Kendell et al v. Peng et al
Filing
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ORDER granting 12 Motion for Judgment on the Pleadings. Defendants' Motion for Protective Order and Motion to Stay Discovery are DENIED as moot. (Signed by Magistrate Judge Elizabeth Preston Deavers on 8/11/2016. (mas) Modified text on 8/11/2016 (mas).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
KELLEE KENDELL, et al.,
Plaintiffs,
Civil Action 2:16-cv-221
Magistrate Judge Elizabeth P. Deavers
v.
LILLY PENG, et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court for consideration of Defendants’ Motion for Judgment on
the Pleadings (ECF No. 12), Plaintiffs’ Response in Opposition (ECF No. 20), and Defendants’
Reply (ECF No. 21.). For the reasons explained below, Defendants’ Motion is GRANTED.
Defendants’ Motions for Protective Order and to Stay Discovery are DENIED as MOOT. (ECF
Nos. 8 & 24.)
I.
On March 10, 2016, Plaintiffs filed their Complaint, alleging that Defendants violated
their constitutional rights while they were under contract to provide coordination services for
Defendants’ home healthcare business. (ECF No. 1.) Plaintiffs subsequently filed their
Amended Complaint on April 28, 2016, removing one count, but leaving the underlying factual
allegations substantially unchanged. (ECF No. 9.)
Plaintiffs allege that, after Plaintiffs filed a lawsuit against Defendants on June 21, 2014
alleging breach of contract, Defendants discharged Plaintiffs without cause. (ECF No. 9 at 3.)
Plaintiffs further allege that Defendants have developed a “symbiotic relationship” with the Ohio
or Federal governments that convert their discharge of Plaintiffs into state action. (Id. at 2.) It is
not disputed that Defendants perform home health care services under contract to the state,
receive compensation under those contracts through government funding, and, as a result, are
extensively regulated by both the state and federal governments. (Id.; ECF No. 11 at1.) As a
result, Plaintiffs argue, Defendants conduct constitutes unconstitutional retaliation for Plaintiffs’
exercise of their right to redress in the courts as secured by federal and state constitutions and
statutes. (ECF No. 9 at 2.)
Defendants filed their Motion for Judgment on the Pleadings on May 2, 2016. (ECF No.
12.) Defendants argue that the Court should dismiss Plaintiffs claims because Plaintiffs have not
alleged sufficient facts to plead state action under the governing statute. (Id. at 5.) Plaintiffs
counter that the question of state action is too fact intensive to be decided on the pleadings and
maintain, in any event, that they have alleged sufficient facts to plead state action. (ECF No. 20
at 3-5.)
II.
Rule 12(c) of the Federal Rules of Civil Procedure allows a party to “move for judgment
on the pleadings.” Fed. R. Civ. P. 12(c). The Court evaluates a motion filed under Rule 12(c)
using the same standard as a Rule 12(b)(6) motion to dismiss. Roth v. Guzman, 650 F.3d 603,
605 (6th Cir. 2011). To survive a motion to dismiss for failure to state a claim under Rule
12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff must satisfy the basic federal
pleading requirements set forth in Federal Rule of Civil Procedure 8(a). Under Rule 8(a)(2), a
complaint must contain a “short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). Thus, Rule 8(a) “imposes legal and factual demands
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on the authors of complaints.” 16630 Southfield Ltd., P’Ship v. Flagstar Bank, F.S.B., 727 F.3d
502, 503 (6th Cir. 2013).
Although this pleading standard does not require “‘detailed factual allegations,’ . . . [a]
pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause
of action,’” is insufficient. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A complaint will not “suffice if it tenders ‘naked
assertion[s]’ devoid of ‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 557).
Instead, to survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), “a
complaint must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on
its face.’” Id. (quoting Twombly, 550 U.S. at 570). Facial plausibility is established “when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. “The plausibility of an inference depends on
a host of considerations, including common sense and the strength of competing explanations for
the defendant’s conduct.” Flagstar Bank, 727 F.3d at 504 (citations omitted).
III.
Plaintiff purports to assert First Amendment retaliation claims against Defendants under
42 U.S.C. § 1983. In order to plead a cause of action under § 1983, a plaintiff must plead two
elements: “(1) deprivation of a right secured by the Constitution or laws of the United States (2)
caused by a person acting under color of state law.” Hunt v. Sycamore Cmty. Sch. Dist. Bd. of
Educ., 542 F.3d 529, 534 (6th Cir. 2008) (emphasis added) (citations omitted).
The issue of whether a private corporation is “a state actor” or “acted under color of state
law” is a question of law for the Court’s determination. Neuens v. City of Columbus, 303 F.3d
667, 670 (6th Cir. 2002). In order for a private entity to “act under color of state law” for § 1983
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purposes, “its actions [must] so approximate the state action that they may be fairly attributed to
the state.” Lansing v. City of Memphis, 202 F.3d 821, 828 (6th Cir. 2000). The Sixth Circuit
employs three tests in order to determine whether a private entity meets this requirement: (1) the
state compulsion test; (2) the symbiotic relationship or substantial nexus test; and (3) the public
function test. Id.; Wolotsky v. Huhn, 960 F.2d 1331, 1335 (6th Cir. 1992). In their Amended
Complaint, Plaintiffs allege that Defendants “developed a symbiotic relationship with Federal
and State of Ohio government, rendering Defendants actors under state law.” (ECF No. 9 at 4.)
Under the substantial nexus test, a private party’s conduct “constitutes state action when
there is a sufficiently close nexus between the state and the challenged action of the regulated
entity so that the action of the latter may be fairly treated as that of the state itself.” Wolotsky,
960 F.2d at 1335. The Sixth Circuit has not established a legal framework for deciding whether
a sufficiently close nexus exists; each case must be evaluated on its own facts. Lansing, 202
F.3d at 830. That being said, however, Supreme Court and Sixth Circuit precedent have
identified several factors which, in and of themselves, are insufficient bases for finding the
existence of a close nexus.
Neither “significant or even total engagement in performing public contracts” nor
“extensive and detailed” state regulation of a private entity creates a sufficient nexus between the
state and the private entity. Rendell-Baker v. Kohn, 457 U.S. 830, 841 (1982); see Wolotsky, 960
F.2d at 1336 (“Acts of private contractors do not become the acts of the government by reason of
their significant or even total engagement in performing public contracts”) (citing Rendell-Baker,
457 U.S. at 840-841.)
In support of their argument that Defendants, who provide patient care coordination and
referral services, are “state actors” under the substantial nexus test, Plaintiffs rely on Brentwood
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Acad. v. Tenn. Secondary Sch. Athletic Ass’n, 531 U.S. 288 (1974), which Plaintiffs assert stands
for the proposition that “the private party-state actor issue [is so] particularly fact sensitive” that
judgment is inappropriate at the pleading stage and, instead, requires the parties to conduct
discovery. (ECF No. 20 at 4.)
In Brentwood, the Court explained that, despite the fact-specific nature of the inquiry, its
precedents have “identified a host of facts that can bear on the fairness of such an attribution [of
state action].” Brentwood, 531 U.S. at 296. The Court elaborated as follows:
We have, for example, held that a challenged activity may be state action when it
results from the State's exercise of “coercive power,” Blum, 457 U.S., at 1004,
102 S.Ct. 2777, when the State provides “significant encouragement, either overt
or covert,” ibid., or when a private actor operates as a “willful participant in joint
activity with the State or its agents,” Lugar, supra, at 941, 102 S.Ct. 2744
(internal quotation marks omitted). We have treated a nominally private entity as
a state actor when it is controlled by an “agency of the State,” Pennsylvania v.
Board of Directors of City Trusts of Philadelphia, 353 U.S. 230, 231, 77 S.Ct.
806, 1 L.Ed.2d 792 (1957) (per curiam), when it has been delegated a public
function by the State, cf., e.g., West v. Atkins, supra, at 56, 108 S.Ct. 2250;
Edmonson v. Leesville Concrete Co., 500 U.S. 614, 627–628, 111 S.Ct. 2077, 114
L.Ed.2d 660 (1991), when it is “entwined with governmental policies,” or when
government is “entwined in [its] management or control,” Evans v. Newton, 382
U.S. 296, 299, 301, 86 S.Ct. 486, 15 L.Ed.2d 373 (1966).
Brentwood, 531 U.S. at 296. Furthermore, the Brentwood Court reviewed a lower court’s
decision at the summary judgment stage and did not address the sufficiency of Plaintiff’s
pleading. Id. at 293. Rather, the Brentwood opinion refined the Court’s “entwinement” standard
of state action and emphasized that the particular facts of a case regarding an entity’s
composition and operation, rather than legal formalisms, are determinative. Id. at 296 (“[O]ur
cases are unequivocal in showing that the character of a legal entity is determined neither by its
expressly private characterization in statutory law, nor by the failure of the law to acknowledge
the entity's inseparability from recognized government officials or agencies.”). Brentwood,
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therefore, does not foreclose the possibility that some pleadings, as a matter of law, fail to allege
sufficient facts to plead state action.
Contrary to Plaintiffs’ position, the federal courts have identified facts that, if alleged
alone, do not, as a matter of law, satisfy the burden of pleading state action. These facts include
allegations limited to extensive government regulation and receipt of government funds. Courts,
for example, have held that “[i]t is well established . . . that private hospitals, even those
receiving federal and state funding and tax exempt status, are not state actors under § 1983.”
Grant v. Trinity Health-Mich., 390 F. Supp. 2d 643, 657 (E.D. Mich. 2005); see also Crowder v.
Conlan, 740 F.2d 447, 449-453 (6th Cir. 1984) (concluding that a private hospital is not a state
actor for purposes of § 1983 even though it derived revenue from government sources, was
heavily regulated, had public officials on its board of directors, and was purchased by the county
and leased back to the board of trustees); Jackson v. Norton-Children’s Hosps., Inc., 487 F.2d
502, 503 (6th Cir. 1973), cert. denied, 416 U.S. 1000 (1974) (finding that a private hospital was
not a state actor even though it received public funds and was heavily regulated, stating that
“[w]henever state action has been discovered in activities of an ostensibly private hospital
something more than a partial federal funding is involved”); Sarin v. Samaritan Health Ctr., 813
F.2d 755, 759 (6th Cir. 1987) (holding that the plaintiff failed to state a § 1983 claim because
state regulation of a hospital and receipt of Medicare and Medicaid funds were insufficient to
establish state action).
In their Amended Complaint, Plaintiffs’ allegations of a substantial nexus between
Defendants and the government are limited to assertions of extensive government regulation of,
and contracts with, Defendants. Specifically, Plaintiffs allege that Defendants are “engaged in
the home health care services business . . . and licensed/certified by Medicare and/or the Ohio
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Department of Health . . . and under contract with the Ohio Department of Job and Family
Services.” (ECF No. 9 at 2.) According to Plaintiffs, “[t]hrough this licensing and regulatory
process Ltd has developed a symbiotic relationship with the Federal and/or State of Ohio
governments, rendering Ltd. a state actor with respect to providing home health care services.”
(Id.)
Plaintiffs have not alleged any further facts with respect to the alleged substantial nexus
between Defendants and the state. Plaintiffs have not alleged that federal or state statutes or
regulations compel or encourage private persons or entities like Defendants to take retaliatory
measures against individuals who initiate lawsuits for breach of contract. Likewise, Plaintiffs
allege no facts showing, as in Brentwood, that the “nominally private character of [Defendant] is
overborne by the pervasive entwinement of public institutions and public officials in its
composition and workings.” 531 U.S. at 298. Plaintiffs’ allegations of “significant or even total
engagement in performing public contracts” and “extensive and detailed” state regulation of a
private entity, alone, are not sufficient to plead state action under § 1983. Rendell-Baker, 457
U.S. at 841; Wolotsky, 960 F.2d at 1336. Indeed, Plaintiffs allege no facts showing that the state
or federal government had a sufficiently close relationship with Defendants such that their
private conduct could be fairly attributed to the state for purposes of § 1983 liability.
IV.
For the reasons explained above, Defendants’ Motion for Judgment on the Pleadings is
GRANTED. (ECF No. 12.) Furthermore, Defendants’ Motion for Protective Order and Motion
to Stay Discovery are DENIED as moot. (ECF Nos. 8 & 24.)
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IT IS SO ORDERED.
Date: August 11, 2016
/s/ Elizabeth A. Preston Deavers
ELIZABETH PRESTON DEAVERS
UNITED STATES MAGISTRATE JUDGE
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