Opinion ID: 2805947
Heading Depth: 2
Heading Rank: 2

Heading: Likelihood of Success on the Plaintiffs’ Due

Text: Process Claim We also conclude that the district court did not abuse its discretion in holding that the Plaintiffs were likely to prevail on their claim that they were denied adequate notice under the Due Process Clause. “The requirements of procedural due process apply only to the deprivation of interests encompassed by the Fourteenth Amendment’s protection of liberty and property.” Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 569 (1972). Therefore, “[t]he first inquiry in every due process challenge is whether the plaintiff has been deprived of a protected interest in ‘property’ or ‘liberty.’” Am. Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59 (1999). It is well settled that a person can have a property interest in continuing to receive government benefits. See, e.g., Goldberg v. Kelly, 397 U.S. 254, 261–63 (1970); Rosas v. McMahon, 945 F.2d 1469, 1474 (9th Cir. 1991) (explaining that Goldberg applies to a reduction of benefits). To have a property interest in a benefit, a person must “have a legitimate claim of entitlement provisions provide no basis for private enforcement by § 1983.” (second alteration in original) (quoting Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17, 28 & n.21 (1981)), with Watson v. Weeks, 436 F.3d 1152, 1159–62 & n.8 (9th Cir. 2006) (analogizing 42 U.S.C. § 1396a(a)(10) to section 1396a(a)(3), the Medicaid fair hearing provision, and concluding that the former creates a right enforceable by section 1983), and Gean v. Hattaway, 330 F.3d 758, 772–73 (6th Cir. 2003) (holding that section 1396a(a)(3) creates a right enforceable by section 1983). The Department has not argued otherwise. See Cal. Alliance of Child & Family Servs. v. Allenby, 589 F.3d 1017, 1020 n.5 (9th Cir. 2009) (explaining that whether a private right of action exists is not a jurisdictional issue and may be deemed waived if not raised). K.W. V. ARMSTRONG 19 to it,” not just “an abstract need or desire for it.” Roth, 408 U.S. at 577. The district court held that because calculating lower budgets had the practical effect of reducing the Plaintiffs’ waiver services, the Plaintiffs were entitled to adequate notice under the Due Process Clause. We reach the same conclusion, but for different reasons. The district court conflated the Medicaid Act’s standards governing fair hearings with the standards governing constitutional Due Process claims. While the Medicaid Act’s fair hearing requirements are triggered by “actions,” including reductions in benefits, the requirements of procedural due process are triggered by deprivations of property. Compare 42 C.F.R. §§ 431.201, 431.206(c)(2), with Am. Mfrs. Mut. Ins. Co., 526 U.S. at 59. However, because the Plaintiffs had a “legitimate claim of entitlement” to waiver services as capped by the calculated budgets, we hold that the district court did not abuse its discretion in holding that the Plaintiffs were likely to prevail on their due process claim. See Erickson v. U.S. ex rel. Dep’t of Health & Human Servs., 67 F.3d 858, 861–62 (9th Cir. 1995) (noting that the district court’s order granting an injunction to redress an alleged Due Process violation “did not address whether [medical provider] plaintiffs possessed a liberty or property interest in continued participation in Medicare,” and proceeding to consider the issue de novo). As we stated in Orloff v. Cleland, “[e]ntitlements are created by ‘rules or understandings’ from independent sources, such as statutes, regulations, and ordinances.” 708 F.2d 372, 377 (9th Cir. 1983) (quoting Roth, 408 U.S. at 577)). Idaho regulations provide that “the Department sets an individualized budget for each participant according to an individualized measurement of the participant’s functional 20 K.W. V. ARMSTRONG abilities, behavioral limitations, and medical needs, related to the participant’s disability.” Idaho Admin. Code r. 16.03.10.514(01). The regulations further provide that the participant’s “plan of service is based on the individualized participant budget.” Id. r. 16.03.10.513. And, the Idaho statute authorizing “[s]ervices for persons with developmental disabilities” provides that “[t]he department shall allow budget modifications only when needed to obtain or maintain employment or when health and safety issues are identified.” Idaho Code § 56-255(3)(e)(ii). The Idaho regulations specifically enumerate the services covered under the DD Waiver program. See Idaho Admin. Code r. 16.03.10.703. Thus, participants in the DD Waiver program are entitled to a service plan featuring covered services with a total value equal to or less than a participant’s individual calculated budget. Because participants have a legitimate claim of entitlement to this benefit under Idaho law, they have a property interest in continuing to receive it. See Roth, 408 U.S. 564. The Department argues that even if the Plaintiffs had a property interest in their benefits, that interest was narrowly circumscribed. The Department contends that participants have no basis for expecting that their budgets will continue beyond the current year because Idaho’s regulations require that a participant’s individual budget be reevaluated each year. We reject this argument. The Department would have us define the substance of the Plaintiffs’ entitlement by the Department’s procedures for evaluating and modifying the participants’ level of services. But these procedures are precisely what the Plaintiffs challenge. If a state grants a property interest, its procedures for terminating or modifying K.W. V. ARMSTRONG 21 that interest do not narrow the interest’s scope. See Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 541 (1985). As the Supreme Court has observed, “[p]roperty” cannot be defined by the procedures provided for its deprivation any more than can life or liberty. The right to due process “is conferred, not by legislative grace, but by constitutional guarantee. While the legislature may elect not to confer a property interest . . . , it may not constitutionally authorize the deprivation of such an interest, once conferred, without appropriate procedural safeguards.” Id. (quoting Arnett v. Kennedy, 416 U.S. 134, 167 (1974) (Powell, J., concurring in part and concurring in result in part)). “Were the rule otherwise, the [Due Process] Clause would be reduced to a mere tautology.” Id. Because the yearly reapplication process is merely a procedure for evaluating eligibility, it does not define the substance of the Plaintiffs’ property interest in their benefits. Having found that the Plaintiffs have a property interest in their benefits, we must now examine whether providing a lower calculated budget to participants deprives them of this property interest. We find that it likely does. If a participant’s new calculated budget is lower than his current budget, the participant has lost the right to craft a service plan that is equal in value to his current service plan. The Department contends that merely calculating a lower budget for the upcoming year does not deprive a participant of property because the participant continues to receive the 22 K.W. V. ARMSTRONG services to which he is entitled under the current plan for some time after the budget notices are circulated. According to the Department, any reduction in services cannot occur until after a participant’s new service plan has been developed, discussed, and approved. But there is ample evidence in the record that participants’ calculated budgets effectively capped the value of services participants could receive. Therefore, once a lower budget is calculated, a participant has already effectively been deprived of the right to receive the same level of services in the coming year. The Department also argues that merely calculating a lower annual budget does not deprive a participant of property because the budget may be increased through appeal. But just because a party deprived of property may recover it by exercising procedural rights does not mean that no deprivation occurs. A primary purpose of providing adequate notice to participants is to enable them to prepare a defense for a hearing. See Barnes v. Healy, 980 F.2d 572, 579 (9th Cir. 1992). It would be illogical if the availability of a hearing deprived the Plaintiffs of their right to receive the notice they need to challenge benefits reductions at that hearing. The district court did not abuse its discretion in holding that the 2011 Budget Notices were inadequate under the Due Process Clause. “Due process requires notice that gives an agency’s reason for its action in sufficient detail that the affected party can prepare a responsive defense.” Id. (citing Goldberg, 397 U.S. at 267-68). The 2011 Budget Notices were inadequate because they did not specify why participants’ budgets had decreased. K.W. V. ARMSTRONG 23