Surf and Sand, Inc. v. Gardebring, C3-90-236

• Decision Date: 17 July 1990
• Docket Number: No. C3-90-236,C3-90-236
• Parties: SURF AND SAND, INC., Appellant, v. Sandra S. GARDEBRING, Commissioner, Minnesota Dept. of Human Services, Respondent.
• Court: Minnesota Court of Appeals

Page 782

457 N.W.2d 782

30 Soc.Sec.Rep.Ser. 545

SURF AND SAND, INC., Appellant, v. Sandra S. GARDEBRING, Commissioner, Minnesota Dept. of Human Services, Respondent.

No. C3-90-236.

Court of Appeals of Minnesota.

July 17, 1990.

Review Denied Sept. 20, 1990.

Syllabus by the Court

1. The State Department of Human Services had jurisdiction to hear an action involving the alleged breach of a "provider agreement."

2. Because appellant's present allegation that the Department of Human Services breached the notice provisions of the provider agreement involved essentially the same facts and the same cause of action as appellant's prior litigation, the issue was res judicata.

3. There is no obvious error or prejudice resulting from the trial court's granting of summary judgment on appellant's federal law claim.

K. Craig Wildfang, Anthony J. Gleekel, Siegel, Brill, Greupner & Duffy, Minneapolis, for appellant.

Hubert H. Humphrey, III, State Atty. Gen., John L. Kirwin, Asst. Atty. Gen., St. Paul, for respondent.

Considered and decided by HUSPENI, P.J., and PARKER and NORTON, JJ.

OPINION

HUSPENI, Presiding Judge.

The trial court found appellant's breach of contract claims to be res judicata under this court's prior affirmance of a Department of Human Services' ruling which required appellant to "pay back" monies to the Department of Human Services. Appellant alleges that this finding was erroneous. We affirm.

FACTS

Appellant Surf and Sand, Inc. is a nursing home certified to participate in the federal Medicaid program. Medicaid is administered at the state level via Minnesota's medical assistance program, which is run by respondent Department of Human Services (DHS). In December of 1980 and of 1981, the parties entered "provider agreements" drafted by DHS wherein DHS agreed to provide money to appellant for services rendered to medical assistance recipients. Under the provider agreements, DHS gave appellant money based on appellant's projected costs. Further, if the actual amount spent by appellant during the year for which the money was provided was less than appellant's projected costs, appellant would pay back the difference to DHS pursuant to "Rule 49" (then 12 MCAR 2.049; now Minn. Rules parts 9510.0010-9510.0480 (1989)). Another of the agreement provisions stated: "[DHS] agrees to notify [appellant] of any changes in * * * Department of Public Welfare Rules 47 and 49."

At the time the parties entered their "provider agreements," nursing home cost changes from one year to the next were calculated under the "gross dollar" method if there was no material change in a facility's occupancy rate. If there was a significant change in the occupancy rate, the "per diem" method of calculating cost changes was used. On May 14, 1982, the Minnesota Supreme Court issued White Bear Lake Care Center v. Department of Public Welfare, 319 N.W.2d 7 (Minn.1982) which stated:

[DHS'] use of a per diem method of calculating implementation of known cost changes pursuant to [Rule 49] is improper because the method constitutes an unpromulgated rule.

Id. In November, 1982, DHS evaluated appellant's 1981 rate year under the "gross dollar" method even though appellant had incurred a substantial change in its occupancy. According to DHS' "gross dollar" calculations, appellant owed DHS $55,659; under the per diem method, appellant would have owed DHS $26,584.

Noting that White Bear was issued in 1982, appellant challenged DHS' use of the "gross dollar" method to calculate its 1981 "pay back." The commissioner adopted an administrative law judge's (ALJ) recommendation that retroactive application of the "gross dollar" method was appropriate to calculate appellant's 1981 costs. This court affirmed that result. See Surf and Sand Nursing Home v. Department of Human Services, 422 N.W.2d 513 (Minn.App.1988), pet. for rev. denied (Minn. June 23, 1988).

In November, 1988, appellant served DHS with a summons and complaint recounting DHS' obligation to inform appellant of any change in "Rule 49." The complaint alleged:

13. DHS did not notify [appellant] that the rules had changed, and that DHS was going to apply the gross dollar method to [appellant] even though there had been a material change in [appellant's] occupancy.

14. DHS, by failing to give [appellant] notice, breached its contract with [appellant] to [appellant's] great detriment.

* * * * * *

16. DHS' failure to notify [appellant] of the rule change was a violation of DHS obligations to [appellant] and [appellant's] rights as defined under the state Medicaid Plan as required by 42 USC 1396a.

DHS subsequently moved for summary judgment on appellant's claims alleging that appellant's contract claims were res judicata under this court's prior ruling. The trial court granted DHS' motion. The trial court also granted summary judgment on appellant's federal claim noting that the relevant federal regulation did not require that appellant be notified of rule changes required by court order. Appellant now maintains that the trial court's summary judgment was error as a matter of law.

ISSUES

1. Are appellant's present contract claims res judicata?

2. Did the trial court err in granting DHS summary judgment on appellant's federal claim?

ANALYSIS

Under the rules, summary judgment

shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law.

Minn.R.Civ.P. 56.03. Additionally,

On appeal from a summary judgment it is the function of [an appellate court] only to determine (1) whether there are any genuine issues of material fact and (2) whether the trial court erred in its application of the law.

Betlach v. Wayzata Condominium, 281 N.W.2d 328, 330 (Minn.1979). Finally, "the nonmoving party has the benefit of that view of the evidence which is most favorable to him." Sauter v. Sauter, 244 Minn. 482, 484, 70 N.W.2d 351, 353 (1955), quoted in Nord v. Herreid, 305 N.W.2d 337, 339 (Minn.1981).

I.

A. DHS' JURISDICTION

By statute

A provider may appeal [to the commissioner] from a determination of a payment rate established pursuant to [Minn.Stat. Sec. 256B] and reimbursement rules of the commissioner if the appeal, if successful, would result in a change to the provider's payment rate.

Minn.Stat. Sec. 256B.50, subd. 1 (1988). Appellant argues that, since its claim based on the provider agreement's notice provisions does not relate to the payment rate,

[appellant] could not have brought the claims which arise out of the notice provisions [of the "provider agreements"] because [DHS] did not have jurisdiction to decide those claims.

We disagree. ¹

Generally,

An administrative agency's jurisdiction * * * is limited and is dependent entirely upon the statute under which it operates.

"Jurisdiction of an administrative agency consists of the powers granted it by statute. Lack of statutory power betokens lack of jurisdiction. It is therefore well settled that a determination of an administrative agency is void and subject to collateral attack where it is made either without statutory power or in excess thereof."

McKee v. County of Ramsey, 310 Minn. 192, 195, 245 N.W.2d 460, 462 (1976) (quoting State ex rel. Spurck v. Civil Service Bd., 226 Minn. 253, 259, 32 N.W.2d 583, 586 (1948)). Additionally,

Neither agencies nor courts may under the guise of statutory interpretation enlarge the agency's powers beyond that which was contemplated by the legislative body.

Waller v. Powers Dept. Store, 343 N.W.2d 655, 657 (Minn.1984).

In setting the parameters of allowable delegation, the supreme court has stated:

" * * * [T]he vesting by the legislature in the industrial commission of quasi-judicial powers--inclusive of the power to determine facts and apply the law thereto * * * is not in violation of state constitutional provisions for the division of the powers of government or for the vesting of the judicial power in the courts, as long as the commission's awards and determinations are not only subject to review by certiorari, but lack judicial finality in not being enforceable by execution or other process in the absence of a binding judgment entered thereon by a duly established court."

We believe that the [above] criteria * * * mark the outside limit of allowable quasi-judicial power in Minnesota.

Wulff v. Tax Court of Appeals, 288 N.W.2d 221, 223 (Minn.1979) (quoting Breimhorst v. Beckman, 227 Minn. 409, 433, 35 N.W.2d 719, 734 (1949)). We can say neither that allowing DHS to evaluate provider agreement disputes would be beyond the limits of allowable delegation nor that it would inappropriately expand DHS' jurisdiction.

The legislature has delegated authority regarding nursing home payments and payment disputes to DHS. See Minn.Stat. Secs. 256B.431 (1988; Supp.1989); 256B.50. Additionally, in administrating the state's medical assistance program, DHS is to

[p]rescribe the form of, print, and supply to the county agencies, blanks for applications, reports, affidavits and such other forms as it may deem necessary or advisable.

Minn.Stat. Sec. 256B.04, subd. 3 (1988) (emphasis added). The general delegation of authority for the complex nursing home payment system, combined with the specific delegation of authority for DHS to draft the documentation required to implement that system, suggests that the legislature believed that DHS' medical assistance expertise would aid in the drafting of the required documents. Because DHS' expertise facilitates drafting of the documents, DHS would also have an advantage in interpreting those documents should aspects of them be disputed. To conclude that DHS does not have jurisdiction to construe its own documents would deprive the dispute resolution process of the expertise the legislature thought necessary to administer the terms of the medical assistance...