Unity Healthcare, Inc. v. Cnty. of Hennepin
| Decision Date | 02 December 2014 |
| Docket Number | Case No. 14-CV-114 (JNE/JJK) |
| Parties | Unity Healthcare, Inc., et al., Plaintiffs, v. County of Hennepin, et al., Defendants. |
| Court | U.S. District Court — District of Minnesota |
This case was brought by two corporations, and the corporations' African-American owner, that provide housing and medical services for elderly and disabled adults. The named Defendants provide case management services to elderly and disabled adults who receive federal and state waiver benefits for services administered in community settings. Plaintiffs allege in their Second Amended Complaint that Defendants discriminated against them in violation of several federal anti-discrimination laws and deprived them of their constitutional substantive and procedural due process rights. Plaintiffs also bring state anti-discrimination, defamation, and tortious interference claims.
A joint motion to dismiss the Second Amended Complaint pursuant to Rule 12(b)(6) was filed by Defendants Meridian Services, Inc. ("Meridian"), Lucy Stewart, People Incorporated ("People"), Angela Reid, Carrie Davies, Axis Healthcare, LLC ("Axis"), and Mary Blegen.1 Meridian and Stewart have also filed a separate motion that seeks dismissal and reasonable costsand attorney fees, pursuant to Rule 12(b)(1), Rule 12(b)(6), and Minn. Stat. §§ 554.01 et seq and 626.557.2
For the reasons set forth below, the joint motion to dismiss is granted in part and denied in part. The portion of Meridian and Stewart's separate motion seeking dismissal pursuant to Minn. Stat. § 626.557 is denied, and the portion seeking dismissal and costs and attorney fees pursuant to Minn. Stat. § 554.01 et seq is referred to Magistrate Judge Jeffrey J. Keyes for a report and recommendation.
Minnesota participates in a federal-reimbursement program created by Medicaid that assists certain qualified individuals in obtaining community- and home-based healthcare. The program, known generally as the "waiver program," was designed to help disabled and elderly individuals seek treatment options that are integrated with their community and avoid institutionalized care. The Minnesota Department of Health ("MDH") licenses treatment providers in Minnesota and monitors their compliance with regulations that govern the waiver program.
Plaintiffs Unity Healthcare, Inc. ("Unity") and Dr. Thomas H. Johnson Housing With Services, Inc. ("HWS") are both Minnesota corporations owned by Plaintiff Beth Balenger, who is an African-American woman. Unity provides healthcare services to its clients, some of whom participate in the federal waiver program. HWS provides housing to these clients. Unity operates under home care licenses issued by MDH. In addition, Unity and HWS had a contract with Defendant Hennepin County known as the "Provider Agreement," which governed the amounts Unity and HWS could charge their clients and the standards they had to follow. Underthe terms of the Provider Agreement, Hennepin County could cancel the agreement and withhold payment to Unity and HWS, demand that Unity and HWS cease providing services to eligible waiver recipients, discontinue referrals of recipients to Unity and HWS, and remove recipients from Unity and HWS.
Defendants Meridian, People, and Axis provide case management services to individuals participating in the waiver program. During the relevant times, Defendant Lucy Stewart was a case manager at Meridian, Defendants Carrie Davies and Angela Reid were case managers at People, and Defendant Mary Blegen was a case manager at Axis. Through a contract with Hennepin County, these Defendants provided case management services to some of Unity's waiver clients. They did not contract directly with Unity, HWS, or Balenger.
In the spring of 2011, MDH conducted surveys of Unity's operations. In August 2011, MDH formally notified Unity of alleged violations and issued correction orders. On October 11, 2011, MDH issued Unity a publicly available Notice of Noncompliance with Correction Orders and a Notice of Conditional License. The Notice of Noncompliance described multiple instances when Unity failed to provide adequate health care and services. Under the conditional license, Unity was barred from admitting new clients and Unity had to disclose to each of its existing clients that MDH had taken this action against Unity. MDH gave Unity until February 12, 2012 to comply with the correction orders. MDH lifted the conditional license in the summer of 2013.
In December 2011, after MDH placed Unity on a conditional license, Hennepin County announced that it would not renew its Provider Agreement with Unity and HWS. In January 2012, Hennepin County reached an agreement with Unity to extend its contract for three months, subject to weekly monitoring by the County. The contract was eventually extended through 2013.
Plaintiffs allege that, after MDH placed Unity on a conditional license, a Hennepin County case management supervisor instructed case managers, including the moving Defendants, to relocate Unity's clients to other providers. Plaintiffs allege that the moving Defendants violated several federal and state laws in their attempts to relocate the clients.
When ruling on a motion to dismiss, a court must accept the facts alleged in the complaint as true and grant all reasonable inferences in favor of the plaintiff. Crooks v. Lynch, 557 F.3d 846, 848 (8th Cir. 2009). Although a complaint need not contain detailed factual allegations, "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
Counts I to VI of the complaint are federal anti-discrimination and federal due process claims. Counts VII to XI are state anti-discrimination, defamation, and tortious interference claims. This Court will first discuss the federal law claims.
Plaintiffs allege a violation of 42 U.S.C. § 1981, which provides all persons "the same right . . . to make and enforce contracts . . . and to the full and equal benefit of all laws . . . as isenjoyed by white citizens." Id. at 1981(a). Plaintiffs seek to enforce section 1981's "full and equal benefit" clause against the moving Defendants. Second Amended Complaint ¶ 62. A claim under the "full and equal benefit" clause can only be asserted against state actors, Youngblood v. Hy-Vee Food Stores Inc., 266 F.3d 851, 855 (8th Cir. 2001), cert. denied, 535 U.S. 1017 (2002), and a section 1981 claim against a state actor must be asserted through section 1983. Jett v. Dallas Indep. Sch. Dist., 491 U.S. 701, 735 (1989); Jones v. McNeese, 675 F.3d 1158, 1160 n.1 (8th Cir. 2012) (). Therefore, if the moving Defendants are not state actors, the section 1981 claim based on the "full and equal benefit" clause should be dismissed. If they are state actors, then the claim of race discrimination should be made under section 1983. Either way, the section 1981 claim must be dismissed. The allegations of the denial of equal rights under the law will be construed to be part of Plaintiffs' section 1983 claim for race discrimination.
Plaintiffs allege that Defendants' actions are impermissible racial discrimination in violation of 42 U.S.C. § 1983, which prohibits any person acting under color of law from depriving others of their constitutional rights. Id. To state a section 1983 race discrimination claim, a plaintiff may allege direct evidence of racial discrimination by state actors. See U.S. v. Frazier, 408 F.3d 1102, 1108 (8th Cir. 2005), cert. denied, 546 U.S. 1151 (2006). A plaintiff may also allege that state actors treated them differently than similarly situated individuals. See Klinger v. Dep't of Corr., 31 F.3d 727, 731 (8th Cir. 1994), cert. denied, 513 U.S. 1185 (1995). Under a similarly situated analysis, a plaintiff's comparators must be "similarly situated in all relevant respects." Woods v. Ark. Dep't. of Correction, 329 Fed. Appx. 688, 692 (8th Cir. 2009).
As a threshold matter, it must be determined whether Unity and HWS have standing to bring a section 1983 claim for racial discrimination, even though they are corporations and not individuals with a racial identity. Because Plaintiff Balenger does not bring the section 1983 claim, Unity and HWS must have standing for the claim to survive. Second Amended Complaint at p. 26 (). The Eighth Circuit has not decided whether a corporation can have a racial identity for the purposes of alleging racial discrimination. See Oti Kaga, Inc. v. S.D. Hous. Dev. Auth., 342 F.3d 871, 880 (8th Cir. 2003).3 However, several circuits that have considered the issue have held that corporations can have standing to assert a racial discrimination claim. See Carnell Constr. Corp. v. Danville Redevelopment & Hous. Auth., 745 F.3d 703, 714-15 (4th Cir. 2014), and cases cited therein. These circuit courts have taken two different approaches to establishing standing. The Fourth Circuit and Ninth Circuit have held that "a minority-owned corporation may establish an 'imputed racial identity' for purposes of demonstrating standing to bring a claim of race discrimination under federal law." Carnell Constr. Corp., 745 F.3d at 715 (citing Thinknet Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1059 (9th Cir....
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