Sheely v. Wisconsin Dept. of Health & Social Services, 87-2121

Citation442 N.W.2d 1,150 Wis.2d 320
Decision Date21 June 1989
Docket NumberNo. 87-2121,87-2121
CourtUnited States State Supreme Court of Wisconsin
Parties, Medicare & Medicaid Guide P 37,938 Linda SHEELY, Petitioner-Respondent-Petitioner, v. WISCONSIN DEPARTMENT OF HEALTH AND SOCIAL SERVICES, Appellant.

F. Thomas Creeron, III, Asst. Atty. Gen., argued, Donald P. Johns, Asst. Atty. Gen., and Donald J. Hanaway, Atty. Gen., on the briefs, for appellant.

Jeffrey Spitzer-Resnick, Madison, amicus curiae, for Center for Public Representation.

DAY, Justice.

This is a review of a decision by the court of appeals, Sheely v. DHSS, 145 Wis.2d 328, 426 N.W.2d 367 (Ct.App.1988), which reversed a judgment 1 for costs and fees The court of appeals reversed; holding DHSS was not a party in the action, and that "there is no express statutory authorization allowing attorney fees and costs to be taxed against a state agency acting in its adjudicative capacity." Id. 145 Wis.2d at 333, 335, 426 N.W.2d 367. We reverse because we hold DHSS was a party to this action and sec. 814.245(3), Stats., permits costs to be assessed against a state agency which has taken a position not substantially justified in its adjudicative capacity. We further hold that the circuit court had jurisdiction to determine whether costs could be assessed and that it correctly concluded the position advocated by DHSS was not substantially justified. We conclude Sheely is permitted to collect fees and costs pursuant to sec. 814.245(3).

                against the Wisconsin Department of Health and Social Services (DHSS) by the Circuit Court for Juneau County, Honorable Wallace A. Brady, Judge.  Linda Sheely (Sheely) petitioned the circuit court for an award of costs and attorney's fees pursuant to sec. 814.245(3), Stats.1985-86. 2  The circuit court held that a "circuit court can award fees to the prevailing party on [150 Wis.2d 323] review, whether or not costs are available within the administrative proceedings."   It also concluded that DHSS's position that Sheely was not "disabled" was not "substantially justified" and awarded costs and attorney's fees to Sheely
                

Four principal issues are presented. First, did the circuit court have jurisdiction to award costs and fees pursuant to sec. 814.245(3)? We hold the circuit court did have jurisdiction. The circuit court retains jurisdiction to assess costs and fees pursuant to sec. 814.245(3), once it has remanded a decision by DHSS back for further proceedings and it need not explicitly state it is retaining such jurisdiction. Second, was DHSS a party to the action as described in sec. 814.245(3)? We hold that DHSS was a party when the circuit court held the determination by DHSS was invalid and remanded the cause back to DHSS. Third, may fees and costs be assessed against DHSS pursuant to sec. 814.245, if it was acting in its "adjudicative" capacity? We hold the statute makes no distinction between the different "functions" of a state agency. Here, DHSS may be assessed costs. Fourth, was the determination by DHSS that Sheely was not "disabled" substantially justified? We conclude it was not.

The facts are undisputed. In September of 1985, Sheely applied to the Juneau County Department of Social Services (Juneau County) 3 for Medical Assistance (M.A.), also known as Medicaid.

Medicaid is a joint federal and state program which provides payment for medical services to eligible persons. The program was created in 1965 under Title XIX of the Social Security Act to provide assistance to both categorically needy Swanson v. Health and Social Services Dept., 105 Wis.2d 78, 83, 312 N.W.2d 833 (Ct.App.1981) (footnotes omitted).

and medically needy individuals.... Wisconsin's plan includes both groups.

The "categorically needy" are those individuals or families who are eligible for medicaid because they are eligible for Aid to Families with Dependent children ("AFDC") or Supplemental Security Income ("SSI") benefits.... Also included within this class are individuals who are excluded from AFDC or SSI because of an eligibility requirement that does not apply to medicaid.

The "medically needy" are those individuals not receiving AFDC or SSI, but whose income and resources, in comparison to their medical expenses, are within the limits established by the Department of Health and Human Services.... Coverage of this latter class of persons is optional for a state which participates in the program.

Crippen v. Kheder, 741 F.2d 102, 103 (6th Cir.1984). See also Rousseau v. Bordeleau, 624 F.Supp. 355 (D.R.I.1985).

Sheely applied as "medically needy" under sec. 49.47(4), Stats. 4 Ms. Sheely also applied to the Social Security Administration for Supplement Security Income (SSI). 5

Based on her medical record, the State Bureau of Social Security Disability Insurance (BSSDI), a division of DHSS, determined that Sheely was not "disabled." This determination was based on federal law which interpreted the federal Title XVI definition of "disability" as contained in 42 U.S.C. sec. 1382c(a)(3). Relying on this determination, Juneau County denied Sheely's application for M.A. in December of 1985. See Sheely, 145 Wis.2d at 331, 426 N.W.2d 367.

Ms. Sheely appealed for an administrative hearing to review the determination by Juneau County. In a decision designated "a final administrative decision of the [DHSS]," a hearing examiner held "[t]he determination of [BSSDI] must be sustained." Sheely then requested a rehearing of the decision by DHSS pursuant to sec. 227.12, Stats. This request was denied by "a final administrative decision of the [DHSS]" on March 31, 1986.

Ms. Sheely next petitioned the Circuit Court of Juneau County "to review a final decision of the Wisconsin Department of Health and Social Services (DHSS) dated March 31, 1986." DHSS was named the defendant and appeared in court as such. In a memorandum decision dated October 2, 1986, the circuit court held the hearing examiner "failed to apply the correct legal standards to all the facts of the case." It found the hearing examiner "relied on the Medical Vocational Guidelines, known as the "grid" (See 20 C.F.R., part 404, subpart P, Appendix 2) to find that jobs existed which Sheely could perform. However, some of [Sheely's] impairments, ... were non-exertional. Because of these non-exertional disabilities, the grid should not have been used." The case was remanded back to DHSS for further proceedings.

Subsequent to the circuit court's order, but prior to any further proceedings, a federal administrative law judge found Sheely "had been under a 'disability' as defined in the Social Security Act." Consequently, Sheely became eligible for SSI benefits. 6 This determination also made Sheely eligible for M.A. under sec. 49.46(1)(a)4, Stats. 7 Sheely's attorney notified Sheely then petitioned the circuit court on June 4, 1987, pursuant to sec. 814.245(3), Stats., to recover costs and attorney's fees for the circuit court's prior review of the matter. According to the memorandum decision of September 23, 1987, the only issues contested were: whether DHSS was a party to the action and whether its conclusion that Sheely was not disabled was substantially justified. It does not appear that DHSS contested whether Sheely was a "prevailing party." The circuit court concluded that Sheely was a "prevailing party" and that DHSS's determination that Sheely was without a disability was not "substantially justified" because the "position had no reasonable basis in law or fact." It also held it could award costs and fees against DHSS "whether or not costs [were] available within the administrative proceedings." DHSS did not challenge the amount requested. Sheely's motion for costs was granted and DHSS appealed.

                the state hearing examiner of the federal decision and stated the matter would be moot and DHSS could "close [its] file."   A decision by DHSS dated May 15, 1987, ordered "that the instructions of the Circuit Court for Juneau County be considered complied with and [its] file on the matter closed."   This decision was also labeled a "final administrative decision of the [DHSS]."
                

The court of appeals reversed. Sheely, 145 Wis.2d at 335, 426 N.W.2d 367. It "conclude[d] that the DHSS was not a party within the meaning of sec. 814.245(3), Stats., and that sec. 814.245(3) does not allow costs and fees to be granted against a state agency acting in its adjudicative capacity." Id. Judge Sundby dissented. He concluded fees and costs could be awarded under sec. 814.245(3), Stats., if a state agency "appears in a proceeding for judicial review under sec. 227.485(6), Stats." and if the other conditions of sec. 814.245, were met. Id. 145 Wis.2d at 340, 426 N.W.2d 367 (Sundby, J., dissenting). We granted Sheely's petition for review.

At oral argument, a newly assigned attorney representing DHSS for the first time questioned whether the circuit court had jurisdiction to award costs. Counsel for Sheely was unaware of this argument until that moment. This court requested supplemental briefs on the issue and the parties supplied such briefs.

This is the first time this court has reviewed Wisconsin's Equal Access to Justice Act, secs. 814.245 and 227.485, Stats. The court of appeals has, however, reviewed it in Kitsemble v. DHSS, 143 Wis.2d 863, 422 N.W.2d 896 (Ct.App.1988) and Behnke v. DHSS, 146 Wis.2d at 178, 430 N.W.2d 600. Our interpretation of these statutes is to be "guided by federal case law ... interpreting substantially similar provisions under the federal equal access to justice act, 5 USC 504." Sections 814.245(1) and 227.485(1).

A construction of a statute or the application of statute to a particular set of facts is a question of law which this court reviews without deference to the lower courts' determination. Minuteman, Inc. v. Alexander, 147 Wis.2d 842, 853, 434 N.W.2d 773 (1989)....

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