WINFREE et al v. WOS et al
Filing
31
MEMORANDUM OPINION AND ORDER. Signed by CHIEF JUDGE WILLIAM L. OSTEEN, JR on 3/21/2016, that Defendants' Motion to Dismiss (Doc. 12 ) is GRANTED IN PART, in dismissing Count II, and DEFERRED IN PART, WITHOUT PREJUDICE, as to Counts I and III. FURTHER ORDERED that the Clerk is directed to set a Joint Rule 26(f) discovery conference in this matter before this court. (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
CORPORATION OF GUARDIANSHIP,
INC., TRUSTEE OF THE HILLARY
WINFREE IRREVOCABLE (D)(4)(A)
SPECIAL NEEDS TRUST,
STEPHEN SINCLAIR WINFREE,
individually, and as
Administrator of the Estate of
HILLARY NICOLE WINFREE, and
MARION F. WINFREE, individually,
Plaintiffs,
v.
RICHARD O. BRAJER, in his
official capacity as Secretary
of the North Carolina
Department of Health and Human
Services, and DAVE RICHARD,
in his official capacity as
Deputy Secretary of Medical
Assistance of the North
Carolina Department of Health
and Human Services,
Defendants.
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1:15CV245
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
Plaintiffs Corporation of Guardianship, Inc., Stephen
Sinclair Winfree, and Marion F. Winfree (collectively
“Plaintiffs”) filed the present action against Defendants
Richard O. Brajer and Dave Richard (“Defendants”) on March 19,
2015. 1 (Complaint (“Compl.”) (Doc. 1).) On May 11, 2015,
Defendants filed a motion to dismiss and supporting brief (Docs.
12, 13).
Plaintiffs filed their response (Doc. 15) on June 22,
2015, and Defendants filed a reply (Doc. 20) on July 9, 2015. In
response to Defendants’ reply, on July 23, 2015, Plaintiffs
filed a motion for leave to file a surreply and request for
hearing or oral argument (Doc. 21). On September 4, 2015, this
court granted in part Plaintiffs’ motion, with respect to a
hearing, and denied in part Plaintiffs’ motion, with respect to
a surreply. (Doc. 24 at 4.) On February 24, 2016, this court
held a hearing and permitted the parties to file supplemental
briefs from the hearing and responses to those supplemental
briefs. Plaintiffs filed their supplemental brief on
February 29, 2016 (Doc. 27), and Defendants filed their
supplemental brief on the same day (Doc. 28). On March 7, 2016,
Plaintiffs filed their reply to Defendants’ supplemental brief
(Doc. 29), and Defendants filed their response to Plaintiffs’
1
Robin G. Cummings was the Director of the Division of
Medical Assistance; however, that office has been superseded by
the office of Deputy Secretary for Medical Assistance, a
position held by Dave Richard, who was therefore substituted for
Cummings pursuant to Federal Rule of Civil Procedure 25(d).
(Doc. 18 at 1-2.) Richard O. Brajer succeeded Aldona Z. Wos as
Secretary of the North Carolina Department of Health and Human
Services and was substituted for her pursuant to the provisions
of Federal Rule 25(d) on September 18, 2015. (Doc. 25 at 1-2.)
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supplemental brief (Doc. 30). The motion to dismiss is now ripe
for adjudication and for the reasons that follow, this court
will grant in part and deny in part Defendants’ motion.
I.
FACTS
Plaintiffs Stephen Sinclair Winfree and Marion F. Winfree
were the parents of Hillary Winfree. (Compl. (Doc. 1) ¶ 8.)
Hillary Winfree was an identified class member in Category Three
Neurological Injury Claims in the E-Ferol litigation. (Id.
¶ 14.) While in 2010 the court presiding over the E-Ferol
litigation approved a settlement of the class action, that court
took subsequent steps to address the potential for state and
third-party claims to the funds prior to distributing them to
the plaintiffs. (See id. ¶¶ 15, 18-30.)
As alleged by Plaintiffs, during the course of the E-Ferol
class litigation, the court had the parties and their counsel
develop a protocol to consider any claims for reimbursement for
E-Ferol-related medical expenses, as formally established by the
court’s March 30, 2011 order. (Id. ¶ 18; Ex. 6 (Doc. 1-6).)
Plaintiffs further allege that the court then contacted all
potential lien claimants, informed them of the appropriate time
to advise the court of medical expenses for which they would be
entitled to reimbursement from the settlement proceeds, and
further notified the claimants that it would have a hearing to
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create a process to consider all claims regarding medical
expenses related to federal and state statutes and regulations
governing Medicare and Medicaid third-party liability claims
recovery. (Compl. (Doc. 1) ¶ 19.) Plaintiffs allege that the
State of North Carolina was one of these potential lien
claimants. (Id. ¶¶ 19-20.) In that court order, Plaintiffs
allege, the court noted that no state agency had filed any claim
as to medical expenses that may have been considered or had
appeared for the June 21, 2011 hearing. (Id. ¶¶ 21-22.)
Plaintiffs allege that the court “ordered that no E-Ferol class
member has any reimbursement obligation ‘ . . . under the ThirdParty Reimbursement and Recovery Provisions of the Medicaid
statutes of the fifty states, or . . . any other . . . state
statute, regulations, and various state laws governing Medicaid
Third-Party liability claims recovery.’” (Id. ¶ 22.)
In approving the class settlement, the court further
ordered that it would approve any required special needs trusts
(“SNTs”) into which the settlement proceeds and annuity payments
would be sheltered for parties who were disabled and
incompetent, in order to allow them to maintain their Medicaid
eligibility. (Id. ¶ 23.) Plaintiffs further allege that in
anticipation of Hillary Winfree’s settlement, Plaintiffs’
counsel sought a motion to approve the settlement and included
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information to show the proposed SNT, the releases necessary,
the trustee affidavit, and the proposed financial structure for
funding the SNT, (id. ¶ 25), and sent the proposed SNT itself to
Social Security and the North Carolina Department of Health and
Human Services (“NC DHHS”) for review. (Id. ¶ 26.) After an
iterative process to iron out the details of the SNT, (id.
¶ 27), the court approved the SNT and the distribution of the
funds into the SNT and reentered its prior order. (Id. ¶¶ 28
(detailing that “the Court re-entered its order (doc. No. 523),
dated June 21, 2011, specifically applying for the applicable
party, HILLARY, the denial of reimbursement to the State of
North Carolina” (citations omitted)), 29-30.)
After the beneficiary, Hillary Winfree, died on May 11,
2014, counsel for Plaintiffs gave notice of her death and
requested the specific Medicaid amount to reimburse the State
for the services she received from the date of the trust’s
establishment (January 31, 2012, thus resulting in a start date
of February 2012 for services) to her death. (Id. ¶¶ 30-32.) A
paralegal for Defendants replied on June 4, 2014, with a letter
indicating that Plaintiffs were required to pay back $695,910.83
— the amount of Medicaid services expended on Hillary from 2002
to her death. (Id. ¶ 33; see also Ex. 23 (Doc. 1-23).)
Plaintiffs disagreed and responded on June 23, 2014, by
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including orders from Judge Sidney A. Fitzwater to support their
argument that the amount owed was $77,587.91 — the amount of
expenses she accumulated from 2012 to 2014. (Compl. (Doc. 1)
¶ 34; see also Ex. 24 (Doc. 1-24).) Plaintiffs subsequently, on
August 4, 2014, sent Defendants a letter and accompanying check
for $77,587.91, specifically declaring it to be the full and
complete settlement of a disputed claim. (Compl. (Doc. 1) ¶ 35;
see also Ex. 25 (Doc. 1-25).) This correspondence also included
an Acknowledgement of Receipt of Funds that Plaintiffs requested
that Defendants sign and return. (Compl. (Doc. 1) ¶ 35.) In the
memo section, the check itself contains the phrase “Full Payment
in Satisfaction of Disputed Claim.” (Id., Ex. 27 (Doc. 1-27).)
Additionally, the letter stated “The Corporation of
Guardianship, Trustee of the Hillary Nicole Winfree Irrevocable
Special Needs (d)(4)(A) Trust, has issued from the corpus of the
Winfree SNT the enclosed check to DMA in the amount of
$77,587.91 in full and complete settlement of a disputed claim.”
(Id., Ex. 25 (Doc. 1-25) at 1.) A lawyer for Defendants
responded via email on August 7, 2014, declaring that the
settlement presented by the check would be rejected and that
they contended that the payback requirement encompassed
$695,910.83 – the beneficiary’s lifetime Medicaid expenses.
(Compl. (Doc. 1) ¶ 36.) Four days later, on August 11, 2014, the
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proffered $77,587.91 check was negotiated and deposited into the
North Carolina State Treasury, DHHS Division of Medical
Assistance bank account. (Id. ¶ 37; see also Ex. 27 (Doc. 1-27)
(negotiated check).)
Plaintiffs filed suit on March 19, 2015, seeking a
declaration and judgment that they have fully satisfied the
Medicaid payback requirement by their check and that Defendants
are to accept that amount as full and complete satisfaction,
(Compl. (Doc. 1) ¶ 50), that Defendant Wos (now Brajer)
acknowledge the satisfaction of the outstanding balance in
writing, (id. at 16) 2, that the court declare that Defendants
violated Plaintiffs’ rights under 42 U.S.C. § 1988 and the
Fourteenth Amendment’s Equal Protection and Due Process clauses,
(id. at 15), that the court enter judgment against Defendants in
their official capacities for violating Plaintiffs’ civil
rights, (id. at 16), and that the court tax Plaintiffs’ costs
and attorneys’ fees against Defendants. (Id. ¶ 58.)
2
All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
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II.
SUBJECT-MATTER JURISDICTION
As an initial matter, Defendants move to dismiss
Plaintiffs’ claims for lack of subject-matter jurisdiction, as
Plaintiffs’ initially pled diversity-of-citizenship subjectmatter jurisdiction under 28 U.S.C. § 1332, (Compl. (Doc. 1)
¶ 12), but no diversity exists whatsoever, as all Plaintiffs and
Defendants are deemed citizens of North Carolina. (Id. ¶¶ 7-11;
Defs.’ Mot. to Dismiss (Doc. 12) at 1-2; Defs.’ Mem. in Supp. of
Mot. to Dismiss (“Defs.’ Mem.”) (Doc. 13) at 18.)
Courts “should dismiss a complaint for lack of subject
matter jurisdiction pursuant to Rule 12(b)(1) if the complaint
fails to allege facts upon which subject matter jurisdiction can
be based or if jurisdictional allegations in the complaint are
not true.” McLaughlin v. Safway Servs., LLC, 429 F. App’x 347,
348 (4th Cir. 2011); Adams v. Bain, 697 F.2d 1213, 1219 (4th
Cir. 1982) (outlining two ways lack of subject-matter
jurisdiction arises: failure “to allege facts upon which subject
matter jurisdiction can be based” and when “the jurisdictional
allegations of the complaint were not true”). A challenged
plaintiff “bears the burden of persuasion” in defending subjectmatter jurisdiction. Williams v. United States, 50 F.3d 299, 304
(4th Cir. 1995). In all cases, jurisdiction must be “established
as a threshold matter,” Steel Co. v. Citizens for a Better
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Environment, 523 U.S. 83, 94 (1998) (citations omitted), and as
a “question the court is bound to ask and answer for itself.”
Mansfield, C. & L.M. Ry. Co. v. Swan, 111 U.S. 379, 382 (1884).
At the February 24, 2016 hearing, this court inquired into
subject-matter jurisdiction and Plaintiffs clarified that they
intended to invoke 28 U.S.C. § 1331 federal-question
jurisdiction instead of § 1332 diversity-of-citizenship
jurisdiction. (See also Pls.’ Suppl. Br. to Defs.’ Mot. to
Dismiss (Doc. 27) at 1 n.1 (“As noted during the hearing,
Plaintiffs rely on 28 U.S.C. Section 1331 for subject matter
jurisdiction. Plaintiffs’ claims arise under federal law,
specifically the payback provision of 42 U.S.C. § 1396p(d), and
the Constitution.”).) This court is satisfied that, upon an
application of the well-pleaded-complaint rule, a federal
question would exist to satisfy 28 U.S.C. § 1331 jurisdiction.
Thus, because “[t]he existence of federal jurisdiction
ordinarily depends on the facts as they exist when the complaint
is filed,” Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826,
830 (1989) (citation omitted), Plaintiffs have leave to amend
their complaint to reflect the proper jurisdictional basis. See
Schlesinger v. Councilman, 420 U.S. 738, 744 & n.9 (1975); Saxon
Fibers, LLC. v. Wood, 118 F. App’x 750, 752 (4th Cir. 2005);
State v. Ivory, 906 F.2d 999, 1001 n.4 (4th Cir. 1990). As
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sufficient federal questions have been pled, this court has
jurisdiction to resolve the other issues presented in
Defendants’ motion to dismiss.
III. LEGAL STANDARD – FAILURE TO STATE A CLAIM
Defendants also move to dismiss Plaintiffs’ claims pursuant
to Rule 12(b)(6). To survive a motion to dismiss, Plaintiffs
must allege “sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To be facially
plausible, a claim must “plead[] factual content that allows the
court to draw the reasonable inference that the defendant is
liable” and must demonstrate “more than a sheer possibility that
a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S.
at 556). A court must accept the complaint’s factual allegations
as true when ruling on a Rule 12(b)(6) motion. Id. Further, “the
complaint, including all reasonable inferences therefrom, [is]
liberally construed in the plaintiff's favor.” Estate of
Williams-Moore v. All. One Receivables Mgmt., Inc., 335 F. Supp.
2d 636, 646 (M.D.N.C. 2004) (citing McNair v. Lend Lease Trucks,
Inc., 95 F.3d 325, 327 (4th Cir. 1996)). However, this “does not
mean that the court can ignore a clear failure in the pleadings
to allege any facts [that] set forth a claim.”
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Id. at 646. A
court does not accept mere legal conclusions as true and
“[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Iqbal,
556 U.S. at 678.
IV.
PLAINTIFFS’ CONSTITUTIONAL CLAIMS
Plaintiffs raise their constitutional claims in Count II of
the Complaint, arguing that Defendants’ actions allegedly
circumvent the decisions of Judge Fitzwater in the underlying
class action and SNT-establishment process and constitute
violations of the Due Process Clause. (Compl. (Doc. 1) ¶ 53.)
Plaintiffs also assert that Defendants’ actions in seeking
payment for the entirety of the beneficiary’s lifetime violate
Plaintiffs’ rights under 42 U.S.C. 1988 and the Equal Protection
and Due Process Clauses because they seek settlement funds postsettlement and post-federal court orders that allegedly excluded
Medicaid expenditures incurred prior to the creation of SNT.
(Id. at 14-15.)
Plaintiffs group their procedural objections to Defendants’
claim to the full Medicaid expenses incurred on the
beneficiary’s behalf as objecting to behavior in contradiction
to § 1988 and the Fourteenth Amendment. (Pls.’ Resp. to Defs.’
Mot. to Dismiss (“Pls.’ Resp.”) (Doc. 15) at 11-18.) Plaintiffs
argue that adequate process already existed in the form of the
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class action court’s claim resolution process for claims against
class members’ settlement proceeds and, because Defendants
failed to avail themselves of this process, their action against
the funds in the SNT involves an effort to not comply with the
prior court’s process. (Id. at 12-13.) They specifically argue
that Judge Fitzwater set up the process for claims, determined
that after failing to use the process the State was not entitled
to make any more claims, and thus any argument that the SNT
provided for a state right of action against the funds would
involve the judge nullifying the process he created. (Id. at
13.) They similarly classify Defendants’ distinction between
third-party claims against the settlement proceeds and state
claims against the later-created SNT as an attempt to subvert
the prior court’s process. (Id. at 14.) Further, in combining
their Equal Protection and Due Process analysis, Plaintiffs
argue that the class at issue here involves disabled persons who
received Medicaid and created SNTs and that this class is
penalized to an arbitrary and capricious extent that fails to
withstand rational basis scrutiny. (Id. at 15-16.) They support
this argument with assertions that Defendants’ urged
interpretation of the payback requirement would create unequal
abilities to transfer assets between those with and without SNTs
as well as that the argument would let states profit from
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wrongdoing and/or gain a potential financial windfall. (Id. at
17-18.) Finally, as to arbitrariness, Plaintiffs assert that
because Defendants’ position would force potential SNT
beneficiaries and their families to gamble on whether creating a
SNT would be worthwhile based on the disabled person’s prognosis
and needs, an unreasonable question arises. (Id. at 18.)
As to specific procedural concerns, Defendants assert that
the prior court orders address third-party claims against class
members’ settlement proceeds, not any subsequent SNTs created on
their behalves, and corresponding laws and precedent support
their ability to seek payment from a SNT regardless of the
status of third-party claims against the beneficiary’s original
settlement. (Defs.’ Mem. (Doc. 13) at 10-15.) Specifically
addressing the Due Process Clause contention, Defendants assert
that because they do not seek the funds under the procedure for
the prior court invoking N.C. Gen. Stat. §§ 108A-57 and 108A-59,
the very foundation of Plaintiffs’ critique is unfounded. (Id.
at 16.) Further, Defendants also argue that if a Due Process
inquiry occurs, Plaintiffs, as the beneficiary’s heirs only, do
not have a legal entitlement to the funds in the SNT because
their interest in the proceeds is subject to the satisfaction of
state claims, and further, because Defendants have only made a
claim at this point, any further action to collect would likely
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occur in state court, thus providing Plaintiffs with sufficient
process to foreclose a procedural Due Process claim. (Id. at
17-18.)
As to the extent of any Equal Protection claim made by
Plaintiffs, Defendants argue that the claim has no factual
support, specifically that since Plaintiffs are not members of a
protected class, the rational basis test applies and no facts
have been pled to establish that any varying treatment is
irrational. (Id. at 15.) They also argue that because Medicaid
is only available for disabled persons, it cannot simultaneously
violate Equal Protection or Due Process rights for disabled
persons. (Defs.’ Reply (Doc. 20) at 9.)
In relevant part, the Fourteenth Amendment to the United
States Constitution states: “No State shall . . . deprive any
person of life, liberty, or property, without due process of
law; nor deny to any person within its jurisdiction the equal
protection of the laws.” U.S. Const. amend. XIV, § 1.
“[T]he Fourteenth Amendment permits the States a wide scope
of discretion in enacting laws which affect some groups of
citizens differently than others” and “[t]he constitutional
safeguard is offended only if the classification rests on
grounds wholly irrelevant to the achievement of the State’s
objective.” McGowan v. State of Md., 366 U.S. 420, 425 (1961).
Further, when it comes to the rights of disabled persons under
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the Equal Protection Clause, the Supreme Court has determined
“that States are not required by the Fourteenth Amendment to
make special accommodations for the disabled, so long as their
actions toward such individuals are rational.” Bd. of Trs. of
Univ. of Ala. v. Garrett, 531 U.S. 356, 367 (2001). Plaintiffs –
to the extent they even allege an Equal Protection Clause claim
– make no allegation that the State has made a classification
here, (Compl. (Doc. 1) ¶¶ 51-54), never mind that it has done so
in a way that violates Constitutional guarantees of equal
protection. 3
As to the Due Process Clause, Plaintiffs focus their
procedural allegations on the argument that Defendants are
engaging in procedural irregularities by “circumvent[ing] the
3
Plaintiffs argue that, to the extent 42 U.S.C. § 1396p(d)
creates a duty to pay back all benefits, such an interpretation
unfairly taxes a small group of disabled individuals by not
imposing a similar provision on other disabled individuals. To
the extent that is the crux of the Equal Protection argument,
this court does not find that those allegations plausibly state
a claim. 42 U.S.C. § 1396p(d) allows a benefit – the right of
the beneficiary to accept and use trust proceeds while
continuing to receive medical assistance benefits – that is
virtually unique in the statutory scheme. Plaintiffs’ argument
recognizes the benefit of a special needs trust and the
potential burden of repayment but presents no similarly situated
class of individuals or circumstances that might suggest unequal
protection. In light of the fact that the prior statutory
scheme would have required a disabled individual to either
accept trust benefits while relinquishing medical assistance
benefits or decline the trust benefits, the rational basis for
the statutory compromise is self-evident.
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decision of Judge Fitzwater” and instead “prioritizing their own
interpretation of the applicable law” and “creating an
additional, untimely, and extra-judicial process which the
Court, by creating its own fair procedures, had intended to
avoid.” (Id. ¶¶ 53-54.) Generally, a Due Process claim first
requires that a governmental action have deprived individual(s)
of life, liberty, or property. See U.S. Const. amend. XIV, § 1;
Beverati v. Smith, 120 F.3d 500, 502 (4th Cir. 1997) (citations
omitted); see also Davis v. Rao, 583 F. App’x 113, 114 (4th Cir.
2014 (“To state a procedural due process claim, [Plaintiff] must
allege that: (1) she had a ‘constitutionally cognizable life,
liberty, or property interest;’ (2) Defendants deprived her of
that interest; (3) and ‘the procedures employed were
constitutionally inadequate.’” (citation omitted)). However,
although “[w]hen protected interests are implicated, the right
to some kind of prior hearing is paramount,” “the range of
interests protected by procedural due process is not infinite.”
Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 569-70
(1972). Thus, before ever considering whether process is
sufficient, courts must first “look to see if the interest is
within the Fourteenth Amendment’s protection of liberty and
property.” Id. at 571. As to property, “the property interests
protected by procedural due process extend well beyond actual
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ownership of real estate, chattels, or money.” Id. at 571-72.
Thus, “[t]he Fourteenth Amendment’s procedural protection of
property is a safeguard of the security of interests that a
person has already acquired in specific benefits” and “[t]hese
interests – property interests – may take many forms.” Id. at
576; see also Town of Castle Rock, Colo. v. Gonzales, 545 U.S.
748, 789 (2005) (“The ‘types of interests protected as
“property” are varied and, as often as not, intangible, relating
“to the whole domain of social and economic fact.”’” (citations
omitted)).
Specifically, “[t]o have a property interest in a
benefit, a person clearly must have more than an abstract need
or desire for it. He must have more than a unilateral
expectation of it. He must, instead, have a legitimate claim of
entitlement to it.” Bd. of Regents of State Colls., 408 U.S. at
577. These interests “are created and their dimensions are
defined by existing rules or understandings that stem from an
independent source such as state law – rules or understandings
that secure certain benefits and that support claims of
entitlement to those benefits.” Id.; see also Perry v.
Sindermann, 408 U.S. 593, 601 (1972) (“Rather, ‘property’
denotes a broad range of interests that are secured by ‘existing
rules or understandings.’” (citation omitted)).
Examples of
property interests recognized by the Supreme Court include
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“welfare benefits, disability benefits, public education,
utility services, government employment, as well as . . . other
entitlements that defy easy categorization.” Gonzales, 545 U.S.
at 789-90 (citations omitted).
While Plaintiffs allege that the process followed by the
Defendants in attempting to garner greater payout from the SNT
at issue here was constitutionally problematic, the basic issue
remains that Plaintiffs have not alleged sufficiently their
entitlement to the trust proceeds. Even baring a specific
allegation that they are entitled to the proceeds of the trust,
the trust is first bound to satisfy its payback obligation –
whether it be the amount advocated by Plaintiffs or the amount
advocated by Defendants – to the State before it can make any
further disbursements. Even further, there is no indication that
Defendants, in pursuing their claim to the full scope of
Medicaid payments from the trust, would circumvent the court
process, where a judge would have the opportunity, when and if
applicable, to apply Judge Fitzwater’s procedural orders. Thus,
Plaintiffs have failed to allege that the government has denied
them a legal entitlement via insufficient process of law.
Consequently, Count II of the Complaint will be dismissed for
failure to state a claim upon which relief can be granted.
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V.
CLAIMS ARISING OUT OF JUDICIAL INTERPRETATION OF 42 U.S.C.
§ 1396p
As to the issue of the scope of the payback required from
the SNT, Plaintiffs seek a declaration from this court that the
State is only entitled to expenses incurred during the period
from the creation of the SNT to the beneficiary’s death. (Compl.
(Doc. 1) ¶¶ 40, 45, 48, 50.) Both parties’ briefs on this matter
focus on their efforts to have this court render an
interpretation of 42 U.S.C. § 1396p(d)(4)(A) and the scope of
the Medicaid payback requirement. However, upon inspection of
the Complaint, submitted materials, the briefs, and arguments,
this court is not satisfied that the issue of the proper
interpretation of § 1396p is ripe for ruling; that is, this
court is not satisfied that a final determination of the proper
interpretation of § 1396p is necessary to the resolution of
Plaintiffs’ claims.
This court notes that the Complaint alleges facts that, if
proved, might result in a finding of an accord and satisfaction.
Specifically, Plaintiffs allege that they sent a check in the
amount of $77,587.91 (the medical expenses that arose after the
creation of the SNT) to Defendants declaring it to be the full
and complete settlement of a disputed claim, along with a
letter, on August 4, 2014, and requested that it be signed and
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returned. (Compl. (Doc. 1) ¶ 35.) They further allege that the
North Carolina Assistant Attorney General Brian Rabinovitz sent
an email saying that the check as a full settlement would be
rejected and that the SNT actually owed all of the lifetime
medical expenses of the beneficiary, in the amount of
$695,910.83. (Id. ¶ 36.) Plaintiffs allege that the check was
negotiated on August 11, 2014, by Defendants depositing it, with
notice and knowledge that the check was in full and complete
satisfaction and reimbursement, and that the deposit was made in
Defendants’ official capacities. (Id. ¶ 37.)
On the physical check itself, in the lower left-hand corner
memo section, there is a handwritten note stating “Full Payment
in Satisfaction of Disputed Claim.” (Id., Ex. 27 (Doc. 1-27) at
1.) The accompanying August 4, 2014 letter stated that the
trustee “has issued . . . the enclosed check . . . in the amount
of $77,587.91 in full and complete settlement of a disputed
claim.” (Id., Ex. 25 (Doc. 1-25) at 1.) The letter also
referenced an enclosed “Receipt of Funds in Full Satisfaction of
Lien that is required to be properly executed and returned” so
that it could “be filed with the federal court as part of the
trustee’s report on the SNT’s closure.” (Id. at 1-2.) There is
no evidence or allegation that Defendants ever signed or
returned this enclosure. Instead, Rabinovitz sent an email on
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August 7, 2014, specifically stating that he had received the
letters, he disagreed with the interpretation of the impact of
Judge Fitzwater’s order on the payback required under
§ 1396p(d)(4)(A), and emphasized that trust documents stated
that Medicaid would be paid back the total amount. (Id., Ex. 26
(Doc. 1-26) at 1.) Further, Rabinovitz went on to declare:
DMA’s cashing of the partial payment that you sent
does not constitute an accord and satisfaction or
acceptance of the partial payment as payment in full.
The amount of Medicaid’s trust claim is determined in
accordance with 42 U.S.C. § 1396p(d)(4)(A) and other
applicable State and federal law and, absent express
agreement by DMA to accept a lesser amount, full
payment of the total amount due is statutorily
required.
(Id.)
While it does not appear that those facts are substantially
in dispute, (see Compl., Ex. 27 (Doc. 1-27)), the facts have not
yet been established as a matter of record.
Because inspection
of the Complaint reveals that an accord and satisfaction is
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alleged and may be applicable here, 4 the question of statutory
interpretation is not ripe for adjudication.
“A case is fit for judicial decision when the issues are
purely legal and when the action in controversy is final and not
dependent on future uncertainties.” Miller v. Brown, 462 F.3d
312, 318-19 (4th Cir. 2006) (citation omitted). In fact,
“[r]ipeness is a justiciability doctrine designed ‘to prevent
the courts, through avoidance of premature adjudication, from
entangling themselves in abstract disagreements over
administrative policies . . . .’ ” Tammy W. v. Hardy, 681 F.
Supp. 2d 732, 735-36 (S.D. W. Va. 2010) (citation omitted).
4
In North Carolina, “[w]hen there is some indication on a
check that it is tendered in full payment of a disputed claim,
the cashing of the check is held to be an accord and
satisfaction as a matter of law.” Sanyo Elec., Inc. v. Albright
Distrib. Co., 76 N.C. App. 115, 117, 331 S.E.2d 738, 740 (1985)
(citation omitted). Further, “[i]f the accord is fully
performed, the performance satisfies the original claim, and
bars a subsequent action to enforce it.” Dobias v. White, 239
N.C. 409, 413, 80 S.E.2d 23, 27 (1954).
As to the question of whether a party can accept a check or
settlement proffered while still maintaining an objection to the
settlement and an action for any remaining funds, the North
Carolina Supreme Court has determined that “[o]ne party will not
be allowed to accept the benefit of the check so tendered and at
the same time retain the right to sue for an additional amount.”
Moore v. Greene, 237 N.C. 614, 616, 75 S.E.2d 649, 650 (1953);
see also Zanone v. RJR Nabisco, Inc., 120 N.C. App. 768, 463
S.E.2d 584 (1995); Barber v. White, 46 N.C. App. 110, 264 S.E.2d
385 (1980).
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Ordinarily, for a case to be found insufficiently ripe
within the context of agency action, there is further action
required from or by the agency before an injury can be deemed to
have occurred and the action be ripe. See, e.g., Nat’l Park
Hosp. Ass’n v. Dep’t of Interior, 538 U.S. 803, 808 (2003). In
this case, the context is the opposite – no further action is
required by or from an agency – but the ripeness issue remains.
That is, if Plaintiffs have alleged facts sufficient to
establish an accord and satisfaction such that no further money
is due from the SNT, then there is no need for this court to
construe the statute. This is particularly true as construing
the statute in this context could result in a construction in a
manner consistent with Defendants’ statutory position (that
§ 1396p(d)(4)(A)’s payback requirement encompasses expenses over
the entirety of the beneficiary’s lifetime) but inconsistent
with an accord and satisfaction (where the disputed payback
amount would be resolved by the cashing of the check reimbursing
only those expenses incurred during the duration of the SNT).
Furthermore, even if this court were to determine, in that
situation, that § 1396p(d)(4)(A) is properly interpreted to
include a broad SNT payback requirement, in accordance with
Defendants’ proffered statutory interpretation, such an
interpretation would be rendered moot if this court should later
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find that the matter between these parties was nevertheless
resolved upon the prior accord and satisfaction of the disputed
debt. Consequently, Defendants’ motion as to this count will be
deferred without prejudice.
VI.
CONCLUSION
Thus, Defendants’ motion to dismiss (Doc. 12) will be
granted in part as to Count II and deferred until trial,
pursuant to Federal Rule of Civil Procedure 12(i), as to Count I
and, to the scope it envelopes it, Count III. 5 See Fed. R. Civ.
P. 12(i). Upon the filing of Defendants’ answer, all parties are
to appear before this court for a Rule 26 discovery conference
in order to establish an appropriate discovery schedule. This
court directs the Clerk to set this matter for a Joint Rule
26(f) discovery conference before this court rather than before
the Magistrate Judge. 6
5
Although the issue is deferred until trial, obviously the
matter may be addressed at summary judgment.
6
This court will hold the discovery conference. The parties
are to confer and, to the extent possible, prepare a proposed
order as to the matters agreed upon as required by the Local
Rules. However, the court will hold a conference before entering
a scheduling order to allow the court to determine how much of
the record may be stipulated to, how long discovery will take,
and an appropriate briefing schedule for summary judgment in
light of the briefs filed in relation to the motion to dismiss.
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For the reasons set forth herein, IT IS HEREBY ORDERED that
Defendants’ Motion to Dismiss (Doc. 12) is GRANTED IN PART, in
dismissing Count II, and DEFERRED IN PART, WITHOUT PREJUDICE, as
to Counts I and III.
IT IS FURTHER ORDERED that the Clerk is directed to set a
Joint Rule 26(f) discovery conference in this matter before this
court.
This the 21st day of March, 2016.
______________________________________
United States District Judge
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