Wicomico Nursing Home v. Padilla

• Decision Date: 06 December 2018
• Docket Number: No. 17-2033,No. 17-1972,17-1972
• Citation: 910 F.3d 739
• Parties: WICOMICO NURSING HOME, as Assignee and/or Authorized Representative of Margaret Smith, Peggy Outten, Ruby Bounds, Shirley Hackett, Carol Synder, and William Soil; Oakview SNF, LLC, d/b/a Oakview Rehabilitation and Nursing Center, as Assignee and/or Authorized Representative of Cheryl Hart; Anchorage Nursing, LLC, d/b/a Anchorage Nursing and Rehabilitation Center, as Assignee and/or Authorized Representative of Benjamin Winder and Frances Johnson; Brooke Grove Foundation, Inc., as Assignee and/or Authorized Representative of Eloise Roberson and Mary Imhoff, Plaintiffs – Appellants, v. Lourdes R. PADILLA; Dennis R. Schrader, Defendants – Appellees. Wicomico Nursing Home, as Assignee and/or Authorized Representative of Margaret Smith, Peggy Outten, Ruby Bounds, Shirley Hackett, Carol Synder, and William Soil; Oakview SNF, LLC, d/b/a Oakview Rehabilitation and Nursing Center, as Assignee and/or Authorized Representative of Cheryl Hart; Anchorage Nursing, LLC, d/b/a Anchorage Nursing and Rehabilitation Center, as Assignee and/or Authorized Representative of Benjamin Winder and Frances Johnson; Brooke Grove Foundation, Inc., as Assignee and/or Authorized Representative of Eloise Roberson and Mary Imhoff, Plaintiffs – Appellants, v. Lourdes R. Padilla; Dennis R. Schrader, Defendants – Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

910 F.3d 739

WICOMICO NURSING HOME, as Assignee and/or Authorized Representative of Margaret Smith, Peggy Outten, Ruby Bounds, Shirley Hackett, Carol Synder, and William Soil; Oakview SNF, LLC, d/b/a Oakview Rehabilitation and Nursing Center, as Assignee and/or Authorized Representative of Cheryl Hart; Anchorage Nursing, LLC, d/b/a Anchorage Nursing and Rehabilitation Center, as Assignee and/or Authorized Representative of Benjamin Winder and Frances Johnson; Brooke Grove Foundation, Inc., as Assignee and/or Authorized Representative of Eloise Roberson and Mary Imhoff, Plaintiffs – Appellants,

v.Lourdes R. PADILLA; Dennis R. Schrader, Defendants – Appellees.

Wicomico Nursing Home, as Assignee and/or Authorized Representative of Margaret Smith, Peggy Outten, Ruby Bounds, Shirley Hackett, Carol Synder, and William Soil; Oakview SNF, LLC, d/b/a Oakview Rehabilitation and Nursing Center, as Assignee and/or Authorized Representative of Cheryl Hart; Anchorage Nursing, LLC, d/b/a Anchorage Nursing and Rehabilitation Center, as Assignee and/or Authorized Representative of Benjamin Winder and Frances Johnson; Brooke Grove Foundation, Inc., as Assignee and/or Authorized Representative of Eloise Roberson and Mary Imhoff, Plaintiffs – Appellants,

v.Lourdes R. Padilla; Dennis R. Schrader, Defendants – Appellees.

No. 17-1972

No. 17-2033

United States Court of Appeals, Fourth Circuit.

Argued: September 27, 2018

Decided: December 6, 2018

ARGUED: Kimberly Mahlow Watt, SB2, INC., Harrisburg, Pennsylvania, for Appellants. David Stephen Lapp, Michael Lee Bouyea, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland, for Appellees. ON BRIEF: Kathleen C. Morris, Katie Z. Van Lake, SB2, INC., Harrisburg, Pennsylvania, for Appellants. Brian E. Frosh, Attorney General, Hilma J. Munson, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland, for Appellees.

Before AGEE and FLOYD, Circuit Judges, and John A. GIBNEY, Jr., United States District Judge for the Eastern District of Virginia, sitting by designation.

Affirmed by published opinion. Judge Agee wrote the opinion, in which Judge Floyd and Judge Gibney joined.

AGEE, Circuit Judge:

Wicomico Nursing Home, Oakview SNF, LLC, Anchorage Nursing, LLC, and Brooke Grove Foundation, Inc. (the "Nursing Homes"), on behalf of eleven residents, sued Lourdes Padilla, the Secretary of the Maryland Department of Human Services, and Dennis Schrader, the Secretary of the Maryland Department of Health (the "Secretaries"). The Nursing Homes allege that the Secretaries wrongfully denied the residents Medicaid benefits in violation of the Fourteenth Amendment and several federal statutes. The district court dismissed the Nursing Homes’ Complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief could be granted. The Nursing Homes moved to alter or amend the judgment, which the district court denied. The Nursing Homes now appeal both orders. For the reasons set forth below, we affirm the district court’s determinations.

I.

"Medicaid is a cooperative program through which the federal government offers financial assistance to states, allowing them to provide medical services to individuals with limited incomes." Pashby v. Delia , 709 F.3d 307, 313–34 (4th Cir. 2013). Maryland participates in Medicaid, and, as a participant in Medicaid, the state "must comply with federally mandated standards." Id.

The Nursing Homes alleged the Secretaries’ handling of the Medicaid program did not comply with state and federal law. For example, the Nursing Homes alleged in their Complaint that the Secretaries did not seek to obtain Medicaid applicants’ financial information electronically, as required by federal regulation, but placed the burden of showing need on applicants. They also alleged the Secretaries did not comply with either federal or state laws requiring them to inform an applicant that his application had been denied. Instead, the Complaint alleges, the Secretaries denied Medicaid applications but told applicants that the applications were "being reconsidered and/or reactivated." J.A. 19 ¶ 43 (internal quotation marks omitted). The Nursing Homes go on to allege that the reactivation procedure was confusing and applied in an arbitrary manner.

Based on these alleged deficiencies, the Nursing Homes, "as assignee and/or authorized representative of" one or more of eleven of their current or former residents (collectively, the "Residents"),¹ initiated a lawsuit against the Secretaries in the District of Maryland. J.A. 9. According to the Complaint, the Residents had been denied Medicaid coverage in the past, had received services from one of the Nursing Homes after being denied Medicaid coverage, and carried "a substantial outstanding balance" with their respective Nursing Homes. J.A. 11–14 ¶¶ 5–15.

Alleging various causes of action under the Fourteenth Amendment, the Medicaid Act, Title II of the Americans with Disabilities Act (the "ADA"), and Section 504 of the Rehabilitation Act, the Nursing Homes asked for declaratory relief and an injunction "requiring the [Secretaries] to automatically approve the [Residents’] Medicaid benefits" J.A. 34 ¶ 131, to apply retroactively to the day each Resident became eligible for Medicaid benefits. The Nursing Homes also sought compensatory and emotional distress damages.

The district court dismissed the Complaint for lack of subject matter jurisdiction on two grounds. First, it concluded the Eleventh Amendment barred the Nursing Homes’ Fourteenth Amendment and Medicaid Act claims. The court noted that the Eleventh Amendment allows only prospective relief, but the relief the Nursing Homes sought was retrospective in nature. Separately, the district court found that the Nursing Homes’ claims for prospective relief were, at best, moot because the Residents were either receiving Medicaid benefits or deceased so no prospective relief could be given. Second, the court held that the Nursing Homes failed to state a plausible due process claim because the Residents had an opportunity to challenge the Secretaries’ actions through the state administrative and judicial processes. Based on these holdings, the district court dismissed the case by order of August 7, 2017, but without specifically addressing the ADA or Rehabilitation Act claims. The Nursing Homes timely appealed the court’s order.

The Nursing Homes also moved to alter or amend the district court’s dismissal order under Rule 59(e) of the Federal Rules of Civil Procedure, contending that the court had overlooked their ADA and Rehabilitation Act claims which were not foreclosed by the Eleventh Amendment. In considering that motion, the district court recognized the ADA and Rehabilitation Act claims were not covered by Eleventh Amendment immunity and that it was required to address them. The district court did so and denied the Nursing Homes’ motion on two separate grounds. First, the district court held that the Nursing Homes had no standing to raise claims under the ADA or the Rehabilitation Act on behalf of the Residents because the Nursing Homes were not the real party in interest and "[o]n this basis, [ ] dismissal [would] be warranted." J.A. 83 n.3. Next, the district court held that the Complaint did not "contain sufficient factual allegations to survive a motion to dismiss under Rule 12(b)(6) [of the Federal Rules of Civil Procedure]." J.A. 81. The court explained that the Nursing Homes did not allege sufficient facts to show the required elements of ADA or Rehabilitation Act claims that the Residents were disabled or were discriminated against because of their disabilities.

The Nursing Homes timely appealed the district court’s order denying their Rule 59(e) motion, and the two appeals were consolidated. This Court has jurisdiction over the consolidated appeal under 28 U.S.C. § 1291.

II.

A.

The district court dismissed the Nursing Homes’ Fourteenth Amendment and Medicaid Act claims for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure because the relief the Nursing Homes sought was barred by the Eleventh Amendment, and the claims not barred by the Eleventh Amendment were moot. We review de novo a district court’s application of the Eleventh Amendment and dismissal based on mootness. See Porter v. Clarke , 852 F.3d 358, 363 (4th Cir. 2017) ; Cash v. Granville Cty. Bd. of Educ. , 242 F.3d 219, 222 (4th Cir. 2001).

B.

The Eleventh Amendment prohibits "any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. It "precludes citizens from bringing suits in federal court against their own states." Litman v. George Mason Univ. , 186 F.3d 544, 549 (4th Cir. 1999). This immunity bars "actions such as that here against state officials that are in fact actions against the state as the real party in interest." Republic of Paraguay v. Allen , 134 F.3d 622, 627 (4th Cir. 1998).

Notwithstanding this broad coverage, the Supreme Court carved out a limited exception to Eleventh Amendment immunity in Ex Parte Young , 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908).² The Ex Parte Young exception to the Eleventh Amendment "allows private citizens, in proper cases, to petition a federal court to enjoin State officials in their official capacities from engaging in future conduct that would violate the Constitution or a federal statute." Antrican v. Odom , 290 F.3d 178, 184 (4th Cir. 2002). Under this exception, a state official who acts in violation of federal law is "stripped of his official or representative character and is subjected in his person to the consequences of his individual conduct." Ex Parte Young , 209 U.S. at 160, 28 S.Ct. 441.

By subjecting a state official to a legal action, the Ex Parte Young exception seeks to "conform [his] future conduct to the requirements of federal law, even though...