Lewis v. Alexander

• Decision Date: 22 August 2011
• Docket Number: NO. 06-3963,06-3963
• Parties: ZACKERY D. LEWIS by his next friends; RICHARD YOUNG; LYNN G. HAINER, Administratrix of the Estate of ADDIE SMITH; SUSAN W. COLEMAN; KATHY A. BURGER; TRACY PALMER; KENNY ATKINSON by his next friend; BERNICE TATE by her next friend; MARY WAGNER; MICHAEL BIDZILYA by his next friend; WILLIAM ALGAR by his next friend; ANTHONY GALE by his next friends; THE ARC COMMUNITY TRUST OF PENNSYLVANIA; and THE FAMILY TRUST, on their own behalf and on behalf of all other persons similarly situated, Plaintiffs, v. GARY ALEXANDER, in his official capacity as Secretary of the Department of Public Welfare of the Commonwealth of Pennsylvania; ERIC ROLLINS, in his official capacity as Executive Director of the Erie County Assistance Office, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

ZACKERY D. LEWIS by his next friends; RICHARD YOUNG; LYNN G. HAINER,

Administratrix of the Estate of ADDIE SMITH; SUSAN W. COLEMAN; KATHY A. BURGER; TRACY PALMER;

KENNY ATKINSON by his next friend; BERNICE TATE by her next friend;

MARY WAGNER; MICHAEL BIDZILYA by his next friend; WILLIAM ALGAR by his next friend;

ANTHONY GALE by his next friends; THE ARC COMMUNITY TRUST OF PENNSYLVANIA;

and THE FAMILY TRUST, on their own behalf

and on behalf of all other persons similarly situated, Plaintiffs,

v.GARY ALEXANDER, in his official capacity as Secretary of the Department

of Public Welfare of the Commonwealth of Pennsylvania;

ERIC ROLLINS, in his official capacity as Executive Director

of the Erie County Assistance Office, Defendants.

NO. 06-3963

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

August 22, 2011

CIVIL ACTION

DuBOIS, J.

MEMORANDUM

Table of Contents

I. Introduction.............................................................................................3

II. Background.............................................................................................4

A. Procedural Background......................................................................4

B. Overview of Medicaid and Pennsylvania's Medical Assistance Program............6

C. Special or Supplemental Needs Trusts....................................................6

D. 62 Pa. Stat. Ann. § 1414 ("Section 1414")................................................8

III. Standing and Ripeness..............................................................................10

A. Standing......................................................................................10

1. Legal Standard..........................................................................10

2. Discussion...............................................................................12

B. Ripeness......................................................................................18

1. Legal Standard..........................................................................18

2. Discussion...............................................................................20

IV. Standard of Review - Motion for Summary Judgment.........................................23

V. Plaintiffs' Claims Under the Supremacy Clause................................................24

VI. Preemption of Section 1414 by Federal Law....................................................26

A. Defendants' Preliminary Arguments on Preemption...................................27

1. Defendants' Argument that Section 1414 is a Permissible Law Regulating State Trusts.............................................................................27

2. Defendants' Argument that 42 U.S.C. § 1396p(d)(4) is Not Mandatory......28

B. Plaintiffs' Preemption Arguments.......................................................29

1. Background of the No-More-Restrictive Rule.....................................29

2. Whether the No-More-Restrictive Rule Applies in the Context of Section 1396p(d)(4) Special Needs Pooled Trusts................................30

3. Section 1414 is More Restrictive Than, and Conflicts with, Section 1396p(d)(4).............................................................................34

4. Summary - Preemption................................................................42

VII. Plaintiffs' Motion for Class Certification........................................................46

A. Legal Standard..............................................................................46

B. Discussion....................................................................................48

1. Numerosity..............................................................................48

2. Commonality.............................................................................48

3. Typicality................................................................................49

4. Adequacy................................................................................50

5. Requirements of Rule 23(b)(2)......................................................53

6. Scope of the Proposed Class..........................................................54

7. Claims Subject to Class Treatment..................................................54

8. Appointment of Class Counsel.......................................................55

VIII. Conclusion...........................................................................................55

I. INTRODUCTION

In this putative class action, plaintiffs challenge Section 9 of Pennsylvania Act 42 of 2005, 62 Pa. Stat. Ann. § 1414 (West 2010) ("Section 1414"). Plaintiffs allege that Section 1414 is inconsistent with the federal Medicaid Act and violates the Supremacy Clause, U.S. Const. art. VI, cl. 2, and their due process rights. The issue in the case is this: Does Section 1414 establish improper eligibility criteria for beneficiaries of pooled special needs trusts, a type of trust excluded in determining whether an individual's income and resources are sufficiently low to qualify for Medicaid?

The parties have stipulated to the relevant facts. Presently before the Court are the parties' cross motions for summary judgment and plaintiff's motion for class certification. For the reasons that follow the Court determines that plaintiffs have standing to challenge Section 1414, that their claims are ripe, and that subsections (b)(1), (b)(2), (b)(3)(ii), (b)(3)(iii), and (c) are preempted by federal law. Additionally, the Court certifies a class composed of the following:

All disabled individuals who are, or who will become, eligible for Medical Assistance and for whom pooled special needs trust accounts that comply in all respects with the federal Medicaid Act were established on or after January 1, 2000, or will be established in the future, but who have been or will be denied Medical Assistance, or who are subject to termination of their Medical Assistance benefits, as a result of the application of Section 1414, as well as trustees of pooled special needs trusts holding such accounts and other persons acting in a representative capacity on behalf of such disabled individuals.

II. BACKGROUND

A. Procedural Background

This putative class action seeking declaratory and injunctive relief was commenced on September 5, 2006 with the filing of a complaint by The Family Trust, the ARC Community Trust (collectively "the trust plaintiffs), and eight individuals holding pooled trust accounts in The Family Trust or ARC Community Trust (collectively "the individual plaintiffs"). The Complaint challenged several provisions of Section 1414 as inconsistent with the federal Medicaid Act, the Supremacy Clause, and the Due Process Clause of the Fourteenth Amendment. Named as defendants were nine Pennsylvania Commonwealth officials, including the Governor and the Secretary of Public Welfare.

Plaintiffs filed a First Amended Complaint on November 21, 2006. Soon after that, on January 17, 2007, defendants moved to dismiss. On February 13, 2007, while the motion to dismiss was pending, plaintiffs filed a motion to certify a class under Federal Rule of Civil Procedure 23(b)(2). On August 3, 2007, this Court issued a Memorandum and Order granting Defendants' Motion to Dismiss in part and denying it in part. Lewis v. Rendell, 501 F. Supp. 2d 671 (E.D. Pa. 2007). Specifically, the Court ruled that the federal law governing special needs trusts, 42 U.S.C. § 1396p(d)(4) ("Section 1396p(d)(4)"), creates rights that are enforceable under 42 U.S.C. § 1983, id. at 686-88, and that Section 1414, which became effective July 7, 2005, does not apply retroactively. Id. at 689-91. The Court further concluded that prospective application of Section 1414, including the application of Section 1414(c) to terminate entire trusts, is rationally related to the state's legitimate interest in limiting the use of scarce state MA resources, and, as such, does not violate plaintiffs' substantive due process rights. Accordingly,the Court dismissed Counts XI and XII of plaintiffs' First Amended Complaint.¹ Id. The Court also dismissed that portion of Count IX that alleged Section 1414 violates plaintiffs' procedural due process rights by depriving them of Medicaid benefits without adequate procedural protections, concluding that state and federal law provide adequate procedures with respect to termination of Medicaid benefits. Id. at 693. Finally, the Court dismissed all defendants except Estelle Richman, in her official capacity as Secretary of the Department of Public Welfare ("DPW") and Chuck Phillips, in his official capacity as Executive Director of Erie County Assistance Office ("Erie CAO").² Id. at 682-85.

On April 23, 2008, the parties filed a joint stipulation providing for a second amended complaint. The Second Amended Complaint added four individual plaintiffs who established pooled trust accounts with either The Family Trust or ARC Community Trust after the effective date of Section 1414, July 7, 2005.³

The parties filed a joint stipulation of facts on May 9, 2008. Plaintiffs filed a motion for summary judgment on July 10, 2008. Defendants responded by filing a cross motion for summary judgment on August 14, 2008. On June 30, 2010, the Court ordered the parties tosubmit supplemental memoranda of law on the question "whether state Medicaid eligibility methodology must be 'no more restrictive' than federal Supplemental Social Security ("SSI") methodology in the context of 42 U.S.C. § 1396(p)(4)(d) trusts." Those memoranda have been filed, and the cross motions for summary judgment are now fully briefed and ripe for review. Plaintiffs' motion for class certification is also fully briefed and ripe for review.

B. Overview of Medicaid and Pennsylvania's Medical Assistance Program

The Medicaid program "is a cooperative federal-state program under which the federal government furnishes funding to states for the purpose of providing medical assistance to eligible...