of her claim.
The second factor in assessing a motion for a preliminary injunction is whether the
Plaintiff is likely to suffer irreparable harm without relief. See KA. ex rel. Ayers, 710 F .3d at
105. Plaintiff has not successfully shown that she is likely to suffer irreparable harm without
injunctive relief. Plaintiff argues that without relief: 1) she risks being discharged from her
nursing facility for non-payment, 2) should she need to leave her nursing home for a brief
hospital stay, she would be unable to return to her nursing home, and no other nursing home
would accept her in her current financial position, and 3) she would lose the ability to be
awarded more than three months' worth of Medicaid benefits. (Pl.'s Br. at 8-9, ECF No. 6-1). It
is true that if Plaintiff is not granted a preliminary injunction, but does ultimately prevail in her
litigation, Defendants' sovereign immunity likely would at most allow Plaintiff to recover three
months' worth of benefits. Morenz v. Wilson-Coker, 415 F.3d 230, 237 (2d Cir. 2005) (granting
a limited three-month exception to defendant's usual sovereign immunity from having to pay
retroactive damages). The Court, however, is not persuaded that this limitation on Plaintiffs
potential recovery is sufficient to qualify as irreparable harm. As previously discussed; it is
likely that, even if Plaintiff otherwise qualifies to receive benefits, a "penalty period" will be
imposed on Plaintiff as a result of her making substantial cash gifts during Medicaid's five-year
lookback period. The imposition of such a penalty period would disqualify her from
immediately receiving benefits. Therefore, even if Plaintiff succeeds on the merits of her claim,
she likely would not be immediately eligible to receive benefits, and could not stay in her present
nursing home on that basis. As a result, Plaintiff has not sufficiently demonstrated that she
would be irreparably harmed without a preliminary injunction.

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The third factor is whether an injunction would harm the defendant more than denying
relief would harm the plaintiff. See K.A. ex rel. Ayers, 710 F.3d at 105. Defendants would be
harmed by an injunction because they would be forced to provide Medicaid benefits to Plaintiff
during the pendency of this litigation, before a determination is made as to Plaintiff's eligibility
for such benefits. It is true that the benefits paid to Plaintiff would be a small portion of New
Jersey's Medicaid expenditures, but the fact remains that Defendants may lose a substantial sum
of money if an injunction were granted. The Court is persuaded that this potential harm to
Defendants, outweighs the potential harm to the Plaintiff given the likelihood of an imposition of
a penalty period before Plaintiff would be eligible for the receipt of benefits. Therefore, this
factor weighs in favor of denying a preliminary injunction.
The final factor in a preliminary injunction analysis is the public interest. K.A. ex rel.

Ayers, 710 F.3d at 105. The Court finds that denying Plaintiff a preliminary injunction would
serve the public interest. Both parties agree that it is in the public interest for Medicaid
applicants to be properly evaluated. (Pl.'s Br. at 10, ECF No. 6-1; Defs.' Br. at 18; ECF No. 71). The Court recognizes that Defendants have an obligation to make payments with Medicaid
dollars efficiently and only to those who qualify for benefits. At the conclusion of this litigation,
Plaintiff may ultimately prove that she is entitled to receive benefits. At this stage, however,
Plaintiff has not sufficiently demonstrated that she is entitled to the immediate receipt of
Medicaid benefits. Therefore, the Court is not persuaded that it would be in the public interest to
compel Defendants to provide Plaintiff benefits during the pendency of this litigation. As a
result, this factor also weighs against granting Plaintiff the injunction she seeks.
Since three of the four factors in the preliminary injunction analysis weigh against of an
injunction, the Court will deny Plaintiffs motion for a preliminary injunction.

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The Court will next address Defendants' cross-motion to dismiss. Defendants make three
arguments to support dismissal under Federal Rule of Civil Procedure l 2(b)(6). First,
Defendants argue that Plaintiff cannot bring suit against Defendants in their official capacities.
(Defs.' Br. at 9, ECF No. 7-1). While defendants cannot be sued in their official capacities for
damages under 42 U.S.C. § 1983, Will v. Michigan Dep't ofState Police, 491 U.S. 58, 71 (1989),
they can be sued under § 1983 for injunctive relief, id. at n. l 0. Plaintiff only seeks injunctive
relief, and thus Defendants' first argument fails.
Second, Defendants argue that Plaintiff did not exhaust her administrative or state court
remedies before filing a complaint in this Court. (Defs.' Br. at 10, ECF No. 7-1). However, a
plaintiff is not required to exhaust its administrative or state court remedies before filing a § 1983
complaint in federal court. Patsy v. Bd. Of Regents, 457 U.S. 496, 516 (1982); James v.

Richman, 547 F.3d 214, 217-18 (3d Cir. 2008). Therefore, this argument also fails.
Third, Defendants argue that Plaintiffs complaint is premature because her husband's
estate has not been fully resolved and she could potentially receive substantial money from his
estate at a later time. (Defs.' Br. at 11-12, ECF No. 7-1). However, Plaintiff has already been
denied benefits based on her late husband's assets, and there is no requirement that Plaintiff
exhaust her administrative remedies before filing a complaint. Construing the facts in the light
most favorable to Plaintiff, the Court finds that none of Defendants' arguments warrant
dismissal. Therefore, Defendants' cross-motion to dismiss will be denied.

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CONCLUSION
For the foregoing reasons, Plaintiff's motion for a preliminary injunction will be denied,
and Defendants' cross-motion to dismiss will be denied. An appropriate order will follow.

Isl Anne E. Thompson
ANNE E. THOMPSON, U.S.D.J.
Date: 9/23/16

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