Kadingo v. Johnson
| Decision Date | 14 August 2017 |
| Docket Number | Civil Action No. 15-cv-02835-NYW |
| Parties | LILAFERN KADINGO, Plaintiff, v. LYNN A. JOHNSON, in her official capacity as director of the Jefferson County Department of Human Services, and SUSAN E. BIRCH, in her official capacity as Executive Director of the Colorado Department of Health Care Policy and Financing, Defendants. |
| Court | U.S. District Court — District of Colorado |
This matter comes before the court on Plaintiff Lilafern Kadingo's ("Plaintiff" or "Ms. Kadingo") Motion for Summary Judgment [#65, filed Mar. 10, 2017] and Defendants Lynn A. Johnson and Susan E. Birch's (collectively, "Defendants") Motion for Summary Judgment [#66, filed Mar. 10, 2017]. The motions are before the undersigned Magistrate Judge pursuant to 28 U.S.C. § 636(c) and the Order Referring Case dated January 29, 2016 [#16]. After carefully considering the motions and associated briefing, the entire case file, the applicable case law, and the comments offered during the June 15, 2017 Motions Hearing, the court hereby DENIES Plaintiff's Motion for Summary Judgment and GRANTS Defendants' Motion for Summary Judgment for the following reasons.
Plaintiff is a ninety-three (93) year old woman who "is incapacitated with dementia and physical disabilities." See generally [#65 at Movant's Statement of Material/Undisputed Facts ("SOMUF") ¶ 3; #65-3 at 2; #66 at Statement of Undisputed Facts ("SOUF") ¶ 9; #68 at 1]. Plaintiff currently resides in a nursing home in Thornton, Colorado, and her son, John Kadingo, "holds a durable power of attorney for [her]." [#65 at SOMUF ¶¶ 1-2; #66 at SOUF ¶ 9]. Plaintiff's husband, Hubert Kadingo ("Mr. Kadingo"), passed away on May 16, 2011, and through his will, he devised one-half of his estate via the Lilafern Kadingo Trust (the "Trust") to Plaintiff and one-half via a separate trust to his children. [#65 at SOMUF ¶¶ 3-4; #66 at SOUF ¶¶ 10-12].1 The Trust is a pure discretionary trust that granted sole and absolute discretion to the trustee (John Kadingo) regarding distributions to Plaintiff, the sole beneficiary of the Trust. [#65 at SOMUF ¶ 5; #66 at SOUF ¶¶ 13-15].
In November 2011, InnovAge prepared and filed a Medicaid application on behalf of Plaintiff as her authorized representative. [#65 at SOMUF ¶¶ 9-10; #66 at SOUF ¶ 16]. At the time of filing Plaintiff's Medicaid application, "Plaintiff's only asset was the residence, as an exempt homestead under 10 CCR 2505-10, 8.100.5.M.2.a, based on intent to return, not whether Plaintiff was able to live there." [#65 at SOMUF ¶ 11].2 The Colorado Department of Health Care Policy and Financing ("CDHCPF") subsequently approved Ms. Kadingo's application for long-term care services beginning in February 2012. [#65 at SOMUF ¶ 12]. Then, about June2013, Plaintiff sold her residence and placed the proceeds from the sale in the Trust. John Kadingo's probate counsel informed Defendants of the sale on multiple occasions. [#65 at SOMUF ¶¶ 13-14; #66 at SOUF ¶ 17].
On July 16, 2014, Leanne Gardner, Trust Officer for the CDHCPF, informed John Kadingo that Plaintiff received an overpayment of $98,703.52 in Medicaid benefits, and that the CDHCPF sought only to recover that overpayment. [#65 at SOMUF ¶ 15; #66 at SOUF ¶ 20]. The Parties dispute whether this letter placed Plaintiff on notice that the CDHCPF considered the placement of the residence proceeds in the Trust as a transfer without fair consideration. Compare [#65 at SOMUF ¶ 15] with [#68 at 2]; see also [#68 at Statement of Additional Material/Undisputed Facts ¶¶ 1-6]. However, it is clear that Plaintiff's counsel and Ms. Gardner then exchanged correspondences regarding the July 16 letter. Plaintiff sought, and received, clarification of the CDHCPF's legal position with respect to Ms. Kadingo's Medicaid benefits. See generally [#66-6; #66-7; #66-8]. Then, on or about July 25, 2014, the Jefferson County Department of Human Services ("JCDHS") sent Plaintiff a notice (the "July 2014 notice"), citing that she was "overresourced" as a basis for denial and penalty, rather than that she had engaged in a transfer without fair consideration. The July 2014 notice was sent directly to InnovAge who did not forward it to Ms. Kadingo. [#65 at SOMUF ¶ 16].
John Kadingo appealed the July 2014 notice, and an Administrative Law Judge ("ALJ") conducted hearings on the matter on July 27, 2015,3 and again on August 10, 2015, via telephone. [Id. at ¶¶ 17-18; #66 at SOUF ¶ 23]. During the July 27 hearing, the ALJ inquired of Plaintiff's counsel whether he would "want to go ahead and have a decision about the transferwithout fair consideration issue." [#66-10 at 27:14-18].4 Following the hearings, the ALJ concluded that the July 2014 notice was defective for citing the incorrect ground for the agency's action; however, the ALJ considered the merits of the case based on a theory of transfer without fair consideration rather than Plaintiff being overresourced. [#65 at SOMUF ¶¶ 18-19; #66 at SOUF ¶ 26]. The Parties dispute whether it was Plaintiff's counsel who urged the ALJ to consider the Defendants' transfer without fair consideration theory. Compare [#65 at SOMUF ¶ 19] with [#66 at SOUF ¶¶ 24-25]. Nevertheless, Plaintiff substantively responded to Defendants' arguments. See [#66 at SOUF ¶ 25 (citing [#66-2 at 1; #66-11])]. The ALJ ultimately concluded that there was a transfer without fair consideration valued at $87,000, and the ALJ issued Plaintiff a future disqualification of benefits penalty, imposing a 14-month disqualification period (i.e., a transfer penalty) to run upon entry of the Final Agency Decision. [#65 at SOMUF ¶ 20; #66 at SOUF ¶ 26]. Plaintiff failed to timely appeal the ALJ's Initial Decision. [#65 at SOMUF ¶ 21; #66 at SOUF ¶ 27]. Accordingly, the CDHCPF issued a Final Agency Decision on October 30, 2015, affirming the ALJ's decision and activating the transfer penalty as of the date of its order. [#65 at SOMUF ¶ 15; #66 at SOUF ¶ 27].
Then, on June 14, 2016, the JCDHS issued a new notice (the "June 2016 notice") to Plaintiff citing transfer without fair consideration as the basis of its action, imposing the 14-month disqualification period set to run from July 1, 2016 to August 31, 2017. [#65 at SOMUF ¶ 22; #66 at SOUF ¶ 28]. Ms. Kadingo timely appealed the June 2016 notice. [#65 at SOMUF ¶ 22]. On October 25, 2016, the ALJ dismissed Plaintiff's appeal of the June 2016 notice because the ALJ had already heard the case and the CDHCPF already issued a Final AgencyDecision on the matter. [Id. at ¶ 23]. To date, the CDHCPF has yet to issue a Final Agency Decision as to the June 2016 notice. [Id.].
On December 11, 2015, Plaintiff commenced this action in the District Court of the City and County of Denver. See [#1 at 1]. Defendants filed their Notice of Removal in the federal district court for the District of Colorado on December 30, 2015, pursuant to 28 U.S.C. § 1331, because Plaintiff's Complaint alleged violations of her constitutional rights and sought declaratory relief under 42 U.S.C. § 1983.5 [Id. at 2]. Following a 90-day stay of the proceedings [#22], Defendants responded to Plaintiff's Complaint with their first Joint Motion to Dismiss Plaintiff's Complaint on May 10, 2016. [#28]. However, on June 29, 2016, Plaintifffiled her First Amended Complaint ("FAC") [#38], the operative Complaint in this matter, and the court denied as moot Defendants' first Joint Motion to Dismiss in light of the FAC. [#39].
Then, on July 13, 2016, Defendants filed their Motion to Dismiss the FAC. [#42]. In ruling on the second Motion to Dismiss, the undersigned interpreted the FAC as alleging that Defendants violated: (1) 42 U.S.C. §§ 1396p(c)(2)(B)(i), 1396p(d)(2)(A), and 1396a(a)(18), with their policy and practice of interpreting a spouse's failure to elect against the decedent spouse's will as a transfer without consideration, infringing her rights to a testamentary trust that would be exempt from consideration under Medicaid ("Claim I"); (2) 42 U.S.C. § 1396p(c)(1)(E)(i)(I), by failing to treat Mr. Kadingo's testamentary trust as equivalent to an elective-share trust under Colorado law and assessing a transfer penalty ("Claim II"); (3) 42 U.S.C. § 1396p(c)(1)(D)(ii), because the ALJ ignored the state regulations and arbitrarily implemented the disqualification penalty in contravention of federal law by utilizing a start date that was not the first day of the month during or after the date in which assets were transferred ("Claim III"); (4) 42 U.S.C. § 1396a(a)(3) and the Fourteenth Amendment of the United States Constitution, because they provided Plaintiff deficient notice of the termination of her Medicaid benefits and failed to provide her a fair and impartial hearing, and seeking a declaration that 10 Colo. Code Regs. §§ 2505.10:8.057.8.D, E are unconstitutional ("Claim IV"); and (5) 42 U.S.C. § 1396p(c)(2)(C) with their policy and practice of applying transfer penalties when an individual fails to elect against their deceased spouse's will with reasons "other than to qualify for medical assistance" ("Claim V"). See [#38 at 15-26]. The claims also interweave facial challenges to the state Medicaid regulations, as well as particular challenges to the manner in which Ms. Kadingo's case was adjudicated. [#38].
On January 26, 2017, the undersigned granted in part and denied in part Defendants' Motion to Dismiss [#42]. See [#60]. Plaintiff's remaining claims are as follows: (1) Claim I, but only to the extent it seeks to challenge Defendants' regulations, policies, and practices as violations of Plaintiff's federal rights under 42 U.S.C. §§ 1396p(d)(2)(A), 1396a(a)(18); (2) Claim IV in its entirety; and (3) Claim V, but only to the extent it seeks to challenge Defendants' regulations, policies, and practices as violations of Plaintiff's federal rights under 42 U.S.C. § 1396p(c)(2)(C) and not to the extent it seeks to...
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