In re E.B., No. 101537

CourtSupreme Court of West Virginia
Writing for the CourtBenjamin
Decision Date21 June 2012
PartiesIn re: E.B., A MINOR Michael J. Lewis, Secretary, West Virginia Department of Health and Human Resources, Petitioner
Docket NumberNo. 101537

IN RE: E.B., A MINOR
Michael J. Lewis, Secretary,
West Virginia Department of Health and Human Resources, Petitioner

No. 101537

SUPREME COURT OF APPEALS OF WEST VIRGINIA

January 2012 Term
Submitted: September 20, 2011
Filed: June 21, 2012



Appeal from the Circuit Court of Hancock County
Honorable James P. Mazzone, Judge
Case No. 09-P-47 M

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

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Darrell V. McGraw, Jr., Esq.
Attorney General
Mary McQuain, Esq.
Assistant Attorney General
DHHR Division/Bureau for Medical
Services
Charleston, West Virginia
Attorneys for Petitioner

Kevin M. Pearl, Esq.
Michael G. Simon, Esq.
Frankovitch, Anetakis, Colantonio &
Simon
Weirton, West Virginia

Louis Bograd, Esq.
Washington, DC
and
Max Freeman, Esq.
Lawrence Lassiter, Esq.
Miller Weisbrod, LLP
Dallas, Texas
Pro Hac Vice
Attorneys for Respondent

David J. Sims, Esq.
Sims Law Offices
Wheeling, West Virginia
Guardian ad litem

JUSTICE BENJAMIN delivered the Opinion of the Court.

CHIEF JUSTICE KETCHUM dissents and reserves the right to file a dissenting opinion.

JUSTICE DAVIS concurs and reserves the right to file a concurring opinion.

JUSTICE WORKMAN concurs and dissents and reserves the right to file a separate opinion.

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SYLLABUS BY THE COURT

1. "In reviewing challenges to the findings and conclusions of the circuit court, we apply a two-prong deferential standard of review. We review the final order and the ultimate disposition under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a clearly erroneous standard. Questions of law are subject to a de novo review." Syllabus Point 2, Walker v. W. Va. Ethics Comm'n, 201 W. Va. 108, 492 S.E.2d 167 (1997).

2. "Preemption is a question of law reviewed de novo." Syllabus Point 1, Morgan v. Ford Motor Co., 224 W. Va. 62, 680 S.E.2d 77 (2009).

3. "The Supremacy Clause of the United States Constitution, Article VI, Clause 2, invalidates state laws that interfere with or are contrary to federal law." Syllabus Point 1, Cutright v. Metro. Life Ins. Co., 201 W. Va. 50, 491 S.E.2d 308 (1997).

4. Pursuant to Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006), the West Virginia Department of Health and Human Resources may obtain reimbursement for medical expenses paid from only that portion of the settlement, compromise, judgment, or award obtained by a recipient of Medicaid assistance that constitutes damages for past medical expenses.

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5. West Virginia Code § 9-5-11 (2009) is preempted to the extent that its assignment and subrogation provisions conflict with federal law. To the extent that our prior decision in Grayam v. Department of Health and Human Resources, 201 W. Va. 444, 498 S.E.2d 12 (1997), provided that pursuant to W. Va. Code § 9-5-11 the Department of Health and Human Resources possesses a "priority right to recover full reimbursement from any settlement, compromise, judgment, or award obtained from such other person or from the recipient of such assistance if he or she has been reimbursed by the other person," that holding is overruled.

6. If another person is legally liable to pay for medical assistance provided by the West Virginia Department of Health and Human Resources, the Department possesses a priority right to be paid first out of any damages representing payments for past medical expenses before the recipient can recover any of his or her own costs for medical care.

7. After a settlement, compromise, judgment, or award has been obtained in a Medicaid assistance recipient's claim to recover damages for injuries, disease, or disability, all reasonable efforts should be made to obtain the agreement of the Department of Health and Human Resources regarding the allocation of that portion thereof that represents the recipient's past medical expenses. No such settlement, compromise, judgment or award shall be consummated or judicially approved, if necessary, until the Department has been notified

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and afforded such opportunity to agree to the parties' allocation of damages or to challenge said allocation.

8. If the Department of Health and Human Resources and the parties cannot agree on an allocation of damages in a settlement context once the Department is notified and provided an opportunity to protect its interest, the parties must seek judicial allocation through the court. If judicial allocation becomes necessary, the trial court is required to hold an evidentiary damages hearing, whereupon all parties and the Department are provided ample notice of the same and are given just opportunity to present the necessary evidence, including fact witness and expert witness testimony, to establish what each contends is an appropriate allocation of damages. In challenging an allocation of damages proposed by the parties, the Department of Health and Human Resources has the burden of proof to establish a proper allocation.

9. For purposes of appeal, the circuit court's judicial allocation decision should be set forth in a detailed order containing the requisite findings of fact and conclusions of law supporting its rulings.

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Benjamin, Justice:

The instant action is before this Court upon the appeal of Michael Lewis, Secretary, West Virginia Department of Health and Human Resources, (hereinafter "DHHR"),1 intervenor below, from a final order entered on July 12, 2010, in an infant summary proceeding under W. Va. Code § 44-10-14 (2002). In its order, the circuit court granted the motion of Respondent, Holly G.,2 for allocation of a $3,600,000 settlement, holding that the United States Supreme Court case, Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006), is the controlling law for the issues raised by the parties herein. The circuit court held that Ahlborn requires a proportional reduction of DHHR's recovery based on the ratio of the settlement to the "full value" of the case among the various damages categories. Using this method of allocation, the circuit court reduced DHHR's statutory reimbursement from the requested amount of $289,075.44, to $79,040.82, and directed that the net settlement proceeds be placed in a special needs trust3 for the benefit of the minor.

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Herein, DHHR seeks a reversal of the circuit court's order and a remand with directions that DHHR is entitled to reimbursement in the amount of $289,075.44, plus interest. This Court has before it the petition for appeal, all matters of record, and the briefs and arguments of counsel. For the reasons expressed below, the July 12, 2010, order of the Circuit Court of Hancock County is affirmed in part, reversed in part, and remanded with directions.

I.

FACTUAL AND PROCEDURAL HISTORY

Holly G. gave birth to her son, E.B., at Coshocton County Memorial Hospital on May 12, 2005, in Coshocton, Ohio.4 E.B. was born with severe brain damage, which has required and will continue to require significant medical care. Holly G., on behalf of E.B., applied for and received Medicaid benefits from the Ohio Department of Job and Family Services ("ODJFS") until February, 2007, when she and E.B. moved to Hancock County, West Virginia. On February 5, 2007, Holly G., on behalf of E.B., applied for and received Medicaid benefits from the West Virginia DHHR.

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On or about May 16, 2007, Holly G. filed a medical malpractice lawsuit on behalf of the infant, E.B., in the United States District Court for the Southern District of Ohio, Eastern Division, against Coshocton County Memorial Hospital; Janet Burrell, R.N.; Gabriel Yandam, M.D.; and LeFemme Obstetrics and Gynecology, LLC. Holly G. settled the case against Dr. Yandom and LaFemme Gynecology, LLC in September 2009 for $1,000,000. The settlement constituted the policy limits of the defendants' insurance coverage and was contingent upon court approval. The settlement agreement did not allocate the amount recovered among the various elements of damages suffered, i.e., medical expenses, pain and suffering, lost wages, etc. DHHR sought reimbursement for its medical payments from the settlement proceeds Holly G. had obtained on E.B.'s behalf.5

On October 13, 2009, Holly G. petitioned the Circuit Court of Hancock County, West Virginia, pursuant to W. Va. Code § 44-10-14, for approval of the first settlement with Dr. Yandom and LaFemme Gynecology, LLC.6 In her Petition, she requested that the Court pay her attorneys fees and legal expenses from the settlement funds, that Medicaid not be reimbursed due to the enormous costs of future care that she alleged

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dwarfed the limited funds available for settlement, that Holly G. be paid a fair sum of the net settlement proceeds, and that the remaining net settlement proceeds be placed in a special needs trust for the benefit of E.B. DHHR filed a motion to intervene on October 26, 2009.7 In its motion, DHHR asserted a statutory priority right to subrogation from the settlement proceeds. It also...

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