Bock Associates v. Chronister

• Decision Date: 03 December 1996
• Docket Number: No. 96-4110-RDR.,96-4110-RDR.
• Citation: 951 F.Supp. 969
• Parties: BOCK ASSOCIATES, Plaintiff, v. Rochelle CHRONISTER, in her capacity as Secretary of the Kansas Department of Social and Rehabilitation Services, Defendant.
• Court: U.S. District Court — District of Kansas

951 F.Supp. 969

BOCK ASSOCIATES, Plaintiff, v. Rochelle CHRONISTER, in her capacity as Secretary of the Kansas Department of Social and Rehabilitation Services, Defendant.

No. 96-4110-RDR.

United States District Court, D. Kansas.

December 3, 1996.

Order Denying Reconsideration February 25, 1997.

COPYRIGHT MATERIAL OMITTED

Thomas L. Griswold, Payne & Jones, Chtd., Overland Park, KS, Jeff H. Eckland, Elizabeth L. Taylor, William L. Roberts, Faegre & Benson, L.L.P., Minneapolis, MN, for Bock Associates.

Reid Stacey, Social & Rehabilitation Services, Topeka, KS, for Rochelle Chronister.

MEMORANDUM AND ORDER

ROGERS, District Judge.

This case is now before the court upon defendant's motion to dismiss the first amended complaint.

I. PLAINTIFF'S CLAIMS

The first amended complaint alleges that plaintiff contracted with the State of Kansas to perform "preadmission screening and resident review" ("PASARR") services for the state's Medicaid program. Of course, Medicaid is funded with state and federal money, and there are state and federal regulations governing the program. PASARR is a federal requirement. The goals of the requirement are: to ensure that only legally eligible individuals in nursing facilities receive Medicaid benefits; to screen patients suspected of suffering from mental illness for the type of specialized services that are needed; and to refer patients, when appropriate, to less costly alternative services. Under federal regulations, the screening of persons with mental illness must be performed by an entity other than the state mental health authority. Since the state mental health authority in Kansas is the Department of Social and Rehabilitation Services ("SRS"), some PASARR services must be performed by a different agency or entity.

Prior to 1993, Kansas Foundation for Medical Care ("KFMC") contracted with SRS to provide PASARR services under the Kansas Preadmission Assessment and Referral Program ("KPARP"). Demonstrated knowledge of the range and availability of community based services offered in the geographic region was the only standard SRS actually applied to assessors hired by KFMC, although the contract contained specific education and experience standards.

In 1993, SRS solicited proposals for continuing the KPARP program for three years. Plaintiff's proposal was chosen. The contract between plaintiff and SRS contained education and experience standards for assessors conducting client interviews as part of the Kansas Preadmission Assessment and Referral Instrument. This "instrument" was a means of collecting information concerning patient needs. But, during plaintiff's performance of the contract, the education and experience standards were not implemented and SRS expressly authorized and directed plaintiff to continue to use former KFMC assessors, even if they did not meet the education and experience standards.

Because the PASARR program was shifted by the state legislature from SRS to the Department of Aging, plaintiff and SRS agreed to terminate their contract on December 31, 1994. Since that time, defendant has refused to fully reimburse plaintiff for its services, and furthermore has demanded a refund from plaintiff. Defendant's position is based upon an internal audit which concluded, inter alia, that plaintiff had billed for assessments not completed by qualified assessors. There has been no claim, however, that an unqualified assessor improperly placed a client or improperly performed a job.

Plaintiff alleges that the qualifications of the assessors was an arbitrary and capricious reason for defendant's actions because: 1) SRS did not audit the prior contractor (KFMC) in spite of indications of mismanagement found by plaintiff; 2) the qualification standards were more stringent than those required of the prior contractor, other contractors and SRS interns; 3) the assessors used by plaintiff were used previously by KFMC or satisfied the standards actually imposed upon KFMC by SRS; 4) SRS never notified plaintiff that the assessors were unqualified; 5) the assessors met the de facto standards employed by SRS; 6) there is no claim by SRS that the assessors made improper decisions; and 7) SRS has not enforced the qualification standards against other contractors and has attempted to avoid scrutiny by the federal government on this issue.

When SRS refused to fully compensate plaintiff for its services and asked for a refund, SRS informed plaintiff of its right to pursue administrative review. The briefs upon the instant motion indicate that plaintiff requested administrative review of SRS's demand and withholding of reimbursement. But, this administrative review has been stayed pending this action.

On the basis of these allegations, plaintiff contends: that its rights under the Medicaid statute have been violated (Count I); that its rights to procedural and substantive due process have been violated (Counts II and III); and that its equal protection rights have been violated (Count IV).

II. ARGUMENTS FOR DISMISSAL

A. Service of process. At the outset, we reject defendant's claim of improper service of the complaint. It appears from the case file that defendant was personally served with the first amended complaint in this case.

B. Defendant's eligibility to be sued under § 1983. We also reject defendant's contention that this case should be dismissed because defendant is not a "person" for purposes of § 1983.¹ Rochelle Chronister, the Secretary of SRS, is the named defendant in this case. She is being sued in her official capacity for injunctive and declaratory relief. In such capacity, she is a "person" for purposes of § 1983 when she is sued for prospective relief. Will v. Michigan Department of State Police, 491 U.S. 58, 71 n. 10, 109 S.Ct. 2304, 2312 n. 10, 105 L.Ed.2d 45 (1989); Williams v. Commonwealth of Kentucky, 24 F.3d 1526, 1544 (6th Cir.) cert. denied, 513 U.S. 947, 115 S.Ct. 358, 130 L.Ed.2d 312 (1994) (refusing to dismiss official capacity claims for declaratory and injunctive relief); Tang v. State of Rhode Island, 904 F.Supp. 55, 60 (D.R.I.1995) (same).

C. Eleventh Amendment. Nevertheless, we are convinced that defendant has presented valid grounds to dismiss this case. First, we believe the Eleventh Amendment bars this court from hearing this case. The first amended complaint asks for a declaratory judgment that plaintiff is entitled to be compensated for the preadmission assessments it performed and precluding defendant from seeking reimbursement. The complaint also asks for an order enjoining defendant from seeking to recover money from plaintiff.

Of course, the Eleventh Amendment bars this court from hearing suits against any state unless the state consents to being sued or unless Congress has unequivocally abrogated the immunity from suit in the exercise of its power. Green v. Mansour, 474 U.S. 64, 68, 106 S.Ct. 423, 425-26, 88 L.Ed.2d 371 (1985). The State of Kansas is not a named defendant in this case. Instead, as mentioned previously, Rochelle Chronister is the defendant in her official capacity. "The general rule is that relief sought nominally against an officer is in fact against the sovereign if the decree would operate against the latter." Hawaii v. Gordon, 373 U.S. 57, 58, 83 S.Ct. 1052, 1053, 10 L.Ed.2d 191 (1963). A decree operates against the state if "the judgment sought would expend itself on the public treasury or domain, or interfere with the public administration, or if the effect of the judgment would be to restrain the Government from acting, or to compel it to act." Dugan v. Rank, 372 U.S. 609, 620, 83 S.Ct. 999, 1006, 10 L.Ed.2d 15 (1963). Plaintiff seeks a judgment which, although labeled as a declaratory judgment, in effect would require the State of Kansas to pay money from its treasury to plaintiff for the assessments plaintiff has performed. Plaintiff cannot avoid the provisions of the Eleventh Amendment by seeking an injunctive and declaratory judgment against a state official, if the judgment would be tantamount to an award of damages against the State of Kansas. Green, 474 U.S. at 73, 106 S.Ct. at 428 (1985); MSA Realty Corp. v. State of Illinois, 990 F.2d 288, 295 (7th Cir.1993) (Eleventh Amendment bars action seeking declaration of constitutional violation and injunction requiring state to return full sales tax increment to municipality to pay debt service on bonds). We believe the effect of the judgment plaintiff seeks in this case would be an order requiring the State of Kansas to pay money to plaintiff. Therefore, the motion to dismiss may be granted on Eleventh Amendment grounds.

D. Failure to state a claim. However, even if the Eleventh Amendment did not bar this action, we believe the case must be dismissed because the first amended complaint fails to state a claim.

The standard for dismissal on a Federal Rule of Civil Procedure 12(b)(6) motion is well-established: "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). The court must accept as true all well-pleaded allegations and must draw all reasonable inferences in favor of the plaintiff. Miree v. DeKalb County, 433 U.S. 25, 27 n. 2, 97 S.Ct. 2490, 2492 n. 2, 53 L.Ed.2d 557 (1977); Mortensen v. First Federal Savings & Loan Association, 549 F.2d 884, 891 (3d Cir.1977).

Count I — Violation of the Medicaid statute. Count I of the complaint alleges that the Medicaid statute creates a federal right to compensation which is enforceable under 42 U.S.C. § 1983 and which was violated by defendant. Defendant asserts that plaintiff has no private cause of action under § 1983 for a violation of the Medicaid statute.

Plaintiff asserts that the following statutory provisions and regulations provide a basis for a cause of action under § 1983...