Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-14-07054/USCOURTS-caDC-14-07054-0/pdf.json

Nature of Suit Code: 444
Nature of Suit: Civil Rights Welfare
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 24, 2015 Decided July 17, 2015

No. 14-7054

NB, BY HER PARENT AND NEXT FRIEND, MICHELLE PEACOCK,

ET AL.,

APPELLANTS

v.

DISTRICT OF COLUMBIA, A MUNICIPAL CORPORATION, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:10-cv-01511)

Jane M. Liu argued the cause for appellants. With her on 

the briefs were Bruce J. Terris and Kathleen L. Millan.

John C. Keeney, Jr. was on the brief for amici curiae The 

Legal Society of the District of Columbia, et al., in support of 

appellant. 

Richard S. Love, Senior Assistant Attorney General, 

Office of the Attorney General for the District of Columbia, 

argued the cause for appellees. With him on the brief were 

Irvin B. Nathan, Attorney General at the time the brief was 

filed, Todd S. Kim, Solicitor General, and Loren L. AliKhan, 

Deputy Solicitor General.

USCA Case #14-7054 Document #1562967 Filed: 07/17/2015 Page 1 of 22
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Before: GRIFFITH and SRINIVASAN, Circuit Judges, and 

SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge SRINIVASAN.

SRINIVASAN, Circuit Judge: The plaintiffs in this case 

are Medicaid recipients who unsuccessfully sought coverage 

for prescription drugs. They filed a lawsuit contending that 

the defendants—the District of Columbia and certain of its 

officials—unlawfully failed to afford them notice of their 

entitlement to a hearing before denying their prescription drug 

claims. They alleged that the lack of notice infringed Title 

XIX of the Social Security Act and its implementing 

regulations, the Due Process Clause of the Fifth Amendment 

of the U.S. Constitution, and D.C. law. The district court 

dismissed the federal claims, concluding that neither Title 

XIX nor the Due Process Clause required the written notice 

the plaintiffs sought. The court also dismissed the claims 

under D.C. law because jurisdiction over those claims 

depended on jurisdiction over the dismissed federal claims.

We affirm the district court’s dismissal of the Title XIX 

claims, but we reverse the dismissal of the due process claims 

and remand for further proceedings. On remand, the district 

court can reconsider its jurisdiction over the D.C.-law claims 

in light of our partial reversal.

I.

A.

Medicaid, established under Title XIX of the Social 

Security Act, 42 U.S.C. §§ 1396 et seq., is a “cooperative 

federal-state program that provides federal funding for state 

medical services to the poor.” Frew ex rel. Frew v. Hawkins, 

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540 U.S. 431, 433 (2004). States participate in Medicaid on a 

voluntary basis, but states electing to avail themselves of the 

federal funding available under Title XIX must comply with 

conditions imposed by federal law. Id.; see Nat’l Fed’n of 

Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2607-08 (2012). The 

District of Columbia qualifies as a state for purposes of this 

litigation. See 42 U.S.C. § 1301(a)(1).

Under federal law, states choosing to participate in 

Medicaid must provide a core set of mandatory services to 

qualified beneficiaries. See id. §§ 1396a(a)(10)(A), 1396d(a). 

For example, state Medicaid plans must provide coverage to 

qualified beneficiaries for “inpatient hospital services” and 

“laboratory and X-ray services.” Id. §§ 1396a(a)(10)(A), 

1396d(a)(1), (3). In addition to those mandatory services, a 

state may also elect to cover other categories of services. 

Those optional services then become part of the state’s 

Medicaid plan, in which event the optional services become

subject to the requirements of federal law. Doe 1-13 ex rel. 

Doe, Sr. 1-13 v. Chiles, 136 F.3d 709, 714 (11th Cir. 1988). 

Prescription drug coverage is one of those optional services, 

see 42 U.S.C. §§ 1396a(a)(10)(A), 1396d(a)(12), and the 

District has elected to offer coverage of certain prescription 

drugs under Medicaid. The District’s Department of Health 

Care Finance (DHCF) implements the prescription drug 

portion of the District’s Medicaid program. See D.C. Code 

§ 7-771.07.

When a state elects to cover prescription drugs, as the 

District has done, it can limit or condition coverage in certain 

ways. First, Title XIX affords participating states some

latitude to determine which classes of prescription drugs to 

cover. The statute specifies categories of drugs that a state 

may entirely “exclude[] from coverage.” 42 U.S.C. § 1396r8(d)(2). Consistent with that authority, the District has opted 

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categorically to exclude from coverage certain classes of 

prescription drugs, including, for instance, those prescribed 

for conditions such as weight loss or erectile dysfunction. See 

D.C. Mun. Regs. tit. 29, § 2706.3(d), (i). The District will 

cover those drugs only if they have been “specifically placed” 

on the District’s “Medicaid Preferred Drug List.” Id.; see 

DHFC, Pharmacy Preferred Drug List (PDL) (June 17, 2015), 

available at https://dc.fhsc.com/downloads/providers/

DCRx_PDL_listing.pdf.

Second, for non-excluded drugs, Title XIX enables a 

state to limit the circumstances under which it will provide 

coverage. A state may, for example, subject a drug to “prior 

authorization” requirements. Id. § 1396r-8(d)(1)(A). The 

District has established a prior authorization requirement for 

certain drugs. Under the District’s prior authorization

requirement, a prescribing physician must obtain pre-approval 

from DHCF and submit certain documentation before the 

District’s Medicaid plan will cover the prescription. See NB 

ex rel. Peacock v. District of Columbia (NB II), 682 F.3d 77, 

80 (D.C. Cir. 2012). 

According to the allegations in the complaint, DHCF uses

a third-party contractor, Xerox, to process prescription drug 

claims under Medicaid. When a potential Medicaid claimant 

presents a prescription to a pharmacist at a Medicaidparticipating pharmacy in the District, the pharmacist submits 

an electronic claim to Xerox. Xerox then provides an 

immediate computerized reply indicating whether Medicaid 

will cover the prescription. Xerox determines, among other 

things, whether the drug is covered by Medicaid or instead is 

excluded from Medicaid coverage, and whether the patient 

satisfies all other applicable threshold coverage restrictions 

(e.g., whether the patient has met any applicable prior 

authorization requirements). If Xerox determines that all 

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requirements for coverage are met, Xerox’s reply so informs 

the pharmacist, and the pharmacist fills the prescription. If 

Xerox determines that coverage should be denied, the patient 

has the option to pay out-of-pocket for the drugs.

B.

Title XIX and its implementing regulations afford certain 

procedural protections to Medicaid beneficiaries. The statute

provides that a state Medicaid plan “must” 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 

promptness.” 42 U.S.C. § 1396a(a)(3). “Medical assistance” 

includes “payment of part or all of the cost” of “prescribed 

drugs.” Id. § 1396d(a)(12). Under the statute, consequently, 

denial of a claim for payment of “prescribed drugs” occasions 

the grant of an “opportunity for a fair hearing before the State 

agency.”

Regulations implementing § 1396a(a)(3) elaborate on the 

requirement to give an opportunity for a hearing. Under the 

regulations, the District must “grant an opportunity for a 

hearing” to “[a]ny applicant who requests it because his claim 

for services is denied or is not acted upon with reasonable 

promptness,” and also to “[a]ny beneficiary who requests it 

because he or she believes the agency has taken an action 

erroneously.” 42 C.F.R. § 431.220(a)(1)-(2).

The regulations also specify circumstances in which 

notice of the right to a hearing must be provided, as well as 

the content of that notice. In particular, the District

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must, at the time specified in paragraph (c) of 

this section, inform every applicant or 

beneficiary in writing—

(1) Of his right to a hearing; 

(2) Of the method by which he may obtain a 

hearing; and 

(3) That he may represent himself or use 

legal counsel, a relative, a friend, or other 

spokesman. 

Id. § 431.206(b)(1)-(3). Section 431.206(c)—i.e., “paragraph 

(c) of th[at] section”—sets forth the times when that notice 

must be afforded to a beneficiary, and requires notice “[a]t the 

time of any action affecting his or her claim.” Id. 

§ 431.206(c)(2) (emphasis added). And the regulations in 

turn define “[a]ction” as a “termination, suspension, or 

reduction of Medicaid eligibility or covered services.” Id.

§ 431.201. The regulatory notice requirements thus are 

triggered by, inter alia, a “termination, suspension, or 

reduction of Medicaid eligibility or covered services.” 

When § 431.206(b)’s notice requirements come into play

because of a termination, suspension, or reduction of 

Medicaid eligibility or covered services, a separate regulation

spells out additional content that must be included in the

notice. The District must include: (a) a statement of what 

action it intends to take; (b) the reasons for the intended 

action; (c) the specific regulations that support the action; (d) 

an explanation of the individual’s right to a hearing; and (e) 

an explanation of the circumstances that Medicaid coverage 

will continue in the interim if a hearing is requested. Id.

§ 431.210(a)-(e).

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D.C. law imposes similar requirements. See NB II, 682 

F.3d at 80 (citing D.C. Code § 4-205.55).

C.

1. The named plaintiffs in this case are nine D.C. 

Medicaid recipients. They contend that the District, the 

Director of DHCF, and the Mayor of D.C. have systematically 

failed to provide Medicaid recipients with “adequate and 

timely notice, the opportunity for a fair hearing, and the 

opportunity for reinstated coverage pending a hearing 

decision” when denying prescription drug coverage. Pls.’ 

Amend. Compl. ¶ 1. Those actions, the plaintiffs allege, 

violate Title XIX and its implementing regulations, the Due 

Process Clause of the Fifth Amendment of the Constitution, 

and D.C. law. The plaintiffs seek no compensation (although 

they do ask for costs and attorneys’ fees). Id. at 49. Instead, 

they request declaratory and injunctive relief, and also seek

certification of a class.

The named plaintiffs allege multiple instances in which

their claims for prescription drug coverage have been denied 

at District pharmacies. The denials, as described in the 

complaint, appear to have occurred for a variety of reasons. 

Some plaintiffs were informed that they failed to comply with

applicable prior authorization requirements, see, e.g., id. ¶¶ 

59, 77; others were advised that they were not covered by 

Medicaid at all, see, e.g., id. ¶ 50; and still others were given 

no reason for the coverage denial, see, e.g., id. ¶ 57. The 

plaintiffs allege that, in all of those circumstances, they did 

not “receive[] written notice of the fact that coverage of 

[their] prescriptions was being denied, the reason for the 

denial[s], the right to appeal, or the circumstances under 

which Medicaid would continue providing coverage of [their] 

prescriptions pending the appeal[s].” E.g., id. ¶ 98. 

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2. The plaintiffs filed suit in the U.S. District Court for 

the District of Columbia, and the district court dismissed the 

action for lack of Article III standing. NB v. District of 

Columbia (NB I), 800 F. Supp. 2d 51, 53 (D.D.C. 2011). On 

appeal, we found that the plaintiffs had established standing,

NB II, 682 F.3d at 86-87, and remanded to the district court to 

proceed to the merits.

On remand, the district court dismissed all claims. NB v. 

District of Columbia (NB III), 34 F. Supp. 3d 146, 152

(D.D.C. 2014). In dismissing the claims under Title XIX, the 

court initially examined circumstances involving denial of

prescription drug coverage for failure to demonstrate 

Medicaid enrollment or to comply with applicable prior 

authorization requirements. The court concluded that 

Medicaid’s procedural protections—including the notice and 

hearing sought by the plaintiffs—extended only to those who 

were in fact enrolled in Medicaid and, as applicable, to those 

who had met required prior authorization and other applicable 

threshold criteria. Id. at 153-55. As for denials of coverage 

for other reasons, the court concluded that the plaintiffs had 

failed to allege that the denials stemmed from government 

action. In the court’s understanding, the plaintiffs’ inability to 

procure coverage for their medications was attributable, not to 

the District, but instead “to a range of acts or omissions by 

private actors—including errors or oversights by doctors and 

pharmacists (and perhaps the patients themselves).” Id. The 

court therefore concluded that the District had no obligation 

under Title XIX or its regulations to give any written notice of

the denials. Id. at 155-56.

In dismissing the due process claims, the court again 

focused initially on denials occasioned by the plaintiffs’ 

alleged failures to demonstrate Medicaid enrollment status or 

to comply with prior authorization or other coverage criteria. 

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Those circumstances triggered no protections under the Due 

Process Clause, the court determined, because the plaintiffs 

lacked a “legitimate claim of entitlement to the drugs.” Id. at 

157-58. As for the denials of prescription drug claims for 

reasons other than failure to demonstrate Medicaid enrollment 

status or to comply with threshold coverage criteria, the court 

again determined that the plaintiffs failed to allege that any 

“state action” caused the denials. Id. at 158-59. With no 

federal causes of action remaining in the case, the court then 

dismissed the D.C.-law claims for lack of pendant 

jurisdiction. Id.

II.

The plaintiffs contend that Title XIX’s implementing 

regulations entitle Medicaid recipients to written notice of an 

opportunity for a hearing at which they can challenge the 

point-of-sale denial of prescription drug benefits. The 

plaintiffs also claim an entitlement to notice of the reasons for 

the decision and of the status of their coverage pending a 

hearing; but those arguments are essentially derivative of their 

claim to notice of an opportunity for a hearing. See 42 C.F.R. 

§ 431.210. We conclude that the regulations afford the 

plaintiffs no basis for relief. We therefore affirm the district 

court’s dismissal of their Title XIX claims. 

A.

The plaintiffs’ argument for relief under Title XIX is that

the District “must provide Medicaid recipients with notice of 

the reason for the denial and the opportunity for a 

hearing . . . whenever a Medicaid recipient’s claim for a 

prescription drug is denied for any reason.” Appellants’ Br. 

7. That is, the plaintiffs argue that any denial of a claim for 

prescription drug coverage at a pharmacy triggers a right to 

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notice under Title XIX. We disagree. Title XIX and its 

implementing regulations do not afford the plaintiffs the 

notice they seek whenever a claim for prescription drug 

coverage is denied.

Under Title XIX, a “[s]tate plan for medical assistance 

must . . . 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.” 42 U.S.C. 

§ 1396a(a)(3). The District does not dispute that the 

plaintiffs’ claims for prescription drug benefits qualify as 

“claim[s] for medical assistance” within the meaning of that 

provision. The District therefore assumes it has an obligation 

under the statute to afford the plaintiffs “an opportunity for a 

fair hearing”—i.e., a hearing upon request—to challenge the 

denial of prescription drug coverage. 

Here, however, none of the plaintiffs requested a hearing. 

And while the statute requires the District to provide for 

“granting an opportunity for a fair hearing,” the statute itself, 

as the District points out, contains no obligation to afford 

notice of an opportunity to request a hearing. Perhaps for that 

reason, the plaintiffs do not argue that the statute, of its own 

force, confers an entitlement to written notice of an 

opportunity for a hearing. The plaintiffs instead rely on the 

regulations implementing Title XIX as the source of their 

alleged entitlement to notice under the Medicaid laws. 

Those regulations contain a provision setting forth 

“[w]hen a hearing is required.” 42 C.F.R. § 431.220. Under 

that regulation, the District “must grant an opportunity for a 

hearing” to, among others, “(1) [a]ny applicant who requests 

it because his claim for services is denied or is not acted upon 

with reasonable promptness,” as well as “(2) [a]ny beneficiary 

who requests it because he or she believes the agency has 

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taken an action erroneously.” Id. § 431.220(a)(1)-(2). With 

regard to the second category, the regulations elsewhere 

define an “[a]ction” as a “termination, suspension, or 

reduction of Medicaid eligibility or covered services.” Id.

§ 431.201. The result is that the District must grant a hearing

to (1) an applicant whose “claim for services is denied” and 

also to (2) a beneficiary who believes that he has been 

subjected to an erroneous “termination, suspension, or 

reduction” of “Medicaid eligibility or covered services.”

A separate set of regulations speaks to the provision of 

notice of the opportunity for a hearing. Significantly, those 

regulations call for notice only with regard to the second of 

the above categories of individuals for whom a hearing is 

available (i.e., persons against whom the District takes an 

“action” as defined by the regulations), not the first category 

(i.e., persons as to whom a claim for services is “denied”). To 

be sure, the regulations governing hearings generally provide

that “[t]he hearing system must meet the due process 

standards set forth in Goldberg v. Kelly, 397 U.S. 254 (1970), 

and any additional standards specified in this subpart.” 42 

C.F.R. § 431.205(d). That provision, however, does not 

specifically refer to notice. It instead more generally calls for

the District to establish a system for hearings that conforms to 

the requirements of due process. The provision thus 

ultimately adds little to the plaintiffs’ arguments under the 

Due Process Clause (which we separately consider below).

Under the regulations specifically addressing the 

provision of notice of an opportunity for a hearing, the 

requirement to afford notice arises, in relevant part, only “at 

the time specified in paragraph (c)” of § 431.206. Id.

§ 431.206(b). The referenced “paragraph (c)” in turn calls for

the District to provide the mandated notice “(1) [a]t the time 

that [an] individual applies for Medicaid” and “(2) [a]t the 

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time of any action affecting his or her claim.” Id. 

§ 431.206(c)(1)-(2) (emphasis added). The plaintiffs make no 

claim of an entitlement to notice under subparagraph (1). We 

therefore focus our attention on subparagraph (2), under 

which notice is required at the time of an “action” affecting a 

Medicaid beneficiary’s claim. Because, as explained, the 

term “action” means a “termination, suspension, or reduction 

of Medicaid eligibility or covered services,” id. § 431.201, the 

pertinent question is whether any denial of prescription drug 

coverage at a pharmacy amounts to a “termination, 

suspension, or reduction of Medicaid eligibility or covered 

services,” id.

We think the answer is no. The regulations, as explained, 

draw a distinction between a person whose “claim for services 

is denied” and a person who “believes the agency has taken 

an action erroneously.” Id. § 431.220(1)-(2) (emphasis 

added); see id. § 431.200(a)-(b). While both the “denial” of a 

claim and an “action” affecting a claim (i.e., a termination, 

suspension, or reduction of Medicaid eligibility or covered 

services) trigger an “opportunity for a hearing” under the 

regulations, id. § 431.220, the regulations pointedly call for 

the provision of notice of the opportunity to request a hearing 

only with regard to an “action affecting [a beneficiary’s] 

claim,” id. § 431.206(c). The regulations contain no such 

requirement of notice whenever a claim for coverage is 

“denied.”

The distinction drawn by the notice regulations is 

reinforced by the difference in common understanding 

between a “denial,” on one hand, and a “termination, 

suspension, or reduction,” on the other. In many cases, a 

denial maintains the status quo; but in all cases, a 

“termination, suspension, or reduction” alters the status quo. 

That much is evident from the ordinary meanings of the 

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terms. All that is required for a denial is that a request be 

turned down or rejected—a decision that, in many cases, will 

maintain the status quo. But a “termination” is “an act of 

ending something,” Termination, Merriam-Webster

Dictionary Online, http://www.merriam

webster.com/dictionary/termination (last visited June 30, 

2015); a “suspension” is the “act of stopping or delaying 

something,” Suspension, Merriam-Webster Dictionary 

Online, http://www.merriamwebster.com/dictionary/suspension (last visited June 30, 

2015); and a “reduction” is “the act of making something 

smaller,” Reduction, Merriam-Webster Dictionary Online, 

http://www.merriam-webster.com/dictionary/reduction (last 

visited June 30, 2015). All of those latter definitions involve 

a change in, not mere maintenance of, existing conditions.

The procedures governing notice set forth in the 

regulations cement our understanding that a denial of 

prescription drug coverage would not generally qualify as a 

“termination, suspension, or reduction” of covered services. 

Apart from certain narrow exceptions not in issue here, the 

regulations provide that, when the District is required to 

afford notice, it must give notice “at least 10 days before the 

date of [an] action,” 42 C.F.R. § 431.211; see also id. 

§§ 431.213, 431.214—that is, ten days before the date of a 

“termination suspension, or reduction of Medicaid eligibility 

or covered services,” id. § 431.201. That requirement makes 

sense in the case of a “termination, suspension, or reduction 

of Medicaid eligibility or covered services” as ordinarily 

understood: an action that alters the status quo. The advancenotice requirement, however, makes little sense in the context 

of a garden-variety denial of prescription drug coverage at the 

point-of-sale in a pharmacy, which need not manifest any 

alteration of the status quo.

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For instance, if the District were set to implement a 

reduction in the menu of covered services for Medicaid 

beneficiaries, it could give beneficiaries notice ten days in 

advance of the “action” it “intends to take” and of the 

“individual’s right to request” a “hearing” in connection with 

that action. Id. § 431.210(a), (d)(1)-(2). By contrast, there 

would be no way for the District to know ten days in advance 

that a patient will come to a pharmacy with a prescription but 

will fail to comply with applicable prior authorization 

requirements, thereby triggering a denial of coverage. In such 

a case, it would be impossible for the District to comply with 

the requirement under § 431.211 to give ten-day advance 

notice of the opportunity for a hearing. It therefore would 

make little sense to read the regulations to impose the notice 

requirement (including the obligation to give notice ten days 

in advance) for every denial of prescription drug coverage at 

the point-of-sale.

For those reasons, we reject the plaintiffs’ argument that 

Title XIX’s notice regulations are triggered whenever there 

has been a denial of a claim for prescription drug coverage at 

the point-of-sale. We therefore affirm the district court’s 

dismissal of the plaintiffs’ Title XIX claims, albeit on 

different grounds. See United States v. Coughlin, 610 F.3d 

89, 108 (D.C. Cir. 2010).

III.

The district court also dismissed the plaintiffs’ due 

process claims. To bring a claim under the Due Process 

Clause, a plaintiff must show (i) deprivation of a protected 

liberty or property interest, see Gen. Elec. Co. v. Jackson, 610 

F.3d 110, 117 (D.C. Cir. 2010); (ii) by the government, see 

Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 50 (1999); 

(iii) without the process that is “due” under the Fifth 

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Amendment, see Mathews v. Eldridge, 424 U.S. 319, 334-35

(1976). The district court determined that, for most of the 

alleged denials, the plaintiffs lacked a protected property 

interest. The court further concluded that, for all of the 

alleged denials, the plaintiffs failed to allege a deprivation at 

the hands of the government. We disagree as to both 

conclusions, and we therefore remand for further proceedings 

to determine what process is “due” to the plaintiffs.

A.

“The first inquiry in every due process challenge is 

whether the plaintiff has been deprived of a protected interest 

in ‘liberty’ or ‘property.’” Gen. Elec. Co., 610 F.3d at 117. 

“Only after finding the deprivation of a protected interest do 

we look to see if the government’s [actions] comport with due 

process.” Id. (brackets omitted). We conclude that the 

plaintiffs have adequately alleged a protected property interest 

in their prescription drug benefits.

It is well established that certain government benefits 

give rise to property interests protected by the Due Process 

Clause. See, e.g., Goldberg v. Kelly, 397 U.S. 254 (1970). 

Not all government benefits do, however. To have a 

protected property interest in a given benefit, “a person 

clearly must have more than an abstract need or desire for it. 

He must have more than a unilateral expectation of it. He 

must, instead, have a legitimate claim of entitlement to it.” 

Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 

(1972). We have thus indicated in similar circumstances that 

a “legitimate claim of entitlement” is an essential condition of

a protected property interest. See Roberts v. United States, 

741 F.3d 152, 161 (D.C. Cir. 2014).

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The District, echoing the district court’s reasoning, 

contends that, to the extent the plaintiffs failed to meet 

preconditions to prescription drug benefits under Medicaid 

(e.g., valid Medicaid enrollment and satisfaction of any prior 

authorization requirements), the plaintiffs had no “legitimate 

claim of entitlement” to those benefits for due process 

purposes. The District’s argument misapprehends what is 

meant by a “legitimate claim of entitlement.” A “legitimate 

claim of entitlement” means that a person would be entitled to 

receive the government benefit assuming she satisfied the 

preconditions to obtaining it. A claim of entitlement therefore

is “legitimate” if award of the benefit would follow from

satisfaction of applicable eligibility criteria. See Wash. Legal 

Clinic for the Homeless v. Barry, 107 F.3d 32, 36 (D.C. Cir. 

1997). Insofar as the government retains “unfettered 

discretion” to withhold the benefit even upon satisfaction of 

all eligibility criteria, “no constitutionally protected property 

interest exists.” Id. But if “the statute or implementing 

regulations place ‘substantive limitations on official 

discretion’” to withhold award of the benefit upon satisfaction 

of the eligibility criteria, there is a legitimate claim of 

entitlement, as to which the Due Process Clause affords

protection. Id. (quoting Olim v. Wakinekona, 461 U.S. 238, 

249 (1983)). Compare Daniels v. Woodbury Cnty., Iowa, 742 

F.2d 1128, 1132-33 (8th Cir. 1984) (award of benefit 

sufficiently mandatory), with Eidson v. Pierce, 745 F.2d 453, 

461 (7th Cir. 1984) (award of benefit insufficiently 

mandatory). 

The District therefore errs in arguing that a plaintiff must 

show that she satisfies the preconditions to prescription drug 

coverage in order to have a “legitimate claim of entitlement” 

to coverage. For instance, the District contends that a plaintiff 

has no legitimate claim of entitlement in connection with a 

drug requiring prior authorization unless the plaintiff has in 

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fact secured prior authorization. And the District similarly 

argues that a plaintiff has no legitimate claim of entitlement if 

she is not enrolled in Medicaid or if she fails to present valid 

proof of enrollment. Those arguments incorrectly skip ahead 

to the plaintiff’s ultimate eligibility for a government benefit

instead of asking whether she would be entitled to the benefit 

if she were to satisfy the preconditions to obtaining it.

Here, we find that the plaintiffs have a legitimate claim of 

entitlement to coverage of any drug not completely excluded 

from coverage under Medicaid. The District’s Medicaid 

regulations providing for prescription drug coverage use 

mandatory, non-discretionary terms. See, e.g., D.C. Mun. 

Regs. tit. 29, § 2703.1 (“The District of Columbia Medicaid 

Program shall reimburse claims . . . .” (emphasis added)). 

And the District makes no argument that, upon the 

satisfaction of all eligibility criteria, it retains discretion to 

deny a claim for a covered prescription drug. The plaintiffs 

therefore have protected property interests in the coverage of 

prescription drugs not completely excluded from Medicaid 

coverage. 

Of course, a plaintiff would still need to demonstrate

valid Medicaid enrollment and compliance with any prior 

authorization or other threshold requirements in order for her

prescription, in fact, to be covered. But the procedural 

protections of the Due Process Clause exist to give her a fair 

opportunity to show that she meets the criteria for coverage. 

We therefore conclude that the prescription drug coverage

sought by the plaintiffs qualifies as a property interest 

protected by the Fifth Amendment.

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B.

Because due process offers no shield against purely 

private conduct, “however discriminatory or wrongful,” 

Jackson v. Metro. Edison Co., 419 U.S. 345, 349 (1974), we 

next examine whether the alleged deprivation of the plaintiffs’ 

property interests occurred at the hands of the government. 

See Am. Mfrs. Mut. Ins. Co., 526 U.S. at 50. We find the Due 

Process Clause’s state action requirement to be satisfied here: 

The plaintiffs adequately alleged that Xerox, a private 

company, determined their eligibility for benefits while acting 

as an agent of the District.

At the motion-to-dismiss stage, we must accept all factual 

allegations in the complaint as true. Browning v. Clinton, 292 

F.3d 235, 242 (D.C. Cir. 2002). The plaintiffs’ complaint 

includes a series of detailed allegations concerning the denials 

of their claims after they presented their prescriptions in a 

pharmacy and sought to invoke Medicaid coverage. As 

described by the plaintiffs:

[T]he recipient presents the prescription to a 

pharmacy provider. The pharmacy provider 

immediately submits an electronic claim 

through its computer to [Xerox]. The claims 

are decided immediately. The pharmacy 

provider receives an electronic return message 

from [Xerox] indicating whether the 

prescription will be covered by Medicaid. If 

the claim is denied, the pharmacy provider 

provides an electronic return message with a 

rejection code that corresponds to the reason 

for the denial of the claim.

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Pls.’ Amend. Compl. ¶ 34. Accepting the truth of those 

allegations, that is more than enough for us to make a 

reasonable inference that Xerox, upon submission of a 

prescription to a pharmacy, engages in a real-time 

determination of the plaintiffs’ eligibility for prescription drug 

benefits under Medicaid. 

The District points out that Xerox’s claims system is not 

necessarily involved every time a pharmacist informs a 

patient that coverage has been denied. That may be true. For 

instance, a pharmacist might simply decline to relay a 

prescription through Xerox’s system and then unilaterally 

inform a plaintiff that coverage has been denied. But in 

addition to their general description of the process, the 

plaintiffs also included in their complaint specific instances—

with rejection codes—in which Xerox determined their 

coverage. See, e.g., Pls.’ Amend. Compl. ¶ 81. With 

upwards of 6,000 claims passing through Xerox’s system on a 

single day (of which approximately half may be denied), see 

id. ¶ 44, we readily infer at this stage that many of the 

plaintiffs’ claims follow that process. For purposes of 

resolving the District’s motion to dismiss, we make the 

reasonable inference that, unless a plaintiff has otherwise 

alleged specific facts to the contrary, a pharmacist who 

informs a claimant of a coverage denial is generally 

communicating the results of Xerox’s determination. 

Xerox, therefore, took the “action.” But is Xerox’s 

action “state action?” We find that it is. While the actions of 

private actors generally do not count as state action for due 

process purposes, see, e.g., S.F. Arts & Athletics, Inc. v. U.S.

Olympic Comm., 483 U.S. 522, 543-47 (1987), the state 

action requirement is met if “there is such a close nexus 

between the State and the challenged action that seemingly 

private behavior may be fairly treated as that of the State 

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itself,” Brentwood Acad. v. Tenn. Secondary Schs. Athletic 

Ass’n, 531 U.S. 288, 295 (2001) (internal quotation marks 

omitted). The requisite nexus generally exists when a private 

party acts as an agent of the government in relevant respects. 

See Skinner v. Ry. Labor Execs.’ Ass’n, 489 U.S. 602, 614 

(1989). Here, the allegations in the complaint support the 

inference that Xerox acted as the District’s agent for purposes 

of determining a person’s eligibility for prescription drug 

coverage under Medicaid. The District does not contend 

otherwise. 

The District instead argues that the state action 

requirement remains unsatisfied because Xerox is not 

necessarily at fault in circumstances in which the Xerox 

system denies coverage to which a beneficiary in fact has an 

entitlement. After all, the District observes, there may be

myriad reasons for the erroneous denial of prescription drug 

coverage, including “pharmacy, physician, or patient error.” 

Appellees’ Br. 45. That is undoubtedly the case. But it still 

remains Xerox’s determination that occasions denial of the 

recipients’ claimed coverage. Xerox’s actions—on behalf of 

the District—effected the denial of prescription drug 

coverage. We therefore find the state action requirement to 

be satisfied.

C.

The final step in the due process inquiry calls for 

assessing whether the plaintiffs received constitutionally 

adequate process in connection with the denial of benefits. 

“[D]ue process is flexible and calls for such procedural 

protections as the particular situation demands.” Mathews, 

424 U.S. at 334. The analysis 

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generally requires consideration of three 

distinct factors: First, the private interest that 

will be affected by the official action; second, 

the risk of an erroneous deprivation of such 

interest through the procedures used, and the 

probable value, if any, of additional or 

substitute procedural safeguards; and finally, 

the Government’s interest, including the 

function involved and the fiscal and 

administrative burdens that the additional or 

substitute procedural requirement would entail.

Id. at 335.

Here, the plaintiffs do get some process: Upon a denial 

of coverage, they may contact DHCF and the District will 

provide them with a reason. See, e.g., Pls.’ Amend. Compl. 

¶ 102. And a hearing is always available to “[a]ny beneficiary 

who requests it because he or she believes the agency has 

taken an action erroneously.” 42 C.F.R. § 431.220(a)(2). But 

the plaintiffs contend that the Due Process Clause entitles 

them to more process, including written notice of the 

opportunity to request a hearing anytime prescription drug 

coverage is denied at the point-of-sale.

We do not resolve that issue. The district court has yet to 

pass upon it, so neither will we. See Liberty Prop. Trust v. 

Republic Props. Corp., 577 F.3d 335, 341 (D.C. Cir. 2009). 

Rather, we remand the case to permit the district court to

conduct an inquiry in the first instance into what process is 

due.

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* * * * *

For the foregoing reasons, we affirm in part and reverse 

in part the district court’s decision. We affirm the court’s 

dismissal of the plaintiffs’ Title XIX claims. We reverse the 

court’s dismissal of the due process claims and remand for 

consideration of what process the plaintiffs are due under the 

Fifth Amendment. Finally, we note that the district court can

reconsider its jurisdiction over the D.C.-law claims in light of 

our partial reversal.

So ordered.

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