Zeigler v. Kirschner

• Decision Date: 05 October 1989
• Docket Number: CA-CV,No. 1,1
• Citation: 781 P.2d 54,162 Ariz. 77
• Parties: John L. ZEIGLER and Elaine Jenkins, as the next friends of Lois Zeigler, and Gloria Vitale, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. Leonard KIRSCHNER, Director of the Arizona Health Care Cost Containment System, in his official capacity, Defendant-Appellee. 88-231.
• Court: Arizona Court of Appeals

Page 54

781 P.2d 54

162 Ariz. 77

John L. ZEIGLER and Elaine Jenkins, as the next friends of Lois Zeigler, and Gloria Vitale, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. Leonard KIRSCHNER, Director of the Arizona Health Care Cost Containment System, in his official capacity, Defendant-Appellee.

No. 1 CA-CV 88-231.

Court of Appeals of Arizona Division 1, Department B.

Oct. 5, 1989.

[162 Ariz. 78] Southern Arizona Legal Aid, Inc. by William E. Morris and Pamela A. Liberty, Tucson, for plaintiffs-appellants.

Winston & Strawn by Logan T. Johnston, Karen Gianas Calderon and Cavender Crosby Kimble, Phoenix, for defendant-appellee.

OPINION

HAIRE, Judge, Retired.

Plaintiffs Zeigler, Jenkins and Vitale filed this action, on behalf of themselves and all others similarly situated, against Leonard Kirschner, director of the Arizona Health Care Cost Containment System (AHCCCS) in his official capacity. Their complaint sought certain declaratory and injunctive relief and restitution pursuant to both 42 U.S.C. § 1983 ¹ and state law. The director moved to dismiss the complaint pursuant to Rules 12(b)(1) and (6), Arizona Rules of Civil Procedure, for lack of subject-matter jurisdiction and failure to state a claim upon which relief may be granted. The trial court granted the director's motion and later entered formal judgment dismissing the complaint for "lack of subject-matter jurisdiction and failure to state a claim." Plaintiffs timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(B).

The following issues have been raised on appeal:

(1) whether the director was protected against plaintiffs' claims under 42 U.S.C. § 1983 by a federal qualified executive immunity;

(2) whether the director was protected against plaintiffs' § 1983 claims by either absolute or qualified immunity under A.R.S. § 12-820 et seq.;

(3) whether the named plaintiffs' failure to exhaust their state administrative remedies precluded assertion of plaintiffs' § 1983 claims;

(4) whether the director was protected against plaintiffs' state-law claims for injunctive and declaratory relief by A.R.S. § 12-820 et seq. and A.R.S. § 12-1802; and

(5) whether the named plaintiffs' failure to exhaust their state administrative remedies precluded assertion of plaintiffs' state-law claims for injunctive and declaratory relief.

PLAINTIFFS' CLAIMS

Plaintiffs' 54-page complaint alleged five separate claims for relief in 251 separately numbered paragraphs. Summarized broadly, the case concerns the requirements and standards AHCCCS has allegedly applied to the counties' evaluation and acceptance of documentation and other proofs of eligibility demanded of applicants for long-term care and for benefits under the state's Medically Indigent/Medically Needy (MI/MN) Program. See A.R.S. §§ 36-2901 through 36-2919 and §§ 36-2931 through 36-2958. The complaint alleged that over the two years preceding the filing of the complaint, the AHCCCS administration conceived and implemented a policy of imposing increasingly elaborate, detailed and stringent requirements for verifying and documenting eligibility for the long-term care and MI/MN Programs. As a result, the applicable regulations and state manual provisions allegedly require applicants to provide redundant, narrowly-limited, and sometimes unobtainable documentation of their eligibility, and in addition, information immaterial thereto.

Some of the more pertinent specific allegations were:

"131. The AHCCCS administration has promulgated formal regulations on documentation/verification of eligibility information at A.C.R.R. [AAC] R9-3-301 et seq.

"132. In addition, AHCCCS staff have developed and required county eligibility workers to use a manual, dealing, in exhaustive detail, with eligibility determinations, when deciding MI/MN and long-term care applications.

"133. Numerous provisions of the AHCCCS Eligibility Manual address documentation/verification of eligibility information in a wide variety of specific circumstances.

"134. In a number of instances, the Manual effectively requires more extensive documentation of eligibility information than the formal AHCCCS regulations contemplate.

"135. Furthermore, the manual severely and rigidly limits the particular types of documentation that will serve as acceptable proof of the facts applicants report during eligibility interviews.

"136. Those Manual provisions remain in effect following amendments to regulations that listed acceptable documentation in less restrictive terms than corresponding Manual sections.

"137. The amendments deleted all enumerations of permissible documentation, thus allowing AHCCCS administrators to impose more onerous requirements in the Manual, without public scrutiny or opposition.

"138. During the last eighteen months, the AHCCCS administration has further amended the regulations themselves to require both documentation and compliance with a verification procedure that a great many applicants simply cannot provide and could not provide, even if they received more time for the purpose than the State scheme ordinarily allows.

....

"143. Plaintiffs ... allege that AHCCCS representatives have adopted and enforced the aforesaid rules in a deliberate effort to use arbitrary and irrational documentation/verification requirements as a primary technique for denying MI/MN eligibility to the largest possible number of applicants, with the same consequences for those seeking long-term care."

The complaint also alleged that in the latter part of 1985 and early 1986 the AHCCCS administration stationed members of its quality assurance staff at the Maricopa County and Pima County eligibility offices. These staff members were allegedly instructed or authorized to review every situation in which county eligibility employees were prepared to rule on MI/MN applications, and the staff members allegedly vetoed favorable determinations they believed were not sufficiently documented or verified, without regard to the actual eligibility of the applicant. Until the end of this "monitoring" exercise, AHCCCS quality assurance staff members allegedly refused to permit certification of many applicants that county eligibility staff members considered eligible. In a majority of cases, quality assurance staff allegedly demanded additional evidence of eligibility that was redundant, otherwise superfluous or calculated to require production of documents necessarily unavailable to applicants.

Toward the end of the quality assurance monitoring, AHCCCS quality assurance staff allegedly ceased demanding additional documentation or verification before permitting county eligibility certifications, and instead informed county personnel that AHCCCS would treat any certifications with deficient documentation or verification as "sanctionable errors," for which the county would be required to reimburse AHCCCS for the full cost of any medical care provided. See A.R.S. § 36-2905.01. These monitoring activities allegedly caused MI/MN certifications in Pima County and Maricopa County to decline by 50 percent from previous monthly totals.

The complaint alleged in addition that during the same period of time AHCCCS quality assurance staff members conducted random audits of MI/MN eligibility certifications in all counties. Quality assurance staff members allegedly determined that each county's sanctionable errors primarily consisted of inadequate, incomplete or otherwise unacceptable documentation or verification of eligibility information. AHCCCS quality assurance staff also allegedly concluded that only a small percentage of each county's sanctionable errors consisted of certifying persons who actually did not qualify for benefits under the statutory residency, income and resource tests.

Plaintiffs filed this action on behalf of themselves and the following described class:

"All persons

"(a) who sought classification as medically-indigent or medically-needy individuals, entitled to care, treatment or any other service furnished through AHCCCS, within the last twenty-four months prior to commencement of this action; or who will hereafter apply for any such classification;

"(b) who applied for long-term health care furnished by the counties of this State, subject to the provisions of A.R.S. § 36-2903 L, within the aforesaid period of time or who will hereafter apply for such care and

"(c) who have been or will be denied eligibility based on their failure to provide prescribed documentation/verification of their income, their resources or both."

It is undisputed that none of the named plaintiffs exhausted their administrative remedies under A.R.S. § 36-2903.01(B)(4) and ACA R9-22-801.

The complaints' first claim for relief alleged in substance that plaintiffs and the proposed class had a property interest in AHCCCS and long-term care benefits; that the AHCCCS amended regulations and manual provisions imposed arbitrary, irrational demands and requirements for documentation and verification of eligibility; that AHCCCS officials enforced those demands and requirements for the purpose of minimizing the number of persons who obtain AHCCCS MI/MN and long-term care coverage; and that the director's maintenance of such policies and practices violated plaintiffs' due process rights under the Fourteenth Amendment to the United States Constitution.

The second claim for relief alleged in substance that the monitoring of county eligibility determinations by AHCCCS quality assurance staff members based on arbitrary, irrational and invidious documentation and verification requirements resulted in disapproval of many MI/MN applicants who actually met all the eligibility requirements of substantive law, and this violated plaintiffs' right to due process under the Fourteenth Amendment. The third claim for relief alleged in substance that the director's quality assurance staff's audits of county MI/MN eligibility certifications,...