Counter v. Cansler, Civil No. 5:07-CV-37-RLV.

• Court: U.S. District Court — Western District of North Carolina
• Writing for the Court: RICHARD L. VOORHEES, District Judge.
• Citation: Armstrong v. Cansler, 722 F.Supp.2d 653 (W.D. N.C. 2010)
• Decision Date: 28 June 2010
• Docket Number: Civil No. 5:07-CV-37-RLV.
• Parties: Emily M. ARMSTRONG, a minor, by and through her Guardian ad litem, William W. Plyler, 1 William E. Armstrong, and Sandra Armstrong, Plaintiffs/Counter-Defendants, v. Lanier M. CANSLER, in his official capacity as secretary of the North Carolina Department of Health and Human Services, 2 Defendant/Counter-Plaintiff.

722 F.Supp.2d 653

Emily M. ARMSTRONG, a minor, by and through her Guardian ad litem, William W. Plyler, ¹ William E. Armstrong, and Sandra Armstrong, Plaintiffs/Counter-Defendants, v.Lanier M. CANSLER, in his official capacity as secretary of the North Carolina Department of Health and Human Services, ² Defendant/Counter-Plaintiff.

Civil No. 5:07-CV-37-RLV.

United States District Court,W.D. North Carolina, Statesville Division.

June 28, 2010.

C. Mark Holt, William B. Bystrynski, Kirby & Holt, LLP, William Webb Plyler, McMillan Smith & Plyler, Raleigh, NC, Jeffrey Thomas Mackie, Sigmon, Clark, Mackie, Hutton, Hanvey & Ferrell, PA, Hickory, NC, for Plaintiffs/Counter-Defendants.

Belinda A. Smith, Susannah Porter Holloway, N.C. Department of Justice, Raleigh, NC, for Defendant/Counter-Plaintiff.

Memorandum and Order

RICHARD L. VOORHEES, District Judge.

THIS MATTER is before the Court on cross-motions for summary judgment and all related memoranda of law and exhibits offered in support and opposition. (Documents # 25, # 28.)

I. Background

This case arises out of the Complaint filed on March 23, 2007 on behalf of the minor child, Emily M. Armstrong. Plaintiff brings the action under 42 U.S.C. § 1983 seeking declaratory and injunctive relief for the deprivation of her rights, as secured by 42 U.S.C. § 1396p (known as the “Federal Medicaid Anti-Lien Provision”) and the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution. In the Complaint, Plaintiff requests a declaratory judgment finding: 1) that Defendant does not have a lien on the proceeds arising from the minor child's personal injury action against James A. Barnes, Jr., M.D., Newton Women's Care, P.A., and Catawba Valley Medical Center (“the underlying action”); 2) that N.C. Gen.Stat. §§ 108A-57 and 108A-59 are unconstitutional to the extent that the statutes allow Defendant to assert a lien on compensation for damages other than medical expenses pursuant to the Supremacy Clause; and 3) that Defendant be enjoined from enforcing N.C. Gen. Stats. §§ 108A-57 and 108A-59 in a manner that violates 42 U.S.C. § 1396, et seq., Arkansas Dep't of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006), and the Equal Protection Clause of the Fourteenth Amendment.

On April 22, 2008, the Court heard oral argument on Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction and Motion To Dismiss pursuant to Rule 12(b)(6) as to Plaintiff's Equal Protection claim. (Document # 7.) By oral Order, the Court denied Defendant's Rule 12(b)(1) motion and granted its 12(b)(6) motion without prejudice. The Court also stayed all Rule 16 discovery obligations pending disposition in the North Carolina Supreme Court of the Andrews v. Haygood appeal. See Andrews v. Haygood, 188 N.C.App. 244, 655 S.E.2d 440 (2008).

On May 1, 2008, Defendant filed its “Answer, Affirmative Defense, Counterclaim, and Motion to Dismiss.” (Document # 12.) Defendant asserts estoppel as its first affirmative defense, arguing that Plaintiff's current contention that North Carolina Department of Health and Human Services is not entitled to any of the recovered funds is inconsistent with her previous statements in the state court proceedings. In its counterclaim, Defendant seeks a declaratory judgment that N.C. Gen. Stats. §§ 108A-57 and 108A-59 are constitutional. Finally, Defendant's filing includes a Rule 12(b)(7) Motion to Dismiss for Plaintiff's failure to join her parents, who Defendant alleges are necessary and indispensable parties.

On January 13, 2009, Plaintiff filed a “Notice in Compliance with Court's Order,” advising the Court of the North Carolina Supreme Court's decision in Andrews v. Haygood, 362 N.C. 599, 669 S.E.2d 310 (2008). (Document # 13.) Accordingly, the Court issued an Order on June 1, 2009, lifting the stay on discovery obligations. (Document # 15.) In the Order, the Court also referred the parties to Local Civil Rules 7.1(C)(1) and 16.1(D) ³ , the effect of which was to direct the parties to proceed with an Initial Attorney's Conference, submit the Certification of Initial Attorney's Conference, and brief the central legal issue presented-cognizability of Plaintiff's claim in light of the Andrews decision.

On July 6, 2009, Plaintiff filed an Amended Complaint adding William E. Armstrong and Sandra Armstrong as Plaintiffs. (Document # 19.)

On October 15, 2009, both parties moved for summary judgment, and these motions are now ripe for disposition by the Court.

II. Standard of Review

When faced with cross-motions for summary judgment, the court must apply the customary standard and review each motion separately on its own merits. Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir.2003). Summary judgment is appropriate when “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.” Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238, 241 (4th Cir.1995); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). All permissible inferences to be drawn from the facts are to be viewed in the light most favorable to the party opposing the motion. Miller v. Fed. Deposit Ins. Corp., 906 F.2d 972, 974 (4th Cir.1990); Matsushita, 475 U.S. at 587-88, 106 S.Ct. 1348. However, where the record taken as a whole “could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate.” Miller, 906 F.2d at 974; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Whether a complaint states a cognizable claim is a legal question dependent on the applicable law, not an issue of fact upon which disagreement would prevent summary judgment. See Loe v. Armistead, 582 F.2d 1291, 1295 (4th Cir.1978).

III. Discussion

In filing cross-motions for summary judgment, the parties dispute the impact of two recent decisions on the North Carolina statutory scheme for Medicaid reimbursement. Plaintiffs contend that the holding of the Supreme Court of the United States in Arkansas Dep't of Health and Human Servs. v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006) is controlling on this matter. (Pl.'s Memo. Supp. Mot. for Summary Judg., 4.) According to Plaintiffs, the North Carolina statutes are inconsistent with federal law as interpreted in Ahlborn; thus, this Court should disregard the contrary decision of the North Carolina Supreme Court in Andrews v. Haygood, 362 N.C. 599, 669 S.E.2d 310 (2008). (Pl.'s Memo. Supp. Mot. for Summary Judg., 9.) On the other hand, Defendant maintains that the Court should give Andrews dispositive effect, holding that the Medicaid recovery statutes comport with Ahlborn, and as a consequence, grant Defendant's Motion for Summary Judgment. (Def.'s Memo. Supp. Mot. for Summary Judg., 8.)

Although the decision in Andrews is not binding on this Court, as Plaintiffs rightly assert, (Pl.'s Memo. Supp. Mot. for Summary Judg., 9) for the forthcoming reasons, the Court holds that the North Carolina Supreme Court was correct in determining that the North Carolina statutes are consistent with federal Medicaid law as construed in Ahlborn. See Andrews, 362 N.C. at 605, 669 S.E.2d 310. Therefore, Plaintiff's opposing claims are denied, and with no genuine issue of material fact remaining, Defendant is entitled to summary judgment.

In Ahlborn, the Supreme Court of the United States addressed a challenge to the Arkansas Medicaid reimbursement statute. 547 U.S. at 280, 126 S.Ct. 1752. That statute permitted the Arkansas Department of Health and Human Services to recover “to the full extent of any amount which may be paid by Medicaid for the benefit of the applicant.” Id. at 277, 126 S.Ct. 1752. Ahlborn, a Medicaid recipient, appealed the statute because it did not limit reimbursement to ADHS to settlement proceeds stipulated as recovery for medical expenses. Id. at 274, 126 S.Ct. 1752. Although the State had stipulated “that only $35, 581.47 of [the settlement] sum represent[ed] compensation for medical expenses,” it asserted a lien for $215,645.30. Id. at 280, 126 S.Ct. 1752. The Supreme Court rejected the State's claim of “absolute priority,” id. at 288, 126 S.Ct. 1752, and held that the Arkansas statute did not comport with federal law. Id. at 284, 126 S.Ct. 1752. According to the Court, 42 U.S.C. §§ 1396a(a)(25) and 1396k(a) are exceptions to the federal anti-lien provision, authorizing the State “to demand as a condition of Medicaid eligibility that the recipient ‘assign’ in advance any payments that may constitute reimbursement for medical costs.” Id. However, to the extent that the Arkansas statute allowed the State to impose a lien beyond the portion of the settlement allocated to medical care, it violated the anti-lien provision in § 1396p(a). Id.

Two years later, in Andrews, the North Carolina Supreme Court properly concluded that Ahlborn did not bar implementation of the North Carolina statutory scheme. 362 N.C. at 604, 669 S.E.2d 310. The court's decision was based on a determination that the Ahlborn holding was limited to a proscription against the State receiving reimbursement in excess of the portion expressly stipulated as recovery for medical expenses in a Medicaid recipient's settlement with a third-party. Id. at 603, 669 S.E.2d 310. In Ahlborn, the Supreme Court did not, however, require “a specific method for determining the portion of a settlement that represents the recovery of medical expenses.” Id. Thus, the Andrews court inferred that a State may adopt a statutory method for making this determination in the absence of a prior judicial allocation. Id. N.C.G.S. § 108A-57(a) is designed to do precisely that in North Carolina, by “defin[ing] ‘the portion of the settlement that represents payment for medical expenses' as the lesser of the State's past medical expenditures or...