DORAN v. MISSOURI DEPARTMENT OF SOCIAL SERVICES (W.D.Mo. 1-8-2008)

ROBIN DORAN, et al., Plaintiffs, v. MISSOURI DEPARTMENT OF SOCIAL SERVICES,

et al., Defendants.

Case No. 07-4158-CV-C-NKL.

United States District Court, W.D. Missouri, Central Division.

January 8, 2008

                                  ORDER

  NANETTE LAUGHREY, District Judge

  Plaintiff Robin Doran, as putative class representative, sued
Defendants Missouri Department of Social Services and its
director, Deborah E. Scott, for placing a Medicaid lien on her
state workers compensation settlement, in violation of
42 U.S.C. § 1983 and § 1396p(a)(1). Defendants move for a partial judgment
on the pleading [Doc. # 5] under Fed.R.Civ.P. 12(c), based on
qualified immunity to the section 1983 claim. They also move for
a judgment on the pleadings on Plaintiffs' state constitutional
claim, arguing the Missouri Constitution does not provide for
recovery of damages. Plaintiffs respond that the law was clearly
established at the time of Defendants' actions, and that the
Missouri Constitution allows recovery of damages for takings
clause violations. The Court now grants Defendants' motion, in
part, and denies, in part.

I. Standard of Review

  In reviewing a motion for a judgment on the pleadings, this
Court accepts as true all facts pleaded by the nonmoving party
and grants all reasonable inferences from the pleadings in favor
of the nonmovant. See Syverson v. Firepond, Inc., 383 F.3d 745,
749 (8th Cir. 2004) (citing United
Page 2
States v. Any & All Radio Station Transmission Equip.,
207 F.3d 458, 462 (8th Cir. 2000)). "Judgment on the pleadings is
appropriate where no material issue of fact remains to be
resolved and the movant is entitled to judgment as a matter of
law." Id. (citing Faibisch v. Univ. of Minn., 304 F.3d 797, 803
(8th Cir. 2002)). The standard of review for a Rule 12(c) motion
is essentially the same as for Rule 12(b)(6). See Martin v.
Crawford, No. 07-4002, 2007 WL 4289730, at *1 (W.D. Mo. Dec. 3,
2007) (citing Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th
Cir. 1990)). "[A] complaint must plead `enough facts to state a
claim to relief that is plausible on its face.'" Metro. St. Louis
Equal Hous. Opportunity Council v. Tillman, No. 07-4114,
2007 WL 3046585, at *1 (W.D. Mo. Oct. 16, 2007) (quoting Bell Atl. Corp.
v. Twombly, 127 S. Ct. 1955, 1974 (2007)). "This does not require
heightened fact pleading. . . . `[O]nce a claim has been stated
adequately, it may be supported by showing any set of facts
consistent with the allegations in the complaint.'" Id.

II. Discussion

  A. Section 1983 and Qualified Immunity

  Doran, as part of a putative class action, alleges the Missouri
Department of Social Services (the "Department") improperly
asserted liens on the proceeds of third-party workers
compensation settlements obtained by Medicaid recipients. It is
undisputed that federal law requires States "to ascertain the
legal liability of third parties . . . to pay for care and
services available under the plan" and "seek reimbursement for
such [medical] assistance to the extent of such legal liability."
42 U.S.C. §§ 1396a(a)(25)(A), (B). As part of these requirements,
States must obtain an assignment of rights to payment for medical
care from Medicaid recipients as a condition of eligibility. See
42 U.S.C. § 1396k. However, this assignment statute "requires
only that the State recover payments from third parties to the
extent of their legal liability to compensate the beneficiary for
medical care
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and services incurred by the beneficiary." Ahlborn v. Ark. Dep't
of Human Servs., 397 F.3d 620, 625 (8th Cir. 2005), aff'd
547 U.S. 268 (2006).

  Moreover, 42 U.S.C. § 1396p(a)(1), the federal "anti-lien"
statute, prohibits "the imposition of a lien `against the
property of an individual prior to his death on account of
medical assistance paid or to be paid on his behalf under the
State plan[.]'" Id. at 623 (citing § 1396p(a)(1)). This statute
"generally prevents a State from attaching property of a
recipient to reimburse the State for benefits paid under a state
Medicaid plan." Id. Under Missouri law, "[p]ayments made to or on
behalf of a person eligible for public assistance as the result
of any compensable injury, occupational disease or disability as
defined by this chapter shall be a debt due the state. . . ."
§ 287.266, RSMo. Thus, the Missouri statute authorizes a lien to
recover these debts. See id.

  Doran contends that workers compensation awards of permanent
total or permanent partial benefits are, "[i]n the overwhelming
majority of . . . cases," not made to reimburse medical costs;
therefore, the Department's lien against these benefits violates
§ 1396p(a)(1). Defendants respond that even if this were the
case, they are still shielded by qualified immunity. "Qualified
immunity shields governmental officials from personal liability
if their actions, even if unlawful, were `nevertheless
objectively reasonable in light of the clearly established law at
the time of the events in question.'" Turpin v. County of Rock,
262 F.3d 779, 783 (8th Cir. 2001) (quoting Anderson v. Creighton,
483 U.S. 635, 638-39 (1987)). Thus, "[a] state official . . . is
protected by qualified immunity from a section 1983 claim `unless
[his] alleged conduct violated clearly established federal
constitutional or statutory rights of which a reasonable person
in [his] position ? would have known." Mo. Protection & Advocacy
Servs. v. Mo. Dep't of Mental Health, 447 F.3d 1021, 1025 (8th
Cir. 2006) (quoting Wright v. Rolette County, 417 F.3d 879, 884
(8th Cir. 2005)). A state
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official is protected by qualified immunity "so long as `their
actions could reasonably have been thought consistent with the
rights they are alleged to have violated.'" Wilson v. Lawrence
County, 260 F.3d 946, 951 (8th Cir. 2001) (quoting Anderson,
483 U.S. at 638).

  In determining whether a legal right is clearly established,
the Eighth Circuit "applies a flexible standard, requiring some,
but not precise factual correspondence with precedent, and
demanding that officials apply general, well-developed legal
principles." Whisman through Whisman v. Rinehart, 119 F.3d 1303,
1309 (8th Cir. 1997). But, the lack of any decisions from the
United States Supreme Court, the Eighth Circuit Court of Appeals,
the Western District of Missouri or the Missouri Supreme Court
does not mean the law is not clearly established. See Konop v.
Nw. Sch. Dist., 1998 DSD 27, ¶ 11, 26 F. Supp. 2d 1189, 1194. The
Eighth Circuit explains:

  While the identity of a court and its geographical
  proximity may be relevant in determining whether a
  reasonable official would be aware of the law (as might
  the dissemination of information within the pertinent
  profession and the frequency of similar litigation), we
  do not think that the defendants' per se rule
  adequately captures what the Supreme Court has meant by
  its objective test for what is clearly established.

Id. at ¶ 11, 1195 (quoting Johnson-El v. Schoemehl,
878 F.2d 1043, 1049 (8th Cir. 1989)). In the absence of any precedence, "a
court should look to all available decisional law including
decisions of state courts, other circuit and district
courts. . . ." Id. (quoting Burnham v. Ianni, 119 F.3d 668, 677
(8th Cir. 1997)). As noted by the Konop court, requiring factual
identity between the current and prior cases would result in
defendants receiving one "bite of the apple," which is contrary
to the purpose of qualified immunity. See id. at ¶ 12, 1195.
Instead, there must be "fair warning" of the constitutional
right, and general principles of law can provide that warning.
See id. (citing United States v. Lanier, 520 U.S. 259 (1997));
see also J.H.H. v. O'Hara, 878 F.2d 240, 243 (8th Cir. 1989)
(explaining that under qualified immunity analysis, courts are to
look to statutory and case precedent
Page 5
in addition to well-established principles of law, "and
demanding that officials apply general, well-developed legal
principles").

  Accepting Doran's facts as true, as the Court must, Defendants
are still protected by qualified immunity against the section
1983 claim for legal damages, at least up to and including
February 9, 2005, when the Eighth Circuit decided Ahlborn v.
Arkansas Department of Human Services. In Ahlborn, the Eighth
Circuit held, "The Arkansas statutes requiring Ahlborn to assign
her entire cause of action against the third-party tortfeasors,
and establishing a statutory lien on settlement proceeds for
matters other than medical care and services, conflict with and
frustrate this federal scheme." 397 F.3d at 628; see also Saucier
v. Katz, 533 U.S. 194, 201 (2001) (noting threshold inquiry in
qualified immunity analysis is whether plaintiff's allegation, if
true, establish a constitutional violation). Thus, it has been
established that a State may not place a lien on a plan
recipient's third-party proceeds unrelated to medical care and
services. As a result, assuming, for the purposes of this Rule
12(c) motion, that the workers compensation benefits at issue in
this case were not provided to reimburse medical services and
care, Defendants have violated 42 U.S.C. § 1396p(a)(1).

  Despite the Defendants' statutory violation, the Court believes
that the law of the Eighth Circuit was not clearly established
until the Ahlborn decision. First, in Ahlborn, the Eighth Circuit
reversed the district court's decision, which had found Arkansas
could assert a lien against the entirety of plaintiff's
settlement. See Ahlborn v. Ark. Dep't of Human Servs.,
280 F. Supp. 2d 881, 888 (E.D. Ark. 2003). The district court noted that
only one case, Martin ex rel. Hoff v. City of Rochester, 642
N.W.2d 1 (Minn. 2002), supported Ahlborn's position, while
Wallace v. Estate of Jackson, 972 P.2d 446 (Utah 1998), and
Wilson v. State, 10 P.3d 1061 (Wash. 2000), resolved the
statutory ambiguity by finding that "once a Medicaid recipient
assigns his cause of action [he] no
Page 6
longer has any interest in the property (his or her cause of
action against third parties) to the extent of the state's
expenditures." See Ahlborn, 280 F. Supp. 2d at 885-86. Moreover,
the district court, the Eighth Circuit, and the Supreme Court all
recognized that two decisions by the Departmental Appeals Board
of the Department of Health and Human Services supported
Arkansas's position that "the federal government can require
States to attempt to recover from third-party payments beyond
those made for medical care." Ahlborn, 397 F.3d at 626 (citing
Wash. State Dep't of Soc. & Health Servs., D.A.B. No. 1561,
1996 WL 157123 (HHS Feb. 7, 1996); Calif. Dep't of Health Servs.,
D.A.B. No. 1504, 1995 WL 66334 (HHS Jan. 5, 1995)); see also
Ahlborn, 547 U.S. at 289-90 (discussing HHS decisions); Ahlborn,
280 F. Supp. 2d at 887 ("The Secretary has consistently adopted
the position urged by Defendants, taking the position that States
must require, as a condition of eligibility, that recipients
assigning to the State their right to recover from third parties
and that, from any such recovery, the State must recover the full
amount of benefits paid on behalf of the recipient."). Thus, as
demonstrated conclusively by the Ahlborn line of cases, there
were divergent opinions on States' ability to recover the full
amount of Medicaid benefits.

  Given that prior to Ahlborn there was no Supreme Court,
Missouri or Eighth Circuit case that had yet decided the issue,
the Court cannot say Defendants' decision was objectively
unreasonable under the circumstances. See Mo. Protection &
Advocacy Servs., 447 F.3d at 1025. Plaintiffs, citing Ahlborn for
support, argue qualified immunity should not apply because the
plain-language of the statute makes it clear that Defendants
violated the law. Further, Plaintiffs assert that Defendants
cannot credibly rely on state supreme court decisions from
outside the Eighth Circuit, of which Defendants were not even
aware. But, Plaintiffs have brought a § 1983 claim, to which
qualified immunity is a defense to legal damages where the law is
not clearly established, even for
Page 7
statutory violations. See Brockinton v. City of Sherwood, Ark.,
503 F.3d 667, 671-72 (8th Cir. 2007). Moreover, for the purposes
of qualified immunity analysis, Defendants' actual knowledge is
irrelevant; instead, the Court considers, objectively, whether a
reasonable official in Defendants' positions would understand
that what he or she is doing violates clearly established right.
See O'Neil v. City of Iowa City, Iowa, 496 F.3d 915, 917 (8th
Cir. 2007). Thus, Defendants need only prove the law was not
clearly established, which they have done in this case. Shockency
v. Ramsey County, 493 F.3d 941, 948 (8th Cir. 2007) ("Defendants
bear the burden of proving that the law was not clearly
established."); see also Mo. Protection & Advocacy Servs.,
447 F.3d at 1025-26 (holding state officials protected by qualified
immunity where there were divergent opinions between New
Hampshire Supreme Court and Third Circuit regarding
interpretation of statute). "[W]hen one faces an unsettled legal
issue, determining a governing legal standard can be quite hairy;
it mires one in conflicting cases, each presented by reasonable
jurists interpreting the applicable rule of law." Mo. Protection
& Advocacy Servs., 447 F.3d at 1025-26. Because the law was not
so clearly established before the Eighth Circuit's decision in
Ahlborn that a reasonable person in Defendants' position at the
time would have known placing a Medicaid lien on permanent total
or partial workers' compensation benefits violated federal law,
the Court grants Defendants qualified immunity for their actions
up to and including February 9, 2005, at least as they relate to
any claim for legal damages.

  However, to the extent that Plaintiffs are simply asking for a
return of their allegedly improperly-taken money or an order
removing any improper lien against their property, qualified
immunity is not available. Basically, Plaintiffs are requesting
equitable relief, which is not precluded by qualified immunity.
See Grantham v. Trickey, 21 F.3d 289, 295-96 (8th Cir. 1994)
("There is no dispute that qualified immunity does not apply to
claims for equitable relief . . . and
Page 8
that state officials may be sued in their official capacity for
equitable relief." (citing Will v. Mich. Dep't of State Police,
491 U.S. 58, 71 n. 10 (1989); Stanley v. Magrath, 719 F.2d 279,
284 n. 9 (8th Cir. 1983))). In discussing qualified immunity and
equitable relief, the Eighth Circuit has explained:

  The fact that a remedy may require one party to pay
  money to another is not a sufficient reason to
  characterize the remedy as "legal relief." However,
  because money damages was the traditional form of
  relief offered in the courts of law, "federal law has
  consistently held that money damages are generally
  characterized as a legal remedy." Accordingly, a
  monetary award will be characterized as equitable only
  if it possesses one of the two fundamental attributes
  of an equitable remedy.

  First, a monetary award may be an equitable remedy if
  the award is "restitutionary" in nature, "such as in
  actions for disgorgement of improper profits."

Hopkins v. Saunders, 199 F.3d 968, 977 (8th Cir. 1999). Here,
Plaintiffs clearly want restitution, restoring to them money that
was rightfully theirs and putting them in the position they would
have been had the statutes been properly followed. See id. As a
result, qualified immunity does not bar Plaintiffs' claim for
equitable relief under section 1983.

  B. Missouri Constitutional Claim

  Plaintiffs assert that Defendants, by placing a lien on their
workers compensation benefits, took their property without just
compensation in violation of the Missouri Constitution. See Mo.
Const. art I, § 26. Defendants essentially argue Plaintiffs have
failed to state a claim, responding that damages are unavailable
for a violation of the Missouri Constitution. See Moody v. Hicks,
956 S.W.2d 398, 402 (Mo.App. 1997). Plaintiffs explain that
because the government took their money without just
compensation, "there is inherent right to recovery of damages in
the amount of the value of the taken property." A fund of money
can be property protected under the Takings Clause. See Phillips
v. Wash. Legal Found., 524 U.S. 156, 160 (1998) (holding interest
income generated by funds is private property of owner of
principal for purposes of Takings Clause).
Page 9

  Moody v. Hicks, though, is inapplicable to the current
situation because that case involved a claim under Article I,
§ 15 of the Missouri Constitution, the state equivalent of the
federal Fourth Amendment. See 956 S.W.2d 398, 402; see also Smith
v. Heimer, 35 Fed. App'x 293, 294 n. 1 (8th Cir. 2002) ("We note
that the Missouri Constitution's search and seizure provision is
co-extensive with the Fourth Amendment . . . and does not give
rise to a private cause of action for money damages. . . ."). The
court acknowledged that the action was similar to a federal
section 1983 action, which was only possible "because Congress
enacted that legislation authorizing suits for federal
constitutional violations" but that "[t]he Missouri General
Assembly has not enacted similar legislation." Moody,
956 S.W.2d at 402. The court also noted that plaintiff had other remedies.
See id. In the current case, unlike § 15 of the Missouri
Constitution, § 26 "is `self-enforcing' and an action may be
brought `directly thereunder.'" Roth v. State Highway Comm'n of
Mo., 688 S.W.2d 775, 777 (Mo.App. 1984) (citing Wells v. State
Highway Comm'n, 503 S.W.2d 689, 690 (Mo. 1973)). Thus, to the
extent that the question is whether damages are available for a
claim under Article I, § 26 of the Missouri Constitution, the
answer has to be yes. See State ex rel. N. W. Elec. Power Co-op.,
Inc. v. Waggoner, 319 S.W.2d 930, 934 (Mo.App. 1959) ("Just
compensation means full indemnity or remuneration for the loss or
damage sustained by the owner of the property taken or
injured."); cf. Peters v. Vill. of Clifton, 498 F.3d 727, 731
(7th Cir. 2007) (explaining that the Fifth Amendment "makes clear
that, ordinarily, compensation, not an injunction, is the
appropriate remedy for a taking that satisfies the public use
requirement.").

  The real question in this case, though, is whether Defendants
were acting through their eminent domain powers when they placed
a lien on Plaintiffs workers' compensation awards. See Home Sav.
of Am. v. State, 817 S.W.2d 518, 519 (Mo.App. 1991) ("[T]he
predicate of such an
Page 10
action is an injury within the constitutional prohibition
against the taking or damaging of private property for public
use." (citing Page v. Metro. St. Louis Sewer Dist.,
377 S.W.2d 348, 354 (Mo. 1964)). The Missouri Court of Appeals explains:

  Eminent domain is the power to take property for public
  use and is an inherent power of the state. The
  legislature has the exclusive role of delegating the
  power of eminent domain to various public and private
  entities by statute, subject to limitations found in
  the United States and Missouri constitutions and other
  Missouri statutes.

Osage Water Co. v. Miller County Water Auth., Inc.,
950 S.W.2d 569, 572 (Mo.App. 1997) (citations omitted). Defendants cite
Home Savings of America v. State, 817 S.W.2d at 518, for the
proposition that where the State does not purport to act under
the power of eminent domain when it collects funds, an action
under § 26 cannot be maintained. In that case, involving a tax
that was previously declared unconstitutional, the court of
appeals explained that plaintiffs already had a statutory remedy,
and that the State had acted through its taxing power, not its
eminent domain power. See id. at 519. "The payment of taxes, even
if the taxing statute is later declared unconstitutional, does
not amount to a taking of private property within the prohibition
of Art. I, § 26, and, therefore, an action in inverse
condemnation may not be maintained to recover the taxes paid."
Id. at 520. Although, in the present case, Defendants did not tax
anybody, Home Savings is still instructive: "The answer to
[plaintiff's argument that the tax was void ab initio so the
State must have appropriated money under eminent domain power] is
that the State never purported to act under the power of eminent
domain when it collected the taxes under § 148.480 and Home
Savings does not allege that the amount paid was paid for any
reason except as the payment of taxes." Id. at 519-20.

  Here, Defendants were not purporting to exercise the State's
inherent power of eminent
Page 11
domain; they were acting under federal statutes that required
them to seek reimbursement for Medicaid assistance as a condition
of eligibility. See 42 U.S.C. §§ 1396a(a)(25)(A), (B), and 1396k.
Thus, the State's power to assert a Medicaid lien does not arise
from its inherent powers or the Missouri Constitution, but from
the federal government. See City of Washington v. Warren County,
899 S.W.2d 863, 867 (Mo. 1995) ("To resolve this case according
to the principles reviewed above, we must ascertain the source of
the City's authority to condemn property. That source is found in
Art. I, §§ 26 and 27 of the Missouri Constitution. . . ."); see
also State ex rel. City of Gower v. Gee, 573 S.W.2d 107, 110
(Mo.App. 1978) ("The power of eminent domain is inherent in
sovereignty and exists in the State of Missouri and initially the
right to exercise such power `is exclusively a legislative
prerogative, subject only to such limitations as are fixed by the
constitution itself.'"). The fact that Defendants may have
improperly asserted a lien on ineligible funds does not convert
the payment of those funds into a taking under the power of
eminent domain. See Home Sav., 817 S.W.2d at 520. As a result,
Defendants' actions were not a taking, and Plaintiffs have failed
to plead enough facts to state a claim to relief that is
plausible on its face. Plaintiffs' Missouri constitutional claim
is dismissed.

III. Conclusion

  Accordingly, it is hereby

  ORDERED that Defendants' Motion for Judgment on the Pleadings,
in Part [Doc. # 5] is GRANTED, in part, and DENIED, in part. To
the extent Plaintiffs' section 1983 claim seeks legal damages,
Defendants are granted qualified immunity for their actions up to
and including February 9, 2005. Defendants are not protected by
qualified immunity against any equitable relief. Plaintiffs'
takings claim under Article I, section 26 of the Missouri
Constitution is dismissed for failure to state
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a claim.