Source: https://www.scribd.com/document/24808698/Final-First-Brief-Before-3rd-Circuit
Timestamp: 2016-07-24 15:29:32
Document Index: 224246878

Matched Legal Cases: ['§ 1396', '§ 1396', '§ 1396', '§ 1409', '§ 1409', '§ 1292', '§1396', '§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 1404', '§1404', '§ 12', '§ 1409', '§1409', '§ 1409', '§ 1409', '§ 1409', '§65', '§ 27', '§ 1396', '§ 1292', '§ 1396', '§ 1396', '§ 1396', '§1396', '§ 1404', '§1404', '§ 1404', '§1404', '§1409', '§1409', '§1404', '§1409', '§ 1404', '§ 1404', '§ 1409', '§1404', '§ 1409', '§1404', '§1404', '§ 1404', '§1404', '§ 12', '§1404', '§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 1396', '§1396', '§1396', '§ 1396', '§1396', '§1396', '§ 1396', '§ 1396', '§1396', '§1396', '§ 1396', '§ 1396', '§ 1396', '§ 1396', '§ 1409', '§ 1409', '§ 1409', '§ 1409', '§1409', '§ 1409', '§ 1409', '§1396', '§ 1409', '§ 27', '§65', '§65', '§1409', '§1409', '§ 101', '§1409', '§ 1396', '§ 1396', '§ 1396', '§3396', '§1396', '§ 1409', '§ 1396', '§ 634']

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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________________________________________________________ Nos. 09-3537 and 09-3538 _____________________________________________________________ RITA L TRISTANI, by and through her Attorney in Fact, MARIA C. KARNES; JOSHUA C. VALENTA, individually, and on behalf of others similarly situated; A.H., individually and as parent and natural guardian of A.H., a minor Appellee/Cross-Appellants vs. ESTELLE RICHMAN, in both her individual and official capacity; FEATHER O. HOUSTON, in her individual capacity, Appellants/Cross-Appellees _____________________________________________________________ BRIEF OF APPELLEES/CROSS-APPELLANTS _____________________________________________________________ Appeal by Permission from the Order of the United States District Court for the Western District of Pennsylvania dated July 23, 2009 Denying Appellants’ Motion for Summary Judgment in Part and Amending a Prior Order to Certify for an Interlocutory Appeal in a Civil Action _____________________________________________________________ Patrick J. Loughren, Esquire Loughren, Loughren & Loughren, PC 310 Grant Street, Suite 2800 Pittsburgh, Pa. 15219 (412) 232-3530 Veronica A. Richards, Esquire Richards & Richards, LLP 16020 Perry Hwy Warrendale, PA 15086 (724) 940-4340 Aaron D. Rihn, Esquire Robert F. Daley, Esquire Robert Pierce & Associates 707 Grant Street, Suite 2500 Pittsburgh, PA 15219 (412) 281-7220
Attorneys for: Appellees/Cross-Appellants
Case: 09-3537
Document: 00319945099
Table of Citations..................................................................................................... iii Statement of the Issues of Plaintiffs’ Cross - Appeal ................................................1 Statement of the Case.................................................................................................2 Summary of Argument...............................................................................................4 Argument....................................................................................................................7 I. Plaintiffs’ Response to Defendants’ Opening Brief ...........................................7 A. Pennsylvania’s Use of TPL Liens Violates Federal Law ................................................................................................7 1. Congress did not envision a lien system ..........................................7 2. DPW failed to comply with federal law.........................................17 3. The federal anti-lien provisions precludes the imposition of a lien...................................................................19 4. The anti-recovery provision precludes any recovery ...................................................................................24 5. The federal reimbursement provisions preclude DPW from recovering more than the capitated payment.............................................................25 a. The federal reimbursement provision............................................................................26
b. Managed Care and Welfare...............................................27 6. The right to recover medical payments does constitute a property interest..................................................33
B. Neither Collateral Estoppel nor Res Judicata Impact the Claims of Ms. Tristani............................................................37 C. The “Voluntary Payment Doctrine” Does Not Preclude Recovery....................................................................................42 D. The Capitation Fee Issue was Properly Decided......................................44 II. Plaintiffs Arguments in Support of Their Cross Appeal .........................................................................................................47 A. The District Court erred in holding that the Defendant’s practice of asserting liens for the full amount of medical expenses did not violate Federal Medicaid law ...............................................................................47 B. The District Court erred in holding that the Defendants were entitled to Qualified Immunity.....................................52 Conclusion ...............................................................................................................57 Combined Certification............................................................................................59 Statutory Addendum 42 U.S.C. § 1396(a)(25)......................................................................................60 42 U.S.C. § 1396k...............................................................................................64 42 U.S.C. § 1396p(a) and (b)..............................................................................66 62 P.S. § 1409 .....................................................................................................72 62 P.S. § 1409.1 .................................................................................................80
Arkansas v. Ahlborn 126 S. Ct. at 279.......................................................................................................17 Arkansas Department of Health and Human Services v. Ahlborn 547 U.S. 268 (2006)....................................................................... 15, 16, 21, passim Barton v. Summers 293 F.3d 944, 951 (6th Cir. 2002) ................................................................14, 15, 26 Bowen v. Massachusetts 487 U.S. 879, 894, 101 L.Ed. 2d 749, 108 S. Ct. 2722 (1988)..........................52, 53 Broselow v. Fisher 319 F.3d 605; 2003 U.S. App. LEXIS 2533 (3rd Cir. 2003)....................................15 Cass County Music Co. v. C.H.L.R., Inc. 88 F.3d 635, 642 (8th Cir. 1996).........................................................................53, 54 Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry 494 U.S. 558, 570, 108 L.Ed. 2d 519, 110 S. Ct. 1339 (1990)................................53 Commonwealth v. Sunbury Converting Works 134 A. 438, 440 (Pa. 1926) ......................................................................................35 Davis v. Scherer 468 U.S. 183, 196 n. 14 (1984)................................................................................55 Dep't of Pub. Welfare v. Md. Casualty Co. 643 A.2d 139 (Pa.Cmmw 1994) ..............................................................................11
Doran v. Missouri Department of Social Services 2008 U.S. Dist. LEXIS 1418 (W.D. Mo. 2008) ..........................................43, 44, 54 iii
Eldred v. Ashcroft 537 U.S. 186, 222 (2003).........................................................................................22 Elmdale Dev., LLC v. City of Des Plaines 2005 U.S. Dist. LEXIS 16967 (ND Ill. 2005) .........................................................43 Garcia v. Community Legal Services 524 A.2d 980 (Pa. Super. Ct. 1987).............................................................35, 36, 37 Geier v. American Honda Motor Co. 529 U.S. 861, 869-874 (2000) .................................................................................32 Green v. City of New York 438 F.Supp.2d 111 (E.D.N.Y. 2006) .................................................................41, 42 Harlow v. Fitzgerald 457 U.S. 800, 818 (1982).........................................................................................56 Hatchigian v. Koch 381, 553 A.2d 1018, 1020 (Pa. Super. Court 1989) ................................................39 Hopkins v. Saunders 199 F.3d 968, 977, (8th Cir. 1999) cert. denied 2000 U.S. LEXIS 5868.................53 In re: Iulo 564 Pa. 205, 766 A.2d 335, 337 (2001)...................................................................38 Jackson v. Novastar Mortgage 2007 U.S. Dist. LEXIS 93584 (WD Tenn. 2007)....................................................43 Kampa v. White Consolidated Indus., Inc. 115 F.3d 585, 586 (1997) (citing Terry, 494 U.S. at 570) ......................................53 Larson v. Domestic & Foreign Commerce Corp. 337 U.S. 682, 688, 69 S.Ct. 1457, 1460, 93 L.Ed. 1628 (1949)..............................53 Lorillard Tobacco Co. v. Reilly 533 U.S. 525, 540-41 (2001) ...................................................................................32
Lynne Carol Fashions, Inc. v. Cranston Print Works Co. 453 F.2d 1177, 1183 (3d Cir. 1972) ..................................................................40, 41 Martin v. City of Rochester 642 N.W.2d 1 (Minn. 2002)...............................................................................13, 21 McCulloch v. Maryland, 4 Wheat 316, 427, 4 L.Ed. 579 (1819) ...................................................................................32 Municipality of Monroeville v. Liberatore 736 A.2d 31, 34 (Pa. Commw. Ct. 1999), app. denied, 751 A.2d 195 (Pa. 2000)..39 Parsowith v. Com. Dept. of Revenue 723 A.2d. 659, 662 n.4 (Pa. Commw. Ct. 1999) ...............................................35, 37 Spisak v. Margolis Edelstein 768 A.2d 874, 876-77 (Pa. Super. Ct. 2001) ...........................................................38 Tranello v. Frey 962 F.2d 244, 265 (2nd Cir. 1992) ..............................................................................3 Tristani v. Richman 438 F.Supp.2d (W.D.Pa. 2009)........................................................ 41,42,44, passim Wallace v. Estate of Jackson 972 P.2d 446 (Utah 1998)........................................................................................15 West Virginia Univ. Hospitals, Inc. v. Casey 499 U.S. 83, 98 (1991).............................................................................................23 Wood v. Strickland 420 U.S. 308, 314-315, n.6 (1975) ..........................................................................52
28 U.S.C. § 1292(b) ...................................................................................................3 v
42 C.F.R. 430.10 ........................................................................................................8 42 U.S.C. 1396a ........................................................................................................8 42 U.S.C. §1396a(a)(18) ....................................................................................19, 20 42 U.S.C. 1396a(a)(25)(A) ........................................................................................8 42 U.S.C. 1396a(a)(25)(i) .........................................................................................8 42 U.S.C. 1396a(a)(25)(B) ..................................................................................8, 48 42 U.S.C. 1396a(a)(25)(A)(ii) ...................................................................................8 42 U.S.C. 1396a(a)(25)(H) ..................................................................................9, 48 42 U.S.C. § 1396(a) .................................................................................................48 42 U.S.C. § 1396k......................................................................................................9 42 U.S.C. § 1396k(a)(1)(C) ....................................................................................10 42 U.S.C.A. § 1396p(a)(1)...........................................................................20, 47, 52 42 U.S.C. § 1396k(b) ..................................................................................26, 32, 48 42 U.S.C.A. § 1396p(b)(1).................................................................................24, 52 62 P.S. § 1404(b)...........................................................................................11, 12,13 62 P.S. §1404(b), Act 1994-49 (H.B. 1392), § 12 ...................................................13 62 Pa.C.S. § 1409(b)(5) ...........................................................................................34 62 P.S. §1409(b)(7) .....................................................................................30, 44, 46 62 P.S. § 1409(b)(7)(i) .............................................................................................44 62 P.S. § 1409(b)(7)(iii)...........................................................................................45
62 PA. STAT. ANN. § 1409(b)(11) ........................................................................49
OTHER BLACK’S LAW DICTIONARY, 923 (6th Ed. 1990) .......................................................34 BLACK’S LAW DICTIONARY, 1006 (5th Ed. 1979) .....................................................37 JOHN J. DVORSKE, 10 STANDARD PENNSYLVANIA PRACTICE 2d §65:98 ............38, 40 MOORE’S FEDERAL PRACTICE ¶ 110.25[1], p.300 2d ed. 1995 ..................................3 Restatement (Second) of Judgments § 27 (1982) ....................................................38 The Omnibus Budget Reconciliation Act (OBRA) of 1981..............................28, 29
STATEMENT OF THE ISSUES OF PLAINTIFFS’ CROSS-APPEAL
Did the District Court err in deciding that the Defendants’ did not violate federal law by asserting liens against the third party tort recoveries of Medicaid beneficiaries for the full amount of medical services rendered, rather than for that portion of the recovery which was reasonably allocated to medical expenses? (This issue was raised by the Plaintiffs in their Summary Judgment Brief (DDE, #69 , pp.6, 39-49) and ruled upon in the District Court’s March 25, 2009 Opinion.) Suggested Answer: Yes
Did the District Court err in deciding in deciding that the individual Defendants were entitled to qualified immunity on the Plaintiffs’ claims that the assertion of liens on the third party tort recoveries violated the anti-lien and anti-recovery portions of the Medicaid Act, 42 U.S.C.A. §§ 1396p(a)(1) and 1396p(b)(1)? (This issue was raised by the Plaintiffs in their Summary Judgment Brief (DDE, #69 , pp. 41-45) and ruled upon in the District Court’s March 25, 2009 Opinion.) Suggested Answer: Yes
STATEMENT OF THE CASE The Plaintiffs do not take issue with the Statement of the Case set forth in the Defendants’ Opening Brief, except with respect to the following two particulars: First, the Defendants contend that the District Court’s March 25, 2009 Opinion did not provide any relief to the Plaintiffs. While this is technically true, the Opinion did determine a number of issues in the Plaintiffs’ favor, including the fact that the Defendants’ practice of recovering the full amount of medical expenditures paid on behalf of Medicaid beneficiaries who were enrolled in Managed Care Organizations (MCOs) rather than the amount which the Pennsylvania Department of Public Welfare paid in capitated payments to enroll these individuals, violated Pennsylvania state law prior to June 2005. The District Court did not order relief on this issue because it had doubts about whether the initial two named Plaintiffs, Rita Tristani and Joshua Valenta, had standing to assert these claims. Following the issuance of the Court’s Opinion, the parties agreed to amend the Complaint to join an additional Plaintiff, A.H. Both parties agreed that A.H. had standing to raise this issue, and the only reason she was added by joint motion at that time was so the Defendants could argue the capitated payment issue on Appeal. The District Court’s March 25, 2009 Order specifically finds that Plaintiff
A.H. has standing on this issue. It is incorrect for the Defendants to now argue that this issue is not properly before this Court, particularly when it was at Defendants’ request that A.H. was added. Second, footnote number three of the Defendants’ Opening Brief questions the validity of the Plaintiffs’ Cross-Appeal, since the Plaintiffs did not seek permission to appeal under § 1292(b). Once again, Plaintiffs are surprised that the Defendants have raised this issue, since they expressed a desire to have Plaintiffs cross-appeal heard at this time, and specifically stated that they did not intend to challenge the validity of Plaintiffs’ cross-appeal. Regardless, Plaintiffs contend that their cross-appeal is properly before this Court. It is well established that an appellate court may address any issue fairly included within the certified order because “it is the order that is appealable, and not the controlling question identified by the district court.” MOORE’S FEDERAL PRACTICE ¶ 110.25[1], p.300 2d ed. 1995). Even the authority cited by the Defendants, Tranello v. Frey, 962 F.2d 244, 265 (2nd Cir. 1992), concedes that the appellate court may have “discretionary” authority to review the cross-appeal under these circumstances. It is proper for this Court to decide these issues together, and it would be a waste of both the parties’ and this Court’s time and resources to require the Plaintiffs to pursue a separate appeal at a later date.
SUMMARY OF ARGUMENT Congress has mandated that States participating in the Medicaid Program agree to directly pursue third parties who cause injury to Medical Assistance beneficiaries resulting in costs to the MA Program. Federal law requires that States obtain an assignment from the welfare recipient of the right to pursue liable third parties with respect to payment for medical expenses. Thereafter, the State is required to pursue third parties directly so long as it is cost effective to do so. DPW's conduct in abdicating its responsibilities under Federal law to pursue liable third parties in order to impose "liens" on the settlements of welfare recipients violates both the anti-lien and anti-recovery provisions of the Social Security Act. By means of the anti-lien and anti-recovery provisions of the Social Security Act, Congress has expressly forbidden the States from imposing liens upon, or recovering from, the property of welfare recipients. The District Court correctly held that State law which purports to allow DPW to impose liens upon and to make recoveries from, the property of welfare recipients, conflicts with the Federal law and violate the Supremacy clause. DPW's argument that Congress intended a "lien system" model is refuted by the plain language of the Social Security Act
Assuming the District Court was in error, and DPW is allowed to both assert liens and make recoveries from the property of welfare recipients, DPW's recovery is specifically limited by Federal law to that which "…is necessary to reimburse it…" Where all that DPW has expended is a capitated premium payment made to a managed care organization, than that is the amount that DPW should recover. DPW's conduct in imposing liens, and recovering the amount subsequently paid by the MCO's on behalf of the individual, violates federal law, as does the state law that purports to permit such liens and recoveries. Additionally, pursuant to the United States Supreme Court’s decision in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), even if DPW was permitted to assert a lien against beneficiaries’ recoveries, that lien was limited to “that portion of a settlement that represents payments for medical care.” Plaintiffs contend that DPW’s practice of asserting a lien for the full amount of services rendered, minus a reduction for fees and costs violated this principle. The District Court attempted to distinguish the
Pennsylvania practice, which limited the amount the lien to one half of the recovery, from the practice declared unconstitutional in the Ahlborn case, which did not apply such a cap, but us discussed below this distinction is unavailing. Finally, the Plaintiffs contend that the District Court erred in finding that the individual Defendants were entitled to qualified immunity from Plaintiffs’ claims 5
that the Medicaid lines were impermissible under federal law.
District Court was correct that there was not any existing case authority on this issue, the Plaintiffs’ right to be free from these liens was clearly established by the plain and unambiguous language of the statute itself.
ARGUMENT I. THE PLAINTIFFS’ RESPONSE TO DEFENDANTS’ OPENING BRIEF A. Pennsylvania’s Use of TPL Liens Violates Federal Law 1. Congress did not envision a lien system
DPW’s primary argument is its contention that liens may be imposed upon the settlements of welfare recipients because “Congress envisioned a lien system” as the means through which States would make third-party liability recoveries. Defendants’ Brief, p. 24. In order to have “envisioned” a lien system, DPW must necessarily argue that Congress envisioned that MA recipients would be filing lawsuits and recovering, at which time DPW would be imposing liens on the recoveries. Congress had no such vision. A cursory review of the applicable statute, as well as numerous cases construing the same, reveals that Congress had no intention to pay out millions of dollars in Medicaid expenditures to States without requiring the States to promise, as a condition of participation in the Medicaid Program, that they – and not the MA recipients – would identify and pursue liable third parties. DPW cites to none of the applicable Federal statutory provisions in
support of its argument that Congress envisioned a “lien model” and a review of that language reveals that DPW’s argument is wholly lacking in merit.
Congress mandated that when States choose to participate in the Medicaid program, they must submit a plan for medical assistance that conforms to the requirements of the Medicaid statute. See: 42 U.S.C. 1396a; 42 C.F.R. 430.10. A State’s Medicaid plan must provide “that the State or local agency administering such plan will take all reasonable measures to ascertain the legal liability of third parties . . . to pay for care and services available under the plan.” 42 U.S.C. 1396a(a)(25)(A). Those measures must include “the collection of sufficient
information” from the beneficiary to “enable the State to pursue claims against such third parties.” 42 U.S.C. 1396a(a)(25)(i). Congress also mandated that once third-party liability is identified, the State must “seek reimbursement for [its medical] assistance to the extent of such legal liability.” 42 U.S.C. 1396a(a)(25)(B). The state plan must also identify how those claims will be pursued. 42 U.S.C. 1396a(a)(25)(A)(ii). Welfare recipients also have obligations. While DPW would have this Court believe that Congress envisioned welfare recipients investigating, identifying, pursuing and suing liable third parties, Congress did not impose those obligations on welfare recipients. As set forth above, those obligations were imposed upon the States. With respect to welfare recipients, Federal law mandates that the State’s plan contain provisions that obligate the welfare recipient only to assist the State in its efforts to pursue liable third parties by assigning rights to the State, and then by
cooperating with the State in its (i.e. the State’s) pursuit of liable third parties. Specifically, Section § 1396k of the Act states, in part:
For the purpose of assisting in the collection of medical support payments and other payments for medical care owed to recipients of medical assistance under the State plan approved under this subchapter [42 U.S.C. §§ 1396-1396v], a State plan for medical assistance shall (1) provide that, as a condition of eligibility for medical assistance under the State plan to an individual who has the legal capacity to execute an assignment for himself, the individual is required (A) to assign the State any rights . . . to support (specified as support for the purpose of medical care by a court or administrative order) and to payment for medical care from any third party. to cooperate with the State . . . in obtaining support and payments (described in paragraph (A)) for himself . . .; and to cooperate with the State in identifying, and providing information to assist the State in pursuing, any third party who may be liable to pay for care and services available under the plan. . . (Emphasis added.)
In further elaboration of the individual’s obligations to effectuate an assignment of rights to the State, § 1396(a)(25)(H) Federal law requires the State plan: (a) Contents
A State plan for medical assistance must— (25) provide 9
that to the extent that payment has been made under the State plan for medical assistance in any case where a third party has a legal liability to make payment for such assistance, the State has in effect laws under which, to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or services;
42 U.S.C. 1396a(a)(25)(H).
If DPW’s argument is correct that “Congress
envisioned a lien system,” then why would Congress have mandated that the State collect information from beneficiaries to “enable the State to pursue claims against such third parties”? §1396k(a)(1)(C) (Emphasis added.) Why would welfare recipients be ordered to cooperate with the State in obtaining payments? Most importantly (as more fully discussed hereinafter), why would Congress mandate that welfare recipients assign rights of action to the State if Congress intended for the welfare recipients to pursue lawsuits against liable third parties? DPW’s argument that “Congress intended to allow States to use a lien model of recovery” Defendants’ Brief, p. 24, has absolutely no support in the text of the statute and should be rejected. Congress intended for States to pursue liable third parties, and to do so via an assignment of rights from the welfare recipient.
Pennsylvania’s conduct evidences that it clearly understands the Federal mandate that it pursue liable third parties via assignment. The argument DPW makes that Congress envisioned a “lien system” wholly lacks merit. In fact, much can be gleaned from Pennsylvania’s conduct in promulgating its welfare code. Pennsylvania promulgated 62 P.S. § 1404(b) in an attempt to comply with its Federal obligations. The pre-1994 version stated: Any person applying for medical assistance benefits shall as a condition to eligibility, give the department the right of subrogation to any other private or public health insurance benefits to which such person is or may become entitled. 62 P.S. §1404(b) (Emphasis added). Section 1404(b) was amended in 1994 for reasons discussed below. As noted above, § 1404(b) purported to give DPW a right of subrogation. Apparently, DPW believed that utilizing subrogation would be consistent with its statutorily mandated obligation to obtain an assignment. In Dep't of Pub. Welfare v. Md. Casualty Co., 643 A.2d 139 (Pa.Cmmw 1994) the plaintiff, who was pregnant, was injured in a motor vehicle accident. thereafter delivered her twins, although one twin died. She
All three individuals
received medical care that was paid for by DPW. Seven years after the accident, DPW filed suit against Maryland Casualty Company contending that, as the victim’s no-fault insurer, Maryland Casualty was obligated to pay medical benefits. DPW’s lawsuit was brought pursuant to §1404 and not §1409 because, as
DPW admitted, the action was time-barred by the statute of limitations set forth in §1409. Maryland Casualty argued that §1404(b) did not create an independent cause of action and that it merely set forth the relationship between the recipient and her doctors. Maryland Casualty argued that DPW’s lawsuit had to be brought pursuant to §1409 (“Third Party Liability”) and that because the statute of limitations set forth in that section had expired, DPW’s case was time-barred. Commonwealth Court agreed, stating, “We must also reject DPW's argument that it may proceed under § 1404. § 1404 does not provide a cause of action independent from that contained in § 1409. To the contrary, §1404 addresses only the relationship between the medical assistance recipient and the provider of the medical assistance payments, providing that receiving medical assistance is contingent upon the recipient giving the department the right of subrogation to any health insurance benefits to which the recipient is entitled. Section 1404 does not in itself authorize an independent action to recover from a third party any monies paid to the recipient. Id., 164 Pa. Commw. at 306. Pennsylvania amended § 1409(b) within one month of this decision. After the amendment, the language of §1404(b) changed DPW’s rights vis-à-vis the welfare recipient from one of subrogee/subrogor to that of assignee/assignor. The amended §1404(b) states: § 1404. Special recipient participation requirements (b) The acceptance of medical assistance benefits shall operate as an assignment to the department, by operation of law, of the assistance recipient's rights to recover 12 The
support, specified by a court as support for the payment of medical care, and to payment for medical care from any third party. 62 P.S. §1404(b), Act 1994-49 (H.B. 1392), § 12, approved June 6, 1994, and effective in 60 days. (Emphasis added.) It is clear that DPW understands its obligations to obtain an assignment from welfare recipients. Why else would DPW have amended §1404(b). Indeed, when an individual applies for Medical Assistance in Pennsylvania, the individual signs an affidavit that reads, in part: WHEN I SIGN THIS FORM, I UNDERSTAND THAT … I am giving the State the right to seek, with or without legal action, payment from private or public health insurance or liable third party (sic). The amount recovered will not exceed the amount paid by Medical Assistance.” App. (II), p. 331a, Excerpt from PUBLIC ASSISTANCE APPLICATION. Thus, pursuant to Federal law, State law, and the application signed by the MA recipient, DPW obtains an assignment to pursue the liable third party – with or without legal action – for the amount paid by DPW. This is in fact what Congress envisioned, and DPW’s argument that Congress envisioned a “lien system”, clearly has no statutory support. In the instant matter, the District Court rejected DPW’s argument that liens (via subrogation or otherwise) were permissible, let alone what Congress “envisioned”. So, too, have several other courts that have studied the Federal scheme. For example, the Minnesota Supreme Court in Martin v. City of
Rochester, 642 N.W.2d 1 (Minn. 2002) cert. denied Minn. v. Martin, 2003 U.S. LEXIS 5037 (U.S., June 27, 2003) carefully reviewed the Federal statutory scheme, and concluded: When the state actually obtains the assignment of rights to third-party payments for medical expenses, subrogation is no longer appropriate because the state is now the owner of the medical assistance recipient's claim and no longer needs to be subrogated. Id., 642 N.W.2d at 20-21. The court in Martin explained that a MA recipient who assigns his/her claim to the state thereafter no longer owns the claim. Rather, the claim, or cause of action, is owned by the state which must pursue the claim against the liable third party: By assigning the right to recover medical expenses, the Medicaid recipient no longer owns that right of recovery, i.e., the right is no longer the property of the recipient. Therefore, state enforcement of the assignment for medical expenses does not violate the anti-lien provision because recovery under the assignment does not operate on the property of the recipient. Moreover, this assignment allows the state to follow the federal directive to pursue third parties that may be liable for the costs of medical care. Although the state may not file a lien, the assignment does give the state the ability to pursue the third parties directly.” Id. 642 N.W.2d at 13. (Emphasis added.) By way of another example, in Barton v. Summers, 293 F.3d 944, 951 (6th Cir. 2002) the Sixth Circuit discussed the assignment provision. Barton involved claims by Medicaid recipients who sought
portions of the Tobacco Settlement.1 Federal scheme as follows:
The Sixth Circuit in Barton, explained the
“Federal law requires states or local administering agencies to take "all reasonable measures to ascertain the legal liability of third parties" for costs incurred under state Medicaid plans. 42 U.S.C. § 1396a(a)(25)(A). In cases where legal liability is found to exist for monies paid out under Medicaid plans, states are required to "seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. § 1396a(a)(25)(B). The purpose of this requirement is straightforward: when reasonably feasible, states are required to attempt to recover medical costs incurred under Medicaid programs from responsible third parties, rather than relying on federal aid exclusively. When a recovery is made, the federal government is paid its share. In order to facilitate recoupment of costs by the federal Medicaid system, state programs are also required to "provide for mandatory assignment [to the payor state] of rights of payment for medical support and other medical care owed to recipients . . . ." 42 U.S.C. §§ 1396a(a)(45).” Id., 293 F.3d at 951-952 Another example of careful analysis of the Federal statutory scheme appears in Judge Durham’s dissenting Opinion in Wallace v. Estate of Jackson, 972 P.2d 446 (Utah 1998), which dissent was cited by the United States Supreme Court in Ahlborn at footnote 13. In his dissent, Judge Durham noted: It is true, as the State argues, that these statutes reflect the legislative intent that Medicaid should recover its health care expenditures where third parties caused a Medicaid recipient to incur them. However, the language of various sections of the This Honorable Court resolved an identical claim in Broselow v. Fisher, 319 F.3d 605; 2003 U.S. App. LEXIS 2533 (3rd Cir. 2003), and briefly discussed the assignment provision.
statute indicates that Congress anticipated that third-party recovery would come directly from the third parties and not from the recipient. The language in section 1396a(25) states plainly that states should pursue their third-party liability claims against the third parties themselves. See 42 U.S.C. § 1396a(25). It does not mention recovery from the Medicaid recipient. Id., 972 P.2d at 450. (Emphasis added.) Lastly, there is some indication in Arkansas v. Ahlborn, 547 U.S. 268 (2006), that the Supreme Court would reject DPW’s argument that “Congress envisioned a lien system”. Plaintiffs first point out the critical factual distinction between the facts in Ahlborn and the facts in the instant matter. Ahlborn involved a Medicaid recipient who recovered a settlement upon which Arkansas attempted to impose a lien. The plaintiff in Ahlborn
stipulated that Arkansas was entitled to some amount of money, but just not everything that Arkansas was claiming. In the instant matter, however, Plaintiffs have not stipulated that DPW is entitled to any money and, in fact, maintain that DPW is entitled to nothing. Because of the stipulation entered into in Ahlborn, the issue of whether Arkansas could, in the first instance, recover one penny from Ahlborn’s settlement was not before the Supreme Court. That is not the case here. That being said, in footnote 9 of its Opinion, the Supreme Court Ahlborn added emphasis, and it is this emphasis that indicates that the Supreme Court would not agree with DPW’s argument that Congress envisioned a lien system:
The parties here assume, as do we, that a State can fulfill its obligation under the federal third-party liability provisions by requiring an “assignment” of part of, or placing a lien on, the settlement that a Medicaid recipient procures on her own. Cf. §§ 1396k(a)(1)(B)-(C)(the recipient has a duty to identify liable third parties and to “provide information to assist the State in pursuing” those parties (emphasis added)).
Arkansas v. Ahlborn, 126 S. Ct. at 279, fn 9. This emphasis the Supreme Court put on the words “assist the State in pursuing” reasonably indicates that while the parties assumed that the State could fulfill its obligation via the imposition of a lien, the Supreme Court’s review of the law may well have lead to a different conclusion – had that particular issue been before the Court, which it was not. Why else would the Supreme Court add the emphasis? In any event, the statutory language that the Supreme Court emphasized in Ahlborn is the very same language that refutes DPW’s argument that it can comply with its statutory obligations by placing a lien on a settlement instead of by pursuing liable third parties. 2. DPW failed to comply with federal law.
After the Plaintiffs in this matter (Tristani, Valenta and A.H.) assigned their rights to DPW, DPW was statutorily mandated to pursue the claims that had been assigned to it, so long as doing so was cost effective. Federal law mandates that the States “shall” pursue liable third parties so long as doing so is cost effective. DPW has presented zero evidence to either this Court, or the District Court, that it would not have been cost effective for DPW to pursue the tortfeasors who harmed 17
Tristani, Valenta or A.H. There is no question that DPW had numerous options available to it to recover in each of the three cases. First, DPW could have made a claim against the tortfeasors. Plaintiffs presume that the Court is well aware that not every claim turns into a lawsuit. It is very often the case that persons and/or entities with causes of action do not always have to file a lawsuit in order to get paid. Mere claims can be made, and liable third parties can pay those claims. DPW had the right to make a claim for past medical expenses, but it did not, and it offers no evidence of record to explain why it did not. Second, DPW could have filed a lawsuit pursuant to the automatic assignment it received from Tristani, Valenta and A.H. DPW did not file a single lawsuit. Third, DPW could have intervened in the lawsuits filed by Tristani, A.H. and Valenta. Indeed, DPW admits that it can intervene in a pending action “at any time” (Defendants’ Brief, p. 35). DPW could have delayed intervening until the lawyers handling the claims of Tristani, Valenta and A.H. had “worked-up” the files with depositions, expert reports, etc., and only then intervened. Pursuant to the Plaintiffs’ obligations – under Federal law – to cooperate and assist DPW with its pursuit of liable third parties, DPW could have obtained depositions, expert reports, etc., and could have easily prepared its claims against the tortfeasors for past medical expenses. Yet, DPW failed to intervene in any of the three lawsuits.
DPW chose to do nothing to pursue its rights, despite the fact that Federal law mandates that States shall pursue liable third parties. DPW elected to wait until the Plaintiffs settled their lawsuits, at which time DPW imposed liens on their settlements. As set forth below, the imposition of a lien on the recoveries made by A.H., Tristani and Valenta violated the Federal law’s “anti-lien provision”. Moreover, DPW made a recovery from the settlements of both Tristani and Valenta. As discussed below, the recoveries made by DPW from the settlements of Tristani and Valenta violated the Federal law’s “anti-recovery” provision. DPW has not made a recovery from A.H. due to the fact that A.H. refuses to pay DPW. 3. The federal anti-lien provision precludes the imposition of a lien
DPW’s imposition of a “lien” on the settlements of Tristani, Valenta and A.H. violates Federal law. First, a review of the statutory framework is appropriate to see how the anti-lien provision is applied to the States. Section 1396a(a)(18), which deals with the contents of a State’s Medicaid plan, requires States to have a plan for medical assistance that specifically provides that the state plan must comply with another provision of the Social Security Act, specifically, §1396p,
which is where the anti-lien provision is found. So that it is clear2, analysis first turns to §1396a(a)(18) setting forth the requirements of the State’s Medicaid plan: § 1396a. State plans for medical assistance (a) Contents
A State plan for medical assistance must— (18) comply with the provisions of section 1396p of this title with respect to liens, adjustments and recoveries of medical assistance correctly paid, transfers of assets, and treatment of certain trusts; 42 U.S.C. §1396a(a)(18) (Emphasis added.) The analysis then turns to §1396p and, specifically, to § 1396p(a)(1) which has been described by the Courts as the “anti-lien provision”. This provision states, in pertinent part:
§ 1396p.
Imposition of lien against property of an individual on account of medical assistance rendered to him under a State plan (1) No lien may be imposed against the property of any individual prior to his death on account of medical assistance paid or to be paid on his behalf under the State plan, except – [in circumstances not relevant here] . ..
Plaintiffs are not trying to be pedantic by carefully presenting the words of the statute. This is exactly what is required, and by doing so Plaintiffs’ intention is to illustrate how clear Congress’s intentions were.
The Supreme Court noted in Ahlborn, “Section 1396a(a)(18) requires that a State Medicaid plan comply with §1396p, which in turn prohibits States (except in circumstances not relevant here) from placing liens against, or seeking recovery from, a Medicaid recipient…” Ahlborn, 126 S. Ct. at 1762. When the District Court reviewed the language of the anti-lien provision, the District Court stated, “Richman and Houston point to no evidence which indicates that the anti-lien and anti-recovery provisions mean something other than what they say. The anti-lien and anti-recovery provisions are unambiguous. App. (I), p. 70a. When the Supreme Court of Minnesota reviewed the language of the anti-lien provision, it stated, “There is little ambiguity about ‘no lien may be imposed’.” Martin v. City of Rochester, 642 N.W.2d 1, fn 12. And, in fact, there is nothing ambiguous, confusing, or unclear about what Congress said. “No lien may be imposed” means just what it says. There really is no other way to argue the point except to say that it is only through double-talk and complete disregard to the rules of statutory construction that anyone could argue that Congress intended to allow liens to be placed upon the property of Medicaid recipients. While DPW argues that giving the words of the statute their plain meaning would in some unexplained way contravene what Congress intended, even if that were true, it would not permit this Court to ignore the words of the statute. The
rules of statutory construction are clear. A Court's interpretive function requires the Court to identify and give effect to the best reading of the words in the provision at issue. Even if the proper interpretation of a statute upholds a "very bad policy," it "is not within our province to second-guess" the "wisdom of Congress’s action" by picking and choosing our preferred interpretation from among a range of potentially plausible, but likely inaccurate, interpretations of a statute. Eldred v. Ashcroft, 537 U.S. 186, 222 (2003). Thus, for example, DPW argues that, “Pennsylvania has thousands of cases worth millions of dollars that would be uncollectable…” because, if the District Court is affirmed, DPW will allegedly not be able to retain lawyers who will pursue these claims in a cost-effective manner3. Defendants’ Brief, p. 32. This argument is unsupported by evidence. It fails to address the language of the statute and explain what is unclear about that language. The argument also ignores that Congress contemplated that there would be third-party liability situations where States would not be required to pursue liable third parities, specifically, those instances where it would not be cost effective to do so. Assuming it is true that DPW could not pursue “thousands” of claims worth “millions” of dollars if it is
The suggestion that DPW could not find attorneys to perform collection work on claims worth “millions of dollars” is absurd. Moreover, since most collection lawyers work on a contingent fee, as a matter of fact the collection effort is costeffective (and therefore compliant with Federal law) because the Plaintiff in a contingency relationship (i.e. DPW) recovers more than the lawyer.
required to do so directly by either intervening in already pending lawsuits, or by pursuing tortfeasors directly (which is highly incredible), maybe these are precisely the claims that Congress was thinking about when it authorized States not to pursue claims where it would not be cost-effective to do so. Because the statute is clear, this court is precluded from speculating. DPW also cites to language from a Senate Report, instead of the statute, in order to support its argument that Congress envisioned a “lien system” once “legal liability is found to exist”. Defendants’ Brief, p. 24. If the language of the statute is free and clear from ambiguity, Courts are precluded from going behind that language in order to determine the legislative intent. The intent is to be gleaned directly from the text of the statute. Once again, DPW fails to even argue that the language of the anti-lien provision is unclear or ambiguous. DPW’s argument must fail as this Court must read the words of the statute – not the words of a Senate Report – and apply the words of the statute. "The best evidence of
[Congress'] purpose is the statutory text adopted by both Houses of Congress and submitted to the President". West Virginia Univ. Hospitals, Inc. v. Casey, 499 U.S. 83, 98 (1991)(emphasis added). There is no question that the anti-lien provision precludes imposition of liens on the property of Medicaid recipients, and DPW’s conduct in imposing liens on the Plaintiffs’ settlements violated Federal law.
The anti-recovery provision precludes any recovery.
The second provision that DPW violated in the cases of Tristani and Valenta, and which DPW is attempting to violate in the case of A.H., is the “antirecovery provision” found at §1396p(b). DPW asserted and recovered liens
against the settlements of Tristani and Valenta, and while DPW has asserted a lien against the settlement of A.H., DPW has not recovered, because A.H. refuses to pay. In addition to barring the imposition of liens, Federal law expressly prohibits DPW from actually recovering money from MA recipients. Specifically, the “antirecovery” provision, 42 U.S.C. § 1396p(b)(1), states: § 1396p Liens, Adjustments and recoveries, and transfers of assets (b) Adjustment or recovery of medical assistance correctly paid under a State plan (1) No adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be made, except . . . [in circumstances not relevant here] . . . (Emphasis added.)
As with the language of the anti-lien provision, the language of the anti-recovery provision is clear. “No…recovery…may be made” of any medical assistance correctly paid. If DPW pays money on behalf of individuals who are frauds or crooks, then that money is not correctly paid and DPW can recover from those individuals. DPW has not contended, nor could it, that any of the Plaintiffs in this 24
action are frauds or thieves. Since the MA benefits paid on their behalf were correctly paid, DPW cannot recover any money from their settlements. DPW presents this Court with no evidence that the words of the anti-recovery provision are unclear, or ambiguous, or why Congress’s mandate that no recovery be made from the property of the Plaintiffs should not be enforced. In conclusion, the District Court correctly concluded that both the anti-lien and anti-recovery provisions mean what they say, and that DPW is prohibited from imposing liens upon, and making recoveries from, the property of welfare recipients.
The federal reimbursement provisions preclude DPW from recovering more than the capitated payment.
The following argument is submitted in the event that this Honorable Court concludes that DPW is, in fact, entitled to assert a lien and make a recovery, despite the language of the anti-lien and anti-recovery provisions. Assuming that DPW is entitled to assert liens and make recoveries from the settlements of MA recipients, the question then becomes “What amount is DPW entitled to recover where the MA recipient is enrolled in managed care and DPW has paid a premium, or capitated payment, and not the medical bills that are often numerous times greater in amount?”
The Federal Reimbursement Provision.
Just as Federal law mandates that DPW shall recover monies through an assignment of rights, Federal law also establishes “how much” the State can recoup. The State can recover that which “…is necessary to reimburse it…” after which the State reimburses the Federal Government, and then pays the remainder to the welfare recipient. Specifically, 42 U.S.C. § 1396k(b) dictates and limits what DPW is entitled to keep:
Such part of any amount collected by the State under an assignment made under the provisions of this section shall be retained by the State as is necessary to reimburse it for medical assistance payments made on behalf of an individual with respect to whom such assignment was executed (with appropriate reimbursement of the Federal Government to the extent of its participation in the financing of such medical assistance), and the remainder of such amount collected shall be paid to the individual.
42 U.S.C. § 1396k(b) (emphasis added). This statute is also clear on its face. Any amount that DPW recovers, pursuant to its assignment of rights, is limited strictly to the amount DPW paid on behalf of an individual recipient. Id. As one court has noted, “…the States are only assignees to the degree that they have paid out for services, and no more.” Barton, supra., 293 F.3d at 952. (Emphasis added) DPW, however, has a practice of asserting liens in amounts far greater than what DPW has paid. This clear violation of Federal law occurs in the situation where the welfare recipient is enrolled in a managed care organization which 26
subsequently pays for the recipient’s care. The only payment made by DPW, however, is a premium, or capitated payment. DPW does not pay the medical bills, which often far exceed the premium. Despite the fact that DPW is only “outof-pocket” the premium payments, DPW imposes liens, and seeks recoveries, for the amounts paid by the insurers, or “Managed Care Organizations”. For example, A.H. was enrolled in managed care. payments in the amount of $26,555.01. DPW only made
App. (II), p. 237a, DDE#95. ¶6h.
Nevertheless, DPW seeks $106,306.88 from the settlement obtained by A.H., representing the amount paid by the MCO, less attorney’s fees and costs. Id.,
DDE#95, ¶6l. DPW stands, therefore, to recover a windfall profit of $79,751.87. DPW’s conduct in attempting to reap a windfall by imposing liens for amounts far in excess of its expenditures violates Federal law. b. Managed Care and Welfare.
States have historically utilized two systems of paying the bills relating to medical care rendered to MA recipients. One system is the Fee-for-Service (FFS) system, and the other is Managed Care. Under the FFS system, the MA recipient receives treatment, and the State pays the bill directly. Under the managed care system, the MA recipient becomes a “member” in a Managed Care Organization (“MCO”). The State pays the MCO a capitated payment, and the MCO then pays the bills. The important point for the Court to keep in the back of its mind – as we
search for Congress’s intent – is the fact that managed care had not been introduced to Medicaid when the provisions at issue were enacted. Why this is important will become clear in a moment. The Omnibus Budget Reconciliation Act (OBRA) of 1981 allowed states, for the first time, to enroll parts of their Medicaid populations into managed care through a process called waivers. DPW’s managed care program was first Known as the “MCO
instituted February 7, 1997. (App. (II), p. 203a-204a)
program”, the program operates by DPW contracting with managed care organizations, which are private entities, to provide services to recipients on a capitated basis. A capitated basis means that the basic fee to which the MCO is entitled for providing MA coverage to eligible recipients is determined on a per member per month basis. Id., p. 204a. DPW bids out contracts to MCOs who compete for the contract. Id. To enroll the welfare recipient in an MCO, DPW pays the MCO the capitated payment on a per month basis. Id. DPW pays the capitated rate for all individuals enrolled in an MCO at the beginning of the month. Id., p. 205a. Enrollment in the managed care delivery system is a mandatory requirement for welfare recipients in twenty-five (25) counties in Pennsylvania, and it is voluntary in twenty-seven (27) counties in Pennsylvania. Id., p. 206a. Typically, the only amount of money that DPW expends for an individual enrolled in an MCO is the capitated premium that
is paid on a monthly basis. Kathy Martofel is the Chief of the Third Party Liability Division of the Department of Public Welfare. Id., p. 208a. Ms. Martofel admitted that for individuals enrolled in mandatory managed care, the only expenditure made by DPW on behalf of the individual is the capitated premium that has been paid on a per month basis to the MCO:
Would you agree that the only amount of money that the DPW has expended for an individual enrolled in an MCO is the capitated premium that has been paid on a per month basis for that individual? Yes.
App. (III)., p. 372a. The amount paid by DPW to enroll the individual in an MCO is often less than the amount DPW asserts as a lien, or claim, against the individual’s third party recovery: Q. …[b]efore the advent of managed care when DPW was straight fee for services, do you agree that DPW would get back from the third party recovery that which DPW had paid to the doctors? Well, that’s what we would assert as our claim, yes. And that was the money that was necessary to reimburse DPW for what it paid. Correct? Yes. And then after the advent of managed care, what DPW has paid on behalf of the individual is in some cases far less than what DPW asserts by way of its claim against the third party recovery. Correct? 29
App. (III), p. 375a., p. 49, lines 1-16. Although DPW could have contracted its obligation, arising under Title XIX, to pursue third party recoveries to the MCOs, DPW has retained the right to pursue third party liability recoveries. Id., p. 206a. DPW pursues third parties by asserting claims against the settlements and/or verdicts achieved by Medical Assistance recipients. DPW asserts claims for the full amount paid by the MCO on behalf of the MA recipient. Id., p. 207a. State law that was in effect at the advent of DPW’s managed care delivery system for MA; and which remained in effect up to and including July 7, 2005, was set forth in The Public Welfare Code, § 1409(b)(7). This provision limited DPW’s right of recovery to “the department’s expenditures”: § 1409. Third party liability (b)(7) In the event of judgment or award in a suit or claim against such third party or insurer: (i) If the action or claim is prosecuted by the beneficiary alone, the court or agency shall first order paid from any judgment or award the reasonable litigation expenses, as determined by the court, incurred in preparation and prosecution of such action or claim, together with reasonable attorney’s fees when an attorney has been retained. After payment of such expenses and attorney’s fees the court agency shall, on the application of the department, allow as a first lien against the amount of such judgment or award, the amount of the department’s expenditures for the benefit of the beneficiary under the
medical assistance program, as provided by subsection (d).4 (Emphasis added.) On January 31, 2005, the Superior Court of Pennsylvania decided In Re: C.S., App. (11) pp. 288a – 295a. In In Re: C.S., the Superior Court the court held that § 1409(b)(7) permitted DPW to recover only the capitation payment made on behalf of a welfare recipient. The court held that DPW was precluded from recovering the amount paid by MCOs, as allowing such a recovery would result in a “windfall” to DPW. Id. DPW did not appeal the decision in In Re: C.S. App. (II), p. 209a – 210a. Rather, Pennsylvania amended the law to include a new provision which purports to allow DPW to collect the amounts expended by MCO’s. The revised statute reads: § 1409. Third party liability (b)(7) In the event of judgment, award or settlement in a suit or claim against such third party or insurer (iii) With respect to claims against third parties for the cost of medical assistance services delivered through a managed care organization contract, the department shall recover the actual payment to the hospital or other medical provider for the service. If no specific payment is identified by the managed care organization for the service, the department shall recover its fee schedule amount for the service.
Although §1409b(7)(i) refers to “subsection (d)”, the Public Welfare Code, § 1409, did not have a subsection (d).
62 P.S. §§ 1409(b)(7)(iii). DPW cannot possibly argue that Congress intended DPW to recover nearly five times what it spent to provide Medicaid benefits to A.H. But this is exactly what DPW seeks. Federal law specifically limits DPW’s recovery to that which “…is necessary to reimburse it…” 42 U.S.C. §1396k(b). DPW’s argument that the Pennsylvania statutory and regulatory scheme allows it to collect the full amount of benefits paid is entirely irrelevant. The Supremacy Clause, and decades of jurisprudence interpreting the Supremacy Clause, clearly prohibit States from promulgating statutes that directly conflict with Federal law. (“Article VI, cl. 2, of the United States Constitution commands that the laws of the United States “shall be the supreme Law of the Land; ... any thing in the Constitution or Laws of any State to the Contrary notwithstanding.” See also: McCulloch v. Maryland, 4 Wheat. 316, 427, 4 L.Ed. 579 (1819) (“It is of the very essence of supremacy, to remove all obstacles to its action within its own sphere, and so to modify every power vested in subordinate governments”) …. State action may be foreclosed by … implication because of a conflict with a congressional enactment, See, e.g., Geier v. American Honda Motor Co., 529 U.S. 861, 869-874 (2000).” Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 540-41 (2001)). In this instance, the Pennsylvania scheme with regard DPW reimbursement is in clear conflict with Federal law, and accordingly, must yield.
The right to recover medical payments does constitute a property interest.
To the extent that the Plaintiffs, despite the automatic assignment mandated by federal law, retain an interest in recovering damages for payments made for medical care in their respective underlying tort actions, that interest does constitute “property” in that it is part of their entire chose in action. Leaving aside for a moment the contention that the Plaintiffs in this case, as argued previously, do not retain any property rights in recovery of medical assistance benefits, because, by law, they assign those rights to DPW, the law is clear that the right to recover damages for medical expenses does constitute a property interest, and as such can not be subject to liens asserted by DPW, as the anti-lien and anti-recovery provisions prevent such actions. In analyzing this question below, the District Court correctly relied on the reasoning of Ahlborn in reaching the conclusion that plaintiffs do have a property interest in their underlying causes of action. As Ahlborn clearly indicated, if a medical assistance recipient retains the right to bring an action against a third party tortfeasor, and if that action can include a claim for medical expenses paid by DPW, then the recipient has, in fact, retained his or her entire chose in action, and that chose in action does constitute a property interest. Ahlborn, 547 U.S. at 285. Further, in a practical sense, the lien does not, and can not, attach until a settlement is reached, at which point the settlement proceeds are clearly in the possession of 33
the medical assistance recipient, and are clearly property. See, Ahlborn, 547 U.S. at 285-86. Further, as the District Court correctly pointed out, under Pennsylvania law, plaintiffs have retained their right to include within their lawsuits claims relating to medical expenses paid by DPW. See 62 Pa.C.S. § 1409(b)(5). As such, and as in Ahlborn, “at all times until judgment [the plaintiffs] retained [their] entire chose in action – a right that included [their] claims for medical damages. Ahlborn, 547 U.S. at 285. Further, it is axiomatic that liens are asserted on the property of another. A lien is defined as “A claim, encumbrance, or charge on property for payment of some debt, obligation or duty.” BLACK’S LAW DICTIONARY, 923 (6th Ed. 1990). Implicit in that definition is that the property upon which a lien is asserted against is the property of another. Simply, there is no need to encumber or make a claim against one’s own property. To accept the Defendants’ argument that the Plaintiffs possess no property interest in the medical portion of their claims would necessarily lead to the conclusion DPW is asserting a lien on its own property. This argument was soundly rejected by Ahlborn. Ahlborn, 547 U.S. at 286.
(“…lien[s] typically are imposed on property of another…”). In an attempt to overcome this obvious contradiction, the Defendants attempt to parse Plaintiffs’ medical claims by arguing that the Plaintiffs maintain
only “bare legal title”, and further arguing that “bare legal title” does not afford Plaintiffs a property right. See Brief of Defendants at pp. 34-35. These bold contentions are completely unsupported by citation to any authority for this proposed parsing, rather the Defendants simply state, as if that alone makes the proposition true, that “the only right that MA recipients have with respect to assigned medical damages is to the ability to obtain bare legal title.” Defendants’ Brief, at p. 34. The reason for the lack of citation is obvious: the argument presented by the Defendants in this regard flies directly in face of United States Supreme Court’s precedent as set forth in Ahlborn. Lastly, Pennsylvania law is clear that a chose in action is property. In particular, a chose in action is a type of intangible personal property. Parsowith v. Com. Dept. of Revenue, 723 A.2d. 659, 662 n.4 (Pa. Commw. Ct. 1999); Commonwealth v. Sunbury Converting Works 134 A. 438, 440 (Pa. 1926). The Pennsylvania Superior Court explained this fact in determining whether a two year, four year, or six year statute of limitations applied in a legal malpractice case in Garcia v. Community Legal Services, 524 A.2d 980 (Pa. Super. Ct. 1987). In Garcia, a claim was brought against Community Legal Services for failing to file suit relative to a claim for damages to a home caused by demolition in a timely fashion. Garcia, 524 A.2d at 981. In that case, Mrs. Garcia’s home was damaged by a demolition project in November of 1977. She retained Community
Legal Services (CLS) in that regard. However, CLS took no action, and Mrs. Garcia eventually retained another attorney, who filed suit in April of 1981 on the theory that a longer statute of limitations applied to the claim. Garcia, 524 A.2d at 981. That claim was rejected, and summary judgment was entered on October 1, 1981. Mrs. Garcia eventually filed a case against CLS, but not until October 6, 1983, outside the two year statute of limitations governing trespass actions. Id. Mrs. Garcia’s case against CLS was dismissed as untimely by the trial court and Mrs. Garcia appealed. The Superior Court, in affirming the grant of summary judgment, reviewed the language of the two year trespass statute of limitations. In particular, the court focused on the language mandating that “an action for taking, detaining, or injuring personal property” must be brought within two years. Garcia, 524 A.2d at 982. The Court held, that in essence, the injury Mrs. Garcia complained of in her suit against CLS was injury and damage to her “cause of action against the demolition company.” Id. at 983. In resolving the issue of whether the two year statute of limitations applied the court found it critical to determine whether Mrs. Garcia’s claimed injury to her cause of action was an injury to her personal property. If it was, the court reasoned, then the two year limitations period applied. Garcia, 524 A.2d at 983.
To make that determination, the court simply looked to the definition of personal property. The court stated: Personal property is defined as: Everything that is the subject of ownership, not coming under the determination of real estate. A right or interest in things personal . . . or any right or interest which one has in things movable. The term ‘personal property’ in its broadest legal significance includes everything the subject of ownership not being land or any interest in land, as goods, chattels, money, notes, bonds, stocks and choses in action generally, including intangible property. Garcia, 524 A.2d at 983, citing BLACK’S LAW DICTIONARY, 1006 (5th Ed. 1979). Based upon this plain meaning of personal property, and because choses in action are clearly personal property pursuant to this plain meaning, the court affirmed the dismissal of Mrs. Garcia’s case. Id. at 984. The definition of personal property has not changed since the Garcia case, and as Parsowith, and as legions of other Pennsylvania cases hold, choses in action are personal property. Because of that fact, the decision of the trial court
determining that the Plaintiffs’ choses of action can not be subject to liens must be affirmed. B. Neither Collateral Estoppel nor Res Judicata Impact the Claims of Ms. Tristani.
The doctrine of collateral estoppel, also known as claim preclusion, "operates to prevent a question of law or issue of fact which has once been litigated
and fully determined in a court of competent jurisdiction from being relitigated in a subsequent suit." Spisak v. Margolis Edelstein, 768 A.2d 874, 876-77 (Pa. Super. Ct. 2001) (quoting Incollingo v. Maurer, 356, 575 A.2d 939 (Pa. 1990)). The doctrine requires the satisfaction of four elements: Collateral estoppel applies when the issue decided in the prior adjudication was identical with the one presented in the later action, there was a final judgment on the merits, the party against whom the plea is asserted was a party or in privity with a party to the prior adjudication, and the party against whom it is asserted has had a full and fair opportunity to litigate the issue in question in the prior adjudication. In re Iulo, 564 Pa. 205, 766 A.2d 335, 337 (2001) (citing Safeguard Mut. Ins. Co. v. Williams, 345 A.2d 664, 668 (1975)). The Second Restatement of Judgments articulates the general rule of issue preclusion as follows: "When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim." Restatement (Second) of Judgments § 27 (1982). Under Pennsylvania law, for an issue to be "actually litigated" it must be "properly raised, submitted for determination, and then actually determined." JOHN J. DVORSKE, 10 STANDARD PENNSYLVANIA PRACTICE 2d §65:98 (citing Com. v. Holder, 805 A.2d 499 (Pa. 2002)).
Not all final judgments carry the preclusive effect of res judicata. For example, in Pennsylvania, "a dismissal, even with prejudice, for failure to prosecute a claim is not intended to be res judicata of the merits to the controversy." Municipality of Monroeville v. Liberatore, 736 A.2d 31, 34 (Pa. Commw. Ct. 1999), app. denied, 751 A.2d 195 (Pa. 2000). See also Hatchigian v. Koch, 381, 553 A.2d 1018, 1020 (Pa. Super. Court 1989) ("since a non pros is not a judgment on the merits, it cannot have res judicata effect," and "where plaintiff has suffered a judgment of non pros, he may later commence a new action between the selfsame parties and alleging the selfsame cause of action so long as the second action is commenced within the applicable statute of limitations"). Ms. Tristani was a plaintiff in a medical negligence action pending in Washington County. It is undisputed that DPW asserted a lien in the amount of $247,514.98 against the recovery obtained by Ms. Tristani. App. II, p. 193a. DPW asserted the lien against the “personal injury claim” App. II, pp. 192a-193a, and not the amount of the “claim” attributable to payment of medical expenses. In determining whether issue preclusion applies, the Court must first determine the issue presented before the Court of Common Pleas of Washington County. The issue presented to the state court was whether a settlement between Ms. Tristani and the malpractice defendants should be approved. The legality of DPW’s lien was not an issue raised by the Petition. On the contrary, in the instant
action, the issue is whether the lien asserted against that settlement was unconstitutional. This issue was certainly not raised or litigated in the proceedings between Ms. Tristani and the medical negligence defendants. Neither Ms. Richman, Ms. Houston, nor DPW were parties to the medical negligence action. They filed no pleadings, petitions or motions in the state court action. The legality of defendants’ conduct was not raised, nor was it an issue in the state court proceedings. Assuming, arguendo, that the legality of the lien asserted by DPW was raised, the issue was not resolved by a “final judgment on the merits”. Clearly, there was no “final judgment on the merits” with respect to whether the assertion of a lien against the settlement was constitutional. The issue, assuming it was raised, was not litigated at all. Under Pennsylvania law, for an issue to be "actually litigated" it must be "properly raised, submitted for determination, and then actually determined." JOHN J. DVORSKE, 10 STANDARD PENNSYLVANIA PRACTICE 2d §65:98 (citing Com. v. Holder, 805 A.2d 499 (Pa. 2002)). Finally, in order for the state court order approving the settlement between Ms. Tristani and the malpractice defendants to have preclusive effect, there must have been a finding in the prior order, and that finding must have been necessary and essential to the “judgment.” "[P]arties should be estopped only on issues they actually deem important, and not on incidental matters." Lynne Carol Fashions,
Inc. v. Cranston Print Works Co., 453 F.2d 1177, 1183 (3d Cir. 1972). The only issue presented to the state court by means of the petition was whether a settlement agreement entered into between Ms. Tristani and the state court defendants should be approved. The order approving that settlement delineated the manner in which the settlement monies were to be distributed, which included payment to DPW of its lien. The payment to DPW, however, was not “necessary” or “essential” to the question of whether the settlement between Ms. Tristani and the malpractice defendants was fair and equitable and should have been approved. The existence, or nonexistence, of liens and/or subrogation claims are, at best, ancillary to whether a settlement agreement between parties to a medical negligence action should be approved. Indeed, trial courts routinely approve third party settlements while lien disputes remain unresolved. The validity of the lien was not litigated, there was no determination “on the merits”, and a determination of the validity of the lien was not necessary nor essential to the approval of the settlement of the malpractice action. DPW’s argument lacks merit in this regard. The District Court, in its decision, noted that there are no Pennsylvania cases that are directly on point. Tristani v. Richman, 609 F.Supp.2d (W.D.Pa. 2009) at 423. The Court, however, did correctly rely upon a decision of the Eastern District of New York, Green v. City of New York, 438 F.Supp.2d 111 (E.D.N.Y. 2006), on a substantially similar set of facts. In Green, MA recipients had paid the New
York equivalent of DPW sums pursuant to court approved settlements. Once the settlements were approved, the Green plaintiffs alleged that the New York agency had overcharged, and sought return of the moneys paid. The New York agency, in defending against the action raised the defense of res judicata. Green, 438 F.Supp. 2d at 115-118, 121. In rejecting that defense, the Green court found a lack of privity between the parties dispositive. The court found held that the New York agency was not a party to the underlying tort action, the New York agency had no control over any of the defendants in the tort actions, and the New York agency’s interests were actually adverse to the interests of the tort defendants. Green, 438 F.Supp.2d at 121-122. As the District Court held, the circumstances leading to the conclusion that privity was lacking in Green are also present here. In other words, DPW was not a party to Ms. Tristani’s tort action, DPW had no control over the defendants sued by Ms. Tristani in Washington County, and DPW’s interests were contrary to those of the Washington County tort defendants. Tristani v. Richman, 609 F.Supp.2d (W.D.Pa. 2009) 450. In light of the foregoing, the District Court was correct in concluding that neither res judicata nor collateral estoppel prevented Ms. Tristani’s claims from moving forward. C. The “Voluntary Payment Doctrine” Does Not Preclude Recovery.
Generally speaking, the voluntary payment doctrine bars recovery where a party makes a voluntary payment with knowledge of all relevant facts, and then sues to recover that payment regardless of any initial legal liability. However, the doctrine is inapplicable when the defendant is alleged to have violated a statutorily defined public policy, Jackson v. Novastar Mortgage, 2007 U.S. Dist. LEXIS 93584 (WD Tenn. 2007), where payments were made under duress. Elmdale Dev., LLC v. City of Des Plaines, 2005 U.S. Dist. LEXIS 16967 (ND Ill. 2005), or where a party was under a mistaken impression with regard to the law. Doran v. Missouri Department of Social Services, 2008 U.S. Dist. LEXIS 66772 at *19-20. The Defendants admit that Tristani’s counsel was advised, “As the attorney for a recipient of medical assistance, you have certain statutory obligations.” App. III, p. 390a. One such obligation was, “…you are required to assure satisfaction of the Department’s claim before making any payment or distribution to yourself or your client.” App. III, p. 390a. Counsel was then advised, “…the law now provides serious penalties if you fail to comply with the foregoing responsibilities. These penalties include criminal prosecution, civil liability, and the assessment of a $1,000.00 civil money penalty,” in the event that the alleged lien was not paid. App. III, p. 390a. In addition to giving rise to a question of fact on the issue of duress, the above referenced facts shows that DPW, by and through the Defendants either
affirmatively misrepresented the state of the law, or was itself mistaken about the state of the law. In either case, the doctrine of voluntary payment would not apply. See Doran, supra. In fact, the District Court correctly determined that “it is undisputed that Tristani and Valenta were unaware of the protections that they enjoyed under the anti-lien and anti-recovery provisions.” Tristani v. Richman, 609 F.Supp.2d
(W.D.Pa. 2009) 480 n.21. As such, and in reliance on Doran, the District Court correctly ruled that the voluntary doctrine was not applicable. should be affirmed. D. The Capitation Fee Issue was Properly Decided. That decision
The Defendants take issue with the fact that District Court, in issuing its Opinion in this matter evaluated the capitation fee issue pursuant to Pennsylvania State law. The District Court conducted an in depth analysis of §1409(b)(7), as it was written prior to July 7, 2005, in order to determine whether DPW was correct in its contention that it was entitled to seek reimbursement beyond capitated fees that it paid on behalf of Medical Assistance recipients who were enrolled in a Managed Care Organization (MCO).5
Section 1409(b)(7)(i) provided, in pertinent part: (7) In the event of judgment or award in a suit or a claim against such third party or insurer: (i) If the action is prosecuted by the beneficiary alone, the court or agency shall first order paid from any judgment or award the reasonable 44
The District Court ultimately determined that pursuant to the terms of §1409(b)(7) DPW was not entitled to recover anything more than capitated payments. See Tristani, 609 F.Supp.2d at 452-53. Importantly, the Defendants do not challenge the rationale of the District Court in this regard, and do not argue contrary to the District Court’s reasoning. Instead, they argue that the District Court should not have reached this issue because neither Ms. Tristani or Mr. Valenta have standing to make the capitated fee argument. Indeed in its Opinion, the District Court acknowledged that “outstanding issues remain concerning whether Tristani and Valenta have standing to seek injunctive relief and declaratory relief…” and indicated that without additional briefing by the parties that it was “disinclined to address these outstanding issues at this time.” Tristani, 609 F.Supp.2d at 488.6
litigation expenses, as determined by such court, incurred in the preparation and prosecution of such action or claim, together with the reasonable attorney’s fees, when an attorney has been retained. After payment of such expenses and attorney’s fees the court or agency shall, allow as a first lien against the amount of such judgment or award, the amount of the department’s expenditures for the benefit of the beneficiary…. 6 In their 2nd Amended Complaint, the Plaintiffs asked for a specific declaration that: Assuming that Section 1409(b)(7)(iii) of the Public Welfare Code, 62 P.S. § 101, et seq., is constitutional, a declaration that Section 1409(b)(7)(iii) limits the amount that the Defendants may recover from the Plaintiffs and the proposed Class to the amount of capitated payments that were paid on their behalf. App. II, p. 154a. 45
That disinclination was reflected in the District Court’s Order dated March 25, 2005, which stated in part “IT IS HEREBY ORDERED that defendants’ motion for summary judgment is GRANTED except with respect to whether the named plaintiffs have standing to seek declaratory or injunctive relief….” App. I, p. 102a. However, the issue of standing was later resolved by the addition of Plaintiff A.H. Indeed, the Order at issue in this appeal specifically states as follows: 1. [A.H], individually and as parent and natural guardian of [A.H], a minor, is joined as a named party plaintiff, and it is determined that she presently has standing to sue for declaratory and injunctive relief in this matter. This Court’s Order of March 25, 2009 is amended to deny Defendants’ motion for summary judgment on the issue of the validity of 62 P.S. §1409(b)(7), in accordance with this Court’s opinion dated March 25, 2009. In all other respects, the Court’s order of March 25, 2009 shall remain unchanged.
…. App. I, pp. 4a-5a. Importantly, the defendants raised no objections to the entry of this Order, and in fact, the Order was the product of the parties’ Joint Motion to Add a Party Plaintiff and Certify Interlocutory Appeal. App. II, pp. 235a-238a. Accordingly, because the Defendants agreed to the addition of plaintiff A.H.; did not object to the Court’s conclusion that plaintiff A.H. had standing to pursue declaratory and injunctive relief; and because Plaintiffs’ 2nd Amended
Complaint asks for precisely that relief with regard to the capitated fee issue, the District Court’s denial of the Defendants’ Motion for Summary Judgment in that regard must be affirmed.
PLAINTIFFS’ ARGUMENTS IN SUPPORT OF THEIR CROSS APPEAL. A. The District Court erred in holding that the Defendants’ practice of asserting liens for the full amount of medical expenses did not violate Federal Medicaid law.
Although this issue is somewhat mooted by the District Court’s holding that Federal Medicaid law prevented the Defendants’ from placing any liens on the third party tort recoveries of Medicaid beneficiaries, it may still be necessary for this Court to decide this issue for the following two reasons: 1) if this Court decides to reject the District Court’s interpretation of §§ 1396p(a)(1) and 1396p(b)(1); and, 2) even if the Defendants were not on notice that the liens violated clearly established federal law, they should have at least realized that liens which exceeded the amount which could be reasonably allocated to medical expenses violated clearly established law. In Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268 (2006), the Arkansas Department of Health and Human Services attempted to assert a lien for the full amount of money it expended on a Medicaid recipient’s medical treatment, even though the lien exceeded the amount of money 47
the recipient received for medical treatment in her recovery from a third-party tortfeasor. Ahlborn, 547 U.S. at 272-74. The Court held that this conduct violated the provisions of the Social Security Act. Id. at 292. In reaching this conclusion, the Court focused on the clear and precise language contained in the following provisions: 42 U.S.C. § 1396a(a)(25)(B), 42 § 1396a(a)(25)(H), §3396k(a), and §1396k(b). The Court found that these
provisions expressly limited the amount of money the State was entitled to recover to “that portion of a settlement that represents payments for medical care.” Ahlborn, 547 U.S. at 282. It is undisputed that at least until September 8, 2007, the Pennsylvania Department of Public Welfare made no efforts to reduce its lien on the third party tort recoveries of its beneficiaries to reflect the amount of the recovery which was intended to represent “payments for medical care.” App. III, p. 341a Plaintiffs contend that this practice was a clear violation of federal law. In rejecting the Plaintiffs’ arguments, the District Court relied upon two distinctions between the applicable Pennsylvania law and the Arkansas law at issue in Ahlborn. Tristani at 463-66. Neither of these differences is compelling. First, the District Court observed that the Arkansas law permitted Health & Human Services to assert a lien for the full amount of medical services rendered, even if that amount consumed the entire recovery, whereas the Pennsylvania law The
which was in effect prior to September 8, 2007 capped the Department of Public Welfare’s lien at “one-half” of the beneficiary’s recovery after deducting for “attorney’s fees, litigation costs, and medical expenses relating to the injury paid for by the beneficiary.” 62 PA. STAT. ANN. § 1409(b)(11). However, this is a distinction without an appreciable legal difference. While the Pennsylvania
practice may have been less harsh than the Arkansas practice in some cases, but both were likely to result in recoveries by the state that far exceeded that permitted by federal Medicaid law. Imagine the (unfortunately common) example of a young woman who is paralyzed by a drunk driver who has only $100,000.00 in insurance proceeds available to satisfy her claim. She is forced to drastically compromise the value of her claim in order to account for the insufficient insurance coverage. Everyone will agree that the medical portion of her claim, while quite substantial, is only a fraction of the total value. In Arkansas, this woman would have received nothing, while in Pennsylvania, she would have received around $30,000 after a reduction for fees, costs, and the satisfaction of DPW lien. Granted, the Pennsylvania system may be less draconian, but it still violates federal law. The District Court offered no rationale for why the Pennsylvania 50 percent cap complied with federal law, but the Arkansas “full satisfaction” practice did not. What if a state would have set its cap at 60, 75 or even 90 percent? The point is
none of these caps attempts to do what federal law requires, namely limit the lien to that portion of the recovery which is reasonably allocated to medical expenses. If a state’s practice fails to do this, it is unlawful, even if it set its cap at 5 percent. If this requires a judicial determination by a trial court, than so be it, such determinations are made routinely. In practice, counsel for the beneficiary and the state would negotiate a resolution in the vast majority of situations. The second difference noted by the court was that the Plaintiffs’ Pennsylvania settlements were unallocated, whereas the recovery in Ahlborn specifically designated what portion of the settlement reasonably represented payment for medical expenses. Tristani at 465. Again, this distinction is illusory. While Pennsylvania has adopted the “made-whole” rule, this rule applies whether a settlement is allocated or not. Plaintiffs certainly cannot end-around this rule by allocating their settlements. Thus, the fact that the Plaintiffs’ settlements were unallocated and the Arkansas recovery was allocated, cannot be determinative of this issue. The absurdity of this result is self-evident. DPW would not be required to reduce its liens (even by the 50 percent cap) on any settlement, it could just come in and enforce its full lien. This would make it next to impossible to settle many cases, and plaintiffs would be forced to try their claims just to get a judicial allocation. Certainly, this was not the system envisioned by Congress.
Imagine the results if this Court overturned the District Court’s ruling that DPW could not assert a lien on third party tort recoveries, but upheld its decision that all settling plaintiffs are made whole under Pennsylvania law. Such a result would make a mockery of Congress’s clear intent, and it would be open season for the Pennsylvania DPW, and every other state which has adopted the made whole rule. Further, as observed by the Supreme Court in Ahlborn, it is clear that Arkansas attempted to specifically override equitable subrogation principles with respect to its Medicaid liens. Ahlborn at 279. This would also be an operation of state law. Certainly, if Pennsylvania has the right to determine that any settling plaintiff is “made whole” by their settlement, Arkansas would also have the right to decide that any settling plaintiff is “made whole” with respect to its ability to assert a Medicaid lien. However, the Supreme Court expressly rejected its ability to do so, and thus this Court must similarly reject Pennsylvania’s attempts to apply this rule to the third party tort recoveries of its beneficiaries. It is a simple matter of preemption. The Arkansas statute squarely conflicted with Congress’s clearly expressed intent that a participating state’s right to recover be limited to that amount reasonably allocated to medical expenditures, and, to the extent the Pennsylvania law conflicts with this intent, it must similarly yield.
The District Court erred in holding that the Defendants were entitled to Qualified Immunity.
The District Court erred in holding that the individual Defendants were entitled to qualified immunity on Plaintiffs’ claims that their conduct violated §§ 1396p(a)(1) and 1396p(b)(1). It must be emphasized that this case does not
involve claims for monetary damages in the strictest sense. The Plaintiffs are not seeking monetary damages to compensate them for some alleged injury, nor are they seeking to penalize the Defendants for their wrong doing, the Plaintiffs are merely seeking a return of the specific monies which were wrongfully taken from them. This is simply restitution, and is therefore not subject to a defense of qualified immunity. It has long been the law that while the doctrine of qualified immunity protects state officials from claims for monetary damages, it does not protect them from claims seeking equitable relief. Wood v. Strickland, 420 U.S. 308, 314-315, n.6 (1975). Regrettably, many courts fail to recognize the distinction between a claim for “money damages” and a claim which merely seeks the specific return of improperly seized money, but this distinction has been explicitly acknowledged by no lesser authority than the United States Supreme Court. In Bowen v. Massachusetts, 487 U.S. 879, 893 (1988), the Court explained this distinction as follows:
Our cases have long recognized the distinction between an action at law for damages – which are intended to provide a victim with monetary compensation for an injury to his person, property, or reputation – and an equitable action for specific relief – which may include an order for the reinstatement of an employee with backpay, or for “the recovery of specific property or monies, ejectment from land, or an injunction either directing or retraining the defendant officer’s actions.” Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 688, 69 S.Ct. 1457, 1460, 93 L.Ed. 1628 (1949)(emphasis added). The fact that a judicial remedy may require one party to pay money to another is not sufficient reason to characterize the relief as “money damages.” Further, this distinction is not some esoteric legal principle confined only to the Bowen decision and a few others; it has been consistently recognized and applied by the highest courts in this land. The 8th Circuit enunciated the distinction and its workings in greater detail in the case of Hopkins v. Saunders, 199 F.3d 968, 977, (8th Cir. 1999) cert. denied 2000 U.S. LEXIS 5868, explaining: The fact that a remedy may require one party to pay money to another is not a sufficient reason to characterize the remedy as “legal relief”. Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 570, 108 L.Ed. 2d 519, 110 S. Ct. 1339 (1990); see also Bowen v. Massachusetts, 487 U.S. 879, 894, 101 L.Ed. 2d 749, 108 S. Ct. 2722 (1988). However, because money damages was the traditional form of relief offered in the courts of law, “federal law has consistently held that money damages are generally characterized as a legal remedy.” Kampa v. White Consolidated Indus., Inc. 115 F.3d 585, 586 (1997) (citing Terry, 494 U.S. at 570). Accordingly, a monetary award will be characterized as equitable only if it possesses one of the two fundamental attributes of an equitable remedy. Terry, 494 U.S. at 570; see also Cass County Music Co. v. C.H.L.R., Inc., 88 F.3d 635, 642 (8th Cir. 1996)
First, a monetary award may be an equitable remedy if the award is “restitutionary” in nature, “such as in actions for disgorgement of improper profits.” Terry, 494 U.S. at 570 (citations omitted); see also Cass County, 88 F.3d at 642….. Second, a monetary award may be deemed an equitable remedy if the award is “incident to or intertwined with injunctive relief.” Terry, 494 U.S. at 571. The District Court for the Western District of Missouri very recently rejected the qualified immunity defense in a case where, like here, the plaintiffs were seeking to recover from welfare officials the monies that were taken from their worker’s compensation recoveries. In Doran v. Missouri Department of Social Services, 2008 U.S. Dist. LEXIS 1418 (W.D. Mo. 2008), the plaintiffs sued the Missouri Department of Social Services alleging that the Department was improperly asserting liens, and improperly taking money from the plaintiffs’ worker’s compensation recoveries. The defendants raised qualified immunity, but the court rejected the defense, holding that qualified immunity was not available because the remedy that the plaintiffs were seeking – a return of the monies taken from them – was an equitable remedy. The court noted, “Here, Plaintiffs clearly want restitution, restoring to them money that was rightfully theirs and putting them in the position they would have been had the statutes been properly followed. As a result, qualified immunity does not bar Plaintiffs’ claim for equitable relief under section 1983.” Doran, 2008 U.S. Dist. LEXIS at p. 13. The remedy here is the same. Plaintiffs seek restitution of their money that is being held by 54
Defendants. Plaintiffs are not seeking “compensation,” they are seeking the return of what is theirs. The District Court held that since an award of damages against the Defendants in their individual capacities could only be executed against the personal assets of the Defendants, they are entitled to qualified immunity. Tristani at 487. The Court further held that an award against the Defendants in their official capacities is barred by the 11th Amendment. Id. Thus, according to the
District Court’s reasoning, a plaintiff can never seek restitution of specific monies from a state actor. This result is nothing less than an impermissible rejection of Supreme Court precedent. Further, it ignores the practical realities of this case. Pursuant to 71 P.S. § 634, the Defendants would be indemnified by the Commonwealth for the actions. Thus, this case presents no true risk to either of the individual Defendants. Qualified immunity fails for another reason as well, and that is that the actions of the Defendants were purely ministerial. Government officials are entitled to qualified immunity for performance of their discretionary duties, but not for the performance of their ministerial functions. Davis v. Scherer, 468 U.S. 183, 196 n. 14 (1984). Defendants Richman and Houston are not entitled to qualified immunity in this case because the Plaintiffs’ claims stem from the Defendants’ violation of their ministerial duties as prescribed by federal law. The practice of
recovering Medicaid medical expenditures is clearly proscribed by federal law. The Defendants’ own witnesses testified that they do not have any discretion in this regard. App. III, p. 341a, 384a. Further, qualified immunity is an affirmative defense, and the burden of proof lies with the Defendants. Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). In the very least the Defendants must be required to come forth with some record evidence in support of their defense. The Defendants in this case have ignored their burden and failed to offer any evidence. Finally, the District Court erred in holding that the Defendants were entitled to qualified immunity because the rights which the Plaintiffs are seeking to enforce were “clearly established” at the time of the Defendants’ wrongful conduct. The District Court does not provide a detailed discussion of this issue other than to observe that, in its opinion, “the law concerning the application of Title XIX’s antilien and anti-recovery provisions” was not clearly established. All the District Court’s Opinion really establishes is that the issue had not yet been litigated. However, the language of the federal statutes at issue in this case is plain and clear on its face, thus the Plaintiffs’ rights have been “clearly established” since the Act’s effective date. The language itself is crystal clear, and not readily
susceptible to any interpretation other than the one employed by the District Court. One of the statutory provisions is even titled the “anti-lien provision.” Certainly this was sufficient to put the Defendants on notice that their liens were
impermissible. Support for this position can be found in the District Court’s own discussion of these provisions, in which it refers to them as “unambiguous.” Tristani at 470. If, as the District Court suggests, this language truly is
unambiguous, than the Defendants cannot attempt to hide behind the shield of qualified immunity.
CONCLUSION This Court should hold that Pennsylvania’s assertion of liens on the thirdparty tort recoveries of Medicaid beneficiaries violates federal law. This Court should hold that neither Tristani’s nor Valenta’s claims are barred by the voluntary payment doctrine. This Court should hold that the trial Court properly decided state law relative to the capitation fee issue. Finally, this Court should hold that neither of the individual Defendants is entitled to qualified immunity. In the alternative, if this Court determines that the assertion of liens is lawful, it should hold that those liens are limited to the amount expended to enroll beneficiaries in MCO plans, and that they are limited to that portion of the recovery which is reasonably allocated to medical expenses. This Court should direct entry of partial summary judgment in favor of the Plaintiffs and against the defendants.
Respectfully submitted, Aaron D. Rihn, Esquire Robert F. Daley, Esquire Robert Pierce & Associates 707 Grant Street, Suite 2500 Pittsburgh, PA 15219 (412) 281-7220 Patrick J. Loughren, Esquire Loughren, Loughren & Loughren, P.C. 310 Grant Street, Suite 2800 Pittsburgh, PA 15219 (412)232-3530 Veronica A. Richards, Esquire Richards & Richards, LLP 16020 Perry Hwy Warrendale, PA 15086 (724) 940-4340
COMBINED CERTIFICATION OF COMPLIANCE I, D. Aaron Rihn, do hereby certify: 1. The Brief in this matter complies with the page limitation of Fed. R. App. P. 32(a)(7)(A) because it contains 13,254 words (as determined by Microsoft Word) excluding tables, certifications, and addenda; complies with Rule 32(a)(5)(A) because it uses a 14 point Times New Roman font; and complies with Rule 32(a) because it is double spaced, with required margins on approximate 8.5 by 11.0 inch paper. The electronic version of this Brief is identical to the hard copy of said Brief. The electronic version of this Brief was checked for computer viruses using McAfee AntiVirus prior to transmittal. This Brief was filed electronically on December 14, 2009, with the Office of the Clerk, U.S. Court of Appeals for the Third Circuit, 21400 U.S. Courthouse, 601 Market Street, Philadelphia, PA 191061790. Opposing counsel were served electronically via ECF. Ten copies of this Brief were transmitted to the Office of the Clerk via UPS on December 14, 2009. I am a member in good standing of the Court of Appeals for the Third circuit, having been admitted to practice on February 27, 2006.
I hereby certify that the foregoing statements made by me are true. Dated: December 14, 2009 By: /s/ D. Aaron Rihn
IN THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT RITA L. TRISTANI, by and through her Attorney in Fact, MARIA C. KARNES, and JOSHUA C. VALENTA, individually, and on behalf of others similarly situated, Plaintiffs, vs. ESTELLE B. RICHMAN, in both her individual and official capacity; and FEATHER HOUSTON, in her individual capacity, Defendants. : : : : : : : : : : : : : : :
Nos. 09-3537 and 09-3538
CERTIFICATE OF SERVICE I certify that I am serving a copy of the foregoing document upon the person and in the manner indicated below: Service by electronic mail addressed as follows: Allen C. Warshaw, Esquire Jason Manne, Esquire Office of General Counsel Department of Public Welfare 303 State Office Building 300 Liberty Avenue Pittsburgh, PA 15222
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