IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION CIVIL CASE NO. 5:11-cv-354

K.C., a minor child, by his mother and next )

friend AFRICA H.; ALLISON TAYLOR

)

JOHNS; L.S., a minor child, by his father

)

and next friend RON S.; and D.C., a minor )

child, by his mother and next friend PENNY )

C.; on behalf of themselves and all others

)

similarly situated,

)

)

Plaintiffs,

)

)

v.

)

)

LANIER CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services, PAMELA SHIPMAN, in )

her official capacity as Area Director of

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Piedmont Behavioral Health Care Area

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Mental Health, Developmental Disabilities, )

and Substance Abuse Authority, and

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PIEDMONT BEHAVIORAL

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HEALTHCARE AREA MENTAL

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HEALTH, DEVELOPMENTAL

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DISABILITIES AND SUBSTANCE

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ABUSE AUTHORITY doing business as

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PBH,

)

Defendants.

CLASS ACTION COMPLAINT

INTRODUCTION 1. Medicaid recipients with disabling and chronic conditions bring this suit to challenge the lack of basic due process protections for Medicaid recipients when their developmental disability services were reduced or terminated effective July 1, 2011 by the North Carolina Department of Health and Human Services (DHHS), through its Medicaid managed care contractor and agent, Defendant Piedmont Behavioral Healthcare (hereinafter “PBH”), under the direction of its Area Director, Defendant Shipman. Without any change in their underlying health conditions or needs, essential Medicaid services previously authorized for the care of each

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named Plaintiff and hundreds of others similarly situated were terminated or reduced effective July 1, 2011 by Defendant PBH. Defendant PBH is using a “Supports Needs Matrix” to terminate the services, but the process uses arbitrary, non-ascertainable standards and the recipients were given no meaningful opportunity to challenge the PBH decisions. This class action seeks to enjoin Defendants from reducing these essential health services without first providing due process to the plaintiffs and others similarly situated. The violations of law and illegal reduction of services suffered by the named plaintiffs are typical of similar violations suffered by hundreds of other North Carolina Medicaid recipients served by PBH. PBH, as Defendant Cansler’s agent, has engaged in a uniform policy and practice of reducing these Medicaid developmental disability services in violation of due process.
2. Plaintiffs and all proposed class members have been receiving developmental disability services in the community through the North Carolina “Innovations Waiver,” which covers home and community based services for developmentally disabled individuals such as the Plaintiffs and class members and is operated by Defendant Cansler’s contractor and agent, Defendant PBH, under the direction of its Area Director and CEO, Defendant Shipman.
3. Prior to July 1, 2011, the Defendants had found the Plaintiffs’ services to be medically necessary and were providing coverage for these services through the Medicaid program. Plaintiffs are representative of a class of more than 600 developmentally disabled North Carolina residents who have received services under the PBH Innovations Waiver, but whose coverage was recently reduced, terminated or eliminated by PBH employees. The PBH employees used a tool called the Supports Intensities Scale (hereinafter, “SIS”) to assign a score to each Plaintiff based on an assessment of an individual’s medical and behavioral support needs and “life activities” in comparison to others with developmental disabilities. Based on the score
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obtained from the SIS, Plaintiffs and other proposed class members were assigned by PBH into a category under PBH’s new Supports Needs Matrix system. That assignment in turn resulted in a reduction of each class member’s services effective July 1, 2011. This reduction in services occurred without adequate written notice of PBH’s decisions, without the opportunity for a fair hearing to contest the SIS score’s accuracy or to appeal their assignment to a particular category, and without the opportunity to continue receiving services at the prior authorized level pending the outcome of such a fair hearing, all in violation of Plaintiffs’ rights under the Medicaid Act and under the Due Process clause of the Fourteenth Amendment.
4. PBH’s illegal policies and practices will cause irreparable harm to the Plaintiffs and the Plaintiff class, all of whom are receiving Medicaid-funded services due to their disabling and chronic conditions. Terminating or reducing developmental disability services that have previously been found to be necessary by Plaintiffs’ treating providers and by PBH will place the health and safety of Plaintiffs and the Plaintiff class at risk, threatening them with imminent irreparable harm. By depriving them of coverage of essential health services to which they are entitled without due process or statutory authority, Defendants leave many of the most vulnerable disabled children and adults in North Carolina without adequate health care services, even though such services are, and have previously been found by Defendants to be, critical to their health, safety, and development. Some Plaintiffs and class members also will be threatened with placement in institutional settings far from their communities if the services which they need to remain at home are not reinstated. Plaintiffs and class members thus have no adequate remedy at law and are entitled to a declaratory judgment and to temporary, preliminary and permanent injunctive relief to reinstate and continue their previously authorized services until they have been provided with due process.
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5. PBH is a Local Management Entity (“LME”) contracted by Defendant DHHS to “manage all publicly funded MH/DD/SA [Mental Health, Developmental Disability, and Substance Abuse] services” within its catchment area. Memorandum of Agreement between NCDHHS and PBH effective April 1, 2008, Attachment B (Scope of Work), Section 2.
6. The N.C. Innovations Waiver is a 42 U.S.C. § 1915(c) Home and Community Based Waiver that offers services to individuals with developmental disabilities who would otherwise qualify for services in an Intermediate Care Facility for the Mentally Retarded (ICF-MR).
7. The program is called a waiver because, under the Medicaid Act, the federal Medicaid agency has given North Carolina permission not to comply with certain, otherwise mandatory provisions of the Medicaid Act. Medicaid Act provisions not specifically waived continue to apply in full force and effect for those enrolled in the program. The federal agency did not waive 42 U.S.C. § 1396a(a)(3) as part of the N.C. Innovations Waiver. The federal agency is without authority to waive the Due Process Clause of the U.S. Constitution.
8. Recently, PBH introduced a new system to allocate funding for services amongst waiver participants called the “Supports Needs Matrix.” For all plaintiffs and proposed class members, the practical effect of this matrix was a termination or reduction of Medicaid-covered services previously approved for them by PBH effective July 1, 2011.
9. Defendants’ actions violate the Medicaid Act and its accompanying regulations, and the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution.
10. Plaintiffs seek declaratory and both preliminary and permanent injunctive relief to halt the implementation of the Supports Needs Matrix system by PBH until the Defendants comply with statutory and constitutional due process requirements.
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11. Plaintiffs further seek class relief for all those individuals who are similarly situated, as described infra, at Paragraph 24, in the proposed class definition.
JURISDICTION AND VENUE 12. This is an action for declaratory and injunctive relief for violation of the Social Security Act, 42 U.S.C. §§ 1396-1396w and of the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution. 13. The Court has jurisdiction over Plaintiffs’ claims under 28 U.S.C. §§ 1331 and 28 U.S.C. §§ 1343(a)(3), which grant this Court original jurisdiction in all actions authorized by 42 U.S.C. § 1983 to redress the deprivation under color of State law of any rights, privileges, or immunities guaranteed by the United States Constitution and Acts of Congress. Declaratory and injunctive relief is also authorized by 28 U.S.C. §§ 2201 and 2202 and Fed. R. Civ. P. 65. 14. Venue is proper because a substantial part of the events or omissions giving rise to Plaintiffs’ claims occurred here and because Defendant Cansler may be found here. 28 U.S.C. § 1391(b)(1).
PARTIES 15. Plaintiff K.C. is a fourteen year old boy who lives in Union County, North Carolina. K.C. has Cerebral Palsy, Moderate Mental Retardation, seizure disorder and incontinence. K.C. does not have a guardian or other duly-appointed representative and appears in this proceeding through his mother and next friend, Africa H. K.C. is unable to obtain necessary and appropriate health services because Defendants illegally reduced coverage of those services. As a result, K.C. is threatened with damage and serious risk to his health, safety, development, and wellbeing.
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16. Plaintiff D.C. is a fourteen year old boy who lives in Union County, North Carolina. D.C. has severe autism and is non-verbal. All twenty-one hours per week of in-home skill building services for D.C. have been terminated by PBH effective July 1, 2011. D.C. does not have a guardian or other duly-appointed representative and appears in this proceeding through his mother and next friend, Penny C. D.C. will be unable to obtain necessary and appropriate health services because Defendants illegally terminated coverage of those services. As a result, D.C. is threatened with damage and serious risk to his health, safety, development, and wellbeing.
17. Plaintiff Allison Taylor Johns (“Taylor”) is an eighteen year old girl who lives in Union County, North Carolina. Taylor has Cerebral Palsy, borderline intellectual functioning, seizure disorder and ADHD. Taylor is unable to obtain necessary and appropriate health services because Defendants illegally reduced coverage of those services. As a result, Taylor is threatened with damage and serious risk to her health, safety, development and well-being.
18. Plaintiff L.S. is a thirteen year old boy who lives in Cabarrus County, North Carolina. L.S. has autism and seizure disorder. L.S. does not have a guardian or other duly-appointed representative and appears in this proceeding through his father and next friend, Ron S. L.S. is unable to obtain necessary and appropriate health services because Defendants illegally reduced coverage of those services. As a result, L.S. is threatened with damage and serious risk to his health, safety, development, and well-being.
19. Defendant Lanier Cansler is the Secretary of the North Carolina Department of Health and Human Services (DHHS). DHHS has been designated as the “single state agency” directly responsible for the administration and supervision of North Carolina’s Medicaid program under Title XIX of the Social Security Act. See 42 U.S.C. § 1396a(a)(5); N.C. Gen.
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Stat. § 108A-54; 42 C.F.R. § 431.10. Defendant Cansler is charged with overall responsibility for the administration of DHHS, which administers the Medicaid program in North Carolina. He is sued in his official capacity.
20. As the director of the single state Medicaid agency, Defendant Cansler is responsible for the supervision and oversight of PBH to make sure that PBH provides Medicaid services in accordance with federal law. See N.C.G.S. § 108A-54; 122C-111, et seq.
21. Defendant PBH is the Local Management Entity (LME) for Davidson, Rowan, Cabarrus, Union and Stanley counties and a managed care behavioral health organization operating with state and federal Medicaid and other state funds to provide necessary services and supports for individuals with developmental disabilities, substance abuse, and mental health needs.
22. Defendant Pamela Shipman is the area director and chief executive officer of PBH. As such she is responsible for the supervision and oversight of PBH to make sure that PBH provides Medicaid services in accordance with federal law. She is sued in her official capacity.
23. PBH’s contract with the State of North Carolina requires PBH’s compliance with federal laws and regulations, including those related to the maintenance of a Grievance System under 42 CFR Part 438 Subpart F and meaningful access to the State’s Fair Hearing system under 42 CFR Part 431 Subpart E.
CLASS ACTION ALLEGATIONS 24. This action is brought as a statewide class action pursuant to Fed. R. Civ. P. 23(a) and (b)(2) on behalf of: all current or future N.C. Innovations Waiver participants whose Medicaid services have been or will be denied, reduced, or terminated by Defendant Cansler or Defendant PBH or
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any of their employees, contractors, agents or assigns through the implementation of the Supports Intensities Scale (SIS) or Supports Needs Matrix, without first being provided adequate notice and hearing rights as required by the Medicaid Act and Due Process. 25. The class is so numerous that joinder of all members is impracticable. Approximately 675 persons receive services from PBH under the Innovations Waiver and all of them have been assessed and categorized under the SIS and Supports Needs Matrix policies. 26. All individuals served by the PBH Innovations Waiver whose services were denied, reduced, or terminated because of the SIS/Supports Needs Matrix system share a common claim with the Plaintiffs in that their services have been or will be terminated, denied or reduced by PBH or DHHS, directly or through their agents or assigns, without adequate due process protections. 27. There are common questions of law and/or fact as to the permissibility of the Defendants’ policies and practices with respect to the procedures for terminating, denying, and reducing Medicaid-covered services that are common to all members of the class. The factual questions common to the entire class include what policies and practices were instituted or permitted by Defendants in the implementation of the SIS/Supports Needs Matrix system and in the resulting denial, termination, and reduction of Medicaid-covered services. The legal questions common to the class include whether Defendants’ policies, practices and procedures in the implementation of the SIS/Supports Needs Matrix system fulfill the notice and fair hearing requirements under the Medicaid Act and the U.S. Constitution. 28. The claims of the class representative plaintiffs are typical of the claims of the class. Plaintiffs and other class members all have had Medicaid-covered services reduced or terminated by Defendants under the same challenged PBH policies, practices and procedures. The
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implementation of the SIS/Supports Needs Matrix system by Defendants terminate, denies or reduces the Medicaid-covered developmental disability services of each plaintiff and class member without adequate notice or opportunity to first contest that proposed action via the federally-mandated fair hearing system.
29. The Plaintiffs will fairly and adequately represent the interests of all members of the class. Plaintiffs know of no conflicts of interest among themselves or between their interests and those of class members. All are seeking the same relief and none are seeking monetary damages.
30. Prosecution of separate actions by individual class members would create a risk of inconsistent or varying adjudications with respect to individual class members, which would establish incompatible standards of conduct for the party opposing the class or could be dispositive of the interests of the other members or substantially impair or impede their ability to protect their interests.
31. Defendant’s actions and omissions have affected and will affect the class generally, thereby making appropriate injunctive and declaratory relief with respect to the class as a whole.
FACTUAL BACKGROUND A. PBH / the N.C. Innovations Waiver 32. The Medicaid Act, Title XIX of the Social Security Act, 42 U.S.C. § 1396-1396w-5, establishes a medical assistance program cooperatively funded by the federal and state governments. Medicaid is designed to ensure that low income people receive necessary medical services. States are required to administer Medicaid “in the best interests of recipients.” Id. at § 1396a(a)(19). 33. A state’s participation in Medicaid is voluntary. Once a state elects to participate, it must adhere to the federal legal requirements, as provided by the United States Constitution, the
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Medicaid Act, and the rules promulgated by CMS. North Carolina has elected to participate in the Medicaid program. N.C. Gen. Stat. 108A-54.
34. The Medicaid Act requires participating states and Medicaid participating managed care entities to provide each Medicaid recipient with adequate written notice and an opportunity for an impartial hearing before services are denied, reduced or terminated. 42 U.S.C. § 1396a(a)(3); 42 C.F.R. part 410.200.
35. The Due Process Clause of the U.S. Constitution requires the state Medicaid agency and its agents to provide each Medicaid recipient with adequate written notice and an opportunity for an impartial hearing before services are denied, reduced or terminated. U.S. Const. XIV Amend.
36. The Department of Health and Human Services (DHHS) is designated as the state Medicaid agency responsible for the administration and supervision of North Carolina’s Medicaid Program under Title XIX of the Social Security Act. DHHS delegated chief responsibility for administering the federal Medicaid program to its Division of Medical Assistance (DMA).
37. PBH operates under a Memorandum of Agreement with the North Carolina Department of Health and Human Services, Division of Medical Assistance (DMA) under which PBH assumes the task of managing MH/DD/SA services in its catchment area, in exchange for an agreed-upon amount of public funds. However, DHHS retains its oversight responsibilities under state and federal Medicaid law.
38. PBH operates as a Prepaid Inpatient Health Plan (“PIHP”), a type of managed care entity under the Medicaid regulations. See 42 C.F.R. § 438.2. PBH internalizes—or conducts all of its own—case management and utilization review functions. PBH employees prepare an
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enrollee’s plan of care that describes the MH/DD/SA services that the enrollee will receive throughout the year. Other PBH employees are responsible for approving or denying the services contained in the plan submitted for approval.
39. If a PIHP denies, terminates, or reduces the services previously authorized for an enrollee’s care, it must provide notice to that enrollee of his/her right to appeal the PIHP’s decision. 42 C.F.R. §§ 438.404(b).
40. PIHPs such as PBH may require individuals to exhaust an internal review process before permitting access to the State fair hearing system. 42 C.F.R. §§ 438.402(a). The Memorandum of Understanding between DMA and PBH requires enrollees to complete PBH’s internal review process, called a “Reconsideration Review” by PBH, before they may continue their appeal with the State fair hearing system.
41. PIHPs must complete their internal review process within specified time frames established by the State, but under no circumstances may an internal review exceed forty-five (45) days from the date the PIHP receives notice that the enrollee wishes to use the internal review process. 42 C.F.R. §§ 438.408(b)(2). The Memorandum of Agreement between DMA and PBH requires PBH to complete its internal review process within this 45-day timeline.
42. The Medicaid Act authorizes states to obtain Home and Community Based Services waivers (HCBS waivers) upon approval from the Centers for Medicare and Medicaid Services (CMS). See 42 U.S.C. § 1396n(c) (also known as Section 1915(c) of the Social Security Act).
43. The N.C. Innovations waiver is a home and community based services waiver in North Carolina. Since 2005, Medicaid-eligible individuals residing in Piedmont Behavioral Healthcare’s catchment area—currently consisting of Stanly, Cabarrus, Rowan, Davidson, and Union counties in North Carolina—are eligible to participate in the N.C. Innovations waiver
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program. All class members are consumers of services under the N.C. Innovations waiver, which currently has approximately 675 total participants.
44. Under the Innovations waiver, participants meet with a PBH employee called a care coordinator once every twelve months to develop a plan of care for the next twelve month period. The meeting takes place the month before the month in which the participant was born. The plan then takes effect the first day of the participant’s month of birth and remains in effect for one year. Under the plan of care, services for the individual for the upcoming year are enumerated, together with providers responsible for the services and funding sources for the services.
B. Supports Needs Matrix 45. In March 2011, PBH issued letters to each individual N.C. Innovations Waiver participant informing them of the implementation of the new Supports Needs Matrix system and of the category to which that participant had been assigned and of the resulting maximum dollar limit on services that could be provided. The letter also included an enclosed pamphlet entitled “2011 Supports Needs Matrix Guide” that purported to explain the new Supports Needs Matrix system to N.C. Innovations Waiver participants and their families. The letter informed each waiver participant that implementation of the individual’s new budget limit would be implemented in phases for all participants facing budget reductions beginning in July 2011. The notice did not explain why PBH was implementing the new budget limits for all participants in July 2011, rather than waiting until each participant’s current plan of care expires at the beginning of the participant’s next birth month. The letter contained no information on how to appeal the decision. PBH care coordinators have routinely informed participants and their providers that their Supports Needs Matrix category could not be appealed.
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46. Under the Supports Needs Matrix system, all Innovations waiver participants were placed into one of four different groupings, or “tiers,” based on two different factors: (1) whether the participant is a child (defined as “age 21 and under”) or an adult (defined as “age 22 or over”) and (2) whether the participant lives at home (a/k/a a “non-residential” participant) or in a residential facility (a/k/a a “residential” participant).
47. Within each grouping, there are seven possible categories (Category A-Category G1) to which a participant could be assigned. Each of the seven categories contains a different “Base Budget” dollar maximum for the total amount of most developmental disability services that can be provided over a twelve month period. A participant’s “Base Budget” is used to fund particular services that provide regular support and supervision during a participant’s day and, therefore, form the core of a waiver participant’s plan of care. These services include: Community Networking, Day Supports, Home Supports, Residential Supports, Respite, and Supported Employment.
48. The Base Budget increases by category in ascending order (i.e. Category A contains the lowest cost budget; Category G contains the highest cost budget). PBH assigned participants to one of these seven categories based substantially upon the results of the participant’s most recent “Supports Intensity Scale” (“SIS”) evaluation.
49. The American Association on Intellectual and Developmental Disabilities created the SIS to “evaluate[] [the] practical support requirements of a person with an intellectual disability through a positive and thorough interview process.” Many organizations, including the North Carolina Developmental Disabilities Consortium, oppose the use of the SIS as a means to allocate Medicaid resources because “[t]here is no empirical research to support” its use in this manner.
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50. The SIS evaluations that were used to determine individuals’ category and Base Budget under the March 2011 Supports Needs Matrix categorizations were performed during 2009, 2010, and 2011. On information and belief, PBH did not consult with the plaintiffs’ treating providers as part of the scoring process.
51. At the time these SIS assessments were performed, a copy of a summary of the assessment and score was mailed to each waiver participant. PBH procedure permitted a participant to ask for the SIS assessment to be amended within 90 days of the assessment. However, the notice of the assessment score mailed to participants did not attach a copy or explanation of the scoring system, or explain how the scoring system worked or how the individual’s score was arrived at. The notice of the SIS score provided to the participant contained no information on how to contest the score from the SIS assessment or of the deadline for doing so. The notice of the SIS score provided to participants also provided no information on how the SIS score would affect the total amount of services the participant could receive. The notice did not inform the individual that failure to meet the 90-day deadline for requesting an amendment of the score would be used to bar the individual from appealing the reduction in services based on that score in the future. Thus, even if a participant otherwise learned that he or she could contest the assessment score, the participant had no way of knowing why contesting the score was important. Moreover, a participant who did contest the SIS score was not provided with a fair hearing by PBH that meets due process standards. Thus PBH provided no formal means through which the participant could contest in person at a fair hearing consistent with due process the SIS score or the resulting category in the Supports Needs Matrix.
52. The March 2011 notice of the new budget maximum informed participants that they would need to meet with the PBH care manager to write a revised plan of care prior to July 2011
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that fits within the budget limit set by the PBH decision. Participants or their guardians were then heavily pressured by the PBH care manager team into signing this new plan of care, which includes statements such as “this plan meets all of [Name of Participant’s] needs,” to make it appear that the participant/guardian agreed with the budget and the reduced array of services contained therein. One of the ways that this pressure was exerted was to inform participants of PBH’s policy that if the new plan were not signed prior to July 1, 2011, all waiver services would end on that date.
53. PBH did allow participants who disagreed with their Supports Need Matrix budget limit to request a further review before PBH’s “Intensive Review Committee.” Such a review might permit the participant to be categorized as an “outlier” within his/her particular category. “Outliers” are eligible for a higher Base Budget than other participants in the same category. However, neither the notices communicating the SIS scores nor the March 2011 letters containing the Supports Needs Matrix category assignments and budget limits contained any information about the Intensive Review process. Rather, the participant had to search through the 2011 Supports Needs Matrix Guide enclosed with the March 2011 notice to find anything about this process. Moreover, the only way to initiate the Intensive Review process was with the agreement and support of the care manager, a PBH employee.
54. PBH has stated that it will not allow more than 7% of all participants to be categorized as an “outlier” within his/her particular category and receive increased funding through the Intensive Review process.
55. PBH care managers have frequently discouraged participants from requesting an Intensive Review. In Plaintiff Taylor Johns’ case, her mother was never properly informed that her request for Intensive Review was denied.
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56. The Intensive Review Committee makes decisions based entirely upon documentation submitted to it; PBH does not permit individuals to present any information in person to the Intensive Review Committee.
57. According to the documents that waiver participants must complete in order to request an Intensive Review, waiver participants may only request an intensive review of their Medical, Behavioral or School needs. Waiver participants may not ask for a review of any combination of these needs through the Intensive Review process.
58. PBH provides no mechanism for appealing the decision of the Intensive Review Committee. The notice of decision provided by the Intensive Review Committee contains no information on appeal rights or about any other steps the individual might take to contest the participant’s budget and category assignment beyond the Intensive Review Committee.
59. The “2011 Supports Needs Matrix Guide” appears to require that after the Intensive Review Committee decision, a participant who disagrees must then convince his care manager, who is a PBH employee, to submit a new plan of care to PBH Utilization Management with a budget that exceeds the maximum permitted by the March 2011 Supports Needs Matrix category assignment decision. However, PBH care managers frequently have failed to inform participants of this right or have actively discouraged them from exercising this right.
60. If an individual did succeed in submitting a new plan of care to PBH Utilization Management with a higher budget total than permitted by the Supports Needs Matrix, PBH did provide a written decision to the participant, including appeal rights if the plan was denied. However this notice and its right to a hearing fails to satisfy due process in several respects:
a. The notice was mislabeled as a denial of an initial request for services, even though the decision by PBH was to reduce or terminate existing services that had
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been previously approved and even though the reduction or termination took effect prior to the expiration of the participant’s previously approved plan of care. b. The notice fails to provide the right to continuation of the previously approved services pending the outcome of an appeal, as required by federal regulations and due process. c. The notice fails to adequately explain the reason for the PBH decision to reduce or terminate services. d. The notice fails to explain that the participant has the right at this point to contest the SIS score or the Supports Needs Matrix categorization. Indeed, PBH care managers have informed some plaintiffs and class members that the SIS score can no longer be contested if it was not challenged within 90 days of the SIS report. e. PBH care managers also have discouraged appeals by informing participants of PBH policy that if the participant did not sign a new plan of care with a reduced budget under the Supports Needs Matrix prior to July 1, 2011, all of the participant’s waiver services would end on July 1, 2011, including termination of the services approved in the PBH decision being appealed, even though all of the participant’s services were previously approved by PBH under a plan of care that did not expire on July 1, 2011. 61. At least one individual who signed the plan of care under protest, the mother of Taylor Johns, was informed by her PBH care manager on June 30, 2011 that Taylor would lose all services on July 1, 2011 because the plan had been signed under protest. 62. The PBH Supports Needs Matrix system, as implemented by PBH, thus circumvents notice and hearing requirements by enforcing upon participants a budget amount for certain
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services which is based upon an individualized factual decision—the participant’s level of need according to the SIS assessment—which the participant was never given an opportunity to challenge through the fair hearing process.
C. Plaintiffs 63. Plaintiff K.C. is 14-years-old. Among other diagnoses, he has moderate mental retardation, cerebral palsy, a seizure disorder, and incontinence. Plaintiff K.C. lives in Monroe, Union County, North Carolina. 64. Prior to the adoption of the Supports Needs Matrix, K.C. had a Base Budget amount of $47,936.40 approved by PBH for the plan year October 2010 through September 2011. 65. Using the Supports Needs Matrix system, PBH provided notice to K.C.’s mother in March 2011, assigning K.C. to Supports Needs Matrix Category “Child Non-Residential B” and that his new Base Budget maximum would be $25,476.40. 66. K.C.’s mother, Africa H., requested that PBH reconsider K.C.’s needs through the Intensive Review process. Before K.C.’s needs could be reviewed by the Intensive Review Committee, however, K.C.’s SIS score was re-evaluated. 67. According to K.C.’s mother, the SIS re-evaluation consisted primarily of an interview between herself and the SIS examiner. Also present during this interview was K.C.’s PBH care manager. 68. Based on this new SIS score, PBH changed K.C.’s Supports Needs Matrix Category from “Child Non-Residential B” to “Child Non-Residential D.” 69. K.C.’s new Supports Needs Matrix Category carries with it a higher Base Budget than K.C.’s former Supports Needs Matrix category. Nonetheless, it is still approximately $10,000 less than K.C.’s budget in 2010-2011.
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70. Because K.C.’s Supports Needs Matrix Category Budget is less than the amount contained in his current plan of care, PBH created a schedule whereby K.C. will be transitioned into his new Supports Needs Matrix Category Budget. In July 2011, K.C.’s individual service plan will be based on an annual Category Budget of $45,550.50 for the period of July 2011 to December 2011. Beginning in January 2012, K.C.’s individual service plan will be based on an annual Category Budget of $36,604.40 for the period of January 2012 to June 2012. The notice did not explain how the reduction was calculated or the basis for the reduction. K.C.’s mother was informed by her PBH care manager that she was required to sign a plan of care prior to July 1, 2011 that does not exceed the newly computed budget limits.
71. K.C.’s health, safety and development are threatened with irreparable harm if his services are not reinstated. Without the medically necessary services that have been eliminated by PBH’s actions, he is likely to regress and be at greater risk of institutionalization.
72. K.C.’s SIS score does not accurately reflect his needs. He therefore seeks the right to challenge his Supports Needs Matrix category through the fair hearing process.
73. K.C. was never provided notice or opportunity to challenge his SIS score or Supports Needs Matrix category through the fair hearing process.
74. Plaintiff L.S. is 13-years-old. Among other diagnoses, he has autism and a seizure disorder. Plaintiff L.S. currently lives with his family in Concord, Cabarrus County, North Carolina.
75. Prior to the adoption of the Supports Needs Matrix, L.S. had a Base Budget amount of $55,297.92 approved by PBH for the plan year December 2010 through November 2011.
76. Using the Supports Needs Matrix system, PBH provided notice in March 2011 to L.S.’s parents, assigning L.S. to the Supports Needs Matrix Category Child Non-Residential D
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and that his Category Budget amount will be reduced to $36,604.40. The notice stated that beginning in July 2011, L.S.’s individual service plan will be based on an annual Category Budget of $36,604.40. The notice did not explain how the reduction was calculated or the basis for the reduction.
77. Shortly after PBH informed L.S.’s parents of his new budget, L.S.’s parents attended a meeting with his PBH care manager. L.S.’s parents were presented with a new plan of care written by the PBH care manager that would reduce L.S.’s services so that their cost fits within L.S.’s new budget maximum. Although L.S.’s parents were not afforded any input on this draft plan of care, they were told that they had to sign it before they could review the final version of the plan of care.
78. L.S.’s parents then were informed by his PBH care manager that she was no longer an advocate on L.S.’s behalf and that her role was to make sure that “parents don’t trump up changes” to their child’s plan of care. L.S.’s parents also asked about the possibility of pursuing an Intensive Review, and were informed by the PBH care manager that they could not request an Intensive Review until at least six months after L.S.’s Category Budget took effect.
79. L.S.’s health, safety and development are threatened with irreparable harm if his services are not reinstated. Without the medically necessary services that have been eliminated by PBH’s actions, he is likely to regress and be at greater risk of institutionalization.
80. L.S.’s SIS score does not accurately reflect his needs. He therefore seeks the right to challenge his Supports Needs Matrix category through the fair hearing process.
81. L.S. was never provided notice or opportunity to challenge his SIS score or Supports Needs Matrix category through the fair hearing process.
20 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 20 of 31

82. Plaintiff Allison Taylor Johns (“Taylor”) is 18-years-old. Among other diagnoses, she has Attention Deficit Hyperactivity Disorder, mild mental retardation, hypotonic cerebral palsy, and a seizure disorder. Taylor currently lives in Indian Trail, Union County, North Carolina.
83. Prior to the adoption of the Supports Needs Matrix, Taylor had a Base Budget amount of $45,543.64 approved by PBH for the plan year November 2010 through October 2011.
84. Using the Supports Needs Matrix system, PBH notified Taylor’s family in April 2011 that her Supports Needs Matrix category was “Child Non-Residential B,” and that her new Base Budget maximum would be $25,476.40. The notice did not explain how the reduction was calculated or the basis for the reduction.
85. Taylor’s mother, Linda Johns, then spoke with Taylor’s PBH care manager to request an Intensive Review of her needs. The care manager discouraged Taylor’s mother from requesting an Intensive Review.
86. Taylor’s mother met with Taylor’s PBH care manager on May 26, 2011. Although Taylor’s mother believed that the purpose of the meeting was to conduct an Intensive Review, it soon became apparent that the PBH care manager’s purpose at the meeting was to create a plan of care that would fit within Taylor’s new budget.
87. Taylor’s mother was asked to have Taylor sign a new plan of care devised by the PBH care manager at the May 26 meeting; she was informed by the PBH care manager that if she did not sign the document, all of Taylor’s services would immediately cease. Taylor’s mother made handwritten revisions to the document. Taylor initialed these revisions and signed the document under duress.
21 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 21 of 31

88. Taylor’s mother again asked the PBH care manager about requesting an Intensive Review, and was told by the care manager that she must have an Intensive Review request signed by Taylor’s physician and submitted to PBH by the end of the day. Taylor’s mother had not previously been informed of these requirements for requesting an Intensive Review.
89. Taylor’s mother filed a written request for an Intensive Review on June 23, 2011. To date, she has not yet received any reply from PBH. However, on June 30, 2011, Taylor’s mother was informed by PBH that all services for Taylor would cease on July 1, 2011 if she did not sign another plan that removed any objections or reference to signing under protest. Under duress, Taylor signed the plan without indicating any objections in writing, only so that PBH would not terminate all services.
90. Taylor’s health, safety and development are threatened with irreparable harm if her services are not reinstated. Without the medically necessary services that have been eliminated by PBH’s actions, she is likely to regress and be at greater risk of institutionalization.
91. Taylor’s SIS score does not accurately reflect her needs. She therefore seeks the right to challenge her Supports Needs Matrix category through the fair hearing process.
92. Taylor was never provided notice or opportunity to challenge her SIS score or Supports Needs Matrix category through the fair hearing process.
93. Plaintiff D.C. is 14-years-old. Among other diagnoses, he has severe autism and is verbally noncommunicative. Plaintiff D.C. lives in Indian Trail, Union County, North Carolina.
94. Prior to the adoption of the Supports Needs Matrix, D.C. had a Base Budget amount of $43,579.52 approved by PBH for the plan year May 2011 through April 2012.
95. Using the Supports Needs Matrix system, PBH provided notice to D.C.’s parents in March 2011, placing D.C. into Supports Needs Matrix Category “Child Non-Residential A” and
22 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 22 of 31

that his new Base Budget maximum would be $18,799.60. The notice did not explain how the reduction was calculated or the basis for the reduction.
96. Because D.C.’s Supports Needs Matrix Category Base Budget is less than the amount contained in his current plan of care, PBH created a schedule whereby D.C. will be transitioned into his new Supports Needs Matrix Category Budget. Beginning July 2011, D.C.’s individual service plan will be based on an annual Category Budget of $28,199.40 for the period of July 2011 to December 2011. Beginning in January 2012, D.C.’s individual service plan will be based on an annual Category Budget of $23,499.50 for the period of January 2012 to June 2012. In July 2012, D.C.’s budget is to be reduced to $18,799.60.
97. D.C.’s Supports Needs Matrix category assignment was based upon an SIS assessment performed in March 2010. This assessment did not accurately reflect D.C.’s actual needs. However, D.C.’s mother, Penny C., did not request that the assessment score be amended at that time for two reasons. First, she was not informed of her right to do so or of the deadline for doing so. Second, she had no way to know that this SIS score would be used to reduce D.C.’s budget over a year later.
98. Despite the March 2011 notice, D.C.’s mother met with his PBH care manager in April 2011 and submitted a Plan of care for the period May 1, 2011 through April 30, 2012 which included an annual base budget of $43,579.52. On April 21, 2011 PBH issued a decision which slightly modified but otherwise approved this plan of care.
99. D.C.’s mother was informed by her PBH care manager that she was required to sign a plan of care prior to July 1, 2011 that does not exceed these reduced budget limits. She was told that if she did not sign a reduced plan, all services would stop on July 1, 2011.
23 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 23 of 31

100. In May 2011, D.C.’s mother asked D.C.’s PBH care manager for a new SIS assessment. The care manager informed her that a new assessment would have no effect on D.C.’s services until 2013. On May 21, 2011, D.C.’s mother requested that PBH reconsider D.C.’s needs through the Intensive Review process.
101. On June 7, 2011, PBH faxed to D.C.’s mother the Intensive Review Committee’s decision denying her request for a higher budget. The decision contains no reason for the decision, no information about appeal rights, and no information about any other steps that could be taken to contest the PBH decision to reduce D.C.’s services.
102. On June 10, 2011, D.C.’s mother met with her care manager again and submitted a plan of care to PBH Utilization Management which requested PBH to approve continuation of D.C.’s services as approved in the April 2011 Plan of Care.
103. On June 22, PBH issued a notice of decision denying the June 10 plan of care. Further, the decision reduces D.C.’s in home skill building services to zero hours, approving only respite services for him. The decision states that the skills building service is denied as not medically necessary, even though D.C.’s needs have not changed since that service was approved by PBH for the plan year beginning May 2011. The decision makes no reference to the Supports Needs Matrix or SIS assessment as a basis for the termination of this service. The notice is incorrectly labeled a denial of an initial request for services and contains no information about D.C.’s right to continue receiving the terminated service pending appeal.
104. On June 30, 2011 D.C.’s mother again contacted his care manager, and was again informed that all services would end on July 1, 2011 unless she signed a new plan of care for reduced services for D.C. on that day. Under duress, she signed the plan, only so that PBH would not terminate respite services. However, above her signature she indicated the following:
24 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 24 of 31

“signed under protest because ISP plan does not meet D.C.’s needs and care coordinator has advised services will end after today if not signed.”
105. D.C.’s health, safety and development are threatened with irreparable harm if his services are not reinstated. Without the medically necessary services that have been eliminated by PBH’s actions, he is likely to regress and be at greater risk of institutionalization.
106. D.C.’s SIS score does not accurately reflect his needs. He therefore seeks the right to challenge his Supports Needs Matrix category through the fair hearing process.
107. D.C. was never provided notice or opportunity to challenge his SIS score or Supports Needs Matrix category through the fair hearing process.
CLASSWIDE ALLEGATIONS 108. PBH has terminated or reduced each of the Plaintiffs’ and class members’ Medicaidcovered services effective July 1, 2011 without due process. For each Plaintiff and class member, there was no way to meet the new assigned category and budget limit without reducing or eliminating some of the waiver participant’s medically necessary core services in the previously approved annual plan of care. 109. Notwithstanding these forced reductions, Plaintiffs and class members have not been provided with proper written notice or any right to a fair hearing to contest the category to which they were assigned. Moreover, PBH has not provided public information demonstrating ascertainable, non-arbitrary standards and procedures by which PBH has made the decisions upon which the reductions in services are based. 110. Defendant Cansler has failed to adequately supervise PBH in order to assure that PBH complies with federal law in implementing the Supports Needs Matrix system.
25 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 25 of 31

111. Defendant Cansler, through his agent PBH, has engaged in numerous practices that violate the Medicaid Act and the Due Process Clause of the U.S. Constitution. Defendants have denied, terminated, and reduced services to hundreds of Medicaid recipients under policies, practices and procedures in clear violation of the law.
112. Defendants have a policy, procedure and practice of instructing waiver participants and providers of waiver services about arbitrary and improper limits on the total cost of core services that may be requested. For example, PBH care managers have informed participants that the plan of care may not request more in services than the Supports Needs Matrix budget allows. Thus, Medicaid services are being denied, reduced, or terminated verbally by Defendants’ agent and employee without providing written notice or hearing rights to the recipient.
113. Defendants, through PBH staff, have engaged in a procedure and practice of discouraging requests for services and discouraging appeals of its decisions to reduce or terminate services by improperly threatening participants that all waiver services will end if the plan of care to reduce services is not signed, even though PBH previously authorized the service as medically necessary and the participant’s plan of care including those services has not expired.
114. Defendants have engaged in a procedure and practice of insisting or strongly encouraging that waiver participants not file requests for Intensive Review and not file a plan of care in excess of the Supports Needs Matrix budget maximum. Defendants thus have engaged in a practice of verbally denying, reducing, and terminating services without issuing a written notice and without permitting any appeal of the decision.
26 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 26 of 31

115. Defendants have engaged in a policy and practice of reducing or terminating services despite the absence of any material change in circumstances or medical improvement since the service was previously approved, without giving an adequate explanation for the change in its decision, even though the period for which services were previously authorized has not expired.
116. Defendants have engaged in a policy and practice of failing to make medical necessity decisions based on the individual facts of the case and controlling law but rather based upon unpromulgated, internal, arbitrary guidelines and procedures that are not readily ascertainable, including but not limited to the failure to publish ascertainable standards for Intensive Review process, and the failure to publish consistent, clear procedures for contesting PBH decisions.
117. Defendants have engaged in a policy and practice of failure to issue timely and adequate written notices when requests for services are denied, reduced or terminated.
118. Defendants have engaged in a policy and practice of failing to provide an adequate explanation of the reasons for their decision in the written notices to Medicaid recipients.
119. Defendants have engaged in a practice of issuing notices that improperly state that services are being initially denied when in fact services are being reduced or terminated and that do not indicate that the Medicaid recipient has a right to continued services pending appeal in that case.
120. After a recipient has appealed a decision by PBH to reduce or terminate services, Defendants have engaged in a policy and practice of failing to provide authorization, with reasonable promptness and for the entire period at issue, for the provider to continue to provide services to recipients pending the outcome of the appeal.
27 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 27 of 31

121. Defendants have engaged in arbitrary, secret procedures that deny, reduce, and terminate Medicaid services based on vague, inconsistent, subjective criteria that bear little, if any, relation to the degree of service and support needed by individual waiver participants.
122. Defendant Cansler and his designees have for each allegation herein specifically authorized the illegal policy, procedure or practice of PBH or repeatedly failed to adequately supervise PBH and to timely and effectively take corrective action to require PBH to obey the law.
FIRST CLAIM FOR RELIEF (Due Process: Lack of Ascertainable Non-Arbitrary Standards) 123. Plaintiffs incorporate and re-allege paragraphs 1 through 122 as if fully set forth herein. 124. In order to comply with due process, a State Medicaid program must use reasonable, ascertainable, non-arbitrary standards and procedures for determining eligibility for and the extent of medical assistance provided. 125. The Supports Needs Matrix system uses vague, subjective, arbitrary and secret criteria and procedures for allocating Medicaid funds amongst waiver participants. Defendants’ use of the Supports Needs Matrix system is therefore inconsistent with the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution.
SECOND CLAIM FOR RELIEF (Medicaid Notice and Hearing Requirements) 126. Plaintiffs incorporate and re-allege paragraphs 1 through 125 as if fully set forth herein.
28 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 28 of 31

127. States must provide for granting an opportunity for a hearing to individuals whose claim for medical assistance is denied, reduced, terminated, or not acted upon with reasonable promptness. 42 U.S.C. § 1396a(a)(3).
128. Defendants’ practices and procedures, alleged herein, violate the Medicaid Act by failing to grant an opportunity for a fair hearing to individuals whose claims for medical assistance have been denied, reduced, terminated, or not acted upon with reasonable promptness.
129. These violations, which have been repeated and knowing, entitle the Plaintiffs and plaintiffs’ class to relief under 42 U.S.C. § 1983 and 42 U.S.C. § 1396a(a)(3) of the Medicaid Act.
THIRD CLAIM FOR RELIEF (Fourteenth Amendment of the U.S. Constitution) 130. Plaintiffs incorporate and re-allege paragraphs 1 through 129 as if fully set forth herein. 131. The Due Process Clause of the Fourteenth Amendment prohibits states from denying, reducing, or terminating Medicaid services without due process of law. According to the U.S. Supreme Court in Goldberg v. Kelly, 397 U.S. 254 (1970), the Constitutional right to due process of law includes the right to meaningful notice prior to the termination of Medicaid benefits, continued benefits pending a pre-termination hearing, and a fair and impartial pre-termination hearing. Following the Court’s decision in Goldberg, these due process requirements were explicitly integrated into federal Medicaid regulations. See 42 CFR § 431.205(d). 132. Defendants have disregarded the requirements set forth in Goldberg by, among other things, failing to properly notify Innovations Waiver participants of their right to appeal and, in many cases, by actively discouraging Innovations Waiver participants from pursuing an appeal or requesting an Intensive Review.
29 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 29 of 31

133. Defendant’s practices and procedures, alleged herein, violate the Due Process clause of the Fourteenth Amendment to the U.S. Constitution by, among other things, denying the Plaintiffs and Plaintiff class adequate, timely notice and a meaningful opportunity for a fair hearing prior to reduction or termination of services previously authorized by Defendants.
134. These violations, which have been repeated and knowing, entitle the Plaintiff and plaintiff class to relief under 42 U.S.C. § 1983 and the Fourteenth Amendment to the United States Constitution.
RELIEF REQUESTED WHEREFORE, Plaintiffs respectfully request that the Court grant the following relief:
1. Certify this action as a class action pursuant to Fed. R. Civ. P. 23(b)(2). 2. Issue a declaratory judgment pursuant to 28 U.S.C. § 2201 and Fed. R. Civ. P. 57 that Defendants’ actions, policies, procedures and practices as alleged herein are in violation of the Medicaid Act and the Fourteenth Amendment of the U.S. Constitution. 3. Grant temporary, preliminary and permanent injunctions enjoining Defendants and their officers, agents, employees, attorneys, and all persons who are in active concert or participation with them from denying, reducing or terminating Medicaid services to plaintiffs and class members based upon the PBH Supports Needs Matrix system until after complying with the Medicaid Act and Due Process, and requiring Defendants to prospectively reinstate services that have been denied, reduced or terminated to plaintiffs and class members whose services are reduced, denied, or terminated by reason of the Supports Needs Matrix system until the violation of law alleged herein are corrected. 4. Waive the requirement for the posting of a bond as security for the entry of temporary and preliminary relief.
30 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 30 of 31

5. Retain jurisdiction over this action to insure Defendants’ compliance with the mandates

of the Court’s Orders.

6. Award the Plaintiffs the costs of this action and reasonable attorney’s fees pursuant to 42

U.S.C. § 1988.

7. Provide such other and further relief as the Court deems to be just and equitable.

Dated: July1, 2011

Respectfully submitted,

/s/ John R. Rittelmeyer

John R. Rittelmeyer john.rittelmeyer@disabilityrightsnc.org N.C. State Bar No. 17204 Jennifer L. Bills jennifer.bills@disabilityrightsnc.org N.C. State Bar No. 37467 DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244

/s/Douglas Stuart Sea Douglas Stuart Sea State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT 1431 Elizabeth Avenue Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org

/s/Jane Perkins Jane Perkins State Bar No. 9993 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org

ATTORNEYS FOR PLAINTIFFS

31 Case 5:11-cv-00354-FL Document 6 Filed 07/05/11 Page 31 of 31

 
 IN THE UNITED STATES DISTRICT COURT 
 FOR THE EASTERN DISTRICT OF NORTH CAROLINA 

WESTERN DIVISION 

NO.5:11-CV-354-FL 


L.S., a minor child, by and through his father

)

and next friend, Ron S.; K.C., a minor child, by )

and through his mother and next friend, Africa )

H.; ALLISON TAYLOR JOHNS; and D.C., a )

minor child, by his mother and next friend,

)

Penny C.;

)

)

Plaintiffs,

)

)

M.S., a minor child, through his parent and

)

natural guardian, Rachelle S.,

)

)

Intervenor Plaintiff,

)

)

v.

)

)

LANIER M. CANSLER, in his official capacity )

as Secretary of the Department of Health and

)

Human Services; PAMELA SHIPMAN, in her )

official capacity as Area Director of Piedmont )

Behavioral Health Care Area Mental Health,

)

Developmental Disabilities, and Substance

)

Abuse Authority; and PIEDMONT

)

BEHAVIORAL HEALTHCARE AREA

)

MENTALHEALTH,DEVELOPMENTAL

)

DISABILITIES AND SUBSTANCE ABUSE )

AUTHORITY doing business as PBH,

)

)

Defendants.

)

ORDER 


This matter comes before the court on class action complaint filed July 5, 2011, wherein plaintiffs K.C., D.C., and intervenor plaintiff M.S. ("moving plaintiffs") request temporary, preliminary, and permanent injunctive relief. Moving plaintiffs recently renewed motion for

temporary restraining order (DE # 70), with supporting affidavits and accompanying memorandum, to which defendants have responded in opposition. Reply now has been made. Interspersed among the filings in the case are those pertaining to plaintiffs' earlier filed motion to disqualifY certain defense counsel, referred to the magistrate judge, on which hearing will be undertaken tomorrow. Also pending is the motion for preliminary injunction, on which briefing has been stayed pending decision on the motion to disqualifY, together with motion to certifY the class, both of which were filed in August of this year. This order addresses the narrow issue of plaintiffs' entitlement to the restraints on defendants requested in that motion filed December 20, 2011.
BACKGROUND The moving plaintiffs seek to enjoin defendants from further reducing their Medicaid services effective January 1,2012, without first providing plaintiffs with notice and opportunity for a hearing to contest the service reductions. Moving plaintiffs contend that on or about January 1, 2012, defendants will impose additional reductions in necessary services for M.S., D.C., and K.C. Moving plaintiffs contend that defendants refused their requests to rescind the proposed reductions. 1 Moving plaintiffs contend they are suffering irreparable harm and are imminently threatened with immediate and severe additional irreparable harm unless the proposed reductions to their services are temporarily enjoined. Moving plaintiffs request a telephonic hearing to be held this week on the motion.
1 In their response, defendants argue that plaintiffs have been aware of the proposed January 2012 reductions since as early as spring 2011. In reply, plaintiffs argue that their efforts to get defendants to rescind the proposed 2012 cuts have been unsuccessful, and that plaintiffs believed the stay currently in place on briefing for the motion for preliminary injunction would have been lifted sooner.
2

COURT'S DISCUSSION 

To obtain such relief, plaintiffs must demonstrate that they are likely to succeed on the
merits, that they will likely suffer irreparable harm in the absence ofan injunction, that the balance
of equities tip in their favor, and that an injunction is in the public interest. See Winter v. Natural
Resources Defense Council, 555 U.S. 7, 129 S. Ct. 365, 374 (2008). Additionally, a court may issue
a temporary restraining order without notice to the opposing party only if:
(A) specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; and (B) the movant's attorney certifies in writing any efforts made to give notice and the reasons why it should not be required.
Fed. R. Civ. P. 65(b)(l).2
Plaintiffs have not satisfied the requirements ofWinter or Rule 65(b)(1) at this juncture. The
court cannot conclude that plaintiffs have demonstrated a likelihood of success on the merits, that
the balance of equities tips in their favor, or that a temporary injunction is in the public interest. It
appears plaintiffs are continuing to receive services, albeit with reduced budgets, and a generalized
fear that plaintiffs' conditions are "likely to regress" at these lower funding levels is insufficient by
itself to warrant the extraordinary relief sought.3 Accordingly, plaintiffs' renewed request for
2 For a defendant to have "notice," he or she must be given a fair opportunity to oppose the motion and prepare for such opposition. See Hoechst Diafoil Co. v. Nan Ya Plastics Com., 174 F.3d 411,422 (4th Cir. 1999) (citing Granny Goose Foods. Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70, 415 U.S. 423, 433 n.7 (1974)). Here, defendants did respond in filing entered onto the docket on December 21,2011. However, such filing was entitled the defendants' "initial" response, suggesting that defendants require more time to prepare a more lengthy response. The court also notes that defendants PBH and Shipman filed their answer on December 27, 2011, while defendant Cansler has received an extension of time to file answer until January 11,2012.
3 As with the prior motion for temporary restraining order, for plaintiffs to obtain temporary emergency injunctive relief, the court would have to assume that the deterioration plaintiffs predict would occur between now and the time by which defendants could respond to the motion for preliminary injunction. While plaintiffs' materials in support of the instant motion suggest that there has been some regression for some moving plaintiffs since prior reductions in services were made in spring and summer of 20 11, there is also discussion that at least some moving plaintiffs are generally doing well. (See. e.g., West Decl. ~ 12, Penny C. Decl. ~ 11, Stitt DecL ~ 8). Thus, the court is unwilling
3 


temporary injunctive relief is denied. CONCLUSION
For reasons given, moving plaintiffs' request for temporary restraining order (DE # 70) is DENIED. Preliminary injunctive relief, of course, remains available to plaintiffs, upon the proper showing. The stay currently in place promptly shall be lifted upon decision on the motion to disqualify counsel. Upon decision by the magistrate judge, the parties immediately shall confer (with benefit ofnew counsel, should defense counsel be disqualified), and determine three alternative dates of availability for conduct of administrative conference by telephone before the undersigned to discuss parameters of a briefing schedule on motions for preliminary injunction and class certification. Notice of said dates and times agreed to shall be provided by counsel to the case manager together with contact information for lead counsel. The court will endeavor to make itself available at one of the times proposed.
SO ORDERED, this the 28th day of December, 2011.
rx:~ ~.:£p~
~LANAGAN
United States District Judge
to make the assumption that denial ofthe instant motion will cause immediate, irreparable harm before the motion for preliminary injunction can be fully briefed and considered.
4

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:11-CV-354-FL

L.S., a minor child, by and through his father )

and next friend, Ron S.; K.C., a minor child, by )

and through his mother and next friend, Africa )

H.; ALLISON TAYLOR JONES; and D.C., a )

minor child, by his mother and next friend,

)

Penny C.,

)

)

Plaintiffs,

)

)

v.

)

)

LANIER M. CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services; PAMELA SHIPMAN, in her )

official capacity as Area Director of Piedmont )

Behavioral Health Care Area Mental Health,

)

Developmental Disabilities, and Substance

)

Abuse Authority; and PIEDMONT

)

BEHAVIORAL HEALTHCARE AREA

)

MENTAL HEALTH, DEVELOPMENTAL

)

DISABILITIES AND SUBSTANCE ABUSE )

AUTHORITY doing business as PBH,

)

)

Defendants.

)

ORDER

This matter came before the court on class acti on complaint filed July 5, 2011, wherein plaintiffs request temporary, preliminary, and permanent injunctive relief. Plaintiffs allege that defendant, in im plementing a new “Supports Needs Matrix” system for allocati ng funding for individuals with developm ental disabilities who would otherwise qualif y for services in an Intermediate Care Facility for the Mentally Retarded, have violated their rights under the Medicaid Act and the Due Process Clause of the Fourteenth Amendment. Plaintiffs allege that application of

Case 5:11-cv-00354-FL Document 19 Filed 07/12/11 Page 1 of 3

the Supports Needs Matrix reduces or terminates Medicaid services, and that plaintiffs have been denied adequate written notice, an opportunity for afair hearing to contest the reduction in services or to appeal their assignm ent to particular level of ser vice, and the ability to continue receiving services at the prior authorized level pending the ouctome of such hearing. Plaintiffs seek to enjoin defendants from denying, reducing orterminating Medicaid services to plaintiffs and putative class members based upon the “Supports Needs Matrix” system , and to require def endants to prospectively reinstate services that have been denied, reduced or terminated to plaintiffs and class members whose services are reduced, denied, or terminated by reason of that system.
Although no formal motion rises to the face of the docket, the court has cause to consider plaintiffs’ request for temporary injunctive relief lodged in the complaint. To obtain such relief, plaintiffs must demonstrate that they are likely to succeed on the merits, that they will likely suffer irreparable harm in the absence of an injunction, that the balance of equities tip in their favor, and that an injunction is in the public interest. See Winter v. Natural Resources Defense Council, 555 U.S. 7, 129 S. Ct. 365, 374 (2008). Additionally, a court may issue a temporary restraining order without notice to the opposing party only if:
(A) specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; and (B) the movant’s attorney certifies in writing any efforts made to give notice and the reasons why it should not be required. Fed. R. Civ. P. 65(b)(1).1
1 For a defendant to have “notice,” he or she must be given a fair opportunity to oppose the motion and prepare for such opposition. SeeHoechst Diafoil Co. v. Nan Ya Plastics Corp,.174 F.3d 411, 422 (4th Cir. 1999) (citing Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70 , 415 U.S. 423, 433 n.7 (1974)). Here, where the parties have consented to allow defendant Lnaier M. Cansler additional time to respond to the complaint, on the grounds that counsel needs an additional thirty (30) daysto prepare an answer or other appropriate response, and where no separate motion for temporary injunctive relief has been lodged on the docket, the court concludes that there has been no fair opportunity to prepare an opposition to plaintiffs’ request.
2
Case 5:11-cv-00354-FL Document 19 Filed 07/12/11 Page 2 of 3

Plaintiffs have not satisfied the requirem ents of Winter or Rule 65(b)(1) at this juncture. From a procedural standpoint, they have not submitted a verified complaint or affidavit showing immediate and irreparable injury, loss, or damage, and there has been no certification by plaintiffs’ counsel of any efforts to give notice to defendants and why it should not be required. Nor, on the facts before it, is the court ableto conclude that plaintiffs have demonstrated a likelihood of success on the merits, that the balance of equities tip in their favor, or that a temporary injunction is in the public interest. It appears from the complaint that all plaintiffs are continuing to receive services, albeit with reduced budgets, and a generalized fear that plaintiffs’ conditions are “likely to regress” at these lower f unding levels is insuf ficient by itself to warrant the extraordinary relief sought.2 Accordingly, plaintiffs’ request for temporary injunctive relief is DENIED.
Preliminary injunctive relief is still available to plaintiffs upon motion properly supported and notice to defendants. The parties are encour aged to confer and propose alternative dates for conference by telephone with the court im mediately after response is m ade to the com plaint by defendants. At conference, the court will discuss the case schedule and briefing on the anticipated motion for preliminary injunction.
SO ORDERED, this the 12th day of July, 2011.
_____________________________ LOUISE W. FLANAGAN Chief United States District Judge
2 For plaintiffs to obtain tem porary emergency injunctive relief, the court would have to assum e that this deterioration would occur between now and the time by which defendants could respond to the complaint and a properly served motion for a preliminary injunction. This unsupported assumption is not one the court is willing to make.
3
Case 5:11-cv-00354-FL Document 19 Filed 07/12/11 Page 3 of 3

 
 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION Case No. 5:11-cv-354

K.C., et al., individually and on behalf of )

all others similarly situated,

)

)

Plaintiffs,

)

)

v.

)

)

LANIER CANSLER, in his official

)

capacity as Secretary of the Department )

of Health and Human Services, et al.,

)

)

Defendants.

)

____________________________________)

MEMORANDUM IN SUPPORT OF PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION The named Plaintiffs have moved the Court to certify this case a class action pursuant to Fed. R. Civ. P. Rules 23(a) and (b)(2). The class should be defined as: All current or future participants in the N.C. Innovations Waiver, as it is currently or subsequently named, whose Medicaid services have been or will be denied, reduced, or terminated by Defendant Secretary of the North Carolina Department of Health and Human Services, Defendant PBH, or any of their employees, contractors, agents or assigns through the implementation of the Supports Intensities Scale or Supports Needs Matrix. Undersigned counsel have also moved the Court to appoint them as class counsel pursuant to Fed. R. Civ. P. Rule 23(g).
Background The class is composed of Medicaid recipients who have disabilities significant enough to qualify them for institutional placement in an intermediate care facility for the developmentally or intellectually disabled. These disabilities include cerebral palsy, seizure

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disorders, intellectual disabilities (sometimes referred to as cognitive disabilities or mental retardation), and autism.
Plaintiffs and the members of the class have been receiving health care services and supports in the community through the N.C. Innovations Waiver. This waiver, obtained by the N.C. Department of Health and Human Services (DHHS) and administered for DHHS by PBH, covers home and community based services for individuals whose disabilities qualify them for care in an intermediate care facility.
Prior to July 1, 2011, Defendants determined that Plaintiffs‟ services were medically necessary and authorized Medicaid coverage of their services for a one-year period, to be reviewed annually. Some time prior to July 1, 2011, however, PBH employees began to use a tool, called the Supports Intensity Scale (SIS), to assign a score to waiver participants based on an assessment of their medical and behavioral needs and daily activities. As demonstrated in the evidence filed with Plaintiffs‟ Motion for Preliminary Injunction, the named Plaintiffs and class members were not informed of the importance of the SIS or of the limited time period within which they could challenge the score. See Class Action Compl. ¶¶ 3, 50-51, 73, 81, 92, 97, 108-122; Mem. of Law in Supp. of Mot. for Prelim. Inj. at 7. PBH describes use of the SIS for children as a “test” in the “research phase” that has “not yet been normed or finalized.” Sea Aff. in Supp. of Mot for Prelim Inj. Ex. T (hereinafter Sea Aff. 1); Dec. of Penny C., Ex. M .1
Based on the SIS score, PBH employees categorized waiver participants using a new “Supports Needs Matrix” system. In late March 2011, PBH mailed an undated notice and brochure to class members telling them that application of the Supports Needs Matrix 1 All affidavits and declarations not otherwise specified are those filed with Plaintiffs‟ Motion for Preliminary Injunction on August 24, 2011 (D.E. 31).
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required their Medicaid services to be reduced. The notice did not include an individualized explanation of how or why the SIS/SNM processes caused their services to change; information about how to file a grievance or appeal to contest the scoring accuracy, category assignment, budget limit, or service reduction; or any explanation of the right to continued benefits at the previously authorized level pending the outcome of a fair hearing. Class Action Compl., ¶¶ 1-8. 52-62, 69-70, 75-76, 54, 95, 108-122; Mem. in Supp. of Mot. for Prelim. Inj. at 8-9.
The Complaint alleges that the policies and practices Defendants use to deny, reduce or terminate Medicaid home and community based services violate Plaintiffs‟ and class members‟ rights under the Medicaid Act, 42 U.S.C. § 1396a(a)(3), and the Due Process Clause of the Fourteenth Amendment. Class Action Compl. ¶¶ 123-34. The only relief sought is declaratory and injunctive relief. See Id. Relief Requested.
ARGUMENT The party seeking class certification bears the burden of proof. In re Panacryl Sutures Prod. Liab. Cases, 263 F.R.D. 312, 318 (E.D.N.C. Nov. 13, 2009). As the moving party, the Plaintiffs must satisfy the four provisions of Rule 23(a) and one subdivision of Rule 23(b). See, e.g., Lukenas v. Bryce’s Mountain Resort, Inc., 538 F.2d 594, 595 n.2 (4th Cir. 1976). Rule 23 is to be interpreted flexibly and given a “liberal rather than a restrictive construction.” In re A.H. Robins Co., Inc., 880 F.2d 709, 740 (4th Cir. 1989), abrogated on other grounds, Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997). A. Rule 23(a)(1): Numerosity Rule 23(a)(1) requires the class to be so numerous that joinder of all parties is impracticable. “No specified number is needed to maintain a class action.” Brady v. Thurston
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Motor Lines, 726 F.2d 136, 145 (4th Cir. 1984). For example, classes of 18 and 74 persons have been found to satisfy the requirement. See Id. (class of 74 persons is “well within the range appropriate for class certification”); Cypress v. Newport News Gen. & Nonsectarian Hosp. Ass’n, 375 F.2d 648, 653 (4th Cir. 1967) (class of 18 members); see also Rodger v. Elec. Data Sys., 160 F.R.D. 532, 535-36 (E.D. N.C. 1995) (certifying class of at least 57 individuals and citing In Re Kirschner Med. Corp. Sec. Litig., 139 F.R.D. 74, 78 (D. Md. 1991), as holding that a class of as few as 25-30 members raises a presumption that joinder would be impracticable). Moreover, where, as here, the only relief sought for the class is injunctive and declaratory in nature, “even speculative and conclusory representations as to the size of the class suffice as to the requirement of many.” Doe v. Charleston Area Med. Ctr., Inc., 529 F.2d 638, 645 (4th Cir. 1975).
Moreover, the impracticality requirement of Rule 23 does not focus solely on a numerical test. See Ballard v. Blue Shield of S. W. Va., 543 F.2d 1075, 1080 (4th Cir. 1976). Relevant considerations of impracticality include geographic dispersion of class members, limited financial resources of class members, and the negative impact on judicial economy if individual suits are required. See, e.g., Rodger, 160 F.R.D. at 536 (citation omitted).
Here, the number of class members easily meets the test for impracticality. According to Defendant PBH, as of April 18, 2011, there were approximately 675 people with disabilities enrolled in the NC Innovations Waiver, and PBH had implemented new budget limits using the Support Needs Matrix procedures for all of them. See Sea Aff. 1, Ex. D (Mem. from Steve Tomlinson, Director of PBH Network Operations, to PBH Network Providers of IDD). PBH admits that it reduced the services of about 25 percent of these
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persons—approximately 169 persons. See Sea Aff. 1, Ex L, p. 2. Thus, the class is composed of at least 169 persons.
In addition to having numerous class members, other factors evidence the impracticality of joinder of all parties in this case. The Medicaid beneficiaries whose services are being terminated and reduced using the notices and procedures at issue are geographically dispersed throughout PBH‟s catchment area, currently consisting of Stanly, Cabarrus, Rowan, Davidson, and Union counties in North Carolina. See Sea Aff. 1, Ex. C (Contract Between N.C. Dep‟t of Health & Human Services Div. of Med. Assistance and PBH, § 2 Contract #2011-301). The class consists of individuals who qualify for Medicaid because they have disabling conditions and their financial resources are insufficient to meet their subsistence and health care needs—individuals who, almost by definition, lack the financial means to hire an attorney and pursue individual legal actions. See Carr v. WilsonCoker, 203 F.R.D. 66, 73 (D. Conn. 2001) (citation omitted) (finding joinder impractical when “many of the class members … by reason of ignorance, poverty, illness, or lack of counsel, may not … [be] in a position to seek [a hearing] on their behalf” or obtain information concerning their rights). Certification of this case as a class action will also ensure judicial economy by assuring that the Defendants are not subjected to various rulings by differing courts in instances where recipients would be able to file individual legal actions.
Finally, the named plaintiffs seek to represent future Medicaid recipients, another factor that supports numerosity. See 1 Newberg on Class Actions § 3:17 at 265 (4th ed. 2002). See also, e.g., Weaver v. Reagen, 701 F. Supp. 717, 721 (W.D. Mo. 1988) (finding numerosity satisfied in a Medicaid case because class included future members); Bruce v.
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Christian, 113 F.R.D. 554, 557 (S.D.N.Y. 1986) (finding impracticality where class included individuals who would be affected in the future, and fluid nature of the class meant identity of individuals would change even as harm and basic parameters of the group affected would remain constant). In addition to future Medicaid beneficiaries in the current five county catchment area, the Defendants will soon expand the catchment areas served by PBH and subject to the procedures challenged herein to the following additional counties: Alamance and Caswell Counties, effective October 1, 2011; Vance, Granville, Franklin, Halifax, and Warren Counties, effective January 1, 2012; and Orange, Person, and Chatham Counties, effective April 1, 2012. See PBH Admin. Communication Bulletin, FY 1112 AA 01, to PBH Network Providers (July 22, 2011) (attached as Ex. D to Sea Aff. in Supp. of Mot. to Disqualify (hereinafter Sea Aff. 2)).
Joinder of all members is impracticable due to the class size, its geographic dispersion, and the fluidity of the class composition. Rule 23(a)(1) is met.
B. Rule 23(a)(2): Commonality Rule 23(a)(2), the “commonality” factor, requires there to be a common thread among all class members, namely “questions of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). The requirement can be satisfied by the existence of even a single common question of law or fact. Wal–Mart Stores, Inc., v. Dukes, 131 S.Ct. 2541, 2556 (2011); see also 1 Newberg on Class Actions, § 3.10 (3d ed. 1992). The commonality factor has been “liberally construed,” and courts have given it a “permissive application so that common questions have been found to exist in a wide range of contexts.” Rodger, 160 F.R.D. at 537 (citation omitted). Moreover, the Rule “does not require that all, or even most issues be common, nor that common issues predominate, but
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only that common issues exist.” Beaulieu v. EQ Indus. Servs., No. 5:06-cv-00400-BR, 2009 WL 2208131, at *11 (E.D. N.C. July 22, 2009) (quoting Central Wesleyan College v. W.R. Grace & Co., 143 F.R.D. 628, 636 (D. S.C.1992)) (Att. A to Mot. for Class Certification).
Nevertheless, highly generalized allegations will not do. The Supreme Court has clarified that, to satisfy this factor, the plaintiff must “demonstrate that the class members „have suffered the same injury,‟” Wal–Mart Stores, 131 S.Ct. at 2551 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U .S. 147, 156 (1982)), and that the claim “depend[s] upon a common contention” that “is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Id. at 2545; cf. Martin v. State Farm Mut. Auto. Ins. Co., No. 3:10-0144, 2011 WL 3667456, at *3 (S.D. W. Va. Aug. 22, 2011) (Att. B to Mot. for Class Certification) (citing Wal-Mart and stating “Nevertheless, the Court is to give Rule 23 a liberal, rather than a restrictive, construction and apply a standard of flexibility that will “best serve the ends of justice for the affected parties and ... promote judicial efficiency.” (quoting Gunnells v. Healthplan Servs., Inc ., 348 F.3d 417, 424 (4th Cir.2003)).
Significantly, when “the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action,” the commonality requirement has been described as “easily met.” 1 Newberg on Class Actions, § 3.10 (3d ed. 1992). And, the Supreme Court has stated:
Class relief is “particularly appropriate” when the “issues involved are common to the class as a whole” and when they “turn on questions of law applicable in the same manner to each member of the class.” [cite omitted] For in such cases, the class action device saves the resources of both the courts and the parties by permitting an issue potentially affecting every [class member] to be litigated in an economical fashion under Rule 23. Falcon, 457 U.S. at 155 (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)).
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The common factual contentions in this case include the following: All of the approximately class members live in or will live in PBH catchment areas and have been found or will be found eligible for and receiving Medicaid home and community based services through the DHHS N.C. Innovations Waiver administered by PBH. Class Action Compl. ¶¶ 24-31. Prior to July 1, 2011, the Defendants authorized coverage of the services contained in each class member‟s plan of care as necessary for that individual. The Defendants authorized the coverage for a one-year period, to be reviewed annually unless the individual‟s condition changed. See Mem. in Supp. of Mot. for Prelim Inj. at 6; Sea Aff. 1, Ex. B App. D-2, F-1, F-2, Att. 1:7, Ex. C at 70-75, Ex. P at 12, 46, 48; see also Dec. of Penny C. ¶ 18 and Ex. K; Dec. of Patricia Holzlohner ¶ 8; Dec. of Paul Peters ¶ 5; but see PBH Waiver Alert (Aug. 2011) (attached to Sea Aff. in Supp. of Class Certification (hereinafter Sea Aff. 3) (purporting to implement a six-month authorization period effective July 1, 2011 for individuals who are being “transitioned” to lower budget limits).
Prior to March 2011, PBH assessed each class member‟s needs using a Supports Intensity Scale (SIS). The class members received a similarly formatted letter from PBH that provided a summary of the SIS score. The notice did not explain the SIS scoring system, why the score was important, how to request a review of the SIS score, or the deadline for doing so. See Dec. of Africa Heath, Ex. A; Dec. of Linda Johns, Ex. A.; Dec. of Ron S, Exs. A, E; Penny C. Dec., Ex. B; Holzlohner Dec. Ex. A; Dec. of Melissa W, Ex. C. PBH used the SIS score, along with the person‟s age and living arrangements, to categorize each class member into a Support Needs Matrix and calculate a budget limit for their waiver services. See Sea Aff. 1, Exs. E, G. In late March 2011, PBH sent class members a similarly formatted notice and brochure informing them that application of the Supports Needs Matrix had resulted in a
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new budget limit on their services and that their services would be reduced or terminated to come within the budget limit. The notice did not adequately explain the basis for the action, contain information on how to appeal the decision, provide deadlines for filing grievances or appeals, or explain how to continue benefits pending appeal. The notice did not explain that individuals who disagreed with the budget limit could request a review by PBH‟s Intensive Review Committee (which can decide to allow additional services for up to seven percent of participants whom it finds to be “outliers”). See Mem. in Supp. of Mot. for Prelim. Inj. at 89; Health Dec., Ex. G; Ron S. Dec., Ex. F; Penny C. Dec., Ex. G; Holzlohner Dec. ¶¶ 12-14 and Ex B; Melissa W. Dec. ¶¶ 8-15, Ex. A; see also Dec. of Paul Peters ¶¶ 9-17 (describing PBH‟s common application of Supports Needs Matrix reviews, inadequate written notices of action, and lack of appeal rights for his patients enrolled in the N.C. Innovations Waiver). Class members were discouraged by PBH employees from challenging the service reductions. See Class Action Compl. ¶¶ 24-31 112-114; Heath Dec. ¶¶ 20, 24; Johns Dec. ¶¶ 20, 24; Ron S. Dec. ¶¶ 16-17, 31; Penny C. Dec. ¶ 31; Melissa W. Dec. ¶ 17-18; Peters Dec. ¶ 14.
To be sure, there are some factual differences from one class member to the next. However, Rule 23(a)(2) does not require facts to be identical. Moreover, “[f]actual differences among the class members‟ cases do not violate the rule, so long as a common legal theory is shared.” Woodward v. Online Info. Servs., 191 F.R.D. 502, 505 (E.D. N.C. 2000) (citing Brown v. Eckerd Drugs, Inc., 663 F.2d 1268, 1275 (4th Cir. 1981)). See also Dajour B. v. City of N.Y. & Novello, No. 00 Civ. 2044 (JGK), 2001 WL 1173504, at *5 (S.D. N.Y. Oct. 3, 2001) (Att. C to Mot. for Class Certification) (finding commonality where “entire controversy turns on common question of law,” whether the defendants are required
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under the Medicaid Act to provide for services as the plaintiffs allege). Here, there are at least three legal questions common to the class:
(1) Whether the Defendants provided the class members with an adequate pretermination notice and opportunity for a fair and impartial pre-termination hearing prior to reducing or eliminating their services, as required by the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution;
(2) Whether the Defendants provided the class members with an adequate pretermination notice and opportunity for a fair and impartial pre-termination hearing prior to reducing or eliminating their services, as required by the Medicaid Act, 42 U.S.C. § 1396a(a)(3).
(3) Whether the Defendants violated the Due Process Clause of the Fourteenth Amendment of the U.S. Constitution by using standards and procedures for determining eligibility for and extent of medical assistance that were unascertainable and arbitrary.
In Hernandez v. Medows, 209 F.R.D. 665 (S.D. Fla. 2002), a case with due process claims similar to those here, the plaintiffs challenged practices being used by the Florida Medicaid agency and its agents. The court found common questions of fact that included whether the “Defendant has failed to ensure that Plaintiffs receive adequate notice and the opportunity for a fair hearing when their prescription drug coverage is denied, delayed, terminated, or reduced” and whether the “Defendant has failed to ensure Plaintiffs the opportunity to pursue pretermination hearings when their prescription drug coverage is reduced or terminated.” Id. at 669. Hernandez found common questions of law that included whether the “the Defendant has violated the federal Medicaid Act and procedural due process
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under the Fourteenth Amendment to the United States Constitution by failing to ensure that Plaintiffs receive adequate notice and hearing rights when their prescription drug coverage is denied, delayed, terminated, or reduced” and whether the Defendant “has violated the federal Medicaid Act and procedural due process under the Fourteenth Amendment to the United States Constitution by failing to ensure Plaintiffs the opportunity to pursue pretermination hearings when their prescription drug coverage is reduced or terminated.” Id. This Court should apply the reasoning of Hernandez and certify this class as requested by the Plaintiffs. See also, e.g., Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir.1997) (finding commonality and typicality requirements satisfied where each class member‟s claim arose from the same course of events, and each class member was making essentially the same legal and factual arguments to prove the government official‟s liability); Carr, 203 F.R.D. at 73 (finding commonality, noting that “while there is variation in the specifics of their individual circumstances, the [Medicaid] plaintiffs do not allege that they have suffered isolated difficulties, but rather, that they face systemic barriers”); Susan J. v. Riley, 254 F.R.D. 439, 460-61 (M.D. Ala. 2008) (finding commonality and typicality where class of disabled persons receiving Medicaid benefits were adjudged ineligible and/or denied services without notice and opportunity for hearing).
Finally, “proposed class actions seeking injunctive and declaratory relief, … „by their very nature‟ present common questions of law and fact.” Disability Rights Council of Greater Washington v. Washington Metro. Area Transit Auth., 239 F.R.D. 9, 26 (D.D.C. 2007) (quoting 7A Charles A. Wright et al., Federal Practice and Procedure § 1763, at 176 (3d ed. 2005 & Supp. 2010)). In this case, the Class Action Complaint seeks uniform
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declaratory and injunctive relief for all class members, thus evidencing the commonality of the legal claims. See Class Action Compl. ¶¶ 123-134.
In sum, the class members bring common experiences and contentions to the Court, along with identical legal claims and requests for relief. The class satisfies the commonality requirement of Rule 23(a)(2), and the Court‟s determination of the truth or falsity of their contentions will resolve their claims “in one stroke.” Wal-Mart, 131 U.S. at 2545.
C. Rule 23(a)(3): Typicality Rule 23(a)(3), the “typicality” factor, says the claims or defenses of the representative parties must be typical of the claims or defenses of the class. Fed. R. Civ. P. 23(a)(3). “Typicality does not mean identicalness.” Woodward, 191 F.R.D. at 505. Rather, this test requires a relationship between the plaintiff‟s claims and those of the class. A plaintiff‟s claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members, and if his or her claims are based on the same legal theory. When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is usually met irrespective of varying fact patterns, which underlie individual claims. 1 Newberg on Class Actions, § 3.13 (3d ed. 1992) (footnotes omitted). “In government benefit class actions, the typicality requirement is generally satisfied when the representative plaintiff is subject to the same statute, regulation, or policy as class members.” Carr, 203 F.R.D. at 75 (quoting Newberg); Rodger, 160 F.R.D. at 538 (stating that courts “will generally look to the defendant‟s alleged conduct and the legal theory advanced by the plaintiff to determine whether certification is appropriate.… A court may determine that the typicality requirement is satisfied even when the plaintiffs‟ claims and the claims of the class members are not identical.”) (citation omitted).
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The typicality requirement is satisfied here. The named Plaintiffs‟ claims arise from the same legal theories as the claims of the class, namely whether the Defendants improperly terminated or reduced their Medicaid coverage pursuant to policies and practices in violation of the due process requirements of constitutional and federal Medicaid law. See Class Action Compl. ¶¶ 108-134 (describing legal claims). The named Plaintiffs‟ factual allegations are also typical of and arise from the same practices challenged on behalf of the class. Id. at ¶¶ 63-107.
Like the class members, all of the named plaintiffs are individuals living in PBH catchment areas who are receiving home and community based services through a DHHS Medicaid waiver program administered by PBH. See Dec. of Africa Heath ¶¶ 1, 8 (stating Plaintiff K.C. resides in Union County, North Carolina and receives Medicaid services through the N.C Innovations Waiver administered by PBH); Dec. of Linda Johns ¶ 1, 6 (stating Plaintiff Allison Taylor Johns resides in Union County, N.C. and receives Medicaid services through the N.C. Innovations Waiver); Ron S. Dec. ¶¶ 1, 8 (stating Plaintiff L.C. resides in Cabarrus County, N.C. and receives Medicaid services through N.C Innovations Waiver); Penny C Dec. ¶¶ 2, 15 (stating Plaintiff K.C. resides in Indian Trail, N.C. and receives Medicaid services through NC Innovations Waiver); Holzlohner Dec. ¶ 3, 6 (stating she is legal guardian of class member Kimberly Beare, a Medicaid recipient living in Marshville, N.C. who receives Medicaid services through the N.C. Innovations Waiver); Dec. of Melissa W. ¶¶ 1-2, 9 (stating she is legal guardian of class member F.A., a Medicaid recipient living in Davidson County, N.C. who receives Medicaid services through the N.C. Innovations Waiver).
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Some time prior to March 2011, PBH assessed each named Plaintiff‟s needs using the Supports Intensity Scale. The Plaintiffs received a notice from PBH that provided a summary of the SIS score. The notice did not explain the SIS scoring system, why the SIS score was important, how to request a review of the SIS score, or the deadline for doing so. See Heath Dec. Ex. A, ¶¶ 9, 25; Johns Dec. Ex. A, ¶¶ 10-11; Ron S Dec. Ex. A, ¶¶ 18-23 (explaining confusion with SIS process); Penny C Dec. Ex. B, ¶¶ 20-23 (describing confusion of receiving SIS score, the lack of information about the importance of the score and ability to amend it so that “[e]ven if I had otherwise learned that I could contest the assessment scores, I had no way of knowing why contesting the scores was important”).
In fact, the SIS score was important because PBH used it in March 2011 to decide where to place waiver participants in its Supports Needs Matrix. In late March 2011, PBH sent each named Plaintiff an undated letter informing them that PBH‟s application of the Supports Needs Matrix system had resulted in a new budget limit on services and that, beginning July 1, 2011, their services would be reduced or terminated to come within the budget limit. The notice did not adequately explain the basis for the action, contain information on how to appeal the action, provide deadlines for filing a grievance or appeal, or explain how to receive continued benefits pending appeal. The notice did not explain that individuals who disagreed with the budget limit could request a review by PBH‟s Intensive Review Committee (which can decide to allow additional services for up to seven percent of participants whom it finds to be “outliers”). See Johns Dec. ¶¶ 12-16, Ex. D; Heath Dec. ¶¶ 12-15, 17, 24, Ex. G; id. at ¶ 25 (“I did not, and still have not, received any explanation about the criteria PBH used to assign K.C. to a specific category and budget.”); Ron S Dec. ¶¶ 915, Ex. F; Penny C Dec. ¶¶ 28, 30, Ex. G; see also Id. at ¶¶ 39, 41 (describing additional
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confusion and inadequate notices of PBH‟s Intensive Review response); see Sea Aff.1 Ex. F p. 11.
Creating further confusion regarding their due process rights, each named Plaintiff was similarly discouraged by PBH‟s employees from challenging their service reductions. See Heath Dec. ¶¶ 20, 35; Johns Dec. ¶¶ 17-18, 20, 28-38; Ron C. Dec. ¶ 16, 24 (PBH case manager stated she was “no longer an advocate for L.S.‟s behalf” and her role was to “make sure that „parents don‟t trump up their child‟s condition‟”); Penny C. Dec. ¶¶ 31, 35 (stating that PBH Care Coordinator “informed me repeatedly” that neither D.C.‟s SIS nor his SNM could be appealed” and “[o]nly after we repeatedly and forcefully continued to object” were we told for the first time that we could request an „Intensive Review‟”).
In sum, the named Plaintiff and class members received similarly formatted notices from Defendant PBH which provided incomplete explanations of the reasons and basis for the Defendants‟ actions, include no information regarding how to file a grievances or appeals, did not explain deadlines for filing grievances or appeals, and did not explain the individual‟s rights to continued benefits pending an appeal. Rule 23(a)(3) has been met.
D. Rules 23(a)(4) and 23(g): Adequacy of Representation The final prong of Rule 23(a) requires the Court to find that the “representative parties will fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). The Fourth Circuit looks for two separate requirements: named plaintiffs whose interests are not antagonistic to the class and adequate counsel. See Woodward, 191 F.R. D. at 506 (citations omitted). The named Plaintiffs do not have interests antagonistic to the class as a whole. The individual plaintiffs have sworn to “fairly and adequately represent the interests of all class
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members” and to “zealously prosecute this lawsuit” so as to obtain the requested relief for all class members and not just themselves or their children. See Heath Dec. ¶¶ 36-38; Johns Dec. ¶¶ 47-49; Ron S. Dec. ¶¶ 39-41; Penny C. Dec. ¶¶ 52-54. The named plaintiffs have also sworn that they know of “no conflict” between the named plaintiff and the interests of the class as a whole. See Heath Dec. ¶ 39; Johns Dec. ¶ 50; Ron S. Dec. ¶ 42; Penny C. Dec. ¶ 55. The requested relief further evidences the lack of conflict between the named Plaintiffs and the unnamed class members: All of the claims in the case involve the same policies and course of conduct by the Defendants, and the case seeks the same prospective injunctive and declaratory relief. See Class Action Compl., Prayer for Relief. Each class representative wants all class members to receive the due process to which each of North Carolina‟s Medicaid-eligible individuals are entitled and to have their previously authorized and Medicaid-covered services reinstated to pre-July 2011 levels pending Defendants‟ compliance with the due process requirements.
Furthermore, Disability Rights North Carolina, Legal Services of the Southern Piedmont, and the National Health Law Program will adequately represent the interests of the class members. Counsel is “qualified, experienced, and able to vigorously conduct the proposed litigation.” See 1 Newberg on Class Actions, § 3.22 (3d ed. 1992). Plaintiffs‟ counsel are working steadily and competently to investigate and identify the claims in this case. The law firms representing the Plaintiffs have each committed the necessary resources to adequately represent the class. The attorneys from each of these firms are experienced in prosecuting class action litigation on behalf of Medicaid recipients. See generally Dec. of John Rittelmeyer (Att. D to Mot. for Class Certification); Dec. of Jennifer Bills (Att. E to Mot. for Class Certification), Aff. of Doug Sea in Supp. of Class Certification (Att. F to Mot.
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for Class Certification) (hereinafter Sea Aff. 3); Dec. of Jane Perkins (Att. G to Mot. for Class Certification). Lead counsel is Disability Rights North Carolina (DRNC), through John Rittelmeyer. Mr. Rittelmeyer has practiced law in North Carolina since 1990 and is currently the Litigation Director of DRNC. See Rittelmeyer Dec.¶¶ 2, 4. In addition to disability law, Mr. Rittelmeyer has extensive experience in general civil and consumer class action litigation. Id. at ¶ 3. Jennifer Bills, another DRNC attorney, is representing the Plaintiffs. See Bills Dec. ¶¶ 1, 4. Ms. Bills has been practicing law for over eight years, focusing on disability, civil rights, and constitutional law. Id. at ¶¶ 3-4. Legal Services of the Southern Piedmont, through Douglas Stuart Sea, is also representing the class. Mr. Sea has practiced law for over 30 years, focusing primarily on Medicaid, other public benefits, and complex litigation. Sea Aff. 3. ¶¶ 2-3. He has participated in at least 12 federal and state class action cases against government agencies, most of them as lead counsel. Id. at ¶ 3. Mr. Sea has been a speaker for at least 40 continuing legal education events on issues of Medicaid or complex litigation. Id. Finally, the National Health Law Program, through Jane Perkins, is serving as class counsel. Perkins Dec. ¶ 2. Ms. Perkins has participated in more than 35 complex and/or class action cases in the federal district and circuit courts of appeals, spoken at well over 200 continuing legal education events on Medicaid and federal court procedure, and published more than 50 articles on Medicaid, health law, and federal court access. Id. at ¶ 6. The requirements of Rule 23(a)(4) and Rule 23(g) are met.
5. Rule 23(b)(2) This lawsuit squarely meets the Rule 23(b)(2) requirement that “the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to
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the class as a whole….” Fed. R. Civ. P. 23(b)(2). Indeed, Rule 23(b)(2) class actions were designed specifically this type of case—“civil rights cases seeking broad declaratory or injunctive relief for a numerous and often unascertainable or amorphous class of persons….” 1 Newberg on Class Actions, § 4.11 (3d ed. 1992) (footnotes omitted).
As discussed previously, Defendants‟ illegal policies and practices concerning the termination or reduction of services to people with disabilities is affecting hundreds of similarly situated Medicaid recipients in the Piedmont region. The Defendants‟ actions have equal application to all class members, as current or future recipients of Medicaid. Plaintiffs ask the Court to enter final injunctive and declaratory relief with respect to the class as a whole. Because the Defendants‟ actions and inactions have affected all the class members in the same or very similar ways, this action should be certified pursuant to Rule 23(b)(2). See Gratz v. Bollinger, 539 U.S. 244, 267-68 (2003) (affirming (b)(2) class certification and noting that certification saved resources of both the court and the parties); Carr, 203 F.R.D. at 75 (certifying (b)(2) class because Medicaid plaintiffs sued the commissioner of the single state agency charged with administering Medicaid services and continuance of the commissioner‟s policies might require injunctive relief).
CONCLUSION For the reasons stated above, the Plaintiffs ask the Court to certify this case as a class action pursuant to Fed. R. Civ. P. 23(a) and 23(b)(2) and, pursuant to Rule 23(g), to appoint the following law firms to represent the class: Disability Rights North Carolina, Legal Services of Southern Piedmont, and National Health Law Program. //
18
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Dated: August 29, 2011

Respectfully submitted,
ATTORNEYS FOR PLAINTIFFS
/s/ John R. Rittelmeyer_____ John R. Rittelmeyer N.C. State Bar No. 17204 Jennifer L. Bills N.C. State Bar No. 37467 DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244 john.rittelmeyer@disabilityrightsnc.org jennifer.bills@disabilityrightsnc.org
/s/ Douglas S. Sea_____ Douglas Stuart Sea State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT, INC. 1431 Elizabeth Avenue Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org
/s/ Jane Perkins______ Jane Perkins State Bar No. 9993 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street, Ste. G-7 Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org

19
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CERTIFICATE OF SERVICE I certify that on this day, I served a true copy of the Plaintiffs‟ Memorandum in Support of Motion for Class Certification upon the Defendants‟ attorneys via electronic means through the CM/ECF system to: Ms. Belinda Smith, N.C. Department of Justice Wallace C. Hollowell and Stephen D. Martin, Nelson Mullins Rile & Scarborough Raboteau T. Wilder, Jr., Womble Carlyle Sandridge & Rice This the 29th day of August 2011.
/s/ Douglas Stuart Sea
20
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 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION Civ. No. 5:11-cv-354

K.C., et al., individually and on behalf of )

all others similarly situated,

)

)

Plaintiffs,

)

)

v.

)

)

LANIER CANSLER, in his official

)

capacity as Secretary of the Department )

of Health and Human Services, et al.,

)

)

Defendants.

)

____________________________________)

PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION

Pursuant to Federal Rule of Civil Procedure 23(a) and 23(b)(2), Plaintiffs move the Court

to certify this case as a class action, with the class defined as: All current or future participants in

the N.C. Innovations Waiver, as it is currently or subsequently named, whose Medicaid services

have been or will be denied, reduced, or terminated by Defendant Secretary of the North

Carolina Department of Health and Human Services, Defendant PBH, or any of their employees,

contractors, agents or assigns through the implementation of the Supports Intensities Scale or

Supports Needs Matrix.

Undersigned counsel also move the Court to appoint them as class counsel pursuant to

Fed. R. Civ. P. Rule 23(g).

This Motion is supported by the Memorandum in Support of Plaintiffs’ Motion for Class

Certification, which Plaintiffs have filed concurrently, the attached cases, declarations, and

affidavit, and the affidavits, declarations, and exhibits previously filed in Support of Plaintiffs’

Motion for Preliminary Injunction.

1 Case 5:11-cv-00354-FL Document 34 Filed 08/29/11 Page 1 of 3

WHEREFORE, Plaintiffs request the Court to enter an order certifying this action as a

class action pursuant to Fed. R. Civ. P. Rules 23(a) and 23(b)(2) and, pursuant to Rule 23(g), to

appoint the following law firms as class counsel: Disability Rights North Carolina, Legal

Services of Southern Piedmont, and National Health Law Program.

Dated: August 29, 2011

Respectfully submitted,

ATTORNEYS FOR PLAINTIFFS

/s/ John R. Rittelmeyer_____ John R. Rittelmeyer N.C. State Bar No. 17204 Jennifer L. Bills N.C. State Bar No. 37467 DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244 john.rittelmeyer@disabilityrightsnc.org jennifer.bills@disabilityrightsnc.org

/s/ Douglas S. Sea_____ Douglas Stuart Sea State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT, INC. 1431 Elizabeth Avenue Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org

/s/ Jane Perkins______ Jane Perkins State Bar No. 9993 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street, Ste. G-7 Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org

2 Case 5:11-cv-00354-FL Document 34 Filed 08/29/11 Page 2 of 3

CERTIFICATE OF SERVICE I certify that on this day, I served a true copy of the Plaintiffs’ Motion for Class Certification upon the Defendants’ attorneys via electronic means through the CM/ECF system to: Ms. Belinda Smith, N.C. Department of Justice Wallace C. Hollowell and Stephen D. Martin, Nelson Mullins Rile & Scarborough Raboteau T. Wilder, Jr., Womble Carlyle Sandridge & Rice This the 29th day of August 2011.
/s/ Douglas Stuart Sea
3 Case 5:11-cv-00354-FL Document 34 Filed 08/29/11 Page 3 of 3

 
 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION Case No.: 5:11-cv-354

K.C. et al., individually and on behalf of all )

others similarly situated,

)

)

Plaintiffs, and

) MEMORANDUM OF LAW IN SUPPORT

) OF MOTION FOR TEMPORARY

M.S., individually and on behalf of all others ) RESTRAINING ORDER

similarly situated,

)

)

Intervenor Plaintiff

)

)

v.

)

)

LANIER CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services, et al.,

)

)

Defendants.

)

This lawsuit, filed on July 1, 2011, challenges significant reductions in the Medicaid-

covered services provided to Plaintiffs and other severely disabled recipients which allow them

to live at home instead of being placed in much more expensive and restrictive institutional

settings. On August 24, 2011, Plaintiffs moved for a Preliminary Injunction to enjoin the

reductions in their services and those of hundreds of others similarly situated that occurred on or

about July 1, 2011. Briefing on that motion has been stayed pending a decision on a separate

motion to disqualify one of Defendant Piedmont Behavioral Health’s (PBH’s) counsel.

Effective January 1, 2012, Defendants will execute another wave of service reductions, as

required by the same undated notices mailed in March 2011 which required the July 1, 2011

reductions. See e.g. Dec. of Penny C Ex. G; Dec. of Rachelle S. Ex. H; Dec. of Africa Heath Ex.

G. Plaintiffs K.C., D.C., and M.S. now move the Court for a Temporary Restraining Order to

prevent Defendants from imposing these additional significant reductions in their Medicaid

1 Case 5:11-cv-00354-FL Document 71 Filed 12/20/11 Page 1 of 7

services effective January 1, 2012.1 Unless the Court acts, these three profoundly disabled
children face even greater and more immediate risk of irreparable harm to their health, safety,
development, and ability to live at home. As with the previous July 2011 reductions in their
services, these additional services cuts will occur, unless this Court acts, without Defendants first
providing to these Plaintiffs the “due process” required by the United States Constitution and the
Medicaid Act—adequate written notice and the opportunity for an impartial hearing prior to
services being reduced or terminated. See Plaintiffs’ Memorandum in Support of a Preliminary
Injunction at 4-19 (Docket Entry (DE) 32) (describing the process Defendants are using to
implement both the July 1, 2011 and January 1, 2012 reductions, the multiple ways in which this
process violates the legal requirements of due process, and the irreparable harm faced by
plaintiffs and other putative class members as a result).
In their August 24, 2011 Memorandum in Support of Motion for a Preliminary Injunction
(DE 32) and in M.S.’s October 21, 2011 Memorandum in Support of Motion to Intervene (DE 53),2 Plaintiffs have demonstrated that they meet all of the requirements for preliminary injunctive relief.3 The Court is referred to the content of those filings, which will not be repeated here.4 However, supplemental declarations are filed herewith to update the Court on events that
1 The Court denied Plaintiffs’ Motion for a Temporary Restraining Order to enjoin the cuts that occurred on July 1, 2011. See Order (July 12, 2011) (Docket Entry (DE) 19). However, that Order was based only on the Complaint and thus occurred before Plaintiffs filed any evidence or legal authority. 2 The Court granted the Motion to Intervene on December 5, 2011. 3 See also Pashby v. Cansler, No. 5:11-cv-273-BO, 2011 WL 6130819, at *8 (E.D.N.C. Dec. 8,
2011) (order certifying the class, granting a preliminary injunction, and holding Plaintiffs likely to succeed on the merits of their due process claims). 4 Plaintiffs hereby incorporate by reference their Memorandum in Support of Motion for a Preliminary Injunction (DE 32) and the Exhibits thereto, and Memorandum in Support of Motion to Intervene (DE 53), and the Exhibits thereto.
2
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have occurred since the prior filings and to demonstrate Plaintiffs D.C.’s, M.S.’s, and K.C’s now immediate need for injunctive relief.
Plaintiff M.S. suffered a twenty-one percent reduction of his necessary Medicaid services without due process on July 1, 2011. Rachelle S. Decl. Exs. C & H (DE 52-6 & 52-11).5 On or about January 1, 2012, the Defendants will impose an additional twenty percent reduction in M.S.’s necessary services without according him due process, meaning that forty-one percent of the services M.S. needs will have been eliminated since July 1, 2011. Id. M.S. has not significantly regressed since July 2011 only because his care provider has continued to provide services to M.S. even though she is not getting paid for a significant amount of her time. Rachelle S. Supp. Dec. at ¶ 12. If the January 2012 cuts take effect, it is “very likely” that M.S. will lose his care provider altogether. Id. According to Bonnie West, a masters-level exceptional children specialist who has worked with M.S. for five years, the further reduction in M.S.’s services scheduled for January 1, 2012 will be “devastating,” may lead to “very threatening” behaviors, will create “a safety issue,” and will cause him to “almost surely regress.” Bonnie West Dec. ¶¶ 12-15.
Plaintiff D.C. suffered a forty-one percent reduction of his necessary Medicaid services without due process on July 1, 2011. Penny C. Decl, Ex. G (DE 31-41). On or about January 1, 2012, the Defendants will make an additional ten percent reduction in D.C.’s necessary services, again without according him due process, meaning that over half of the services D.C. needs will have been eliminated since July 1, 2011. Id.; Penny C. Supp. Dec. ¶ 13. Since July, D.C.’s family has been struggling to keep services for D.C so that he will not “retreat into his own world,” Id.
5 As noted in Exhibit H (D.E. 52-11). PBH claimed that M.S. had a base budget of $51,679.44 from April 2010 through March 2011; however, his Individual Support Plan for that time period, shown in Exhibit C, clearly establishes that PBH had approved his budget at $64,142.64.
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at 14, by paying from their own limited savings for the services Defendants eliminated. However, continuing to do so will “very soon” no longer be possible for this highly-stressed family if the January 2012 reductions take effect. Id. at ¶ 15. According to Wyndie Stitt, a boardcertified behavioral consultant who has worked with D.C. for ten years, it is “absolutely critical” to prevent a reduction in D.C.’s services because “he is right in the middle of gaining a lot of skills, and if his services are cut now … he will stop progressing,” “regress,” “suffer from depression,” be at risk of “retreating inward,” and likely suffer an “increase in meltdowns, or other disruptive behavior.” Wyndie Stitt Decl. ¶¶ 8-10.
Plaintiff K.C. suffered a five percent reduction of his necessary Medicaid services on July 1, 2011.6. Heath Decl. Exs. C & F (DE 31-64 & 31-67). On or about January 1, 2012, the Defendants will make an additional nineteen percent reduction in K.C.’s necessary services, again without according him adequate due process, meaning that twenty-four percent of the services K.C. needs will have been eliminated since July 1, 2011. Id. K.C.’s mother Africa Heath describes the harm he has already suffered from even the small reduction in his services, which will be magnified significantly if the much greater January 2012 cuts take effect. Heath Supp. Dec. Already his negative behaviors have increased, such as hitting the wall and throwing objects at others, and he has less time in the community and has regressed in the skills he had learned. Id. at ¶¶ 7, 8, 10. The much larger cuts scheduled for January 1, 2012 are expected to worsen these problems. Id. at ¶¶ 11-12.
PBH has refused requests to rescind the January 2012 reductions for M.S. and D.C. even though its own most recent evaluations demonstrate that both children need more services. As PBH admits, the Support Needs Matrix categories in which these children were placed, which in 6 K.C. was able to successfully change his SNM category from a B (wherein he would have lost
20 percent of his services) to a Category D. Health Decl. Exs.C & F (DE 31-64 & 31-67).
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turn required both the July 2011 and January 2012 service reductions, were primarily based on Support Intensities Scale (SIS) evaluations performed by PBH employees. PBH Ans. ¶ 48 (DE 38). Because the SNM categories and corresponding budget limits assigned to M.S. and D.C. are not adequate to provide the services these children need, both families requested and eventually received new SIS evaluations by PBH in November 2011. Penny C. Supp. Dec. Ex. A; Rachelle S Supp. Dec. Ex. A. Both children’s new SIS evaluations showed dramatically higher levels of need than the prior SIS scores upon which the July 2011 and January 2012 cuts are based. Id. Upon receiving the summaries of their children’s new SIS scores in mid-November 2011, both M.S.’s and D.C.’s parents promptly requested of PBH immediate increases in their services based on the higher SIS scores. Penny C. Supp. Dec. ¶ 8; Rachelle S. Supp. Dec. ¶¶ 4-5. To date, PBH has refused both requests, but has failed to provide any written notice of that refusal or any right to a hearing to challenge that refusal. Penny C. Supp. Dec. ¶ 9; Rachelle S. Supp. Dec. ¶ 10. Thus, unless this Court acts immediately, Defendants will once again significantly reduce critical services to these children without first providing notice and an opportunity for a hearing to challenge their decisions as required by due process.
CONCLUSION
For the foregoing reasons and those stated in Plaintiffs’ prior filings, Plaintiffs request that this Court issue a Temporary Restraining Order prohibiting Defendants from further reducing Medicaid services to Plaintiffs K.C., D.C., and M.S. effective January 1, 2012 until Defendants first comply with the Due Process requirements of the United States Constitution and the Medicaid program. Plaintiffs also renew their pending request for a preliminary injunction requiring Defendants to restore services to all Plaintiffs and putative class members to the levels in effect prior to July 1, 2011.
5 Case 5:11-cv-00354-FL Document 71 Filed 12/20/11 Page 5 of 7

Dated: December 20, 2011

ATTORNEYS FOR PLAINTIFFS
/s/ Douglas S. Sea______ Douglas Stuart Sea N.C. State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT, INC. 1431 Elizabeth Avenue Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org
/s/ John R. Rittelmeyer______ John R. Rittelmeyer N.C. State Bar No. 17204 Jennifer L. Bills N.C. State Bar No. 37467 Morris F. McAdoo N.C. State Bar No. 34851 DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244 john.rittelmeyer@disabilityrightsnc.org jennifer.bills@disabilityrightsnc.org
/s/ Jane Perkins______ Jane Perkins N.C. State Bar No. 9993 Jina Dhillon N.C. State Bar No. 41997 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street, Ste. G-7 Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org

6 Case 5:11-cv-00354-FL Document 71 Filed 12/20/11 Page 6 of 7

CERTIFICATE OF SERVICE I hereby certify that I have on this day served a true copy of Plaintiffs’ MOTION FOR TEMPORARY RESTRAINING ORDER and supporting MEMORANDUM OF LAW, SUPPLEMENTAL DECLARATIONS OF RACHELLE S., PENNY C, and AFRICA HEATH, and DECLARATIONS OF BONNIE WEST and WYNDIE STITT upon the Defendant’s attorneys via electronic means through the CM/ECF system to: Belinda Smith and Iain Stauffer, N.C. Department of Justice Stephen D. Martin and Wallace C. Hollowell, Nelson, Mullins, Riley and Scarborough Rabotteau T. Wilder, Womble, Carlyle, Sandridge, and Rice This the 20th day of December, 2011.
/s/Douglas Sea____ Douglas Sea
7 Case 5:11-cv-00354-FL Document 71 Filed 12/20/11 Page 7 of 7

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION

K.C., a minor child, by his mother and next friend Africa H.; ALLISON TAYLOR JOHNS; L.S., a minor child, by his father and next friend Ron S.; and D.C., a minor child, by his mother and next friend Penny C.,
Plaintiffs,

Civil Action No. 5:11-cv-354-FL
ANSWER AND AFFIRMATIVE DEFENSES OF DEFENDANTS PAMELA L. SHIPMAN AND PBH

vs.

LANIER CANSLER, in his official capacity as Secretary of the Department of Health and Human Services; PAMELA L. SHIPMAN, in her official capacity as Chief Executive Officer of PBH; and PBH,

Defendants.

Defendants Pamela L. Shipman (“Shipman”) and PBH (together, the “PBH Defendants”), by and through their undersigned attorneys, answers Plaintiffs Complaint [D.E. 6] (“Complaint”) as follows:
FIRST DEFENSE The allegations of the Plaintiffs’ Complaint fail to state a claim upon which relief can be granted, and the Complaint should be dismissed.
SECOND DEFENSE Specifically responding to the enum erated paragraphs of Plaintiffs’ Complaint, the P BH Defendants answer as follows:

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RESPONSE TO “INTRODUCTION” 1. The PBH Defendants adm it that th e Plaintiffs are all M edicaid consumers who purport to seek certain declaratory and injunctive relief, but deny that there is any basis in fact or law for Plaintiffs to receive the relief they purport to seek. The PBH Defendants further adm it that Plaintiffs purport to bring this action as a class action, but deny that there is any basis in fact or law f or the sam e. Except as oth erwise admitted, the PBH Def endants deny the alleg ations contained in paragraph 1 of the Complaint. 2. Based on confirmation received from counsel for the Plain tiffs on July 26, 2011 as to the identity of the minor Plaintiffs, the PBH Defendants admit that the named Plaintiffs are Medicaid consumers who have been receiv ing Medicaid services th rough North Carolina’s 1915(b)/(c) Medicaid Waiver, specifically the 1915(c) Waiver, know n as the “Innovations Waiver.” The PBH Defendants admit that Defendant PBH operates the Innovations Waiver and that Defendant Shipman is the Chief Executive Officer of PBH, but aver that the nam e of the entity is “P BH”, not “Piedm ont Behavioral Healthcare Area Mental Health, Dev elopmental Disabilities and Substance Abuse Authority.” The PBH Defendants deny that there is any basis in fact or law for Plaintiffs’ action to be certifi ed as a class action. Except as otherwise adm itted or averred, the PBH Defendants deny the allegations contained in paragraph 2 of the Complaint. 3. The PBH Defendants admit that prior to July 1, 2011, PBH had approved the use of Medicaid funds through the Innovations W aiver to reimburse providers for providing certain Medicaid services for each of the Plaintiffs in specific quantities and for specific, limited periods of time. The PBH Defe ndants admit that specially trained personnel co nducted evaluations of each of the nam ed Plaintiffs using an analy tical tool known as the Supports In tensity Scale
2 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 2 of 33

(“SIS”). E xcept as ex pressly admitted and av erred, the PBH Defendants deny th e allegations contained in paragraph 3 of the Complaint.
4. The PBH Defendants deny the allegations contained in paragraph 4 of the Complaint.
5. The PBH Defendants admit that PBH is a “local management entity” (“LME”) as defined in N.C. Gen. Stat. § 122C-3(20b). The PB H Defendants further admit that by agreement between PBH and the North C arolina Department of Health and Hum an Services (the “Department”), with the approval of the Centers for Medicare and Medicaid Service s (“CMS”), PBH operates as a Pre-Paid Inpa tient Health Plan (“P IHP”) pursuant to 42 C.F.R. § 438.2. PIHPs are one of three types of Managed Care Organizations (“MCOs”) authorized to operate Medicaid managed care program s pursuant to Medica id waivers in accordance with Section s 1915(b) and 1915(c) of the Social Security Act (42 U.S.C. §§ 1396n(b) and (c)). Except as expressly admitted, the PBH Def endants deny the allega tions contained in p aragraph 5 of the Complaint.
6. The PBH Def endants admit the allega tions contained in paragraph 6 of the Complaint.
7. The PBH Defendants adm it that pursuant to Sections 1915(b) and 1915(c) of the Social Security Act (42 U.S.C. §§ 1396n(b) and (c)), the North Carolina Department of Health and Human Services has waived portions of North Carolina’s traditional “fee-for-service” Medicaid program and replaced them with a mana ged care program (the “1915(b)/(c) Waiver”). The PBH Defendants further admit that PBH operates the 1915(b)/(c) W aiver. The PBH Defendants aver that the 1915(b) Waiver, know n as the “Cardinal Health Plan”, is a Medicaidfunded, managed care health plan for qualified consumers who require m ental health and
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substance abuse healthcare services. The 19 15(c) Waiver, known as “Innovations”, is a Medicaid-funded, managed care he alth plan for qualified consum ers who require healthcare services for intellectual and developm ental disabilities. The 1915(c) W aiver operates concurrently with the 1915(b) W aiver, which means that the operational requirem ents contained in the 1915 (b) Waiver also app ly to the 1915 (c) Waiver. Except as express ly admitted and averred, the PBH Defendants deny the allegations contained in paragraph 7 of the Complaint.
8. The PBH Defendants deny the allegations contained in paragraph 8 of the Complaint.
9. The PBH Defendants deny the allegations contained in paragraph 9 of the Complaint.
10. The PBH Defendants acknowledge that the Pl aintiffs purport to seek declaratory and injunctive relief, but deny th at there is any basis in fact or law for the sam e, and deny the allegations contained in paragraph 10 of the Complaint.
11. The PBH Defendants acknowledge that th e Plaintiffs purpor t to seek class certification, but deny that there is any basis in fact or law for the same, and deny the allegations contained in paragraph 11 of the Complaint.
RESPONSE TO “JURISDICTION AND VENUE” 12. The allegations contained in paragraph 12 of the Complaint are legal conclusions to which no response is required. To the extent a response is required, the PBH Defendants deny the allegations contained in said paragraph. 13. The allegations contained in paragraph 13 of the Complaint are legal conclusions to which no response is required. To the extent a response is required, the PBH Defendants deny the allegations contained in said paragraph.
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14. The allegations contained in paragraph 14 of the Complaint are legal conclusions to which no response is required. To the extent a response is required, the PBH Defendants deny the allegations contained in said paragraph, exce pt admits that Defendant Cansler’s m ain office is located in this District.
RESPONSE TO “PARTIES” 15. The PBH Defendants adm it the allegations contained in th e first and second sentences of paragraph 15 of the Complaint upo n information and belief. The PBH Defendants deny the allegations contained in the third and fourth sentences of said paragraph. 16. The PBH Def endants admit the allega tions contained in the first sentence of paragraph 16 of the Complaint upon inform ation and belief. The PBH Defendants deny the allegations contained in the sec ond sentence of said paragrap h. The PBH Defendants adm it the allegations contained in the th ird sentence of said paragraph upon inform ation and belief. The PBH Defendants deny the allegations contained in the fourth and fifth sentences of said paragraph. 17. The PBH Defendants adm it the allegations contained in th e first and second sentences of paragraph 17 of the Complaint upo n information and belief. The PBH Defendants deny the allegations contained in the third and fourth sentences of said paragraph. 18. The PBH Defendants adm it the allegations contained in th e first and second sentences of paragraph 18 upon infor mation and belief. The PBH Defendants deny the allegations contained in the third and fourth sentences of said paragraph. 19. The allegations contained in paragraph 19 of the Complaint are not directed at the PBH Defendants, and therefore no response is required. To the extent a response is required, the
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PBH Defendants lack knowledge as to the truthf ulness of the allegations contained in said paragraph.
20. The allegations contained in paragraph 20 of the Complaint are not directed at the PBH Defendants, and therefore no response is required. To the extent a response is required, the PBH Defendants lack knowledge as to the truthf ulness of the allegations contained in said paragraph.
21. The PBH Def endants admit the allega tions contained in paragraph 21 of the Complaint.
22. The PBH Def endants admit that Def endant Shipman is the Chief Executive Officer of PBH.
23. The PBH Def endants admit that PBH’s contrac t with the North Carolina Department of Health and Human Services requires compliance with the Medicaid managed care regulations contained in 42 C.F. R. Part 438. The PBH Defe ndants deny that PBH is required to comply with any Medicaid fee- for-service regulations contained in 42 C.F.R. Part 431, as PBH exclusively operates Me dicaid managed care waiver s. Exce pt as expres sly admitted, the PBH Defendants deny the allegations contained in paragraph 23 of the Complaint.
RESPONSE TO “CLASS ACTION ALLEGATIONS” 24. The PBH Defendants acknowledge that the Pl aintiffs purport to bring this action as a class action, but deny that there is any ba sis in fact or law for the sam e, and deny the allegations contained in paragraph 24 of the Complaint. 25. The PBH Defendants deny that there is any basis in f act or law f or this action being made a class action, and therefore deny the a llegations contained in the first sentence of paragraph 25 of the C omplaint. The PBH Defendants admit that 675 Medicaid consum ers
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receive services under the Innova tions Waiver, and that P BH has reviewed and authorized Medicaid reimbursement for services pursuant to the policies and operational processes of the Support Needs Matrix (“SNM”). The PBH Defe ndants specifically deny that any of the 675 Medicaid consumers under the In novations Waiver “receive” serv ices from PBH; rather, the PBH defendants aver that PBH reviews and authorizes the use of Medicaid funds to pay for approved Medicaid services, wh ich are provided to consum ers by a network of healthcare providers coordinated and maintained by PBH.
26. The PBH Defendants deny the allegations contained in paragraph 26 of the Complaint.
27. The PBH Defendants deny the allegations contained in paragraph 27 of the Complaint.
28. The PBH Defendants deny the allegations contained in paragraph 28 of the Complaint.
29. The PBH Defendants deny the allegations contained in paragraph 29 of the Complaint.
30. The PBH Defendants deny the allegations contained in paragraph 30 of the Complaint.
31. The PBH Defendants deny the allegations contained in paragraph 31 of the Complaint.
RESPONSE TO “FACTUAL BACKGROUND” RESPONSE TO “A. PBH / the N.C. Innovations Waiver” 32. The allegations contained in paragraph 32 of the Complaint are not directed at the PBH Defendants, and therefore no response is required. Should a response be deemed required,
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the PBH Defendants admit that Title XIX of the Social Security Act, which Plaintiffs refer to as the “Medicaid Act”, establishes a medical assistance program funded by the federal and state governments, and respectfully refers the Court to Title XIX of the So cial Security Act for its full text. Exc ept as exp ressly admitted, the PBH Defendants deny the a llegations contained in paragraph 32 of the Complaint.
33. The allegations contained in paragraph 33 of the Complaint are not directed at the PBH Defendants, and therefore no response is required. Should a response be deemed required, the PBH Defendants adm it the allegations cont ained in said paragraph upon inform ation and belief and r espectfully refers the Co urt to T itle XIX of the Social Secu rity Act and N.C. Gen. Stat. § 108A-54 for their full text.
34. The allegations contained in paragraph 34 of the Complaint are not directed at the PBH Defendants, and therefore no response is required. Should a response be deemed required, the PBH Defendants admit that Title XIX of the So cial Security Act, at 42 U.S.C. § 1396a(a)(3), requires that a State Medicaid Plan “provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical assistance under the plan is denied or is not acted upon with reasonable prom ptness,” and respectfully refer the Court to Title XIX of the Social Security Act for its full text. The PBH Defendants aver that Plaintiffs’ citation of “42 C.F.R. part 410.200” does not correspond with any regulation promulgated by the United States Department of Health and Hum an Services as of the m ost recent publication of the Code of Federal Regulations. Except as expressly adm itted and averred, th e PBH Defendants deny the allegations contained in paragraph 34 of the Complaint.
35. The allegations contained in paragraph 35 of the Complaint are not directed at the PBH Defendants, and therefore no response is required. Should a response be deemed required,
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the PBH Def endants admit that th e Fourteenth Amendment to the United Sta tes Constitution provides, inter alia, that “nor shall any Stat e deprive any person of li fe, liberty, or property, without due process of law,” and respectfully refe rs the Court to the Fourteenth Am endment for its full text. Except as expressly admitted, the PBH Defendants deny the allegations contained in paragraph 35 of the Complaint.
36. The allegations contained in paragraph 36 of the Complaint are not directed at the PBH Defendants, and therefore no response is required. Should a response be deemed required, the PBH Defendants adm it the allegations cont ained in said paragraph upon inform ation and belief.
37. The PBH Defendants admit that PBH operates, with respect to all issues pertinent to this litigation, pursu ant to a contract with the North Carolina Department of Health and Human Services, Division of Medical Assistance (“DMA”) under which PBH operates the North Carolina 1915(b)/(c) Waiver in a five-county catchm ent area (i.e., Cabarrus, Davidson, Rowan, Stanly, and Union Counties), and respectfully refers the Court to the contract between DMA and PBH for its f ull text. Except as expressly admitted, the PBH Def endants deny the allega tions contained in paragraph 37 of the Complaint.
38. The PBH Defendants adm it that pursuan t to the North Carolina 1915(b)/(c) Waiver, and the contract between DMA and PBH, PBH operates as a Prepaid Inpatient Health Plan (“PIHP”), which is defined at 42 C.F.R. § 438.2. The PBH Defendants further admit that pursuant to the contract between DMA and PBH, the North Carolina 1915(b)/(c) Waiver, and 42 C.F.R. § 438.240, PBH is responsible for c onducting utilization m anagement. Except as expressly admitted, the PBH Def endants deny the al legations contained in paragraph 38 of the Complaint.
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39. The PBH Def endants admit that Title XIX of the Social Secu rity Act and the Centers for Medicare and Medicaid Services (“CMS”) regulations prom ulgated thereunder require State Medicaid Plans to provide for an opportunity for Medicaid consum ers to “appeal” “actions”, as those term s are defined at 42 C. F.R. § 438.400(b). The PBH Defendants av er that 42 C.F.R. § 438.404(b), which is cited by the P laintiffs in paragraph 39 of the Complaint, sets out the required contents of a “Notice of action ”, as the term “action” is defined in 42 C.F.R. § 438.400(b), and respectfully refers the Court to th ese provisions for their full text. Except as expressly admitted and averred, the PBH Defendants deny the allegations contained in paragraph 39 of the Complaint.
40. The PBH Def endants admit the allega tions contained in paragraph 40 of the Complaint.
41. The PBH Def endants admit the allega tions contained in paragraph 41 of the Complaint.
42. The PBH Def endants admit the allega tions contained in paragraph 42 of the Complaint.
43. The PBH Defendants adm it that the N.C. Innovations waiver (the “Innovations Waiver”) is a home and community-based services waiver in North Carolina, and aver that PBH operates the Innovations W aiver pursuant to a c ontract between the North Carolina Departm ent of Health and Hum an Services, Division of Me dical Assistance (“DMA”) and PBH. The PBH Defendants aver that in order to be eligible to participate in the Innovations Waiver, one must be a Medicaid-eligible consumer residing in PB H’s catchment area (cu rrently consisting of Cabarrus, Davidson, Rowan, Stanly, and U nion Counties), and also m eet the eligibility requirements set forth in the Innovations W aiver. The PBH Defendants aver that as of the date
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of this Verified Answer, there are 675 PBH c onsumers who are eligible to receive services through the Innovations Waiver. Ex cept as expressly admitted or averred, the PBH Defendants deny the allegations contained in paragraph 43 of the Complaint.
44. The PBH Defendants adm it that each PB H consumer enrolled in the Innovations Waiver is encouraged to m eet at least once each year with his or her planning team and a PBH Care Coordinator to discuss the services available and their annual budget. The PBH Defendants aver that th e purpose of these m eetings is to develop and design an Individual Service Plan (“ISP”) for each consumer, as required for continued enrollment in the Innovations Waiver. The PBH Defendants further aver that a PBH Care Coordinator facilitates and assists the PBH consumer and his/her planning te am to design and subm it a plan m eeting the consumer’s goals and needs, but it is the consumer’s plan and m ust be signed by the consum er or his/her legally responsible person. The PBH Defe ndants further aver that the PBH Care Coordinator does not approve or deny plans, but rath er submits a proposed plan or plan update to the PBH Utilization Management department with a Treatm ent Authorization Request (“TAR”) for approval or denial. The PBH Defe ndants further aver that the PBH Utiliz ation Management department, under eligibility and utilizati on management criteria, approves or denies the plan and corresponding TAR. The PBH De fendants admit an approved plan is generally effective for a year, starting the first day after the consumer’s month of birth. Except as expressly admitted or averred, the PBH Defendants deny the allegations contained in paragraph 44 of the Complaint.
Response to “B. Supports Needs Matrix” 45. The PBH Defendants adm it that in Ma rch 2011, PBH m ailed a Waiver Alert to all PBH consumers receiving services through the Innovations Waiver entitled “Transition from the Individual Budget System to the Suppor t Needs Matrix”, and the PBH Defendants
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respectfully refer to the Court to that document for its full text. The PBH Defendants admit that on April 4, 2011, PBH mailed letters to each of the four named Plaintiffs informing each Plaintiff of his or her Category and Matr ix of the Support Needs Matrix based in part on his or her Supports Intensity Scale (SIS) score. The PB H Defendants further adm it that the April 4, 2011 letters also informed each of the Plaintiffs of his or her assigned annual budget under the Support Needs Matrix, based on his or her Category a nd Matrix, and whether there were any “step downs” from their previous base annual budg et. Except as express ly admitted or averred, th e PBH Defendants deny the allegations contained in paragraph 45 of the Complaint.
46. The PBH Defendants adm it that under the Support Needs Matrix, there are four (4) separate matrices, or groupings, and aver that these matrices ensure that the correct amount of funding is available to m eet the needs of the individuals assigned to that m atrix. The PBH Defendants further admit that the four (4) matrices under the Support Needs Matrix are:
• Children Living at Home (a/k/a “Non-Residential”) • Children Living in Residential ( e.g., licensed group hom es, licensed
Alternative Family Living (“AFL”) placements) • Adults Living at Home (a/k/a “Non-Residential”) • Adults Living in Resid ential (e.g., licensed group hom es, licensed and
unlicensed AFL placements) Except as expressly admitted, the PBH Def endants deny the allega tions contained in paragraph 46 of the Complaint.
47. The PBH Defendants adm it that under th e Support Needs Matrix, each of the matrices described in Response to Paragraph 46, above, has seven (7) categories of consum ers who have similar support and funding needs, nam ed categories A, B, C, D, E, F, and G. The PBH Defendants further aver th at categories A and G each have subcategories to address th e
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needs of individuals assigned to that category that are different from others in that category. The PBH Defendants admit that each category and subcategory has a specific dollar amount tied to it, known as a Base Budget, which re flects the total am ount available to fund the typical types of services used by individual consum ers in these categories (“Base Budge t Services”). The PBH Defendants aver that each consumer’s Base Budget is the maximum amount of funding available to pay for Base Budget Services, w hich include community networking, day supports, in-hom e intensive supports, in-home skill building, personal care services, res idential supports, respite, and supported employment. The P BH Defendants also aver that there are other services which are Non-Base Budget Services, that are preventative, crisis, and/ or equipment and supplies, and which do n ot affect th e Base Budget. Excep t as exp ressly admitted or averred, the PBH Defendants deny the allegations contained in paragraph 47 of the Complaint.
48. The PBH Defendants adm it that the Base Budget assign ed to each catego ry increases in ascending order ( i.e., Category A contains the lowe st budget; Category G contains the highest budget). The PBH De fendants aver that PBH consumers who receive services through the Innovations waiver are assigned to on e of the ca tegories based on each consum ers’ assessed support needs, which includes the SIS assessment and an assessm ent of Community Safety Risk, their age, and their living ar rangement. Except as expre ssly admitted, the PBH Defendants deny the allegations contained in paragraph 48 of the Complaint.
49. The PBH Defendants adm it that the SIS was developed by the Am erican Association on Intellectual and Developmental Disabilities as an assessment tool to “evaluate the practical support requirements of a person with an intellectual disability through a p ositive and thorough interview process.” Upon inform ation and belief, the PBH Defe ndants aver that the North Carolina Developmental Disabilities Consortium opposes the use of th e SIS, but aver that
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the SIS is b eing used p resently in at least s ixteen (16) o ther States to evaluate the needs of Medicaid consumers with dev elopmental disabilities and to a llocate resources to consum ers based on th ose needs. Except as e xpressly admitted or av erred, the P BH Defendant deny th e allegations contained in paragraph 49 of the Complaint.
50. The PBH Defendants adm it that the SIS evaluations us ed to dete rmine the Category and Matrix for each of the Plaintiffs, as shown in the April 4, 2011 letters to each of the Plaintiffs, were conducted in 2009, 2010, and 2011. Except as expressly adm itted, the allegations contained in paragraph 50 of the Complaint are denied.
51. The PBH Defendants adm it that at the tim e that the SIS assessm ents were conducted for each of the Plain tiffs in 2009, 2010, and 2011, PBH m ailed a copy of their SIS score and a summary of the assessm ent to each of the Plaintiffs. Except as expressly adm itted, the PBH Defendants deny the allegations contained in paragraph 51 of the Complaint.
52. The PBH Defendants admit that the Plaintiffs were notified that their respec tive PBH Care Coordinator would contact them to assist in the creation of an appropriate ISP update. Except as expressly admitted, the PBH Def endants deny the allega tions contained in paragraph 52 of the Complaint.
53. The PBH Defendants adm it that consum ers whose planning team s believe that they have unique beh avioral, safety, health, and welf are needs tha t make them outliers as compared with others in their Support Needs Matrix Category a nd which cannot be m et in their assigned Support Needs Matrix Category m ay request consideration of individual needs that require additional funding through the Intens ive Review Comm ittee at PBH. The PBH Defendants admit that the March and April 2011 letters did not spec ifically discuss the Intensive Review process, although the PBH Defenda nts aver that the Intensive Review process is
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discussed in the 2011 S upport Needs Matrix Guid e which PBH sent to all PBH consum ers who receive services through the Innovations W aivers. The PBH Defendants further aver that the request for an Intensive Review is prepared by a consumer’s PBH Care Coordinator with input from the consum er and his/her care team . Except as exp ressly admitted or averred, the PBH Defendants deny the allegations contained in paragraph 53 of the Complaint.
54. The PBH Defendants admit that the 2011 Support Needs Matrix Guide states that “[i]n the NC Innovatio ns Waiver, up to seven pe rcent (7%) of the participan ts may receive increased funding based on identification as an ou tlier . . . ” Except as express ly admitted, the PBH Defendants deny the allegations contained in paragraph 54 of the Complaint.
55. The PBH Defendants deny the allegations contained in paragraph 55 of the Complaint.
56. The PBH Defendants adm it that the In tensive Review Comm ittee makes its determinations based on the reco rds submitted to it, and tha t the In tensive Review Comm ittee does not hold hearings where live testimony is permitted. Except as expressly admitted, the PBH Defendants deny the allegations contained in paragraph 56 of the Complaint.
57. The PBH Defendants admit that the Instructions on the Intensive Review Request Cover Sheet state, in p ertinent part, that “You ma y only request review unde r one type of issue: Medical, Behavioral, or Beyond Academics.” The PBH Defendants further admit that under the Innovations Waiver, consumers may only request an Intensive Review for one type of issue, and not for a co mbination of issues. E xcept as expressly admitted, the PBH Defendants deny the allegations contained in paragraph 57 of the Complaint.
58. The PBH Defendants admit that there is no direct appeal from the determ ination of the Intensive Review Committee that a particular consu mer is not an outlier f orm his or her
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Support Needs Matrix Category, but aver that a determ ination of the Intensive Review Committee is not a “decision ” or an “action” that m ay be appealed p ursuant to 4 2 U.S.C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq. Except as expressly admitted and averred, the PBH Defendants deny the allegations contained in paragraph 58 of the Complaint.
59. The PBH Defendants aver that the 2011 S upport Needs Matrix Guide is the best evidence of its contents, and respectfully refer the Court to the 2011 Support Needs Matrix Guide for its actual lan guage and full text. Except as expressly averred, the PBH Defendants deny the allegations contained in paragraph 59 of the Complaint.
60. The PBH Defendants deny the allegations contained in paragraph 60, including subparagraphs (a) through (e).
61. The PBH Defendants deny the allegations contained in paragraph 61 of the Complaint.
62. The PBH Defendants deny the allegations contained in paragraph 62 of the Complaint.
Response to “C. Plaintiffs” 63. Upon information and belief, the PBH Defendants admit the allegations contained in paragraph 63 of the Complaint. 64. The PBH Defendants adm it that in August 2010, K.C. subm itted an Individu al Support Plan (“ISP”) w hich included a base budget of $47,936.40 for the period O ctober 2010 through September 2011. Except as expres sly admitted, the PBH Defendants deny th e allegations contained in paragraph 64 of the Complaint. 65. The PBH Defendants adm it that in Marc h 2011, PBH provided K.C. with notice (though his mother, Africa H., who serves as K.C.’s guardian) that K.C.’s Matrix and Category
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under the Support Needs Matrix was Matrix “C hild Non-Resident” and Category “B”, and that his Base Budget for the period from July 2011 through June 2012 would be $25,476.40. The PBH Defendants respectfully refer the Court to the March 2011 the April 4, 2011 letters for their actual language and full text. Except as expr essly admitted, the PBH De fendants deny the allegations contained in paragraph 65 of the Complaint.
66. The PBH Defendants aver that K.C.’s m other, Africa H., and K.C.’s care team requested that K.C. be re-evaluated using the Supports Intensity Scale due to a significant change in support needs since his original SIS, and further aver that PBH granted this request. Except as expressly averred, the P BH Defendants deny the allegations cont ained in paragraph 66 of the Complaint.
67. The PBH Defendants adm it that the Suppor ts Intensity Scale re-evaluation of K.C. included an interview between the SIS exam iner and K.C.’s mother, Africa H., and further admit that K.C.’s PBH’s care coordinator was p resent during the interview. Except as expressly admitted, the PBH Defendants deny the allegations contained in paragraph 67 of the Complaint.
68. The PBH Defendants admit that based on his new SIS score, K.C. was assigned to the “Child Non-Resident” Matrix and the “D” Category in the S upport Needs Matrix. Except as expressly admitted, the allegations contained in paragraph 68 of the Complaint are denied.
69. The PBH Defendants admit that the Base Budgets for the “B” and “D” Categories in the “Child Non-Resident” Matrix in the Support Needs Matrix are $25,476.40 and $36,360.40, respectively. Except as express ly admitted, the PBH Def endants deny the alleg ations contained in paragraph 69 of the Complaint.
70. The PBH Defendants adm it that K.C.’s Indi vidual Service Plan for the period of July 2011 through December 2011 is based on an annualized budget of $45,755.50, representing
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the first “step-down” from his previous annual budget. The PBH Defe ndants further admit that K.C.’s Individual Service Plan for th e period January 2012 through June 2012 will b e based on an annualized budget of $36,604.40, re presenting the second “step-down” from his previous annual budget. Except as expressly adm itted, the PB H Defendants deny the allegations contained in paragraph 70 of the Complaint.
71. The PBH Defendants deny the allegations contained in paragraph 71 of the Complaint.
72. The PBH Defendants deny the allegations contained in the first sentence of paragraph 72 of the Complaint. With respect to the second sentence of said paragraph., the PBH Defendants admit that K.C. purports to seek th e right to challenge his Support Needs Matrix Category (“Child Non-Resident D ”) through the fa ir hearing process, and aver that if a Treatment Authorization Request ( “TAR”) for services f or K.C. is su bmitted in excess of the Base Budget for his “Child Non-Resident” Matrix and “D” Category and PBH Utilizatio n Management denies the TAR in whole or in pa rt, K.C. may challenge his Support Needs Matrix and Category in the fair hearing process pursu ant to 42 U.S.C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq. The PBH De fendants aver that the SIS is only one factor used in the Support Needs Matrix, and further aver that there exis t mechanisms to request a new or revised SIS assessment, where appro priate. Exc ept as e xpressly admitted or ave rred, the PBH Def endants deny the allegations contained in the second sentence of said paragraph.
73. The PBH Defendants deny the allegations contained in paragraph 73 of the Complaint, and aver th at as of the date of this Answer, PBH Utiliza tion Management has no t denied any Treatm ent Authorization Request subm itted by or on behalf of K.C. that would
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trigger the fair hearing proce ss pursuant to 42 U.S.C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq. wherein K.C. could challenge his SIS score or Support Needs Matrix Category.
74. Upon information and belief, the PBH Defendants admit the allegations contained in paragraph 74 of the Complaint.
75. The PBH Defendants adm it that in October 2010, L.S. subm itted an Individual Support Plan (“ISP”) which included a base budget of $55,297.92 for the period December 2010 through November 2011. Except as express ly admitted, the PBH Defendants deny the allegations contained in paragraph 75 of the Complaint.
76. The PBH Defendants admit that in March 2011, PBH provided L.S. with notice (though his father, Ron S., who serves as L.S.’s guardian) that L.S.’s Matrix and Category under the Support Needs Matrix was Matrix “Child N on-Resident” and Categor y “D”, and that his Base Budget for the period from July 2011 through June 2012 would be $36,604.40. The PBH Defendants respectfully refer the Court to the March 2011 and the April 4, 2011 letters for their actual language and full text. Except as expr essly admitted, the PBH De fendants deny the allegations contained in paragraph 76 of the Complaint.
77. The PBH Defendants adm it that L.S.’s parents met with L.S.’s PBH Care Coordinator and discu ssed L.S.’s new budget. Except as expres sly admitted, the PBH Defendants deny the allegations contained in paragraph 77 of the Complaint.
78. The PBH Defendants deny the allegations contained in paragraph 78 of the Complaint.
79. The PBH Defendants deny the allegations contained in paragraph 79 of the Complaint.
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80. The PBH Defendants deny the allegations contained in the first sentence of paragraph 80 of the Complaint. With respect to the second sentence of said paragraph., the PBH Defendants admit that L.S. purports to seek th e right to challenge his Support Needs Matrix Category “D” and Matrix “Child Non-Resident” through the fair hearing process, and aver that if a Treatment Authorization Request (“TAR”) f or services for L.S. is subm itted in excess of the Base Budget for his Support Needs Matrix Category and Matrix, and PBH Utilization Management denies the TAR in whole or in part, that L.S . may challenge his Support Needs Matrix Category and Matrix in the fair hearing process pursuant to 42 U. S.C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq. The PBH Defendants aver that the SIS is only one factor used in the Support Needs Matrix, and further aver that there exist mechanisms to request a new or revised SIS assessment, where approp riate. Except as expressly admitted and av erred, the PBH Defendants deny the allegations contained in the second sentence of said paragraph.
81. The PBH Defendants deny the allegations contained in paragraph 81 of the Complaint, and aver th at as of the date of this Answer, PBH Utiliza tion Management has no t denied any Treatment Authorization Request submitted by or on behalf of L.S. that would trigger the fair hearing process pursuant to 42 U.S.C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq. wherein L.S. could challenge his SIS score or Support Needs Matrix Category.
82. Upon information and belief, the PBH Defendants admit the allegations contained in paragraph 82 of the Complaint.
83. The PBH Defendants adm it that in Sep tember 2010, Allison Taylor Johns submitted an Individual Support Plan (“ISP”) which included a base budget of $45,543.84 for the period November 2010 through October 2011 . Except as express ly admitted, the PBH Defendants deny the allegations contained in paragraph 83 of the Complaint.
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84. The PBH Defendants adm it that in March 2011, PBH provided Alliso n Taylor Johns with notice that her Ma trix and Category under the Suppor t Needs Matrix was Matrix “Child Non-Resident” and Category “B”, and that her Base Budget for the period from July 2011 through June 2012 would be $25,476.40. The PBH Defend ants respectfully refer the Court to the March 2011 and the April 4, 2011 letters for their actual language and full text. Except as expressly admitted, the PBH Def endants deny the al legations contained in paragraph 84 of the Complaint.
85. The PBH Defendants adm it that Linda Johns , Allison T aylor Johns’ mother, spoke with her PBH Care Coordinator about an In tensive Review of Taylo r’s needs. Except as expressly admitted, the PBH Def endants deny the al legations contained in paragraph 85 of the Complaint.
86. The PBH Defendants adm it that Linda Johns, Allison Taylor Johns’ m other, met with Taylor’s PBH Care Coordinato r on or abou t May 26, 2 011. Except as exp ressly admitted, the PBH Defendants deny the allegations contained in paragraph 86 of the Complaint.
87. The PBH Defendants adm it that Linda Johns, Allison Taylor Johns’ m other, met with Taylor’s PBH Care Coordinato r on or abou t May 26, 2 011. Except as exp ressly admitted, the PBH Defendants deny the allegations contained in paragraph 87 of the Complaint.
88. The PBH Defendants ad mit that Linda Johns, Allison Taylor Johns’ mother, and Taylor’s PBH Care Coordinator discussed the Intensive Review. Except as express ly admitted, the PBH Defendants deny the allegations contained in paragraph 88 of the Complaint.
89. The PBH Defendants admit that on June 23, 2011, Allison Taylor Johns signed a written request for an Intens ive Review. The PBH De fendants aver that on June 30, 2011, the Intensive Review Comm ittee met to consider Allison Taylor Johns’ request for Intens ive
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Review, and concluded that the Comm ittee would not recomm end that Taylor’s plan be submitted under the Intensive Review Category. Except as expressly adm itted and averred, the PBH Defendants deny the allegations contained in paragraph 89 of the Complaint.
90. The PBH Defendants deny the allegations contained in paragraph 90 of the Complaint.
91. The PBH Defendants deny the allegations contained in the first sentence of paragraph 91 of the Complaint. With respect to the second sentence of said paragraph., the PBH Defendants admit that Allison T aylor Johns purports to seek the righ t to challenge her Support Needs Matrix Category “B” and Ma trix “Child Non-Resident” through the fair hearing process, and aver that if a Treatment Authorization Request (“TAR”) for services for Taylor is submitted in excess of the Base Budget for her Support Needs Matrix Category and PBH Utilization Management denies the TAR in whole or in part , that Taylor m ay challenge her Support Needs Matrix Category and Matrix in the fair hearing process pursuant to 42 U. S.C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq. The PBH Defendants aver that the SIS is only one factor used in the Support Needs Matrix, and further aver that there exist mechanisms to request a new or revised SIS assessment, where approp riate. Except as expressly admitted and av erred, the PBH Defendants deny the allegations contained in the second sentence of said paragraph.
92. The PBH Defendants deny the allegations contained in paragraph 92 of the Complaint, and aver th at as of the date of this Answer, PBH Utiliza tion Management has no t denied any Treatment Authorization Request submitted by or on b ehalf of Allison Taylor John s that would trigger the fair hear ing process pursuant to 42 U.S. C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq. wherein Allison T aylor Johns could ch allenge her SIS score or Su pport Needs Matrix Category.
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93. Upon information and belief, the PBH Defendants admit the allegations contained in paragraph 93 of the Complaint.
94. The PBH Def endants admit that in Ap ril 2011, D.C. subm itted an I ndividual Support Plan (“ISP”) which included a ba se budget of $43,579.52 for the period May 2011 through April 2012. Ex cept as exp ressly admitted, the PBH Defendants deny the alleg ations contained in paragraph 83 of the Complaint.
95. The PBH Defendants adm it that in Marc h 2011, PBH provided D.C. with notice (though his mother, Penny C., who se rves as D.C.’s guardian) that D.C.’s Matrix and Category under the Support Needs Matrix wa s Matrix “Child Non-Resident” and Category “A”, and that his Base Budget for the period from July 2011 through June 2012 would be $18,799.60. The PBH Defendants respectfully refer the Court to the March 2011 a nd the April 4, 2011 letters for their actual language and full text. Except as expressly admitted, the PBH Defendants deny the allegations contained in paragraph 95 of the Complaint.
96. The PBH Defendants adm it that D.C.’s Indi vidual Service Plan for the period of July 2011 through December 2011 is based on an annualized budget of $28,199.40, representing the first “step-down” from his previous annual budget. The PBH Defe ndants further admit that D.C.’s Individual Service Plan for th e period January 2012 through June 2012 will b e based on an annualized budget of $23,499.50, re presenting the second “step-down” from his previous annual budget. The PBH Defendants further admit that effective July 1, 2012, D.C.’s budget will be the Base Budget am ount for his category, or presently $18,799.60. Ex cept as expressly admitted, the PBH Defendants deny the allegations contained in paragraph 96 of the Complaint.
97. The PBH Def endants admit that D.C.’s Support Needs Matrix Ca tegory and Matrix is based, in part, on an evaluation of D.C. using the SIS perfor med in March 2010.
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Except as expressly admitted, the PBH Def endants deny the allega tions contained in paragraph 97 of the Complaint.
98. The PBH Defendants adm it that D.C.’s mother, Penny C., m et with D.C.’s PBH Care Coordinator in April 2011 and submitted an ISP for the period of May 1, 20 11 through April 30, 2012, which included a base budget of $43,579.52, and that on April 21, 2011, PBH issued a “N otice of Decision on In itial Request for Medicaid Services .” Except as express ly admitted, the PBH Defendants deny the allegations contained in paragraph 98 of the Complaint.
99. The PBH Defendants deny the allegations contained in paragraph 99 of the Complaint.
100. The PBH Defendants admit that in May 2011, D.C.’s mother, Penny C., discussed the SIS with D.C.’s PBH Care Coordinator and requested Intensive Review. The PBH Defendants aver that on or about May 25, 2011, an Intensive Review request from D.C.’s mother was submitted. Excep t as exp ressly admitted or ave rred, the PBH Def endants deny th e allegations contained in paragraph 100 of the Complaint.
101. The PBH Defendants adm it that on or about June 7, 2011, PBH faxed a copy of the Intensive Review Comm ittee Response Form regarding D.C.’s request for an Intensive Review to Penny C. The PBH Defe ndants aver that the Intensive Review Comm ittee Response Form is the best evidence of its contents, and re spectfully refer the Court to that document for its actual language and f ull text. Exce pt as expres sly admitted and averre d, the PBH Def endants deny the allegations contained in paragraph 101 of the Complaint.
102. The PBH Defendants adm it that on June 10, 2011, D.C.’s mother, Penny C., m et with D.C.’s PBH Care Coordinator. The PBH Defendants further admit that on or about June 15,
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2011, D.C.’s mother, Penny C., submitted to PBH an ISP for D.C. Except as expressly admitted, the PBH Defendants deny the allegations contained in paragraph 102 of the Complaint.
103. The PBH Defendants adm it that on or about June 22, 2 011, PBH Utilization Management issued a N otice of Decision on Initi al Request for Medicaid Services. The PBH Defendants aver that the Notice of Decision on In itial Request for Medicaid Services is the best evidence of its contents, and respectfully refer the Court to said document for its actual language and full text. Except as express ly admitted or averred, the PBH Defendants deny the allegations contained in paragraph 103 of the Complaint.
104. The PBH Defendants admit that on or about June 30, 2011, D.C.’s mother, Penny C., and D.C.’s PBH Care Coordinator comm unicated and that PBH recei ved an ISP update for D.C. signed by Penny C. dated June 30, 2011, w ith language indicating it was “signed under protest because ISP Plan does not m eet [D.C.]’s needs and care coord. ha s advised services will end after today if not signed --.” Except as ex pressly admitted, the PBH Defendants deny the allegations contained in paragraph 104 of the Complaint.
105. The PBH Defendants deny the allegations contained in paragraph 105 of the Complaint.
106. The PBH Defendants deny the allegations contained in the first sentence of paragraph 106 of the Com plaint. With respect to th e second sentence of said paragraph., the PBH Defendants adm it that D.C. purports to seek the right to challenge his Support Needs Matrix Category “A” and Matrix “Child Non-Re sident” through the fair hearing process, and aver that on June 22, 2011, PBH Utilization Management denied a TAR subm itted by D.C. an d provided him with notice of appeal rights where he could challenge, inter alia, his Support Needs Matrix Category and Matrix in the f air hearing process pur suant to 42 U.S.C. §
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1396a(a)(3) and 42 C.F.R. § 438.400, et seq. The PBH Defendants aver that the SIS is only one factor used in the Support Needs Matrix, and furthe r aver that there exist mechanisms to request a new or revised SIS assessment, where appropriate. Except as expressly admitted and averred, the PBH Defendants deny the allegations contained in the second sentence of said paragraph.
107. The PBH Defendants deny the allegations contained in paragraph 107 of the Complaint, and aver th at on June 22, 2011, PBH Utilization Managem ent denied a TAR submitted by D.C. and provided him with notice of appeal rights where he could challenge, inter alia, his Support Needs Matrix Category and Matrix in the fair hearing process pursuant to 42 U.S.C. § 1396a(a)(3) and 42 C.F.R. § 438.400, et seq.
RESPONSE TO “CLASSWIDE ALLEGATIONS” 108. The PBH Defendants deny the allegations contained in paragraph 108 of the Complaint, and specifically deny that there is any basis in law or f act for this Court to certify a class. 109. The PBH Defendants deny the allegations contained in paragraph 109 of the Complaint, and specifically deny that there is any basis in law or f act for this Court to certify a class. 110. The allegations contained in paragraph 110 of the Complaint are not directed at PBH, and t herefore no response is required. To the extent a response is deem ed required, the PBH Defendants deny the allegations contained in said paragraph 110. 111. The PBH Defendants deny the allegations contained in paragraph 111 of the Complaint. 112. The PBH Defendants deny the allegations contained in paragraph 112 of the Complaint.
26 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 26 of 33

113. The PBH Defendants deny the allegations contained in paragraph 113 of the Complaint.
114. The PBH Defendants deny the allegations contained in paragraph 114 of the Complaint.
115. The PBH Defendants deny the allegations contained in paragraph 115 of the Complaint.
116. The PBH Defendants deny the allegations contained in paragraph 116 of the Complaint.
117. The PBH Defendants deny the allegations contained in paragraph 117 of the Complaint.
118. The PBH Defendants deny the allegations contained in paragraph 118 of the Complaint.
119. The PBH Defendants deny the allegations contained in paragraph 119 of the Complaint.
120. The PBH Defendants deny the allegations contained in paragraph 120 of the Complaint.
121. The PBH Defendants deny the allegations contained in paragraph 121 of the Complaint.
122. The PBH Defendants deny the allegations contained in paragraph 122 of the Complaint.
RESPONSE TO “FIRST CLAIM FOR RELIEF (Due Process: Lack of Ascertainable Non-Arbitrary Standards)” 123. The PBH Defendants incorporate each adm ission, denial, and averm ent set forth in their Responses to paragraphs 1 through 122 of the Complaint, as if fully set forth herein.
27 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 27 of 33

124. The allegations contained in paragraph 124 of the Com

plaint are a legal

conclusion as to which no response is required.

125. The PBH Defendants deny the allegations contained in paragraph 125 of the

Complaint.

RESPONSE TO “SECOND CLAIM FOR RELIEF (Medicaid Notice and Hearing Requirements)”

126. The PBH Defendants incorporate each adm ission, denial, and averm ent set forth

in their Responses to paragraphs 1 through 125 of the Complaint, as if fully set forth herein.

127. The allegations contained in paragraph 127 of the Complaint are legal conclusions

as to which no response is required. The PBH De fendants respectfully refer the Court to 42

U.S.C. § 1396a(a)(3) for its actual language and full text.

128. The PBH Defendants deny the allegations contained in paragraph 128 of the

Complaint.

129. The PBH Defendants deny the allegations contained in paragraph 129 of the

Complaint.

RESPONSE TO “THIRD CLAIM FOR RELIEF (Fourteenth Amendment of the U.S. Constitution)”

130. The PBH Defendants incorporate each adm ission, denial, and averm ent set forth

in their Responses to paragraphs 1 through 129 of the Complaint, as if fully set forth herein.

131. The allegations contained in paragraph 131 of the Complaint are legal conclusions

as to which no response is required. The PBH Defendants respectfully refer the Court to the U.S.

Supreme Court’s decision in Goldberg v. Kelly , 397 U.S. 253 (1970) and to 42 C.F.R. §

431.205(d) for their actual language and full text.

28 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 28 of 33

132. The PBH Defendants deny the allegations contained in paragraph 132 of the Complaint.
133. The PBH Defendants deny the allegations contained in paragraph 133 of the Complaint.
134. The PBH Defendants deny the allegations contained in paragraph 134 of the Complaint.
RESPONSE TO “RELIEF REQUESTED” The un-numbered paragraph following para graph 134 of the Co mplaint, including subparts (1) through (7), is not an allegation an d therefore no responsive pleading is required. Should a response be deem ed required, the PBH De fendants deny each and every allegation contained in said paragraph, except admit that Plaintiffs purport to demand judgment and certain forms of relief, but deny that there is any legal or factual basis for awarding the same.
THIRD DEFENSE No action taken by Defendants Shipm an and/or PBH violated any clearly established constitutional or statutory right of the Plaintiffs, and therefor e Plaintiffs’ Complaint fails to state a claim upon which relief may be granted. Therefore, Plaintiffs’ Complaint should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6).
FOURTH DEFENSE Plaintiffs’ Complaint must be dismissed pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) because Plaintiffs lack standing under Article III, Section 2 o f the United States Cons titution to challenge the acts or om issions of De fendants PBH and Shipm an. There is no case or
29 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 29 of 33

controversy between the parties, and Plaintiffs’ claims are not ripe for ad judication because they have suffered no injury in fact.
FIFTH DEFENSE Plaintiffs’ Complaint must be dismissed pursuant to Fed. R. Civ. P. 12(b)(1) based on the Eleventh Amendment to the United States Constitution. In addition to declaratory and injunctive relief, Plaintiffs seek from Defendant Shipman in her official capacity and from Defendant PBH “[a]ll such other and further relief as the Court d eems to be just and equ itable.” Plaintiffs seek far-ranging remedies from this Court as to D efendants Shipman and PBH above and beyond simple prospective injunctive relief.
SIXTH DEFENSE Plaintiffs’ Second Claim fo r Relief m ust be dism issed pursuant to Fed. R. Ci v. P. 12(b)(6) for failure to exhaust administrative remedies.
SEVENTH DEFENSE Plaintiffs’ Complaint should be dismissed pursuant to Fed. R. Civ. P. 19(a) for fai lure to join necessary parties, i.e., the approxim ately 546 PBH consum ers enrolled in the Innovations Waiver whose Base Budget under the Support N eeds Matrix has remained the same or increased with the im plementation of the Support Need s Matrix effective July 1, 2011. The funding available to PBH for the Innovations W aiver is finite and fixed, and th e allocation of funds through Innovations is zero sum . To the extent any of the Plain tiffs were to receive the injunctive relief they seek, the impact would necessarily be to reduce the Base Budgets of other consumers enrolled in the Innovations W aiver, including funding for services which have already been authorized for those consumers.
30 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 30 of 33

Inasmuch as the Complaint does not desc ribe the alleged underlying claim s with sufficient particularity to enable the PBH Defendants to determine all of their legal, contractual, and equitable rights, the PBH De fendants reserve the right to a mend and/or supplem ent the averments of their Answer to assert any and all pertinent liability defenses ascertained through further investigation and discovery of this action.
The PBH Defendants incorporat e any applicable affirm ative defenses of the defense asserted by any other defendants to this action. The PBH Def endants will rely on all defenses that may become available during the discovery period.
WHEREFORE, the PBH Defendants respec tfully demand judgment dismissing the Plaintiffs’ Complaint with prejudice and awar ding the PBH Defendants their reasonable costs and disbursements, together with such other and further relief that the Court m ay deem just and proper.
Respectfully submitted, this the 29th day of August, 2011. NELSON MULLINS RILEY & SCARBOROUGH LLP
By: /s/ Stephen D. Martin Wallace C. Hollowell III N.C. State Bar No. 24304 Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: chuck.hollowell@nelsonmullins.com E-Mail Address: steve.martin@nelsonmullins.com
31 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 31 of 33

Raboteau T. Wilder, Jr. WOMBLE CARLYLE SANDRIDGE & RICE, PLLC One Wells Fargo Center, Suite 3500 301 South College Street Charlotte, NC 28202-6037 Telephone: (704) 331-4932 Facsimile: (704) 444-8165 E-Mail Address: rwilder@wcsr.com
Counsel for Defendants Pamela L. Shipman and PBH
32 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 32 of 33

CERTIFICATE OF SERVICE
I, the undersigned atto rney of the law o ffices of Nelson Mullin s Riley & Scarb orough LLP, attorneys for Defendants Shipm an and PBH do hereby certify that on August 29, 2011, I electronically filed th e foregoing ANSWER AND AFFIRMAT IVE DEFENSES OF DEFENDANTS PAMELA L. S HIPMAN AND P BH with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following:
• John R. Rittelmeyer (john.rittelmeyer@disabilityrightsnc.org) • Jennifer L. Bills (jennifer.bills@disabilityrightsnc.org) • Morris F. McAdoo (morris.mcadoo@disabilityrightsnc.org) • Douglas S. Sea (dougs@lssp.org) • Jane Perkins (perkins@healthlaw.org)
Attorneys for the Plaintiffs
• Belinda A. Smith (bsmith@ncdoj.gov) Attorney for Defendant Lanier Cansler
NELSON MULLINS RILEY & SCARBOROUGH LLP /s/ Stephen D. Martin Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: steve.martin@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
33 Case 5:11-cv-00354-FL Document 38 Filed 08/29/11 Page 33 of 33

 
 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION Case No.: 5:11-cv-354

K.C. et al., individually and on behalf of all )

others similarly situated,

)

)

Plaintiffs, and

) MOTION FOR TEMPORARY

) RESTRAINING ORDER

M.S., individually and on behalf of all others )

similarly situated,

)

)

Intervenor Plaintiff,

)

)

v.

)

)

LANIER CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services, et al.,

)

)

Defendants.

)

Plaintiffs K.C. and D.C. and Intervenor Plaintiff M.S. move the Court for a Temporary Restraining Order pursuant to Federal Rule of Civil Procedure 65 to enjoin Defendants from further reducing their Medicaid services effective January 1, 2012 without first providing notice and the opportunity for a hearing. The reasons for this motion are that:
1. Defendants already reduced each of these Plaintiffs’ services effective July 1, 2011 without notice or hearing rights. Defendants now intend to further reduce these Plaintiffs’ services by significant amounts effective January 1, 2012, again without notice or hearing rights.
2. These three named plaintiffs seek a Temporary Restraining Order to prevent Defendants from further reducing their services until they are first provided with due process or until this Court rules on their already pending request for a preliminary injunction.
3. Plaintiffs K.C., D.C. and M.S. are already suffering irreparable harm and are imminently threatened with immediate and severe additional irreparable harm unless the further significant reductions in their services scheduled for January 1, 2012 are

Case 5:11-cv-00354-FL Document 70 Filed 12/20/11 Page 1 of 3

temporarily enjoined.

4. The actions of the Defendants, as demonstrated by the attached declarations and

memorandum of law and those filed with Plaintiffs’ previous Motions for Preliminary

Injunction, Class Certification, and Intervention of M.S., plainly violate the Medicaid

Act and the Due Process Clause of the United States Constitution.

5. The immediate irreparable injury with which these three plaintiffs are threatened will

occur before this Court can rule on Plaintiffs’ pending motion for preliminary

injunction, as the briefing on that motion has been stayed.

6. Plaintiffs have verified that Defendants will not consent to this motion and that

Defendants wish to be heard prior to entry of a Temporary Restraining Order.

WHEREFORE, Plaintiffs move the Court to:

A.

Schedule a telephonic hearing for the week of December 26, 2011 on this

motion.

B.

Temporarily restrain Defendants and their successors, agents, officers,

servants, employees, attorneys and representatives and all persons acting in

concert or participating with them, from further reducing or terminating

Medicaid services to named plaintiffs K.C., and D.C. and Intervenor Plaintiff

M.S. under the PBH Innovations Waiver based on budget limits under the

Support Needs Matrix until Defendants first provide advance notice and the

opportunity for a fair hearing.

C.

Waive any requirement for security on the part of the plaintiffs.

Dated: December 20, 2011

ATTORNEYS FOR PLAINTIFFS
/s/ Douglas S. Sea______ Douglas Stuart Sea N.C. State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT, INC. 1431 Elizabeth Avenue Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org

Case 5:11-cv-00354-FL Document 70 Filed 12/20/11 Page 2 of 3

/s/ John R. Rittelmeyer______ John R. Rittelmeyer N.C. State Bar No. 17204 Jennifer L. Bills N.C. State Bar No. 37467 Morris F. McAdoo N.C. State Bar No. ???? DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244 john.rittelmeyer@disabilityrightsnc.org jennifer.bills@disabilityrightsnc.org
/s/ Jane Perkins______ Jane Perkins N.C. State Bar No. 9993 Jina Dhillon N.C. State Bar No. 41997 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street, Ste. G-7 Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org
Case 5:11-cv-00354-FL Document 70 Filed 12/20/11 Page 3 of 3

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION

K.C., a minor child, by his mother and next friend Africa H.; ALLISON TAYLOR JOHNS; L.S., a minor child, by his father and next friend Ron S.; and D.C., a minor child, by his mother and next friend Penny C.; and M.S., a minor child, by and through his next friend, Rachelle S.,
Plaintiffs,

Civil Action No. 5:11-cv-354-FL
DEFENDANTS PAMELA L. SHIPMAN AND PBH’S INITIAL RESPONSE TO
CERTAIN PLAINTIFFS’ MOTION FOR TEMPORARY RESTRAINING
ORDER [D.E. 70]

vs.

LANIER CANSLER, in his official capacity as Secretary of the Department of Health and Human Services; PAMELA L. SHIPMAN, in her official capacity as Chief Executive Officer of PBH; and PBH,

Defendants.

Defendants Pamela L. Shipman (“Shipman”) and PBH (together, the “PBH Defendants”), by and through their undersigned at torneys, respectfully submit the following initial response to Plaintiffs K.C., D.C., and M.S.’s Motion for Temporary Restraining Order with respect to the procedural aspects of said Motion, and respectfully reserve the right to f ile a fuller response on the merits of said Motion at the direction of the Court.
Certain Plaintiffs’ request for a telephone conference with the Court regarding their Motion for Tem porary Restraining Order durin g the week of Decem ber 26, 2011 should b e denied for the following reasons:
• The Court has already considered and de nied Plaintiffs’ request for tem porary injunctive relief.

Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 1 of 9

• Plaintiffs currently have a Motion for Preliminary Injunction before the Court, the briefing on which has been stayed by the C ourt in order to first address P laintiffs’ earlier-filed motion to disqualify counsel for the PBH Defendants.
• There is no new or ch anged basis for the in stant motion that was not already contained in Plaintiffs’ Motion for Pre liminary Injunction, which is presently stayed. Compare Plaintiffs’ Motion for Prelim inary Injunction [D.E. 31, p. 1] (“Defendants reduced the rem aining named Plaintiffs’ services ef fective July 1, 2012 and intend to further reduce their services effective January 1, 2012 . . . ”) with the in stant Motion (“Defendants now intend to f urther reduce these Plaintiffs’ services by significant amount s effective January 1, 2012 . . . ” [D.E. 70, p.1].
• Although by their own adm ission the moving Plaintiffs have all known about the planned January 1, 2012 reduction in their Support Needs Matrix budgets since at least March 2011, the Plaintiffs waited unt il the evening of December 20, 2011 to bring the instant motion. The moving Plaintiffs waited to bring the instant motion until a time imm ediately prior to th e Christmas holiday, when the PBH Defendants’ offices will be closed.
A. The Court Has Already Denied Plaintiffs’ Request for Temporary Injunctive Relief. Plaintiffs filed their Complaint in this action July 1, 2011 [D.E. 1], in which the Plaintiffs
sought temporary, preliminary, and perm anent injunctive relief. In order to comply with the Local Rules requiring pleadings to redact or alter the names of minor children, Plaintiffs re-filed their Complaint on July 5, 2011 [D.E. 6] in wh ich they sought the sam e relief. Although Plaintiffs did not file a Motion for Temporary Restraining Order w ith or in the 10 days af ter
2 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 2 of 9

filing their Com plaint, the Cour t took up consideration of Plai ntiffs’ request for tem porary injunctive relief in its July 12, 2011 Order. [D.E. 19]. The Court found that the Plaintiffs had not met the requirem ents for tem porary injunctive relief set o ut in Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008). The Court noted that as alleged in the Complaint, “all plaintiffs are continuing to r eceive services, albeit with reduced budgets . . . ” [D.E. 19, p. 3]. The Court denied Plaintiffs’ request for temporary injunctive relief.
B. Plaintiffs Have Already Filed Their Moti on for Preliminary Injunction, on which the Court has Stayed the Briefing. On August 24, 2011, Plaintiffs filed a Motion fo r Preliminary Injunction and materials in
support of the sam e. [D.E. 31]. On the day before, however, Plaintiffs had filed a Motion to Disqualify Counsel with respect to certain counsel of record for the PBH Defendants. [D.E. 23]. On September 6, 2011, the Court entered an Or der staying the briefing on the m otion for preliminary injunction and Plaintiffs’ Motion for Cl ass Certification, “turning its attention to the plaintiffs’ motion to disqualify counsel.” [D.E. 39].
Briefing on Plaintiffs’ Motion fo r Preliminary Injunction remains stayed while the Court continues to consider plaintiffs’ motion to disqualify counsel. Presently, the motion to disqualify counsel is pending before Magi strate Judge Jones for a m emorandum and recommendation. See D.E. 66, p.1, fn.1.
On December 5, 2011, the Court entered an Order allowing M.S. to intervene as a plaintiff in this action. [D.E. 67]. In that Order, the Court concluded, in pertinent part:
Where the motion to disqualify c ounsel still rem ains before the court for decision, the deadlines for defendants to respond to the motion for preliminary injunction and first motion to certify class remain stayed. W hen decision is reach ed on the m otion to disqualify counsel, the court shall prom ptly institute deadlines for defendants to respond to said pending motions.
3 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 3 of 9

Id. at p. 6. C. The Instant Motion is an Improper Attemp t to Circumvent the Court’s Stay of the Briefing on Plaintiffs’ Motion for Preliminary Injunction. Although the Court has stayed briefing on Plai ntiffs’ Motion for Prelim inary Injunction,
and as recently as tw o weeks ago re-affirm ed that the br iefing on said m otion would rem ain stayed until the Court had resolv ed Plaintiffs’ Motion to Disqua lify Counsel (in effect, deciding whether the PBH Defe ndants can continue to be represented in this action by their selected counsel), the moving Plaintiffs now seek to circum vent the Court’s stay w ith the instant motion. However, there is nothing new or changed since the Court re-affirmed the stay of the briefing on preliminary injunction that would justify a temporary restraining order.
The stated basis for the moving Plainti ffs’ instant motion is that “Defendants now intend to further reduce these P laintiffs’ services by significant amounts effective January 1, 2012 . . .” [D.E. 70, ¶ 1] (emphasis added). However, this is not a new or recently announced action of th e Defendants; indeed, it m irrors the stated basis for Plaintiffs’ m otion for preliminary injunction. “Defendants reduced the rem aining Plaintiffs’ services effective July 1, 2011 and intend to further reduce their servi ces effective January 1, 2012 . . . ” [D.E. 31, ¶ 2]. Further, by the moving Plaintiffs own admission, they have known about the planned January 1, 2012 reduction in their respective Support Needs Matrix budgets since at least March 2011:
Effective January 1, 2012, Defendant s will execute another wave of service reductions, as requir ed by the same undated notices mailed in March 2011 which required the July 1, 2011 reductions. See. e.g., Dec. of Penny C. Exh. G; Dec. of Rachelle S. Exh H.; Dec of Africa Heath Ex. G.
4 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 4 of 9

[D.E. 71, p. 1]. 1 As noted above, these planned reductions for med the core basis for the Plaintiffs’ request for tem porary injunctive relief in the ir Complaint, and the cor e basis for Plaintiffs’ motion for preliminary injunction.2

1

The undated March 2011 letters have been prev iously filed with the Court at D.E. 31-41,

31-68, and 52-11. All of these exhi bits clearly show each of these Plaintiffs’ “Base Budget” for

the prior planning period, thei r respective SNM Category and Ca tegory Budget, and how each

Plaintiff will be “phased in to this new SNM Category B udget” in various steps, with the firs t

step occurring in July 2011, the next in January 2012, and so on.

2

The PBH Defendants strongly reject Plaintiffs’ characterization of these reductions in the

Plaintiffs’ Support Needs Matrix budgets as “service reductions,” as PBH does not provide any

of the Plaintiffs with services, but rather “m anages the 1915(b)/(c) Medicaid W aiver and serves

as the payor for a network of private sector healthcare providers who provide services to

enrollees.” See Decl. of Pamela Shipman [D.E. 41] ¶ 7.

The PBH Defendant s further reject the Plaintiffs’ co re argument, which is that these reductions in their Supp ort Needs Matrix budg ets entitled them to some federal co nstitutional, statutory, and/or regulatory due process rights which they were not afforded. As discussed in the PBH Defendants’ Answer to Plain tiffs’ Complaint, and a s will be dis cussed more fully in the PBH Defendants’ Response to Plaintiffs’ Moti on for Prelim inary Injunction when briefing on that motion resumes, the things about which the Plaintiffs claim to have due process rights (their SIS score, their assignment to a Support Needs Matrix category, the setting of a SNM budget for their category) are no t “actions” that give rise to an app eal (i.e., due p rocess rights) under the federal regulations governing PB H’s operation as a m anaged care Medicaid organization. A n “appeal” is required only when PBH takes an “action,” as those terms are defined in 42 C.F.R. § 438.400(b).

In the instances where PBH has taken an “acti on” that trig gers due process righ ts with respect to one of the Plaintiffs, PBH has appropriately issued that Plaintiff a written notice of the action and apprised her of her due process ri ghts. Indeed, in November 2011, PBH took an “action” in denying, in part, the p roposed Individual Service Plan (“ISP”) for Plaintiff Allison Taylor Johns for the plan year 11/1/11 through 10/31/12. PBH issued Ms. Johns a notice of her due process rights, and Ms. Johns has exercised her due process rights and is presently appealing PBH’s partial denial of her proposed ISP in th e North Carolina Office of Adm inistrative Hearings, Case No. 11 MED 13784. (Presum ably this is the reason why Plaintiff All ison Taylor Johns did not join in the movi ng Plaintiffs’ Motion for Temporary Restraining Order.) PBH has not taken an “action” with respect to Plaintiffs K.C. or M.S. W hile PBH did take an “action” with respect to P laintiff D.C. in June 2011 and issued him a notice of th e decision and apprised him of his appeal rights, D.C.’s guardian mooted his appeal by submitting a new up date to his ISP, which was approved by PBH in whole, and was thus not an “action.”

5 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 5 of 9

The underlying reason for the Court’s stay of the briefing on the Motion for Preliminary Injunction has not changed. At present, Plaintiffs are still seeking to disqualify PBH Defendants’ selected counsel in this action, and until tha t issue is resolved by the Court, further briefing on the substantive issues r aised in Pla intiffs’ Motion f or Preliminary Injunction is in appropriate. Until the Court has resolved the motion to disqualify counsel, the PBH Defendants will not know which counsel may participate in the defense of this case, including the motions for injunctive relief.
Further, while the Plaintiffs have known that there would be additional reductions in their respective Support Needs Matrix budgets effective January 1, 2012 for at least 8 m onths, the moving Plaintiffs have waited until the last m inute to bring the instant motion. The Plaintiffs’ delay has created a significant difficulty on the PBH Defendants to respond to the instant motion, and indeed this appears to have been part of Plaintiffs’ strategy. PBH’s offices will be closed on December 26-27 for th e Christmas holiday, and PBH employees who woul d be n ecessary to fully respond to the instant m otion will be out of the office. C ounsel’s law offices will likewis e be closed during the Christmas holidays. Further, at least one of the undersigned counsel will be out of the S tate for 10 days beginning December 23, making participation in the response and hearing on this matter difficult.
CONCLUSION As set forth above, the moving Plaintiffs’ Motion for Temporary Restraining Order is a procedurally inappropriate attempt to circumvent the Court’s stay of the briefing on Plaintiffs’ Motion for Prelim inary Injunction. The pur ported exigent circumstance justifying this extraordinary remedy is a planned January 1, 2012 reduction in certain Plaintiffs’ respective
6 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 6 of 9

Support Needs Matrix budget which was announced in March 2011, and which for med the basis
for Plaintiffs’ Motion for Preliminary Injunction in August 2011.
The PBH Defendants respectfully request that the Court deny the moving Plaintiffs’
Motion for Te mporary Restraining Order as improperly brought. Alternatively, the PBH
Defendants respectfully request that th e Court deny the m oving Plaintiffs’ request for a
telephone hearing on th e instant m otion during the week of Dece mber 26, 2011, and instead
incorporate the ins tant motion with Plaintiffs’ already-filed Motion f or Preliminary Injunction,
the briefing on which will r emain stayed un til the Cour t has decid ed Plaintiffs’ Motion to
Disqualify Counsel. A lternatively, if the Court will grant the moving Plaintiffs’ request for a
telephone hearing during the week of Dece mber 26, 2011, the PBH Defendants respectfully
request that the Court set that hearing fo r Friday, December 30, 201 1 to allow the PBH
Defendants sufficient time to prepare and file a full response to the instant motion. Respectfully submitted, this the 21st day of December, 2011.
NELSON MULLINS RILEY & SCARBOROUGH LLP
By: /s/ Stephen D. Martin Wallace C. Hollowell III N.C. State Bar No. 24304 Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: chuck.hollowell@nelsonmullins.com E-Mail Address: steve.martin@nelsonmullins.com
Raboteau T. Wilder, Jr. WOMBLE CARLYLE SANDRIDGE & RICE, PLLC One Wells Fargo Center, Suite 3500 301 South College Street
7 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 7 of 9

Charlotte, NC 28202-6037 Telephone: (704) 331-4932 Facsimile: (704) 444-8165 E-Mail Address: rwilder@wcsr.com
Counsel for Defendants Pamela L. Shipman and PBH
8 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 8 of 9

CERTIFICATE OF SERVICE
I, the undersigned atto rney of the law o ffices of Nelson Mullin s Riley & Scarb orough LLP, attorneys for Defendants Shipman and PBH do hereby certify that on December 21, 2011, I electronically filed the foregoing DEFE NDANTS PAMELA L. SHIPMAN AND PB H’S INITIAL RESPONSE TO CERTAIN PL AINTIFFS’ MOTION F OR TEMPORARY RESTRAINING ORDER [D.E. 70] with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following:
• John R. Rittelmeyer (john.rittelmeyer@disabilityrightsnc.org) • Jennifer L. Bills (jennifer.bills@disabilityrightsnc.org) • Morris F. McAdoo (morris.mcadoo@disabilityrightsnc.org) • Douglas S. Sea (dougs@lssp.org) • Jane Perkins (perkins@healthlaw.org)
Attorneys for the Plaintiffs
• Belinda A. Smith (bsmith@ncdoj.gov) Attorney for Defendant Lanier Cansler
NELSON MULLINS RILEY & SCARBOROUGH LLP /s/ Stephen D. Martin Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: steve.martin@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
9 Case 5:11-cv-00354-FL Document 73 Filed 12/21/11 Page 9 of 9

 
 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION Case No.: 5:11-cv-354

K.C. et al., individually and on behalf of all )

others similarly situated,

)

)

Plaintiffs,

) MOTION FOR PRELIMINARY

v.

) INJUNCTION

)

LANIER CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services, et al.,

)

)

Defendants.

)

)

)

Plaintiffs move the Court, individually and on behalf of all others similarly situated, for a preliminary injunction to enjoin Defendants from reducing or terminating the waiver services of the named plaintiffs and others similarly situated without notice or the opportunity for a hearing. The reasons for this motion are set forth fully in the attached Memorandum of Law, Affidavits and Declarations, which show that:
1. Plaintiff Alison Taylor Johns has been informed by Defendant PBH since the filing of this lawsuit that she must sign a new plan of care agreeing to significant reductions in her services or that all of her services will stop no later than October 31, 2011. She seeks a preliminary injunction to prevent Defendants from terminating or reducing her services until she is first provided with due process or until this Court rules on her request for a permanent injunction.
2. Defendants reduced the remaining named Plaintiffs’ services effective July 1, 2011 and intend to further reduce their services effective January 1, 2012, in both cases without notice or hearing rights. These plaintiffs seek a preliminary injunction to restore their services to the level authorized on June 30, 2011, the day before the filing of this lawsuit, and to prevent further reductions in their services, pending a final ruling by this Court or until they are provided with due process.

Case 5:11-cv-00354-FL Document 31 Filed 08/24/11 Page 1 of 3

3. Plaintiffs are already suffering or are imminently threatened with irreparable harm

unless the activities of the Defendants are temporarily enjoined.

4. The actions of the Defendants, as proven by the attached documents, plainly violate

the Medicaid Act and the Due Process Clause of the United States Constitution.

5. By Defendant PBH’s admission, at least one hundred sixty persons are similarly

situated to the named Plaintiffs. Two of those proposed plaintiff class members have

provided evidence that they are suffering or threatened with irreparable harm.

Plaintiffs will very shortly be filing a motion for class certification and herein seek

preliminary relief on behalf of all similarly situated persons.

WHEREFORE, Plaintiffs move the Court to:

A.

Preliminarily enjoin Defendants and their successors, agents, officers, servants,

employees, attorneys and representatives and all persons acting in concert or

participating with them, from reducing or terminating Medicaid services to the

named plaintiffs and all others similarly situated under the N.C. Innovations

Waiver based on budget limits under the Support Needs Matrix until

Defendants first provide advance notice and the opportunity for a fair hearing

prior to the reduction or termination of services.

B.

Order Defendants to reinstate the level of services authorized prior to July 1,

2011 to Plaintiffs and all others similarly situated until the Court issues a final

ruling.

C.

Waive any requirement for security on the part of the plaintiffs.

D.

Schedule for as soon as practicable a hearing on this motion.

Dated: August 24, 2011

ATTORNEYS FOR PLAINTIFFS
/s/ Douglas S. Sea______ Douglas Stuart Sea N.C. State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT, INC. 1431 Elizabeth Avenue

Case 5:11-cv-00354-FL Document 31 Filed 08/24/11 Page 2 of 3

Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org
/s/ John R. Rittelmeyer______ John R. Rittelmeyer N.C. State Bar No. 17204 Jennifer L. Bills N.C. State Bar No. 37467 DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244 john.rittelmeyer@disabilityrightsnc.org jennifer.bills@disabilityrightsnc.org
/s/ Jane Perkins______ Jane Perkins N.C. State Bar No. 9993 Jina Dhillon N.C. State Bar No. 41997 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street, Ste. G-7 Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org
Case 5:11-cv-00354-FL Document 31 Filed 08/24/11 Page 3 of 3

 
 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION Case No.: 5:11-cv-354

K.C. et al., individually and on behalf of all )

others similarly situated,

)

)

Plaintiffs, and

) PLAINTIFFS’ REPLY IN SUPPORT OF

) MOTION FOR TEMPORARY

M.S., individually and on behalf of all others ) RESTRAINING ORDER

similarly situated,

)

)

Intervenor Plaintiff

)

)

v.

)

)

LANIER CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services, et al.,

)

)

Defendants.

)

On December 20, 2011, Plaintiffs K.C., D.C., and M.S. moved the Court for a Temporary

Restraining Order to prevent Defendants from imposing significant reductions in their Medicaid

services effective January 1, 2012. On December 21, 2011, Defendant Piedmont Behavioral

Health (PBH) filed an “Initial Response” to the Motion. Plaintiffs now file this reply to address

new issues raised by PBH.

PBH contends the motion should be denied because the Court previously denied a

Temporary Restraining Order. See Order (July 12, 2011) (Docket Entry (DE) 19). However, that

Order was solely in response to an unverified Complaint and thus occurred before Plaintiffs filed

any evidence or legal authority and before Defendants had had any opportunity to respond. The

Court specified that “preliminary injunctive relief is still available upon motion properly

supported and notice to defendants.” Id. at 3. Moreover, that Order denied a request in the

Complaint to temporarily enjoin the July 1, 2011 reductions, not the January 1, 2012 cuts. The

total amount by which Plaintiffs M.S.’s D.C.’s and K.C.’s services will have been reduced by

1 Case 5:11-cv-00354-FL Document 75 Filed 12/22/11 Page 1 of 7

Defendants will substantially increase on January 1, so the circumstances before the Court are now different than at the time of its prior Order. See generally Pla. Memo in Supp. of Mot. for TRO [DE 70]. Indeed, Intervenor Plaintiff M.S. was not yet even part of the lawsuit when the July 12 Order was entered, and the Court certainly did not prohibit Plaintiffs from returning to court for a TRO if, as has occurred here, the situation changed.
PBH also argues the motion should be denied because a motion for preliminary injunction is already pending. However, the TRO requested is for much more limited relief than sought in Plaintiffs’ preliminary injunction motion. The TRO motion seeks relief only for three named plaintiffs, not the entire class, and seeks only to preserve the status quo as of today by preventing the scheduled January 2012 reductions, leaving the July 2011 reductions in place until the Court can rule on the preliminary injunction motion. See Pla. Mot. for TRO [DE 70].
PBH speculates that Plaintiffs are seeking to circumvent the stay placed by the Court on briefing of the preliminary injunction motion. This is not correct. Rather, Plaintiffs seek much more limited emergency relief until the stay is lifted. PBH claims its attorneys cannot defend the TRO motion until the stay is lifted, but its thorough response filed within one day of the filing of plaintiffs’ motion proves the contrary. See Def. PBH Initial Resp. to Mot. for TRO [DE 73].
PBH further asserts that because the January 2012 cuts have been scheduled since April 2011, Plaintiffs should have requested this relief sooner. However, Plaintiffs had three good reasons for waiting to file the present motion. First, Plaintiffs were hopeful until this month that the stay would be lifted by now, that the Court would then order expedited briefing as requested by Plaintiffs, and that their preliminary injunction motion could be heard before January 2012. The motion to disqualify has been fully briefed since Plaintiffs filed their Reply on September 22, 2011 [DE 49] and Plaintiffs had no way to know that the stay would remain in effect for so
2 Case 5:11-cv-00354-FL Document 75 Filed 12/22/11 Page 2 of 7

long. Second, Intervenor Plaintiff M.S. could not file this motion until the Court granted his motion to intervene, which did not occur until December 5, 2011 [DE 67]. Third, as their declarations make clear, Plaintiffs D.C. and M.S. have been until very recently seeking to avoid the January 2012 cuts in their services through requests to PBH to increase their services based on the results of their recent SIS evaluations. Supp. Dec. of Rachelle S ¶¶ 2-10; Supp. Dec. of Penny C. ¶¶ 7-9 [DE 70-2 & 70-5]. Only after it became increasingly clear as this month progressed that PBH would not act on those requests were these Plaintiffs compelled to seek emergency relief from this Court. Id.
On the merits, PBH argues that it took no “action” requiring due process. PBH Resp. at n. 2 [DE 73]. This hyper-technical argument, which is based solely on an artificial interpretation of federal regulations and not the Constitution, ignores the reality of the situation demonstrated by Plaintiffs’ evidence. PBH did take adverse action to reduce authorization for Medicaid services to the Plaintiffs in its undated notices mailed in March 2011 by imposing a lower maximum dollar amount, effective July 1, 2011, on the amount of services for which PBH would reimburse Plaintiffs’ health care providers. See Decs. of Penny C. Ex. G, Africa Heath Ex. G, & Rachelle S. Ex. H [DE 31-41, 31-68, 52-11]1 PBH has made clear that once the maximum budget imposed by that undated notice is exhausted, PBH will entirely cease making payments for Plaintiffs’ Medicaid services. See e.g. PBH 7/8/11 and 7/13/11 Progress Notes re Alison Johns (attached as Ex. A).2 The PBH waiver itself specifies that “the budget limits in the Level of
1 PBH correctly notes that it is not an actual provider of services, PBH Resp. at n. 2 [DE 73], but this is true in all cases where the authorization to provide services has been reduced or terminated by a Medicaid agency, and the law is very clear that such action by the state Medicaid agency or its agent first requires adequate written notice and the opportunity for a fair hearing. See Memo of Law in Supp. of Mot. for Prel. Injun. at 14-20 [DE 32].
2 These documents were recently obtained from PBH by Plaintiffs’ attorneys in discovery in a state administrative proceeding.
3 Case 5:11-cv-00354-FL Document 75 Filed 12/22/11 Page 3 of 7

Support Need Matrix are the maximum Individual Budget amount that can be authorized in a waiver participant’s Person Centered Plan.” Sea Aff. Ex. E, App. C-4: 3 [DE 31-7 p.8].
The undated notices mailed to Plaintiffs by PBH in March 2011 specified the maximum amount of services PBH would pay for beginning July 1, 2011 and January 1, 2012 and further stated “the annual Category Budget is the maximum amount of base service funds that can be authorized in your Individual Support Plan.” See Decs. of Penny C. Ex. G, Africa Heath Ex. G, & Rachelle S. Ex. H [DE 31-41, 31-68, 52-11]. This notice then informed each plaintiff that a PBH employee would contact him or her to develop a new plan to reduce services to fit within this maximum budget. Id. Those PBH employees then instructed Plaintiffs that they must sign new plans of care to reduce their services effective July 1, 2011, in many cases specifically informing Plaintiffs’ families that they had no appeal rights and that failure to “agree” to the reduction would cause services to stop entirely on July 1, 2011 or that their children could be removed from their home. See e.g. Dec. of Penny C. ¶¶ 31, 33, 35, 40, 43, 46, Exs. U, X; Dec. of Africa Heath ¶¶ 20, 24, 30; Dec. of Rachelle S. ¶¶ 21, 22, 24 [DE 31-34, 31-61, 52-3]. PBH thus plainly attempted to circumvent its legal duty to provide the right to a hearing prior to reducing Medicaid services through a system of budget limits coupled with coercion. Such an end-run scheme to prevent Plaintiffs from exercising the right to contest agency action is plainly inconsistent with due process. See generally Memo in Supp. of Mot. for Prelim. Injun. at 4-20 [DE 32].
Finally, PBH complains that one of its attorneys will be out of the state next week and that its offices are closed on Monday and Tuesday. However, Plaintiffs have requested a hearing by telephone, which can easily be attended from out of state, and plaintiffs have no objection to
4 Case 5:11-cv-00354-FL Document 75 Filed 12/22/11 Page 4 of 7

holding the hearing on Friday, December 30.3 Alternatively, because both sides have filed briefs, the Court could rule on the motion without a hearing.
CONCLUSION

For the foregoing reasons and those stated in Plaintiffs’ prior filings, Plaintiffs request

that this Court issue a Temporary Restraining Order prohibiting Defendants from further

reducing Medicaid services to Plaintiffs K.C., D.C., and M.S. effective January 1, 2012 until

Defendants first comply with the Due Process requirements of the United States Constitution

and the Medicaid program.

Dated: December 22, 2011

ATTORNEYS FOR PLAINTIFFS
/s/ Douglas S. Sea______ Douglas Stuart Sea N.C. State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT, INC. 1431 Elizabeth Avenue Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org

/s/ John R. Rittelmeyer______ John R. Rittelmeyer N.C. State Bar No. 17204 Jennifer L. Bills N.C. State Bar No. 37467 Morris F. McAdoo N.C. State Bar No. 34851 DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244 john.rittelmeyer@disabilityrightsnc.org jennifer.bills@disabilityrightsnc.org

/s/ Jane Perkins______ Jane Perkins

3 The parties have agreed to appear at a hearing on December 29, 2011 before Magistrate Judge Jones concerning the Plaintiffs’ Motion to Disqualify Counsel.

5 Case 5:11-cv-00354-FL Document 75 Filed 12/22/11 Page 5 of 7

N.C. State Bar No. 9993 Jina Dhillon N.C. State Bar No. 41997 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street, Ste. G-7 Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org
6 Case 5:11-cv-00354-FL Document 75 Filed 12/22/11 Page 6 of 7

CERTIFICATE OF SERVICE I hereby certify that I have on this day served a true copy of Plaintiffs’ REPLY IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER upon the Defendant’s attorneys via electronic means through the CM/ECF system to: Belinda Smith and Iain Stauffer, N.C. Department of Justice Stephen D. Martin and Wallace C. Hollowell, Nelson, Mullins, Riley and Scarborough Rabotteau T. Wilder, Womble, Carlyle, Sandridge, and Rice This the 22nd day of December, 2011.
/s/Douglas Sea____ Douglas Sea
7 Case 5:11-cv-00354-FL Document 75 Filed 12/22/11 Page 7 of 7

 
 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION CIVIL ACTION FILE NO. 5:11-CV-354(FL)

K.C. a minor child, by his mother and next )

friend AFRICA H.; ALLISON TAYLOR

)

JOHNS; L.S., a minor child, by his father and )

next friend RON S.; D.C., a minor child, by his )

mother and next friend PENNY C.; and M.S., a )

minor child, through his parent and natural )

guardian, Rachelle S.,on behalf of themselves )

and all others similarly situated,

)

)

Plaintiffs,

)

)

vs.

)

)

LANIER CANSLER, in his capacity as the )

Secretary of the Department of Health and )

Human Services, PAMELA SHIPMAN, in her )

official capacity as Area Director of Piedmont )

Behavioral Health Care Area Mental Health, )

Developmental Disabilities, and Substance )

Abuse Authority, and PIEDMONT

)

BEHAVIORAL HEALTHCARE AREA

)

MENTAL HEALTH, DEVELOPMENTAL )

DISABILITIES AND SUBSTANCE ABUSE )

AUTHORITY doing business as PBH,

)

)

Defendants.

)

_______________________________________

DEFENDANT CANSLER’S RESPONSE IN OPPOSITION TO THE
MOTION FOR CLASS CERTIFICATION
[F.R. Civ. P. 7]

NOW COMES Defendant Lanier Cansler, by and through his counsel Roy Cooper, Attorney General of the State of North Carolina, Belinda A. Smith, Special Deputy Attorney General and Iain Stauffer, Assistant Attorney General, pursuant to Rule 7 of the Federal Rules of Civil Procedure and Local Civil Rules 7.1, 7.2 and 10.1, and files this response in opposition to the motion for class certification.

Case 5:11-cv-00354-FL Document 101 Filed 02/01/12 Page 1 of 9

NATURE OF THE CASE On 29 August 2011, Plaintiffs moved to certify a statewide class of plaintiffs pursuant to Federal Rule of Civil Procedure 23(a) and (b)(2), defined as: “All current or future participants in the N.C. Innovations Waiver, as it is currently or subsequently named, whose Medicaid services have been or will be denied, reduced or terminated by Defendant Secretary of the North Carolina Department of Health and Human Services, Defendant PBH, or any of their employees, contractors, agents or assigns through the implementation of the Supports Intensities Scale or Supports Needs Matrix.” On behalf of themselves and the proposed class, the five named Plaintiffs seek declaratory and injunctive relief preventing Defendants from using the “PBH Supports Needs Matrix system” and to “prospectively reinstate services that have been denied, reduced or terminated to plaintiffs and class members whose services are reduced, denied, or terminated by reason of the Supports Needs Matrix system.” Plaintiffs claim that use of the Supports Needs Matrix system is inconsistent with the Due Process Clause of the Fourteenth Amendment and that Defendants’ practices and procedures associated with the Supports Needs Matrix system violate the Medicaid Act and the Due Process Clause.
STATEMENT OF THE FACTS The Medicaid program was established in 1965 in Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. It is a cooperative federal-state program that provides federal financial assistance to participating states to furnish medical assistance “as far as practicable under the conditions in such State,” by reimbursing providers for covered health care services rendered to certain categories of individuals and for “rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care.” 42 U.S.C. § 1396-1.
2
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The Plaintiffs in this action are Medicaid recipients enrolled in and receiving benefits from the Medicaid Innovations Waiver. The North Carolina Department of Health and Human Services (“Department”) is the single state agency designated to administer or supervise the administration of the State’s Medicaid program under Title XIX of the Social Security Act. 42 U.S.C. § 1396a(a)(5); N.C. Gen. Stat. § 108A-54. The Department’s Division of Medical Assistance is responsible for the day-to-day administration of the Medicaid program. Secretary Cansler is the head of the Department, duly appointed by the Governor and vested with the statutory responsibility to oversee the operations of the Department and its various Divisions and Offices. N.C. Gen. Stat. § 143B-9; § 143B-10.
Defendant PBH is a multi-county area mental health, developmental disabilities and substance abuse authority. Shipman Aff. ¶ 3 [D.E. 41]; [D.E. 31-5, p. 6]. The Division of Medical Assistance entered into a contract with Defendant PBH to arrange for and manage the delivery of services and perform other waiver operational functions under the § 1915(c) Waiver through its Prepaid Inpatient Health Plan (“PIHP”) for Medicaid recipients in its catchment area. Shipman Aff. ¶ 4 [D.E. 41]; [D.E. 31-3, p. 5]; [D.E. 31-5, p. 6]. Defendant PBH manages the PIHP through which all mental health, developmental disabilities and substance abuse services are authorized for Medicaid. Shipman Aff. ¶ 5 [D.E. 41]. Regulations controlling the administration and operation of managed care organizations and PIHPS are found in 42 C.F.R. Part 438.
Through its PIHP, Defendant PBH administers the Innovations Waiver, a § 1915(c) Home and Community Based Services Waiver which supports people with intellectual and developmental disabilities. Shipman Aff. ¶¶ 5, 6 [D.E. 41]. This § 1915(c) Waiver allows North Carolina to furnish an array of home and community-based services to assist Medicaid recipients to live in the
3
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community and avoid institutionalization. [D.E. 31-3, Application p. 1]. North Carolina’s participation in the waiver program was approved by the federal agency that administers the Medicaid program, the Centers for Medicare and Medicaid Services (“CMS”). 42 C.F.R. § 430.25(e); Shipman Aff. ¶ 4 [D.E. 41]; Misenheimer Aff. ¶ 3 [D.E. 42].
ARGUMENT I. Standard of Review.
“The burden of establishing that a case meets the requirements for class certification under the Rule rests on the party seeking certification.” In re A.H. Robins Co., 880 F.2d 709, 728 (4th Cir. 1989). The assessment required for class certification “is the responsibility of the District Court, which is to make its decision after ‘a rigorous analysis’ of the particular facts of the case.” Id., quoting Jenkins v. Raymark Industries, Inc., 782 F.2d 468, 471-72 (5th Cir. 1986). Federal Rule of Civil Procedure 23 sets forth a two-part test that plaintiffs must satisfy to demonstrate that their claims are suitable for class resolution. First, the plaintiffs bear the burden of establishing that the proposed class satisfies all four prerequisites contained in Rule 23(a): (1) the class is so numerous that joinder of all members is impracticable (numerosity); (2) there are questions of law or fact common to the class (commonality); (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class (typicality); and (4) the representative parties will fairly and adequately protect the interests of the class (adequacy of representation). Fed. R. Civ. P. 23(a); Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___, 131 S. Ct. 2541, 2548 (June 20, 2011); Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 318-319 (4th Cir. 2006).
Second, the proposed class must satisfy at least one of the three requirements listed in Rule
4
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23(b). See Gunnells v. Healthplan Servs., 348 F.3d 417, 423 (4th Cir. 2003). Here, Plaintiffs rely on Rule 23(b)(2), which applies when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Fed. R. Civ. P. 23(b). Certification under Rule 23(b)(2) does not allow individuals to opt out of the class, so the result is binding on all members. A.H. Robins Co., 880 F.2d at 728. II. Plaintiffs Have Not Demonstrated a Need for Rule 23(b)(2) Class Certification.
Plaintiffs are attempting to bring a class action for declaratory and injunctive relief under Rule 23(b)(2). The nature of the claims for relief in this case are such that a class action would be unnecessary, inappropriate and unduly burdensome. Defendant Cansler urges this Court to exercise its discretion and deny the motion.
Granting class status is soundly within the discretion of the district court. Central Wesleyan College v. W.R. Grace & Co., 6 F.3d 177, 185 (4th Cir. 1993); Jenkins v. Raymark Industries, Inc., 782 F.2d 468, 471-72 (5th Cir. 1986). The Fourth Circuit has intimated that a court does not abuse its discretion by denying certification of a class where granting it would provide plaintiff with no more protection than would injunctive relief alone. The Fourth Circuit has observed that the settled rule is that “[whether] plaintiff proceeds as an individual or on a class suit basis, the requested [injunctive] relief generally will benefit not only the claimant but all other persons subject to the practice or the rule under attack.” Sandford v. R.L. Coleman Realty Co., Inc., 573 F.2d 173, 178 (4th Cir. 1978), citing 7 Wright & Miller, Federal Practice and Procedure, § 1771, pp. 663-664 (1972); see also Bailey v. Patterson (5th Cir. 1963) 323 F.2d 201, 206, cert. denied 376 U.S. 910, 11 L. Ed. 2d 609, 84 S. Ct. 666, (stating in a discrimination case, “whether or not appellants may properly
5
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represent all Negroes similarly situated, the decree to which they are entitled is the same.”) This ruling was reaffirmed in United Farmworkers of Florida Housing Project, Inc. v. City of Delray Beach, 493 F.2d 799, 812 (5th Cir. 1974). In Gray v. International Broth. of Elec. Workers, the Court said:
Insofar as this aspect of the plaintiffs’ suit is concerned, then, there exists no need for this case to be certified as a class action. This Court has consistently and emphatically adhered to the view that when, as here, ‘the relief being sought can be fashioned in such a way that it will have the same purpose and effect as a class action,’ the certification of a class action is unnecessary and inappropriate. 73 F.R.D. 638, 640-641 (D.D.C. 1977). The Gray court found that with respect to the predominant part of the plaintiff’s prayer seeking declaratory and injunctive relief, “no useful purpose would be served by permitting this case to proceed as a class action.” Id. Where, as here, Plaintiffs seek a declaration that a governmental practice is unconstitutional, there is no need for class certification because the Court may presume the good faith of government officials to respect such a ruling on a broadly applicable basis. Numerous federal decisions highlight this point. For example, in Feld v. Berger, 424 F. Supp. 1356 (S.D.N.Y. 1976), the court faced a constitutional challenge to certain policies adopted in the implementation of social service and benefits programs. The court “deem[ed] class certification superfluous,” reasoning that because “[t]he defendants [we]re public officials charged with compliance with and enforcement of federal as well as state laws,” the court could “assume[] these public officials, mindful of their responsibilities, w[ould] apply the determination [of constitutionality in the instant case] to all persons similarly situated.” Id. at 1363. Likewise, in Kow v. New York City Housing Authority, 92 F.R.D. 73 (S.D.N.Y. 1981), a plaintiff sought declaratory and injunctive relief with respect to the Housing Authority’s rent
6
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policies. The court denied class certification because it “assume[d] the[] public officials, mindful of their responsibilities, w[ould] apply the determination here made equally to all persons similarly situated.” Id. at 74. The court relied on the principle that “[w]here . . . there is no reason to doubt that the defendants would accord to all members of the proposed class the benefits of any judgment accorded the plaintiff, class certification has been denied.” Id. See also McArthur v. Firestone, 690 F. Supp. 1018, 1019 (S.D. Fla. 1988) (citing Kow for the proposition that “[t]here [is] no benefit to having a class when there is no reason to doubt that the defendants would accord all members of the proposed class the benefits of any judgment accorded to the plaintiffs.”).
In Craft v. Memphis Light, Gas and Water Division, 534 F.2d 684 (6th Cir. 1976), individual plaintiffs challenged a city’s policy of terminating and refusing to connect power and water services, sought a declaratory judgment that the policy was unconstitutional, and sought an injunction barring prospective enforcement of the policy. The district court refused to certify a proposed class and the court of appeals agreed, explaining that “the district court properly recognized that such relief to the extent granted would . . . accrue to the benefit of others similarly situated and, consequently, . . . no useful purpose would be served by permitting this case to proceed as a class action because the determination of the constitutional question can be made by the Court and the rules and regulations determined to be constitutional or unconstitutional regardless of whether this action is treated as an individual action or as a class action.” Id. at 686 (quotation marks and alterations omitted) (collecting cases in accord). See also Ihrke v. Northern States Power Co., 459 F.2d 566, 572 (8th Cir. 1972), vacated as moot, 409 U.S. 815 (1972) (“The determination of the constitutional question can be made by the Court and the rules and regulations determined to be constitutional or unconstitutional regardless of whether this action is treated as an individual action or as a class
7
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action. No useful purpose would be served by permitting this case to proceed as a class action.”) This Court should refuse to certify the proposed class because the determination of the
constitutional questions can be made by the Court regardless of whether this action is treated as an individual action or a class action and Defendant Cansler will be bound by any such decision.
Respectfully submitted, this the 1st day of February, 2012. ROY COOPER Attorney General /s/ Belinda A. Smith Belinda A. Smith Special Deputy Attorney General N.C. State Bar No. 13708 bsmith@ncdoj.gov /s/ Iain Stauffer Iain Stauffer Assistant Attorney General N.C. State Bar No. 28099 istauffer@ncdoj.gov N.C. Department of Justice Post Office Box 629 Raleigh, North Carolina 27602-0629 Telephone: (919) 716-6840 Facsimile: (919) 716-6758 Counsel for Defendant Cansler
8
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CERTIFICATE OF SERVICE I hereby certify that on 1 February, 2012, I electronically filed the foregoing DEFENDANT CANSLER’S RESPONSE IN OPPOSITION TO THE MOTION FOR CLASS CERTIFICATION with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following: John R. Rittelmeyer, Jennifer L. Bills, Douglas Stuart Sea, Jane Perkins and Morris McAdoo, Attorneys for Plaintiffs; Stephen D. Martin, Wallace C. Hollowell, III, and Reed Hollander Attorneys for Defendants Shipman and PBH, and I hereby certify that I have mailed the document to the following non CM/ECF participants: none.
/s/ Belinda A. Smith Belinda A. Smith Special Deputy Attorney General
9 Case 5:11-cv-00354-FL Document 101 Filed 02/01/12 Page 9 of 9

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION

K.C., a m inor child, by his m other and next friend Africa H.; ALLISON TAYLOR JOHNS; L.S., a minor child, by his father and next friend Ron S.; and D.C., a m inor child, by his m other and next friend Penny C.,
Plaintiffs,
M.S., a m inor child, through his parent and natural guardian, Rachelle S.,

Civil Action No. 5:11-cv-354-FL
DEFENDANTS PAMELA L. SHIPMAN AND PBH’s MEMORANDUM IN OPPOSITION TO PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION

Intervenor Plaintiff,

v.

LANIER CANSLER, in his official capacity as Secretary of the Departm ent of Health and Human Services; PAMELA L. SHIPMAN, in her official capacity as Chief Executive Officer of PBH; and PBH,

Defendants.

The Motion for Class Certif ication [D.E. 34] (the “Motion”) fails to establish the

prerequisites for certification of a class for at l east three reasons. First, Plaintiffs’ Complaint,

Motion and Memorandum fail to identify a precisely defined class. Second, the named Plaintiffs

lack standing to ra ise each class claim and those cla ims have becom e or shor tly will becom e

moot. Third, the proposed class representatives’ claims are not typical of all proposed class

members; the proposed class representatives have interests antagonistic to other m embers of the

class and, in addition, three of the proposed class counsel have an actual or potential conflict of

interest due to representation of certain proposed class m embers in other litigation. For these

reasons, discussed more fully herein, the Motion for Class Certification should be denied.

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CASE SUMMARY This case involves a lawsuit brought by four minors, through their parents, and one adult in her own nam e, who are enroll ees in a North Carolina-b ased managed behavioral healthcare (MBHO) Medicaid program known generally as the North Carolin a Innovations W aiver (hereinafter, “Innovations Waiver” or “Innovations”), which is operated by the PBH Defendants on behalf of the State of Nort h Carolina. The Innovations Waiv er provides funds for home- and community-based services for people with inte llectual and developmental d isabilities. Th e program operates using a fixed pool of funds, and therefore PBH works to distribute these fixed and limited Medicaid funds in an efficient, fair, equitable, and sustainable manner. During the spring and early summ er of 201 1, there was a federa lly-reviewed and approved transition of the Innovations W aiver from a funding allocation system known a s “Benchmarks” to a m ore efficient, fair, equita ble and sustainable allo cation system known as “Support Needs Matrix.” As a result of this transition, some Innovations W aiver enrollees received lower funding levels than they had previously received, while other Innovations Waiver enrollees received the sam e or greater funding levels. The nam ed Plaintiffs, who seek to represent a class of Innovations Waiver enrollees, all received an initial reduction in funding resulting from the transition to the S upport Needs Matrix system, and who contend (as a result) that they were deprived of statutory and constitutional due process. The lack of merits of the due process contentions are addressed at length in the PBH Defendants’ Memorandum in Opposition to Motion for Preliminary Injunction, the facts and argum ents of which are incorporated herein by reference. [D.E. 104] The instant m emorandum is presented to the Court in opposition to the Plaintiffs’ Motion for Class Certification. [D.E. 34]
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STATEMENT OF FACTS PBH’s Role in Managing a North Carolina Managed Care Waiver
Approved by the Federal and State Governments PBH is a multi-coun ty area m ental health, developmental disabilities, and sub stance abuse authority (“area authority”) established pu rsuant to N.C. Gen. Stat. § 122C-115(c) by the Boards of Comm issioners of Alam ance, Cabarrus, Caswell, Davidson, Rowan, Stanly, and Union Counties. Shipman Decl. [D.E. 41, ¶ 3]. As an area authority, P BH is a “local political subdivision of the State.” N.C. Gen. Stat. § 122C-116. As an area authority, P BH is also referred to as a “local management entity” (“LME”). N.C. Gen. Stat. § 122C-3(20b). Defendant Pamela L. Shipman is the Chief Executive Officer of PBH. Shipman Decl. [D.E. 41, ¶ 1]. By an April 7, 2011 agreem ent between PBH and the North Carolina Departm ent of Health and Human Services (the “Department”), and with the approval of the U.S. Departm ent of Health and Hum an Services, Centers for Medicaid and Medi care Services (“CMS”), PBH operates as a Prepaid Inpatient Health Plan (“PIHP”) pursuant to 42 C.F.R. § 438.2. Id. ¶ 4; D.E. 31-5. PBH’s operation as a PIHP m eans that PBH is pre-paid by the State to pro vide care, and PBH accepts the financial risk for p roviding that care. Shipman Decl. [D.E 41, ¶¶ 4, 8]. This model is also referred to as managed care Medicaid, as opposed to the more trad itional fee-forservice Medicaid. See, generally, 67 F.R. 40989 (June 14, 2002) (describing the history of feefor-service Medicaid and managed care Medicaid). In traditional fee-for-service Medicaid, an eligible Medicaid recipient is seen by a clinical professional for needed services, and the professional then submits forms to the appropriate state Medicaid agency to obtain his o r her fee for the services provided. There is essentially no limit to the amount of services that can be provided to an eligible Me dicaid recipient and little to n o
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ability of the state (or federal) governm ent to predict or contain the resultant costs. Misenheimer Second Decl. [D.E. 105, ¶ 4.]
In managed care Medicaid, such as the Innovations W aiver, the state obtains a waiver from the federal government which allows it to operate a managed care entity in compliance with federal Medicaid requirements. The m anaged care Medicaid arrangement intentionally creates an incentive for PBH to provide the most efficient and cost-effective care. Shipm an Decl. [D.E 41, ¶ 8]. Pursuant to 42 U.S.C. §1396n(b)(3), historical cost savings generated by providing efficient and cost-effective care have been used to provide ad ditional healthcare services, which would not otherwise be available.1 See Id. See also 42 C.F.R. § 431.55(e).
The Creation and Amendment of the Innovations Waiver Pursuant to Sections 1915(b) and (c) of the Social Secur ity Act (42 U.S.C. §§ 1396n(b) and (c)), the Departm ent sought and obtained from CMS a waiver of portions of North Carolina’s traditional fee-for-service Medicaid program for behavioral health services, to replace it with a m anaged care program (the “1915(b)/(c) Medicaid Waiver”). [D.E. 31-3 and 41, ¶ 4]. The 1915(b) waiver, known as th e Cardinal Health Plan, is a Medicaid-funded m anaged care health plan for qualified enrollees who require m ental health and/ or substance abuse services. [D.E. 41, ¶ 5]. The 1915(c) waiver, titled the “Innovations Waiver,” is an optional Medicaidfunded managed care health plan for qualified en rollees who require hea lthcare services for intellectual and developmental disabilities. Id. In order to obtain the Innovations Waiver unde r Section 1915(c) of the Social Security Act, the Departm ent (with input from PBH), was required to subm it to CMS a lengthy and

1

PBH is a non -profit entity and therefore does not realize any pecuniary gain or benefit from any

cost savings it can generate through pr oviding efficient and cost-effective care. Misenheimer Second

Decl. [D.E. 105 ¶ 5.]

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detailed application. [D.E. 31-3 and 31-4]. Th e original Innovations Waiver application was filed on or about April 1, 2008 and was approved by CMS. [D.E. 31-3 and 31-4; D.E. 42, ¶ 3].
CMS Approved, Inter Alia, the Transition from the “Benchmarks” Method of Patient Needs Evaluation to the “Support Needs Matrix” Method of Patient Needs Assessment, Including Use of the Supports Intensity Scale (SIS) Assessment Tool to Assist in Allocating Service Dollars
As part of the Innovations W aiver approved by CMS, there was a change in the m ethod used by the State (through PBH) to assess the needs of the enroll ees in the Innovations program. The State (through PBH) had prev iously used a system known as “Benchmarks” to evaluate participant needs and to select funding levels associated with those needs. However, under the Benchmarks program, the amount of funding an enrollee received for services was not always as well related to that enrollee’s support needs as it might be. Misenheimer Decl. [D.E. 42, ¶ 4]. In an effort to create a better system of evaluating enrollees’ needs and associated funding levels, the State (with input fro m PBH) received appr oval from CMS for PBH to change the “Support Needs Matrix” system (hereinafter, “Support Needs Matrix”). [D.E. 42, ¶ 6]
Under the Support Needs Matrix , enrollees with the greates t support needs generally receive more funding than enrollees with fewe r support needs. Misenheim er Decl. [D.E. 42, ¶ 5]. PBH obtained and implem ented the Support N eeds Matrix to distri bute limited Medicaid funds in an efficient, fair, equitable, and sust ainable manner. Misenheimer Decl. [D.E. 42, ¶ 4]. The Support Needs Matrix is utilization m anagement criteria, which comp lies with the federal requirement to design and m aintain a Qual ity Assessment and Perform ance Improvement Program pursuant to 42 C.F.R. § 438.240. Shipm an Decl. [D.E. 41, ¶ 10]; Misenheim er Decl. [D.E. 42, ¶ 20].
The level of support that an enrollee need s is m easured by PBH using a standardized, nationally-recognized, evaluation tool called the Supports Intensit y Scale (“SIS”). Misenheim er
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Decl. [D.E. 42, ¶ 7]. The SIS is a valid, reliable instrument administered by trained professionals to assess the level of an enrollee’s support ne eds in m ajor areas of daily living as well as behavioral and medical needs. Id. The SIS has been used by PBH since 2005, and was developed over a five-year perio d by the Am erican Association of Intellec tual and Developm ental Disabilities, tested on a populati on of over 1,200 persons with m ental retardation and related intellectual disabilities in the U.S. and Canada, a nd is used in 16 states across the United States and 17 countries. Id. It is widely recognized by scholars as well. See, e.g., Fortune, J., Agosta, J., and Bershadsky, J., 2011 Validity and Reliability Results Regarding the SIS (2011). [D.E. 421] PBH uses the SIS because it d irectly measures the assistance needed by enrollees, rather than enrollees’ lack of skills. Misenheimer Decl. [D.E. 42, ¶ 7]
In addition to using the SIS, PBH also uses supplemental questions to identify individuals who present a current, extreme risk to themselves and/or other individuals in the community and who require high levels of support. Such indi viduals are referred to as having a Community Safety Risk. Misenheimer Decl. [D.E. 42, ¶ 8].
The Support Needs Matrix establishes fundi ng categories for enrollees. These funding categories are based on the following factors: (1) where som eone lives, either at hom e (nonresidential) or in a residentia l facility (residential); (2) the individual' s age, child (age 21 and younger) or adult (age 22 and older); and (3) th e individual's assessed support needs (which includes the SIS assessment and the assessment of Community Safety Risk). Misenheimer Decl. [D.E. 42, ¶ 9].
Within the Support Needs Matrix, there are fo ur separate groupings (also referred to as matrices): (1) Child Residential; (2) Child Non-Residential; (3) Adult Residential; and (4) Adult Non-Residential. Within each of these groupings, there are approximately seven categories (A –
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G). Each c ategory has a specific dollar am ount tied to it (“Base Budget”), which reflects the total amount available to fund th e typical types of services used by individuals in these categories ("Base Budget Services"). For exampl e, as of July 1, 2011, a child living at hom e who is in Category A would have a Base B udget of $18,799.60, whereas a child living at home who is in Category G would have greater su pport needs and would have a Base Budget of $76,665.20. Misenheimer Decl. [D.E. 42, ¶ 10].
The Base Budget is the m aximum amount of funding available to pay for Base Budget Services. Base Budget Services include community networking, day supports, in-home intensive supports, in-home skill building, personal care services, reside ntial supports, respite, and supported employment. In addition, there are other services that are Non-Base Budget Services, which do n ot impact the Base Bud get. Th ese are services that are p reventative, crisis, and/or equipment and supplies. Som e examples of Non-Base Budget Services include assistive technology equipment and supplies, home modifications, vehicle modifications, natural supports education, and specialized cons ultation. Under the Innovations program, the com bination of Base Budget Services and Non-Base Budget Services cannot exceed $135,000 per year ("Waiver Cost Limit"). Misenheimer Decl. [D.E. 42, ¶ 11].
The Support Needs Matrix funding system provides the benefit of a m ore equitable and sustainable funding system. In ad dition, it provides the individual with more choice about what array of services he or she would like to obtai n, and in what com bination, as compared to the previous funding system, which involved more detailed management of each request for services by PBH. Misenheimer Decl. [D.E. 42, ¶ 12].
Within the Support Needs Matrix f unding system, there are ways to address tem porary and permanent changes to an individual's support needs. If there is an unplanned and unexpected
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situation that is expected to last f or less than six months (for example, and unexpected surgery needed by a caregiver), the individ ual's planning team may submit a Tem porary Request for additional funding to PBH. If an individual' s needs change permanently, the planning team may request a new SIS assessm ent or a change to a different grouping (such as due to a changed living situation). Misenheimer Decl. [D.E. 42] ¶ 13.
In addition, if an individual needs more services than their Base Budget will provid e, the planning team can request Intensive Review to determine if the individual should be classified as an outlier. In the Support Needs Matrix, an outlier is an indivi dual who has behavioral, safety, health and welfare needs that differ significantly from others within the sam e Support Needs Matrix category and that cannot be met with the funding available in that category. Up to 7% of the participants may receive in creased funding as a resu lt of being designated as outliers . Misenheimer Decl. Id. ¶ 14.
For those enrollees with a si gnificant change in budget (gre ater or less than $3,000 fro m their prior year actual costs), PBH offered si x-month phased-in "step-downs" and "step-ups" to further aid in a sm ooth transition. Misenheimer Second Decl. [D.E. 105] ¶ 23. This was communicated to consumers via a variety of mechanisms, including via Waiver Alerts. Id. See, e.g., March 2011 Waiver Alert [D.E. 31-19].
After an individual has been placed into one of the Support Needs Matrix categories, the individual's planning team, whic h includes one of PBH’s Care C oordinators, will work together to develop the Individual Support Plan (“ISP”) (som etimes referred to as a Person Centered P lan (“PCP”)), which will identify, among other things, the services sought to be obtained through the Innovations program. Misenheimer Decl. [D.E. 42] ¶ 16. Any ne w ISP or ISP update would be signed by the enro llee or their gu ardian and s ubmitted by the Ca re Coordinator, along with a
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request for services, to PBH’s Utilization Management department for review under the Support Needs Matrix utilization management criteria. An enrollee must have an approved ISP to remain enrolled in the Innovations program. Id.
As a managed care plan, the Innovations waiv er requires enrollees, usually through their healthcare providers or a Care Coordinator, to formally request serv ices through a Treatm ent Authorization Request (“TAR”). In response to a TAR, PBH will eith er approve and authorize the requested service, or deny the requested service. Authoriz ations are issued for specific services, frequency (such as a number of hours per week of a service), and for a lim ited duration (time period). Upon expiration of the author ization, a new TAR m ust be subm itted and the process is repeated. Misenheimer Decl. [D.E. 42] ¶ 17.
In accordance with 42 C.F.R. § 438.400, if PBH denies the service requested in a TAR, the enrollee is given the required notice of his or her appeal rights. Likewise, if PBH reduces, suspends, or terminates a service prior to th e expiration of an existing au thorization, PBH will also provide notice of appeal rights. Misenheimer Decl. [D.E. 42] ¶ 18.
In the context of the Support Needs Matrix funding system , the individual’s planning team may submit a TAR for Bas e Budget Servic es that exceeds th e Base Budget for the individual’s Support Needs Matr ix category. They m ay also subm it a TAR in which the combination of Base Budget Serv ices and Non-Base Budget Services exceeds the Waiver Cost Limit $135,000 per year. In such scenarios, PB H will authorize the services and amounts which are compliant with the Support Needs Matrix, or Waiver Cost Limit, and deny those services that are not. Enrollees will be given notice of their appeal rights to appeal the denial of those services because they are non-com pliant and not available under the Innovations waiver. Misenheim er Decl. [D.E. 42] ¶ 19.
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The appeal process con sists first of a PBH- level appeal, referred to as Reconsider ation Review, in which an independent reviewer who has had no prior involvem ent in the case will make an independent decision. Shipman Decl. [D.E. 41] ¶ 10. If the individual wishes to appeal further following Reconsideration Review, the next level of appeal is to the North Carolina Office of Administrative Hearings. Id. See also [D.E. 31- 5, pp. 19-24] and N.C. Gen. Stat. § 108A-70.9A(d).
The Funding Mechanism for the Innovations Waiver The funding for the Innovations Waiver program comes through a fixed, m onthly capitation – effectively, a lum p-sum allocation – by the North Caro lina Department of Health and Human Services (the “Department”) to PBH. This allocation from the Department includes, in part, matching funds from the federal government. This lum p-sum allocation is the pre-paid amount received from the Department. Misenheimer Second Decl. [D.E. 105] ¶ 6. This structure creates a fin ite pool of funds, which m ust be used by PBH to serve the population of eligible Medicaid recipients who are within the Innovations Waiver program. As a result, the funding available to PBH for th e Innovations Waiver is finite and fixed. Id. at ¶ 7. As of the filing of the Complain t, the Innovations Waiver authorized a maximum of 675 Medicaid recipients within five counties covered by th e program (Union, Stanly, Rowan, Cabarrus, and Davidson counties), and the program has operated (and is expected to continue to operate) at its maximum capacity. Id. at ¶ 8. Therefore, this lump-sum amount provided by th e Department for Innovations Waiver consumers in Union, St anly, Rowan, Cabarrus, and Davidson counties is allocated by PBH t o fund these 675 enrollees to meet their individual health care needs as efficiently and equitably as
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possible.2 Id. at ¶ 9. Fr om July 2010 through June 2011, over 60 new Innovations enrollees began receiving funding through the Support Needs Matrix system. On July 1, 2011, PBH began implementing the Support Needs Matrix system w ith enrollees who we re already enrolled in Innovations. As a result, by July 1, 2011, PBH ha d allocated the Innovations funding across all 675 Innovations enrollees. Id. at ¶ 10.
This was done by an individual analysis of each client’s support needs and placement of each enrollee within the Support Needs Matrix. Id. at ¶ 11. Each enrollee was then provided a Support Needs Matrix Base Budget, which could be used to fund Base Budget Services within the Innovation program . Id. at ¶ 12. This process resulted in some Innovations enrollees receiving a reduced funding level as com pared to their pre-July 1, 20 11 funding level, som e receiving approximately the sam e funding level as com pared to their pre-July 1, 2011 funding level, and some receiving an increased funding level compared to their pre-July 1, 2011 funding level. Id. at ¶ 13.
Changes in Funding to Innovations Waiver Enrollees Due to Federally-Approved Amendment of the Innovations Waiver The before-and-after summary of these enrollees' funding levels pre-July 1, 2011 (prior to the transition to the Support N eeds Matrix system) and as of July 1, 2011 (upon im plementation of the Support Needs Matrix system) is as follows: • approximately 151 enrollees saw a reduction in the total dollar am ount of their budgets from pre-July 1 levels;

2

As of September 16, 2011, there was a waiting list of over 400 eligible enrollees waiting for an

open enrollment spot in the Innovations Waiver. [ D.E. 41, ¶ 6]. While those eligible enrollees await an

open spot within the Innovations Waiver, they continue to receive ICF/MR services. Id.

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• approximately 141 enrollees saw little to no change in the total dollar amount of their budgets from pre-July 1 levels ( i.e., they were within $3,000 of their previous budget, either plus or minus); and
• approximately 372 enrollees saw an increa se in the total dollar am ount of their budgets from pre-July 1 levels.
Id. at ¶ 14. On July 1, 2011, approximately 11 slots were open in the Innovations program, as is the
case from time to time as individuals move in and out of the program for various reasons. Id. at ¶ 15. Because the finite funds available for use in the Innovations program have been allocated among the 675 enrollees in the program, it would not be possible to reinstate to pre-July 1, 2011 funding levels all enrollees whose funding was reduced effective July 1, 2011, without also decreasing the funding to other Innovations enrollees. Id. at ¶ 16.
LEGAL ARGUMENT A. Plaintiffs Bear the Burden of Proof. While “a district court has broad discretion in deciding whether to certify a class,” Lienhart v. Dryvit Sys., Inc. , 255 F.3d 138, 146 (4th Cir. 2001) (internal quotation m arks omitted), “plaintiffs bear the burden . . . of demonstrating satisfaction of the Rule 2 3 requirements, and the district court is required to make findings on whether the plaintiffs carried their burden . . . .” Gariety v. Grant Thornton, LLP , 368 F.3d 356, 370 (4th Cir. 2004); Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 317 (4th Cir. 2006). It is well estab lished that the proponent of class certification bears the burden of establishing th at all of the necessary requirements of Rule 23 have been satisfied. In re A.H. Robins Co., 880 F.2d 709, 728 (4th Cir. 1989), cert. denied, 493 U.S. 959 (1989); Int’l Woodworkers of Am. v. Chesapeake Bay Plywood
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Corp., 659 F.2d 1259, 1267 (4th Cir. 1981) (“The burde n of establishing the requirem ents of Rule 23 rests, of course, with the party seeking certification.”).
When determining whether a prop onent of class certification has met all neces sary criteria, “the court may not confine itself to the allegations of the complaint.” Shelton v. Pargo, Inc., 582 F.2d 1298, 1312 (4th Cir. 1978). The district court must take a “close look” at the facts relevant to the certification question and, if neces sary, make specific findings on the propriety of certification. Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 319 (4th Cir. 2006).
B. The Court Should Employ a Rigorous Analysis in Evaluating the Motion. The court must e mploy a rigorous analysis to verify that the Rule 23 prerequisites are met. General Telephone Co. of Southwest v. Falcon , 457 U.S. 147, 161 (1982). This rigorous analysis is required, in part, be cause “[t]he clas s action is ‘an excep tion to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2550, 180 L.Ed.2d 374, 389- 390 2011 U.S. LEXIS 4567 at *18, quoting Califano v. Yamasaki, 442 U.S. 682, 700-701, 99 S. Ct. 2545, 61 L.Ed.2d 176 (1979); accord, Broussard v. Meineke Di scount Muffler Shops, Inc. , 155 F.3d 331, 345 (4th Cir. 1998). “In order to justify a departure from that rule, ‘a class representative must be part of the class and possess the sam e interest and suffer the same injury as th e class members.” Id., quoting East Tex. Motor Freight System, Inc. v. R odriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 52 L .Ed.2d 453 (1977). The purpose of Rule 23(a) is to ensure “that the nam ed plaintiffs are appropriate representatives of the class whose claims they wish to litigate.” Id. C. The Six Rule 23(a) Requirements. Rule 23(a) expressly requires Plaintiffs to satisfy each of four requirements: (1) the size of the proposed class m akes joinder of its members impracticable
(“numerosity requirement”);
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(2) common questions of law or fact exist among the proposed class members and class representatives (“commonality requirement”);
(3) the class representatives’ claim s typify those of the proposed class members (“typicality requirement”); and
(4) the class representatives will fairly and adequately protect the interests of the class (“adequate representation requirement”).
Fed R. Civ. P. 23; see also Lienhart v. Dryvit Sys, Inc., 255 F.3d 138, 146 (4th Cir. 2001). In addition to the four express requirem ents of Rule 23(a), there are two unwritten
requirements as well: F irst, “Rule 23(a) requires that a precisely defined class exist and that the proposed class representatives be members of the putative class.” Beaulieu v. E Q Industrial Services, 2009 WL 2208131 (E.D.N.C. July 22, 2009); Roman v. ESB, Inc., 550 F.2d 1343, 1348 (4th Cir. 1976) (“Although not specifi cally mentioned in the rule, the definition of the class is an essential prerequisite to maintaining a class action”). Second, “[i]t is well-established that ‘prior to the certification of a class, and technically speaking before undertaking any formal typicality or commonality review, the district court mu st determine that at leas t one nam ed class representative has Article III stan ding to rais e each class claim .’ Any analysis of clas s certification must begin with the issue of standing.” Prado v. Bush, 221 F.3d 1266, 1279-80 (11th Cir. 2000) (quoting Griffin v. Dugger, 823 F.2d 1476, 1482 (11th Cir. 1987)).
In summary, there are s ix requirements that must be satisfied: (1 ) a precisely defined class; (2) standing to bring each cla im; (3) numerosity; (4) commonality; (5) typica lity; and (6) adequate representation. As expl ained below, Plaintiffs fail to ca rry their burden of proof as to five of the six requirements, and therefore the Motion should be denied.
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D. Plaintiffs’ Proposed Class Definition is Unclear.

The first step which should be undertaken by the Court is to understand and determ ine

the definition and scope of the proposed class.

Unfortunately, Plaintiffs’ proposed class

definition and Plaintiffs’ prayer for relief leav e a rather muddled picture of who would be a

member of the proposed class.

In the Motion and the Memorandum in Support, the proposed class definition is stated as:

All current or future enrollees in the N.C. Innovations Waiver, as it is currently or subsequently na med, whose Medicaid services have been or will be denied, reduce d, or term inated by [Defendants] through the im plementation of th e Support Intensities Scale or Supports Needs Matrix.

[D.E. 35, p. 1]

Only 151 out of 675 enrollees in the Innovations Waiver program had their total allocated

funding reduced after implem entation of the Support Needs Matrix, although there was no

denial, reduction or term ination of those enrollees’ services. T hus, the proposed class could be

seen as comprising perhaps 151 persons. Howe ver, the proposed class is not m ade up solely of

persons who were impacted in the past; Plaintif fs include in th eir proposed class definition all

persons whom they allege “will be” negatively affected. Under one theo ry, the definition could

encompass all 675 present enrollee s in the Innovations W aiver program, since any one of them

has the potential to have their funding reduced, or their benefits “denied, reduced, or terminated”

in the unknown near or distant future, depending on changes in their particular needs, reductions

in program funding, or other si milar reasons. On the othe r hand, predicting which future

enrollees’ services “will be” affected as d escribed is im possible to define . Therefore, it is

unclear whether the proposed class is comprised of 675 individuals or 151 individuals.

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In addition to considering the proposed clas s definition, the Court should also closely scrutinize the re lief prayed for in the Com plaint in ord er to d etermine whether the c lass is sufficient to encom pass all those who would be affected by the proposed relief. Plaintiffs’ requested relief creates a sim ilar lack of clarity on who is inte nded to be within the proposed class.
Among the relief sought by the nam ed Plaintiffs, and therefore by the class if it were approved, is “requiring Defendants to prospectively reinstate serv ices that have been denied, reduced, or terminated to plain tiffs and class members whose serv ices are reduced, denied, or terminated by reason of the Supports Needs Matrix system until the violation [sic] of law alleged herein are corrected.” Com pl. [D.E. 6] p. 30, ¶ 3]. P laintiffs argue in their cla ss certification memorandum that “[e]ach class representative wants all class m embers to . . . have their previously authorized and Medicaid-covered servi ces reinstated to pre-July 2011 levels pending Defendants’ compliance with the due process requirements.” [D.E. 35, p. 16].
Given this language, it appears that the pr oposed class of Plainti ffs seeks one of the following types of relief for the class:
1. They seek an order requiring that a ll enrollees whose funding was reduced (approximately 151 persons) be “reinstated” to the level of f unding they received prior to July 1, 2011; or
2. They seek an order requiring that all 675 enrollees in the Innovations program be “reinstated” to the level of funding they received prior to July 1, 2011.
These are two different avenues of relief, each of which carries with it a different class definition and scope. If the Plaintiffs seek option one, then the “class” would be com prised solely of enrollees whose funding was reduced; however, if they seek option tw o, then the
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“class” would be comprised of all enrollees, in cluding those whose funding increased due to the Support Needs Matrix transition.
However, regardless of which option defines Plaintiffs’ actual proposed class, P laintiffs run into substantial problem s, which arise as a result of the finite pool of funds available for services under the Innovations Waiver program. Under op tion one, an order requiring any increase in funding to proposed class m embers who had their funding reduced could not be implemented by PBH without one of the followi ng: either (a) corresponding language in the order reducing funding to non-class members, which raises serious problem s with the order’s impact on non-party, non-represen ted individuals; or (b) a unila teral decision by PBH to reduce funding to non-class m embers in order to free up the funds that would be necessary to com ply with such an order, which in turn would likely engender appeals by the affected non-class members, repeating and compounding the issue.
Under option two, an order requ iring an increase in funding to class m embers who had their funding reduced could be im plemented, but only by taking m oney from the class members who received equal allocations or increased allocations. This creates a d irect intra-class conflict between proposed class m embers. More over, as discussed in Section F. infra., there is no proposed class representative who represents the interests of those persons whose funding levels remained the same or increased on July 1, 2011.
PBH has a set pool of funds which it has allocated among Innovations enrollees using a reasonable method, which has been approved by th e Department and by CMS. The Plaintiffs seek a bigger share of th e pie, which can only co me at the ex pense of other enrollees, whether they are within the class or not. For these reas ons, the proposed class is both poorly defined and either (1) is insufficient to bi nd the necessarily-affected non-class members, or (2) is com posed
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of class members with directly ad verse interests. Therefore, the class should not be certified as proposed and the Motion should be denied.
E. Plaintiffs Lack Standing to Bring Their Claims. The second requirement which Plaintiffs must prove in order to obtain class certification is that there is at least one proposed class repres entative who has standing to bring each claim in this matter. Independent of the class defin ition issues discussed above, the Motion should be denied due to the lack of sta nding of the proposed class represen tatives to bring the asserted claims. It is only “after the court determ ines the issues for which the nam ed plaintiffs have standing [that] it should address the question whet her the nam ed plaintiffs have representative capacity, as defined by Rule 23(a), to assert the rights of others.” Griffin v. Dugger , 823 F.2d 1476, 1482 (11th Cir. 1987), cert denied, 486 U.S. 1005, 108 S.Ct. 1729, 100 L.Ed.2d 19 3 (1988). Making the standing determ ination requires two inquiries: (1) do Plaintiffs allege violations of federal rights such that there is a “legally protected inte rest” sufficient to support standing, and (2) is at least one member of the class among the injured with respect to the claims made by members of that class? “[E]ach claim must be analyzed separately, and a claim cannot be asserted on behalf of a class unless at least one nam ed plaintiff has suf fered the injury that gives rise to that claim.” Prado v. Bush, 221 F.3d 1266, 1280 (11th Cir. 2000). Where the Court determ ines that the claim asserted is not cognizab le, no class plaintiff has standing to raise the claim and no class shou ld be certified as to that claim . See, e.g., Susan J. v. Riley , 254 F.R.D. 439 (M.D. Ala. 2008) (finding lack of standing to raise a Fourteenth Amendment substantive due proces s claim where the court could not “loc ate, in case law or elsewhere, support for the proposition” underlying Plai ntiffs’ claim.) With respect to Plaintiffs’ lack of stan ding on each of their three clai ms, the PBH Defendants in corporate herein by
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reference the arguments contained in their Me morandum in Opposition to Plaintiffs’ Motion for

Preliminary Injunction [D.E. 104, § III], which explain why each of Pl aintiffs’ three claims fails

to state a valid cause of action and, therefore, Plaintiffs lack standing to bring such claims.

In addition, the claim s of each of the nam ed class members are moot. As explained in

PBH Defendants’ Memorandum in Opposition to Pl aintiffs’ Motion for Prelim inary Injunction

[D.E. 104, pp. 24-26], K.C., L.S., and Allison

Taylor Johns each had their prev ious

authorizations expire in the last six months of 2011, which mooted their claims in this case.

Further, D.C. and M.S . are each receiving increases in their budgets as a resu lt of

category changes arising out of a more recent SIS evaluation and Support Needs Matrix analysis.

Effective March 31, 2012, D.C. is going from a Ca tegory A to a Category E, which results in a

change in budget from $18,799.60 to $45,506.80. Covert Decl. [D.E. 106 at ¶ 30.] W hile this is

less than his previous budget re ferenced in the Support Needs Ma trix letter which for med the

basis of his original complaint, $47,588.52, it is a difference of less than $3,000.00 dollars. Id. at

¶ 31. Also effective March 31, 2012, M.S. is going from a Category B to a Category G, a change

from $25,476.40 to $76,665.20. Id. at ¶ 46. This am ount is substantially greater than M.S.’s pre-

Support Needs Matrix budget, which was $51,679.44, and his previous cost of services in 2010,

which was $62,881.32. Id. at ¶ 47. Thus, M.S. will soon b e receiving funds in excess of any

which he has previous ly requested or receiv ed. These changes m oot the claim s of D.C. and

M.S., such that they lack stand ing to brin g their claim s, both individually and as class

representatives in this matter.

Because each of the nam ed plaintiffs’ claims are now m oot, there is n o named plaintiff who can represent the purported class. See Clay v. Miller, 626 F.2d 345 (4 th Cir. 1980) (prayer

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for injunctive relief against county jail m ooted when prisoner was releas ed; plaintiff was not a
member of the class he purported to represent at the time class certification was denied).
F. Three of the Four Express Requirements of Rule 23(a) Are Not Met.
While the numerosity requirement of Rule 23(a) appears to be satisfied (whether the class
is 151 persons or 675 persons), Plaintiffs are una ble to show that they m eet the final three
requirements: typicality, commonality, and ad equate class representation. These three
requirements can be considered together, since:
[t]he commonality and typicality requirements of Rule 23(a) tend to merge. Both serve as guideposts f or determining whether under the particular circum stances maintenance of a class action is economical and whether the nam ed plaintiff’s claim and the class claims are s o interrelated that the interes ts of the class m embers will be f airly and adequately pro tected in the ir absence. Those requirements therefore also tend to merge with the adequacy-ofrepresentation requirement, although the latter requirem ent also raises concerns about the com petency of class counsel and conflicts of interest.
General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157 n. 13 (1982); accord, Lienhart
v. Dryvit Sys., 255 F.3d 138, 147 (4th Cir. 2001), citing Broussard v. Meineke Discount Muffler
Shops, Inc., 155 F.3d 331, 337 (4th Cir. 1998). As shown in the following discussion, the
commonality and typicality argum ents in this case are intertwined with the ad equacy of
representation by class representa tives and counsel, and lead to the conclusion that the class
should not be certified.
The typicality requirem ent mandates inquiry into whether the nam ed Plaintiffs’ claim s
and the class claims are so inter related that the interests of the class m embers will be f airly and
adequately protected in their absence. Falcon at 157, n. 13. Given the nature of the intra-class
conflict between Innovations enrollees who received equal or great er funding as of July 1, 2011,
versus those who received reduced funding as of July 1, 2011, and the fact that the nam ed
20
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Plaintiffs are lim ited solely to tho se who r eceived reduced funding as of July 1, 2011, it is apparent that the named Plaintiffs’ claims are not typical of those of the entire class.
For the same reason, the nam ed Plaintiffs ca nnot adequately protect the interests of all class members. The ad equacy of the Plain tiffs as putative class repres entatives is an essentia l element of Rule 23 certification. As the Fifth Circuit explained in Berger v. Compaq Computer Corp., 257 F.3d 475 (5th Cir. 2001):
The determination of whether the proposed represen tative will fairly and adequately protect the interests of the class is a matter of utmost importance and not on e which can be m ade on presumptions. The decision on class representation is of such significance because it i mplicates the due process righ ts of all members who will be bound by the judgment. Id. at 480 n.8, 481. “The adequacy inquiry under Rule 23(a)(4) se rves to uncover conflicts of interest between named parties and the clas s they seek to represent.” Id. at 157-158, n. 13, 72 L.Ed.2d 740, 102 S.Ct. 2364. “[A] class representative m ust be part of the class and ‘possess the sam e interest and suffer the same injury’ as the class members.” East Tex. Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977) (quoting Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 216, 94 S .Ct. 2925, 41 L.Ed.2d 706 (1974)). Accord, Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625-626 (1997). Within this analysis, Plaintiffs have the burden to prove that they (1 ) possess the sam e interest as all class m embers; and (2) suffered the same injury as all class members. East Tex. Motor Freight at 403. Neither of these showings can be made by the named Plaintiffs, assuming that the class is defined as all enro llees within Innovations. Each of the na med Plaintiffs, who are also the proposed class representatives, are individuals whose July 1, 2011 authorizations were for lower dollar amounts than their respective prior authorizations. T hose Plaintiffs seek an order from
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this Court requiring that “their previously authorized and Me dicaid-covered services [be] reinstated to pre-July 2011 levels pending De fendants’ compliance with the due process requirements.” [D.E. 35, p. 16; accord, D.E. 6, p. 30].
As explained above, the na med Plaintiffs do not have the sam e interest as all proposed class members. The named Plaintiffs want their pre-July 1, 2011 authorizat ions reinstated. The approximately 513 m embers of the proposed class w ho received or will be receiving equal or greater funding under the Support N eeds Matrix compared with their prior budgets presum ably would not want their pre-July 1, 2011 authorizations reinstated because they would receive fewer funds and would have significantly redu ced flexibility in spending those funds as com pared to the current program . For the sam e reasons, it is obvious that the named Plaintiffs have not suffered the sam e alleged “injury” as the clas s members whose auth orizations were equal or greater as of July 1, 2011.
As noted above at p. 19, the claims of D. C. and M.S. are m oot due to the increased funding they will soon be receiv ing. However, even if the Court were to determ ine that these increases in funding did not m oot the claim s of D.C. and M.S ., the funding increases create a substantial conflict between D.C. and M.S., on the one hand, and the remaining named Plaintiffs. If the Plaintiffs obtain the relief they seek in the com plaint, the funding a llocated to D.C. and M.S. would have to be reduced in order to free up funds for the other na med plaintiffs (not to mention other potential class m embers). This conf lict is at the core of Plaintiffs’ case and, in particular, substantially impacts the typicality, commonality, and adequate representation prongs of the Rule 23(a) test discussed herein.
If the Court were to grant the requested relief, the funds necessary to do so would have to be taken from other enrollees in Innovations. This is a problem endemic to the nature of
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Plaintiffs’ claim for reinstatem ent of expired authorizations, and presents either (a) an irreconcilable internal conflict to this proposed class, or (b) a conflict between the proposed class and unrepresented non-class m embers. For th ese reasons, the n amed Plaintiffs hold in terests which are actually or potentially antagoni stic to other m embers of the class. Accord, General Tel. Co. of the Northwest, Inc. v. Equal Employment O pportunity Commission, 446 U.S. 318, 331, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980) (“In em ployment discrimination litigation, conflicts might arise, for exam ple, between employees an d applicants who were denied em ployment and who will, if granted relief, compete with employees. . . . Under Rule 23, the sam e plaintiff could not represent these classes.”)
When addressing class certificat ion for a lim ited fund arising in a m ass tort context, the Supreme Court reminded:
As we said in Amchem, “for the currently injured, the critical goal is generous imm ediate payments,” but “that goal tugs against the interest of exposure-only plaintiffs in ensuring an am ple, inflationprotected fund for the future.” No such procedure was employed here, and the conflict was as cont rary to the eq uitable obligation entailed by the lim ited fund rationale as it was to the requirem ents of structural protection applicable to all c lass actions under Rule 23(a)(4). Ortiz v. Fibreboard Corp. , 527 U.S. 815, 856-857 (1 999) (internal citations omitted). Accordingly, Plaintiffs’ m otion for class certification fails to prove that the proposed class representatives meet this requirement of Rule 23(a)(4) and should therefore be denied.
G. Three Class Counsel Have Conflicts of Interest Which Would Imp act Their Ability to Represent the Proposed Class.
The adequate rep resentation requirement also n ecessitates analysis of the adequacy of proposed class counsel. Three of the proposed Plaintiffs’ class counse l have a significant conflict of interes t which would affect their ability to represent the interests of the proposed
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class. Presently pending in the Middle District of North Carolina is the case of Clinton L., et al. v. Cansler, et al. , 1:10-cv-123-JAB. John Rittelm eyer and Jennifer Bills of Disability Righ ts North Carolina (“DRNC”), counsel in the pres ent matter and proposed class counsel, are also counsel of record for the six plaintiffs in the Clinton L. case.
Five of the six pl aintiffs in the Clinton L. case are current m embers of the Innovations Waiver (i.e. they are among the 675 persons whose se rvices are governed by the Support Needs Matrix utilization management criteria). Four plaintiffs in the Clinton L. case whose services are governed by the Support Needs Matrix did not receive a reduction of their Innovations funding as of July 1, 2011. In fact, the lead plain tiff, Clinton L., received an increase in his Innovations budget of approximately $46,000 as a result of the implementation of the Support Needs Matrix. Covert Decl. [D.E. 106 at ¶ 58.] Other named plaintiffs in the Clinton L. case, Timothy B., Steven C., and Jason A., either received sm all increases in their budgets or their budgets remained the same as of July 1, 2011. Id. at ¶ 59.
In the present case, Mr. Rittelmeyer andd Ms. Bills, and their colleague at DRNC, Morris F. McAdoo, seek to represent a class consisting of enrollees in the Innovations program. Five of the members of that class would be persons who are presently represented on an individual basis by Mr. Rittelmeyer and Ms. Bills and DRNC in the Clinton L. case. The relief sought on behalf of the proposed class in the pr esent case would likely have, for the reasons explained above, a direct negative effect on the funding available to four of those indi viduals. In particular, Clinton L., Timothy B., Steven C., and Jaso n A. would each be at s ignificant risk of receiving reduced funding in the Innovations program if the propos ed class relief were granted in a m anner permitting Vernon W. (and others) to receive an increase in their funding. In short, Vernon W.’s interest in “hav[ing] [his] previously authorized and Medicaid-covered services reinstated to pre-
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July 2011 levels pending Defendant s’ compliance with the due pr ocess requirements” [D.E. 35, p. 16], places his interests in dire ct conflict with the in terests of Clinton L., Tim othy B., Steven C., and Jason A. in maintaining their present levels of funding under the Support Needs Matrix system.
Moreover, Rule 1.7 of the North Carolina Rules of Professional C onduct expressly prohibits an attorney from representing a client “if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2 ) the representation of one or more clients may be materially limited by the lawyer’s responsibilities to another client, a form er client, or a third person, or by a personal interest of the lawyer .” Mr. Rittelm eyer, Ms. Bills, and Mr. McAdoo seek, in this case, to obtain relief which would be directly adverse to four of their Plaintiff-clients in the Clinton L. case. For this reason, Mr. Rittelmeyer, Ms. Bills, and Mr. McAdoo should not be approved as class counsel in this matter.
CONCLUSION Plaintiffs have failed to m eet their burden to prove to this Court that certification of a class is appropriate in this matter. First, Plaintiffs’ Complaint, Motion and Memorandum fail to identify a precisely defined class. S econd, the named Plaintiffs lack standing to raise each class claim and those claim s have becom e or shortly will becom e moot. Th ird, the proposed class representatives’ claims are not typical of all proposed class m embers and they have interests antagonistic to other m embers of the class and, in addition, three of the proposed class counsel have an actual or potentia l conflict of interest due to representation of certain proposed class members in other litigation. For these reasons, the PBH Defendants respectfully request that the Court deny Plaintiffs’ Motion for Class Certification.
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Respectfully submitted, this the 1st day of February, 2012. NELSON MULLINS RILEY & SCARBOROUGH LLP By: /s/ Reed J. Hollander Wallace C. Hollowell III N.C. State Bar No. 24304 Reed J. Hollander N.C. State Bar No. 23405 Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: chuck.hollowell@nelsonmullins.com E-Mail Address: reed.hollander@nelsonmullins.com E-Mail Address: steve.martin@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
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CERTIFICATE OF SERVICE I, the undersigned atto rney of the law o ffices of Nelson Mullin s Riley & Scarb orough LLP, attorneys for Defendants Shipm an and PBH do hereby certify that on February 1, 2012, I electronically filed the foregoing DEFE NDANTS PAMELA L. SHIPMAN AND PB H’S MEMORANDUM IN OPPOSITION T O PLAINTIFFS’ MOTION FOR P RELIMINARY INJUNCTION with the Clerk of the Court us ing the CM/ECF system which will sen d notification of such filing to the following:
• John R. Rittelmeyer (john.rittelmeyer@disabilityrightsnc.org) • Jennifer L. Bills (jennifer.bills@disabilityrightsnc.org) • Morris F. McAdoo (morris.mcadoo@disabilityrightsnc.org) • Douglas S. Sea (dougs@lssp.org) • Jane Perkins (perkins@healthlaw.org)
Attorney for the Plaintiffs • Belinda A. Smith (bsmith@ncdoj.gov) • Iain Stauffer (istauffer@ncdoj.gov)
Attorney for Defendant Lanier Cansler
NELSON MULLINS RILEY & SCARBOROUGH LLP /s/ Reed J. Hollander Reed J. Hollander N.C. State Bar No. 23405 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: reed.hollander@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
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 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION

K.C., et al.,

Civil Action No. 5:11-cv-354-FL

Plaintiffs, vs. LANIER CANSLER, et al.,
Defendants.

DEFENDANTS PAMELA L. SHIPMAN AND PBH’s RESPONSE IN
OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY
INJUNCTION

Defendants Pamela L. Shipman (“Shipman”) and PBH (together, “PBH”), by and through their undersigned attorneys, resp ectfully submit this Response in Opposition to Plain tiffs’ Motion for Preliminary Injunction [D.E. 31] (the “Motion”).
NATURE OF THE CASE This case involves the Innovations program, a community-based federal Medicaid waiver approved by the federal Secretary of the U.S. De partment of Health and Human Services and its division, the Centers for Medicare and Medicaid Services (“CMS”), and is operated by PBH as a managed care program pursuant to a contract with the North Carolina Department of Health and Human Services ( the “Department”). The subject of Plaintiffs’ Complaint is the design and implementation of the Support Needs Matrix, a u tilization management tool approved by CMS and the Departm ent and used by PBH in the Innovations program. Plaintiffs allege that the implementation of the Support Needs Matrix by the Defendants has resulted in P BH making reductions in Plaintiffs’ Medicaid services without first (1) providing prior written notice to the Plaintiffs explaining the reducti ons; (2) providing an opportunity for a fair hearing where the Plaintiffs can challenge the alleged reduction s in services; and (3) providing continued benefits at the previously autho rized level pending the outco me of a fair hearin g. Plaintiffs claim that

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PBH is legally required to take these steps bef ore making the alleged reductions, and that PBH’s failure to do so is in violation of the Medicaid Act, the applicable federal regulations, and the Due Process Clause of the Fourteenth Am endment. The Defendants have denied m ost of Plaintiffs’ factual allegations, and all of their claims for relief.
Plaintiffs now seek an Order from this Court preliminarily enjoining the Def endants “from reducing or terminating Medicaid services to the named plaintiffs and all others sim ilarly situated under the N.C. Innovations W aiver based on budget lim its under the Support Needs Matrix until Defendants first provide advance noti ce and the opportunity for a fair hearing prior to the reduction or term ination of services.” Motion, p. 2. Plaintiffs further seek an Order requiring the Defendants “to reinst ate the level of services aut horized prior to July 1, 2011 to Plaintiffs and all others sim ilarly situated until the Court i ssues a final ruling.” Id. For the reasons set forth below and in the Memorandum submitted by Defendant Cansler, Plaintiffs have not met their burden under Winter v. Natural Resources Def. Council, Inc. , 555 U.S. 7 (2008) and Fed. R. Civ. P. 65(a), and Plaintiffs’ Motion should be denied.
STATEMENT OF FACTS PBH incorporates herein by reference the Statement of Facts set forth in its Respon se in Opposition to Plaintiffs’ Motion for Class Certifi cation [D.E. 103]. In addition to those facts, PBH further states as follows: PBH began informing all Innovations waiver enrollees about the Support Needs Matrix system in August 2010, when it m ailed the firs t of several “W aiver Alerts” regarding the Supports Needs Matrix. Misenheim er Second D ecl. [D.E. 105] ¶ 17, Exhs. A-D. In March 2011, PBH notified all Innovations wa iver enrollees of the change over to the Support Needs Matrix, and provided each enroll ee with information about the Support Needs Matrix generally,
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and the specific Support Needs Matrix catego ry for each enrollee individually. Cote Decl. [D.E. 107] ¶ 3; Misenheim er Second Decl. [D.E. 105] ¶ 19, Exh E. PBH also advertised and held a series of town hall m eetings throughout its cat chment area where Innovations waiver enrollees, providers, and interested parties had an opportun ity to learn about the Support Needs Matrix and its implementation, and to ask questions of PBH staff. Id. ¶ 21. Further, each enrollee’s PBH Care Coordinator was available to m eet (and most did meet) with each enrollee individually to discuss the Support Needs Matrix, to answer que stions about the Support Needs Matrix, and to aid the enrollee in planning for his or her services under thei r Support Needs Matrix Base Budget. Cote Decl. [D.E. 106] ¶ 4.
For those enrollees whose Support Needs Matrix Base Budgets were less than the total amount of Base Budget Services requested in the enrollee’s then-exi sting Individual Support Plan (“ISP”), PBH Care Coordinators encouraged the enrollee to meet with their treatment team (consisting of the enrollee, their g uardian and family members, their provider(s), their Care Coordinator, and any other individual with an inte rest in the enrollee’s treatment) to re-examine their existing ISP and the full array of Innovations waiver services available to develop a plan of care within their Support Needs Matrix Base Budget. Id. ¶¶ 5-7.
If enrollees believed that their Support N eeds Matrix Base Budget wa s inadequate to provide the services necessary to support their n eeds, PBH Care Coordinators inform ed them of their options, which included se eking an Intensive Review. Id. ¶¶ 10-11. Intensive Review is for enrollees who believe that they have support needs which make them outliers as opposed to others in their Support Needs Matrix category. Id. If an enrollee wished to pursue an Intens ive Review, the PBH Care Coordinators assisted the enrollee to gather the necessary documentation, complete the request, and to submit the request to PBH’s Intensive Review Committee. Id.
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PBH Care Coordinators encouraged enrollees to explore planning options within their Support Needs Matrix B ase Budget before reques ting Intensive Review because on e portion of the Intensive Review form asks for an explanat ion of the options attem pted before requesting Intensive Review. Id. ¶ 12. If an enrollee still felt that hi s or her Support N eeds Matrix Base Budget (with or without Intensive Review) was inadequate to provi de the services they believed to be necessary to suppo rt their needs, the enrollee could submit an ISP or an update to the ISP requesting services in excess of their Support Needs Matrix Base Budget. Id. ¶ 13.
Facts about the named Plaintiffs are included in Sections III and VI of the argument. ARGUMENT
I. STANDARD OF REVIEW “A preliminary injunction is an extraordinary remedy which should not be granted unless
there is a clear showing of both likely succes s and irrep arable injury.” Muhammad v. Plaster , 5:10-CT-3199-FL, 2011 U.S. Dist. LEXIS 59654 (E.D.N.C., June 3, 2011) ( citing The Real Truth About Obama, Inc. v. FEC , 575 F.3d 342, 345 (4th Cir. 2009), vacated on other grounds, 130 S. Ct. 2371 (2010), reinstated in relevant part on remand, 607 F.3d 355 (4th Cir. 2010)).
A movant must establish the fo llowing to obtain a prelim inary injunction: (1) that he is likely to succeed on the merits; (2) that he is likely to suf fer irreparable harm in the absen ce of preliminary relief; (3) that the balance of equities tips in his favor; and (4) that an injunction is in the public interest. Muhammad at *1-2 ( citing Winter v. Natural Re sources Defense Council, Inc. , 555 U.S. 7 (2008). “B ecause a prelim inary injunction grants relief before trial, it is ‘an ex traordinary remedy never awarded as of right.’” Galaton v. Johnson , 5:11-CV-397-D, 2011 U.S. Dist. LEXIS 92125 at *5 (E.D.N.C., Aug. 17, 2011) (quoting Winter, 555 U.S. at 24).
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Although Plaintiffs assert that the Motion is necessary “to preserve the status quo,” [D.E. 32, p. 3], the relief Plaintiffs seek would significantly change, rath er than preserve, the status quo. As such, Plaintiffs’ Motion is appropriate ly reviewed under the fa r stricter standards required for a m andatory preliminary injunction. “[M]andatory preliminary injunctions do not preserve the status quo and norm ally should be granted only in those circum stances when the exigencies of the situation demand such relief.” E. Tenn. Natural Gas Co. v. Sage, 361 F.3d 808, 828 (4th Cir. 2003). In general, m andatory injunctions “are not granted unless extrem e or very serious damage will result . . . ” Anderson v. U.S., 612 F.2d 1112, 1115 (9th Cir. 1979); see also Little v. Jo nes, 607 F.3d 1245, 1251 (10th Cir. 2010) (to obtain a m andatory preliminary injunction “which requires the nonmoving party to take an affi rmative action . . . the m ovant must make a heightened showing of the four factors.”).
Under the standard cited by the Plaintiffs th at the status quo is defined as “the last uncontroverted status preceding the pending litigation,” Fed. Leasing, Inc. v. Underwriters at Lloyd’s, 487 F. Supp. 1248, 1259 (D. Md. 1980), aff’d 650 F.2d 495 (4th Cir. 1981), the injunction that Plaintiffs purport to seek would change the status quo, and is thus a m andatory injunction. The relief Plaintiffs seek includes an Order requiring PBH “to reinstate the level of services authorized prior to July 1, 2011 to P laintiffs and all others similarly situated until the Court issues a final ruling.” Motion [D.E. 31], p. 2. However, each o f the Plaintiffs presently receives services that h ave they h ave requested and that have been specifically authorized by PBH for limited periods of time.
As discussed in Sectio n III.A, infra, the expiration of a lim ited authorization is not considered a “reduction, suspension, or termination” entitling the enrollee to continued benefits during some appeals process. Rather, under the managed care Medicaid regulations that apply to
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PBH’s operation of the Innovations waiver progr am, at or before the expiration of an authorization period, th e enrollee must subm it a request for re -authorization of serv ices to receive the sam e services, which the m anaged care Med icaid regulations treat as a “new” request. If the enrollee requests re-authorization of the same level of services, and if PBH does not approve the full dollar am ount or scope of th e requested services, PBH is not required to provide the enrollee with continued benefits at the now-expired level during the appeal process. Thus, Plaintiffs do not seek to restore the status quo. Instead, they seek continued benefits at the now-expired levels indefinitely during the pendency of this cas e, in contravention of the managed care Medicaid regulations.
Additionally, as discuss ed in Sectio n III.A, infra, the injun ction that Plaintiffs seek is inconsistent with the m anaged care Medicaid regulations that govern PBH’s operation of the Innovations waiver program at issue in this ca se. These regulations require PBH to provide notice of appeal rights only when it takes an “action,” as that term is defined in the regulations. Most of what the Plaintiffs com plain of are not “actions” pursuant to the applicable regulations, and thus do not trigger appeal ri ghts for the Plaintiffs. Plaintiffs seek an injun ction from the Court which would rewrite these regulations and require PBH to issue appeal rights (and to provide continued benefits while P laintiffs exercised those newly create d appeal rights) with respect to PBH decisions that are not “actions.” Plaintiffs seek a funda mental change in PBH’s operation which is not supported by the applicable Medicaid regulations; this would not maintain the status quo, but rather would be a mandatory injunction.
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II. BASED ON ALL THE MATERIALS S UBMITTED BY THE PLAINTIF FS TO DATE, THIS COURT HAS ALRE ADY FOUND THAT PLAINTIFFS HAVE FAILED TO MEET THEI R BURDEN UNDER THE WINTER STANDARD TO OBTAIN INJUNCTIVE RELIEF. This Court has twice considered Plaintiffs’ request for the same injunctive relief they
seek in the instant Motion, and ha s twice found that the P laintiffs have failed to carry their burden under the Winter standard. On July 12, 2011, the Court issued an Order denying the request for tem porary injunctive relief in Plai ntiffs’ Complaint. [D.E. 19]. Noting that the Plaintiffs had not yet su bmitted affidavits or other materials in support of their Complaint, th e Court found that at that early stage, the Plaintiffs had not yet satisfied their burden. Id.
On August 24, 2011, the Plaintiffs filed the instant Motion, a Memorandum in Support of the same, and a large volum e of m aterials in support of their Moti on. [D.E. 31, 32]. On December 20, 2011, Plaintiffs K.C., D.C., and interv ening Plaintiff M.S. m oved the Court for a temporary restraining order. [D.E. 70] These movi ng plaintiffs incorporated all of t he materials and Memorandum submitted in support of the Mo tion for Prelim inary Injunction into their motion for a temporary restraining order, and a lso filed additional supporting materials. [D.E. 71, p. 2, n. 4]. W ith this entire reco rd before the Court, on Decem ber 28, 2011 the Court again found that the Plaintiffs had failed to carry their burden under Winter. [D.E. 82]. “Plaintiffs have not satisfied the requ irements of Winter or Rule 65(b)(1) at this juncture. The court cannot conclude that plaintiffs have demonstrated a likelihood of success on the m erits, that the balance of equities tips in their favor, or that a te mporary injunction is in the public in terest.” Id. at 3. The Court also expressed doubt as to Plaintiffs ability to show irreparable harm. Id.
Plaintiffs have not sub mitted any additional materials in support of the ins tant Motion beyond what was before the Court at the tim e it issued its December 28, 2011 Order. The Court
7 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 7 of 32

was correct to deny Plaintiffs’ m otion for tem porary injunctive relief, and the Court should further deny Plaintiffs’ motion for preliminary injunctive relief on the same record. III. PLAINTIFFS’ MOTION FOR PRELIMINARY INJ UNCTION SHOULD B E
DENIED BECAUSE PLAINTIFFS ARE NOT LIKELY TO SUCCEED ON THE MERITS OF THEIR CLAIMS. Plaintiffs’ Motion should be denied, as an initial matter, because Plaintiffs are unlikely to succeed on the m erits of their claims. As “a pre liminary injunction affords relief b efore trial,” the burden is on the plaintiff to “ make a clear showing that [plaintiff] will likely succeed on the merits at trial.” Real Truth, 575 F.3d at 346 (citing Winter, 129 S.Ct. at 374, 376). Plaintiffs’ Complaint and m aterials submitted in support of their Motion con tain a blizzard of dates and names and alleged statements by various PBH employees, most of which is superfluous to Plaintiffs’ actual claim s.1 At the core of this blizz ard, Plaintiffs allege that th e PBH Defendants have “reduced” a nd/or “terminated” Medicaid services for t he Plaintiffs without providing Plaintiffs the due process afforded them by the Medicaid Act and the regulations promulgated thereto, and by the Fourteenth Am endment to the United S tates Constitution as set forth in Goldberg v. Kelly, 397 U.S. 254 (1970) and its progeny. Plaintiffs’ motion does not address or rely on their First Claim for Relief,2 and Plaintiffs

1

Further, Plaintiffs’ Declarations contain num erous inaccuracies and errors, some of which are

addressed in the Declar ations of Sonja Goodwin [D.E. 108], Melissa Campbell [ D.E. 109], Denise

Denosky [D.E. 110], and Tanyon Martin [D.E. 111].

2

Plaintiffs Motion for Preliminary Injunction is only brought as to Claims Two and Three in their

Complaint. As noted in the Mem orandum submitted by Defendant Cansler [D.E. 102], Plaintiffs did not

include Claim One in their Motion, and Plaintiffs’ Mem orandum in Support of their Motion does not

substantively address Plaintiffs’ First Claim for Relief. Consequently, Plaintiffs’ Motion for Preliminary

Injunction is appropriately limited to Plaintiffs’ Second and Third Claims for Relief.

Further, Plaintiffs’ First Claim, which asserts a substantive due process claim, is unavailing. It is based on the allegation that PBH acted arbitrarily and subjectively in allocating Medicaid funds among Innovations Waiver enrollees. See Compl. ¶ 125. “Substantive due process rights guard against the government’s exercise of power without any reasona ble justification in t he service of a legitimat e governmental objective. Only the m ost egregious official conduct can be s aid to be arbitrary in the

8 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 8 of 32

are unlikely to succeed on the m erits of their S econd and Third Claims for Relief. Plaintiffs’
argument focuses primarily on PBH’s alleged f ailure to adequately fulfill the mechanics of due
process, while largely glossing over the m ore important prerequisite of whether due process
rights are even triggered here. Rather than glo ssing over this first issue as Plaintiffs urge, the
proper analysis would be as follows:
There are, essentially, three is sues before us . . . First, does the change in . . . services . . . cons titute an agency action under [the applicable regulations]? If so, what process was due those recipients as a conseq uence of that action ? Finally, w ere the recipients entitled to aid-conti nuing pending disposition on the merits of their challenge to the agency action?
Granato v. Bane , 74 F.3d 406, 411 (2d Cir. 19 96). Here, because th e changes ab out which
Plaintiffs complain do not cons titute agency “actions” under the applicable regulations, the analysis ends there.3 Further, because the first and thir d issues in this analysis should be
answered in the negativ e, Plaintiffs are not en titled to receive continued benefits during the
appeal process. Lastly, even if the Plaintiffs had been able to show a likelihood of success at
some point, the claims of all five of the named Plaintiffs are now moot.

constitutional sense and therefore unconstitutional.” County of Sacramento v. Lewis, 523 U.S. 83 3, 846, 118 S.Ct. 1708, 140 L.E d.2d 1043 (19 98) (citations omitted). Plaintiffs’ complaint fails to allege facts that could give rise to a c laim that the PBH Defendants behavior was outrageous or egregious so as t o “shock the conscience.” See, e.g., Pestera Center for Mental Health v. Lawton, 111 F.Supp.2d 768, 778 (S.D. W.Va. 2000). (“The substantive co mponent of the Due Process Cl ause is violated by executive action only when it ‘can properly be characterized as arbitrary, or conscience shocking, in a constitutional sense.’ Conduct deliberately intended to injure in some way, unjustifiable by any government interest, is the sort of official action most likely to rise to the conscience-shocking level.”)

3

Plaintiffs’ characterization of a Medicaid agency’ s legal require ments might be correct if the

Innovations waiver at issue here was a traditional fe e-for-service Medicaid program. However, the legal

and regulatory requirements for PBH’s operation of Innovations as a managed care Medicaid program are

substantively different, an d do not support Plaintiffs’ Second and Third Claims for Relie f. As such,

Plaintiffs’ assertions about PBH’ s legal requirements are clearly erroneous, and these errors drive

Plaintiffs’ incorrect characterization of the Support Needs Matrix as a “reduction in services.”

9 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 9 of 32

A. Plaintiffs’ Claims for Relief are Based on a Clearly Erroneous Assertion of PBH’s Legal Requirements.
The Medicaid Act requires that the State Medicaid plan must
provide for granting an opportunity for a fair hearing before the State agency to any ind ividual whose claim for medical assistance under the plan is denied or is not acted upon with reasonable promptness.
42 U.S.C. § 1396a(a)(3). The CMS regulations pr omulgated pursuant to this statute generally
require that an enrollee be provided with an opportunity for a fair hearing whenever the
Medicaid agency takes an “action” as that term is defined in the applicab le regulations. See 42
C.F.R. §§ 431.201(b); 438.400(b). T hus, by design of CMS, enrollees are not able to challenge
any and every decis ion of the Medicaid ag ency, but rath er are only permitted to challeng e
decisions defined as “actions.” However, th e CMS regulations governing the operation of
traditional fee-for-service Medicaid programs, and those go verning the operation of managed
care Medicaid programs, define “action” differently. The difference in the definition of “action”
– which Plaintif fs’ entire lawsuit attem pts to blur – is at the heart of why the Plaintif fs are
unlikely to succeed on the merits of their claims.
1. Managed Care Medicaid Regulations, the Waiver, and PBH’s Contract with the State of N orth Carolina Require PBH to Implement a “Grievan ce System” Pursuant to 42 C.F.R. § 438 Subpart F.
PBH operates as a Pre-Paid Inpatie nt Health Plan (“PIHP”), as that term is defined at 42
C.F.R. § 438.2. See Contract between PBH and the Department § 2 (“Contractor Designated as a
Single Prepaid Inpatient Health Plan (PIHP)”) [D.E. 31-5, p. 6] ; 1915(c) Waiver [D.E. 31-3, p.
5]. A PIHP is a type of MCO wh ich is prepaid by the State, based on capitation rates, to provide care, and accepts the financial risk of providing that care.4

4

This arrangement intentionally creates an incen tive for PBH to provide the most efficient and

cost-effective care, which includes not authorizing care requested by or on behalf of a con sumer where

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The specific regulations adopted pursuant to the statutory language in 42 U.S.C. § 1396a(a)(3) for the operation of m anaged care Medicaid by MCOs, including PIHPs like PBH, are found at 42 C.F.R. Part 438 (“Managed Care”). These regulations require MCOs to establish a “Grievance System” that enables enrolled Medicaid consumers to contest certain decisions of an MCO in a fair hearing process as those decisions relate to consumers’ services. See 42 C.F.R. § 438 Subpart F. The “Grievance System” set forth in 42 C.F.R. § 438 Subpart F is comprised of “appeals” and “grievances,” as those terms are defined in the regulations. Plaintiffs’ Second and Third Claims for Relief relate to “a ppeals,” which are defined as “a reque st for review of a n action, as ‘action’ is def ined in this section.” 42 C.F.R. § 438.400(b). The federal regulations governing PBH’s operation as a PIHP require P BH to provide notice of and an opportunity for a fair hearing (i.e., an “appeal”) for “actions,” which are defined in pertinent part as follows:
Action means – In the case of an MCO or PIHP – (1) The denial or lim ited authorization of a requested service,
including the type or level of service; (2) The reduction, suspension, or term ination of a previously
authorized service; 42 C.F.R. § 438.400(b). 5

there is not a de monstrated clinical need for the car e. Any cost savings realiz ed by PBH as a result of providing efficient and cost-effective care are required to be used to provide additional medical care for Medicaid beneficiaries enrolled in the plan. Shipman Decl. [D.E. 41] ¶ 8.

5

42 C.F.R. § 438.400(b) defines “grievance” in pertinent part as “an expression of dissatisfaction

about any matter other than an action, as ‘action’ is defined in this section.” Critically, the submission of

a “grievance” does not initiate the fa ir hearing process. Pl aintiffs do not allege that th ey have been

deprived of t he opportunity to subm it “grievances” to PBH expr essing their dissatisfaction about any

matter other than an action, and do not a llege that PBH has failed to respond to any grievance as required

by the federal regulations.

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In its Utilization Management process, PBH makes time-limited prior authorizations for specific requested services. Under m anaged care Medicaid, the natural expiration of a ti melimited authorization is not trea ted as a “term ination” of services triggering notice and due process. For the enrollee to receive the service after the end of the authorization period for that service, she must submit a new request for that service, which PBH must then authorize.
This distinction is s et out in subs ections (1) and (2) in the m anaged care Med icaid definition of “action.” If an enrollee is requesting a service for the first time, a denial or lim ited authorization of that service is an “action” pursuant to subsection (1). If PBH reduces, suspends, or terminates a previously authorized service du ring the authorization period, that is an “action” pursuant to subsection (2). However, if an enrollee’s prior authorization expires on its own accord, and the en rollee requests re-autho rization of the s ervice at th e same level, and PBH authorizes the service at a lower level than the enrollee requested, th is is an “action” under subsection (1) ( i.e., a “denial or lim ited authorization”) and not under subsection (2) (a “reduction, suspension, or termination of a previously authorized service”).6

6

This distinction is further clarified in the Comments and Responses in the Final Rule adopting 42

C.F.R. § 438 Part F. In response to the Proposed Rule, CMS received conflicting comments, with so me

commenters urging that the expiration of an existi ng authorization does not constitute a “term ination”

requiring notice and appeal rights, while other co mmenters urged the opposit e view. In the Final Rule,

CMS weighed in on the side of the former:

We agree with the first s et of co mmenters that the expiration of an

approved number of visits does not constitute a termination for purposes

of notice and continuation of benefits. Likewise, w hen a prescription

(including refills) runs out and the enrollee requests another prescription,

this is a new request not a term

ination of benefits. In these

circumstances, the MCO or PIHP would not need to send a notice of

continued benefits pending the outcome of an appeal of Sta te fair

hearing. If the enrollee requests a re -authorization that the MCO or

PIHP denies, the MCO or PIHP must treat this request as a new request

for service authorization and provide notice of the denial or limitation.

We disagree with the second co mmenters that a denial of

authorization for additional days is a “term ination,” since the

enrollee had no expectation of cov erage on those days, and this was

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Further, in this third sce nario, PBH is requ ired to (and does) issue appeal rights to the enrollee pursuant to 42 C.F.R. § 438.404, but is not required to provide the enrollee with continued benefits at his previously authorized (but now expired) leve l pending the outcom e of the appeal. See 42 C.F.R. 438.420(b) (PIHP “must continue the enrollee’s benefits if . . . the appeal involves the term ination, suspension, or re duction of a previously authorized course of treatment” . . . and “the origin al period covered by the original authorization has not expired.”); see also Karen L. v. Health Net of the Northeast , 267 F. Supp. 2d 184, 191 (D. Conn. 2003) (referring to subsection (2), “t he Federal Medicaid regulations require MCOs to provide aid pending appeal only in certain circu mstances.”). Plaintiffs erroneously argue that in this third scenario, PBH is legally required to provide c ontinued benefits pending the outcom e of the appeal. Pltffs’ Memo. [D.E. 32] p. 20, n. 10.
In support of this argum ent, Plaintiffs cite 42 C.F.R. §§ 435.916(a) and 440.230(d), neither of which address the issue of continuation of managed care Medi caid services past the expiration of their prior authorization. Plaintiffs confuse regulati ons pertaining to an enrollee’s continued eligibility to receive any services with the expiration of a time-limited authorization to provide a specifically requested service. Furthe r, Plaintiffs’ argum ent ignores the applicable
thus simply a denial of a new request , not a termination of services the enrollee had a right to expect to continue. We believe that the prop osed rule already clearly reflected the above interpretation. In t he definition of “Action,” the reference to a “reduction, suspension, or ter mination” in the proposed rule was qualified by the phrase, “o f a previously authorized service.” Thus, the cessation of services because the authorization expired would not be an “action,” becaus e services after the date when the author ization expired would not be “previously authorized.” 67 Fed. Reg. 40989, 41058 (June 14, 2002) (second Co mment and Response under “3. Notice of Action (Proposed 438.404).”) (emphases added).
13 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 13 of 32

managed care Medicaid regulation – 42 C.F.R. § 438.420(b) – and the Comm ents and Response in the Final Rule adopting that regulation.7

Although Plaintiffs relegate this argument to a footnote in their Memorandum, their claim

to continued benefits when th e Plaintiffs submit updated ISPs requesting changes in their

services, or even after the expiration of a prev ious authorization, is tr uly the gravam en of the

Prayer for Relief in their Complaint, and is at the heart of the injunctive relief they seek in the

instant Motion. As dis cussed in Section IV.B. , infra, Plaintiffs presently have th e ability to

trigger and enjoy due process appe al rights they purport to seek, but such due process rights do

not include continued benefits duri ng an appeal. Plaintiffs are no t satisfied with the due process

rights afforded them by the legal and regulat ory framework for m anaged care Medicaid, and

instead ask this Court to create new due pro framework.8

cess rights which run cont rary to the exis ting

7

See 67 Fed. Reg. 40989 a t 41064 (second, thir d, and fifth Comments and Responses under “9 .

Continuation of Benefits When an MCO or PIHP Appeal of a Term ination, Suspension, or Reduction,

and State Fair Hearings on Such an Action, are Pending (Pro posed 438.420).”) (“[W]e agree that th e

expiration of an approved number of visits does not constitute a ter mination for purposes of notice and

continuation of benefits. If an enrollee requests re-authorization for services and the MCO or PIHP

denies the request or re-authorizes the services at a lower level than requested, the MCO or PIHP must

treat this request as a new service authorization request and provide notice of the denial.” . . . “[ W]e

believe that if services are discontinued on the date the authorization expires, this is not a ‘termination’ of

services that the enrollee has any right to expect to receive, and thus is not a termination within the

meaning of section 1902( a)(3) [42 C.F.R. § 1396a(a)(3 )] and the im plementing regulations. . . . We

believe that this process is fully consistent with the Medicaid statute and constitutional requirements, to

the extent applicable.”).

See also Id. at 41058 (second Comment and Response under “3 . Notice of Action (Proposed 438.404”) (“In a case in which services which were ‘previously authorized’ are continued or reinstated at the request of the enrollee pending appeal, and during this continuation period, the period of authorization expires, services may be terminated as provided in the original authorization.”) (emphasis in original).

8

Plaintiffs’ failure to cite t he traditional fee-for-service regulation requiring continued benefits

during appeals (42 C.F.R. § 431.230) is a tacit acknowledg ment by the Plaintif fs that the fee-for-service

regulations do not control with resp ect to PBH’s operation of the Innovatio ns wavier program as a PIHP.

Further, the only case that Plaintiffs contend holds that Goldberg requires continued benefits after th e

expiration of a prior authorization is inapplicable here. Contin uation of benefits arose in Jonathan C. v.

14 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 14 of 32

2. Plaintiffs’ Claims are Based on Substant ively Different Regul ations Governing Traditional Fee-for-Service Medicaid Programs Under 42 C.F.R. § 431 Subpart E.
In contrast, the standard th at underlies Plaintiffs’ Second and Third Claim s for Relief, and upon which Plaintiffs seek injunctive relief from this Court, is the m aterially different and inapplicable definition of “action” found in the regulations for fee-for-service Medicaid, which are found at 42 C.F.R. § 431 Subpart E. 9 As with Managed Care Medicaid, traditional fee-forservice Medicaid requires due process rights only when the State takes an “action.” However, in traditional fee-for-service Medicaid, “action” is defined as “a term ination, suspension, or reduction of Medicaid e ligibility or covered services.” 42 C.F.R. § 431.201. Unlike the m ore limited definition of “action” which applies to the managed care Innovations program , the feefor-service definition of “action” is not tied to requests f or authorization, and is broad and unlimited as to tim e. If a f ee-for-service enrollee is receiving a s ervice, any reduction or termination of that service, even at the end of an authorization period, is an “action” requiring the due process rights the Pl aintiffs seek here (i.e., (1) prior written notic e explaining the proposed reduction, (2) an opportunity for a fair hearing to contest th e proposed reduction; and (3) continued benefits at the previously authorized level pending the outcome of the fair hearing.).

Hawkins, 2006 WL 3498 494 (E.D. Tex., Dec. 5, 200 6) pursuant to the fee-for-service regulations which are not applicable here. Further, the fa ctual situation in Jonathan C., where the agency failed to com ply with the numerous orders reversing its decisions on appeal, is extrem e and inapposite to the facts before the Court here.

9

While some the general provisions for fair h earings for consumers for all Medi caid entities set

forth in 42 C.F.R. § 431 Subpart E m ight apply to PBH, these general provisions are superseded by the

specific provisions for the Grievance Sy stem for PIHPs, like PBH, set forth in 42 C.F.R. § 43 8 Subpart F

to the extent the more specific provisions governin g managed care Medicaid ar e inconsistent with the

general provisions for all Medicaid entities. The general procedures for fair hearings, set out in 42 C.F.R.

§ 431 Subpart E apply when a “PIHP takes action under subpart F of part 438 of this chapter.” 42 C.F.R.

§ 431.200(b). Thus, CM S has by regulation mandate d that for a PIHP like PBH, the definition of

“action” in Part 438, and not the definition of “action” in Part 431, describes the “actions” that trigger an

opportunity for a fair hearing.

15 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 15 of 32

The Plaintiffs’ reliance on this broa d and limitless definition of “action” with its right to continued benefits in all fair hearings underlie s Plaintiffs Second and Third Claims for Relief. See Compl. [D.E. 6] ¶ 127, 131; Memorandum in Support of Motion for Prelim inary Injunction [D.E. 32] p. 2. This reliance is clearly erroneous.10 Further, it is this misapplication of Medicaid regulations that caus es the Plaintiffs to inco rrectly characterize th e implementation of the Support Needs Matrix (where PBH did not take an “action” by reducing or term inating a previously authorized service) as a “reduction in servi ces.” Plaintiffs are unlikely to succeed on the merits of their claims as a result.
3. Plaintiffs’ Constitutional Due Process Rights, if any, are Coterm inous with their Statutory and Regulatory Due Process Rights.
Courts have held that the Due Process clause of the Fourteenth Amendment, as interpreted in Goldberg and its progeny, applies to Medicaid because enrollees have a “property interest” in the benefits. However, “property in terests are not created by the Constitution, ‘they are created and their dim ensions are defined by existing rules or understandings that stem from an independent source such as state law.’” Cleveland Bd. of Educ. v. Loudermill , 470 U.S. 532, 538 (1985) (quoting Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)). “In determining whether a given benefits regime creates a property interest protected by the Due Pr ocess Clause, we look to the statutes and regulations govern ing the distribution of benefits.” Kapps v. Wing, 404 F.3d

10

Indeed, all of the Medicaid-related cas es cited by the Pl aintiffs in support of their Motion for

Preliminary Injunction arise in the fee-for-service co ntext applying the broad a nd, in this case, erroneous

§ 431.201 definition of “action.” See, e.g., Granato v. Bane, 74 F.3d 406, 411 (2d Cir. 1996) (first issue

before the court was “does the change in hom e care services . . . constitute an agency action under 42

C.F.R. § 431 .201?”); Catanzano v. Dowling , 60 F .3d 113, 117 (2d Cir. 199 5) (followed definition of

“action” in 42 C.F.R. 431 Subpart E); Jonathan C. v. Hawkins, 2006 WL 3498494 at *6 (E.D. Tex., Dec.

5, 2006) (court looked t o the definition of “acti on” in 42 C.F.R. § 431.201 to identify due process

requirements); Cramer v. Chiles, 33 F. Supp. 2d 1342, 1351-52 (S.D. Fla. 1999) (same); Ladd v. Thomas,

962 F. Supp. 284, 291 (D. Conn. 1997) (same); Perry v. Chen, 985 F. Supp. 1197, 1203 (D. Ariz. 1996)

(same); Haymons v. Williams, 795 F. Supp. 1511, 1520-21 (M.D. Fla. 1992) (same). Plaintiffs do not cite

any case (and PBH is not aware of an y case) applying the broad § 431.201 defin ition of “action” to the

operation of a PIHP.

16 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 16 of 32

105, 113 (2d Cir. 2005). Because the “prop erty interest” of Medicaid benefits was created (and can be changed or elim inated) by Congress, Courts defer to the Congress and to CMS to define the scope of the “property” which an enrollee may protect under the Due Process Clause.
Here, the Innovations waiver program is not an entitlement, but rather is an optional waiver program. The Medicaid Act does not make mandatory the Home and Community-Based Services pursuant to 42 U.S.C. § 1396n(c), such as the Innovati ons waiver, and thus Medicaid beneficiaries “can prove no set of facts” in sup port of claim s that would have a C ourt order a Medicaid agency to provide be nefits under such a waiver. A.M.H. v. Hayes , 2004 U.S. Dist. LEXIS 27387 at *30 (S .D. Ohio, Sept. 30, 2004). Th e Innovations waiver (the 1915(c) waiver) is not a Medicaid en titlement, but rather is an alternative to the Medicaid entitlement. Shipman Decl. [D.E. 41] ¶ 6; See also 1915(c) W aiver [D.E. 31-3] p. 5 (“Purpose: The Innovations Waiver is designed to provide an array of community based serv ices and supports that prom ote choice, control and co mmunity membership. These services prov ide a community based alternative to institutional care for persons who requi re an ICF-MR level of care.”) (emphasis added). Because the Innovations program is an optional program , and not an entitlem ent, Innovations enrollees do not have co nstitutional due process rights with respect to th e program. Rather, their due process rights are limited to those provided by statute, regulation, and contract.
Even if the Court finds that Innovations en rollees have constitutional due process rights in the managed care Medicaid context applicable to this case, such rights are coterm inous with the enrollees’ statutory/regulatory due process rights. The protectable “property interest” is only in an enrollee’s existing, time-limited authorization for a specific service during the duration of the authorization, and in an enrollee’s request fo r authorization of a specific service. As the regulations and the Comments and Responses adopting them cited in footnotes 6 and 7 , supra,
17 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 17 of 32

make clear, Congress and CMS have narrowly define d the “property” in which an enrollee has a

right to protect under the Due Process Clause. CMS’s interpre tation of 42 U.S.C. § 1396a(a)(3)

“is entitled to conside rable deference; a c ourt may not substitu te its own readin g unless the

agency’s interpretation is unreasonable.” Skandalis v. Rowe, 14 F.3d 173 (2d Cir. 1994) (citing

Chemical Man’f Ass’n v. Natural Resources Defense Council, Inc. , 470 U.S. 116, 125 (1985); Chevon U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 844 (1984)).11

For the Plaintiffs to succeed on the merits of their claims, this Court will have to find that the managed care Medicaid regulations at 438 Subpart F fail to meet the requirements of the 14th

Amendment as set forth in Goldberg and its progeny. The PBH Defendants’ research has

revealed no court in the country which has so held. This Court should decline to be the first.

B. Application of Legal Standard to Plaintiffs’ Claims.

In the Memorandum in Support of their Motion, Plaintiffs argued they are “highly likely

to prevail on their legal claims,” [D.E. 32, p. 2] and framed those claims around the following:

(1) the use of the SIS to determine Plaintiffs’ level of need without an opportunity for a fair hearing;

(2) assignment to a SNM category an d Base Budget without an opportunity for a fair hearing;

(3) the denial of Intensive Review without an opportunity for a fair hearing; and

(4) Plaintiffs were informed that “they must sign new plans of care substantially reducing their c overed services, and if they refused to do so, all of their services would stop.”

Id. Plaintiffs are unlikely to succeed on the m erits as to th e first three of these iss ues because

those are n ot “actions”, and theref ore the Plainti ffs have no right to a fa ir hearing to contest

11

When an agency construes its own regulations , as CMS did in its Responses to Comments in the

Final Rule cited in foot notes 6 and 7, supra, “such deference is particularly appropriate, and even m ore

appropriate where, as h ere, we consi der a s mall corner of a laby rinthine statute.” Id. (internal citati on

omitted).

18 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 18 of 32

them. With respect to the fourth, Plaintiffs’ allegations are factually inaccurate. However, even if true, these are not “actions” triggering due process rights.
1. The Administration of the SIS, the A ssignment of each Plaintiff to a SNM Category and Base Budget, and Intensive Review are not “Actions” for which Plaintiffs have direct a ppeal rights, but rather are part of the m anaged care planning process.
Plaintiffs complain that PBH has “used an as sessment tool to deci de each Plaintiff’s and others’ medical and behavioral health needs but provided no opportunity to appeal the validity of their assessment scores.” [D.E. 32, p. 2]. Plain tiffs refer here to the Supports Intensity Scale (“SIS”), which is natio nally-recognized evaluation tool used as a standardized m easure of a person’s level of support needs. Misenheimer Decl. [D.E. 42] ¶ 7, Exh. A.
The support needs of all Innovations enrollees as reflected on their SIS scores, as well as demographic and other inform ation, are used to develop the Support Needs Matrix. Id. ¶¶ 7-8. An enrollee’s SIS score is one of the com ponents used to assign each enrollee to a Support Needs Matrix category with a cohor t of other enrollees with comparable levels of support needs. Id. Taking into account the lim ited financial resources available to the Innovations program , each Support Needs Matrix catego ry is assigned a Base Budget, which reflects the total am ount of money available to fund the typical types of services used by enrollees in each category. Id. ¶ 10. Plaintiffs also complain th at PBH has not provided Plaintiffs with “proper written notice or any right of fair hearing to contest the [Suppor t Needs Matrix] category to which they wer e assigned.” Compl. ¶ 109. This is false.
If an enrollee’s treatm ent team believes th at she needs more serv ices than her Base Budget will provide, the enrollee can request Inte nsive Review to determ ine if the enrollee should be classified as an outlier from her Support Needs Matrix category and whose behavioral, safety, health and welfare needs differ signifi cantly from others in the sam e category.
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Misenheimer Decl. [D.E. 42] ¶ 14; Cote Decl. [D.E. 107] ¶ 11; D.E. 105-5, pp. 13-15. Plaintiffs complain that they were not given sufficient not ice about Intensive Revi ew, and that if PBH’s Intensive Review Committee does not recommend that the Plaintiff’s needs made her an ou tlier within her Support Needs Matrix category, that th e Plaintiffs are not given an opportunity for a fair hearing to challenge this recommendation. 12
Critically, none of these issues - the administration of a SIS evaluation, the assignment of an enrollee to a Support Needs Ma trix category with a specific Base Budget, or an Intensive Review – is an “action” as defined in 42 C.F. R. § 438.400(b). “Actions” in the m anaged care Medicaid context are tied to sp ecific requests for authorization of services by an enrollee. None of these issues is tied to a specific request for authorization of services. Rather, each falls within the purview of the necessary and important pl anning and budgeting functions of a PIHP, whi ch are not “actions” triggering appeal rights.
Moreover, Plaintiffs have th e ability to challenge their SIS score, their Support N eeds Matrix category or Base Budget, or a denial of an Intensive Review recommendation. Within 90

12

In their Com plaint, Plaintiffs allege that the Defendants “have engaged in a procedure an d

practice of insisting or s trongly encouraging that waiver participants not fi le requests for Intensive

Review . . . ” Compl. ¶ 114. The only evidence put forward by the Plaintiffs that PBH encouraged any of

Innovations participant not to file a requ est for Intensive Review is limited to the Declarations of Ron S.

[D.E. 31-23] and Lin da Johns [ D.E. 31-69]. Ron S. st ated that his son ’s Care Coordinator, Son ja

Goodwin, “told me that L. S. would need to wait unt il at least six m onths after his new budget became

effective before we can make a request for an Intensive Review.” D.E. 31-23, ¶ 17. Ms. Goodwin

declares that she never told Ron S. or any other member of L.S.’s family that he had to wait any period of

time before being allowed to make a request for Intensive Review. Goodwin Decl. [D.E. 108] ¶ 6. Linda

Johns stated that her son ’s Care Coordinator, Denise Denosky, “discouraged me fro m requesting an

Intensive Review.” Ms. Denosky declares that she did not discourage Ms. Johns fro m requesting

Intensive Review. Denosky Decl. [D.E. 110] ¶ 14. In fact, Plaintiff Allison Taylor Johns did submit a

request for Intensive Review in June 2011. Covert Decl. [D.E. 106] ¶ 12.

The other Plaintiffs and putative clas s members either requested an Intensive Review (see Decl. of Penny C. [D.E. 31-34] ¶¶ 35-36; Decl. of Africa Health [D.E. 31-61] ¶ 20; Decl. Melissa W. [D.E. 3174] ¶¶ 18-19), or stated that Intensive Review w as never discussed with them ( see Decl. of Rachelle S. [D.E. 52-3] ¶ 24). In sum , there is no credible evid ence before the Court to support Plaintif fs’ allegation in paragraph 114 of the Complaint.

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days of receiving their SIS scores , any enro llee may challenge the accuracy of their SIS evaluation. Each enrollee m ay request an Intensive Review if they believe that their level of support needs m akes them an outlier within th eir Support Needs Matrix category cohort. Cote Decl. [D.E. 107] ¶ 11. Even if the Intens ive Review Committee does not recommend that an enrollee is a n outlier, each enrollee m ay still su bmit a requ est for authorization of services to PBH Utilization Management in excess of her Ba se Budget and provide docum entation to show that she is an outlier in support of that reques t. Id. ¶¶ 13-14; D.E. 105-5 at 15. As discussed in Section VI.B., infra, with or without an Intensiv e Review, each enrollee may force PBH to take an “action” by submitting a request for authorization of services in excess of their Support Needs Matrix Base Budget which, if PBH de nies it in whole or in part, tr iggers appeal rights. If a n enrollee exercises her appeal ri ghts at that stage, she m ay challenge her SIS evaluation, her Support Needs Matrix category and Base Budget, and her Intensive Review. Not before.
2. Plaintiffs’ Claim that P BH Required Pl aintiffs to Sign New Plans of Care Reducing their Services and Threatened Plaintiffs with Ter mination of All Services is Factually In accurate, and is also Not an “Action” Triggering Appeal Rights.
In March and April 20 11, each of the Plaintiffs received a letter from PBH inform ing them of the Support Needs Matrix categories to which they had been as signed, along with their Base Budget. Cote Decl. [D.E. 107] ¶ 3; e.g., D.E. 31-28. For enrollees whose Base Budget was significantly less than the actual cost of th eir care from January to Dece mber 2010, PBH provided a series of budget step-downs to gra dually transition the enrollee to his new Support Needs Matrix Base Budget in 6-m onth increments. Misenheimer Second Decl. [D.E. 105] ¶ 23, Exhs. B, D. PBH also sent all enrollees a co py of the 2011 Support Needs Matrix Guide providing important infor mation about the progr am, and held a series of open comm unity meetings where enro llees and fa milies could learn m ore and ask questions of PBH about the
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Support Needs Matrix. Id. ¶ 21, Exh E. Further, each enrollee’s PBH Car e Coordinator met with the enrollee and his treatment team to discuss the Support N eeds Matrix, to provide information, and to answer questions. Cote Decl. [D.E. 107] ¶ 4.
PBH informed the enrollees that it would begin using the S upport Needs Matrix as the Utilization Management criteria for requests f or authorization of services to be pro vided on or after July 1, 2011. Each enrollee’s Support Needs Matrix Base Budget reflected the total amount of money that enrollee could spend on Base Budget services durin g the year. Misenheimer Decl. [D.E. 42] ¶ 11. If enrollees ha d previously authorized services which extended beyond July 1, 2011, PBH did not reduce or term inate those servic es, but instead allowed those enrollees to continue to receive their prev iously authorized services at their p reviously authorized levels. Covert Decl. [D.E. 106] ¶ 8. Plaintiff Allison Taylor Johns is such an enrollee. When Ms. Johns was assigned to her Support Needs Matrix category and assigned a Base Budget, she had existing authorizations for services through the end of her ISP pl an year on October 31, 2011. Id. ¶ 10. PBH did not term inate or reduce Ms. Johns’ servi ces during those previous authorizations, and Ms. Johns continued to receive th e all of her previously authorized services through October 31, 2011. Id. ¶ 11.
However, for enrollees like Ms. Johns who chos e to continue to receive their previously authorized services, they cons umed their rem aining Support N eeds Matrix Base B udget at a faster rate than they would have if they had updated their ISPs effective July 1 to request services within their Support Needs Matrix Base Budget. Consequently, when Ms. Johns requested authorization for services begi nning November 1, 2011 in her new ISP, Ms. Johns had less money remaining in her Base Budget available to provide services. Id. ¶ 13. PBH authorized a limited pro-rated share of Ms. John s’ requested services and deni ed the amount in excess of her
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remaining Base Budget, and then issued Ms. John s notice of appeal rights , which she exercised. Id. ¶¶ 14-15.
To avoid the faster spend-through that Ms. Johns experienced, PBH encouraged all enrollees whose Support Needs Matrix Base Budgets were less than their previously authorized services to closely exam ine the array of Base Budget Services and Non-Base Budget Services available to them and identify a group of services that could meet their support needs within their Support Needs Matrix Base Budget. Cote Decl. [D.E. 107] ¶¶ 6-8, 12, 14. When each enrollee’s treatment team had identified such a group of services, the enrollee submitted an update to his or her ISP requesting authorization of the new array of services beginning July 1, 2011. W ith the approval of an update to an enrollee’s ISP, thei r newly authorized services supplanted their existing overlapping services.
Plaintiffs now argue that this pro cess of updating the ir existing ISPs constitu ted a “reduction in services ” which required advanc e written notice explaining the reduction, a fair hearing process in which the Plaintiffs could challenge the reduction, and continued benefits during the fair hearing process. Plaintiffs’ ar gument is fundam entally flawed. PBH did not terminate or reduce an existing authorization wit hout the approval of an en rollee. Covert Decl. [D.E. 106] ¶ 8. Rather, PBH reviewed and appr oved the Plaintiffs’ new, updated requests for services. It was the Plaintiffs who reques ted an authorization for a dif ferent array of services beginning on or after July 1, 2011, including pha se-in steps that changed budgets in m ore manageable increments. If, as occurred with Plaintiffs K.C., L.S., D.C., and M.S ., PBH authorized all of the services that the Pla intiffs requested, there was no “action” to appeal. 13 Covert Decl. [D.E. 106] ¶¶ 20, 27, 37-38, 43.

13

A logical playing out of Plaintiffs’ argument further reveals its flaws. Plaintiffs argue that t hese

ISP updates were reductio n in services which required PB H to provide advanc e notice to the Plaintiffs

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Plaintiffs further complain that “PBH care managers have informed participants that the plan of care m ay not request m ore in services than the Support Needs Ma trix budget allows.” Compl. ¶ 112. This, too, is factually incorrect. Rather, every Innovations participant, including each of the Plaintiffs, received th e 2011 Suppor t Needs Matrix Guide in March 2 011, which specifically states th at “[t]he planning team may submit the Individual Support Plan to Utilization Management with a request for Base Budget Se rvices that exceeds th e individual’s Support Needs Matrix Category.” See D.E. 31-8, p. 15 of 18 (em phasis added). In its Answer to Plaintiffs’ Complaint, PBH reitera ted that each of the Plaintif fs could subm it a request f or services in excess of their Base Budget which, if denied in whole or in part, would trigger appeal rights. [D.E. 38, ¶¶ 7 2, 80, 91, 1 06] Indeed , Plaintiffs Allison Taylor Johns and D.C., and putative class m ember Kimberly Beare, all sub mitted ISPs or upda tes to their ISPs reques ting approval for Base Budget Services in excess of their Support Needs Ma trix category. Covert Decl. [D.E. 106] ¶¶ 13-14, 26, 53-54. A ll of these requests were appr oved in part and denied in part by Utilization Management, and PBH issued these individuals notice of appeal rights. Ids.
C. The Named Plaintiffs’ Claims are Moot. Even should the Court finds that the July 1, 2011 im plementation of the Support Needs
Matrix was a reduction in Plaintiffs’ prev iously authorized services and thus was an “actio n” triggering appeal rights, the claims of all of the named Plaintiffs are now moot.
explaining the reduction. But it was the Plaintiffs who requested the change in services by submitting the ISP update i n the first pl ace. What kind of notice should PBH provide t o the Plaintiffs explaining t he reduction that the Plaintiffs had initiated by submitting the request? Next, Plaintiffs argue that PBH was required to provide an opportunity for a fair hearing where the Plaintiffs could challenge the very changes in services th at they had r equested when the y submitted the ISP updates. Lastly, Plaintiffs argue tha t PBH was required to continue to provide Plaintiffs’ previously authorized services during this fair hearing process, rather than the change in services that the Plaintiffs the mselves had requested at the start of the review process. Each of Plaintiffs’ contentions fail under the weight of common sense.
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If Plaintiffs K.C. and L.S. had not updated th eir ISPs effec tive July 1, their previously authorized services would all have expired by now, and their claims would now be moot. K.C.’s previously authorized services would have expired on their own accord on Septem ber 30, 2011, while L.S.’s previous authorizations would have expired on November 30, 2011. Covert Decl. ¶¶ 21, 39. Both of these Plaintiffs have sin ce submitted new ISPs req uesting authorization of services within their Support Needs Matrix Base Budgets, and PBH authorized all of the services K.C. and L.S. requested in those ISPs.14 Id. ¶¶ 22, 40. Thus, their claims are now moot.
Plaintiff Allison Taylo r Johns’ previously au thorized services did expire of the ir own accord on October 31, 2011, and she submitted a new ISP requesting re-authorization of services at her previously authorized levels, which was in excess of her Support Needs Matrix Base Budget. PBH Utilizatio n Management authorized a pro-rated portion o f Ms. Johns’ reques ted services, denied the rem ainder, and issued Ms. Johns notice of he r appeal rights, which she has exercised. Id. ¶¶ 13-15. Ms. Johns’ claim here is now moot.
Additionally, the claims of the remaining Plaintiffs – D.C. a nd M.S. – als o are moot. In November 2011, both D.C. and M.S. received new SIS evaluations. When scored, these new SIS evaluations reflected a greater le vel of need than their prior SIS evaluations. D.C. and M.S.’s new SIS evaluations resulted in changes in their respective SNM categories, and a corresponding increase in their respective Support Needs Matrix Base Budgets. Id. ¶¶ 30, 46, Exhs. B, C. Bot h D.C. and M.S. now have Support Needs Matrix Base Budgets available to them in excess of their last previously authorized services. Id. ¶¶ 34, 4 8. Ironically, if D.C. and M.S. are successful on

14

As discussed in Section III.A., supra, under managed care Medicaid, these requests are treated as

new requests for services. Although neither K.C. nor L.S. did so, if they had submitted an ISP requesting

authorization for services in excess of their Base Bu dgets, and if PBH authorized these new requests at a

lower level than their expired authorizations to fit within their Support Needs Matrix Base Budgets, these

Plaintiffs would have bee n issued appeal rights, but would not have been entitled to continuation of

benefits at their previously authorized (but since expired) level during any appeal.

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their claims and receive all the relief to which they claim to be entitled, each will now see a decrease in their available Base Budgets as a result. D.C. and M.S’s claims are now moot. IV. PLAINTIFFS’ MOTION FOR PRELIMINARY INJ UNCTION SHOULD B E
DENIED BECAUSE PLAINTIFFS WILL NOT BE IRREPARABLY HARMED. To obtain a preliminary injunction, a plaintiff is required to “make a clear showing that it is likely to be irreparably harm ed absent preliminary relief.” Real Truth at 347 (citing Winter, 129 S.Ct. at 374-76) (emphasis added) . Plaintiffs have failed to m ake a clear showing that they are likely to be irreparably harmed in the absence of injunctive relief. A. Two Innovations Consumers Who are the Basis of the Preliminary
Injunction Motion Have No Injury Because They Ha ve Exercised their Appeal Rights and Have Obtained Exactly the Services Requested. Plaintiffs claim that they have been depriv ed the due process right to challenge various decisions made by PBH. Plaintiffs are clear that they do not seek a ruling that they are entitled to the underlying services at issue, but only that the Defendants must provide the Plaintiffs with due process rights. D.E. 32, p. 29. Plaintiffs assert that they will be irreparably harm ed unless the Court issues an injunction because they will not have the due process rights they seek. Contrary to their protestations , none of the Plaintiffs has be en irreparably harmed. The Plaintiffs in this case and their counsel know exactly how to obtain the appeal rights that they are purporting to seek in this case. In fact, two of the Innovations enrollees who are discussed in Plaintiffs’ motion have exercised their appeal rights and, as a re sult. Covert Decl. ¶¶ 13-15, 5354. In March 2011, PBH described to all Innovations enrollees how to obtain appeal rights in the “2011 Support Needs Matrix Guide.” PBH explained: The planning team may submit the Individual Support Plan to Utilization Management with a req uest for Base Budget Services that exceeds the indiv idual’s Support Needs Matrix Category.
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Utilization Management will e ither approve or deny the Person Centered Plan. If Utilization Management denies the r equest, the individual or legally res ponsible person will receive their appeal rights.
D.E. 105-5. Likewise, in filings in this case, PBH had reiterated that an enrollee can reques t
services that exceed his or her categ ory budget, in which cas e PBH will approve th e request for
those services within th e budget limits, it will deny the services that exceed the b udget limits,
and the enrollee will be given notice of his or her appeal rights. See PBH Answer [D.E. 38, ¶¶
72, 80, 91, 106]. On September 16, 2011, PBH further explained:
Enrollees and their plan ning teams may submit TARs [treatm ent authorization requests] for Base Budget Services that exceeds [sic] the Base Budget for the enrollee' s Support Needs Matrix category. They may also subm it TARs in which th e combination of Base Budget Services and Non-Base Budget Services exceed the waiver Cost Limit of $135,000 per person per year. In such scenarios, PBH will authorize the services and amounts which are complian t with the Support Needs Matrix, or waiver Cost Li mit, and deny those services that are not. Enrollees will be give n notice of their right to appeal the de nial of those services because they are noncompliant and not available under the Innovations waiver.
Misenheimer Decl. [D.E. 42, ¶ 19].
Indeed, Allison Taylor Johns, a nam ed Plaintiff, and Kimberly Beare, a purported class
member, have followed this process. Both Johns and Beare submitted ISPs requesting
authorization of services in excess of their Support Needs Matrix Base Budgets. PBH Utilization
Management authorized a lim ited portion of thei r requested service pro-rated to their Base
Budget, denied the remainder, and issued notice of appeal rights to both Johns and Beare. Both
Johns and Beare elected to pursue their appeal rights.
B. Plaintiffs Could Avoid the Alleged Injury, But Have Chosen Not to Do So.
The remaining Plaintiffs are fully capable of obtaining the relief they s eek – and, thus,
avoiding the injury they com plain of – without the need for the extraordinary rem edy of a
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preliminary injunction. Because Plaintiffs have the ability to obtain the due process hearings that they seek at any tim e, they do not require this C ourt’s extraordinary assistance in obtaining that relief. Because they can avoid their alleg ed irreparable injuries, but have not chos en to do so, they are not entitled to a preliminary injunction.
“Any party claim ing an injury is u nder a du ty to m itigate its d amages. A m ovant for extraordinary relief can not mask an ongoing f ailure on its part to mitigate its dam ages as an ongoing instance of irre parable harm.” Lanvin Inc. v. Colonia, Inc. , 739 F. Supp. 182, 192-93, (S.D.N.Y. 1990). “Nor can it cl aim irreparable harm when its delay is itself the cause of whatever harm it alleges.” Id. at 193.
“Even if [plaintiff] could demonstrate that it would be i rreparably harmed, it must also show that it could not prevent such harm .” Air Transp. Int’l LLC v. Aerolease Fin. Group, Inc. , 993 F. Supp. 118, 123 ( D. Conn. 1998). See also American Brands, Inc. v. Playgirl, Inc. , 498 F.2d 947, 950 (2d Cir. 1974) (in discu ssion of irreparable harm, the Court noted that “[i]t would appear to be basic that [plaintiff] is obligated to mitigate its damages”).
The remaining Plaintiffs have had, and conti nue to have, th e ability to f ollow the same procedure as Johns and Beare. Each could su bmit an over-budget request for services, should they desire to do so, and obtain the due process rights they purport to seek.
Any alleged injury asserted by Plaintiffs that supposedly flows from not having had a due process hearing can be easily avoided by Plaintiffs. All Plaintiffs have the ability to obtain a due process hearing regarding their level of serv ices under their Support N eeds Matrix category. Because the Plaintiffs are fully capable of avo iding the harm that they claim they are suffering, they have failed to m ake a clear showing of i rreparable harm, and thei r motion for preliminary injunction should be denied.
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V. THE BALANCE OF THE EQUITIES TIPS IN FAVOR OF THE DEFENDANTS. The balance of the equities tips in favor of the Defendants and their use of the Support
Needs Matrix funding system . One of the fund amental objectives of the Support Needs Matrix system is to make the funding of services more equitable for all Innovations enrollees including the Plaintiffs. See Misenheimer Decl. [D.E. 42] ¶¶ 4-5. All Innovations enrollees have been evaluated according to the sam e standardized criteria. Further, there are several m echanisms in place to address outliers, as well as temporary or permanent changes in an individual's needs. Id. ¶¶ 13-14.
The injunction sought by Plaintiffs would tu rn back the clock to June 30, 2011. Because of the finite sum of m oney available to PBH for the Inno vations waiver, such an injunction would require funds to be taken away from individuals with greater needs in order to provide increased budgets for individuals , like P laintiffs, with fewer n eeds as m easured on the same standardized criteria. This is certainly not an equitable result.
The balance of the equities is one of the four requirements that a plaintiff m ust prove to be entitled to a p reliminary injunction. Because Plaintiffs have not satisfied this requirem ent, their motion should be denied. VI. AN INJUNCTION IS NOT IN THE PUBLIC INTEREST.
In addition, a plaintiff is require d to show that an injunction is in the public interest. See Real Truth at 346. “[I]n Winter, the Supreme Court emphasized the public interest requirement, stating, ‘In exercising their sound discretion, courts of equity should pay particular regard for the public consequences in e mploying the extraordinary remedy of injunction.’” Id. at 347 (citing Winter, 129 S.Ct. at 376-77). The injunction that Plaintiffs seek is not in the public interest.
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The federal waivers that PBH operates began as a pilot project in PBH’s origina l fivecounty area. Because these waivers have p roven to be a successful w ay to manage behavioral health services and costs, the North Carolina General Assembly enacted legislation to expand the PBH model statewid e. See N.C. Se ss. Laws 2011-264 (House Bill 916 ). Indeed, the General Assembly specifically instructed the Department to follow the PBH model and to use utilization management criteria to allocate resources based on an assessm ent of need so that an appropriate amount of services are authorized. This is exactly what the Support Needs Matrix syste m accomplishes. See also Shipman Aff. [D.E. 41] ¶ 9.
In addition, the Innovations waiver and its use of the Support Needs Matrix funding system has been approved by both the Department and CMS. Misenheim er Aff. [D.E. 42] ¶ 6. PBH adopted the Support Needs Matrix system in order “to distribute limited Medicaid funds in an efficient, fair, equitable, and sustainable manner.” Id. at ¶ 4.
Thus, the Support Needs Matrix system is de signed to prom ote the public interest of providing access to an appropriate level of services for all I nnovations enrollees, according to their needs. Because of the finite po ol of funds available to fund serv ices under the Innovations program, an injunction that require s individuals with fewer needs, relative to other Innovations enrollees, to receive funding at an increased level, would necessarily mean that other Innovations enrollees with greater needs would have to receive less funding. Such a result is certainly no t in the public interest.
CONCLUSION For the reasons set forth above, Plaintiffs have failed to m eet their burden under Winter and Fed. R. Civ. P. 65(a), and the Court s hould deny Plaintiffs’ Motion for Prelim inary Injunction.
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Respectfully submitted, this the 1st day of February, 2012. NELSON MULLINS RILEY & SCARBOROUGH LLP By: /s/ Stephen D. Martin Wallace C. Hollowell III N.C. State Bar No. 24304 Reed J. Hollander N.C. State Bar No. 23405 Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: chuck.hollowell@nelsonmullins.com E-Mail Address: reed.hollander@nelsonmullins.com E-Mail Address: steve.martin@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
31 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 31 of 32

CERTIFICATE OF SERVICE
I, the undersigned atto rney of the law o ffices of Nelson Mullin s Riley & Scarb orough LLP, attorneys for Defendants Shipm an and PBH do hereby certify that on February 1, 2012, I electronically filed the foregoing DEFE NDANTS PAMELA L. SHIPMAN AND PB H’S RESPONSE IN OPPOSITION TO PLAI NTIFFS’ MOTION FOR PRE LIMINARY INJUNCTION with the Clerk of the Court us ing the CM/ECF system which will sen d notification of such filing to the following:
• John R. Rittelmeyer (john.rittelmeyer@disabilityrightsnc.org) • Jennifer L. Bills (jennifer.bills@disabilityrightsnc.org) • Morris F. McAdoo (morris.mcadoo@disabilityrightsnc.org) • Douglas S. Sea (dougs@lssp.org) • Jane Perkins (perkins@healthlaw.org)
Attorney for the Plaintiffs
• Belinda A. Smith (bsmith@ncdoj.gov) Attorney for Defendant Lanier Cansler
NELSON MULLINS RILEY & SCARBOROUGH LLP /s/ Stephen D. Martin Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: steve.martin@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
32 Case 5:11-cv-00354-FL Document 104 Filed 02/01/12 Page 32 of 32

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:11-CV-354-FL

L.S., a minor child, by and through his father )

and next friend, Ron S.; K.C., a minor child, by )

and through his mother and next friend, Africa )

H.; ALLISON TAYLOR JOHNS; and D.C., a )

minor child, by his mother and next friend,

)

Penny C.;

)

)

Plaintiffs,

)

)

M.S., a minor child, through his parent and

)

natural guardian, Rachelle S.,

)

)

Intervenor Plaintiff,

)

)

v.

)

)

ALBERT A. DELIA,1 in his official capacity as )

Secretary of the Department of Health and

)

Human Services; PAMELA SHIPMAN, in her )

official capacity as Area Director of Piedmont )

Behavioral Health Care Area Mental Health,

)

Developmental Disabilities, and Substance

)

Abuse Authority; and PIEDMONT

)

BEHAVIORAL HEALTHCARE AREA

)

MENTAL HEALTH, DEVELOPMENTAL

)

DISABILITIES AND SUBSTANCE ABUSE )

AUTHORITY doing business as PBH,

)

)

Defendants.

)

ORDER

1 On March 12, 2012,former defendant Lanier M. Cansler filed notice withthe court that defendant Albert A. Delia is now the acting secretary of the North Carolina Depratment of Health and Human Services. On March 16, 2012, the court entered order that defendant Delia sh all be substituted as the state defendant. See Fed. R. Civ. P. 25 (d) (providing for automatic substitution of public officers).
Case 5:11-cv-00354-FL Document 154 Filed 03/29/12 Page 1 of 32

This matter comes before the court on plaintiffs’ motion for preliminary injunction (DE # 31) and first motion to certify class (DE # 34). Defendant Albert A. Delia (“defendant Delia”) filed response in opposition and defendants Pamela Shipman (“defendant Shipman”) and defendant PBH also filed response in opposition. Plaintiff filed se parate replies to both responses. On March 7, 2012, plaintiffs were granted leave to file supplemental declarations. Defendants were also granted leave to supplement their filings accordingly. Plaintiffs filed a second reply. In this posture, the issues raised are ripe for ruling. For the following reasons the court grants plaintiffs’ motions.
STATEMENT OF THE CASE Plaintiffs filed com plaint as putative cl ass action on J uly 5, 2011 against defendants. Plaintiffs allege violation of due process protections with respect to alteration of Medicaid benefits and seek preliminary and permanent injunctions. On July 12, 2011, the court entered order denying plaintiffs’ motion for temporary restraining order, which motion was lodged in the complaint. On August 24, 2011, plaintiffs filed the instant motion for preliminary injunction. On August 29, 2011, plaintiffs filed the instant motion to certify class. On September 6, 2011, the court stayed the tim e for defendants to fi le responses to the motions for preliminary injunction and class certification pending ruling on pl aintiffs’ motion to disqualify counsel, filed August 23, 2011. On October 20, 2011, plaintiff intervenor M.S. filed motion to intervene and complaint in intervention, which motion the court allowed on December 5, 2011, in order lodged on the docket at entry 67. Plaintiffs filed second motion for temporary restraining order on December 20, 2011, which motion was denied on Decem ber 28, 2011. On Janua ry 6, 2012, the court held adm inistrative
2
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telephonic conference with the parties (exceptingformer counsel for defendants Shipman and PBH from Womble Carlyle). Briefing schedule for the instant motions was memorialized and deadlines were set, including date for oral argument.
Upon review of the briefs filed in support of the instant motions, however, the court entered order on March 7, 2012, dispensing with oral argument. In same order, the court granted plaintiffs’ motions for leave to filed supplemental declarations in support of the instant motions, and allowed defendants seven days to supplement their own responses, which they did. Plaintiffs filed second reply. The court has considered all of the filings in its determination of the instant motions.
BACKGROUND The named plaintiffs are Medicaid recipients, four minors and one adult, who have chronic and disabling conditions. Although plaintif fs’ conditions are serious enough to qualif y them for institutional placement, they can thrive in stable home environments with adequate support. The North Carolina Innovations W aiver (“Innovations W aiver”) is a Hom e and Com munity Based Waiver, approved under 42 U.S.C. § 1396n of the Medicaid Act, that offers Medicaid services to individuals like plaintiffs with developmental disabilities who would otherwise qualify for services in an institutional facility. The programis called a waiver because the federal Medicaid agency has given North Carolina permission to ignore certain otherwise mandatory provisions of the Medicaid Act. All members of the putative class are cons umers of services under the Innovations Waiver. The Innovations Waiver currently has approximately 675 total participants. Pls.’ Mem. Supp. Mot. Prelim. Inj. 5. The North Carolina Department of Health and Human Services (“NCDHHS”) is the single state agency designated to adm inister or supe rvise the adm inistration of the state’s Medicaid
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program under Title XIX of the Social Security Act. 42 U.S.C. § 1396a(a)(5); N.C. Gen. Stat. § 108A-54. The NCDHHS’s division of medical assistance (“DMA”) is responsible for the day to day administration of the Medicaid program. Defendant Delia is the head of the NCDHHS.
Defendant PBH is a m ulti-county area m ental health, developm ental disabilities, and substance abuse authority. Defendant Delia contracts with defendant PBH to perform certain functions in operating the Innovations W aiver. Defendant PBH is a local m anagement entity (“LME”), which is defined by statute as a local political subdivision of the states. See N.C. Gen. Stat. § 122C-116(a). Defendant PBH is the LMEfor Davison, Rowan, Cabarrus, Union, and Stanley counties.2 Defendant PBH operates as a managed care organization (“MCO”) under the Medicaid regulations, and defendant Pamela Shipman is its chief executive officer.
The DMA entered into a contract with defendanPt BH to arrange for and manage the delivery of services and perform other waiver operational functions through its prepaid inpatient health plan (“PIHP”) for Medicaid recipients in its area. Defendant PBH manages the PIHP through which all mental health, developmental disabilities and substance abuse services are authorized of r Medicaid. Def. Delia’s Resp. Opp’n Mot. Prelim. Inj. 4.
Under the Innovations W aiver, participants m eet with a PBH em ployee, called a care coordinator, once every twelve (12) months to develop a service plan of care, which specifies the services requested to be authorized for the next twelve (12) m onth period. The plan is then submitted to a PBH employee in the Utilization Management section for approval or denial. Once approved, the participants twelve-month plan takes effect on the first day of the participant’s month of birth. Services under the waiver are authorizedby PBH for one year whenthe annual plan of care
2 Supplemental declarations offered by plaintiffs suggest that the number of counties has increased.
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is approved, although mid-year modifications can be requested if a participant’s needs change. Of particular importance is the process defendant PBH has used and is using to i mpose
reductions to certain participants’ budgets. As part of the Innovations W aiver approved by the Centers for Medicare and Medicaid Service (“CMS”), there was a change in the m ethod used by defendant PBH to assess the needs of program participants. The new program utilized a m odel called the support needs matrix (“SNM”). Underthe SNM, employees of defendant PBH conducted evaluations using a “support intensity scale” (“SIS”).Defendants contend that the SIS is a valid way to assess a participant’s support needs.3 The SNM establishes funding categories for participants. The categories are based on various factors, including where a participant lives, his or her age, his or her assessed support needs, and safety risk. Within the SNM, there are different groupings based on where a participant lives (at home or in an institution), which also factor into the base budget. The SNM groupings and categories into which a participant falls determ ine the specific dollar amount of that participant’s base budget. A participant can also receive non-base budget services in a year. The combination of base budget and non-base budget services cannot exceed $135,000 per year. PBH procedure permits an individual to ask for the SIS assessment to be amended within ninety (90) days of the assessment.
In March 2011, defendant PBH issued undated form letters to plaintiffs and other participants, informing them that they had been assigned to one of twenty-eight (28) categories of need using the SNM system, a score based primarily on scores determined by the SIS assessment. The March 2011 letter informed that the assignment to a category would result in new, maximum
3 Plaintiffs do not challenge t he SNM or SIS; rather they challenge the use and application of both without notice and opportunity for hearing to contest the same. Thus, the systems themselves are not at issue here, but rather the use of these systems and whether or not such use comports with the requirements of federal law and due process.
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dollar limits for the individual’s services. For some participants, the letter informed that the new budget limit would be in effect beginning July 1, 2011. The letter instructed each participant to contact his or her PBH care coordinator to revise the already approved plan of care, in most cases before July 1, 2011, to reduce or modify services to make them fit within the new budget limit.
The March 2011 letter contained no information about the right to appeal defendant PBH’s decision. Penny C. Decl. Exh. B; Holzlohner Decl. Ex A. Plaintiffs also contend that defendant PBH’s care coordinators repeatedly informed plaintiffs and others that the SIS scores and resulting assigned SNM categories and new budgets could not be challenged or appealed. See, e.g, P. enny C. Decl. ¶ 31, Ron S. Decl. ¶¶ 16, 31; Supp. Decl. of Rachelle S. ¶ 8. De fendants dispute this, contending that care coordinators inform ed participants of their options, including the opt ion of seeking an intensive review. Decl. of Nicole Cote ¶¶ 10-13.
Plaintiffs contend that the summary mailed to participants did not include an explanation of the scoring system or an adequate explanation of the im port of the score and what it m eant for a participant’s services. The March 2011 letter wasaccompanied by a booklet of general information. Pages 11 to 13 of the booklet include a description of a process by which a Innovations Wa iver participant could request an “intensive review.” Defendants describe intensive review as a process for participants who “believe that they havesupport needs which make them outliers as opposed to others in their Support Needs Matrix category.” Def. PBH’s Resp. Opp’n Mot. Prelim . Inj. 3. Defendants contend that if a participant wanted topursue an intensive review, the care coordinators assisted the participant to gather the necessary documentation, complete the request, and submit the request to the intensive review committee. (Id.) Plaintiffs, however, contend participants could only request an internal paper review by a PBH committee, and that intensive review was limited to a
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small number of outliers. Plaintiffs further argue that contrary to defendant PBH’s representation, care coordinators repeatedly failed to inform participants and their providers of t he option for intensive review or discouraged them from requesting such a review. See, e.g., Decl. of Penny C. ¶ 35; Decl. of Patricia Holzlohner ¶ 17.
Defendants dispute plaintiffs’ allegations of defendant PBH employees discouraging appeals, and also describe other m ethods by which a participant in the Innovations W aiver can appeal a budget reduction and receive additional services. Defendants note that participants can form ally request services through a Treatment Authorization Request (“TAR”). Service authorizations under a TAR are issued for specific services and for limited duration. If defendant PBH denies a service request in a TAR, the participant is given notice of his or her appeal rights.
A participant’s planning team may also submit a TAR for base budget services that exceed the base budget for the participant’s SNM category. In these cases, defendant PBH will authorize the services and amounts that coincide with the SNM, and deny the services that do not. Defendants contend that participants are given notice of theirappeal rights upon denial. The appeal process first consists of an appeal to defendant PBH, called a Reconsideration Review. If further appe al is desired, the next level is the North Carolina Office of Administrative Hearings (“NCOAH”).4
Plaintiffs accuse defendants of engaging in practices that reduced and terminated Medicaid services with no written notice or right to a hearing. Specifically, plaintiffs accuse defendant PBH and its employees of: (1) routinely informing participants and providers that their SNM category
4 Atleast one named plaintiffs, Allison Johns, and oneproposed plaintiff, Kimberly Beare, appealed reductions in their base budgets to theNCOAH. However, both claimed they only navigated the appeal systemwith the assistance of their lawyers. Both contend that upon the initial notification from defendant PBH that their budgets were reduced, neither were provided with appeal rights. See Decl. of Linda Johns ¶¶ 11, 15; Decl. of Patricia Holzlohner ¶¶ 13-14, Exhs. A, B.
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cannot be appealed; (2) pressuring participants ortheir guardians into signing a new plan of care that does not meet the needs of the recipient, even though the previously approved plan should still be in effect; (3) informing participants that if a new plan reducing services was not signed, all waiver services would end; (4) informing participants thatthe SIS score could not be contested unless it was challenged within ninety (90) days, even though the SIS report contained no notice of appeal; (5) informing participants that they could not requestan intensive review unless they waited six months or otherwise discouraging them from making the request; and (6) suggesting to participants that if they did not change their plans and reduce service,sthey would run out of money and services would stop entirely. Plaintiffs offer declarations of plaintiffs or their guardians to support each of these allegations, and supplemented many of those same affidavits which reiterate the same. Defendants deny the allegation, and contend that defendant PBH em ployees communicated certain ways to contest the SIS scores and SNM categorization, though at least one em ployee acknowledges communicating that the SNM category could not be appealed. See Decl. of Melissa Campbell ¶ 8.
Plaintiffs also contend that the practices described above are ongoing. While at least two of the named plaintiffs have received notification from defendant PBH in 2012 that their SNM category has changed, resulting in higher budgets to become effective in March 2012, plaintiffs contend that defendants’ practice of depriving participants of due process when budgets are reduced continues. Plaintiffs contend that reductions in their budgets over the past year have caused s ignificant hardships, including behavioral regression, emotional and mental anguish from the same, and a fear that plaintiffs will be institutionalized. See Decl. of Amie C. ¶ 27; Decl. of Laurie Haley ¶ 23.
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DISCUSSION A. First Motion for Class Certification
1. Standard of Review Rule 23 sets forth the requirements that plaintiffs must satisfy to be permitted to represent a class. Fed. R. Civ. P. 23(a). First, a plaintiff must show that “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests ofthe class.” Id. Additionally, plaintiffs seeking class certification must also satisfy one of the requirements in Rule 23(b). Plaintiffs bear the burden of proving the requirements of Rule 23, Thorn v. JeffersonPilot Life Ins. Co., 445 F.3d 311, 317 (4th Cir. 2006) (internal citations omitted), and only one plaintiff must have standing with respect to each claim. Village of Arlington Heights v. Metro. Hous. Dev. Corp., 429 U.S. 252, 264 (1977). Here, plaintiffs contend they satisfy both therequirements of Rules 23(a) and 23(b)(2), which provides that class certification is appropriate where “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunc tive relief or corresponding declaratory relief with is appropriate respecting the class as a whole.” Fed. R. Civ. P. 23(b)(2). The putative class is defined by plaintiffs as All current or future participants in the N.C. Innovations Waiver, as it is currently or subsequently nam ed, whose Medicaid services have been or will be denied, reduced, or terminated by Defendant Secretary of the [NCDHHS], Defendant PBH, or any of their employees, contractors, agents or assigns, through the implementation of the [SIS] or [SNM] Pls.’ Mot. Class Certification 1. Defendants PBH and Shipman argue that plaintiffs’ proposed class
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definition is unclear. The court disagrees. Plai ntiffs make clear that the class includes those participants in the Innovations Waiver whose services will be “denied, reduced, or terminated.” The proposed class does not include persons whose services are increased.
The court also finds defendant PBH’s and defendant Shipm an’s arguments against class certification because of finite resources to be similarly unavailing. Defendant PBH acknowledges that its contract with the NCDHHS results in itsassumption of the risk. “PBH’s operation as a PIHP means that PBH is pre-paid by the State to provide care, and PBH accepts the financial risk for providing that care.” Defs. PBH and Shipman Resp. Opp’n Class Certification 3. Defendants PBH and Shipman cite no authority to support the implication that because they have a finite amount of funds, they do not have to alter conduct that is in violation of federal law and due pr ocess. Inadequate appropriations does not excuse compliance with the Medicaid Act. Ala. Nursing Home Ass’n v. Harris, 617 F.2d 388, 396 (5th Cir. 1980); Sm ith v. Benson, 703 F.Supp.2d 1262, 1277 (S.D. Fla. 2010) (“[N]either the garvity nor the difficulty of funding Medicaid obligations . . . excuse a violation of federal law.”); Bontragerv. Indiana Family and Soc. Servs. Admin., __ F.Supp.2d __, 2011 WL 5386646 at *16 (N.D. Ind. 2011) (citing Smith); Benjamin H. v. Ohl, 1999 WL 34783552 at *14 (S.D.W.Va. 1999). Without any legal support for this position, the court declines to engage in a factual analysis of whether or not defendanPt BH actually has a certain amount of funds, or how it manages its funds.
Defendants PBH and Shipman next argue that the named plaintiffs do not have standing to bring this action. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). The court first addresses the standing issue, as it is a jurisdictional requirement.
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2. Standing Standing is the determination of whether a particular individual is the proper party to assert a claim in federal court; it “is founded in concern about the proper-and properly limited role-of the courts in a democratic society.” Warth v. Seldin, 422 U.S. 490, 498 (1975). The standing doctrine curtails the types of disputes that an Article III court can decide; it does so by requiring courts to hew to their express constitutional mandate of resolving “cases” and “controversies.” U.S. Const. art. III, § 2, cl. 1; W arth, 422 U.S. at 498. The standing question is one that asks “whethe r the litigant is entitled to have the courtdecide the merits of the dispute or of particular issues.” Id. An affirmative answer t o this question requires a pl aintiff to dem onstrate at least three m inimum constitutional requirements: (1) that the plaintiff has suffered an “injury in fact” - an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or im minent, not conjectural or hypothetical; (2) a causal connectoi n between the injury and the conduct complained of - the injury has to be fairly traceable to the defendant; (3) it must be likely, not speculative, that the injury will be redressed by a favorable decision. Lujan, 504 U.S. at 560-61. Named plaintiffs who represent a class “must allege and show that they personally have been injured, not that injury has been suffered by other,unidentified members of the class to which they belong and which t hey purport to represent.” Doe v Obam a, 631 F.3d 157, 160 (4th Cir. 2011) (citations omitted). Thus, before the court engages in the Rule 23 analysis, it must determine that the named plaintiffs have standing. Defendants PBH and Shipman initially suggest thatno plaintiff raises a cognizable claimand thus no class can be certified as to any claim . Defendants PBH and Shipm an incorporate their arguments raised in opposition to the motion for preliminary injunction to argue that plaintiffs assert
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no cognizable claim s. For the reasons discussed infra, the court disagrees, a nd finds that a cognizable claim is set forth as to each of plaintiffs’ three claims.
The bulk of defendant PBH’s and defendant Shipman’s argument that plaintiffs do not have standing, however, is that nam ed plaintiffs’ claims are moot. Specifically, defendants PBH a nd Shipman contend that K.C.’s, L.S.’s, and Allison Taylor Johns’s previous authorizations expired in the last six months of 2011, which mooted their claims. Additionally, defendants PBH and Shipman contend that D.C. and M.S. are both receiving increases in their budgets as a result of category changes resulting from a more recent SIS evaluation.
The court finds these argum ents to be unpersuasive and c ontrary to case law. As to the contention that plaintiffs K.C., L.S. and Allison Johns no longer have ripe claims because their authorization periods expired, the court addresses similar argument later in this order, and reefrences the same here. See infra Part B.1. The expiration of those plaintiffs’ prior authorizations has no bearing on the ripeness of their constitutional claims that defendants provided them with no notice or opportunity for hearing when, during their aut horization periods, their previously authorized budgets were reduced without notice or opportunity for hearing.
As to the argum ent that because D.C. and M.S. will receive i ncreases in their budgets sometime in the future, the court finds this reasoning s imilarly unavailing and finds that “Defendant[s] [do] not challenge . . . whethe r the nam ed Plaintiffs had standing at the commencement of this suit, but appear[] rather to be contending that the c laims of some of the named Plaintiffs are, in light of subsequent actoins by Plaintiffs and Defendants now moot.” Pashby v. Cansler, __ F.R.D. __, 2011 WL 6130819 at *6 (E.D.N.C. 2011). Such a position is contrary to established law. Mootness does not reuslt from a defendant’s voluntary cessation ofallegedly illegal
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conduct. United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953); see also City of Memphis v. Aladdin’s Castle, Inc., 455 U.S. 283, 289 (1982). Additionally, in increasing D.C.’s and M.S.’s services in 2012, defendants make no assertion that the future use of the SIS and SNM resulting in decisions to reduce participants’ services will comply with federal law and due process. SeePashby at *7. Accordingly, all named plaintiffs, including D.C. and M.S., continue to face reduction of their authorized services without due process guarantees of notice and hearing. Se e Doe v. Kidd, 501 F.3d 348, 354 (4th Cir. 2007); Peter B. v. Sanford , No. 6:10-CV-00767, 2011 W L 824584 at *1 (D.S.C. March 7, 2011).
The court agrees with plaintiffs that the named plaintiffs continue to have live claims because all are participants in the Innovations Waiver and thus all are subject to the SNM and the SIS, and the use of these indexes for determining services. It is the use ofthese indexes to reduce plaintiffs’ services without notice or hearing that is challenged in this case, not whether in a few months time, some plaintiffs might get more services than they currently have. Because defendants assert the legality of the processes for reduc ing services, the case falls under the class of cases in which a defendant’s alleged wrong is capable of repetition yet currently evading review. SeeKidd, 501 F.3d at 354. Accordingly, the court finds the named plaintiffs have standing to challenge the adequacy of the notice and opportunity for hearing allegedly denied them when their services were reduced in 2011.
3. Rule 23 Having determined the named plaintiffs have standing to bring the instant suit, the court turns its attention to whether plaintiffs have satisfied their burden under Rule 23. As noted above, the requirements of Rule 23(a) are: numerosity of parties, commonality of factual or legal issues,
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typicality of claims and defenses of class representatives, and adequacy of representation. Thorn, 445 F.3d at 318. This court has “wide discretion whehter or not to certify a proposed class.” Central Wesleyan College v. W.R.Grace & Co., 6 F.3d 177, 185 (4th Cir. 1993).
a. Numerosity There is no specified or m inimum number of plaintiffs needed to maintain a class action. Brady v. Thurston Motor Lines, 726 F.2d 136, 145 (4th Cir. 1984). Additionally, where the relief sought for the class is injunctive and declaratory in nature, more speculative representations as to the size of the class suffice as to the numerosity requirement. Doe v. Charleston Area Med. Ctr., Inc., 529 F.2d 638, 645 (4th Cir. 1975).Defendants do not dispute thenumerosity requirement here. Plaintiffs’ contention that the class is composed of at least 169 persons is supported by the evidence of record and plaintiffs’ des cription of the proposed class, and the court finds the num erosity requirement met.
b. Commonality, Typicality, and Adequacy of Representation “[T]he final three requirements of Rule 23(a) tend to merge, with commonality and typicality serving as guideposts for determining whether . . . maintenance of a class action is economical and whether the named plaintiff’s claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.” Lienhart v. Dryvit Sys., Inc., 255 F.3d 138, 147 (4th Cir. 2001) (internal quotations and citations omitted). Rule 23(a)(2) does not require that all factual or legal questionsraised be common, so long as there is at least one common question of law or fact. SeeWalmart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2556 (2011). As discussed above, the court finds the proposedclass to be sufficiently defined as to include only those Innovations Waiver participants whose services were reduced. Defendants’ arguments
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that the commonality requirement cannot be satisfied because of the com peting interests of class members whose services were not reduced is without merit.5
Defendant PBH’s and defendant Shipman’s arguments that class counsel have conflicts of interest which would impact their ability to represent the proposed class is similarly not well taken where this argum ent is prem ised solely on the assum ption that the proposed class includes participants whose services were not reduced. As such, the court finds no a pparent conflict of interest in the proposed class counsel.
Finding defendant PBH’s and defendant Shipman’s arguments as to the Rule 23(a) factors to be unavailing, the court proceeds to analyze whether plaintiffs’ claims satisfy the commonality, typicality, and adequacy of representation requirements. The court finds that all three requirements are met. The requirement of commonality can be satisfied by just a single common question of law or fact. Id. Yet the com mon contention m ust be capable of class-wide r esolution so that a “determination of its truth or falsity will resolve an issue central to the validity of each one of the claims in one stroke.” Id.at 2551. The typicality requirement mandates that the representative must demonstrate that his claims arise from the same practices and are based in the same theory of law as the claims of the class. Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 340 (4th Cir. 1998).
The court finds that all of the named plaintiffs’ claims arise from the same legal theory and
5 Defendants place particular emphasis on the alleged conflict of interest between D.C. and M.S. and the rest of the proposed class because defendants subm it that these plaintiffs will soon be receiving increases in their funds. However, as discussed in the context of de fendants’ allegations regarding standing, a claim is not m ooted because defendants alter allegedly illegal conduct. Grant, 345 U.S. at 632. As noted by p laintiffs, even if D.C. and M.S. do receive increases in the spring of 2012, they still may face reductions in service in the future and would still lack the due process protections to challenge the sam e. Defendants’ cita tion to Gen. Tel. Co. of the Northwest, Inc. v. Equal Employment Opportunity Comm’n, 446 U.S. 318, 331 (1980) is unhelpful where this case is factually distinguishable from an employment case where employers and employees could reasonably be expected to have competing interests as opposed to this case one where all plaintiffs are subject to the SIS and SNM and reductions in services.
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the same factual circumstances as those of the class: the named plaintiffs and class members live in the PBH catchment areas, are eligible for Medicaid services through the Innovations Waiver, and had services authorized prior to July 1, 2011, that were reduced based on application of the SNM and the SIS. Common questions of law include whether violations of the Fourteenth Amendment to the United States Constitution occurred through the use of the SIS and subsequent alleged lack of notice and opportunity for hearing after serviceswere reduced, and whether federal law also was violated by the lack of notice and opportunity for hearing. Any differences am ong the named plaintiffs and class members are minor and do not disturb the similarities noted above. Ultimately, the claims of the named plaintiffs are “so interrelated” that the interests of the class members will be fairly and adequately protected. Lienhart, 255 F.3d at 147.
Lastly, the court finds that the adequacy of repr esentation requirement is met. Where the Fourth Circuit has two requirements for this element to be met—that the named plaintiffs do not have antagonistic interests to the class, Barnett v. W .T. Grant. Co., 518 F.2d 543, 548 (4th Cir. 1975), and that there is adequate counsel, Central Wesleyan Coll. v. W.R. Grace & Co., 6 F.3d 177, 183 (4th Cir. 1993), both requirements are met. See Woodward v. Online Information Servs., 191 F.R.D 502, 506 (E.D.N.C. 2000). The court has previously discussed why it finds that the named plaintiffs’ interests are not antagonistic to the class.As to the adequacy ofrepresentation, where the only challenge to the same is defendant PBH’s and defendant Shipman’s arguments that a conflict of interest exists, which argument was rejected,the court sees no reason why proposed counsel, each with extensive experience in this particular area of the law, are not aedquate to represent the interests of the class.
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c. Rule 23(b)(2) Finding the Rule 23(a) requirements to have been satisfied, the court moves to defendant Delia’s argument that plaintiffs have failed to satisfy this requirement.6 Defendant Delia asserts that the nature of the claim s or relief in this cas e are such that certifying a class action would be unnecessary, inappropriate, and unduly burdensom e. Defendant Delia raises the “necessity argument.” That argument suggests that where the relief being sought can be fashioned in such a way so that it will have the sam e purpose and effect as a class action, certification of a class is inappropriate. See Gray v. Int’l Broth. Of Elec. W orkers, 73 F.R.D. 638, 640-41 (D.D.C. 1977). In support, defendant Delia cites older cases, noneof which are controlling authority for this court. Additionally, the court finds plaintiffs’ argum ent well taken that the necessity argum ent contradicts the language of recent Supreme Court precedent. “In other words, Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class.” Wal-mart Stores v. Dukes, __ U.S. __, 131 S.Ct. 2541, 2557 (2011.) As such, the court finds no need to address defendant Delia’s arguments regarding government good faith. The case is one which, under the language in Dukes , a single injunction or declaratory judgm ent would provide relief to the entire class proposed by plaintiffs. Defendants do not argue to the contrary. Accordingly, having found that the requirem ents of Rule 23 are m et, the court, in its discretion, grants plaintiffs’ motion to certify the class. Counsel requesting to be appointed as class counsel in plaintiffs’ motion for class certification lodged on the docket at entry 34 are appointed pursuant to Fed. R. Civ. P. 23(g).
6 Defendants PBH and Shipman lodge no argument that plaintiffs’ failed to satisfy the requirements of Rule 23(b)(2).
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B. Motion for Preliminary Injunction 1. Standard of Review “A preliminary injunction is an extraordinary and drastic remedy.” Munaf v. Geren, 553
U.S. 674 (2008) (citations om itted). A m ovant must establish each of four elem ents before a preliminary injunction may issue: (1) he is likely to succeed on the merits; (2) he is likely to suffer irreparable harm in the absence ofpreliminary relief; (3) the balance ofequities tips in his favor; and (4) an injunction is in the public interest. W inter v. Nat. Res. Def. Counsel, Inc. , 555 U.S. 7, 20 (2008); Real Truth About Obama Inc. v. Fed. Election Comm’n, 575 F.3d 342, 347 (4th Cir. 2009).
Defendants PBH and Shipman contend that the correct l egal standard to be applied is the stricter standard required for mandatory preliminary injunction. Mandatory preliminary injunctions do not preserve the status quo and are only grant ed in very specific circum stances, usually only when extreme or serious damage will result. See E. Tenn. Nat. Gas Co. v. Sage, 361 F.3d 808, 828 (4th Cir. 2011); W etzel v. Edwards , 635 F.2d 283, 286 (4th Cir. 1980). Defendant s PBH and Shipman argue that the relief plaintiffs seek woudl change the status quo since each of the plaintiffs currently receives services specifically authorized by defendant PBH for specific periods of time. Def. PBH Resp. Opp’n Mot. Prelim. Inj. 5.
Plaintiffs, except plaintiff Johns, seek a preliminary injunction to restore their services to the level authorized the day before the instant suit was filed, thus June 30, 2011, and an order preventing further reductions until a f inal ruling by this court. As to plaintiff Johns, since she was told her services would stop on October 31, 2011, she seeks apreliminary injunction to prevent defendants from terminating or reducing her services as of that date.
As plaintiffs note in their reply, the basis of their motion for preliminary injunction is that
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their services, to which they were entitled for an authorization period of one year, were cut short in the middle of the authorization period, thus the staut s quo would be the amount of services to which they believe they were entitled for the authorization period that w as cut short July 1, 2011. The same argument applies to plaintiff Johns, with the exception that the status quo of her benefits is what she received prior to October 31, 2011, when defendant PBH stated her services would be terminated.7 Thus, the court finds plaintiffs seek a preliminary injunction to restore the status quo as it was on July 1, 2011, and the stricter standard for a m andatory preliminary injunction is not applicable.
2. Analysis Several general issues must be addressed before the court analyses the specific m erits of plaintiffs’ motion for preliminary injunction. First, the findings set forth herein apply to all defendants. The court rejects defendant Delia’s argument in his response in opposition to plaintiffs’ motion for preliminary injunction that plaintiffs do not allege direct action by him or that plaintiffs are alleging an impermissible form of respondeat superior liability. Def. Delia’s Resp. Opp’n Pls.’ Mot. Prelim. Inj. 7. As the head ofthe single state agency responsible for adm inistering the Me dicaid program in North Carolina, NCDHHS, defendant Delia remains accountable for the admi nistration of the Medicaid program through contracts with defendant PBH. This findni g is supported in the case law cited by plaintiffs. See McCartney v. Cansler, 608 F.Supp.2d 694 (E.D.N.C. 2009); DTM v. Cansle, r382 F. App’x 334, 338 (4th Cir. 2010) (“where injunctive, as opposed to monetary relief is sought, no ‘direct and
7 Plaintiffs cite some authority suggesting that the distinction defendants PBH and Shipman appear to make here, between the servicesplaintiffs are now entitled to, now that the authorization periods in effect on July 1, 2011, have expired, and the authorization services they were entitled toon June 30, 2011, is a distinction without a difference. See Jonathan C. v. Hawkins, 2006 WL 3498494 at *12 (E.D.Tex. 2006).
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personal involvement is required in order to hold high-level officials responsible for the actions of subordinates and to subject themto the equitablejurisdiction of the court.”) (citations omitted). As such, the findings set forth herein apply to all defendants, including defendant Delia.8
Second, defendants PBH and Shipman suggest in their response in opposition that plaintiffs’ motion for preliminary injunction does not touch plaintiffs’ first claim for relief in the complaint, which alleges violation of due process for non-arbitrary standards. Plaintiffs oppose this position, arguing that their first claimis based on defendantPBH’s failure to disclose how SIS scoring or the support needs matrix categorization works. Plaintiffs’ memorandum in support of the motion for preliminary injunction does address the issues raisedin this first claim; specifically, that defendant PBH’s use of the support needs m atrix and corresponding SIS num ber was not explained t o participants, nor was the import of the score explained to illuminate for participants what it meant for them. See Pls. Mem . Supp. Mot. Prelim . Inj. 7. The discussion of the first prong of t he preliminary injunction standard, whether or not plaintiffs are likely to succeed on the m erits, addresses this issue, and as such, the court finds that plaintiffs’ motion for preliminary injunction applies to all three claims for relief as set forth in the complaint.
Third, the court notes that defendants, i n their respective responses in opposition to the motion for prelim inary injunction, suggest that the court has already addressed the m erits of plaintiffs’ motion in its denial of plaintiffs’ motions for temporary restraining order, the first filed in the original com plaint and the second f iled in late Decem ber 2011. As the court’s orders
8 The court agrees with plaintiffs that defendant Delia’s reliance on Clark v. Keller , 2011 W L 3664296 (E.D.N.C 2011) is unavailaing. Clarkinvolved a prisoner’s § 1983 claims against two supervisory officials in theNorth Carolina Department of Correction. The prisoner’s claims were based on a theory of respondeat superior, and alleged the officials were liable through that theory for the actions of unit phys icians at a correctional facility. The case is factually and legally distinguishable from the present one.
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addressing both motions for temporary restraining order noted, the court found the extraordinary remedy sought in those motions to be inappropriate without a thorough consideration of both sides’ arguments as to the motion for preliminary injunction. The court did not consider the merits of the argument presented in plaintiffs’ m otion for preliminary injunction before the m otion was ripe. Thus, contrary to what defendants assert, the coutrhas not considered andfound deficient plaintiffs’ arguments as to either the motion for preliminary injunction or motion for class certification.
a. Likelihood of Success on Merits Plaintiffs have demonstrated a likelihood of success on the merits. Title XIX of the Social Security Act establishes the Medicaid program. 42 U.S.C. §§ 1396-1396w-5. State participation in the Medicaid program is voluntary, and participating states are reim bursed by the federal government for a majority of the costs of Medicaid benefits. § 1396-1. Sattes that elect to participate must “comply with detailed federally mandated standards.” Antrican v. Odom, 290 F.3d 178, 183 n.2 (4th Cir. 2002); 42 U.S.C. § 1396a. If a participtiang state fails to comply with federal standards, the Secretary of the United States Department of Health and Human Services may withhold funding from the state until it brings its plan back into compliance with those standards. Id.; 42 U.S.C. § 1396c. The Medicaid Act requires participating states and managed care entities to provide each Medicaid recipient with adequate written notice and an opportunity for an impartial hearing before services are denied, reduced or terminated. §§ 1396a(a)(3) and 1396u-2(a); 42 C.F.R. §§ 431.200 and 438. North Carolina has elected to participate in Medicaid. See N.C. Gen. Stat. §§ 108A-54, 108A-56. The NCDHHS is the single state agency required to ensure that Medicaid rules are followed. Id. § 108A-71. As the head NCDHHS, defendant Delia heads the single state Medica id agency which directly oversees the Innovations W aiver and ensures that Medicaid rules are followed. Federal
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approval specifies that defendant Delia must provide the opportunity for a fair hearing pursuant to
federal regulations, 42 C.F.R. § 431.200 subpart E, to every waiver participant whose services are
denied, suspended, reduced, or terminated. 42 C.F.R. § 431.200(a). DefendantPBH, as a managed
care organization contracting with NCDHHS, must also provide the individual with proper written
notice of his or her right to appeal a decision as provided in the federal regulations. 42 C.F.R. §§
438.404(b).9
Defendants’ primary argument turns on whether or not defendant PBH has undertaken an
agency “action” requiring enrollees to have opport unity for fair hearing. Def endants argue that
because PBH operates as a PIHP, the applicable regulations for managed care entities in 42 C.F.R.
§ 438 only require notice and opportunity for fair hearing when the PIHP has taken an “action,” and
that defendant PBH has not taken such action. The regulations define agency “action” as:
In the case of a MCO10 or PIHP -
(1) The denial or limited authorization of a requested service, including the type orlevel of service;
(2) The reduction, suspension, or termination of a previously authorized service;
42 C.F.R. § 438.400(b).11
9 Plaintiffs bring this action pursuant to 42 U.S.C. §§ 1983 et seq. on behalf of other Medicaid recipients similarly situated. The parties do not dispute that § 1983 imposes liability of anyone who, under color of state law, deprives a person “of any rights, privileges, or immunities secured by the Constitution and laws.” 42 U.S.C. § 1983. Because § 1983 does not itself create a federarlight, a plaintiff will prevail under § 1983 only if he is able to demonstrate the violation of a statute or federal constitutional provision that confers a right intended to be enforceable by a private cause of action. Golden State Transit Corp. v. Los Angeles, 493 U.S. 103, 106 (1989). No argument has been lodged that plaintiffs fail to assert a federal enforceable right under § 1983, and the court finds that under the applicable law, plaintiffs have s uccessfully asserted such a right. See DTM et. al v. Cansler , No:7:08-CV-57-H, slip op. at 6-8 (E.D.N.C. March 16, 2009).
10 A “MCO” isa Managed Care Organization. As defendants explain in their brief, a PIHP like defendant PBH is a type of MCO. Def. PBH Resp. Opp’n Mot. Prelim. Inj. 10.
11 Additionally, defendants also acknowledge that the regualtions require defendant PBH to continue to provide an enrollee with benefits pending the out come of an appeal involving the “termination, suspension, or reduction of a previously authorized course of treatment,” . . . and “the original period covered by the original authorization has not
(continued...)
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Defendants argue that defendant PBH’s notification to participants in the spring of 2011 of budget reductions effective July 2011, does not constitute an“action” because plaintiffs’ services have not been terminated; instead, plaintif fs had tim e-limited authorizations f or services that naturally expired.
As to this argum ent, that defendants have not taken agency action, the court disagrees. Though numerous, lengthy briefs by both sides have to some extent confused the issues of what exactly defendant PBH has done, the court finds that defendant PBH, under defendant Shipman’s direction, has taken action that “reduc[ed], suspend[ed], or terminat[ed] . . . a previously authorized service,” the previously authorized service beinga particular enrollee’s authorized services budget for one calendar year. See 42 C.F.R. § 438.400(b). Def endants do not dispute that under the Innovations Waiver, participants meet with their c are coordinator once every year to develop a service plan of care, which specified which servicews ere to be authorized for the next twelve-month period. See Pls.’ Mem. Supp. Mot. Prelim. Inj. 6; Sea Aff. Exh. B, Att. 1: 7; see, e.g. , Decl. Of Penny C. ¶ 13, Exh. F.; Decl. Of Ron S. ¶ 8. Oneapproved, the participant’s twelve-month plan of care took effect on the first day of the participant’s month of birth. See, e.g., Decl. of Ron S. ¶ 8.
In March 2011, defendant PBH took action that reduced or suspended the participants’ previously annually authorized services. See, e.g,. Decl. of Ron S. ¶ 9-10; Decl. of Penny C. ¶¶ 24,
11(...continued) expired.” See 42 C.F.R. § 438.420(b). Because the court grants pal intiffs’ motion for preliminary injunction and orders that defendants reinstate the level of services authorized to plaintiffs prior to July 1, 2011, until the court issues a final ruling, it need not decide the issue of whether, under § 4384.20(b), plaintiffs are entitled to benefitspending their appeal in spite of the language suggesting that benefits pending appeal are only authorized if the “original period covered by the original authorization has not expired.” See 42 C.F.R. § 438.420(b)(4). Plaintiffs offer som e case law that the benefits should continue despite this language. See Jonathan C, 2006 WL 3498494 at *13-14. However, the issue has not been fully briefed, and is not immediately necessary to be decided in light of the relief granted herein.
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28, 41.12 Thus, participants met with a care coordinator and developed a plan of service under a
certain budget, for a period of a year. In March 2011, defendant PBH communicated to plaintiffs
that as of July 2011, they must reduce or terminate certain services to comply with “new” budgets,
developed based on the SIS and SNM, neither of which plaintiffs understood or knew how to
challenge. The court disagrees with defendants that defendant PBH’s action was simply taken at
the conclusion of a previously authorized period ofservice. Defendants donot offer factual support
for this contention beyond general assertions that the agency “action” in this case is the expiration
of a time-limited authorization to provide a specific service. See Def. PBH’s Resp. Opp’n Mot.
Prelim. Inj. 13. Defendants do not show how, for instance, the scenario cited above and described
in the declaration of Ron S., is the expirationof a time limited authorization, when defendant PBH
stated that a budget authorized until December 2011, would be reduced in July 2011. The facts do
not support defendants’ argument that defendant PBH did not engage in agency action under the regulation which triggered notice and appeal rights.13 In fact, plaintiffs have offered evidence that
previously authorized budgets were seemingly disregarded in light of the new SNM categories for
plaintiffs, categories reached by application of the SIS, which participants did not understand and were not clearly told they could contest.14
12 Although the declarations submitted by plaintiffs each describe a similar scenario, by way of example, the declaration of Ron S. states that plaintiff L.S. had anannual approved base budget of$56,197.92, beginning in December 2010 and going through December 2011. Decl.of Ron S. ¶¶ 8-9. However, in March 2011, Ron S. received a letter from defendant PBH explaining that L.S.’s new budget would be $36,604.40, beginning July 2011. Id. ¶ 11.
13 In their supplement to the response inopposition to plaintiffs’ motion for preliminary injunction, defendants PBH and Shipm an lodge a confusing argum ent that suggests that some plaintiffs’ authorized services were only authorized for six-month periods. H owever, a closer analysis shows that wh ile some participants’ services were approved in “phases,” these two six-month phases were based on one annual budget. Decl of Ron M. (DE # 122) ¶¶ 7-8. For instance, defendant PBH approved a plan that M.M.’s services from April 2012 through September 2012 would be based on an “ annual” budget of $25,476.40, yet in January 2012, defendant PBH stated that the annual budget was reduced to $18,799.60, effective April 1, 2012. (Id.)
14 This practice appears to be ongoing. See Decl. of Ron M. (DE # 122) ¶¶ 7-9.
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Plaintiffs’ legal claims include allegations that: (1) defendants use the SIS to determ ine
plaintiffs’ level of need without an opportunity for a fair hearing; (2) plai ntiffs are assigned to a
SNM category and base budget without an opport unity for fair hearing; (3) plaintiffs are denied
intensive reviews without opportunity for a fair hear ing; and (4) plaintiffs were told they have to
sign new plans of care reducing their services and failrue to do so would result in all otfheir services
stopping. Defendants contend that none of plaintiffs’ legal claims are agency “actions,” but rather
are part of the “managed care planning process.” Def. PBH Resp. Opp’n Pls.’ Mot. Prelim. Inj. 19.
While each one of these efforts m ight not be an agency “action” itself unde r the regulations, the
court finds that agency action was taken, often in conjunction with the above m entioned efforts,
when plaintiffs were notified that their annual, authorized base budget was no longer effective in July 2011.15
Having found that defendants engaged in agency action of terminating or reducing benefits,
it follows that plaintif fs were entitled to the notice and appeal rights outlined in the Medicaid
regulations, cited above, as well as under general principles of due process. SeeO’Bannon v. Town
Court Nursing Ctr., 447 U.S. 773, 786-87 (1980); Goldberg v. Kelly, 397 U.S. 254, 269-71 (1970); McCartney ex rel. McCartney v. Cansler, 608 F.Supp.2d 694, 699 (E.D.N.C. 2009)1.6 The court next
turns to whether the notice and appeal requirements of federal law and due process were followed,
and finds they were not.
15 This conclusion is underscored by plaintiffs’ repeated assertion that they do not challenge the SIS or SNM themselves, rather they challenge the use of the sam e to unilaterally reduce or terminate a service under a previously authorized budget without due process. While defendants repeatedly raise the cry that what plaintiffs really seek is just to freeze services in place, the court does not agree. It is the opportunity to challenge use of the SIS and SNM to arbitrarily reduce or terminate benefits that plaintiffs seek. Defendant PBH’s argument in its supplemental response in opposition to the motion for preliminary injunction (see DE # 149 n.1) is thus inapposite. Granting plaintiffs’ motion would not frustrate current due process protections where there appear to be none. Instead, granting plaintiffs’ relief would require notice and appeal requirements that comport with federal law and due process to be instituted.
16 Thus, the court rejects defendants’ argum ent that notice of appeal rights have n ot “even been triggered.” Defs. PBH Supp. Resp. Opp’n Mot. Prelim. Inj. n.4.
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Federal regulations require that a managed care provider such as defendant PBH m ust provide notice and oppor tunity for hearing when action is going to be taken. See 42 C.F.R. § 438.404, 438.406. The content of the notice must explain seven things: (1) the action the PIHP has taken or intends to take; (2) the reasons for the action; (3) the enrollee’s or the provider’s right to file a PIHP appeal; (4) if the state does not re quire the enrollee to exhaust PIHP level appeal procedures, the enrollee’s right torequest a state fair hearing1;7 (5) the procedures for exhausting the rights specified in the regulations; (6) the circum stances under which expedited resolution is available and how to request it; and (7) the enrollee’s right to have benef its continue pending resolution of the appea l, how to request that be nefits be continued, and the circum stances under which the enrollee may be required to pay the costs of these services. 42 C.F.R. § 438.404(b).
The requirements for appeal of an agency action are set for th in 42 C.F.R. § 438.406 and include ensuring that the individuals who make decisions on grievances and appeals are individuals not involved in any previous level of revi ew or decision-m aking, providing the enrollee an opportunity to present evidence and allegations of fact or law in person or in writing, providing opportunity for an enrollee to exam ine his or her file, and including as parties to the appeal an enrollee and his or her representative. See C.F.R. § 438.406(a) and (b).
Defendants did not satisfy either the notice or appeal requirem ents. While the SIS score itself is not being challenged, plaintiffs note thathe SIS assessments mailed in 2011 did not explain the significance of the score or howto challenge it. Pls. Mem. Supp. Mot. Prelim. Inj. 7. The score summary did not inform participants that failure to challenge it within ninety (90) days would bar future appeals of term ination in service. See, e.g. , Decl. of Penny C. Ex. B. Participants who
17 The contract between DMA and PBH requires participants to complete defendant PBH’s internal review, called a “Reconsideration Review” by defendant PBH before they may continue their appeal in the State fair hearing system. Pls.’ Mot. Prelim. Inj. 6 n.2. The reconsideration review process is not at issue in this case.
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contested the score were not provided with a fair hearing or appeal, as set forth in the regulations where defendants do not show that any appeal was conducted by a decision maker not involved in any previous level of review or decision-making. See 42 C.F.R. § 438.406(a).
In March 2011, plaintiffs and proposed cla ss members received undated letters from defendant PBH stating that according to the SNM,new budget limits for the participant’s category of need would be implemented in July 2011. The letters did not contain information about appeal. Id.; see, e.g., Penny C. Decl. Exhs. B, G, I; Johns Decl. Exh. D. While there was a booklet enclosed with each notice, the booklets contained information about an “intensive review,” which defendant PBH has acknowledged only applies to “outliers,” the number of which is capped at seven percent. See Def. PBH Resp. Opp’n Mot. Prelim. Inj. 19; Misenheimer Decl. (DE # 42) ¶ 14.18 Looking at the facts as alleged, and rejec ting defendants’ argument that no agency action was taken when defendant PBH contacted participants and informed them that their annual budgets would change based on the SNM, the regulations setting forth the notice and opportunity for hearing requireemnts were not followed.
The court further finds that plaintiffs are likely to succeed on the merits on their claims that the same actions violated plaintiffs’ due processrights under the Fourteenth Amendment. Plaintiffs have set forth the applicable law in detail,including the Supreme Court decision in Goldberg, which required that welfare recipients have timely and adequate notice detailing the reasons for proposed termination, that the opportunity to be heard be tialored to the capacities and circumstances of those to be heard, an opportunity to confront and cross-examine the witnesses relied on by the opposing
18 A few plaintiffsdid submit a plan of care exceedni g their new allotted budget limit, and when defendant PBH denied the same, it did so in writing and included appeal rights. Penny C. Decl. ¶ 40. However, plaintiffs contend that even this notice of appeal rights failed to satisfy due proce ss for failure to adequately explain the reasons for denial. However, the court need not engage in analysis owf hether this notice satisfies federallaw and due process, having found that the agency action of informing participants of reductions in their annual budgets was an agency action and notice and opportunity for hearing were not provided.
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side, and an impartial decision maker. 397 U.S. at 268-71. Defendants suggest that Goldberg is inapplicable because no agency action has taken place, a contention the court rejects19. Defendants
also argue that plaintiffs have no property intere st in their services t riggering due process rights
because defendant PBH is a MCO. This contention is not supported by the case law, and the court
finds that plaintiffs have a property interest inthe services received under the Innovations Waiver.
See J.K. by and through R.K. v. Dillenburg , 836 F.Supp. 694, 700 (D. Ariz. 1993) (treatm ent
decisions by MCO are not exempt from due process concerns).
Because defendants rely on the premise that no agency action has been taken, defendants
lodge no meaningful argument that what was provided to participants in the formof the March 2011,
adequately complied with the requirements of Goldberg, specifically the need for individualized
information a participant can use to determ ine whether a m istake has been m ade as well as
information regarding participants’ right to an impartial pre-termination hearing and how to exercise
that right. See Goldberg, 397 U.S. at 266; Mallette v. Arlington Co. Employees’ Supp. Ret. Sys.,
91 F.3d 630, 640-41 (4th Cir. 1996). Participants who received notification in spring of 2011 that
their annual budget was being reduced because of the SIS score did not understand the score, how
the score was reached, and did not have opportunity for a hearing in front of an impartial decision maker.20
19 Goldbergis applicable to the instant case because Medicairdecipients have a statutoryentitlement to benefits and such entitlement is protected by the due process clause of the Fourteenth Amendment. See O’Bannon v. Town Court Nursing Ctr., 447 U.S. 773, 787 (1980), a point defendants do not contest.
20 Defendants m ake much of the fact th at two plaintiffs have successfully appealed their SNM and corresponding budgets. See Def. PBH’s Resp. Opp’n Mot. Prelim . Inj. 26-27. Yet affidavits subm itted by the representatives of both plaintiffs statethat they only proceeded through the appeal process with the help of their lawyers. See Supp. Decl. of Patty Holzlohner ¶ 5; Second Decl. of Linda Johns ¶ 4. The m ajority of affidavits and sworn statements offered by plaintiffs instead suggest a pro cess in which little to no appeal rights are com municated. Proceeding through the appeal process whether through the in tensive review process or by subm itting a plan with a higher SNM budget is a process m ost participants do not understand or cannot complete without the assistance of experienced counsel.
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Considering the foregoing, the court finds thatplaintiffs have made a sufficient showing of
likelihood of success on the m erits of their claim s that defendants’ notification of reduction in
services in the spring of 2011 and after violates applicable federal regulations as we ll as due
process.21
b. Irreparable Harm
Plaintiffs have also demonstrated irreparable harm. In the absence of an injunction, plaintiffs
risk constant re-evaluation pursuant to the SIS and SNM without notice and opportunity to appeal
the same. Plaintiffs have submitted multiple affidavits from plaintiffs or from individuals who care
for plaintiffs who cite deteriorating and regressivebehavior from lack of services, serious financial
strain on plaintiffs’ families, and for some, the threat of being institutionalized, as a result ofreduced
budgets since July 2011. While defendants suggest thatsome plaintiffs are about to enjoy increases
in their benefits, without injunctive relief as to the lack of notice and opportunity to appeal, such
benefit could be reduced without due process as quickly as it is give n.22 Defendants PBH and
Shipman also argue that all plaintiffs know how teoxercise their appeal rights. The evidence offered
by plaintiffs belies this contention and the court has also previously discussed the great difficulty
plaintiffs have demonstrated to actually appeal a reduction in benefits based on the SNM.
21 The court notes that plaintiffs repeatedly allege that employees of defendant PBH actively discouraged participants from exercising appeal rights orcommunicated that efforts to appeal or seek an intensive review were futile. Pls.’ Mem. Supp. Mot. Prelim. Inj. 13-14. Plaintiffs support these allegations with numerous affidavits. Defendants rebut the allegations by offering their own affidavits denying thatcertain things were said, and this particular aspect of the parties’ briefs reveals a factual dispute as towhat was said by defendant PBH care coordinators and what was heard by participants and their guardians. The court need not engagein substantial analysis of these factual disputes basedon its decisions lodged herein regarding plaintiffs’ likelihood ofsuccess on the merits, but notes that if plaintiffs’ allegation are true, such practices by defendant PBH would be furthe r evidence that the general due process protections in the Medicaid Act and as set forth inthe case have been violated. See Goldberg, 397 U.S. at 266-67; Mallette, 91 F.3d 64041.
22 Defendant Delia’s response in opposition to the motion for preliminary injunction suggests that plaintiffs seek an order from the court “freez[ing] the use of the [SNM].” Def. Delia’s Resp. Opp’n Mot. Prelim. Inj. 10. The court does not agree that plaintiffs make this request, finding that plaintiffs contest the application of the SNM without notice and opportunity for hearing to contest it.
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Further, where defendants suggest that every plaintiff could simply submit an over-budget request for services, such argument does not changethe fact that defendant PBH took agency action when it notified participants that previously authorized se rvices were to be reduced, without providing proper notice and opportunity to appeal. Additionally, plaintiffs have offered evidence that it is de fendant PBH’s policy to deny such requests to the extent they exceed the budget defendant PBH determines to be appropriate. See Def. PBH’s Resp. Opp’n Class Cert. 9. (“[A participant’s planning team] may also submit a TAR in which the com bination of Base Budget Services and Non-Base Budget Services exceedsthe Waiver Cost Limit $135,000 per year. In such scenarios, PBH will authorize the services and am ounts which are compliant with the [SNM], or Waiver Cost Limit, and deny those services that are not.”) (citing Decl. of Andrea J. Misenheimer ¶ 19). Additionally, plaintiffs have offered evidence, disputed by defendants, that participants were repeatedly told they could not appeal. Supp. Decl. of Rachelle S. ¶ 8 Decl. of Linda Biggs, ¶¶21, 22, 23; Decl. of Laurie Haley, ¶ 15, 16, 20; Decl. of Melissa Campbell, ¶ 8.
Taken as a whole, the serious physical and mental entry or forced entry into an institutional setting for many of the named plaintiffs and members in the class if injunctive relief is not provided constitutes irreparable harm. See, e.g. , Mayer v. Wing, 922 F.Supp. 902, 909 (S.D.N.Y. 1996); Crabtree v. Goetz, No. 3:08-0930, 2008 WL 5330506 at *30 (M.D.Tenn. Dec. 19, 20008); Benjamin H. v. Ohl, 1999 WL 34783552 at *13 (S.D. W.Va. July 15, 1999); Peter B. v. Sanford, 2010 WL 5912259 at *9-10 (D.S.C. Nov. 24, 2010).
c. Public Interest Finally, plaintiffs have also shown that the balance of equities tips in their favor and that the public interest supports the issuance of an injunction. As noted earlier, where defendants complain of fiscal complications and insufficient funds to comply with relief plaintiffs seek, fiscal concerns cannot be held to outweigh harm to plaintiffs’ safety, health, and well-being. See Todd v. Sorrell,
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841 F.2d 87, 88 (4th Cir. 1988). Additionally, the public interest always lies with upholding the law and having theamndates
of the Medicare Act and due process enforced. As plaintiffs have shown a likelihood of success o the merits as to these claims, the court finds that aninjunction is in the best interest ofplaintiffs and the public.
3. Bond Plaintiffs request that the court waive any requirem ent to post a cash bond under Federal Rule of Civil Procedure 65. Rule 65(c) provides, The court may issue a preliminary injunction or temporary restraining order only if the movant gives security in an am ount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. Fed. R. Civ. P. 65(c). While plaintiffs offer case law from other circuits suggesting that no bond is required here, the language of Rule 65 as well asFourth Circuit precedent counsel that “[f]ailure to require a bond before granting preliminary injunction relief is reversible error.” Maryland Dep’t of Human Resources v. U.S. Dep’t of Agriculture , 976 F.2d 1462, 1483 (4th Cir. 1992). The computation of the bond amount, however, is within the court’s discretion. Id;.Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 421 (4th Cir. 1999). At least two circuits have approved dispensing with security for indigent plaintiffs who are otherwise entitled to preliminary injunctive relief. See Pharm. Soc’y Inc. v. Dep’t of Soc. Servs., 50 F.3d 1168, 1174 (2d Cir. 1995); Temple Univ. v. White, 941 F.2d 201, 291-20 (3d Cir. 1991) (upholding waiver of the bond requirement in an action to enforce compliance with the Medicaid Act). Plaintiffs suggest that they are indigent, or at the very least, as recipients of public assistance, they should not be required to post a bond. No defendant has raised objection to plaintiffs’ request for the court to waive the bond, nor have defendants suggested that if a prelim inary injunction is otherwise deemed proper, plaintiffs
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should be required to post security. Considering Fourth Ci rcuit precedent as well as plaintiffs’ status, the court orders that plaintiffs posta nominal cash bond in the amount of $100.00 as security for the payment of such damages as any person m ay be entitled to recover as result of wrongful injunctive relief. Defendants may move to amend the order if they assert that the limited preliminary injunction will cause them to incur expenses f or which plaintiffs should be required to provide security.
CONCLUSION Based on the foregoing, plaintiffs’ m otion for prelim inary injunction (DE # 31) is GRANTED. Plaintiffs’ motion to certify class (DE # 34) is GRANTED. Counsel for plaintiffs are directed to provide appropriate notice to the class pursuant to Rule 23 of the Federal Rules of Civil Procedure. Counsel requesting to be appointed as class counsel in plaintiffs’ motion for class certification lodged on the docket at entry 34 are appointed pursuant to Fed. R. Civ. P. 23(g). Plaintiffs shall post immediately the bond discussed herein. Further order shall follow addressing case scheduling issues. SO ORDERED, this the 29th day of March, 2012.
_____________________________ LOUISE W. FLANAGAN United States District Judge
32 Case 5:11-cv-00354-FL Document 154 Filed 03/29/12 Page 32 of 32

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION

L.S., a minor child, by and through his father and next friend, Ron S.; K.C., a minor child, by and through his mother and next friend, Africa H.; ALLISON TAYLOR JOHNS; and D.C., a minor child, by his mother and next friend, Penny C.;
Plaintiffs,

Civil Action No. 5:11-cv-354-FL
NOTICE OF INTERLOCUTORY APPEAL
Fed. R. App. P. 4(a)

M.S., a minor child, through his parent and natural guardian, Rachelle S.,

Intervenor Plaintiff,

v.

ALBERT A. DELIA, in his official capacity as Acting Secretary of the Department of Health and Human Services; PAMELA SHIPMAN, in her official capacity as Area Director of Piedmont Behavioral Health Care Area Mental Health, Developmental Disabilities, and Substance Abuse Authority; and PIEDMONT BEHAVIORAL HEALTHCARE AREA MENTAL HEALTH, DEVELOPMENTAL DISABILITIES AND SUBSTANCE ABUSE AUTHORITY doing business as PBH,

Defendants.

Notice is hereby given that Defendants Pam ela Shipman, in her official capacity as Chief

Executive Officer of PBH, and PBH (together, the “PBH Defendants”), pursuant to Rule 4(a) of

the Federal Rules of Appellate Procedure and 28 U.S.C. § 1292(a), appeal to the United States

Court of Appeals for the Fourth Circuit from the Order of the Honorable Louise W . Flanagan

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entered in the United States District Court for the Eastern District of No rth Carolina on March 29, 2012, granting Plaintiffs’ Motions for Preliminary Injunction and to Certify Class.
Respectfully submitted, this the 27th day of April, 2012. NELSON MULLINS RILEY & SCARBOROUGH LLP By: /s/ Stephen D. Martin Wallace C. Hollowell III N.C. State Bar No. 24304 Reed J. Hollander N.C. State Bar No. 23405 Stephen D. Martin N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: chuck.hollowell@nelsonmullins.com E-Mail Address: reed.hollander@nelsonmullins.com E-Mail Address: steve.martin@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
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CERTIFICATE OF SERVICE I, the undersigned atto rney of the law o ffices of Nelson Mullin s Riley & Scarb orough LLP, attorneys for Defendants Shipm an and PBH do hereby certify that on April 27, 2012, I electronically filed the foregoing N OTICE OF A PPEAL with the Cle rk of the Court using the CM/ECF system which will send notification of such filing to the following:
• John R. Rittelmeyer (john.rittelmeyer@disabilityrightsnc.org) • Jennifer L. Bills (jennifer.bills@disabilityrightsnc.org) • Morris F. McAdoo (morris.mcadoo@disabilityrightsnc.org) • Douglas S. Sea (dougs@lssp.org) • Jane Perkins (perkins@healthlaw.org)
Attorney for the Plaintiffs • Belinda A. Smith (bsmith@ncdoj.gov) • Iain Stauffer (istauffer@ncdoj.gov)
Attorney for Defendant Albert A. Delia
NELSON MULLINS RILEY & SCARBOROUGH LLP /s/ Stephen D. Martin Wallace C. Hollowell, III N.C. State Bar No. 28658 4140 Parklake Avenue, Suite 200 Raleigh, NC 27612 Telephone: (919) 877-3800 Facsimile: (919) 877-3799 E-Mail Address: steve.martin@nelsonmullins.com Counsel for Defendants Pamela L. Shipman and PBH
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 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION Case No.: 5:11-cv-354

K.C. et al., individually and on behalf of all )

others similarly situated,

)

)

Plaintiffs,

) MEMORANDUM OF LAW IN SUPPORT

v.

) OF MOTION FOR PRELIMINARY

) INJUNCTION

LANIER CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services, et al.,

)

)

Defendants.

)

)

)

INTRODUCTION The Plaintiffs are Medicaid recipients because they have chronic and disabling

conditions, such as cerebral palsy, seizure disorders, and autism. Although Plaintiffs have

disabilities severe enough to qualify them for institutional placement, they can thrive in stable

home environments at much less expense to the Defendants if they receive adequate supports.

The Defendants have heretofore approved a range of health and personal care services which

have allowed Plaintiffs to live with their families. Effective July 1, 2011, however, all but one of

the Plaintiffs‘ services were abruptly and significantly reduced even though there had been no

change in their underlying conditions or health care needs. The remaining Plaintiff, Alison Johns,

is threatened with the imminent loss of all of her services. The Plaintiffs filed this lawsuit to

challenge the failure of Defendant Cansler and his contractor and agent, Piedmont Behavioral

Health (PBH), to provide them with the ―due process‖ required by the United States Constitution

and the Medicaid Act—adequate written notice and the opportunity for an impartial hearing prior

to services being reduced or terminated. Plaintiffs—who rely on Medicaid coverage for these

services—have yet to receive adequate individualized notices of the extent and basis of the

cutbacks so that they can challenge and, hopefully, reverse incorrect service reductions and

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maintain their ability to live outside of an institutional setting. Plaintiffs are highly likely to prevail on their legal claims. Defendant PBH employees
used an assessment tool to decide each Plaintiff‘s and others‘ medical and behavioral health needs but provided no opportunity to appeal the validity of their assessment scores. Then, in March 2011, based on these assessment scores, Defendant PBH assigned Plaintiffs and proposed class members maximum budget limits that require significant reductions in the core services they receive. Again, Defendant PBH did not provide the requisite notice or the opportunity for an impartial hearing to challenge the assigned budget limits to which each Plaintiff was assigned. Instead, Defendant PBH informed Plaintiffs that they must sign new plans of care substantially reducing their covered services, and if they refused to do so, all of their services would stop. Defendant Cansler‘s state Medicaid agency actively participated or acquiesced in these actions by his agent and contractor, PBH.
The complex and coercive processes used by the Defendants to establish individual need for services and the resulting budget limits were not adequately explained to Plaintiffs, leaving them unable to understand why their services have been reduced or terminated. These practices are ongoing. Defendant PBH is forcing reductions in services without first providing the legally required prior, written, individualized notice explaining the proposed action, or the opportunity for a fair hearing to contest the reductions or terminations of services, or the opportunity to continue receiving services at the previously authorized level pending the outcome of a fair hearing. Each of these systemic failures violates Plaintiffs‘ and class members‘ rights under the Medicaid Act and under the Due Process Clause of the Fourteenth Amendment.
As a result of the Defendants‘ actions, Plaintiffs and members of the proposed class are suffering, or are threatened with, irreparable harm to their health, safety, development, and
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ability to live at home. Plaintiffs ask the Court to preliminarily enjoin Defendants from reducing or terminating Medicaid services for all named plaintiffs and proposed class members without first providing them the process that is due under the Due Process Clause and the Medicaid Act.
LEGAL STANDARD In actions brought under Section 1983 to enforce the Medicaid Act, district courts are invested with broad equitable powers to fashion appropriate remedial relief. Doe v. Kidd, 419 Fe. Appx. 411 (4th Cir. 2011). ―A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits and to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.‖ Winter v. Natural Res. Def. Council Inc., 129 U.S. 365, 374 (2008)); Real Truth About Obama, Inc. v. Fed. Elec. Comm., 575 F.3d 342 (4th Cir. 2009). Plaintiffs meet this test.1 Plaintiffs filed their lawsuit on the day the contested reductions took effect. Thus, the preliminary relief requested is to preserve the status quo, which ―has been consistently defined as the last uncontroverted status preceding the pending litigation.‖ Fed. Leasing, Inc. v. Underwriters at Lloyd’s, 487 F. Supp. 1248, 1259 (D. Md. 1980), aff’d 650 F.2d 495.
BACKGROUND Title XIX of the Social Security Act establishes the Medicaid program. See 42 U.S.C. §§ 1396–1396w-5. State participation is voluntary. Participating states are reimbursed by the federal government for a majority of the costs of Medicaid benefits. See 42 U.S.C. § 1396b. If a state
1Although plaintiffs are simultaneously filing a motion for class certification, ―[d]istrict courts are empowered to grant preliminary injunctions regardless of whether the class has been certified.‖ Brantley v. Maxwell-Jolly, 656 F. Supp. 2d 1151, 1178 n.14 (N.D. Cal. Sept. 10, 2009) (quotation marks omitted) (on appeal). See also 2 Newberg on Class Actions, § 9:45, at 411 n.3 & 413-14 (4th ed. 2002) (interim injunctive relief should be awarded on class-wide basis where ―activities … are directed generally against a class of persons‖; collecting cases ordering class-wide preliminary injunctive relief pending class certification).
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elects to participate in Medicaid, it must ―comply with detailed federally mandated standards.‖ Antrican v. Odom, 290 F.3d 178, 183 n.2 (4th Cir. 2002). The Medicaid Act requires participating states and managed care entities to provide each Medicaid recipient with adequate written notice and an opportunity for an impartial hearing before services are denied, reduced or terminated. 42 U.S.C. §§ 1396a(a)(3) and 1396u-2(b); 42 C.F.R. parts 410.200 and 438.
North Carolina has elected to participate in Medicaid. See N.C.G.S. §§ 108A-54, 108A56. As required by federal law, 42 U.S.C. § 1396a(a)(5), North Carolina has designated the North Carolina Department of Health and Human Services (―DHHS‖ or ―Department‖) to be the ―single state agency.‖ N.C.G.S. § 108A-71. The single state agency is required, as a condition of participation in the Medicaid program, to ensure that Medicaid rules are followed. Id. These duties – which include assurance of the procedural protections at issue here – are non-delegable. See, e.g., 42 U.S.C. § 1396a(a)(5); 42 C.F.R. § 431.10 (single state agency may not delegate to others its authority to ―issue policies, rules, and regulations on program matters‖). Defendant Lanier Cansler is the Secretary of DHHS. In DTM v. Cansler, 382 Fed. App‘x 334, 338 (4th Cir. 2010), the Fourth Circuit held that Defendant Cansler is responsible for assuring that the actions of N.C. Medicaid services contractors comply with federal law.
ARGUMENT I. PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS OF THEIR DUE
PROCESS CLAIMS. A. Plaintiffs’ Services Have Been Reduced or Terminated by Defendants Without
First Providing Adequate Written Notice or the Right to a Hearing. The N.C. Innovations Waiver is a Home and Community Based Waiver, approved under 42 U.S.C. § 1396n of the Medicaid Act, that offers Medicaid services to individuals with developmental disabilities who would otherwise qualify for services in an Intermediate Care Facility for the Mentally Retarded (ICF-MR). See Piedmont Innovations Waiver (excerpts) and
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Apr. 1, 2008 CMS Approval Ltr., Affidavit of Douglas Sea (Sea Aff.) Exhs. A, B. The program is called a waiver because the federal Medicaid agency has given North Carolina permission to ignore certain, otherwise mandatory provisions of the Medicaid Act. All members of the Plaintiff class are consumers of services under the N.C. Innovations waiver, which currently has approximately 675 total participants. Tomlinson Apr. 18, 2011 Memo, Sea Aff. Exh. C.
Defendant Cansler‘s single state Medicaid agency ―directly oversees the Innovations Waiver [and must] approve all policies and procedures governing waiver operations….‖ Sea Aff. Exh. B Att. 1: 3. Due process requirements of 42 U.S.C. § 1396a(a)(3) are not waived. Rather, the federal approval affirmatively specifies that Defendant Cansler must provide the opportunity for a fair hearing pursuant to federal regulations, 42 CFR § 431.200 Subpart E, to every waiver participant ―whose services are denied, suspended, reduced, or terminated.‖ Sea Aff. Exh. B App. F-1. Defendant Cansler contracts with Defendant PBH to perform certain functions in operating the Waiver. Sea Aff. Exh. B Att. 1: 3, App. A. PBH is a Local Management Entity (―LME‖), which is described by statute as ―a local political subdivision of the state.‖ N.C.G.S. §122C-116(a). Currently PBH is the LME for Davidson, Rowan, Cabarrus, Union and Stanley counties. Sea Aff. Exh. B Att. 1: 3. PBH operates as a managed care organization under the Medicaid regulations. Id. Defendant Pamela Shipman is the director of PBH. Sea Aff. Exh. S.
Defendant Cansler‘s contract with PBH states that PBH ―shall provide to Enrollees covered under this Contract, through arrangement with others, all of the Covered Services identified in Attachment H. These services shall be provided in the manner set forth in this Contract.‖ Contract between NCDHHS, Division of Medical Assistance and PBH effective May 1, 2011 (excerpts), Sea Aff. Exh. C p. 15. Attachment H to the contract lists services including ―HCBS waiver services as defined in the ‗Innovations‘ waiver.‖ Sea Aff. Exh. C p. 63. PBH is
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responsible for approving or denying services requested under the waiver through a process known as utilization management. Sea Aff. Exh. C pp. 28-29, 61. If PBH denies, terminates, or reduces a Medicaid beneficiary‘s services, it must provide the individual with proper written notice of his/her right to appeal its decision. 42 C.F.R. §§438.404(b); Sea Aff. Exh. C pp. 70-75.2
Under the Innovations waiver, participants meet with a PBH employee, called a care coordinator, once every twelve months to develop a service plan of care, which specifies the services that are requested to be authorized for the next twelve-month period. Sea Aff. Exh. B Att. 1: 7, Exh. P p. 12; see e.g. Decl. of Penny C., Exh. F. The plan is then submitted to PBH employees in the Utilization Management section for approval or denial. Sea Aff. Exh. C p. 28.
Once approved, the participant‘s twelve-month plan of care takes effect on the first day of the participant‘s month of birth. Sea Aff. Exh. B App. D-2: 2-5; Sea Aff. Exh. P pp. 53, 65. Services under the waiver are ―authorized‖ by PBH for one year when the annual plan of care is approved, although a mid-year modification of the plan can be requested by the participant if the participant‘s needs change. Sea Aff. Exh. B App. D-2: 5; Sea Aff. Exh. P pp. 46, 48; Penny C. Decl.¶18 and Exh. K; Patricia Holzlohner Decl.¶8; Paul Peters Decl. ¶5. The Waiver, PBH contract, and federal regulations all make clear that PBH may not reduce or terminate services during the approved one-year authorization period unless the recipient is first provided advance, adequate written notice of the proposed change. Sea Aff. Exh. B App. F-1, F-2, Exh. C. pp. 7075, Exh. P p. 46; 42 CFR 438.210(c), 404, 420. In that instance, the recipient must be permitted to continue receiving services through the state fair hearing process. Id.
2 The contract between DMA and PBH requires enrollees to complete PBH‘s internal review process, called a ―Reconsideration Review‖ by PBH, before they may continue their appeal in the State fair hearing system. Sea Aff. Exhs. C pp. 70-75, M, O, R. See 42 C.F.R. §§ 438.402(a).
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At the heart of this lawsuit is the process by which Defendants are imposing substantial reductions and terminations of previously approved services for Plaintiffs and class members. During 2010 and early 2011, PBH employees conducted evaluations using a ―Support Intensity Scale‖ (SIS). Penny C. Decl. ¶20; Holzlohner Decl. ¶11; Heath Decl. ¶9; Ron S. Decl. ¶23; Johns Decl. ¶10; Melissa W. Decl. Exh. C; Sea Aff. Exh. K.3 In some cases, PBH did not consult with the Plaintiffs‘ treating providers as part of the evaluation process. Peters Decl. ¶11; Holzlohner Decl. ¶9. After these SIS assessments were performed, a summary of the assessment and the resulting numerical scores was mailed to each waiver participant. However, the summary mailed to participants did not include or attach an explanation of the scoring system or adequately explain how the scoring system worked or how the individual‘s score was determined. The summary also did not explain whether or how the SIS score would affect the services the individual would receive in the future. Thus, even if a participant learned that she could contest the assessment score, she had no way of knowing why contesting the score was important. See Penny C. Decl. Exh. B; Holzlohner Decl. Exh. A; Heath Decl. Exh. A; Johns Decl. Exh. A.
PBH procedure permitted an individual to ask for the SIS assessment to be amended within 90 days of the assessment. Sea Aff. Exh. H. However, the summary mailed by PBH to participants contained no information about how to contest the accuracy of the assessment or of any deadline for doing so. Penny C. Decl. Exh. B; Holzlohner Decl. Exh. A; Heath Decl. Exh. A; Johns Decl. Exh. A; Ron S. Decl. Exh. A; Melissa W. Decl. Exh. C. The summary also did not inform the Medicaid recipient that failure to meet PBH‘s 90-day deadline for requesting an amendment of the assessment score would bar the individual from appealing reductions or
3 PBH‘s use of the SIS instrument to measure need in children is the apparently first such experiment in the United States, which PBH describes as a ―test‖ in the ―research phase‖ of a tool that has ―ntoyet been normed or finalized.‖ Sea Aff. Exh. T; Penny C. Decl. Exh. M.
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terminations in services based on that score in the future. Id. Participants who did try to contest the SIS score were not provided with a fair hearing by PBH that meets due process standards. Sea Aff. Exh. H.
In March 2011, PBH issued undated form letters to each Plaintiff and proposed class member informing them that PBH had assigned each of them to one of twenty-eight possible categories of need, using a Supports Needs Matrix system. Sea Aff. Exh. G. That assignment was based primarily on the scores the individual has received during the most recent SIS evaluation. Sea Aff. Exh. E App. C-4: 1. The letter stated that the categorization would result in a new maximum dollar limit for each individual‘s core services – those services that provide regular support and supervision to a participant, including Community Networking, Day Supports, Home Supports, Residential Supports, Respite, and Supported Employment. In most but not all cases,4 the undated PBH letter stated that the new budget limit for the participant‘s assigned category of need would be implemented beginning July 1, 2011. The letter told each participant to contact his or her PBH care coordinator to revise the already-approved plan of care, in most cases before July 1, 2011, to reduce or eliminate enough core services to come within the budget limit PBH had assigned. The letter contained no information about the right to appeal this PBH decision. Penny C. Decl. Exh. G; Heath Decl. Exh. G; Ron S. Exh. F; Holzlohner Decl. Exh. B; Melissa W. Decl. Exh. A. PBH care coordinators have repeatedly informed participants and their 4 For some class members PBH did not implement the SNM budget effective July 1, 2011. For example, class member Kimberly Beare‘s budget will not be reduced until January 1, 2012. Holzlohner Decl. Exh. B. In her case this appears to be based on the fact that January is her birthday month. Peters Decl. ¶15. PBH has never explained on what basis it decided to apply the new SNM budget limits for some waiver participants during their plan year but not for others. Peters Decl. ¶16. In implementing the reductions before their birth month for many participants, PBH appears to have violated one of its own written policies, thus arbitrarily penalizing some recipients before others. Sea Aff. Exh. Q.
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care providers that their SIS scores and resulting assigned matrix categories and budget limit could not be challenged or appealed. Penny C. Decl. ¶31; Peters Decl. ¶14; Holzlohner Decl. ¶17; Heath Decl. ¶¶20, 24; Johns Decl. ¶¶20, 24; Ron S. Decl. ¶¶16, 17, 31; Melissa W. Decl. ¶¶17-18.
According to PBH, there are approximately 675 waiver participants and PBH has implemented its new budget limits for all of them. Sea Aff. Exh. D. PBH admits that about 25% of these persons (approximately 169 persons) are having their services reduced under these policies. Sea Aff. Exh. L, p. 2. All of the letters sent to Plaintiffs and other class members with SIS results as well as the letters with their assigned budget limits appear to be identical in format and none of them contain appeal rights. See, Penny C. Decl. Exhs. B, G, I; Heath Decl. Exhs. F, G; Johns Decl. Exh. D; Ron S. Decl. Exhs. E, F; Holzlohner Decl. Exhs. A, B; Melissa W. Decl. Exhs A, C.
Defendant PBH did enclose a booklet of general information with each undated notice it mailed in March 2011. On pages 11 to 13 of that booklet, PBH described a process by which a waiver participant could request an ―intensive review.‖ Sea Aff. Exh. F. However, as the booklet and other PBH documents make clear, this process fell short of due process standards in at least five different ways. First, recipients could only request an internal paper review by a PBH committee, not an in-person hearing by an impartial decision-maker. Penny C. Decl. ¶38, Exh. N; Sea Aff. Exh. F p. 13. Second, access to this paper review was limited to a small number of ―outliers‖ with ―unique behavioral, safety, health and/or welfare support needs that are distinguished from the support needs of other participants in the same‖ category. Sea Aff. Exh. E
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App. C-4: 4, Exh. F pp. 10-12, Exh. N; Penny C. Decl. ¶35.5 Third, the only way to initiate this Intensive Review process was with the agreement and support of the care coordinator, a PBH employee. Sea Aff. Exh. D. p. 11-13, Exh. C-4: 4, Exh. F p. 11-12. PBH care coordinators repeatedly have either failed to inform participants and their providers of this option or actively discouraged them from requesting such a review. Penny C. Decl. ¶35; Peters Decl. ¶14; Holzlohner Decl. ¶17; Johns Decl. ¶¶20, 26, 28, 37; Heath Decl. ¶20, 35; Ron S. Decl. ¶17, 31; Melissa W. Decl. ¶18. Fourth, the intensive review process did not allow individuals to explain how the combination of their various needs require additional services. Ron S. Decl. ¶26. 6 Fifth, the notice of decision issued by the PBH Intensive Review Committee provides no right to appeal to an impartial hearing officer. Penny C. Decl. Exh. O. This process thus was in no way a substitute for a fair hearing by which any participant could challenge their forced service reductions, their SIS scores, or the SNM category into which they were assigned by PBH.
Finally, if a person requested and was denied an intensive review, the PBH booklet enclosed with the undated March 2011 notice states that the ―planning team may submit‖ a plan of care that exceeds the budget limit to PBH, and that if that plan is denied by PBH the recipient ―will receive their appeal rights.‖ Sea Aff. Exh. F p. 13. As will become clear in Section I.B. infra, this general, contingent, and vague information about appeal rights buried in the booklet
5 PBH has stated that it will not allow more than 7% of all participants to be categorized as ―outliers‖ and receive increased funding through the Intensive Review process. Sea Aff. Exh. F p. 11, Exh. J, Exh. N. 6 According to the documents that waiver participants must complete in order to request an Intensive Review, waiver participants may only request an intensive review of their Medical, Behavioral or School needs. Penny C. Decl, Exh. N. Waiver participants thus may not ask for a review of any combination of these needs through the Intensive Review process.
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does not satisfy the duty to provide understandable, individualized notice that clearly explains the right to appeal, how to appeal, and the deadline for doing so.
The multi-step process leading to appeal rights described in the booklet also fails to satisfy due process for at least three other reasons. First, the booklet makes clear that the only persons who can hope to receive appeal rights are those few who can convince the PBH care coordinator that they have ―unique‖ needs such that the PBH employee will agree to request ―outlier status‖ through an intensive review and who are then denied additional services by the intensive review. Id. Second, even after intensive review is denied, the discretion given to the ―planning team‖ means that the decision whether to submit a request to exceed the budget limit is within the control of the PBH care coordinator, who is the only person on the ―team‖ who can write the plan of care. Id; Peters Decl. ¶7; Penny C. Decl. ¶¶17, 40; Holzlohner Decl. ¶19. If the care coordinator and her supervisor do not deem the services ―necessary,‖ the services are not included in the plan. Sea Aff. Exhs. N, P p. 67. Third, as discussed below, the notice provided by PBH after such a plan is submitted and denied still does not satisfy due process.
Remarkably, given the labyrinth created by PBH that an individual must somehow navigate before finally receiving a notice with appeal rights, one of the Plaintiffs did manage to convince his PBH care coordinator, after being denied an intensive review, to submit a plan of care that exceeded his budget limit. Penny C. Decl. ¶40, Exh. P. PBH then did issue a written decision denying that plan, which included appeal rights. Penny C. Decl. Exh. Q. However even at this belated stage, the PBH notice fails to satisfy due process: (1) The notice is mislabeled as a denial of an initial request for services, even though the decision by PBH was to reduce or terminate existing services that had been previously approved and even though the reduction or termination was to take effect prior to the expiration of the participant‘s previously approved
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plan of care. See Penny C. Decl. Exh. K. (2) The notice fails to provide the right to continuation of the previously approved services pending the outcome of an appeal, as required by federal regulations and due process. Penny C. Decl. Exh. Q. (3) The notice fails to adequately explain the reason for the PBH decision to reduce or terminate services, not even mentioning the Support Needs Matrix or budget limit but merely stating, without explanation, that the services were not medically necessary. Id. (4) The notice fails to explain that the participant has the right at this point to contest the SIS score or the Supports Needs Matrix categorization. Id. (5) When D.C.‘s mother tried to appeal this notice she was told she could not appeal because she had signed a plan of care agreeing for D.C.‘s services to be substantially reduced, even though she signed this plan only under the threat by the PBH care coordinator that all of D.C.‘s services would otherwise end on the next day. Penny C. Decl. ¶¶43, 46, Exhs. U, V, X.
Two other Plaintiffs never received notices with appeal rights before their services were reduced. Plaintiff K.C.‘s core services were reduced by almost 7 percent effective July 1, 2011 and will be reduced by another 18 percent effective January 1, 2012, without being notified of any right to appeal. Heath Decl. ¶¶10, 15, 27. When his mother tried to appeal anyway, PBH would not allow it. Id. at ¶¶ 19, 20. Plaintiff L.S.‘s budget for core services was reduced by over 35 percent. Ron S. Decl. ¶¶9, 11, 32. His parents were required to sign the signature page for a new plan of care reducing his services before the plan was even complete. Id. at ¶20.
In contrast to the other named Plaintiffs, Plaintiff Allison Taylor Johns did not lose any services effective July 1, 2011.7 PBH refused to accept the new plan of care to reduce her services because it was signed by her under protest. Johns Decl. ¶¶34, 38. Thus, Taylor continues to receive services at the same level as prior to July 1. Johns Decl. ¶39. However, PBH has 7 Paragraphs 89 and 90 of the Complaint incorrectly imply that Taylor‘ services were reduced on July 1, 2011. Plaintiffs request that the Complaint be treated as amended to correct this error.
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repeatedly informed Taylor‘s grandmother since July 1, 2011 that Taylor is ―on the matrix system.‖ Ms. Johns therefore believes that the budget limit assigned to Taylor effective July 1, 2011 by the undated March 2011 PBH notice nonetheless applies to her. If PBH enforces the July through December 2011 budget limit in the undated March notice in Taylor‘s case, because she continues to receive services at the level previously authorized in her approved plan of care, Taylor will in early October 2011 ―exhaust the funds‖ in her budget, leaving no money to pay for any services for the remainder of the calendar year. Johns Decl ¶43. Moreover, Taylor‘s PBH care coordinator has informed her grandmother that unless she signs a new plan of care substantially reducing her services by September 8, 2011, all of Taylor‘s services will stop by October 31, 2011. Id. at ¶43. Thus, unless this Court promptly intervenes, Taylor‘s services are likely to be completely terminated in October 2011 without any prior written notice, right to appeal, or right to continue receiving those services pending the outcome of such an appeal.
In addition to creating the above obstacles to prevent Plaintiffs and other recipients from challenging PBH‘s decisions to reduce their services, PBH has engaged in other practices designed to coerce agreement with its decisions. The effect of these ongoing practices is to reduce and terminate Medicaid services with no written notice or right to a hearing, through verbal misinformation and intimidation. These practices by PBH employees include: (1) routinely informing participants and providers that their Supports Needs Matrix category cannot be appealed (Penny C. Decl. ¶31; Peters Decl. ¶14; Holzlohner Decl. ¶17; Heath Decl. ¶20; Ron S. Decl. ¶17; Melissa W. Decl. ¶¶17-18); (2) pressuring participants or their guardians into signing a new plan of care that does not meet the needs of the recipient, even though the previously approved plan should still be in effect (Penny C. Decl. ¶¶40, 43; Johns Decl. ¶¶24, 26, 38, 43; Peters Decl. ¶7; Holzlohner Decl. ¶19; Ron S. Decl. ¶¶20, 21; Heath Decl. ¶30); (3)
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informing participants that if a new plan reducing services was not signed, all waiver services would end (Penny C. Decl.¶¶40, 43; Johns Decl. ¶¶26, 38, 43); (4) informing participants that the SIS score could not be contested unless it was challenged within 90 days of the SIS report, even though the SIS report contained no notice of appeal rights (Penny C. Decl. ¶31); (5) informing participants that they could not request an intensive review unless they waited six months, or otherwise discouraging them from making that request (Penny C. Decl. ¶35; Peters Decl. ¶14; Holzlohner Decl. ¶17; Johns Decl. ¶¶20, 26, 28, 37; Heath Decl. ¶20, 35; Ron S. Decl. ¶17, 31; Melissa W. Decl. ¶18); (6) suggesting to participants that if their plan was not changed to reduce services they would run out of money and their services would stop entirely. (Johns Decl.¶39). In sum, PBH has created an environment where participants are intimidated into accepting PBH decisions, making a sham of their due process rights.
B. PBH Notices and Other Practices Violate Due Process and the Medicaid Act. It is well-established that Medicaid recipients have a statutory entitlement to benefits that is protected by the Due Process Clause of the Fourteenth Amendment. O’Bannon v. Town Court Nursing Ctr., 447 U.S. 773, 787 (1980) (Medicaid recipient has right protected by due process to continued Medicaid benefits to pay for services from the qualified provider of his choice). In Goldberg v. Kelly, 397 U.S. 254 (1970), the Court noted that termination of welfare benefits for the poor (a category which includes the Medicaid program) ―pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits.‖ Id. at 264. Thus, the Court held that such individuals are entitled, under due process, to an evidentiary hearing before benefits can be discontinued. Such recipients must also be given an ―opportunity to be heard … at a meaningful time and in a meaningful manner.‖ 397 U.S at 267. These principles
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require that a recipient have timely and adequate notice detailing the reasons for a proposed termination … . The opportunity to be heard must be tailored to the capacities and circumstances of those who are to be heard … . Welfare recipients must … be given an opportunity to confront and cross-examine the witnesses relied on by the department … [and] … the recipient must be allowed to retain an attorney if he so desires … . And, of course, an impartial decision maker is essential. 397 U.S. at 268-71. See also Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314
(1950) (requiring ―notice reasonably calculated, under all circumstances, to apprise interested
parties of the pendency of the action and afford them an opportunity to present their objections.‖).
The written notice required by due process must provide recipients with individualized
information they can use to decide whether the agency has made mistakes in terminating their
benefits and, if so, how they can contest those mistakes at a hearing. Goldberg, 397 U.S. at 266,
268; see also Gray Panthers v. Schweiker, 652 F.2d 146, 168 (D.C. Cir. 1981) (without adequate notice of reasons for denial ―hearing serves no purpose‖); Vargas v. Trainor, 508 F.2d 485, 490
(7th Cir. 1974) (notice especially important because of ―human tendency, even among those
more experienced and knowledgeable in the ways of bureaucracies than … disabled persons … to assume that an action taken by a government agency in a pecuniary transaction is correct‖).
A proper due process notice also informs the individual of their right to an impartial pre-
termination hearing and how to exercise that right. ―The purpose of the notice under the Due
Process Clause is [also] to apprise the affected individual of, and permit adequate preparation for, an impending hearing.‖ Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 14 (1978);
see Mallette v. Arlington Co. Employees’ Supplemental Ret. Sys., 91 F.3d 630, 640-41 (4th Cir. 1996) (quoting Memphis Light and finding notice was not ―reasonably calculated‖ to afford
claimant a meaningful opportunity to present her side of the story). See also Goldberg, 397 U.S. at 267-68 (requiring ―timely‖ notice ―detailing the reasons for a proposed action‖); Mullane , 339
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U.S. at 315 (―[W]hen notice is a person‘s due,… [t]he means employed must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it.‖).
These due process requirements have been repeatedly enforced by the courts in the context at issue here: the denial, reduction, or termination of services provided to Medicaid recipients. See, e.g., Granato v. Bane, 74 F.3d 406 (2d Cir. 1996); Catanzano v. Dowling, 60 F.3d 113 (2d Cir. 1995); Featherston v. Stanton, 626 F.2d 591 (7th Cir. 1980); Jonathan C. v. Hawkins, 2007 WL 1138432 (E.D. Tex. Apr. 16, 2007); 8 Cramer v. Chiles, 33 F. Supp. 2d 1342, 1352 (S.D. Fla.1999); Ladd v. Thomas, 962 F.Supp. 284 (D. Conn. 1997); Perry v. Chen, 985 F. Supp. 1197 (D. Ariz. 1996); Mayer v. Wing, 922 F. Supp. 902 (S.D.N.Y. 1996); Haymons v. Williams, 795 F. Supp. 1511 (M.D. Fla. 1992); Greenstein v. Bane, 833 F. Supp. 1054, 1076 (S.D. N.Y. 1993). See also 42 C.F.R. § 431.205(d) (stating federal Medicaid regulations are incorporating the requirements of Goldberg).9
As described in Section I.A. supra, none of the notices sent to Plaintiffs and other class members even arguably comply with these fundamental due process requirements. Only one of the letters sent by PBH throughout the complex process contains any information whatsoever about the right to appeal. Penny C. Decl. Exh. Q. One sentence buried on page 13 of a booklet mailed in March 2011 states that participants with ―unique‖ needs who convince a PBH employee to first request an intensive review and then, upon denial of that request, to submit a plan contrary to the budget limit finally ―will receive their appeal rights.‖ This is the only mention of appeal rights that most waiver participants ever receive. Sea Aff. Exh. F. This 8 Pursuant to Local Civil Rule, E.D.N.C., 7.2(d), a copy of this and the other unpublished decisions cited in this brief are being furnished to the Court and opposing counsel. 9 Because the termination or reduction of services to Plaintiffs is the result of individual factual determinations of need through the SIS assessment, the exception to notice and hearing rights for ―automatic change‖ does not apply here. Compare Atkins v Parker, 472 U.S. 115 (1985) with Soskin v. Reinertson, 353 F.3d 1242, 1263 (10th Cir. 2004).
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contingent, narrowly limited, and vague sentence is inadequate. Federal law requires that an explanation of appeal rights be contained in an individualized notice at the time an action is taken to reduce or terminate services. See 42 C.F.R. §§431.206 and 431.210; Goldberg; Baker v. Dep’t of Health & Soc. Servs., 191 P.3d 1005 (Alaska 2008) (holding Medicaid notices must, as feasible, show how and why reductions in at-home services were determined, including copy of the assessment tool, and that notice requirement cannot be construed to include information recipients already had); cf. 42 C.F.R. § 438.10(g) (requiring information about appeals to be included in general information provided to enrollees) with 42 C.F.R. §§ 438.402, 438.404 (specifying the content of the written notice that must be provided to the enrollee at the time an action is taken to deny, reduce or terminate services).
Of importance, there is also little or no information in any of the PBH notices providing an individualized factual or legal explanation for PBH‘s decisions. The SIS Summary mailed to Plaintiffs contains the individual‘s ―raw numbers‖ for different areas and ―the percentage of SIS subscales‖ but no total SIS score, no explanation of what the raw numbers or percentages mean, nothing about how to obtain a further explanation or copy of the actual SIS evaluation, nothing about PBH‘s legal authority for using the SIS, and nothing about the effect these scores would have on the recipient‘s services. See e.g. Penny C. Decl. Exh. B. The undated March 2011 notice informs participants what category of need they have been placed in and the resulting budget limit but says nothing about why this individual was placed in that category, how PBH determined the budget limit for that category, or what legal authority exists for the change being made. See e.g. Penny C. Decl. Exh. G. The Intensive Review Committee‘s decision notice contains no explanation whatsoever for their decision. See e.g. Penny C. Decl. Exh. O. The June, 22, 2011 notice mailed to D.C. simply states that continuation of his services is ―denied‖ because
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―no medical necessity to support services at requested level of care.‖ Penny C. Decl. Exh. Q.
There is no mention in this notice of D.C.‘s SIS evaluation or of the budget limit imposed by
PBH March 2011 as the reasons that his services must be reduced. Id.
Due process requires a notice ―detailing the reasons for a proposed termination‖ and
including ―the legal and factual bases‖ for the decision. Goldberg, 397 U.S. at 267-68. See also,
e.g., Hamby v. Neel, 368 F.3d 549 (6th Cir. 2004); Ortiz v. Eichler, 794 F.2d 889 (3d Cir. 1986);
Turner v. Walsh, 574 F.2d 456 (8th Cir. 1978); Vargas v. Trainor, 508 F.2d 485 (7th Cir. 1974);
Baker v. Alaska DHHS, 191 P.3d 1005 (Alaska 2008). As one district court has explained:
At a minimum, due process requires the agency to explain, in terms comprehensible to the claimant, exactly what the agency proposes to do and why the agency is taking this action … . This detailed information is needed to enable claimants to understand what the agency has decided, so that they may assess the correctness of the agency‘s decision, make an informed decision as to whether to appeal, and be prepared for the issues to be addressed at the hearing. Ortiz v. Eichler, 616 F. Supp. 1046, 1061, 1062 (D. Del. 1985)(citations omitted). Similarly, the Alaska Supreme Court has explained the role of the notice as follows:
Due process notices are designed to protect recipients from erroneous deprivation of benefits by allowing them to assess whether or not the agency‘s calculations are accurate … . [A]gencies make mistakes. If a major purpose served by benefit change or denial notices is protecting recipients from agency mistakes, then it stands to reason that such notices should provide sufficient information to allow recipients to detect and challenge mistakes.
Allen v. Alaska Dep’t of Health & Soc. Servs., 203 P.3d 1155, 1167-68, n.61 (Alaska 2009)
(collecting cases). Notably, in reaching its conclusions, the Allen Court found no authority for
the assertion that failure of the agency to comply ―with an explicit federal regulation notice
requirement can be cured if a recipient, through her own initiative, challenges the Agency action,
and eventually obtains the information that the federal regulations specifically required the
Agency‘s initial notice to contain.‖ Id. at 1169, n.68 (collecting cases). See also, e.g., Kapps v.
Wing , 404 F.3d 105, 124 (2d Cir. 2005) (―Claimants cannot know whether a challenge to an
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agency‘s action is warranted, much less formulate an effective challenge, if they are not provided with sufficient information to understand the basis for the agency‘s action. [citation omitted]. Thus, in the absence of effective notice, the other due process rights afforded a benefits claimant … are rendered fundamentally hollow.‖); Weaver v. Dept. of Social Services, 791 P.2d 1230 (Colo. Ct. App. 1990) (Medicaid notice reducing services was constitutionally inadequate because it did not furnish accurate information to allow recipients to ascertain the standards governing coverage). See Walters v. Reno, 145 F.3d 1032 (9th Cir. 1998) (due process violated where notices ―created an unacceptable risk of confusion‖). ―Unless a person is adequately informed of the reasons for denial of a legal interest, a hearing serves no purpose and resembles more a scene from Kafka than a constitutional process.‖ Gray Panthers, 652 F.2d at 168.
The pervasive PBH practice of discouraging recipients from challenging its decisions also violates due process. Due process protects against unreasonable state agency action that has the effect of denying access to the hearing process. ―A system or procedure that deprives persons of their claims in a random manner…necessarily presents an unjustifiably high risk that meritorious claims will be terminated.‖ Logan v. Zimmerman Brush, 455 U.S. 422, 434-35 (1982). Practices of discouragement, misinformation and intimidation effectively deny, reduce, or terminate Medicaid services by interfering with the opportunity for a hearing. The due process right to be heard is empty if access to the hearing process is denied.
Finally, Defendants have violated due process by reducing or terminating services for Plaintiffs in the middle of previously approved twelve-month authorization periods, and yet treating that decision as a denial of an initial request for services, so that recipients are denied their right to continued services pending appeal. PBH has informed Plaintiffs that if they do not agree to this reduction in services, services will stop altogether. The essence of Goldberg and its
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progeny is the well-settled proposition that notice and the opportunity for an impartial hearing must be provided before Medicaid services are terminated or reduced.10
II. PLAINTIFFS AND CLASS MEMBERS ARE EXPERIENCING AND ARE THREATENED WITH IRREPARABLE HARM.
Numerous courts have found irreparable harm where Medicaid beneficiaries‘ due process
rights have likely been violated and the beneficiaries face loss of Medicaid services. In Benjamin
H. v. Ohl, 1999 WL 34783552 (S.D. W.Va. July 15, 1999), for example, the court granted a
preliminary injunction, finding the plaintiffs were likely to succeed on their Medicaid due
process and other claims. The court found irreparable harm because the plaintiffs were being
denied home and community based services they needed, including therapy, habilitation services,
and respite care; plaintiffs were losing skills previously acquired, where existing services were
insufficient to maintain them; and families and care givers were experiencing unnecessary stress
due to the lack of appropriate services. Id. at *12. See also Knowles v. Horn, 2010 WL 517591
(N.D. Tex. Feb. 10, 2010) (finding irreparable harm where in-home Medicaid services
terminated without due process); Cota v. Maxwell-Jolly, 688 F. Supp.2d 980 (N.D. Cal. 2010)
(finding plaintiffs likely to succeed on due process claims and that ―the reduction or elimination
of public medical benefits is sufficient to establish irreparable harm to those likely to be affected
by the program cuts.‖); Crawley v. Ahmed, 2009 WL 1384147 at *28 (E.D. Mich. May 14, 2009)
10Goldberg‘s requirements apply equally to Plaintiffs and class members whose terminations or reductions of services occur at the end of their twelve-month authorization periods. The state Medicaid agency, through its contractor, has the right to conduct periodic utilization reviews in order to assure that recipients continue to meet the requirements to receive Medicaid payment for their services. See 42 C.F.R. §§ 435.916(a), 440.230(d). However, these utilization review procedures in no way convert Medicaid into a time-limited benefit not protected by due process. To the contrary, the federal Medicaid Act requires the state agency to furnish Medicaid to all eligible individuals, 42 U.S.C. § 1396a(a)(8), and the implementing regulation specifies that the state agency must ―continue to furnish Medicaid regularly to all eligible individuals until they are found to be ineligible.‖ 42 C.F.R. §435.930(b). The Medicaid regulations, which specifically implement Goldberg‘s constitutional protections, require Defendant Cansler to continue benefits pending appeal. 42 C.F.R. 431.231(c). See Jonathan C. v. Hawkins, supra.
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(finding plaintiffs likely to succeed on their Medicaid due process claims and that irreparable harm existed because ―it is undeniable that the unpaid bills, loss of needed medical assistance, and ultimately poor health suffered by Plaintiffs, cannot be adequately addressed by the promise of future Medicaid coverage‖); Newton Nations v. Rogers, 316 F. Supp. 2d 883, 888 (D. Ariz. 2004) (finding Medicaid beneficiaries likely to succeed on their due process and other claims and that irreparable harm existed where recipients could be denied medical care if they were unable to pay increased costs of copayments for medical services); Bizjak v. Blum, 490 F. Supp. 1297, 1303 (N.D.N.Y. 1980) (finding irreparable harm in due process case, stating ―It is not at all inconceivable that the inability to review the case record prior to a ‗fair hearing‘ could result in the further inability to prepare properly for the hearing with the result being an erroneous denial of benefits. Thus it is clear that the possibility of irreparable injury in this case is neither remote nor speculative but, in fact, highly likely.‖); see also Catanzano v. Dowling, 60 F.3d 113 (2d Cir. 1995) (affirming preliminary injunction in Medicaid due process case).
Indeed, courts have long-recognized irreparable harm where reductions or terminations of Medicaid services will create the potential or actual loss of health care. See Beltran v. Meyers, 677 F.2d 1317, 1322 (9th Cir. 1982) (holding irreparable injury is established when enforcement of a Medicaid policy ―may deny needed medical care‖); Massachusetts Ass’n of Older Americans v. Sharp, 700 F.2d 749, 753 (1st Cir. 1983) (―Termination of [Medicaid] benefits that causes individuals to forego such necessary medical care is clearly irreparable injury.‖); Caldwell v. Blum, 621 F.2d 491, 498 (2nd Cir. 1980) (finding harm where Medicaid applicants would ―absent relief, be exposed to the hardship of being denied essential medical benefits‖).
In Peter B. v. Sanford, 2010 WL 5912259 (D. S.C. Nov. 24, 2010), the South Carolina Medicaid agency reduced medical and personal care services to plaintiffs who had ―behavioral
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and special needs that benefitted from a stable environment and personalized treatment.‖ Id. at *9. The plaintiffs moved to enjoin the reductions, providing evidence of their declining mental and physical conditions and lost opportunities of community living. While acknowledging that the plaintiffs‘ at home care is ―complicated, burdensome, and inexact,‖ the court decided that ―if anyone knows what might be the best, among many less than perfect alternatives, it is the plaintiffs, their families, and their physicians.‖ Id. at 4. The court concluded that a preliminary injunction should lie. See also Comancho v. Tex. Workforce Comm’n, 326 F.Supp. 2d 794, 802 (W.D. Tex. 2004) (loss of Medicaid benefits constitutes irreparable harm); Mayer v. Wing, 922 F.Supp. 902, 905, 909 (S.D.N.Y. 1996) (holding ―reduc[tion] or terminati[on of] home care services … would result in the deprivation of life-sustaining medical services. This certainly constitutes irreparable harm.‖); McMillan v. McCrimon, 807 F. Supp. 475, 479 (C.D. Ill. 1992) (―The nature of [the] claim—a claim against the state for medical services—makes it impossible to say that any remedy at law could compensate them.‖).
Courts have also found actions that force plaintiffs to pay out-of-pocket for care and/or forego other necessary expenditures are noncompensable, irreparable injuries. In Schalk v. Teledyne 751 F. Supp. 1261 (W.D. Mich. 1990), retirees sought to enjoin changes in a collective bargaining agreement that resulted in increased out-of-pocket payments for health insurance ranging from $592 to $1900 annually. The court found these payments would impose a ―financial hardship‖ and place an unacceptable ―financial planning burden‖ on plaintiffs. Id. at 1268. The ―uncertainty and worry‖ posed by the ―lack of knowing just how much money will be needed to cover medical expenses‖ under the new plan was also a form of noncompensable injury causing irreparable harm. Id. In a similar case, Merkner v. AK Steel Corp., 2010 WL 373998 (S.D. Ohio Jan. 29, 2010), the collective bargaining agreement was changed to eliminate
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no-cost health insurance. The court issued an injunction, finding that increases in out-of-pocket expenses for medical coverage would result in ―decreases in medical care, the rationing of other necessities of life, and an increased uncertainty and anxiety….‖ Id. at *5. ―The uncertainty and worry of not knowing the full extent of their prospective health expenses under the newly reduced plan would cause a worry and uncertainty that could not be compensated.‖ Id.
Not surprisingly, courts also have found increases in out-of-pocket payments to result in irreparable harm to Medicaid beneficiaries. In Mowbray v. Kozlowski¸ 725 F.Supp. 888 (W.D. Va. 1989), the court enjoined a Medicaid policy that resulted in some beneficiaries being terminated from the program while others were required to pay more out-of-pocket before becoming eligible. The Virginia Medicaid agency asked the court to stay the injunction, but the court refused. The court found beneficiaries were threatened with irreparable harm because
some number of these will be faced with the difficult decision of either forgoing needed medical attention, forgoing other expenditures, or disposing of enough of their property to come within the guidelines as to assistance … . If class members choose to seek medical care and skimp on other necessities such as food, clothing, or shelter they may also be substantially harmed. Id. at 891. See also Reed v. Lukhard, 578 F. Supp. 40, 42 (W.D. Va. 1983) (finding irreparable harm where plaintiffs had other sources of income, noting that while plaintiffs ―have not yet starved to death,‖ the public benefits ―no doubt, go far toward improving the daily quality of their lives.‖); Claus v. Smith, 519 F. Supp. 829, 831 (N.D. Ind. 1981) (noting ―domino effect‖ of increased out of pocket payments and entering preliminary injunction in a Medicaid case); Becker v. Toia, 439 F. Supp. 324, 336 (S.D.N.Y. 1977) (enjoining Medicaid copayments, finding that ―injury to those whose health is maintained on the slenderest chemical balance provided through medication is not merely irreparable, it is ultimate.‖).11
11 In all probability, a future suit by the Plaintiffs for restitution of their out-of-pocket payments would be barred on Eleventh Amendment grounds. See Edelman v. Jordan, 415 U.S. 656 n.5,
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A finding of irreparable harm is also appropriate where the services at issue permit
plaintiffs who would otherwise be institutionalized to remain in their homes. Crabtree v. Goetz,
2008 U.S. Dist. LEXIS 103097 at *82 (home care service cuts will cause irreparable injury
because ―institutionalization will cause Plaintiffs to suffer injury to their mental and physical health, including a shortened life, and even death for some Plaintiffs‖); Long v. Benson, 2008
U.S. Dist. LEXIS 109917 (N.D. Fla. Oct. 14, 2008); aff’d, 2010 U.S. App. LEXIS 12826 (11th
Cir. 2010) (similar); Martinez v. Schwarzenegger, 2009 U.S. Dist. LEXIS 57960 at *17 (N.D.
Cal. June 26, 2009) (institutionalizing individuals who can comfortably survive in their home
with the help of [Medicaid] providers will ―cause Plaintiffs to suffer injury to their mental and physical health, including a shortened life, and even death for some Plaintiffs.‖), aff’d sub nom
Dominguez v. Schwarzenegger, 596 F.3d 1087 (9th Cir., 2010), certiorari granted on other
grounds sub nom Maxwell-Jolly v. Cal. Pharm. Ass’n, 131 S.Ct. 192 (2011).
The Plaintiffs in this case are suffering direct, serious harm and will, in the future, suffer
even greater harm if a preliminary injunction is not granted. Plaintiffs‘ physical and mental
conditions are deteriorating, and they are losing skills previously acquired. In addition, the
reductions and terminations are causing unnecessary stress on beneficiaries and their families.
The lack of appropriate services is forcing some families to consider institutionalization. Finally,
Plaintiffs‘ families are experiencing financial hardship and uncertainty attributable to increased
out-of-pocket payments that they are being required to make in order to maintain health services.
Plaintiff D.C. is a 14-year-old Medicaid recipient who suffers from severe autism. He is 671 (1974) (allowing prospective relief but finding additional relief sought infringed on sovereign immunity under the Eleventh Amendment because the plaintiffs sought retroactive payment of benefits that were found to have been wrongfully withheld). But cf. DTM v. Cansler, 382 F. App'x 334, 337-38 (4th Cir. 2010) ("[T]he request for prospective reinstatement of benefits is precisely the type of relief that we recognized in Kimble v. Solomon, 559 F.2d 599, 605 (4th Cir. 1979), that plaintiffs may seek consistent with the Eleventh Amendment when they allege a state Medicaid agency's reduction of their benefits violated federal law.").
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verbally non-communicative and uses a modified version of American Sign Language to communicate. Decl. ¶ 3-4. D.C. needs a stable environment, including someone with him at all times who is familiar with his behaviors and how he communicates his needs. D.C. requires substantial prompting, supervision, repetition, and training in order to complete the most basic activities of daily living, including personal hygiene, toileting, bathing, dental care, eating, dressing and repetition of skill training. He requires supervision at all times to ensure that he does not injure himself because of his lack of awareness of danger and lack of safety skills. Id. at 4-5. D.C. also requires daily therapeutic intervention to address inappropriate behaviors, including ―childlike behaviors that are inappropriate for his age, taking things that don‘t belong to him if he is curious, inability to tolerate changes in routine and order, and inappropriate selfsoothing and self-stimulatory behaviors.‖ Id. at 7. Since authorization for about half of the hours of his primary training service (In-Home Skill Building, or ―IHSB‖) was terminated without due process effective July 1, 2011, his parents have had to pay for those services out of their savings to assure his physical safety, control his behavior, and prevent him from losing essential skills he has worked so hard to obtain. Id. ¶¶ 4-11, 48-51. They will soon no longer be able to afford to keep his services in place, particularly since a further reduction in his services without due process is scheduled to take place on January 1, 2012. Id. ¶¶ 48, 49. When D.C.‘s services were reduced in the past, his skill development came to a ―standstill.‖ Id. at ¶ 51. According to his mother, the reductions being forced by Defendants will place DC ―at risk of further delays in his progress in learning essential life skills and attainment of his other plan goals. His health, development, and safety will be at growing risk without the previously approved amount of IHSB and Respite services. His ability to communicate his needs and wants, his physical safety, and his progress towards attainment and retention of essential skills to allow him to continue to
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live at home are dependent on consistent provision of the professional services he receives.‖ Id. at ¶ 50. Without necessary services, ―there is little question that D.C. will eventually end up living in an institution.‖ Id.
Plaintiff Allison Taylor Johns has ten different chronic medical conditions, including mental retardation, cerebral palsy, and a seizure disorder. Johns Decl. ¶4. Taylor is threatened with losing all of her waiver services unless the Court acts. Id at ¶43. If her services stop or are reduced, her grandmother, who has cared for her all of her life, expects Taylor to regress and have more behavior problems. Id at ¶44. As her grandparents age, Taylor‘s needs for support from others is increasing. Id at ¶45. Her current level of services, particularly skill building to increase her independence, is essential if she is to continue to be able to live at home. Id. Dr. Jeanne Murrone, a psychologist who recently evaluated Taylor, has opined that without the support services she receives, ―Taylor will not be able to live independently.‖ Murrone Decl. ¶8. She further states that scheduled reductions in her services ―will produce a substantial likelihood of both increasing the difficulties of meeting Taylor‘s needs in the community and losing any skills developed from her participation in these services.‖ Id at ¶10.
Plaintiff K.C. is a 14-year old Medicaid recipient who has cerebral palsy, a seizure disorder, moderate mental retardation, and incontinence. Heath Decl. ¶ 3. Since losing some of his Medicaid services without due process, K.C. is experiencing more crying episodes and violent behavior and has lost self-care skills. Id. at ¶¶ 32-34. An even greater reduction in K.C.‘s services without due process is scheduled for January 1, 2012. Id. at ¶14. His treating physician believes that scheduled reductions in his services ―will result‖ in difficulties in addressing his needs and a regression in his skills, creating a ―substantial risk‖ of losing developmental and habilitative skills and threatening him with ―irreparable harm to K.C.‘s safety and development.‖
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Decl. of Kristen Strange, M.D. ¶¶10-11. Thirteen-year-old Plaintiff L.S. suffers from autism and a seizure disorder. Ron S. Decl. ¶
3. He needs assistance with most activities of daily living. Id at ¶4. He has violent behaviors and will wander if left alone. Id at ¶¶ 5, 6. Since his services have been substantially reduced, his communication has regressed, he is more easily distracted from tasks, he has become more withdrawn, and his inappropriate behaviors have increased. Id at ¶¶33-35. His skill development has been affected, putting him at risk of institutionalization. Id at ¶36.
Kimberly Beare, age 42 and a member of the putative plaintiff class, has Down Syndrome and mental retardation. Holzlohner Decl. ¶4. She functions at the level of a three-yearold. Id. at ¶3. She is threatened with losing skills and with safety risks if her services are reduced without due process by 20 percent, as scheduled for January 1, 2012. Id. at ¶¶21-23. Her mother does not know how she ―will possibly be able to continue‖ to care for her daughter without her current services. Id. at ¶7, 21.
F.A. is age 17 and suffers from mental retardation and a severe seizure disorder. Melissa W. Decl. ¶3. He requires 24-hour supervision and requires assistance with ―most all of his daily activities. Id. at ¶¶3, 4. Since his core services were reduced by 55% effective July 1, 2011 without due process, his behavior has worsened and he is unable to learn the new skills in his plan or to maintain the skills he previously achieved. Melissa W. Decl. ¶¶9-11, 22.
III.THE BALANCE OF EQUITIES FAVOR PLAINTIFFS. Defendants must show that proposed injunctive relief poses more than mere fiscal and
administrative problems for Defendants to tip the balance away from Plaintiffs, who are suffering physical, emotional, and financial harm in the absence of relief. The Supreme Court has held that a state Medicaid agency‘s claim of economic harm does not outweigh the harm
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posed to a plaintiff facing the threat of having to forgo necessary medical care: On the other side of the balance are the life and health of the members of this class: persons who are aged, blind, or disabled and unable to provide for necessary medical care because of lack of resources. The District Court noted that some of the members of the class have already died since this suit was filed, and the denial of necessary medical benefits during the months pending filing and disposition of a petition for writ of certiorari could well result in the death or serious medical injury of members of this class. The balance of equities therefore weighs in favor of the respondents.
Blum v. Caldwell, 446 U.S. 1311, 1316 (1980). See also Todd v. Sorrell, 841 F.2d 87, 88 (4th
Cir. 1988) (―[H]arm to the plaintiff would have been enormous, indeed fatal, were the injunction
denied, and harm to the Commonwealth if granted, while it may not have been negligible, was
measured only in money and was inconsequential by comparison.‖); L.J. v. Massinga, 838 F.2d
118 (4th Cir. 1988) (monetary costs and administrative inconvenience to city from preliminary
injunction was outweighed by preventing continuing harm to plaintiffs caused by defendants‘
mismanagement of foster care system). Accord Daniels v. Wadley, 926 F. Supp. 1305, 1313
(M.D. Tenn. 1996); Kansas Hosp. Ass’n v. Whiteman, 835 F. Supp. 1548, 1552-53 (D. Kan.
1993); see generally Multi-Channel TV Cable Co. v. Charlottesville Quality Cable Operating
Co., 22 F.3d 546 (4th Cir. 1994).
IV. THE PUBLIC INTEREST FAVORS ISSUANCE OF THE INJUNCTION.
An injunction is also in the public interest. The public interest is served when laws passed
by Congress and the U.S. Constitution are enforced. See Glenwood Bridge, Inc. v. City of
Minneapolis, 940 F.2d 367, 372 (8th Cir. 1991); Kansas Hosp. Ass’n, 835 F. Supp. at 1553; see
also Nat’l Wildlife Fed. v. Nat’l Marine Fisheries Serv., 235 F. Supp. 2d 1143, 1162 (W.D.
Wash. 2002); Haskins v. Stanton, 794 F.2d 1273, 1277 (7th Cir. 1986) (where an injunction
seeks to require defendants to comply with existing law, the injunction imposes no burden but
―merely seeks to prevent the defendants from shirking their responsibilities‖); White v. Martin,
2002 U.S. Dist. LEXIS 27281, 22-23 (W.D. Mo. 2002). 28
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In determining whether the public interest will be disserved by the granting of a request for preliminary injunction, courts may look to the intent in enacting the law sought to be enforced. Johnson v. U.S.D.A., 734 F.2d 774, 788 (11th Cir. 1984). Among the stated purposes of the Medicaid Act is ―to furnish … services to help [low income] families and individuals attain or retain capacity for independence or self-care.‖ 42 U.S.C. § 1396(2). Preserving Plaintiffs‘ health, well-being, and independence is thus squarely in the public interest.
Importantly, Plaintiffs do not seek a ruling from this Court that they are entitled to the services at issue, but only that Defendants must comply with fundamental due process requirements before reducing or terminating those services. Long term fiscal interests thus are not threatened by issuance of the injunction. Indeed, if the services at issue are determined at a fair hearing to be necessary for Plaintiffs to remain in their homes, Defendants will pay less for those services than for much more expensive institutional care, which costs an average of $135,000 per year for persons with developmental disabilities. Sea Aff. Exh. E App. C-4:6. Providing the necessary amount of services under the Innovations Waiver thus saves the State money by allowing individuals to remain in their homes longer. Because of support from their families Plaintiffs each need services costing far less than the cost of institutionalization. Penny Decl. ¶24; Johns Decl. ¶9; Ron S. Decl. ¶9; Heath Decl. ¶10; Holzlohner Decl. ¶15. However, this assistance is critical to their ability to live safely at home. See generally attached Decls.
V. THIS COURT SHOULD WAIVE THE BOND. Plaintiffs request that they not be required to post any cash bond under Federal Rule of
Civil Procedure 65. This Court has discretion to issue a preliminary injunction without requiring Plaintiffs to give security. See, e.g., Baldree v. Cargill, Inc., 758 F. Supp. 704 (M.D. Fla. 1990), aff’d, 925 F.2d 1474 (11th Cir. 1991). Federal courts routinely waive bond requirements in suits
29 Case 5:11-cv-00354-FL Document 32 Filed 08/24/11 Page 29 of 32

to enforce important federal rights of public interest. See, e.g., Barahona-Gomez v. Reno, 167 F.3d 1228, 1237 (9th Cir. 1999); Doctor's Assoc., Inc. v. Stuart, 85 F.3d 975, 985 (2d Cir. 1996); Moltan Co. v. Eagle-Picher Indus., Inc., 55 F.3d 1171, 1176 (6th Cir. 1995); Stockslager v. Carroll Elec. Co-op. Corp., 528 F.2d 949, 951 (8th Cir. 1976). Courts also have used their discretion to waive the bond requirement for indigent plaintiffs. See, e.g. Bass v. Richardson, 338 F. Supp. 478, 490 (S.D.N.Y. 1971) (―It is clear that indigents, suing individually or as class Plaintiffs, ordinarily should not be required to post a bond under Rule 65(c).‖); Denny v. Health and Soc. Services Bd. of State of Wisconsin, 285 F. Supp. 526, 527 (E.D. Wis. 1968) (―Poor persons… are by hypothesis unable to furnish security as contemplated in Rule 65(c), and the court should order no security in connection with this preliminary injunction.‖).
Important federal rights are at stake in this litigation. See, e.g., Temple Univ. v. White, 941 F.2d 201, 220 n. 27 (3d Cir. 1991) (―Public Policy under [federal law governing state modification of Medicaid programs] mandates that parties in fact adversely affected by improper administration of programs pursuant thereto be strongly encouraged to correct such errors.‖). Given the high likelihood of success on the merits, Plaintiffs‘ status as public assistance recipients, as well as the fact that the injunction seeks merely to require Defendants to comply with federal law in their procedures to reduce or stop services, no bond should be required.

CONCLUSION

For all the foregoing reasons, Plaintiffs request that this Court issue a preliminary

injunction prohibiting Defendants from reducing or terminating Medicaid services to Plaintiffs

and others similarly situated without first complying with Due Process requirements.

Dated: August 24, 2011

ATTORNEYS FOR PLAINTIFFS
/s/ Douglas S. Sea______ Douglas Stuart Sea

30 Case 5:11-cv-00354-FL Document 32 Filed 08/24/11 Page 30 of 32

N.C. State Bar No. 9455 LEGAL SERVICES OF SOUTHERN PIEDMONT, INC. 1431 Elizabeth Avenue Charlotte, North Carolina 28204 Telephone: (704) 376-1600 dougs@lssp.org
/s/ John R. Rittelmeyer______ John R. Rittelmeyer N.C. State Bar No. 17204 Jennifer L. Bills N.C. State Bar No. 37467 DISABILITY RIGHTS NC 2626 Glenwood Avenue, Suite 550 Raleigh, NC 27608 Phone: (919) 856-2195 Fax: (919) 856-2244 john.rittelmeyer@disabilityrightsnc.org jennifer.bills@disabilityrightsnc.org
/s/ Jane Perkins______ Jane Perkins N.C. State Bar No. 9993 Jina Dhillon N.C. State Bar No. 41997 NATIONAL HEALTH LAW PROGRAM 101 E. Weaver Street, Ste. G-7 Carrboro, NC 27510 Telephone: (919) 968-6308 perkins@healthlaw.org
31
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CERTIFICATE OF SERVICE I hereby certify that I have on this day served a true copy of Plaintiffs‘ MOTION FOR PRELIMINARY INJUNCTION AND SUPPORTING MEMORANDUM, AFFIDAVIT, and DECLARATIONS upon the Defendant‘s attorneys via electronic means through the CM/ECF system to: Belinda Smith, N.C. Department of Justice Stephen D. Martin and Wallace C. Hollowell, Nelson, Mullins, Riley and Scarborough Rabotteau T. Wilder, Womble, Carlyle, Sandridge, and Rice This the 24th day of August, 2011.
/s/ ______ Douglas Sea
32 Case 5:11-cv-00354-FL Document 32 Filed 08/24/11 Page 32 of 32

 
 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO. 5:11-CV-354-FL

L.S., a minor child, by and through his father )

and next friend, Ron S.; K.C., a minor child, by )

and through his mother and next friend, Africa )

H.; ALLISON TAYLOR JONES; D.C., a minor )

child, by his mother and next friend, Penny C., )

and M.S., a minor child, through his parent and )

natural guardian, Rachelle S.,1

)

)

Plaintiffs,

)

)

v.

)

)

LANIER M. CANSLER, in his official capacity )

as Secretary of the Department of Health and )

Human Services; PAMELA SHIPMAN, in her )

official capacity as Area Director of Piedmont )

Behavioral Health Care Area Mental Health,

)

Developmental Disabilities, and Substance

)

Abuse Authority; and PIEDMONT

)

BEHAVIORAL HEALTHCARE AREA

)

MENTAL HEALTH, DEVELOPMENTAL

)

DISABILITIES AND SUBSTANCE ABUSE )

AUTHORITY doing business as PBH,

)

)

Defendants.

)

ORDER

This matter comes now before the court on the third party motion to intervene as plaintiff in this action (DE # 55) by M.S.,a minor child, through his parent and natural guardian Rachelle S., pursuant to Rule 24(b)(1)(B) of the Federal Rules of Civil Procedure. Defendants have responded. Defendant Lanier M. Cansler (“def endant Cansler”) opposes the m otion, and defendants Pamela

1 In light of the court’s decision to allow M.S.’s motion to intervene, the court adds M.S. to the case caption of this matter. The Clerk is DIRECTED to conform the docket accordingly.

Shipman (“Shipman”) and PBH (together “defendant PBH”) neither oppose nor consent to the motion. M.S. has filed reply. In this posture, thessiues raised are ripe for review. For the following reasons, the court grants the motion and allows M.S. to intervene as plaintiff in this action.
STATEMENT OF THE CASE Plaintiffs filed complaint as a putative class action on July 5, 2011. Plaintiffs allege violation of due process protections with respect to alteration of Medicaid benefits and seek preliminary and permanent injunctions. On August 24, 2011, plaintfifs filed motion for preliminary injunction. On August 29, 2011, plaintiffs filed their first motion to certify class. On August 23, 2011, before filing the aforem entioned motions, plaintiffs filed motion to disqualify counsel. On Septem ber 7, 2011, of its own initiative, the court stayed the tim e for defendants to respond to the m otions for preliminary injunction and to ce rtify class, pending the court’s decision on plaintiffs’ m otion to disqualify counsel. Said m otion is currently bei ng considered by the court. On October 21, 2011, interested party M.S. f iled the instant motion, seeking to intervene pursuant to Rule 24(b)(1)(B). To promote the continued efficient administration of this case, the court now turns now to this motion.
COURT’S DISCUSSION Rule 24(b) of the Federal Rules of Civil Procedure provides for permissive intervention of parties. Rule 24(b)(1)(B) states that on timely motion, the court may permit anyone to intervene who “has a claim or defense that shares with the main action a common question of law or fact.” Fed. R. Civ. P. 24(b)(1)(B). Th e court enjoys substantial discretion over allowing or rejecting motions to intervene under Rule 24(b). Hill v. Western Elec. Co., 672 F.2d 381, 385-86 (4th Cir.
2

1982); Black v. Central Motor Lines, Inc., 500 F.2d 407, 408 (4th Cir. 1974).

Rule 24(b)(3) provides that in exercising its discretion, the court must consider whether the

intervention will unduly delay or prejudice the adjudication of the original parties’ rights. The rule

itself is silent as to what constitutes a “timely” motion for intervention. The Fourth Circuit has noted

that to determine whether an application for intervention is timely, the following factors should be

examined: how far the suit has progressed, the prejudice that delay might cause other parties, and

the reason for the tardiness inmoving to intervene. SeeScardelletti v. Debarr, 265 F.3d 195, 202-03

(4th Cir. 2001), reversed on other grounds by Devlin v. Scardelletti, 536 U.S. 1 (2002) (citations

omitted).

At least one ci rcuit has laid out various factor s for the trial court to consider af ter it has

determined that the initial conditions for permissive intervention under Rule 24(b) have been met.

While these factors do not control the court’s analysis, they include t he nature and extent of the

intervener’s interest, the intervener’s standing to raise relevant legal issues, the legal position the

intervener seeks to advance, and its probable relatoin to the merits of the case. Spangler v. Pasadena

City Bd. of Ed., 552 F.2d 1326, 1329 (9th Cir. 1977). The court may also consider whether changes

have occurred in the litigation so that interven tion that was once denied shoul d be reexamined,

whether the interveners’ interests are adequatelyrepresented by other parties, whether intervention

will prolong or unduly delay the litigation, and whether parties seeking i

ntervention will

significantly contribute to full development of the underlying factual issues in the suit. Id.

None of the parties dispute the f act that M.S.’s complaint in intervention raises com mon

issues of law and f act to those raised in the original plaintiffs’ com plaint. In fact, defendants’

responses, to the extent they oppose the instant m otion, state that because M.S.’s claim s are so

3

similar to other plaintiffs’, he would be adequate ly represented by the nam ed plaintiffs if class certification is allowed, and therefore intervention is premature and unnecessary. (See, e.g., Def. Cansler’s Resp. 3.) The f acts alleged in M.S.’s complaint in intervention are similar to the facts alleged in plaintiffs’ complaint.2 As an example, like other plaintiffs’, M.S. claims that defendant PBH reduced his Support Intensities Scale (“SIS” ) score even though his needs did not change. M.S.’s mother claims that defendant PBH failed totell her that she could challenge or appeal the SIS score. Similarly, M.S. also alleges the same legal claims as other plaintiffs’, specifically the due process violations claimed to have occurred in the calculation of the SIS score and the subsequent reduction in benefits. (Compl. in Intervention ¶¶ 30-63, 76-102). To the extent defendants argue that M.S.’s motion to intervene is premature because his interests could be represented by the class, such argument is unconvincing at this stage, wherethe court has not yet ruled on the motion for class certification.
In addition, M.S.’s complaint in intervention includes new allegations of fact not contained in the plaintiffs’ original complaint. (See Compl. in Intervention ¶¶ 44, 47, 61, 62.) While new, these allegations are closely tied to the allegations in plaintif fs’ original com plaint. These allegations include claims that defendant PBH sent misleading letters regarding the previous base budget for waiver participants, a claim that defendant PBH never publicly explained the basis by which it determined the maximum base budget assigned to each Supports Needs Matrix category, a claim that defendant PBH has circumvented due process by engaging in a practice of acting as the
2 Defendant PBH notes in its response that it disput es the accuracy and veracity of m any of the factual allegations contained in the declarations accompanying M.S.’s motion to intervene, and expressly reserves the right to challenge the substance of the declarations in its response tothe motion for preliminary injunction. Nothing in the instant order shall be construed as a finding of fact by the court, and the court expressly acknowledges all defendants’ right to oppose the allegations in the complaint in intervention and supporting documentation when responding to the motion for preliminary injunction and motion to certify class.
4

court-appointed legal guardian for many Innovation Waiver participants, and that defendant PBH circumvented due process by creating an environmenitn which waiver participants and theirafmilies feared retaliation ifthey challenged defendant PBH’s decisions. (Seeid.) These new claims, which are closely related to other plaintiffs’ claims, support M.S.’s argument that his interests might not be adequately represented by the other named plaintiffs, and support intervention.
Lastly, the court looks at the potential prejudice tothe parties. As to timeliness, considering the present procedural posture of the case, the court finds that M.S.’s m otion to intervene was timely. The motion was made only a few months after the filing of the original complaint. Delay occurred because M.S.’s mother and guardian was unaware of the instant matter until late September 2011. (Decl. of Rachelle S. ¶ 32.)Additionally, due to the court’s decision to stay the response time for plaintiffs’ motions for preliminary injunction and for class certification, defendants’ response time for those motions has not yet passed. Other efficeincies reveal themselves in the fact that M.S. is represented by the same legal counsel as the original plaintiffs, and M.S.’s brief reveals that the original plaintiffs have no objection to intervention and are willing to submit joint pleadings and briefs. (Mot. Intervene 6.)
Furthermore, where allowing the intervention of M.S. could provide for a m ore thorough consideration of the class certification question, cf.McBroom v. Western Elec. Co., 1974 WL 156, *3 (M.D.N.C. 1974), as well as provide for more thorough briefing of the issues pertinent to class certification and preliminary injunction by the parties, the court finds that neither undue delay nor undue prejudice will accrue from allowing M.S.’s motion. The court’s conclusion is bolstered by the fact that defendant PBH does not oppose MS. .’s motion, and though defendant Cansler opposes the motion, he also acknowledges that the decision to permit the intervention is within the court’s
5

discretion. Accordingly, for the foregoing reasons, the c ourt allows M.S.’s m otion to intervene as
plaintiff in this matter. CONCLUSION
For the foregoing reasons, interested party M.S.’s m otion to intervene as plaintiff in t his matter (DE # 55) is ALLOWED. Where the motion to disqualify counsel still remains before the court for decision, the deadlines for defendants torespond to the motion for preliminary injunction and first motion to certify class remain stayed. When decision is reached on the motion to disqualify counsel, the court shall prom ptly institute deadl ines for defendants to respond to said pending motions. The Clerk is DIRECTED to conform the docket in accordance with the court’s direction in footnote 1 of this order.
SO ORDERED, this the 5th day of December, 2011.
_____________________________ LOUISE W. FLANAGAN United States District Judge
6

 
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PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

K.C., a minor child, by and



through his mother and next

friend, Africa H.; ALLISON TAYLOR

JOHNS; L.S., a minor child, by and

through his father and next friend,

Ron S.; D.C., a minor child, by

his mother and next friend, Penny

C.,

Plaintiffs-Appellees,

M.S., a minor child, through his parent and natural guardian, Rachelle S.,

 Intervenor/Plaintiff-Appellee, v.

PAMELA SHIPMAN, in her official capacity as Area Director of Piedmont Behavioral Health Care Area Mental Health, Developmental Disabilities, and Substance Abuse Authority; PIEDMONT BEHAVIORAL HEALTHCARE AREA MENTAL HEALTH, DEVELOPMENTAL DISABILITIES AND SUBSTANCE ABUSE AUTHORITY, d/b/a PBH,

 Defendants-Appellants,

No. 12-1575

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2

K.C. v. SHIPMAN

and



LANIER M. CANSLER, in his official capacity as Secretary of the
 Department of Health and Human
Services; ALBERT A. DELIA, in his official capacity as Acting Secretary of the Department of Health and Human Services,

 Defendants.

Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh.
Louise W. Flanagan, District Judge. (5:11-cv-00354-FL)

Argued: March 21, 2013

Decided: May 10, 2013

Before WILKINSON, KING, and WYNN, Circuit Judges.

Appeal dismissed by published opinion. Judge Wilkinson wrote the opinion, in which Judge King and Judge Wynn joined.
COUNSEL
ARGUED: Wallace Churchill Hollowell, III, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Raleigh, North Carolina, for Appellants. Douglas Stuart Sea, LEGAL SERVICES OF SOUTHERN PIEDMONT, INC., Charlotte, North Carolina, for Appellees. ON BRIEF: Stephen D. Mar-

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K.C. v. SHIPMAN

3

tin, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Raleigh, North Carolina, for Appellants. Jane Perkins, NATIONAL HEALTH LAW PROGRAM, Carrboro, North Carolina; John R. Rittelmeyer, Jennifer L. Bills, Morris McAdoo, DISABILITY RIGHTS NC, Raleigh, North Carolina, for Appellees.

OPINION
WILKINSON, Circuit Judge:
Plaintiffs are a class of Medicaid beneficiaries who suffer from severe developmental disabilities. In July 2011, they sued (1) the Secretary of the North Carolina Department of Health and Human Services ("the Secretary" or "the NCDHHS"); (2) Piedmont Behavioral Healthcare ("PBH"), a local subdivision of the state that manages the delivery of plaintiffs’ Medicaid services pursuant to a contract with the NCDHHS; and (3) Pamela Shipman, the director of PBH. Plaintiffs alleged that defendants violated their rights under the Medicaid statute and the Due Process Clause of the Fourteenth Amendment by reducing their health care services without notice and an opportunity for a hearing. The district court awarded a preliminary injunction in plaintiffs’ favor, ordering defendants to reinstate plaintiffs’ services to their prior levels and enjoining defendants from reducing those services without a hearing.
In this appeal, PBH and Shipman challenge the district court’s entry of the preliminary injunction. Critically, however, the other defendant in this case—the Secretary of the NCDHHS — did not join in the appeal. Under the Medicaid statute and basic principles of justiciability, the Secretary’s decision dictates the disposition of this case. That is because a provision in the statute, 42 U.S.C. § 1396a(a)(5), requires each state to designate a "single State agency" to administer

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K.C. v. SHIPMAN

its Medicaid plan (here, the NCDHHS) and a regulation prohibits PBH from "chang[ing] or disapprov[ing] any administrative decision of that agency," 42 C.F.R. § 431.10(e)(3). Yet PBH seeks to do exactly that through its appeal—to reduce plaintiffs’ services immediately, notwithstanding the NCDHHS’s decision to comply with the injunction. Moreover, the Secretary’s choice means that any judgment we could enter in PBH’s favor would not provide PBH the redress it seeks: because the NCDHHS would remain bound by the preliminary injunction, so too would PBH as its agent. We therefore dismiss this appeal.

I.

A.

The case involves the delivery of Medicaid services to a class of North Carolina Medicaid recipients who suffer from chronic disabilities such as cerebral palsy, seizure disorders, mental retardation, and autism. While plaintiffs’ conditions are serious enough to qualify them for institutional placement, they are able to live in community environments with the assistance of certain support services. For example, named plaintiff D.C. is a teenage Medicaid recipient with severe autism. Although he is verbally non-communicative and requires supervision at all times, D.C. is able to live at home with the help of professionals who teach him basic skills such as eating, dressing, and personal hygiene, and who provide temporary care for him when his parents are unavailable.

Plaintiffs receive these services through a type of Medicaid program known as "managed care Medicaid." In contrast to traditional fee-for-service Medicaid, where beneficiaries seek services directly from providers who are then reimbursed by the state, managed care Medicaid is a model in which the state contracts with a managed care organization ("MCO"), which oversees the delivery of services to beneficiaries in exchange for a fixed, prospective payment from the state for each

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5

enrollee. See Medicaid Program; Medicaid Managed Care: New Provisions, 67 Fed. Reg. 40,989, 40,989 (June 14, 2002).

In this case, PBH is the MCO that manages the delivery of plaintiffs’ Medicaid services, and Shipman is PBH’s director.1 More specifically, PBH is party to a contract with the NCDHHS under which PBH provides managed care to roughly 675 disabled individuals, including plaintiffs, as part of a program known as the North Carolina Innovations Waiver. The contract requires PBH to provide these enrollees with a list of certain covered health care services. PBH does so through a system in which it requires pre-authorization for non-emergency services like the skill-building and temporary care provided to plaintiff D.C. To obtain authorization, enrollees and their guardians meet each year with their physicians and a PBH employee to design an individual support plan identifying the services that the enrollee needs. The identified services are then submitted to PBH for approval. Once an enrollee’s services are authorized, the contract provides that if PBH reduces or terminates those services, PBH must provide the enrollee with certain notice and appeal rights described in 42 C.F.R. §§ 438.400-.424.

As part of its pre-authorization process, PBH sets annual "base budget" amounts for each enrollee—the maximum level of funding that is available for certain non-emergency services. Prior to 2011, PBH set plaintiffs’ base budget amounts using a benchmark system that was intended to tailor the amount of funding an enrollee could receive to his or her medical needs. In light of increasing service requests and budget shortfalls, however, PBH designed a new system, which established different funding categories for enrollees based on factors such as the enrollee’s needs, safety risk, age, and place of living.

1For ease of reference, we generally refer to PBH and Shipman collectively as PBH.

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K.C. v. SHIPMAN

Pursuant to this updated system, PBH sent letters to Innovations Waiver enrollees in March and April of 2011 informing them of their newly assigned base budget amounts. For some enrollees—in particular, the five named plaintiffs and the members of the class eventually certified by the district court—the letter indicated that their previous base budget amounts would be reduced. The letter also stated that the new base budget amounts would be "the maximum amount of base service funds that can be authorized in your Individual Support Plan" and that PBH would be in contact to develop their next plan.

To illustrate, D.C.’s parents received a letter from PBH informing them that D.C.’s base budget would be reduced from $47,588.52 to $18,799.60 in graduated steps beginning on July 1, 2011. The letter contained no information on how to appeal or challenge the reduced amount. As a result, even though D.C. was approved on April 21, 2011 to receive $43,579.52 worth of skill-building and temporary care services, D.C.’s mother eventually signed a new plan (under what she states were threats that PBH would terminate all of D.C.’s services) reducing D.C.’s services to comply with his new budget. Under the new plan, D.C.’s services were reduced by seventy to one hundred hours per month from their prior levels. In order to maintain D.C.’s services at those prior levels and to avoid placing him in an institution, D.C.’s parents paid for his care directly out of their savings.

B.

On July 5, 2011, four Innovations Waiver enrollees filed a
class action against Lanier Cansler, the Secretary of the NCDHHS;2 PBH; and Shipman. A fifth enrollee, M.S., inter-

2After then-Governor Beverly Perdue named Albert Delia Acting Secretary of the NCDHHS in 2012, Delia was substituted for Cansler as the state defendant under Federal Rule of Civil Procedure 25(d). In January 2013, however, Pat McCrory succeeded Perdue as governor and named Aldona Zofia Wos Secretary of the NCDHHS—making Wos the current state defendant in the underlying action.

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7

vened as a plaintiff in December 2011. The plaintiffs (now appellees) sought preliminary and permanent injunctions reinstating their services to previously authorized levels and enjoining defendants (and their agents) from reducing their services without complying with the notice and hearing requirements of the Medicaid statute and the Fourteenth Amendment.

The district court ruled on plaintiffs’ motion for a preliminary injunction on March 29, 2012. Because the Medicaid regulations require an MCO to provide notice and hearing rights only when it has taken "action," 42 C.F.R. § 431.200(b), the court focused its attention on defendants’ argument that the reduction of plaintiffs’ budgets did not amount to "action" in the first place. The court noted that "action" is defined in relevant part as the "reduction, suspension, or termination of a previously authorized service," id. § 438.400(b). It then reasoned that PBH took "action" by reducing the plaintiffs’ authorized service budgets and "communicat[ing] to [them] that as of July 2011, they must reduce or terminate certain services to comply with" those reduced budgets. The district court thus held that plaintiffs were entitled to the notice and appeal rights provided for by the Medicaid statute and the Fourteenth Amendment. The court further ruled that defendants had failed to comply with those requirements and accordingly granted the motion for a preliminary injunction.

On April 27, 2012, defendants PBH and Shipman filed a timely notice of their interlocutory appeal of the district court’s order. The deadline to appeal expired fourteen days later, see Fed. R. App. P. 4(a)(3), with no notice filed by the remaining defendant, the Secretary of the NCDHHS.

II.

PBH contends that "the narrow legal question" before us is "whether the budget communications that PBH sent to [plain-

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K.C. v. SHIPMAN

tiffs] in March and April 2011 constituted agency ‘action,’ as that term is defined in 42 C.F.R. § 438.400(b)." Appellants’ Br. 23. But before reaching that question, we must first address the threshold issue of whether PBH may litigate this appeal to begin with, given that the NCDHHS has decided not to. For the reasons that follow, we conclude that the Medicaid statute and accompanying regulations preclude PBH from appealing in the absence of the NCDHHS.

A.

We begin with the relevant provision of the Medicaid statute and its attendant regulations. At the heart of our inquiry is Congress’ pronouncement that each state must "provide for the establishment or designation of a single State agency to administer or to supervise the administration" of its Medicaid program, 42 U.S.C. § 1396a(a)(5), a command we shall refer to as the "single state agency requirement." In implementing this requirement, the U.S. Department of Health and Human Services has set forth the following regulation:

If other State or local agencies or offices perform services for the Medicaid agency, they must not have the authority to change or disapprove any administrative decision of that agency, or otherwise substitute their judgment for that of the Medicaid agency with respect to the application of policies, rules, and regulations issued by the Medicaid agency.

42 C.F.R. § 431.10(e)(3).

As implemented through this rule, the single state agency requirement reflects two important values: an efficiency rationale and an accountability rationale. From an efficiency perspective, the requirement ensures that final authority to make the many complex decisions governing a state’s Medicaid program is vested in one (and only one) agency. The requirement thereby avoids the disarray that would result if multiple

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state or even local entities were free to render conflicting determinations about the rights and obligations of beneficiaries and providers. Thus, for example, where the designated state agency determines that a person is eligible for Medicaid benefits, administrative efficiency counsels that the agency itself, the individual, and other affected parties should be able to rely on the decision without worrying that some other state or local entity may later "change or disapprove" it, in violation of 42 C.F.R. § 431.10(e)(3). See Forsyth Cnty. Bd. of Soc. Servs. v. Div. of Soc. Servs., 346 S.E.2d 414, 416-17 (N.C. 1986) (holding that under 42 C.F.R. § 431.10(e)(3), a county department of social services cannot sue seeking reversal of the single state agency’s Medicaid eligibility determination).

With respect to the accountability rationale, the vesting of responsibility over a state’s Medicaid program in a single agency safeguards against the possibility that a state might seek to evade federal Medicaid requirements by passing the buck to other agencies that take a less generous view of a particular obligation. As the Second Circuit has explained, "the reason for the requirement that a state designate a ‘single State agency’ to administer its Medicaid program . . . was to avoid a lack of accountability for the appropriate operation of the program." Hillburn v. Maher, 795 F.2d 252, 261 (2d Cir. 1986) (rejecting single state agency’s argument that it did not need to comply with certain Medicaid regulations because of contrary decisions by another agency). As a result, a single state agency may not "diminish[ ] or alter[ ]" its Medicaid responsibilities based on the "action or inaction of other state offices or agencies." Id.

In sum, the single state agency requirement represents Congress’s recognition that in managing Medicaid, states should enjoy both an administrative benefit (the ability to designate a single agency to make final decisions in the interest of efficiency) but also a corresponding burden (an accountability regime in which that agency cannot evade federal require-

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ments by deferring to the actions of other entities). See San Lazaro Ass’n v. Connell, 286 F.3d 1088, 1100-01 (9th Cir. 2002) (noting that single state agency requirement ensures "systemwide efficiency" and "systemwide accountability"). This does not mean, of course, that a single state agency may never delegate responsibilities to other entities. Such agency relationships are expressly contemplated, for example in the context of MCOs like PBH that manage the provision of Medicaid on the state’s behalf. See 42 C.F.R. §§ 438.1(b), 438.6. But the single state agency requirement does mean that a delegation can go only so far: where the agency makes a final decision, it cannot be overridden by another state or local entity.

B.

In this case, there is no dispute that North Carolina law designates the NCDHHS as the agency responsible for operating the state’s Medicaid plan. N.C. Gen. Stat. § 108A-54. Nor is there any dispute that PBH is a "local political subdivision of the State," N.C. Gen. Stat. § 122C-116(a), which has contracted with the NCDHHS to operate a managed care Medicaid program on the state’s behalf. Federal and state law thus interlock, establishing the following propositions: the NCDHHS is the "single State agency" with the final responsibility to administer the state’s Medicaid program under 42 U.S.C. § 1396a(a)(5), and as a local subdivision of the state, PBH is forbidden to "change or disapprove any administrative decision" made by the NCDHHS pursuant to 42 C.F.R. § 431.10(e)(3).

The question, then, is whether PBH’s appeal seeks to "change or disapprove" an "administrative decision" of the NCDHHS such that it is barred by § 431.10(e)(3). PBH contends that the answer is "no." It argues first that this appeal does not change or disapprove any NCDHHS decision at all because PBH and the NCDHHS still take "the same position in this litigation"—namely that they did not violate plaintiffs’

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notice and hearing rights. Appellants’ Reply Br. 22-23. But this contention misses the mark for a simple reason: it focuses on the wrong decision.

The agency decision that PBH seeks to disapprove is not the NCDHHS’s ultimate position on the merits of the underlying case. It is the NCDHHS’s decision not to appeal and thereby to comply with the preliminary injunction. The NCDHHS’s decision to comply means that the injunction is binding not only on the NCDHHS itself, but also on the NCDHHS’s "agents" and any who are in "active concert or participation" with it. Fed. R. Civ. P. 65(d)(2). There is thus no escaping the fact that the NCDHHS has effectively decided that it and PBH—which is obligated to manage plaintiffs’ care in accordance with its contract with the NCDHHS —will provide plaintiffs with their prior level of services (or else notice and a hearing) until a final judgment permits otherwise. Yet the entire purpose of PBH’s appeal is to overturn that decision: PBH seeks to reduce plaintiffs’ services immediately, without providing notice or a hearing. We must therefore reject PBH’s contention that this appeal does not "change or disapprove" any decision by the NCDHHS.

PBH responds that even if its appeal does seek to change or disapprove some decision made by the NCDHHS, the decision in question is not an "administrative decision of that agency" protected under § 431.10(e)(3), but rather a mere "litigation" decision. Appellants’ Reply Br. 22. Again we disagree.

To start, we find no support for the notion that litigation decisions are somehow categorically precluded from constituting an "administrative decision" under the regulation. Although the phrase is not expressly defined in the relevant provisions, the plain meaning of an "administrative decision" of a single state Medicaid agency naturally encompasses decisions that pertain to the management of the state’s Medicaid program. See Random House Dictionary of the English Lan-

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guage 26 (2d ed. 1987) (defining "administrative" as "pertaining to administration" and "administration" as the "management of any office, business or organization"). No less than its decisions in other contexts, of course, an agency’s litigation decisions can have substantial impacts on the management of a state’s Medicaid program. One need look no further than this case to see how: the NCDHHS’s choice to comply with the preliminary injunction means that absent the provision of notice and appeal rights, the state must provide a class of Medicaid beneficiaries their previously authorized level of services pending a final ruling from the courts.

Of course, our conclusion that the Secretary’s decision not to appeal is an "administrative decision" protected from interference by another agency under § 431.10(e)(3) does not mean every litigation decision by a single state agency qualifies as such. But we do not need to list every example of an "administrative decision" in order to hold that where, as here, an agency’s decision is tantamount to a substantial policy choice, the decision falls within the sphere of agency judgment covered by § 431.10(e)(3). After all, it can hardly be disputed that if the NCDHHS had issued a policy statement declaring that all PBH enrollees would be eligible to receive their prior level of services (or else a fair hearing) until a contrary judicial ruling, that choice would surely constitute an "administrative decision" that local agencies would not be permitted to "change or disapprove" under § 431.10(e)(3). The result should not be any different here simply because the Secretary made the same decision in response to litigation rather than before it. If anything, a decision made in the instant context should be entitled to even greater respect because it comes with the backing of a court order announcing a preliminary interpretation of federal law.

Our conclusion is all the more necessary when one considers the implications of PBH’s opposing approach. If important litigation decisions made by a single state agency were not "administrative decisions" protected from challenge by

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another agency, the resulting inefficiency and turmoil would be profound. Consider, for example, a case in which a single state agency agrees to a consent decree confirming the Medicaid eligibility of a group of citizens. PBH’s position would imperil that decision by permitting any county Medicaid office or local MCO to embroil the courts in a collateral lawsuit seeking a reversal of the decree. Or consider the converse situation where the designated agency elects to litigate a Medicaid case rather than to settle. Under PBH’s view of § 431.10(e)(3), the agency’s choice to pursue the lawsuit could be subject to "change or disapprov[al]" by another state or local entity that would prefer to settle the matter on whatever terms that other entity deemed satisfactory. The result of PBH’s interpretation would be a constant state of confusion in the litigation process in which parties (and judges) must not only attempt to argue (or decide) the merits of each case, but where they must first identify which of multiple state entities is even speaking with the state’s final authority.

PBH’s view would thus compromise both the efficiency and accountability rationales for the single state agency requirement. That requirement prevents improvident ends by arresting their beginnings. Put simply, by directing states to designate a single Medicaid agency the decisions of which may not be overridden by other state and local actors, the requirement prohibits precisely what PBH aims to achieve in this appeal: to place itself in the driver’s seat and call the shots on how the state’s Medicaid program is to be administered in the face of a clearly contrary decision by the NCDHHS. PBH’s appeal thus contravenes 42 U.S.C. § 1396a(a)(5) and 42 C.F.R. § 431.10(e)(3), and must be dismissed.

C.

The case for dismissal of the appeal is underscored not only by the single state agency requirement, but also by the fact that it follows from that very requirement that PBH is pushing

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the court to issue an advisory opinion. For the Secretary’s decision not to appeal means that PBH would remain bound by the preliminary injunction regardless of any decision this court might issue.

1.

A party seeking recourse must establish that it is "likely, as opposed to merely speculative, that [its] injury will be redressed by a favorable decision." Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (internal quotation marks omitted). Of course, the elements of standing must be satisfied not just at the outset of a suit, but also on appeal. See Bond v. United States, 131 S. Ct. 2355, 2362 (2011).

In this appeal, PBH seeks relief in the form of a reversal of the district court’s preliminary injunction. PBH argues that such a decision "would in no way be merely advisory" because once the injunction is reversed, PBH’s injury will necessarily be redressed: that is, PBH will be free to reduce plaintiffs’ services (or as PBH argues, their budgets) without first providing notice and hearing rights. Appellants’ Reply Br. 27.

PBH is mistaken. Its problem lies again in the Secretary’s choice not to appeal and to instead comply with the preliminary injunction while litigating the case through to final judgment. In that context, the question becomes whether the fact that the NCDHHS remains obligated to obey the injunction means that PBH would also be bound to comply regardless of any decision we might issue. Or, put slightly differently, the question is whether PBH—the NCDHHS’s contractual agent with respect to plaintiffs’ Medicaid services—may disregard the injunction even as PBH’s principal is obligated to comply with it. For several reasons, we cannot countenance that result.

First, because the preliminary injunction binds the NCDHHS, so too must it bind PBH under ordinary operation

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of the Federal Rules of Civil Procedure. Federal Rule of Civil Procedure 65(d)(2) dictates that every order granting an injunction is binding not only on named parties, but also on "the parties’ . . . agents" as well as any others with whom they "are in active concert or participation." As the Supreme Court has explained, the purpose of this rule is to prevent defendants from "nullify[ing] a decree by carrying out prohibited acts through aiders and abettors." Regal Knitwear Co. v. NLRB, 324 U.S. 9, 14 (1945). Echoing that purpose, the plaintiffs’ motion in this case specifically requested preliminary injunctive relief against not just the defendants, but also their "agents . . . and all persons acting in concert or participating with them."

Applying Rule 65(d)(2) to this case, there is no dispute that PBH is an agent of the NCDHHS due to its contract to administer plaintiffs’ Medicaid services on behalf of the state. Nor is there any question that PBH is acting in participation with the NCDHHS to that same end. Thus, PBH is restrained by the preliminary injunction through not one, but two channels: first, in its capacity as a named defendant, and second, in its capacity as an agent and co-participant of the NCDHHS with respect to plaintiffs’ Medicaid services. To be sure, a decision in this appeal in PBH’s favor could negate the former channel of restraint. But such a decision could in no way affect the latter channel because the NCDHHS’s choice not to appeal means that the injunction remains binding on it—and, as a consequence of Rule 65(d)(2), so too its agent and coparticipant PBH. See Tenn. Ass’n of Health Maint. Orgs. v. Grier, 262 F.3d 559, 565 (6th Cir. 2001) (holding that under Rule 65(d), consent decree issued against single state Medicaid agency was also binding on MCOs due to their agency relationship with the state); U.S. ex rel. Rahman v. Oncology Assocs., 198 F.3d 502, 511 (4th Cir. 1999) (citing Rule 65(d) and holding that writ of mandamus issued against Medicare agency was also binding on non-party Medicare contractors).

There is another reason why we may not allow PBH to evade a preliminary injunction that continues to run against

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the NCDHHS: the single state agency requirement. Recall that this requirement embodies an important accountability rationale: Congress’s desire to prevent states from backsliding on their Medicaid obligations by deferring to the nonconforming actions of other agencies. See Hillburn, 795 F.2d at 260-61. To that end, 42 C.F.R. § 431.10(e)(1) provides that the single state agency "must not delegate . . . authority to [e]xercise administrative discretion in the administration" of the state’s Medicaid plan to others. Another regulation, id. § 435.903(b), requires the agency to "[t]ake corrective action to ensure" the adherence of local agencies to the state’s Medicaid program. The single state agency requirement thus forbids the result that PBH seeks on appeal: it bars the NCDHHS from escaping its legal responsibilities (i.e., to obey the injunction) by acquiescing to the non-compliant actions of another agency like PBH.

In sum, PBH must show that it is likely, not just speculative, that a favorable decision will provide the redress it seeks. See Lujan, 504 U.S. at 561. Yet the binding effect of the preliminary injunction on PBH pursuant to Rule 65(d)(2) and the single state agency requirement makes it speculative at best whether a decision in this appeal would enable PBH to engage in the conduct that the district court enjoined.

2.

PBH asserts that any decision reversing the injunction as to it would automatically inure to the benefit of NCDHHS because "it is not logical to argue that an order that is reversed or vacated based on an erroneous interpretation of law would somehow still be enforceable against a party simply because that party did not also take an interlocutory appeal." Appellants’ Reply Br. 25-26. If PBH were correct, there would be no redressability problem since a ruling in its favor would negate both channels through which it is restrained by the preliminary injunction: the injunction would no longer bind PBH either as a named defendant or as an agent of the NCDHHS.

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But PBH is again mistaken. It is basic to appellate practice that a "judgment will not be altered on appeal in favor of a party who did not appeal"—a rule that applies even if "the interests of the party not appealing are aligned with those of the appellant." Smith v. Dairymen, Inc., 790 F.2d 1107, 1109 (4th Cir. 1986) (quoting 9 Moore’s Federal Practice ¶ 204.11[4], at 4-54 to -55 (2d ed. 1980)). Indeed, where "codefendants are held liable below, and one appeals and one does not," if the district court’s order is reversed as to the appealing party, "the party not appealing remains liable, despite the fact that the liability of each depends upon the same legal principles." Id.

We are thus powerless to provide the very relief that PBH needs: an order reversing the preliminary injunction as against both PBH and the NCDHHS. We lack that ability for good reason, too, because offering a non-appealing party the automatic benefit of any appellate decision won without its participation would produce an intractable free-rider problem, not to mention endless follow-on litigation by non-appealing parties to determine whether their interests are closely enough aligned with those of the appealing party to warrant the benefit of the appellate judgment. We accordingly reject PBH’s contention that a decision in its favor would as a matter of course render the preliminary injunction unenforceable against the NCDHHS.3

3PBH further argues that even if this appeal would not automatically benefit the NCDHHS, a reversal would still redress PBH’s injury by enabling the Secretary to file a motion in the district court for relief from the preliminary injunction pursuant to Federal Rule of Civil Procedure 60(b). But "a preliminary injunction is not a ‘final judgment, order, or proceeding’ that may be addressed by a motion under Rule 60(b)." Prudential Real Estate Affiliates v. PPR Realty, Inc., 204 F.3d 867, 880 (9th Cir. 2000) (quoting Fed. R. Civ. P. 60(b)). Moreover, even if a Rule 60(b) motion were available, there is some question whether the Secretary would apply for such relief if given the chance. After all, the Secretary had the ability to appeal the preliminary injunction as a matter of right by simply filing a notice to that effect, but chose not to do so. In addition, even

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III.

On March 28, 2013, one week after oral argument and more than ten months after the Secretary’s deadline to file a notice of appeal had expired, we received a motion from the Secretary seeking leave to file a "Memorandum in Response to Questions Raised at Oral Argument." In the motion, the Secretary sought the court’s consent "to clarify [the NCDHHS’s] position to the extent it is relevant to the Court’s further consideration of the matters presented in this case." Secretary’s Mot. for Leave to File Mem. in Resp. to Questions Raised at Oral Arg. 4. Reflecting the unusual nature of its request as a non-party to this appeal, the Secretary filed the motion under Rule 2 of the Federal Rules of Appellate Procedure, which permits a court to "suspend any provision of [the Rules]" for "good cause." The Secretary did not specify which rules she would like us to suspend, but for the reasons that follow we find no "good cause" to suspend any rules at all.

To start, the Secretary points to nothing close to good cause for why this court should consider her views on the issues raised by this appeal ten months after her deadline elapsed to participate in it as a matter of right. The only explanation the Secretary offers is that the NCDHHS "did not anticipate prior to oral argument that this Court might view or interpret [its] decision not to . . . appeal as precluding an appeal by [PBH]." Secretary’s Mot. for Leave to File Mem. in Resp. to Questions Raised at Oral Arg. 4. We find that explanation wanting.

if a Rule 60(b) motion were available for relief from a preliminary injunction, and even if the Secretary were to file such a motion, there is no guarantee that it would succeed. The remedy afforded by Rule 60(b) is an "extraordinary" one that is "only to be invoked upon a showing of exceptional circumstances." Compton v. Alton S.S. Co., 608 F.2d 96, 102 (4th Cir. 1979). In any event, we need not (and may not) decide the ultimate outcome of any hypothetical Rule 60(b) motion filed by the Secretary. Our only point here is that PBH’s theory—that a ruling in its favor will redress its injury by virtue of such a motion—is riddled with speculation.

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For one thing, the NCDHHS has been aware of its responsibilities under the single state agency requirement since at least 2009, when it was the defendant in a Medicaid case that held that "[a]s North Carolina’s ‘single state agency,’ . . . [the NCDHHS] may not disclaim its responsibilities under federal law by simply contracting away its duties." McCartney v. Cansler, 608 F. Supp. 2d 694, 701 (E.D.N.C. 2009). Thus, even though it is generally permissible for a single state agency to enter into a contractual relationship with an MCO, the Secretary was on clear notice that allowing such a contractor to take a particular action (i.e., an appeal)—while disavowing the opportunity to take the same action in the agency’s own right—could be subject to attack. Even worse for the Secretary, plaintiff/appellees filed their brief in this case in August 2012, squarely arguing that the NCDHHS’s failure to appeal should trigger dismissal of PBH’s appeal. PBH responded to that argument in its reply brief two weeks later. The NCDHHS nowhere disputes that it was (or at least should have been) aware of both of these filings, yet it made no effort to address either one. It thus defies reason for the NCDHHS to suggest now, seven months after the issue was briefed and years after a related ruling against it in district court, that it was surprised by the panel’s questions at oral argument.

More fundamentally, we decline to find good cause here because the basic rule from which the Secretary seeks relief is as easy to follow as it is widely known. That is, the NCDHHS’s motion effectively asks for permission to participate in this appeal despite the fact that it failed to appeal in a timely fashion. Yet the NCDHHS is represented in this matter by the North Carolina Attorney General, a sophisticated and frequent litigant in this court. As such, the NCDHHS is surely aware of the time limit for filing an appeal, as well as the fact that this limit has been "treated as jurisdictional in American law for well over a century." Bowles v. Russell, 551 U.S. 205, 209 n.2 (2007). The NCDHHS must also know that there is even a special procedure to make things easier on entities that share

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similar interests in an appeal: under Federal Rule of Appellate Procedure 3(b)(1), such parties "may file a joint notice of appeal" and "proceed on appeal as a single appellant." Thus, literally all the Secretary had to do to participate in this appeal, as it hopes to do now, was co-sign PBH’s notice one year ago.

Why the NCDHHS failed to take such an easy step, we cannot say for certain. The NCDHHS suggests that it declined to appeal because doing so would have been "duplicative," Secretary’s Mot. for Leave to File Mem. in Resp. to Questions Raised at Oral Arg. 3, but that answer only raises more questions. Duplicative in what sense? Surely not in terms of wasted effort, since the Secretary could simply co-sign PBH’s papers. And surely not duplicative in the sense of "unnecessary," for the NCDHHS acknowledges that it will not automatically benefit from a ruling in PBH’s favor, instead requiring the filing of a Rule 60(b) motion, a problematic course for all the reasons we have discussed. See ante at 17-18 n.3. In short, we find it dubious that the Secretary would think it permissible to allow some other litigant to be its stalking horse in this court, only then to seek leave to participate in the case long after the time for doing so had run. We recognize, of course, that there has been a change in administrations since the Secretary’s failure to notice an appeal. But if we let a state off the hook for its decision not to appeal based on new electoral outcomes, what other rules would we be called upon to bend when the political winds shift and a new executive experiences buyer’s remorse for decisions of the old? The better course by far is to enforce consistently for all litigants the time-honored rules that have long governed how an entity may participate in appeals in this court.

In the end, the Secretary’s motion serves only to reinforce the weaknesses in PBH’s appeal. For if, as PBH argues, the Secretary and PBH were truly in agreement all along that they did not wish to comply with the preliminary injunction, all the

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Secretary had to do to make that position clear was join in PBH’s appeal. That the NCDHHS did not take that simplest of steps indicates that it was actually making an administrative policy decision to comply with the injunction, which the single state agency requirement forbids PBH to overrule. Likewise, it is the Secretary’s failure to file a simple notice of appeal that bars her late participation in this case.

Of course, our decision does not leave the Secretary without recourse. Quite the contrary. The Secretary is free to press her views on the merits when the permanent injunction is litigated in the district court, as well as in any subsequent appeal of such an injunction before this court. What the Secretary may not do, however, is participate in the instant appeal of the preliminary injunction, almost a year after the proper time for doing so has passed, in order to respond to supposedly surprising questions posed at oral argument that she should have known were on the way. The Secretary’s motion is accordingly denied.

IV.

Spanning hundreds of regulations across fourteen parts and scores of subparts in the Code of Federal Regulations, Medicaid is—to put it mildly—a complicated program to administer. Seen in that light, the single state agency requirement is a sensible measure aimed at eliminating the added layer of complexity that would result if primary actors and courts were required to ask in every case, "who actually speaks for the state?" Because of this requirement, we cannot permit PBH to override the NCDHHS’s decision not to appeal, but to comply with, the preliminary injunction. One head chef in the Medicaid kitchen is enough.

The appeal is hereby dismissed.

DISMISSED

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 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION CIVIL ACTION FILE NO. 5:11-CV-354

L.S., a minor child, by and through his father )

and next friend, Ron S.; K.C., a minor child, by )

and through his mother and next friend, Africa )

H.; ALLISON TAYLOR JOHNS; and D.C., a )

minor child, by his mother and next friend,

PennyC.;

)

)

Plaintiffs,

)

)

M.S., a minor child, through his parent and natural guardian, Rachelle S.,

) )

Intervenor Plaintiff,

)

)

vs.

)

)

ALDONA ZOFIA WOS, in her official

)

capacity as the Secretary ofthe Department )

of Health and Human Services; PAMELA

)

SHIPMAN, in her official capacity as Area )

Director of Piedmont Behavioral Health Care )

Area Mental Health, Developmental

)

Disabilities, and Substance Abuse Authority, )

and PIEDMONT BEHAVIORAL

)

HEALTHCARE AREA MENTAL HEALTH, )

DEVELOPMENTAL DISABILITIES AND )

SUBSTANCE ABUSE AUTHORITY doing )

business as PBH,

)

)

Defendants.

)

)

SETTLEMENT AGREEMENT

Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 1 of 29

SETTLEMENT AGREEMENT
NOW COME L.S., a minor child, by and through his father and next friend, Ron S.; K.C., a minor child, by and through his mother and next friend, Africa H.; Allison Taylor Johns; D.C., a minor child, by his mother and next friend, Penny C., and M.S., a minor child, through his parent and natural guardian, Rachelle S., on behalf of themselves and the members of the certified class ("Plaintiffs") and the Defendants in this case: Aldona Zofia Wos, in her official capacity as the Secretary of the North Carolina Department of Health and Human Services ("NCDHHS"); Pamela Shipman, in her official capacity as Area Director and Chief Executive Officer of Cardinal Innovations Healthcare Solutions (formerly PBH) and Cardinal Innovations Healthcare Solutions (collectively referred to as "Cardinal") and enter into the following Settlement Agreement ("Agreement"). The Plaintiffs, NCDHHS and Cardinal are hereinafter referred to collectively as "the Parties."
RECITALS
WHEREAS, on July 5, 2011, Plaintiffs filed their Complaint in this case, alleging violations by Defendants of the Medicaid Act and the due process clause of the Fourteenth Amendment to the U.S. Constitution;
WHEREAS, on August 24, 2011, Plaintiffs filed a motion for preliminary injunction;
WHEREAS, on August 29, 2011, Plaintiffs filed a motion to certify class under Rules 23(a) and 23(b)(2) ofthe Federal Rules of Civil Procedure;
WHEREAS, on March 29, 2012, the district court entered an Order granting Plaintiffs' motions to certify class and for preliminary injunction;
WHEREAS, on April 27, 2012, Defendants PBH and Shipman filed their Notice of Appeal from the district court's March 29, 2012 Order granting a preliminary injunction;
WHEREAS, on May 10, 2013, the Fourth Circuit Court of Appeals dismissed the appeal without reaching the merits;
WHEREAS, on June 10, 2013, the Parties conducted the Rule 26(f) conference;
WHEREAS, based on the Parties' productive settlement discussions, the district court extended the deadline for the Rule 26 disclosures and the filing of the Joint Report and Plan on multiple occasions, the most recent being until August 29, 2014;
WHEREAS, the Parties recognize that this case involves legal issues that may take a prolonged time to fully litigate and resolve and further recognize that continued litigation would be an expensive, lengthy and time-consuming matter;
2
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WHEREAS, the Parties agree that neither entering into this Agreement nor the terms of this Agreement shall be construed as an acknowledgment, an admission, or evidence of liability of Defendants under the Constitution or any federal or state law, and this Agreement may not be used as evidence of liability in any other administrative, civil or criminal proceeding;
WHEREAS, the Parties share a mutual interest in seeing that appropriate due process is provided to Participants in the North Carolina Innovations Waiver; and
WHEREAS, the Parties wish to enter into a contingent Settlement Agreement as is fully set forth herein;
NOW THEREFORE, the Parties have decided to resolve this matter in the manner set forth below.
AGREEMENT
I. Definitions.
A. Base Budget Services. The Medicaid-funded array of supports identified as "Base Budget Services" in the North Carolina Innovations Waiver
B. Care Coordinator. An employee of the LME/MCO who assists in coordinating and monitoring Services provided to Innovations Participants.
C. LME/MCO. As defined in N.C. Gen. Stat.§ 122C-3(20c).
D. North Carolina Innovations Waiver or "Innovations". The Medicaid home and community-based Services waiver approved under authority of§ 1915(c) of the Social Security Act, which is administered by LME/MCOs in North Carolina and overseen by the North Carolina Division of Medical Assistance, a division of the North Carolina Department of Health and Human Services.
E. Participant or "Innovations Participant". A Medicaid beneficiary enrolled in the North Carolina Innovations Waiver, and includes the Participant's legally responsible person or the Participant's service provider when the provider is acting on behalf of the Participant and with the Participant's or legally responsible person's written consent, as allowed by law.
F. Plan of Care. The written plan developed by the Innovations Participant and/or the Participant's legally responsible person, with the assistance of the care coordinator, which specifies, among other things, the specific amount of each Service that the Participant is requesting be authorized, and including any requested amendment or update to the Plan of Care during the Plan Year.
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G. Plan Year. The period during which an Innovations Participant's Plan of Care is in effect, which begins the first day of the month following the Innovations Participant's birth month, and ends on the last day of the Innovations Participant's next birth month. (Example: an Innovations Participant with a birthdate of June 12 would have a Plan Year running from July 1 through June 30.)
H. Service Appeal. An appeal by an Innovations Participant of a denial or limited authorization of a request for Services, or of a reduction, suspension, or termination of previously-authorized Services.
I. Services. The Medicaid-funded array of supports offered through the North Carolina Innovations Waiver to Participants.
J. Support Intensity Scale ® or "SIS ®". The instrument currently used by Defendants, or any substantially similar means, to document support needs of an Innovations Participant.
K. Suooort Needs Matrix or "SNM". The current, or any future substantially similar mechanism used by Defendants, or their agents or contractors, to identify individuals with similar support needs and assign budgets as a guideline for some Innovations Services.
L. SNM Base Budget. The annual amount of funding identified by the LME/MCO as a guideline for Base Budget Services for a Participant in a Participant's Plan Year. The SNM Base Budget is not synonymous with the Individual Cost Limit as set forth in Appendix B-2 to the Innovations Waiver, and nothing in this Settlement Agreement shall be construed to affect the Individual Cost Limit.
II. North Carolina Innovations Waiver Services.
A. Implementation of Agreement:
1. No later than 90 days after the court enters its Order of Approval (Exhibit 5), as described in Section III below, unless that time period is extended by agreement of the Parties, Defendants agree to have implemented and begin compliance with this Agreement by implementing and complying with the policies and procedures set out in Sections II(B) through II(H) below with respect to the North Carolina Innovations Waiver. Defendants may certify implementation prior to entry of the Order of Approval such that the monitoring period may begin prior to Court approval as specified in Section III(E)(iii) below.
a. If implementation is certified by counsel for Defendants prior to entry of the Order of Approval by the Court, and an
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Innovations Participant receives a decrease in or initial assignment to his or her SNM Base Budget that is effective at the end of the Participant's Plan Year or during the Participant's Plan Year and before the Court enters its Order of Approval (Exhibit 5), Defendants will provide notice of the ability to appeal to reconsideration and to the Office of Administrative Hearings any decrease in or initial assignment to the Participant's SNM Base Budget .
11. NCDHHS will require that the LME/MCOs who are not parties to this action implement and begin compliance with the policies and procedures set out in Sections II(B), (E), (F), and (G) below, except where otherwise specified, no later than 90 days after the court enters its Order of Approval (Exhibit 5), unless that time period is extended by agreement of the Parties, and with the remaining sections of this Agreement by the date the LME/MCO notifies any Participant of his or her SNM Base Budget.
111. Nothing in this Agreement shall be construed to obligate Defendant NCDHHS to affirmatively perform a function, responsibility, or requirement imposed by this Agreement that it has delegated or contracted to an LME/MCO; however, Defendant NCDHHS shall be responsible for assuring performance of any requirements imposed by this Agreement which DHHS has delegated or will delegate to LME/MCOs.
IV. Nothing in this Agreement shall be construed to obligate Defendants Cardinal and Shipman to carry out any of the responsibilities or requirements contained in this Agreement with regard to Innovations Participants who are not Cardinal's enrollees.
v. Defendants, through counsel, will notify class counsel in writing on the date on which Defendants have fully implemented and are in compliance with Section II of this Agreement. That date shall be used in connection with the time periods set forth in Sections III(E)(iii)(a) and (b) below. If Plaintiffs dispute whether Defendants have fully implemented and are in compliance with this Agreement as of the date of notification of implementation by Defendants, Plaintiffs may raise that concern by following the procedures in Section VI(A), below; however, the date of implementation as indicated by Defendants shall not be changed, regardless of the outcome of any dispute resolution attempt.
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vt. Beginning with the date of implementation, the terms of Section II of this Agreement will apply to events and decisions occurring after that date in all pending Service requests and Service Appeals.
B. Support Intensity Scale ® ("SIS ®") Evaluations. When Innovations Participants are notified of the results of a new SIS ® evaluation, LME/MCOs will inform the Participant and/or Participant's legally responsible person in writing of the opportunity and process for raising concerns regarding the SIS ® evaluation. Such processes shall include an opportunity to discuss the results of the SIS ® evaluation with the LME/MCO and the potential for results to be adjusted if it is determined particular support needs of the individual were not accurately captured, as well as the opportunity to file a grievance. The failure to request a grievance shall not be a waiver of the Participant's ability to argue that the results of the SIS ® are incorrect in requesting Services or during a Service Appeal.
C. Support Needs Matrix ("SNM") Base Budget Letters. When new Innovations Participants are notified of their initial SNM Base Budgets, or when Innovations Participants are notified of decreases in their SNM Base Budgets, LME/MCOs will inform the Participant and/or Participant's legally responsible person in writing of the following:
1. The Participant may request Services that cost in excess of his or her SNM Base Budget if he or she believes his or her needs cannot be met within his or her SNM Base Budget;
11. The results of a SIS ® and the SNM Base Budget are guidelines that do not constitute a binding limit on the amount of Services that may be requested or authorized in a plan. This means if all criteria unrelated to the SNM Base Budget to receive a Service are met, and the LME/MCO determines that it is medically necessary for an Innovations Participant to have an array of Base Budget Services authorized in excess of the Participant's SNM Base Budget, the LME/MCO will authorize such Services.
111. If the Participant makes a request for authorization of Services and that request is denied, in whole or in part, Defendants will, at the time of the denial, provide notice of the reasons for the decision and the process for seeking an appeal of such decision; and
tv. Should the Participant wish to pursue a grievance regarding his or her SNM Base Budget, the process for doing so.
The written information provided does not need to contain the exact language used in Section II(C)(i) - (iv) above but will not contain any material differences in meaning from the above language.
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The failure of a Participant to request a grievance identified in Section II(C)(iv) above is not a waiver of the Participant's ability to argue the Participant's SNM Base Budget is insufficient or incorrect in requesting Services or during a Service Appeal.
D. SNM Base Budget Procedures during a Plan Year.
1. No Base Budget Changes Effective Mid-Plan Year for One Year after Implementation: During the one (1) year period after implementation of this Agreement and prior to dismissal of this case:
a. Defendants Cardinal and Shipman agree not to reduce an Innovations Participant's SNM Base Budget effective during that Participant's Plan Year or provide notice of a new SNM Base Budget for a Participant that is effective during the Participant's then-current Plan Year and less than the cost of Base Budget Services authorized in the Participant's thencurrent Plan of Care; and
b. Defendant NCDHHS shall require that, if other LME/MCOs implement SNM during that one (1) year period, that during such one (1) year period other LME/MCOs do not reduce an Innovations Participant's SNM Base Budget effective during a Plan Year, or provide notice of a new SNM Base Budget for a Participant that is effective during the Participant's thencurrent Plan Year and less than the cost of Base Budget Services authorized in the Participant's then-current Plan of Care.
u. Procedures for Mid-Plan Year Base Budget Changes for Two Years after Dismissal of this Case: Subsequent to dismissal of this case and during the two year period thereafter that this Agreement remains in effect, if an LME/MCO: (1) reduces one of its Innovations Participant's SNM Base Budgets effective during that Innovations Participant's Plan Year; or (2) upon implementation of SNM by an LME/MCO, provides notice of a new SNM Base Budget for a Participant that is effective during the Participant's then-current Plan Year and which is less than the cost of authorized Base Budget Services in the Participant's then-current Plan of Care, the LME/MCO shall:
a. Provide notice of the right to a Service Appeal if the SNM Base Budget reduction or initial assignment results in a denial, reduction or termination of Services; or
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b. Ensure existing authorizations for Services are not affected by the reduction in the SNM Base Budget.
111. Notwithstanding the foregoing, reductions in the SNM Base Budget are permitted effective during a Plan Year and notice and due process rights are not required if an Innovations Participant changes residential setting which is the sole basis for the reduction in the SNM Base Budget. During the time this Agreement is in effect, a letter notifying a Participant of a reduction in a Participant's SNM Base Budget or a new SNM Base Budget that is not effective until the Participant's new Plan Year will not require an LME/MCO to provide a notice with appeal rights to the Participant but will require LME/MCOs to provide the letter described in Section II(C) above.
E. Requests for Authorization of Services.
1. To the extent a Care Coordinator or another LME/MCO employee facilitates or assists in making a Participant's request for authorization of Services, the LME/MCO will assure that the request shall be made in a manner consistent with the desires of the Participant and that those desires are reflected in the Participant's Plan of Care, including desires for the type, amount, and duration of Services. LME/MCOs will follow the timeframes set forth in 42 C.F.R. § 438.210(d) in reviewing requests for authorization of Services. Participants may make a new request for Services at any time by requesting an update of the Plan of Care.
11. When discussing a proposed Plan of Care with a Participant, an LME/MCO Care Coordinator will discuss the duration of a Service expected by the Participant, and the LME/MCO Care Coordinator will assure that the proposed Plan of Care requests authorization for that Service at the duration expected by the Participant during that Plan Year. If the LME/MCO authorizes the Service for a duration less than as requested in the Plan of Care, unless the Service has a maximum benefit duration contained within the Innovations Waiver and the LME/MCO authorizes the Service requested up to that maximum, the LME/MCO must provide written notice with appeal rights at the time of that limited authorization, which notice will include the clinical reasons for the decision.
111. The results of a SIS ® and the SNM Base Budget are guidelines that do not constitute a binding limit that may not be exceeded on the amount of Services that may be requested or authorized in a Plan of Care, or requested or authorized in a Service Appeal. This means if all criteria unrelated to the SNM Base Budget to receive a Service are
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met, and the LME/MCO determines, or the final results of a Service Appeal determine, that it is medically necessary for an Innovations Participant to have an array of Base Budget Services authorized in excess of the Participant's SNM Base Budget, the LME/MCO will authorize such Services, without requiring that an Innovations Participant request "intensive review."
tv. If the LME/MCO denies a request for authorization of Services by an Innovations Participant, in whole or in part, or authorizes a requested Service in a limited manner (including the type, level, or duration of service), LME/MCOs will, at the time of such denial or limited authorization, provide written notice and due process rights in accordance with 42 C.P.R. § 438.404. If an LME/MCO is utilizing the SNM and denies a request for authorization of Services, and the Services requested cost in excess of that Innovation's Participant's SNM Base Budget, the written notice shall explain that if a Service Appeal is requested, and if it is determined on appeal that Services in excess of the SNM Base Budget are medically necessary, the LME/MCO will authorize such Services.
v. An appeal of a notice denying a Service request or providing limited authorization of a requested Service shall not prevent the Service that was authorized from being provided pending the outcome of the appeal. A pending appeal also shall not prevent a Participant from making a new request for Services.
F. Reductions, Suspensions, or Terminations of Previously-Authorized Services. If an LME/MCO reduces, suspends, or terminates an Innovations Participant's Services during an existing authorization period (as previously authorized based on a request for services in a Plan of Care), the LME/MCOs shall, upon the request of the Participant, continue the Innovations Participant's benefits as set forth in 42 C.P.R. § 438.420, if all the requirements in 42 C.P.R. § 438.420 are met. Nothing in this Settlement Agreement shall be construed to address whether or not benefits are required to continue after the expiration of the authorization period.
G. Discouragement Protections.
i. Defendants will implement procedures to protect all Innovations Participants from discouragement, coercion, or misinformation about the amounts of Services they may request in their plans of care or their right to appeal the denial, reduction or termination of a Service, except LME/MCOs who have not implemented the SNM need not address SNM Base Budgets or the SNM in their procedures unless and until they implement the SNM. Nothing in this Agreement shall
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be construed to require an LME/MCO to implement the SNM at any particular time.
n. Defendants shall not attempt to influence, limit, or interfere with a Participant's right or decision to file or pursue a grievance, request for an LME/MCO level appeal, or a contested case hearing.
111. Examples of prohibited discouragement include but are not limited to the following actions by a Care Coordinator or other LME/MCO employee or agent:
a. Informing an Innovations Participant that he or she cannot request: 1. a particular Service or amount or frequency or duration (within a Plan Year) of a particular Service; u. Services in excess of the Participant's SNM Base Budget. Notwithstanding Section II(A) of this Agreement above, LME/MCOs not currently implementing the SNM do not need to comply with this subsection unless and until they implement the SNM; iii. Services in excess of any other limit.
b. Informing an Innovations Participant that he or she must sign a Plan of Care that does not contain the Services the Participant wishes to request or that Services cannot be requested in a Plan of Care or authorized for the entire Plan Year. Nothing in this section shall prevent LME/MCO employees or agents from explaining the maximum benefit duration or amount of a Service if such a limit is contained in the Innovations Waiver, or prevent an LME/MCO from denying a request for services or authorizing the request in a duration that was less than requested if the LME/MCO complies with the process outlined in Section II(E)(ii) above.
c. Informing an Innovations Participant that if a request for authorization of Services is denied, he or she may not appeal from that denial.
d. Failing to assist in preparation of a Plan of Care that contains the Services the Innovations Participant wishes to request, even if the Care Coordinator has explained alternative Service options that may be appropriate.
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e. Threatening to make a claim for attorney's fees or otherwise retaliate against the Participant if he or she appeals.
f. Threatening recoupment of the cost of continuation of benefits, as defined in 42 C.F.R. § 438.420, in order to discourage an appeal, except that Defendants may inform Participants of the circumstances in which certain persons can be held responsible for that cost (i.e. the Participant, the parent of a minor Participant, or the spouse of a Participant may be responsible if the appeal is lost and the disputed level of Services was continued pending appeal).
tv. Defendants shall not intentionally provide material misinformation to any Innovations Participant that has the foreseeable effect of significantly discouraging requests for Services, the filing or prosecution of administrative appeals, or the reporting of violations of this Agreement.
v. Defendant NCDHHS shall instruct all LME/MCOs to take reasonable steps to ensure that no employee of the LME/MCO serves as a guardian in his or her official capacity for a Medicaid beneficiary currently served by the employing LME/MCO. To the extent an LME/MCO or an employee of the LME/MCO is currently acting as a guardian in an official capacity for a Medicaid beneficiary currently served by that LME/MCO, NCDHHS shall instruct that LME/MCO to take step to effectuate the transfer of guardianship. To the extent any employee of an LME/MCO acts as guardian in his or her individual capacity for someone currently served by that LME/MCO, Defendant NCDHHS will instruct the LME/MCO to take reasonable steps to ensure mitigation of any potential conflict of interest. Defendants Cardinal and Shipman agree to affirmatively comply with this subsection with regard to its employees.
vi. Care coordinators shall affirmatively assist Participants in developing plans of care by offering and explaining options regarding the Services available to them. Nothing in this Agreement shall be construed to prevent clinical or treatment discussions between Defendants, Participants, and providers.
vn. Defendants shall not tell any Innovations Participant that he or she must sign a Plan of Care with which he or she does not agree. This does not prevent Defendants from informing a Participant that there must be a signed Plan of Care in order to receive Services under the Innovations Waiver except that in providing this information,
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Defendants must explain that the required signed Plan of Care should include the Services being requested by the Participant, and that the decision on what Services are authorized is made by Utilization Management, which may differ from the Services that are requested.
vm. Defendants shall ensure that LME/MCO Care Coordinators do not ask an Innovations Participant to sign a blank or incomplete Plan of Care, or ask an Innovations Participant to sign a Plan of Care prepared by the LME/MCO without discussing the draft with the Participant and offering to make any requested changes prior to signature.
tx. LME/MCO Care Coordinators will not request an Innovations Participant to submit or update his or her Plan of Care to request Services costing less than or equal to the reduced SNM Base Budget as a result of a reduction in his or her SNM Base Budget. Nothing in this subsection shall be construed to prevent an Innovations Participant from requesting Services costing less than or equal to the reduced SNM Base Budget, or any other array of Services, if he or she wishes to do so, nor shall anything in this subsection be construed to conflict with subsection II(G)(x) below.
x. Nothing in this section shall be construed to prevent Defendants from offering alternative Services, engaging in clinical or educational discussions with Participants or providers, or engaging in informal attempts to resolve Participant concerns prior to the issuance of a notice of an appealable decision. Furthermore, nothing in this section shall prohibit Defendants from explaining that a request may be denied and suggesting alternative Services, or explaining the enrollee appeals process, including the LME/MCO's right to recoup from the Participant or a parent of a ,minor Participant or spouse of a Participant the cost of Services paid for by an LME/MCO under continuation of benefits, as defined in 42 C.F.R. § 438.420, during the pendency of the appeal if the LME/MCO ultimately prevails, so long as Defendants make clear that the Participant has the right to request authorization of the Services he or she wants to request.
H. Stakeholder Education: No later than the date of implementation as described in Section II(A) above, to the extent the terms of this Agreement make already existing written materials, procedures, or trainings inconsistent with this Agreement, Defendants agree to make such changes to make the content of the written materials, procedures, or trainings consistent with the terms of this Agreement. Furthermore:
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1. "Changing" or "updating" materials, as described in this Section and its subsections, does not require reprinting and re-mailing materials outside of the ordinary course ofbusiness. At the next reprinting or remailing of such materials that occurs in the ordinary course of business after December 31, 2014, or earlier at the discretion of Defendants, such materials shall reflect the prior changes made to electronically posted versions of the materials. Otherwise, implementation of this Agreement, as described in Section II(A) above, only requires updates to the electronic versions of such materials, procedures, and trainings, and reasonable notice to prior recipients of the information that is being changed.
ii. No later than the date of implementation as described in Section II(A) above, Defendant Cardinal will train its relevant staff on the requirements of Section II of this Agreement, and Defendant Cardinal shall provide to class counsel a copy of materials used during the training.
iii. No later than the date of implementation as described in Section II(A) above, Defendant Cardinal will update its materials provided to Participants and publicly-posted online materials to reflect the information contained in Sections II(E), II(G)(ii), II(G)(iii), and II(G)(vi) - (ix) of this Agreement. Defendant Cardinal will update such materials in a manner reflective of the language contained in Appendix A to this Agreement. The written information provided does not need to contain the exact language used in Appendix A, but will not contain any material differences in meaning from the language contained therein. No later than the date of implementation as described in Section II(A) above, Defendant Cardinal will provide copies of such materials to class counsel. During Defendant Cardinal's next annual mailing to its enrollees, Defendant Cardinal will provide a link to its website (www.cardinalinnovations.org or one of its subdomains or subpages) where the materials referenced in this subsection will be posted, along with information about how its enrollees may request hard copies of such materials, as well as a brief explanation of the content ofthe updates to such materials.
iv. No later than the date of implementation as described in Section II(A) above, in at least one of Defendant Cardinal's weekly newsletters to its network providers, Defendant Cardinal will provide a link to its website (www.cardinalinnovations.org or one of its subdomains or subpages) where the materials referenced in Section H(iii) above will be posted, as well as a brief explanation of the content of the updates to such materials.
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v. If class counsel believes the documents provided to them by Defendant Cardinal constitute substantial non-compliance with this Agreement, Plaintiffs may address that concern by following the procedures in Section VI(A), below; however, as indicated in Section II(A) above, the date of implementation as indicated by Defendants shall not be changed, regardless of the outcome of any dispute resolution attempt.
vi. No later than the date of implementation as described in Section II(A) above, Defendant NCDHHS will provide training to the LME/MCOs that are not parties to this Agreement regarding Section II(B), (E), (F) and (G) of this Agreement. Defendant NCDHHS shall provide a copy of the materials used during the training to class counsel. Defendant NCDHHS will ensure that the LME/MCOs that are not parties to this Agreement will:
a. No later than the date of implementation as described in Section II(A) above, train their relevant staff on the requirements of Section II (B), (E), (F) and (G) of this Agreement.
b. Update their materials provided to Participants and providers and publicly-posted online to reflect the information contained in Sections II(E)(i), (ii), (iv), and (v) and II(G)( ii), (iii), (vi), and (viii). The updates will be in a manner reflective of the language contained in Appendix A to this Agreement, however, any written information provided does not need to contain the exact language used in Appendix A but will not contain any material differences in meaning from the language contained therein.
vii. The LME/MCOs that are not parties to this Agreement and who have not implemented the Supports Needs Matrix shall not be required to update, revise, or amend any of their written materials or train their relevant staff on the provisions of this Agreement related to the Supports Need Matrix until immediately prior to when the LME/MCO first notifies an Innovations Participant of his or her SNM Base Budget.
III. Entry of Order of Approval: This Agreement is expressly made contingent upon the Court's approval of this Settlement Agreement and entry of Order(s) approving this Agreement pursuant to Rule 23(e) of the Federal Rules of Civil Procedure and Local Rule 17.1 of the Eastern District ofNorth Carolina.
A. Required Attachments: Attached hereto are the following:
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1. Summary of the Provisions of this Agreement to be Provided to Participants and Providers (Appendix A)
n. Joint Expedited Motion and Attached Supporting Memorandum of Law For Preliminary Approval of Settlement Agreement, Notice to Class Members, Scheduling of Fairness Hearing, Final Approval of Settlement Agreement and Clarification of Class Definition ("Joint Motion") (Exhibit 1);
m. [proposed] Order Preliminarily Approving Proposed Settlement and Directing Notice to the Class (Exhibit 2);
tv. [proposed] Notice Publication Schedule (Exhibit 3)
v. [proposed] Notice to Class Members of Settlement (Exhibit 4);
vt. [proposed] Order of Approval of Settlement (Exhibit 5);
vn. [proposed] Order of Dismissal with Prejudice (Exhibit 6);
vm. Class List as ofNovember 19, 2014 (Exhibit 7);
ix. Joint Statement of the Parties (Exhibit 8)
B. Approval by the Court: In entering into this Agreement the Parties are aware that, pursuant to Rule 23 ofthe Federal Rules ofCivil Procedure and Local Rule 17.1 of the Eastern District ofNorth Carolina, the Court must approve the terms of this Agreement and make certain findings in support of its approval. The Parties agree that the Court is not to retain jurisdiction of this matter following entry of the Order of Dismissal with Prejudice (Exhibit 6). The Parties further agree that any Order which modifies or alters the understandings of the Parties as set forth herein, or which creates additional obligations upon the Parties, will render this Agreement voidable at the election of any Party to this Agreement, provided notice of voiding the Agreement is given to opposing counsel within thirty (30) days of notice of any such Order, with the exception that if the March 29, 2012 preliminary injunction order and opinion is not vacated, that does not render this Agreement voidable.
C. Definition of the Class: The Parties and their counsel further agree and understand that, as reflected in the Joint Motion:
1. If this Agreement is approved by the Court, and not otherwise voided, the certified class in this case shall consist of all individuals enrolled in the Innovations Waiver during the time period that this Agreement is in effect, including individuals who enroll in the Innovations Waiver subsequent to the approval of this Agreement by the Court and prior to
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dismissal of this case. Within thirty (30) days of Approval of this Agreement by the Court, Defendants, through counsel, shall provide to class counsel the names, addresses, and phone numbers for all Innovations Participants. During the one (1) year period between implementation of this Agreement and dismissal of this case, within thirty (30) days of an individual becoming enrolled in Innovations and becoming an Innovations Participant, Defendants shall provide class counsel with the names, addresses, and phone numbers of those individuals.
11. If this Agreement is not approved by the Court, or is otherwise voided prior to dismissal of this case, the certified class consists only of the individuals identified on the attached Master Class List (Exhibit 7), as well as any Innovations Participants who receive a reduction in their SNM Base Budget during the time this Agreement is in effect prior to it being voided, as well as individuals who receive a reduction in their SNM Base Budget subsequent to the voiding of this Agreement.
iii. If this Agreement is voided prior to dismissal of this case, counsel for Defendants will provide the names, addresses, and phone numbers for the additional class members identified in Section III(C)(ii) above within thirty (30) days of the date this Agreement is voided.
D. Non-Incorporation of this Agreement: The Parties agree that the terms of this Agreement are not to be incorporated into any order of the Court and that other than the [proposed] Order Preliminarily Approving Proposed Settlement and Directing Notice to the Class, (Exhibit 2); the [proposed] Order of Approval of Settlement (Exhibit 5); the [proposed] Order of Dismissal with Prejudice, (Exhibit 6); no further orders shall be necessary to effectuate this Agreement.
E. Effectuation of Settlement Agreement: Following execution of this Agreement by the Parties, counsel will submit to the Court the Joint Motion, which shall request the Court to:
1. Hold a fairness hearing;
11. Approve the Settlement Agreement;
111. Place the above-captioned action on the inactive docket; and
a. If this Agreement is approved by the Court on or before December 31, 2014, one year following the implementation of the Settlement Agreement, as described in Section II(A) above, or the date of Court approval, whichever comes last, dismiss the above-captioned action with prejudice, except that the
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Order of Dismissal shall not be issued by the Court while dispute resolution under Section VI(A) below is pending, but shall be issued immediately upon a successful resolution to such a dispute; or
b. If this Agreement is not approved by the Court on or before December 31, 2014, notwithstanding the continued, expedited, and best efforts by all counsel to obtain Court Approval prior to that date, and the Defendants have certified implementation prior to the date of Court Approval, then the Court will dismiss the above-captioned action with prejudice on December 31, 2015, except that the Order of Dismissal shall not be issued by the Court while dispute resolution under Section VI(A) below is pending, but shall be issued immediately upon a successful resolution to such a dispute.
The Parties will request the Court to expedite the scheduling of the fairness hearing, and counsel will work together to facilitate the fairness hearing. All counsel will use their continued and best efforts to obtain court approval of the Settlement Agreement and the above-referenced Orders.
F. The March 29,2012 Preliminary Injunction:
1. Upon the date of Court approval or of Defendants' certification of implementation of this Agreement, whichever comes last, the Parties agree that the terms of the Court's March 29, 2012 Preliminary Injunction are stayed indefinitely.
u. If this Agreement becomes void under Section III(B) above or Section VI(A)(ii) below, the terms of the Court's March 29, 2012 Preliminary Injunction shall be stayed for ninety (90) days subsequent to the date this Agreement becomes void, after which the terms of the Court's March 29, 2012 Preliminary Injunction shall be in full effect, unless, within thirty (30) days of the date of this Agreement becoming void, Defendants file a Motion for Relief from the Preliminary Injunction (or other similar Motion).
a. If Defendants file such a Motion, the Parties agree to collaborate and propose an expedited briefing schedule to the Court, and the terms of the March 29, 2012 Preliminary Injunction shall remain stayed until Defendants' Motion is ruled upon by the Court and such ruling denies Defendants' Motion, or otherwise reinstates the terms of the March 29, 2012 Preliminary Injunction. In either event, the terms of the Court's Order on Defendant's Motion shall control.
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111. Nothing in this Agreement shall be construed to constitute an agreement between the parties as to the meaning, interpretation, or implementation of the March 29, 2012 Preliminary Injunction. The Parties further agree that if this Agreement does not become void, the March 29, 2012 preliminary injunction, whether or not vacated by the Court, shall have no preclusive, persuasive or precedential effect in any future litigation that may occur between the Parties.
iv. No later than 270 days after implementation of this Agreement, as described in Section II(A) above, Defendants may move to vacate the March 29, 2012 Preliminary Injunction order and opinion effective upon dismissal of this case, and Plaintiffs agree not to oppose such Motion on procedural grounds and consent to the Court granting leave to file such Motion. Plaintiffs agree that if such Motion is filed, Plaintiffs will not oppose such Motion, but may submit a list of authority they believe is pertinent to the Court's consideration of such Motion.
IV. Attorneys Fees. Within thirty (30) days of approval of this Settlement Agreement by the Court at the hearing, Defendants shall deliver to the National Health Law Program as trustee a check in the amount of $375,000 for expenses, costs and attorneys' fees. These funds are not immediately disbursable to Plaintiffs' counsel and shall be held in trust in an interest bearing trust account (with any interest paid to the N.C. IOLTA program) until the Order of Dismissal with Prejudice (Exhibit 6), is entered by the Court. At that time, the trustee shall cause these funds to be disbursed in a manner agreed upon by Plaintiffs' counsel. The payment of these funds will satisfy in full any claim by Plaintiffs for attorneys' fees under 42 U.S.C. § 1988. Alternatively, should the Order of Dismissal with Prejudice not be entered by the Court, then the trustee shall remit the sum of$375,000 to NCDHHS.
V. Term; Material Change in Law or Fact. If this Agreement is approved by the Court, all Parties shall be bound by the terms of the Agreement from the date the Court enters the Order of Approval of Settlement (Exhibit 5), until two (2) years after the Court enters the Order of Dismissal with Prejudice (Exhibit 6). During this time, all terms of this Agreement shall remain in effect, unless and until there is a material change in the law or facts that are the basis of this Agreement. Two years after the date the Court enters the Order of Dismissal with Prejudice, no Party shall be bound by the terms of this Agreement any longer, except that the Parties shall still remain bound by the Release set forth in Section VIII.
VI. Dispute Resolution. It is the Parties' intent to pursue a problem-solving approach so that disagreements can be minimized and resolved amicably, without resorting to further litigation. Only substantial non-compliance shall constitute a breach of the Agreement. Substantial non-compliance with this Agreement occurs when there are violations of the Agreement that are significant, repeated, and systemic in nature.
18
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A. Following Entry of Order of Approval. During the period between the date of Defendants' notification to Plaintiffs of implementation of this Agreement, as described in Section II(A) above, and the date ofthe Court's entry of the Order of Dismissal (during which time this case shall be placed on the Court's inactive docket), the Parties agree to employ the following in an effort to resolve any disputes that might arise related to this Agreement.
1. If Plaintiffs believe that Defendants have taken an action, or failed to take an action, that amounts to substantial non-compliance with the requirements of this Agreement, Plaintiffs' counsel may submit information to Defendants' counsel suggestive of such substantial noncompliance. Plaintiffs will submit such information no later than 30 days before the one year period expires. Defendants will promptly investigate the information and Defendants' counsel will meet and confer with Plaintiffs' counsel regarding their findings within fortyfive (45) days of the date Plaintiffs' counsel submits the information. Thereafter, Plaintiffs' counsel will inform Defendants' counsel within fourteen (14) days whether they are satisfied with the information provided, such satisfaction not to be unreasonably withheld. If not, Plaintiffs' counsel will give Defendants' counsel written notice which details with specificity the matters alleged to be substantially out of compliance and the facts and information upon which Plaintiffs base their allegations of substantial non-compliance to enable Defendants to attempt to cure the alleged substantial non-compliance.
ii. If the alleged substantial non-compliance is not cured to the satisfaction of Plaintiffs' counsel (such satisfaction not to be unreasonably withheld) within twenty (20) days of Plaintiffs' written notice, then either party may request a conference with a magistrate assigned by the court for the purpose of attempting to resolve the dispute through mediation. If such efforts at mediation fail, this settlement agreement shall become void, the Parties shall request the Court to place the case back on the active docket, and the litigation shall resume.
B. Following Entrv of Order of Dismissal with Prejudice. During the two (2) year period following the Court's entry of the Order of Dismissal that the Parties remain bound by the terms of this Agreement, the Parties agree to employ the following in an effort to resolve any disputes that might arise related to this Agreement.
1. If Plaintiffs believe that Defendants have taken an action, or failed to take an action, that amounts to substantial non-compliance with the requirements of this Agreement, Plaintiffs' counsel may submit information to Defendants' counsel suggestive of such substantial noncompliance. Defendants will promptly investigate the information and Defendants' counsel will meet and confer with Plaintiffs' counsel
19
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regarding their findings within forty-five (45) days of the date Plaintiffs' counsel submits the information. Thereafter, Plaintiffs' counsel will inform Defendants' counsel within fourteen (14) days whether they are satisfied with the information provided, such satisfaction not to be unreasonably withheld. If not, Plaintiffs' counsel will give Defendants' counsel written notice which details with specificity the matters alleged to be substantially out of compliance and the facts and information upon which Plaintiffs base their allegations of substantial non-compliance to enable Defendants to attempt to cure the alleged substantial non-compliance.
11. If the alleged substantial non-compliance is not cured to the satisfaction of Plaintiffs' counsel (such satisfaction not to be unreasonably withheld) within twenty (20) days of Plaintiffs' written notice, then either party may request a conference with a mutuallyagreeable mediator for the purpose of attempting to resolve the dispute through mediation, with mediation expenses to be shared equally between Plaintiffs and Defendants if a pro bono mediator cannot be identified and mutually agreed to by the Parties.
111. This Agreement represents a contract between the Parties. In the event that mediation fails, any Party, including any individuals who were members of the certified class in this action as of the date of dismissal in this case may file a breach of contract action in Superior Court in Wake County, North Carolina no later than two (2) years after the date of dismissal of this case.
C. No Contempt of Court. Nothing herein gives any party a right to attempt to hold any other party in contempt of court.
VII. North Carolina Law. The laws of the State ofNorth Carolina and of the United States shall govern this Agreement.
VIII. Release. If this Agreement is approved by the Court and the case is dismissed with prejudice, upon entry of the Order of Dismissal with Prejudice, it is the Parties' intent that Plaintiffs and Defendants shall release one another from all claims related to the civil action now styled, L.S. eta/. v. Wos et al., No. 5:11-CV-354 (the "Lawsuit"). Notwithstanding this general release, as stated in Section ll(F), nothing in this Settlement Agreement shall be construed to address whether or not benefits are required to continue after the expiration of an authorization period
A. Release by Plaintiffs. Upon entry of the Order of Dismissal with Prejudice, Plaintiffs, on behalf of themselves and the members of the certified class, hereby release Defendants, their officials, employees, agents, representatives, successors and assigns from any and all claims, demands, actions, causes of action, damages, costs and expenses that
20
Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 20 of 29

were raised or could have been raised based upon the factual allegations contained in the amended complaint or intervenor complaint based upon events or actions occurring prior to the effective date of this Agreement, with the exception of Plaintiffs' claim that Services are required to continue pending the outcome of an appeal after the expiration of an authorization period, which is specifically reserved.
B. Release by Defendants. Upon entry of the Order of Dismissal with Prejudice, Defendants hereby release Plaintiffs, their officials, employees, agents, representatives, successors and assigns from any and all claims, demands, actions, causes of action, damages, costs and expenses which Defendants ever had, now have, or hereinafter can, shall, or may have, by reason of anything occurring, done or omitted to be done by Plaintiffs as of, or prior to, the effective date of this Agreement relating to the Lawsuit.
IX. Joint Statement. The Parties and their legal counsel agree that, following entry of the Order of Dismissal with Prejudice, they shall release a joint statement in the form set forth in Exhibit 8 regarding the resolution of this case. The Parties and their legal counsel further agree that they shall not otherwise make any public statements regarding the resolution of this case.
X. Merger. The parties agree and acknowledge that this written Agreement sets forth all of the terms and conditions between them concerning the subject matter of this Agreement, superseding all prior oral and written statements and representations, and that there are no terms or conditions between the parties except as specifically set forth in this Agreement.
XI. Amendments. Any amendment or modification to this Agreement must be in writing and signed by all Parties.
XII. Third Partv Beneficiaries. Other than the Parties, including members of the certified Plaintiff class, no person or entity is intended to be a third party beneficiary of the provisions of this Agreement for purposes of any civil, criminal, or administrative action, and accordingly, no third party or entity may assert any claim or right as a beneficiary under this Agreement in any civil, criminal, or administrative action. Neither third parties, nor the Court, shall have the ability to modify the terms set out in this Agreement without consent of all Parties.
XIII. No Strict Interpretation Against Draftsman. The parties have participated in the drafting of this Agreement and have had the opportunity to consult with counsel concerning its terms. This Agreement shall not be interpreted strictly against any one party on the ground that it drafted the Agreement or any part of it.
XIV. Voluntarv Acceptance of Terms. The Parties represent and acknowledge that this Agreement is the result of extensive, thorough and good faith negotiations. The Parties further represent and acknowledge that the terms of this Agreement have been voluntarily accepted, after consultation with counsel, for the purpose of making a full and final compromise and settlement of any and all claims, allegations, or defenses set forth by the Parties in the Lawsuit.
21
Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 21 of 29

XV. Recitals and Headings. All parts and provisions of this Agreement, including the recitals, paragraph headings, and exhibits, are intended to be material parts of the Agreement.
XVI. Authority to Settle. Each Party to this Agreement represents and warrants that the person who has signed this Agreement on behalf of his or her entity is duly authorized to enter into this Agreement and to bind that Party to the terms and conditions of this Agreement. The signatures below of officials or attorneys representing the Parties signify that all Parties have given their approval to this Agreement, subject to approval by the United States District Court for the Eastern District ofNorth Carolina.
XVII. Facsimile or Emailed Signatures Binding. In order to expedite the signing of this Agreement, the Parties stipulate and agree that the delivery of an executed signature page by one party to the other via facsimile transmission or email of a PDF copy shall bind the transmitting party to the same extent as service of the original signature page by hand delivery. The Parties stipulate and agree that a party that sends a signature page via facsimile transmission or email shall mail the original to the other party within five (5) business days after the facsimile transmission or email.
XVIII. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and the counterparts shall together constitute one and the same Agreement, notwithstanding that each party is not a signatory to the original or the same counterpart. All references to signature or execution of the Agreement shall be calculated from the date on which the last party executed the Agreement.
XIX. Effective Date. This Agreement shall become effective on the date when the last of the Parties signs the Agreement.
XX. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties have executed three (3) original copies of this Agreement.
[SIGNATURE PAGES FOLLOW ON PAGES 23- 29]
22
Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 22 of 29

TillS SETTLEMENT AGREEMENT agreed to and executed by the Parties hereto: PLAJ TIFF L.S., a minor child, by and through his father and next friend, R . S.:
By:
Signature
;;jz:;-/!f
Date

23

TOO~

Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 23 of 29

THIS SETTLEMENT AGREEMENT agreed to and executed by the Parties hereto: PLAINTIFF K.C., an incompetent adult, by and through his mother and guardian, A--H.:
By:
24 Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 24 of 29

THIS SEITLEMENT AGREEMENT agreed to and executed by the Parties hereto: ~~.,.~:
25
Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 25 of 29

THIS SETTLEMENT AGREEMENT agreed to and executed by Parties hereto:
PLAINTIFF D.C., a minor child, by and through his mother and next friend, IT 1 C.:
By:
26
Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 26 of 29

THIS SETTLEMENT AGREEMENT agreed to and executed by the Parties hereto:
R.41···· INTERVENOR flLAINTIFF M.S., an~incompetent adult, by and through his mother and
guardian, Date
27 Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 27 of 29

THIS SETTLEMENT AGREEMENT agreed to and executed by the Parties hereto: DEFENDANT ALDONA ZOFIA WOS, in her official capacity as the Secretary of the North Carolina Department of Health. and Human Services
By: B/da/za 2'8/~:a J/oy Printed Name 5e.crela r ?' Official Tit!~_:]. 7 Date
28 Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 28 of 29

THIS SETTLEMENT AGREEMENT agreed to and executed by the Parties hereto:

DEFENDANT PAMELA SHIPMAN, in her official capacity as Chief Executive Officer of

CARDINAL INNOVATIONS HEALTHCARE SOLUTIONS

By: B~e-\a.__ L5h~tP rl"""'\O..Y)

Printed Name

1

~E.O

~-- ? . ? l e

)/ -91., It
Date

This instrument has been pre-audited in the manner required by the Local Government Budget and Fiscal Control Act, N.C. Gen. Stat. Chapter 159.
By: Printed Name

Date I 7

29 Case 5:11-cv-00354-FL Document 193 Filed 12/12/14 Page 29 of 29

 
 Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 1 of 25
CLOSED
U.S. District Court EASTERN DISTRICT OF NORTH CAROLINA (Western Division)
CIVIL DOCKET FOR CASE #: 5:11−cv−00354−FL

L.S., et al v. Brajer, et al Assigned to: District Judge Louise Wood Flanagan Case in other court: 4Th Circuit Court of Appeals, 12−01575 Cause: 42:1983 Civil Rights Act
Plaintiff

Date Filed: 07/01/2011 Date Terminated: 12/31/2015 Jury Demand: None Nature of Suit: 890 Other Statutory Actions Jurisdiction: Federal Question

K.C. a minor child, by and through his mother and next friend, Africa H.

represented by Morris Fonville McAdoo Disability Rights of North Carolina 3724 National Drive, Suite 100 Raleigh, NC 27612 919−856−2195 Fax: 919−856−2244 Email: morris.mcadoo@disabilityrightsnc.org LEAD ATTORNEY ATTORNEY TO BE NOTICED

Douglas Stuart Sea Legal Services of Southern Piedmont 1431 Elizabeth Ave. Suite 600 Charlotte, NC 28204 704−971−2593 Fax: 704−376−8627 Email: dougs@lssp.org ATTORNEY TO BE NOTICED

Jennifer Leah Bills Disability Rights of North Carolina 2626 Glenwood Ave., Suite 550 Raleigh, NC 27608 919−856−2195 Fax: 919−856−2244 Email: jennifer.bills@disabilityrightsnc.org ATTORNEY TO BE NOTICED

Martha Jane Perkins National Health Law Program 200 North Greensboro St. Suite D−13 Carrboro, NC 20510 919−968−6308 Fax: 968−8855 Email: perkins@healthlaw.org ATTORNEY TO BE NOTICED

John R. Rittelmeyer Disability Rights of North Carolina 3724 National Drive, Suite 100 Raleigh, NC 27612 919−856−2195 Fax: 919−856−2244 Email: john.rittelmeyer@disabilityrightsnc.org ATTORNEY TO BE NOTICED

Plaintiff Allison Taylor Johns

represented by

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 2 of 25

Morris Fonville McAdoo (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Douglas Stuart Sea (See above for address) ATTORNEY TO BE NOTICED

Jennifer Leah Bills (See above for address) ATTORNEY TO BE NOTICED

Martha Jane Perkins (See above for address) ATTORNEY TO BE NOTICED

John R. Rittelmeyer (See above for address) ATTORNEY TO BE NOTICED

Plaintiff
L.S. a minor child, by and through his father and next friend, Ron S.

represented by Morris Fonville McAdoo (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Douglas Stuart Sea (See above for address) ATTORNEY TO BE NOTICED

Jennifer Leah Bills (See above for address) ATTORNEY TO BE NOTICED

Martha Jane Perkins (See above for address) ATTORNEY TO BE NOTICED

John R. Rittelmeyer (See above for address) ATTORNEY TO BE NOTICED

Plaintiff
D.C. a minor child, by and through his mother and next friend, Penny C.

represented by Morris Fonville McAdoo (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Douglas Stuart Sea (See above for address) ATTORNEY TO BE NOTICED

Jennifer Leah Bills (See above for address) ATTORNEY TO BE NOTICED

Martha Jane Perkins (See above for address) ATTORNEY TO BE NOTICED

John R. Rittelmeyer (See above for address) ATTORNEY TO BE NOTICED

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 3 of 25

V. Intervenor Plaintiff M.S. a minor child, by and through his parent and natural guardian Rachelle S.
V. Defendant Lanier M. Cansler in his official capacity as Secretary of the Department of Health and Human Services TERMINATED: 03/16/2012
Defendant Pamela Shipman in her official capacity as Area Director of Piedmont Behavioral Health Care Area Mental Health, Developmental Disabilities, and Substance Abuse Authority

represented by Douglas Stuart Sea (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
John R. Rittelmeyer (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Jennifer Leah Bills (See above for address) ATTORNEY TO BE NOTICED
Martha Jane Perkins (See above for address) ATTORNEY TO BE NOTICED
Morris Fonville McAdoo Disability Rights of North Carolina 2626 Glenwood Ave., Suite 550 Raleigh, NC 27608 919−856−2195 Fax: 919−856−2244 Email: morris.mcadoo@disabilityrightsnc.org ATTORNEY TO BE NOTICED
represented by Belinda A. Smith N. C. Dept. of Justice P. O. Box 629 Raleigh, NC 27602−0629 919−716−6840 Fax: 716−6758 Email: bsmith@ncdoj.gov TERMINATED: 12/28/2015 LEAD ATTORNEY
Iain Stauffer N. C. Dept. of Justice 114 West Edenton St., 9001 Mail Service Center P. O. Box 629 Raleigh, NC 27602−0629 919−716−6840 Fax: 919−716−6758 Email: istauffer@ncdoj.gov TERMINATED: 09/30/2015
represented by Alison R. Bost Womble Carlyle Sandridge & Rice, LLP One Wells Fargo Center 301 S. College Street, Suite 3500 Charlotte, NC 28202 704−331−4900

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 4 of 25

Fax: 704−331−4955−7855 Email: abost@wcsr.com TERMINATED: 01/11/2012 LEAD ATTORNEY

Raboteau T. Wilder , Jr. Womble Carlyle Sandridge & Rice, LLP One Wells Fargo Center 301 S. College Street, Suite 3500 Charlotte, NC 28202 704−331−4932 Fax: 704−444−8165 Email: rwilder@wcsr.com TERMINATED: 01/11/2012 LEAD ATTORNEY

Reed J. Hollander Nelson Mullins Riley & Scarborough LLP GlenLake One, Suite 200 4140 Parklake Avenue Raleigh, NC 27612 919−877−3816 Fax: 919−877−3149 Email: reed.hollander@nelsonmullins.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Stephen D. Martin Cardinal Innovations Healthcare Solutions 550 S. Caldwell Street Suite 1500 Charlotte, NC 28202 919−913−4194 Fax: 704−939−7904 Email: steve.martin@cardinalinnovations.org LEAD ATTORNEY ATTORNEY TO BE NOTICED

Wallace C. Hollowell , III Cardinal Innovations Healthcare Solutions 550 S. Caldwell Street Suite 1500 Charlotte, NC 28202 919−649−3088 Email: chuck.hollowell@cardinalinnovations.org LEAD ATTORNEY ATTORNEY TO BE NOTICED

Defendant
Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority doing business as PBH

represented by Alison R. Bost (See above for address) TERMINATED: 01/11/2012 LEAD ATTORNEY
Raboteau T. Wilder , Jr. (See above for address) TERMINATED: 01/11/2012 LEAD ATTORNEY

Reed J. Hollander (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 5 of 25

Stephen D. Martin (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Wallace C. Hollowell , III (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Defendant
Aldona Zofia Wos in her official capacity as Secretary of the Department of Health and Human Services TERMINATED: 09/30/2015

represented by Belinda A. Smith (See above for address) TERMINATED: 12/28/2015 LEAD ATTORNEY
Iain Stauffer (See above for address) TERMINATED: 09/30/2015

Defendant
Richard Brajer in his official capacity as the Secretary of the Department of Health and Human Services

represented by Belinda A. Smith (See above for address) TERMINATED: 12/28/2015 LEAD ATTORNEY

Michael T. Wood N.C. Department of Justice P.O. Box 629 114 West Edenton St. Raleigh, NC 27602−0629 919−716−0186 Fax: 919−716−6758 Email: MWood@ncdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

Iain Stauffer (See above for address) TERMINATED: 09/30/2015

Date Filed 07/04/2011
07/05/2011
07/05/2011 07/05/2011 07/05/2011

# Docket Text
NOTICE OF DEFICIENCY − All documents in this case have been provisionally SEALED due to counsel's failure to comply with Local Civil Rule 17.1(d). Counsel must correct and refile all documents, removing all references to the names of minor children. Only initials may be utilized in reference to minor children. (Baker, C.) (Entered: 07/04/2011)
6 COMPLAINT against All Defendants ( Filing fee $ 350 receipt number 253PH4L5) filed by K.C., D.C., L.S., Allison Taylor Johns. (Attachments: # 1 Civil Cover Sheet, # 2 Cansler Summons, # 3 PBH Summons, # 4 Shipman Summons) (Rittelmeyer, John) (Entered: 07/05/2011)
7 FINANCIAL DISCLOSURE STATEMENT by K.C. (Rittelmeyer, John) (Entered: 07/05/2011)
8 FINANCIAL DISCLOSURE STATEMENT by Allison Taylor Johns. (Rittelmeyer, John) (Entered: 07/05/2011)
9 FINANCIAL DISCLOSURE STATEMENT by L.S. (Rittelmeyer, John) (Entered: 07/05/2011)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 6 of 25

07/05/2011 07/05/2011 07/05/2011 07/05/2011 07/05/2011 07/06/2011 07/06/2011 07/11/2011 07/11/2011 07/12/2011 07/12/2011
07/12/2011 07/13/2011 07/15/2011 07/15/2011 07/15/2011

10 FINANCIAL DISCLOSURE STATEMENT by D.C. (Rittelmeyer, John) (Entered: 07/05/2011)
11 Summonses Issued as to Lanier M. Cansler, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, and Pamela Shipman. Counsel should print summonses and effect service. (Baker, C.) (Entered: 07/05/2011)
12 NOTICE of Appearance by Raboteau T. Wilder, Jr on behalf of Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Wilder, Raboteau) (Entered: 07/05/2011)
13 FINANCIAL DISCLOSURE STATEMENT by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Wilder, Raboteau) (Entered: 07/05/2011)
14 FINANCIAL DISCLOSURE STATEMENT by Pamela Shipman. (Wilder, Raboteau) (Entered: 07/05/2011)
15 NOTICE of Appearance by Stephen D. Martin on behalf of Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 07/06/2011)
16 NOTICE of Appearance by Wallace C. Hollowell, III on behalf of Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Hollowell, Wallace) (Entered: 07/06/2011)
17 NOTICE of Appearance by Belinda A. Smith on behalf of Lanier M. Cansler. (Smith, Belinda) (Entered: 07/11/2011)
18 MOTION for Extension of Time to File Answer re 6 Complaint, by Lanier M. Cansler. (Attachments: # 1 Text of Proposed Order Granting Enlargement of Time) (Smith, Belinda) (Entered: 07/11/2011)
MOTION REFERRED to Dennis P. Iavarone, Clerk of Court − 18 MOTION for Extension of Time to File Answer re 6 Complaint. (Baker, C.) (Entered: 07/12/2011)
19 ORDER − This matter came before the court on class action complaint filed July 5, 2011, wherein plaintiffs request temporary, preliminary, and permanent injunctive relief. Although no formal motion rises to the face of the docket, the court has cause to consider plaintiffs' requests for temporary injunctive relief lodged in the complaint. Plaintiffs' request for temporary injunctive relief is DENIED. Preliminary injunctive relief is still available to plaintiffs upon motion properly supported and notice to defendants. The parties are encouraged to confer and propose alternative dates for conference by telephone with the court immediately after response is made to the complaint by defendants. At conference, the court will discuss the case schedule and briefing on the anticipated motion for preliminary injunction. Signed by Chief Judge Louise Wood Flanagan on 07/12/2011. (Baker, C.) (Entered: 07/12/2011)
20 ORDER granting 18 Motion for Extension of Time to Answer Complaint − Lanier M. Cansler's answer due 8/29/2011. Signed by Dennis P. Iavarone, Clerk of Court on 07/12/2011. (Baker, C.) (Entered: 07/12/2011)
21 FINANCIAL DISCLOSURE STATEMENT by Lanier M. Cansler. (Smith, Belinda) (Entered: 07/13/2011)
22 MOTION for Extension of Time to File Answer re 6 Complaint, by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 07/15/2011)
MOTION REFERRED to Dennis P. Iavarone, Clerk of Court − 22 MOTION for Extension of Time to File Answer re 6 Complaint. (Baker, C.) (Entered: 07/15/2011)
23 ORDER granting 22 Motion for Extension of Time to Answer Complaint − Answer due 08/29/2011 by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority and Pamela Shipman. Signed by Dennis P. Iavarone, Clerk of Court on 07/15/2011. (Baker, C.) (Entered: 07/15/2011)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 7 of 25

07/26/2011 07/27/2011 08/03/2011 08/23/2011 08/23/2011 08/23/2011
08/24/2011
08/24/2011 08/24/2011
08/24/2011

24 NOTICE of Appearance by Jennifer Leah Bills on behalf of All Plaintiffs. (Bills, Jennifer) (Entered: 07/26/2011)
**** Set Hearing: Telephonic Conference as to 19 ORDER set for 8/30/2011 at 12:30 PM before Chief Judge Louise Wood Flanagan. Dial−In instructions sent to counsel on 7/27/2011. (Tripp, S.) (Entered: 07/27/2011)
25 NOTICE of Appearance by Morris Fonville McAdoo on behalf of All Plaintiffs. (McAdoo, Morris) (Entered: 08/03/2011)
26 NOTICE of Appearance by Douglas Stuart Sea on behalf of D.C., Allison Taylor Johns, K.C., L.S. (Sea, Douglas) (Entered: 08/23/2011)
27 MOTION to Disqualify Counsel by D.C., Allison Taylor Johns, K.C., L.S. (Sea, Douglas) (Entered: 08/23/2011)
28 *DOCUMENT CORRECTED AND REFILED AT DOCKET ENTRY 30 * − AFFIDAVIT re 27 MOTION to Disqualify Counsel by D.C., Allison Taylor Johns, K.C., L.S.. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F) (Sea, Douglas) Modified on 8/24/2011 to insert refiling information. (Baker, C.) (Entered: 08/23/2011)
NOTICE OF DEFICIENCY re: 28 Affidavit − Counsel is directed to refile this document and bring it into compliance with Section L of this court's Electronic Case Filing Administrative Policies and Procedures Manual pertaining to clear and complete identification/description of attachments and exhibits. (Baker, C.) (Entered: 08/24/2011)
29 AFFIDAVIT by Jane Perkins re 27 MOTION to Disqualify Counsel by D.C., Allison Taylor Johns, K.C., L.S. (Sea, Douglas) Modified on 8/24/2011 to clarify docket entry text. (Baker, C.) (Entered: 08/24/2011)
30 AFFIDAVIT of Douglas Sea regarding 27 MOTION to Disqualify Counsel by D.C., Allison Taylor Johns, K.C., L.S. (Attachments: # 1 Exhibit A − Emails with Womble, # 2 Exhibit B − Settlement Agreement, # 3 Exhibit C − Amended Complaint, # 4 Exhibit D − PBH Memo, # 5 Exhibit E − Comparison of allegations, # 6 Exhibit F − Bar Rules) (Sea, Douglas) (Entered: 08/24/2011)
31 MOTION for Preliminary Injunction by D.C., Allison Taylor Johns, K.C., L.S. (Attachments: # 1 Affidavit of Douglas Sea, # 2 Sea Exhibit A−CMS letter, # 3 Sea Exhibit B part one−waiver, # 4 Exhibit Sea Exhibit B part two−waiver, # 5 Sea Exhibit C Contract, # 6 Sea Exhibit D PBH 4−18 memo, # 7 Sea Exhibit E waiver amendment, # 8 Sea Exhibit F SNM guide, # 9 Sea Exhibit G 2nd 4−18 PBH memo, # 10 Sea Exhibit H SIS results, # 11 Sea Exhibit I Aug 2010 PBH memo, # 12 Sea Exhibit J Apr 2011 PBH memo, # 13 Sea Exhibit K SIS Info, # 14 Sea Exhibit L July 15 PBH release, # 15 Sea Exhibit M DMA memo, # 16 Sea Exhibit N PBH slides, # 17 Sea Exhibit O PBH provider manual, # 18 Sea Exhibit P PBH Family Guide, # 19 Sea Exhibit Q PBH March 2011 memo, # 20 Sea Exhibit R PBH consumer handbook, # 21 Sea Exhibit S PBH March 2011 release, # 22 Sea Exhibit T PBH SIS chart, # 23 Affidavit of Ron S. Declaration, # 24 Ron S. Exhibit A SIS Rpt, # 25 Ron S. Exhibit B SIS rpt 2, # 26 Ron S. Exhibit C Plan of care, # 27 Ron S. Exhibit D−plan update, # 28 Ron S. Exhibit E−4−4−11 ltr, # 29 Affidavit of Holzlohner, # 30 Holzlohner Exhibit A SIS rpt, # 31 Holzlohner Exhibit B SNM ltr, # 32 Affidavit of Peters, # 33 Peters Exhibit A−SNM ltr, # 34 Affidavit of Penny C., # 35 Penny C. Exhibit A 3−4−10 Ltr, # 36 Penny C. Exhibit B SIS rpt, # 37 Penny C. Exhibit C 6−4−11 ltr, # 38 Penny C. Exhibit D 3−11 assessment, # 39 Penny C. Exhibit E 3−11 evaluation, # 40 Penny C. Exh F 4−11 Plan, # 41 Penny C. Exhibit G undated Ltr, # 42 Penny C. Exhibit H 4−8−11 memo, # 43 Penny C. Exhibit I 4−4−11 ltr, # 44 Penny C. Exhibit J 4−20−11 memo, # 45 Penny C. Exhibit K 4−21−11 ltr, # 46 Penny C. Exhibit L 4−27−11 ltr, # 47 Penny C. Exhibit M 5−25−11 ltr, # 48 Penny C. Exhibit N Inten Review Request, # 49 Penny C. Exhibit O Internal Revenue Decision, # 50 Penny C. Exhibit P 6−10 plan update, # 51 Penny C. Exhibit Q 6−22−11 letter, # 52 Penny C. Exhibit R 6−28−11 memo, # 53 Penny C. Exhibit S 6−29 email, # 54 Penny C. Exhibit T 6−30−11 email, # 55 Penny C. Exhibit U 6−30 Plan update, # 56 Penny C. Exhibit V 7−11−11 memo, # 57 Penny C. Exhibit W 7−14 plan update, # 58 Penny C. Exhibit X 8−4−11 ltr, # 59 Affidavit of Murrone, # 60 Affidavit of Strange, # 61 Affidavit of Heath, # 62 Heath Exhibit A 2011 SIS, # 63 Heath Exhibit B 2010 SIS, # 64 Heath Exhibit C 6−11 Plan

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08/24/2011 08/25/2011 08/25/2011 08/29/2011
08/29/2011 08/29/2011 08/29/2011 08/29/2011
08/29/2011 09/07/2011
09/16/2011 09/16/2011 09/16/2011

update, # 65 Heath Exhibit D 3−11 plan update, # 66 Heath Exhibit E 2010 Plan, # 67 Heath Exhibit F 4−4−11 ltr, # 68 Heath Exhibit G undated ltr, # 69 Affidavit of Johns, # 70 Johns Exhibit A SIS rpt, # 71 Johns Exhibit B 5−11 plan update, # 72 Johns Exhibit C 2010 plan, # 73 Johnsibit Exh D 4−4−11 ltr, # 74 Affidavit of Melissa W., # 75 Melissa W. Exhibit A SNM ltr, # 76 Melissa W. Exhibit B plan updates, # 77 Melissa W. Exhibit C SIS rpts) (Sea, Douglas) (Entered: 08/24/2011)
32 MEMORANDUM IN SUPPORT re 32 Motion for Preliminary Injunction by D.C., Allison Taylor Johns, K.C., L.S. (Sea, Douglas) Modified on 8/25/2011 to correct docket entry text and terminate erroneous motion event. (Baker, C.) (Entered: 08/24/2011)
NOTICE OF CORRECTION re: 32 Motion for Preliminary Injunction − This is not a motion. This is a memorandum in support of a motion. In future filings, counsel is reminded that motion events are not to be utilized for non−motion filings. The Clerk's office has corrected the deficiency in this instance. (Baker, C.) (Entered: 08/25/2011)
33 NOTICE of Appearance by Martha Jane Perkins on behalf of All Plaintiffs. (Perkins, Martha) (Entered: 08/25/2011)
34 First MOTION to Certify Class by D.C., Allison Taylor Johns, K.C., L.S. Responses due by 9/19/2011. (Attachments: # 1 Appendix unreported decision EQ Indus, # 2 Appendix unreported decision Martin, # 3 Appendix unreported Decision Dajour B, # 4 Affidavit Declaration Of John Rittelmeyer, # 5 Affidavit Declaration of Jennifer Bills, # 6 Affidavit 3rd Affidavit of Douglas Sea, # 7 Exhibit Sea Affid Exh A Waiver Alert, # 8 Affidavit Declaration of Jane Perkins) (Sea, Douglas) (Entered: 08/29/2011)
35 Memorandum in Support re 34 First MOTION to Certify Class filed by D.C., Allison Taylor Johns, K.C., L.S. (Sea, Douglas) (Entered: 08/29/2011)
36 Declaration re 34 First MOTION to Certify Class as Corrected by Jane Perkins by D.C., Allison Taylor Johns, K.C., L.S. (Sea, Douglas) (Entered: 08/29/2011)
37 ANSWER to 6 Complaint, by Lanier M. Cansler. (Smith, Belinda) (Entered: 08/29/2011)
NOTICE TO COUNSEL re: 19 Order − Telephonic Scheduling Conference. Counsel is hereby advised that the originally scheduled telephonic Scheduling Conference set for this matter on 8/30/2011 at 12:30 p.m. is to be rescheduled to a date uncertain at this time. Counsel will be notified accordingly once a new date has been set. (Edwards, S.) (Entered: 08/29/2011)
38 ANSWER to 6 Complaint, and Affirmative Defenses by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 08/29/2011)
39 ORDER − The court dispenses with the telephonic conference postponed from August 30, 2011 due to Hurricane Irene given the procedural posture that the case has assumed since entry of the court's order on July 12, 2011. Of its own initiative, the court STAYS the time for defendant to respond to the motions for preliminary injunction and to certify the class, turning its attention to the plaintiffs' motion to disqualify counsel. Signed by Chief Judge Louise Wood Flanagan on 09/06/2011. (Baker, C.) (Entered: 09/07/2011)
40 Memorandum in Opposition re 27 MOTION to Disqualify Counsel filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Wilder, Raboteau) (Entered: 09/16/2011)
41 AFFIDAVIT re 40 Memorandum in Opposition "Affidavit of Pamela L. Shipman" by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Wilder, Raboteau) (Entered: 09/16/2011)
42 AFFIDAVIT re 40 Memorandum in Opposition "Affidavit of Andrea J. Misenheimer" by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Exhibit A − 2011 Validity and Reliability Results) (Wilder, Raboteau) (Entered: 09/16/2011)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 9 of 25

09/16/2011
09/16/2011
09/16/2011
09/16/2011 09/16/2011 09/22/2011 09/22/2011 09/22/2011 09/22/2011 09/22/2011 10/18/2011 10/20/2011

43 AFFIDAVIT regarding 40 Memorandum in Opposition "Affidavit of Reid C. Adams" by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Exhibit A − Perkins Email, # 2 Exhibit B − Notice of Appearance, # 3 Exhibit C − Order, # 4 Exhibit D − Settlement Agreement, # 5 Exhibit E − Order of Approval of Settlement Agreement, # 6 Exhibit F − Email String − Sea, # 7 Exhibit G − Email String − Perkins/Sea, # 8 Exhibit H − Notice of Ethical Screen) (Wilder, Raboteau) (Entered: 09/16/2011)
44 AFFIDAVIT regarding 40 Memorandum in Opposition "Affidavit of Murray C. Greason III" by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Exhibit A − Notice of Appearance, # 2 Exhibit B − Order, # 3 Exhibit C − Settlement Agreement, # 4 Exhibit D − Order of Approval of Settlement Agreement, # 5 Exhibit E − Email String − Sea, # 6 Exhibit F − Email String − Perkins/Sea, # 7 Exhibit G − Notice of Ethical Screen) (Wilder, Raboteau) (Entered: 09/16/2011)
45 AFFIDAVIT regarding 40 Memorandum in Opposition "Affidavit of David J. Mazza" by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Exhibit A − Notice of Appearance, # 2 Exhibit B − Order, # 3 Exhibit C − Settlement Agreement, # 4 Exhibit D − Order of Approval of Settlement Agreement, # 5 Exhibit E − Email String − Sea, # 6 Exhibit F − Email String − Perkins/Sea, # 7 Exhibit G − Notice of Ethical Screen) (Wilder, Raboteau) (Entered: 09/16/2011)
46 AFFIDAVIT regarding 40 Memorandum in Opposition "Affidavit of Raboteau T. Wilder, Jr." by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Exhibit A − Notice of Ethical Screen, # 2 Exhibit B − CPR 147) (Wilder, Raboteau) (Entered: 09/16/2011)
47 RESPONSE to Motion re 27 MOTION to Disqualify Counsel filed by Lanier M. Cansler. (Smith, Belinda) (Entered: 09/16/2011)
48 REPLY to Response to Motion re 27 MOTION to Disqualify Counsel as to Arguments Raised by Defendant PBH filed by D.C., K.C., L.S. (Attachments: # 1 Exhibit − HCBS Waiver Application, # 2 Exhibit − NC State Bar Journal Article) (Rittelmeyer, John) (Entered: 09/22/2011)
49 REPLY to Response to Motion re 27 MOTION to Disqualify Counsel as to Arguments Raised by Defendant Cansler filed by D.C., K.C., L.S. (Rittelmeyer, John) (Entered: 09/22/2011)
50 First MOTION to Seal 45 Affidavit, 44 Affidavit, 43 Affidavit, by D.C., K.C., L.S. (Rittelmeyer, John) (Entered: 09/22/2011)
51 Memorandum in Support re 50 First MOTION to Seal 45 Affidavit, 44 Affidavit, 43 Affidavit, filed by D.C., K.C., L.S. (Rittelmeyer, John) (Entered: 09/22/2011)
Remark − Affidavits at 43 , 44 , and 45 provisionally sealed pending this court's ruling in re 50 MOTION to Seal. (Baker, C.) (Entered: 09/22/2011)
Motion Submitted to District Judge Louise Wood Flanagan − 50 First MOTION to Seal 43 Affidavit, 44 Affidavit, 45 Affidavit and 27 MOTION to Disqualify Counsel. (Baker, C.) (Entered: 10/18/2011)
52 *DOCUMENT CORRECTED AND REFILED AT DOCKET ENTRY 55 * − Third Party MOTION to Intervene by D.C., Allison Taylor Johns, K.C., L.S.. (Attachments: # 1 Affidavit Declaration of Hagan, # 2 Affidavit Declaration of Simmons, # 3 Affidavit Declaration of Rachelle S, # 4 Exhibit Rachelle S Ex A, # 5 Exhibit Rachelle S Ex B, # 6 Exhibit Rachelle S Ex C, # 7 Exhibit Rachelle S Ex D, # 8 Exhibit Rachelle S Ex E, # 9 Exhibit Rachelle S Ex F, # 10 Exhibit Rachelle S Ex G, # 11 Exhibit Rachelle S Ex H, # 12 Exhibit Rachelle S Ex I, # 13 Exhibit Rachelle S Ex J, # 14 Exhibit Rachelle S Ex K, # 15 Exhibit Rachelle S Ex L, # 16 Exhibit Rachelle S Ex M, # 17 Exhibit Rachelle S Ex N) (Sea, Douglas) Modified on 10/21/2011 to insert refiling information. (Baker, C.) (Entered: 10/20/2011)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 10 of 25

10/20/2011
10/20/2011 10/21/2011
10/21/2011
10/21/2011 10/21/2011 10/24/2011 10/24/2011 10/25/2011 10/25/2011
10/25/2011 10/25/2011 10/25/2011

53 *DOCUMENT CORRECTED AND REFILED AT DOCKET ENTRY 56 * − Memorandum in Support re 52 Third Party MOTION to Intervene filed by D.C., Allison Taylor Johns, K.C., L.S.. (Attachments: # 1 Exhibit Brief Exhibit A) (Sea, Douglas) Modified on 10/21/2011 to insert refiling information. (Baker, C.) (Entered: 10/20/2011)
54 Third Party Intervenor COMPLAINT filed by M.S. (Sea, Douglas) (Entered: 10/20/2011)
NOTICE OF DEFICIENCY re: 53 Memorandum in Support and 52 Motion to Intervene − Pursuant to the Electronic Case Filing Administrative Policies and Procedures Manual available on the court's website or from the clerk's office, attachments and exhibits must be identified with a clear and complete description of the document. Counsel is directed to refile these documents and properly name the associated attachments. (Baker, C.) (Entered: 10/21/2011)
55 Third Party MOTION to Intervene as Plaintiff by M.S. (Attachments: # 1 Affidavit − Declaration of Gina Hagan, # 2 Affidavit − Declaration of Amy Simmons, # 3 Affidavit − Declaration of Rachelle S., # 4 Exhibit A − Rachelle S. − 2/3/10 PBH Ltr, # 5 Exhibit B − Rachelle S. − 2/10/10 SIS summary, # 6 Exhibit C − Rachelle S. − 2010 ISP, # 7 Exhibit D − Rachelle S. − 3/16/10 PBH ltr, # 8 Exhibit E − Rachelle S. − 10/18/10 assessment, # 9 Exhibit F − Rachelle S. − draft 2011 ISP, # 10 Exhibit G − Rachelle S. − 2011 ISP final, # 11 Exhibit H − Rachelle S. − PBH SNM Ltr, # 12 Exhibit I − Rachelle S. − 4/4/11 PBH ltr, # 13 Exhibit J − Rachelle S. − damaged envelope, # 14 Exhibit K − Rachelle S. − envelope contents, # 15 Exhibit L − Rachelle S. − 7/1/11 ISP Update, # 16 Exhibit M − Rachelle S. − 2008 SIS, # 17 Exhibit N − Rachelle S − 2010 SIS) (Sea, Douglas) Modified on 10/21/2011 to clarify docket entry text. (Baker, C.) (Entered: 10/21/2011)
56 Memorandum in Support re 55 Third Party MOTION to Intervene as Plaintiff filed by M.S. (Attachments: # 1 Exhibit A − Waiver slots by LME) (Sea, Douglas) (Entered: 10/21/2011)
NOTICE TO COUNSEL re: 55 Motion to Intervene − All counsel intending to represent potential intervenor M.S. must file a Notice of Appearance pursuant to Local Civil Rule 5.2(a). (Baker, C.) (Entered: 10/21/2011)
57 NOTICE of Appearance by John R. Rittelmeyer on behalf of M.S. (Rittelmeyer, John) (Entered: 10/24/2011)
58 NOTICE of Appearance by Douglas Stuart Sea on behalf of M.S. (Sea, Douglas) (Entered: 10/24/2011)
59 NOTICE of Appearance by Morris Fonville McAdoo on behalf of M.S. (McAdoo, Morris) (Entered: 10/25/2011)
NOTICE TO COUNSEL re: 58 Notice of Appearance − Incorrect electronic signature on Certificate of Service. Pursuant to section J (1) of the CM/ECF Policy Manual, the name of the CM/ECF user under whose log−in and password the document is submitted must be preceded by a "/s/" and typed in the space where the signature would otherwise appear. Counsel is reminded of the correct electronic signature to be used on future filings. No need to re−file. (Jenkins, C.) (Entered: 10/25/2011)
60 NOTICE of Appearance by Jennifer Leah Bills on behalf of M.S. (Bills, Jennifer) (Entered: 10/25/2011)
61 NOTICE of Appearance by Martha Jane Perkins on behalf of All Plaintiffs. (Perkins, Martha) (Entered: 10/25/2011)
NOTICE TO COUNSEL re: 61 Notice of Appearance − Electronic signature on Certificate of Service inconsistent with the filing attorney. Pursuant to Section J(1) of the CM/ECF Policy Manual, all documents must be signed by the CM/ECF user under whose log−in and password the document is submitted for purposes of the Federal Rule of Civil Procedure 11. In the future, the filing attorney is reminded that he or she must sign the pleadings using the electronic signature block. No need to re−file at this time. (Jenkins, C.) (Entered: 10/25/2011)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 11 of 25

11/14/2011 11/14/2011 11/15/2011 11/18/2011 11/21/2011 11/30/2011 12/02/2011
12/05/2011
12/09/2011 12/09/2011 12/12/2011 12/20/2011 12/20/2011 12/21/2011 12/21/2011
12/21/2011

62 RESPONSE to Motion re 55 Third Party MOTION to Intervene as Plaintiff filed by Lanier M. Cansler. (Smith, Belinda) (Entered: 11/14/2011)
63 RESPONSE to Motion re 55 Third Party MOTION to Intervene as Plaintiff filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 11/14/2011)
64 NOTICE of Appearance by Iain Stauffer on behalf of Lanier M. Cansler (Stauffer, Iain) (Entered: 11/15/2011)
65 REPLY to Response to Motion regarding 55 Third Party MOTION to Intervene as Plaintiff filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 11/18/2011)
Motion Submitted to District Judge Louise Wood Flanagan − 55 Third Party MOTION to Intervene as Plaintiff. (Baker, C.) (Entered: 11/21/2011)
MOTIONS REFERRED to Magistrate Judge Robert B. Jones, Jr. − 27 MOTION to Disqualify Counsel and 50 First MOTION to Seal 43 Affidavit, 44 Affidavit, and 45 Affidavit. (Baker, C.) (Entered: 11/30/2011)
66 ORDER denying without predjudice 50 Motion to Seal − The exhibits [DE−43, 44, 45] presently under provisional seal shall remain provisionally sealed for a period of 14 days or, if a motion to seal is filed, until further order. Any response to a motion shall be filed within 10 days after service of the motion. If a motion to seal is not timely filed as to any exhibit, the Clerk is DIRECTED to unseal that exhibit. Signed by Magistrate Judge Robert B. Jones, Jr. on 12/02/2011. (Baker, C.) (Entered: 12/02/2011)
67 ORDER granting 55 Motion to Intervene as Plaintiff as to Interested Party M.S. − Where the motion to disqualify counsel still remains before the court for decision, the deadlines for defendants to respond to the motion for preliminary injunction and first motion to certify class remain stayed. When decision is reached on the motion to disqualify counsel, the court shall promptly institute deadlines for defendants to respond to said pending motions. The Clerk is DIRECTED to conform the docket in accordance with the court's direction in footnote 1 of this order. Signed by District Judge Louise Wood Flanagan on 12/05/2011. (Baker, C.) (Entered: 12/05/2011)
68 Corrected MOTION to Seal Document by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Text of Proposed Order) (Rittelmeyer, John) (Entered: 12/09/2011)
69 Memorandum in Support re 68 Corrected MOTION to Seal Document filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Rittelmeyer, John) (Entered: 12/09/2011)
MOTION REFERRED to Magistrate Judge Robert B. Jones, Jr. − 68 Corrected MOTION to Seal Document. (Baker, C.) (Entered: 12/12/2011)
70 MOTION for Temporary Restraining Order by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 West Declaration, # 2 Penny C. Supplemental Declaration, # 3 Stitt Declaration, # 4 Rachelle S. Supplemental Declaration, # 5 Heath Supplemental Declaration) (Sea, Douglas) (Entered: 12/20/2011)
71 Memorandum in Support re 70 MOTION for Temporary Restraining Order filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 12/20/2011)
Motion Submitted to District Judge Louise Wood Flanagan − 70 MOTION for Temporary Restraining Order. (Baker, C.) (Entered: 12/21/2011)
NOTICE TO COUNSEL re: 70 Motion for Temporary Restraing Order − Pursuant to Local the judge's practice preferences on the court's website, counsel should submit a proposed order. The order must be filed electronically using the event PROPOSED ORDER located in the RESPONSES AND REPLIES category. (Baker, C.) (Entered: 12/21/2011)
72 Proposed Order re 70 MOTION for Temporary Restraining Order filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 12/21/2011)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 12 of 25

12/21/2011 12/22/2011
12/22/2011 12/22/2011 12/22/2011 12/23/2011 12/27/2011 12/27/2011 12/28/2011 12/28/2011 12/28/2011 12/28/2011 12/28/2011
12/29/2011

73 RESPONSE re 70 MOTION for Temporary Restraining Order − PBH Defendants' Initial Response filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 12/21/2011)
74 *DOCUMENT CORRECTED AND REFILED AT DOCKET ENTRY 75 * − REPLY to Response to Motion re 70 MOTION for Temporary Restraining Order filed by D.C., Allison Taylor Johns, K.C., L.S., M.S.. (Attachments: # 1 Exhibit PBH Progress Notes) (Sea, Douglas) Modified on 12/22/2011 to include refiling information. (Baker, C.) (Entered: 12/22/2011)
75 REPLY to Response to Motion re 70 MOTION for Temporary Restraining Order − FOOTNOTE 3 CORRECTED filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Exhibit PBH Progress Notes) (Sea, Douglas) (Entered: 12/22/2011)
76 ORDER Setting Hearing on 27 MOTION to Disqualify Counsel − Motion Hearing set for 12/29/2011 at 1:00 PM in Wilmington − Courtroom 3 before Magistrate Judge Robert B. Jones Jr. Signed by Magistrate Judge Robert B. Jones, Jr on 12/22/2011. (Baker, C.) (Entered: 12/22/2011)
77 MOTION for Extension of Time to File Answer re 54 Intervenor Complaint by Lanier M. Cansler. (Attachments: # 1 Text of Proposed Order) (Smith, Belinda) (Entered: 12/22/2011)
Motion Referred to Dennis P. Iavarone, Clerk of Court − 77 MOTION for Extension of Time to File Answer re 54 Intervenor Complaint. (Baker, C.) (Entered: 12/23/2011)
TEXT ORDER granting 77 Motion for Extension of Time to Answer − Lanier M. Cansler's answer due 1/11/2012. Entered by Dennis P. Iavarone, Clerk of Court on December 27, 2011. (Iavarone, Dennis) (Entered: 12/27/2011)
78 ANSWER to 54 Intervenor Complaint Answer and Affirmative Defenses by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 12/27/2011)
79 MOTION for Leave to File Notice of Appearance Manually by Alison R. Bost. (Attachments: # 1 Text of Proposed Order) (Hartman, M.) (Entered: 12/28/2011)
80 NOTICE of Appearance by Alison R. Bost on behalf of Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority and Pamela Shipman. (Hartman, M.) (Entered: 12/28/2011)
MOTION REFERRED to Dennis P. Iavarone, Clerk of Court − 79 MOTION for Leave to File Notice of Appearance Manually. (Baker, C.) (Entered: 12/28/2011)
81 ORDER granting 79 Motion for Leave to File Notice of Appearance Manually − Signed by Dennis P. Iavarone, Clerk of Court on 12/28/2011. (Baker, C.) (Entered: 12/28/2011)
82 ORDER denying 70 Motion for Temporary Restraining Order − Preliminary injunctive relief, of course, remains available to plaintiffs, upon the proper showing. The stay currently in place promptly shall be lifted upon decision on the motion to disqualify counsel. Upon decision by the magistrate judge, the parties immediately shall confer (with benefit of new counsel, should defense counsel be disqualified), and determine three alternative dates of availability for conduct of administrative conference by telephone before the undersigned to discuss parameters of a briefing schedule on motions for preliminary injunction and class certification. Notice of said dates and times agreed to shall be provided by counsel to the case manager together with contact information for lead counsel. The court will endeavor to make itself available at one of the times proposed. Signed by District Judge Louise Wood Flanagan on 12/28/2011. (Baker, C.) (Entered: 12/28/2011)
83 Minute Entry for proceedings held before Magistrate Judge Robert B. Jones, Jr.: Motion Hearing, re: 27 MOTION to Disqualify Counsel and 68 Corrected MOTION to Seal Document held on 12/29/2011 in Wilmington, Courtroom 3. Counsel for plaintiffs and defendants present. Arguments made by both sides. Court allows 27 MOTION to Disqualify Counsel and 68 Corrected MOTION to Seal Document. Written order to follow. (Court Reporter FTR Gold) (Grady, B.) (Entered: 12/29/2011)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 13 of 25

12/29/2011
12/29/2011 01/03/2012
01/03/2012
01/05/2012 01/06/2012
01/06/2012 01/10/2012 01/10/2012 01/11/2012 01/24/2012

84 ORDER granting 68 Motion to Seal Document − The court finds good cause to allow Plaintiffs' motion to seal the Affidavit of Reid C. Adams [DE−43] in its entirety and Exhibits F and G to the affidavit [DE−43−6 and DE−43−7], the Affidavit of Murray C. Greason, III [DE−44] in its entirety and Exhibits E and F to the affidavit [DE−44−5 and DE−44−6], and the Affidavit of David J. Mazza [DE−45] in its entirety and Exhibits E and F to the affidavit [DE−45−5 and DE 45−6]. Signed by Magistrate Judge Robert B. Jones, Jr. on 12/29/2011. (Baker, C.) (Entered: 12/29/2011)
ORAL ORDER granting 27 Motion to Disqualify Counsel and granting 68 Motion to Seal Document.. Entered by Magistrate Judge Robert B. Jones, Jr. on 12/29/2011. (Grady, B.) (Entered: 01/06/2012)
85 OFFICIAL TRANSCRIPT OF HEARING ON (#27) PLAINTIFFS' MOTION TO DISQUALIFY COUNSEL AND (#68) PLAINTIFFS' MOTION TO SEAL DOCUMENTS Proceedings held on 12/29/2011, before Magistrate Judge Robert B. Jones, Jr. Transcriber Janice Russell. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Please review Attorney obligations regarding the redaction of electronic transcripts of court proceedings available on the court's website. Redaction Request due 1/27/2012. Redacted Transcript Deadline set for 2/6/2012. Release of Transcript Restriction set for 4/5/2012. (Steele, F.) (Entered: 01/03/2012)
NOTICE of Filing of Official Transcript − DE 85 − Transcript. The parties have seven calendar days from the filing of the transcript to file a Notice of Intent to Request Redaction. The parties must also serve a copy on the court reporter or transcriber. After filing the Notice of Intent to Request Redaction, a party must submit to the court reporter or transcriber, within 21 calendar days of the filing of the transcript, a written statement indicating where the personal data identifiers to be redacted appear in the transcript. (Steele, F.) (Entered: 01/03/2012)
NOTICE of Administrative Conference − Telephonic administrative conference set for 1/6/2012 at 9:00 AM before District Judge Louise Wood Flanagan. Counsel will be contacted in advance of the conference and provided with the necessary dial−in information to participate. (Baker, C.) (Entered: 01/05/2012)
Minute Entry for proceedings held before District Judge Louise Wood Flanagan − Administrative Telephonic Conference held on 01/06/2012. Present at conference: Douglas Sea, John Rittelmeyer and Martha Jane Perkins (counsel for plaintiffs); Stephen Martin and Wallace Hollowell, III (counsel for defendants Shipman and Piedmont Behavioral Healthcare); Belinda Smith and Iain Stauffer (counsel for defendant Cansler); Caroline Batchelor, Law Clerk; and Christa Baker, Case Administrator. Conference convened to memorialize briefing schedule re 31 MOTION for Preliminary Injunction and 34 MOTION to Certify Class. With agreement of all parties, court sets deadline for response to both motions to be made by February 1, 2012. Reply, if any, shall be filed within fourteen (14) days thereafter. Oral arguments scheduled for Tuesday, March 13, 2012 at 10:00 a.m. before District Judge Louise Wood Flanagan in New Bern Courtroom. Counsel should be prepared to address both pending motions at hearing. (Baker, C.) (Entered: 01/06/2012)
Set Hearing as to 31 MOTION for Preliminary Injunction and 34 First MOTION to Certify Class − Oral arguments set for 3/13/2012 at 10:00 AM in New Bern Courtroom before District Judge Louise Wood Flanagan. (Baker, C.) (Entered: 01/06/2012)
86 SEALED ORDER re 27 MOTION to Disqualify Counsel − Signed by Magistrate Judge Robert B. Jones, Jr. on 01/10/2012. (Baker, C.) (Entered: 01/10/2012)
87 WRITTEN ORDER following ORAL ORDER granting 27 MOTION to Disqualify Counsel − (Redacted). Signed by Magistrate Judge Robert B. Jones, Jr. on 01/10/2012. (Baker, C.) (Entered: 01/10/2012)
88 ANSWER to 54 Intervenor Complaint by Lanier M. Cansler. (Stauffer, Iain) (Entered: 01/11/2012)
89 APPEAL OF US MAGISTRATE JUDGE DECISION to District Court by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman re 86 SEALED Order, 87 Order (Wilder,

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01/24/2012
01/24/2012 01/25/2012 01/25/2012 01/25/2012 01/25/2012
01/25/2012 01/27/2012
02/01/2012 02/01/2012 02/01/2012 02/01/2012 02/01/2012

Raboteau) (Entered: 01/24/2012)
90 SEALED Memorandum in Support (Selected Participants Only)by Defendants Pamela Shipman and Piedmont Behavioral Healthcare Area Mental Health (available to: Plaintiffs D.C., Allison Taylor Johns, K.C., L.S., Intervenor Plaintiff M.S., Defendants Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman) re 89 Appeal of Magistrate Judge Decision to District Court. (Wilder, Raboteau) (Entered: 01/24/2012)
91 MOTION to Seal Document 90 PROPOSED SEALED Memorandum in Support, by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Wilder, Raboteau) (Entered: 01/24/2012)
92 MOTION to Dismiss for Lack of Jurisdiction Appeal of Magistrate's Order by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 01/25/2012)
93 Memorandum in Support re 92 MOTION to Dismiss for Lack of Jurisdiction Appeal of Magistrate's Order filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 01/25/2012)
94 RESPONSE to Motion re 91 MOTION to Seal Document 90 PROPOSED SEALED Memorandum in Support, filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 01/25/2012)
95 *DOCUMENT CORRECTED AND REFILED AT DOCKT ENTRY 96 * − First MOTION for Extension of Time to File Response as to 89 Appeal of Magistrate Judge Decision to District Court by D.C., a minor, Allison Taylor Johns, K.C., a minor, L.S., a minor, M.S., a minor. (Attachments: # 1 Text of Proposed Order) (Sea, Douglas) Modified on 1/25/2012 to insert refiling information. (Baker, C.) (Entered: 01/25/2012)
96 Amended MOTION for Extension of Time to File Response as to 89 Appeal of Magistrate Judge Decision to District Court Corrected by D.C., a minor, Allison Taylor Johns, K.C., a minor, L.S., a minor and M.S., a minor. (Attachments: # 1 Text of Proposed Order) (Sea, Douglas) (Entered: 01/25/2012)
97 ORDER granting 91 Motion to Seal Document; denying 92 Motion to Dismiss Appeal; and, denying 96 Motion for Extension of Time to File Response to Appeal − Defendants' appeal was timely. Neither Rule 72(a) nor Local Rule 72.4(a) sets forth a deadline for responding to a party's objections to a magistrate's order on a nondispositive matter. The 1983 Advisory Committee Note to Rule 72(a) provides, however, that opportunity for such a response is contemplated. Where expedient resolution of this matter is in the interest of all parties involved, the court DENIES plaintiffs' request for extension but allows plaintiffs ten (10) days from entry of this order to respond to defendants' appeal. Signed by District Judge Louise Wood Flanagan on 01/27/2012. (Baker, C.) (Entered: 01/27/2012)
98 SEALED RESPONSE (Selected Participants Only)by Jane Perkins (available to: Defendants Lanier M. Cansler, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman, Plaintiffs D.C., Allison Taylor Johns, K.C., L.S., Intervenor Plaintiff M.S.) re 90 SEALED Memorandum in Support. (Perkins, Martha) (Entered: 02/01/2012)
99 MOTION to Seal Document 98 PROPOSED SEALED Response, by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Text of Proposed Order) (Perkins, Martha) (Entered: 02/01/2012)
100 NOTICE of Appearance by Reed J. Hollander on behalf of Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Hollander, Reed) (Entered: 02/01/2012)
101 RESPONSE in Opposition re 34 First MOTION to Certify Class filed by Lanier M. Cansler. (Smith, Belinda) (Entered: 02/01/2012)
102 RESPONSE in Opposition re 31 MOTION for Preliminary Injunction filed by Lanier M. Cansler. (Stauffer, Iain) (Entered: 02/01/2012)

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02/01/2012 02/01/2012 02/01/2012
02/01/2012
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103 RESPONSE in Opposition re 34 First MOTION to Certify Class filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Hollander, Reed) (Entered: 02/01/2012)
104 RESPONSE in Opposition re 31 MOTION for Preliminary Injunction filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 02/01/2012)
105 Declaration re 104 Response in Opposition to Motion, 103 Response in Opposition to Motion Declaration of Andrea S. Johnston−Misenheimer by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Attachments: # 1 Exhibit A − Waiver Alert August 2010, # 2 Exhibit B − Waiver Alert March 2011, # 3 Exhibit C − Waiver Alert April 2011, # 4 Exhibit D − Waiver Alert August 2011, # 5 Exhibit E − 2011 Support Needs Matrix Guide). (Martin, Stephen) (Entered: 02/01/2012)
106 Declaration re 104 Response in Opposition to Motion, 103 Response in Opposition to Motion Declaration of Melissa M. Covert by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Attachments: # 1 Exhibit A − Notice of Decision 11−4−11, # 2 Exhibit B − Garvin Letter to D.C., # 3 Exhibit C − Schmitz Letter to M.S., # 4 Exhibit D − Notice of Decision 12−22−11, # 5 Exhibit E − Notice of Decision 1−23−12). (Martin, Stephen) (Entered: 02/01/2012)
107 Declaration re 104 Response in Opposition to Motion, 103 Response in Opposition to Motion Declaration of Nicole Cote by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Martin, Stephen) Modified on 2/2/2012 to clarify docket entry text. (Baker, C.) (Entered: 02/01/2012)
108 Declaration re 104 Response in Opposition to Motion Declaration of Sonja Goodwin by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Martin, Stephen) (Entered: 02/01/2012)
109 Declaration re 104 Response in Opposition to Motion Declaration of Melissa Campbell by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Martin, Stephen) (Entered: 02/01/2012)
110 Declaration re 104 Response in Opposition to Motion Declaration on Denise Denosky by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Martin, Stephen) (Entered: 02/01/2012)
111 Declaration re 104 Response in Opposition to Motion Declaration of Tanyon N. Martin by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority. (Martin, Stephen) (Entered: 02/01/2012)
112 NOTICE by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman re 104 Response in Opposition to Motion Appendix of Materials Cited (Attachments: # 1 Appendix A − 42 C.F.R. 431.200 et seq., # 2 Appendix B − 42 C.F.R. 431.400 et seq., # 3 Appendix C − Excerpts of 67 Fed. Reg. 40989 (June 14, 2002), # 4 Appendix D − NC Session Law 2011−264) (Martin, Stephen) (Entered: 02/01/2012)

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02/02/2012
02/02/2012
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03/02/2012 03/02/2012 03/02/2012 03/02/2012 03/02/2012 03/02/2012 03/02/2012 03/02/2012
03/02/2012 03/02/2012
03/02/2012

NOTICE TO COUNSEL − as to 105 Declaration. For future reference, counsel should not use abbreviations when identifying exhibits. Clerk's Office corrected the abbreviation "Exh" to reflect "Exhibit" in the text window. (Heath, D.) (Entered: 02/02/2012)
NOTICE TO COUNSEL − as to 106 Declaration. For future reference, counsel should not use abbreviations when identifying exhibits. Clerk's Office corrected the abbreviation "Ltr" to reflect "Letter" and "Exh" to reflect "Exhibit" in the text window. (Heath, D.) (Entered: 02/02/2012)
Motions Submitted to District Judge Louise Wood Flanagan − 89 APPEAL OF US MAGISTRATE JUDGE DECISION and 99 MOTION to Seal Document 98 PROPOSED SEALED Response. (Baker, C.) (Entered: 02/02/2012)
113 First MOTION for Extension of Time to File Reply as to 31 MOTION for Prelimary Injunction and 34 MOTION to Certify Class by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Text of Proposed Order). (Sea, Douglas) Modified on 2/3/2012 to clarify docket entry text. (Baker, C.) (Entered: 02/02/2012)
Motion Submitted to District Judge Louise Wood Flanagan − 113 First MOTION for Extension of Time to File Reply as to 31 MOTION for Prelimary Injunction and 34 MOTION to Certify Class. (Baker, C.) (Entered: 02/03/2012)
114 ORDER granting 113 Motion for Extension of Time to File Reply re 31 MOTION for Preliminary Injunction and 34 First MOTION to Certify Class − Replies due by 3/2/2012. Signed by District Judge Louise Wood Flanagan on 02/03/2012. (Baker, C.) (Entered: 02/06/2012)
115 REPLY to Response to Motion re 31 MOTION for Preliminary Injunction by PBH filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/02/2012)
116 REPLY to Response to Motion re 31 MOTION for Preliminary Injunction by Cansler filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/02/2012)
117 REPLY to Response to Motion re 34 First MOTION to Certify Class by PBH filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/02/2012)
118 REPLY to Response to Motion re 34 First MOTION to Certify Class by Cansler filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/02/2012)
119 MOTION for Leave to File Supplemental Declarations by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/02/2012)
120 Memorandum in Support re 119 MOTION for Leave to File Supplemental Declarations filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/02/2012)
121 Declaration re 119 MOTION for Leave to File − Supplemental Declaration of Ron S. by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Sea, Douglas) (Entered: 03/02/2012)
122 Declaration re 119 MOTION for Leave to File − Supplemental Declaration of Ron M by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − Plan of care MM, # 2 Exhibit B − 2012 SNM letter) (Sea, Douglas) (Entered: 03/02/2012)
123 Declaration re 119 MOTION for Leave to File − Supplemental Declaration by Rachelle S. by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Sea, Douglas) (Entered: 03/02/2012)
124 Declaration re 119 MOTION for Leave to File = Supplemental Declaration by Penny C. by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − DC letter, # 2 Exhibit B − DC plan) (Sea, Douglas) (Entered: 03/02/2012)
125 Declaration re 119 MOTION for Leave to File − Supplemental Declaration by Paul Peters filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit

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03/02/2012 03/02/2012 03/02/2012 03/02/2012 03/02/2012
03/02/2012
03/02/2012 03/02/2012
03/02/2012 03/02/2012

A − PBH emails, # 2 Exhibit B − Timmons assessment, # 3 Exhibit C − OAH Peters affidavit 1, # 4 Exhibit D − OAH Peters affidavit 2) (Sea, Douglas) (Entered: 03/02/2012)
126 Declaration re 119 MOTION for Leave to File − Supplemental Declaration of Patty Holzlohner by filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − intensive review, # 2 Exhibit B − PBH email, # 3 Exhibit C − Internal Revenue addendum, # 4 Exhibit D − PBH email, # 5 Exhibit E − ISP, # 6 Exhibit F − PBH notice, # 7 Exhibit G − recon request, # 8 Exhibit H − PBH notice, # 9 Exhibit I − TRO) (Sea, Douglas) (Entered: 03/02/2012)
127 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Pamela Shearer by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Sea, Douglas) (Entered: 03/02/2012)
128 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Melinda Plue by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Sea, Douglas) (Entered: 03/02/2012)
129 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Linda Johns by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A−PCP, # 2 Exhibit B−PBH notice, # 3 Exhibit C−Recon request, # 4 Exhibit D−PBH letter, # 5 Exhibit E−recon decision, # 6 Exhibit F−TRO, # 7 Exhibit G− Preliminary Injunction) (Sea, Douglas) (Entered: 03/02/2012)
130 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Linda Biggs by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − SIS summary, # 2 Exhibit B − ISP, # 3 Exhibit C − ISP 2, # 4 Exhibit D − ISP update, # 5 Exhibit E − PBH letter, # 6 Exhibit F − ISP update 2, # 7 Exhibit G − ISP update 3, # 8 Exhibit H − ISP update 4, # 9 Exhibit I − SIS summary 2, # 10 Exhibit J − ISP update 5) (Sea, Douglas) (Entered: 03/02/2012)
131 Declaration re 129 Declaration, 119 MOTION for Leave to File Supplemental Declarations by Laurie Haley by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − ISP update, # 2 Exhibit B − ISP update 2, # 3 Exhibit C − PBH email, # 4 Exhibit D − DMA email, # 5 Exhibit E − email exchange, # 6 Exhibit F − email exchange 2, # 7 Exhibit G − email exchange 3, # 8 Exhibit H − PBH email 2, # 9 Exhibit I − email exchange 4) (Sea, Douglas) (Entered: 03/02/2012)
132 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Iris Green by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − ALJ decision, # 2 Exhibit B − Agency Decision) (Sea, Douglas) (Entered: 03/02/2012)
133 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Douglas Sea by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − SNM guide, # 2 Exhibit B − Cansler/CMS ltr, # 3 Exhibit C − Caswell minutes, # 4 Exhibit D − SIS Q and A, # 5 Exhibit E − waiver alert, # 6 Exhibit F − GA report, # 7 Exhibit G − GA report 2, # 8 Exhibit H − DMH report, # 9 Exhibit I − DMA policy, # 10 Exhibit J − DMA notice, # 11 Exhibit K − waiver summary, # 12 Exhibit L − SMM, # 13 Exhibit M − PBH briefs, # 14 Exhibit N − PBH contract) (Sea, Douglas) (Entered: 03/02/2012)
134 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Donna Stegall by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Sea, Douglas) (Entered: 03/02/2012)
135 Declaration re 119 MOTION for Leave to File Supplemental Declarations by David Cornwall by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − PBH minutes, # 2 Exhibit B − PBH minutes 2, # 3 Exhibit C − PBH minutes 3, # 4 Exhibit D − PBH minutes 4) (Sea, Douglas) (Entered: 03/02/2012)

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03/12/2012 03/12/2012 03/14/2012

136 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Brenda Arthur by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit 1 − ISP, # 2 Exhibit 2 − PBH letter) (Sea, Douglas) (Entered: 03/02/2012)
137 Declaration re 119 MOTION for Leave to File Supplemental Declarations Amie C by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − ISP, # 2 Exhibit B − SIS, # 3 Exhibit C − ISP 2, # 4 Exhibit D − PBH letter, # 5 Exhibit E − PBH letter 2, # 6 Exhibit F − ISP update) (Sea, Douglas) (Entered: 03/02/2012)
138 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Aimee T by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Attachments: # 1 Exhibit A − ISP, # 2 Exhibit B −SNM letter) (Sea, Douglas) (Entered: 03/02/2012)
139 Declaration re 119 MOTION for Leave to File Supplemental Declarations by Cullom by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Sea, Douglas) (Entered: 03/02/2012)
140 MOTION for Leave to File Supplemental Declaration of Africa Heath by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Affidavit − Declaration of Africa Heath) (Sea, Douglas) (Entered: 03/03/2012)
NOTICE OF DEFICIENCY re: 140 Motion for Leave to File and 119 Motion for Leave to File − Pursuant to the judge's practice preferences on the court's website, counsel must submit a proposed order. The order must be filed electronically using the event PROPOSED ORDER located in the RESPONSES AND REPLIES category. (Baker, C.) (Entered: 03/05/2012)
Motions Submitted to District Judge Louise Wood Flanagan − 34 First MOTION to Certify Class, 140 MOTION for Leave to File Supplemental Declaration of Africa Heath, 31 MOTION for Preliminary Injunction, and 119 MOTION for Leave to File Supplemental Declarations. (Baker, C.) (Entered: 03/05/2012)
141 Proposed Order re 119 MOTION for Leave to File Supplemental Declarations filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/05/2012)
142 Proposed Order re 140 MOTION for Leave to File Supplemental Declaration of Africa Heath filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/05/2012)
143 Corrected Declaration of Linda Johns re 129 Declaration by M.S., L.S., Allison Taylor Johns, D.C., K.C. filed by M.S., L.S., Allison Taylor Johns, D.C., K.C. (Sea, Douglas) Modified on 3/5/2012 to clarify docket entry text. (Baker, C.) (Entered: 03/05/2012)
144 ORDER granting 119 and 120 Motions for Leave to File Supplemental Declarations − The supplemental affidavits filed in conjunction with plaintiffs' motions are incorporated into the record. Defendants are allowed seven days from entry of this order to augment their responses to the motions for preliminary injunction and class certification accordingly, to respond to the matters at issue of or relating said declarations. Upon its preliminary review of the briefings in support of and in opposition to the pending motions for preliminary injunction and class certification, the court, in its discretion, now dispenses with oral argument. Accordingly, the Clerk is DIRECTED to remove the same, currently scheduled for March 13, 2012 at New Bern, from the court's calendar. Signed by District Judge Louise Wood Flanagan on 03/07/2012. (Baker, C.) (Entered: 03/07/2012)
145 NOTICE by Lanier M. Cansler (Attachments: # 1 Text of Proposed Order Albert A. Delia is Substituted As Defendant Secretary of DHHS). (Smith, Belinda) (Entered: 03/12/2012)
Remark − 145 NOTICE and Proposed Order submitted to District Judge Louise Wood Flanagan. (Baker, C.) (Entered: 03/12/2012)
146 ORDER re 89 Appeal of Magistrate Judge Decision to District Court (Redacted version) − The magistrate judge's order granting plaintiff's motion to disqualify WCSR as defendants' counsel of record in this case is neither clearly erroneous or contrary to

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03/14/2012 03/14/2012 03/14/2012 03/14/2012 03/14/2012
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law. Accordingly, PBH's and Shipman's appeal of the magistrate judge's order is DENIED and the order is AFFIRMED. Signed by District Judge Louise Wood Flanagan on 03/12/2012. (Baker, C.) (Entered: 03/14/2012)
147 SEALED ORDER re 89 Appeal of Magistrate Judge Decision to District Court − Signed by District Judge Louise Wood Flanagan on 03/14/2012. (Baker, C.) (Entered: 03/14/2012)
148 RESPONSE re 144 Order on Motion for Leave to File filed by Lanier M. Cansler (Attachments: # 1 Declaration of Susan Johnson). (Stauffer, Iain) (Entered: 03/14/2012)
149 RESPONSE in Opposition re 31 MOTION for Preliminary Injunction Supplemental Response in Opposition Pursuant to Court's March 7, 2012 Order filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman (Attachments: # 1 Exhibit 1 − Fourth Circuit Order, March 6, 2011, in Pashby v. Cansler). (Martin, Stephen) (Entered: 03/14/2012)
150 RESPONSE in Opposition re 34 First MOTION to Certify Class Supplemental Response in Opposition Pursuant to Court's March 7, 2012 Order filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Hollowell, Wallace) (Entered: 03/14/2012)
151 Declaration re 149 Response in Opposition to Motion, 150 Response in Opposition to Motion, Declaration of Robert J. Kocourek by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority filed by Pamela Shipman, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority (Attachments: # 1 Exhibit A − Contract between N.C. Dept. of Health and Human Services and PBH, # 2 Exhibit B − PBH Press Release, January 22, 2010). (Martin, Stephen) (Entered: 03/14/2012)
152 REPLY to Response to Motion re 34 First MOTION to Certify Class, 31 MOTION for Preliminary Injunction filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Sea, Douglas) (Entered: 03/16/2012)
153 ORDER − Based upon the Notice of Substitution of Defendant Secretary of the Department of Health and Human Services, and it appearing that Albert A. Delia is now the Acting Secretary of the Department of Health and Human Services, it is therefore ORDERED that Acting Secretary Albert A. Delia shall be substituted as the State defendant. All papers subsequently filed in this action should reflect this substitution. Signed by District Judge Louise Wood Flanagan on 03/16/2012. (Baker, C.) (Entered: 03/16/2012)
154 ORDER granting 31 Motion for Preliminary Injunction and 34 Motion to Certify Class − Counsel for plaintiffs are directed to provide appropriate notice to the class pursuant to Rule 23 of the Federal Rules of Civil Procedure. Counsel requesting to be appointed as class counsel in plaintiffs' motion for class certification lodged on the docket at entry 34 are appointed pursuant to Fed. R. Civ. P. 23(g). Plaintiffs shall post immediately the bond discussed herein. Further order shall follow addressing case scheduling issues. Signed by District Judge Louise Wood Flanagan on 03/29/2012. (Baker, C.) (Entered: 03/29/2012)
Security BOND in the amount of $ $100.00 posted pursuant to 154 ORDER. (Receipt number RAL024882) (Baker, C.) (Entered: 04/02/2012)
155 INITIAL ORDER REGARDING PLANNING AND SCHEDULING − Counsel should review the attached order for critical deadlines and information. The court also notes plaintiffs' pending motion to seal at docket entry 99. For good cause shown, plaintiff's motion is granted. Signed by District Judge Louise Wood Flanagan on 04/03/2012. (Baker, C.) (Entered: 04/04/2012)
156 First MOTION for Extension of Time to File motion for fees by Plaintiffs DC and by Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Text of Proposed Order) (Sea, Douglas) (Entered: 04/11/2012)
Motion Submitted to District Judge Louise Wood Flanagan − 156 First MOTION for Extension of Time to File Motion for Fees by Plaintiffs. (Baker, C.) (Entered:

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04/12/2012
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04/11/2012)
157 ORDER granting 156 First Motion for Extension of Time to File Motion for Fees − Deadline for plaintiffs to file their motion for attorneys' fees is extended until fourteen (14) days following the date on which the Court's final ruling on the merits in this case has become no longer appealable. Signed by District Judge Louise Wood Flanagan on 4/12/12. (Tripp, S.) (Entered: 04/12/2012)
158 MOTION for Extension of Time by Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Text of Proposed Order) (Perkins, Martha) (Entered: 04/18/2012)
Motion Submitted to District Judge Louise Wood Flanagan − 158 MOTION for Extension of Time. (Baker, C.) (Entered: 04/18/2012)
159 ORDER granting 158 Motion for Extension of Time − The deadline for the Rule 26(f) conference is extended by 30 days to May 25, 2012. Signed by District Judge Louise Wood Flanagan on 04/20/2012. (Baker, C.) (Entered: 04/20/2012)
160 NOTICE OF INTERLOCUTORY APPEAL as to 154 Order on Motion for Preliminary Injunction, Order on Motion to Certify Class by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. Filing fee $ 455, receipt number 0417−2044266. (Martin, Stephen) (Entered: 04/27/2012)
161 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals regarding 160 Notice of Interlocutory Appeal, by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Fogle, L.) (Entered: 04/30/2012)
162 US Court of Appeals Case Number 12−1575, Cathy Tyree, Case Manager for 160 Notice of Interlocutory Appeal, filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Fogle, L.) (Entered: 05/02/2012)
163 Second MOTION for Extension of Time to Complete Discovery by Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Text of Proposed Order) (Sea, Douglas) (Entered: 05/18/2012)
Motion Submitted to District Judge Louise Wood Flanagan − 163 Second MOTION for Extension of Time to Complete Discovery. (Baker, C.) (Entered: 05/21/2012)
NOTICE OF DEFICIENCY regarding 163 Motion for Extension of Time to Complete Discovery − Pursuant to Fed. R. Civ. P. 5(d), counsel must file a Certificate of Service for this document. (Baker, C.) (Entered: 05/21/2012)
164 CERTIFICATE OF SERVICE by Allison Taylor Johns, K.C., L.S., M.S. regarding 163 Second MOTION for Extension of Time to Complete Discovery. (Sea, Douglas) (Entered: 05/21/2012)
165 ORDER granting 163 Motion for Extension of Time to Complete Discovery − The deadline for the Rule 26(f) conference is thirty (30) days following a ruling by the Fourth Circuit Court of Appeals on Defendant PBH's and Shipman's appeal of this Court's March 29, 2012 Order granting Plaintiffs' motion for a preliminary injunction. If any party determines that it needs formal discovery prior to a ruling by the Fourth Circuit Court of Appeals, such party may make a motion to pursue formal discovery at that time. Signed by District Judge Louise Wood Flanagan on 05/29/2012. (Baker, C.) (Entered: 05/29/2012)
166 ORDER − The parties have until June 10, 2013, to engage in this conference. Requirements and deadlines earlier set forth in the court's initial order (DE 155) are made operative, where stay is lifted. Signed by District Judge Louise Wood Flanagan on 05/10/2013. (Baker, C.) (Entered: 05/10/2013)
167 PUBLISHED Opinion from Fourth Circuit Court of Appeals. DISMISSED by published opinion. (Fogle, L.) (Entered: 05/13/2013)
168 US Court of Appeals Judgment as to 160 Notice of Interlocutory Appeal, filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. In accordance with the decision of this

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06/03/2013
06/14/2013 06/17/2013 06/17/2013
08/05/2013 08/06/2013 08/06/2013
08/12/2013 08/12/2013 08/14/2013 11/18/2013 11/19/2013 11/19/2013
01/27/2014 01/28/2014

court, this appeal is dismissed. This judgment shall take effect upon issuance of this court's mandate in accordance with Fed. R. App. P. 41. (Fogle, L.) (Entered: 05/13/2013)
169 MANDATE of US Court of Appeals (certified copy) as to 160 Notice of Interlocutory Appeal, filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. The judgment of this court, entered May 10, 2013, takes effect today.This constitutes the formal mandate of this court issued pursuant to Rule41(a) of the Federal Rules of Appellate Procedure. (Fogle, L.) (Entered: 06/03/2013)
170 Joint MOTION for Extension of Time by Aldona Zofia Wos. (Attachments: # 1 Text of Proposed Order) (Stauffer, Iain) (Entered: 06/14/2013)
Motion Submitted to District Judge Louise Wood Flanagan − 170 Joint MOTION for Extension of Time. (Baker, C.) (Entered: 06/17/2013)
171 ORDER granting 170 Motion for Extension of Time − For good cause shown, the Court grants the parties' joint motion for an extension of the deadlines and requirements of this Court's Initial Scheduling Order Regarding Planning and Scheduling in this matter for sixty (60) days up and until August 24, 2013. Signed by District Judge Louise Wood Flanagan on 06/17/2013. (Baker, C.) (Entered: 06/17/2013)
172 Second MOTION for Extension of Time by Aldona Zofia Wos. (Attachments: # 1 Text of Proposed Order) (Stauffer, Iain) (Entered: 08/05/2013)
Motion Submitted to District Judge Louise Wood Flanagan − 172 Second MOTION for Extension of Time. (Baker, C.) (Entered: 08/06/2013)
173 ORDER granting 172 Second Motion for Extension of Time − For good cause shown, the Court grants the parties' second joint motion for an extension of the deadlines and requirements of this Court's Initial Scheduling Order Regarding Planning and Scheduling in this matter up to and until December 1, 2013. Signed by District Judge Louise Wood Flanagan on 08/06/2013. (Baker, C.) (Entered: 08/06/2013)
174 Joint MOTION for Protective Order by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Text of Proposed Order) (Perkins, Martha) (Entered: 08/12/2013)
Motion Submitted to District Judge Louise Wood Flangan − 174 Joint MOTION for Protective Order. (Baker, C.) (Entered: 08/12/2013)
175 QUALIFIED PROTECTIVE ORDER − Signed by District Judge Louise Wood Flanagan on 08/14/2013. (Baker, C.) (Entered: 08/14/2013)
176 Joint MOTION for Extension of Time by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 11/18/2013)
Motion Submitted to District Judge Louise Wood Flanagan − 176 Joint MOTION for Extension of Time. (Baker, C.) (Entered: 11/19/2013)
177 ORDER granting 176 Joint Third Motion for Extension of Time − For good cause shown, the Court grants the parties' third joint motion for an extension of the deadlines and requirements of this Court's Initial Scheduling Order, including the filing of initial Rule 26 disclosures and a Discovery Plan in this matter up to and until February 3, 2014. Signed by District Judge Louise Wood Flanagan on 11/19/2013. (Baker, C.) (Entered: 11/19/2013)
178 Joint MOTION for Extension of Time by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 01/27/2014)
Motion Submitted to District Judge Louise Wood Flanagan − 178 Joint MOTION for Extension of Time. (Baker, C.) (Entered: 01/28/2014)

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01/31/2014
03/21/2014 03/21/2014 03/21/2014
06/23/2014 06/24/2014 06/24/2014
08/12/2014 08/12/2014 08/12/2014
08/27/2014 08/27/2014 08/27/2014
08/27/2014

179 ORDER granting 178 Motion for Extension of Time − For good cause shown, the Court grants the parties' fourth joint motion for an extension of the deadlines and requirements of this Court's Initial Scheduling Order, including the filing of initial Rule 26 disclosures and a Discovery Plan in this matter up to and until April 4, 2014. Signed by District Judge Louise Wood Flanagan on 01/31/2014. (Baker, C.) (Entered: 01/31/2014)
180 Joint MOTION for Extension of Time by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 03/21/2014)
Motion Submitted to District Judge Louise Wood Flanagan − 180 Joint MOTION for Extension of Time. (Baker, C.) (Entered: 03/21/2014)
181 ORDER granting 180 Motion for Extension of Time − The Court grants the parties' fifth joint motion for an extension of the deadlines and requirements of this Court's Initial Scheduling Order, including the filing of initial Rule 26 disclosures and a Discovery Plan in this matter up to and until July 1, 2014. Signed by District Judge Louise Wood Flanagan on 03/21/2014. (Baker, C.) (Entered: 03/21/2014)
182 Joint MOTION for Extension of Time by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 06/23/2014)
Motion Submitted to District Judge Louise Wood Flanagan: 182 Joint MOTION for Extension of Time. (Tripp, S.) (Entered: 06/24/2014)
183 ORDER granting 182 Joint Motion for Extension of Time − The Court grants the parties' sixth joint motion for an extension of the deadlines and requirements of this Court's Initial Scheduling Order, including the filing of initial Rule 26 disclosures and a Discovery Plan in this matter up to and until August 15, 2014. Signed by District Judge Louise Wood Flanagan on 6/24/2014. (Tripp, S.) (Entered: 06/24/2014)
184 Joint MOTION for Extension of Time by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 08/12/2014)
Motion Submitted to District Judge Louise Wood Flanagan − 184 Joint MOTION for Extension of Time. (Baker, C.) (Entered: 08/12/2014)
185 ORDER granting 184 Joint Motion for Extension of Time − The Court grants the parties' seventh joint motion for an extension of the deadlines and requirements of this Court's Initial Scheduling Order, including the filing of initial Rule 26 disclosures and a Discovery Plan in this matter up to and until August 29, 2014. Signed by District Judge Louise Wood Flanagan on 08/12/2014. (Baker, C.) (Entered: 08/12/2014)
186 Joint Notice of Settlement and Joint Motion to Stay Discovery Pending Submission and Approval of Settlement Agreement by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 08/27/2014)
NOTICE OF DEFICIENCY regarding 186 Motion to Stay − Pursuant to the judge's practice preferences on the court's website, counsel must submit a proposed order. The order must be filed electronically using the event PROPOSED ORDER located in the RESPONSES AND REPLIES category. (Baker, C.) (Entered: 08/27/2014)
187 Proposed Order regarding 186 Joint Notice of Settlement and Joint Motion to Stay Discovery Pending Submission and Approval of Settlement Agreement filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 08/27/2014)
Motion Submitted to Disitrct Judge Louise Wood Flanagan − 186 Joint Notice of Settlement and Joint Motion to Stay Discovery Pending Submission and Approval of Settlement Agreement. (Baker, C.) (Entered: 08/27/2014)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 23 of 25

08/28/2014
10/27/2014 10/28/2014 11/25/2014 11/26/2014 11/26/2014 12/12/2014
12/12/2014 12/12/2014
12/12/2014
12/12/2014

188 ORDER granting 186 Motion to Stay Discovery Pending Submission and Approval of Settlement Agreement − For good cause shown, the Court grants the parties' joint motion to stay discovery pending submission and approval of a settlement agreement. If appropriate settlement documentation is not filed within sixty (60) days, a status report shall be filed informing of progress of settlement activities and what additional time is requested to finalize same. Signed by District Judge Louise Wood Flanagan on 08/28/2014. (Baker, C.) (Entered: 08/28/2014)
189 STATUS REPORT − Joint Status Report of Progress of Settlement Activities by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 10/27/2014)
190 ORDER regarding 189 Status Report − Extension motion is granted. An additional thirty (30) days is allowed for the parties to finalize and submit the appropriate documentation to the court referenced in the parties' status report. Signed by District Judge Louise Wood Flanagan on 10/28/2014. (Baker, C.) (Entered: 10/28/2014)
191 Eighth MOTION for Extension of Time by Aldona Zofia Wos. (Attachments: # 1 Text of Proposed Order) (Stauffer, Iain) (Entered: 11/25/2014)
Motion Submitted to District Judge Louise Wood Flanagan − 191 Eighth MOTION for Extension of Time. (Baker, C.) (Entered: 11/26/2014)
192 ORDER granting 191 Motion for Extension of Time − The Parties have up to and until December 12, 2014 to file the Settlement Agreement and attachments with the Court. Signed by District Judge Louise Wood Flanagan on 11/26/2014. (Baker, C.) (Entered: 11/26/2014)
193 SETTLEMENT AGREEMENT by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Appendix A to Settlement Agreement, # 2 Exhibit 1 − Joint Expedited Motion for Preliminary Approval of Settlement Agreement, Notice to Class Members, Scheduling of Fairness Hearing, Final Approval of Settlement Agreement, and Clarification of Class Definition, and Memorandum of Law in Support of same, # 3 Exhibit 2 − Proposed Order Approving Settlement and Directing Notice, # 4 Exhibit 3 − Schedule of Publication, # 5 Exhibit 4 − Notice to Class Members, # 6 Exhibit 5 − Proposed Order Approving Settlement Agreement, # 7 Exhibit 6 − Proposed Order of Dismissal with Prejudice, # 8 Exhibit 7 − Class List as of 11/19/2014, # 9 Exhibit 8 − Joint Statement following Dismissal) (Martin, Stephen) (Entered: 12/12/2014)
194 NOTICE by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman regarding 193 Settlement Agreement − Certificate of Service. (Martin, Stephen) (Entered: 12/12/2014)
195 Notice of Filing PROPOSED SEALED Exhibit (Selected Participants Only) by Pamela Shipman and PBH (available to: Defendants Lanier M. Cansler, Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman, Aldona Zofia Wos, Plaintiffs D.C., Allison Taylor Johns, K.C., L.S., Intervenor Plaintiff M.S.) regarding 193 Settlement Agreement. (Attachments: # 1 Exhibit 7 to Settlement Agreement − Class List as of 11/19/2014) (Martin, Stephen) (Entered: 12/12/2014)
196 Notice of Filing PROPOSED SEALED Document (Selected Participants Only) by Pamela Shipman and PBH (available to: Plaintiffs D.C., Allison Taylor Johns, K.C., L.S., Intervenor Plaintiff M.S., Defendants Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman, Aldona Zofia Wos) regarding 193 Settlement Agreement. (Attachments: # 1 Settlement Agreement − Unredacted signatures pages of Plaintiffs) (Martin, Stephen) (Entered: 12/12/2014)
197 Joint MOTION to Seal Document 196 PROPOSED SEALED Document, 195 PROPOSED SEALED Exhibit, by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 12/12/2014)

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 24 of 25

12/12/2014 12/12/2014 12/12/2014 12/15/2014 12/15/2014 12/19/2014 12/22/2014 12/24/2014
12/30/2014 01/02/2015 01/02/2015 03/20/2015

198 Memorandum in Support regarding 197 Joint MOTION to Seal Document 196 PROPOSED SEALED Document, 195 PROPOSED SEALED Exhibit, filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 12/12/2014)
199 Joint Expedited Motion for Preliminary Approval of Settlement Agreement, Notice to Class Members, Scheduling of Fairness Hearing, Final Approval of Settlement Agreement, and Clarification of Class Definition regarding 193 Settlement Agreement by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Attachments: # 1 Text of Proposed Order) (Martin, Stephen) (Entered: 12/12/2014)
200 Memorandum in Support regarding 199 Joint Expedited Motion for Preliminary Approval of Settlement Agreement, Notice to Class Members, Scheduling of Fairness Hearing, Final Approval of Settlement Agreement, and Clarification of Class Definition regarding 193 Settlement Agreement filed by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman. (Martin, Stephen) (Entered: 12/12/2014)
Motions Submitted to District Judge Louise Wood Flanagan − 199 Joint Expedited Motion for Preliminary Approval of Settlement Agreement, Notice to Class Members, Scheduling of Fairness Hearing, Final Approval of Settlement Agreement, and Clarification of Class Definition and 197 Joint MOTION to Seal 196 PROPOSED SEALED Document and 195 PROPOSED SEALED Exhibit. (Baker, C.) (Entered: 12/15/2014)
201 ORDER granting 197 Motion to Seal 196 PROPOSED SEALED Document and 195 PROPOSED SEALED Exhibit − Signed by District Judge Louise Wood Flanagan on 12/15/2014. (Baker, C.) (Entered: 12/15/2014)
202 NOTICE by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman regarding 193 Settlement Agreement − Notice of Filing of Complete Exhibit 3 to the Settlement Agreement. (Attachments: # 1 Exhibit 3 to the Settlement Agreement) (Martin, Stephen) (Entered: 12/19/2014)
203 NOTICE by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman regarding 202 Notice amd 193 Settlement Agreement − Joint Notice of Service. (Martin, Stephen) (Entered: 12/22/2014)
TEXT ORDER regarding 199 Joint Expedited Motion for Preliminary Approval of Settlement Agreement, Notice to Class Members, Scheduling of Fairness Hearing, Final Approval of Settlement Agreement, and Clarification of Class Definition − In supplement to the parties' filings regarding the proposed plan for providing notice, the court requests that a copy of the proposed notice itself be filed with the court as it does not appear to be included among the materials of record. Said supplement shall be filed within seven (7)days. Signed by District Judge Louise Wood Flanagan on 12/24/2014. (Baker, C.) (Entered: 12/24/2014)
204 NOTICE by Piedmont Behavioral Healthcare Area Mental Health, Developmental Disabilities and Substance Abuse Authority, Pamela Shipman regarding 193 Settlement Agreement. (Attachments: # 1 Exhibit 4 to the Settlement Agreement, previously filed as D.E. 193−5) (Martin, Stephen) (Entered: 12/30/2014)
205 ORDER granting 199 Joint Expedited Motion for Preliminary Approval of Settlement Agreement, Notice to Class Members, Scheduling of Fairness Hearing, Final Approval of Settlement Agreement, and Clarification of Class Definition − Signed by District Judge Louise Wood Flanagan on 1/2/2015. (Tripp, S.) (Entered: 01/02/2015)
TEXT NOTICE of Hearing: Fairness Hearing set for 4/6/2015 at 1:30 PM in New Bern − Courtroom before District Judge Louise Wood Flanagan. (Tripp, S.) (Entered: 01/02/2015)
206 Declaration of John R. Rittelmeyer by D.C., Allison Taylor Johns, K.C., L.S., M.S. (Attachments: # 1 Exhibit 1 − NHeLp Notice, # 2 Exhibit 2 − NHeLP LSsettlement Webpage, # 3 Exhibit 3 − DRNC Notice, # 4 Exhibit 4 − DRNC LSsettlement

Case: 5:11-cv-354 As of: 10/26/2017 10:53 PM EDT 25 of 25

04/06/2015
04/06/2015 09/29/2015 09/30/2015 12/23/2015 12/28/2015
12/28/2015 12/28/2015 12/29/2015 12/31/2015

Webpage, # 5 Exhibit 5 − DRNC Email Alert, # 6 Exhibit 6 − LSSP Notice, # 7 Exhibit 7 − LSSP LSsettlement Webpage, # 8 Exhibit 8 − Arc Notice, # 9 Exhibit 9 − ASNC Notice, # 10 Exhibit Ex. 10 − ASNC Twitter Post, # 11 Exhibit 11 − CCR Notice, # 12 Exhibit 12 − ECAC Notice, # 13 Exhibit 13 − FinF Notice, # 14 Exhibit 14 − Benchmarks Notice) (Rittelmeyer, John) (Entered: 03/20/2015)
207 Minute Entry for proceedings held before District Judge Louise Wood Flanagan in New Bern, NC − Fairness Hearing held on 4/6/2015. Counsel present for all parties. Court confirms by inquiry of all parties that no objections have been received from any of the class members regarding the terms of settlement. Court finds settlement fair and reasonable and not in violation of public policy. Court signs order of final approval for class settlement. Dismissal of the case will be automatic as of 12/31/15, unless the court is notified of noncompliance under the terms of the settlement agreement. Court orders plaintiff to file five days prior to 12/31/15 a notice that there are no disputes. Plaintiff agrees to file a joint notice. (Court Reporter − David Collier) (Baker, C.) (Entered: 04/06/2015)
208 ORDER OF APPROVAL OF SETTLEMENT − Signed by District Judge Louise Wood Flanagan on 04/06/2015. (Baker, C.) (Entered: 04/06/2015)
209 Notice filed by Aldona Zofia Wos Substitution of Party for Defendant Secretary of DHHS. (Smith, Belinda) (Entered: 09/29/2015)
210 Notice of Substitution of Counsel filed by Iain Stauffer on behalf of Richard Brajer. (Stauffer, Iain) (Entered: 09/30/2015)
211 Notice filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. Regarding Dismissal with Prejudice. (Sea, Douglas) (Entered: 12/23/2015)
NOTICE OF DEFICIENCY regarding 211 Notice − Counsel failed to attach a certificate of service pursuant to Fed. R. Civ. P. 5(d) and Section F(3) of the Court's CM/ECF Electronic Policies and Procedures Manual. Counsel should file a separately captioned certificate of service using the appropriate event located under the 'Civil Events − Service of Process' category. (Baker, C.) (Entered: 12/28/2015)
212 First MOTION to Withdraw as Attorney filed by Richard Brajer. (Attachments: # 1 Text of Proposed Order Granting Motion to Withdraw Appearance) (Smith, Belinda) (Entered: 12/28/2015)
213 ORDER granting 212 Motion to Withdraw as Attorney − Attorney Belinda A. Smith terminated as counsel for defendant Richard Brajer. Signed by District Judge Louise Wood Flanagan on 12/28/2015. (Baker, C.) (Entered: 12/28/2015)
214 Certificate of Service filed by D.C., Allison Taylor Johns, K.C., L.S., M.S. regarding 211 Notice. (Sea, Douglas) (Entered: 12/29/2015)
215 Order of Dismissal with Prejudice − Signed by District Judge Louise Wood Flanagan on 12/31/2015. (Baker, C.) (Entered: 12/31/2015)