United States District Court, D. Colorado
ERNESTO REYES, KRISTINA RYAN, EDUARDO VALE, individually and as parent and conservator of NAYELI VALE, ISABELLE VALE, individually and as parent and conservator of NAYELI VALE, and SHEREE PEREZ, individually and as representative plaintiffs for a similarly situated class of persons, Plaintiffs,
JOHN HICKENLOOPER, Governor of the State of Colorado, in his official capacity, SUSAN E. BIRCH, Executive Director of the Colorado Department of Health Care Policy and Financing, in her official capacity, DAVID SMITH, individually and in his official capacity as Manager of the Benefits Coordination Section of the Colorado Department of Health Care Policy and Financing, LEANNE GARDNER, individually and in her official capacity as Trust Officer of the Benefits Coordination Section of the Colorado Department of Health Care Policy and Financing, and ERIC STRICCA individually and in his official capacity as Long Term Care Medicaid Eligibility Policy Specialist of the Colorado Department of Health Care Policy and Financing, Defendants
For Ernesto Reyes, individually, Kristina Ryan, individually, Eduardo Vale, Parent and Conservator of Nayeli Vale, other, Nayeli Vale, Eduardo (I) Vale, individually, Isabell Vale, Parent and Conservator of Nayeli Vale, other, Nayeli Vale, Isabell (I) Vale, individually, Sheree Perez, individually, and as representative plaintiffs for a similarly situated class of persons, Plaintiffs: R. Eric Solem, LEAD ATTORNEY, Solem, Mack & Steinhoff, P.C., Englewood, CO; Alfred (Fred) F. Paoli, Jr., Bogue Paoli & Thomas, LLC, Denver, CO; Jeffrey A. Esses, Jeffrey A. Esses, Attorney at Law, Denver, CO.
For John Hickenlooper, Governor of the State of Colorado, in his official capacity, Susan E. Birch, Executive Director of the Colorado Department of Heath Care Policy and Financing, in her official capacity, David Smith, Manager of the Benefits Coordination Section of the Colorado Department of Health Care Policy and Financing, in is official capacity, David (I) Smith, individually, Leanne Gardner, Trust Officer of the Benefits Coordination Section of the Colorado Department of Health Care Policy and Financing, in her official capacity, Leanne (I) Gardner, individually, Eric Stricca, Long Term Care Medicaid Eligibility Policy Specialist of the Colorado Department of Heath Care Policy and Financing, in his official capacity, Eric (I) Stricca, individually, Defendants: Alisa Campbell, LEAD ATTORNEY, Jennifer Lee Weaver, W. Eric Kuhn, Colorado Attorney General's Office, Ralph L. Carr Colorado Judicial Center, Denver, CO.
ORDER GRANTING MOTION TO DISMISS WITHOUT PREJUDICE IN PART AND WITH PREJUDICE IN PART
William J. Martínez, United States District Judge.
Plaintiffs Ernesto Reyes (" Reyes" ), Kristina Ryan (" Ryan" ), Nayeli Vale (" Vale" ), and Sheree Perez (" Perez" ) (collectively, " Plaintiffs" ) have sued the Governor of Colorado in his official capacity; Susan Birch, executive director of the Colorado Department of Health Care Policy and Financing (" Department" ), in her official capacity; and certain of the Department's employees--David Smith (" Smith" ), Leanne Gardner (" Gardner" ), and Eric Stricca (" Stricca" )--in both their individual and official capacities. All five defendants will be referred to collectively as " Defendants." Smith, Gardner, and Stricca will be referred to collectively as the " Individual Defendants."
Plaintiffs claim that the Department (as managed by Defendants) has failed to provide a procedure by which Plaintiffs and those similarly situated may contest Medicaid liens that the Department asserts against money they have received through lawsuit settlements or insurance proceeds. (ECF No. 1.) Before the Court is Defendants' Motion to Dismiss Class Complaint Pursuant to Fed.R.Civ.P. 12(b)(6). (ECF No. 14.) For the reasons set forth below, the Court grants the motion without prejudice in part and with prejudice in part.
I. LEGAL STANDARD
Under Fed.R.Civ.P. 12(b)(6), a party may move to dismiss a claim in a complaint for " failure to state a claim upon which relief can be granted." The 12(b)(6) standard requires the Court to " assume the truth of the plaintiff's well-pleaded factual allegations and view them in the light most favorable to the plaintiff." Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). In ruling on such a motion, the dispositive inquiry is " whether the complaint contains 'enough facts to state a claim to relief that is plausible on its face.'" Id. (quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Granting a motion to dismiss " is a harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect the interests of justice." Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (internal quotation marks omitted). " Thus, 'a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.'" Id. (quoting Twombly, 550 U.S. at 556).
In this case, Plaintiffs have attached various documents to their complaint and other filings. Specifically, they have attached to their complaint certain court filings from other cases, and certain correspondence. ( See ECF Nos. 1-2 to 1-11.) They have attached another court filing to their response in opposition to Defendants' motion to dismiss. ( See ECF No. 21-2.) The Court may consider these documents without converting the motion to dismiss to one for summary judgment. See Fed.R.Civ.P. 10(c) (" A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes." ); Pace v. Swerdlow, 519 F.3d 1067, 1072--73 (10th Cir. 2008) (district court properly took judicial notice of state court records relating to the federal action); Tal v. Hogan, 453 F.3d 1244, 1264 n.24 (10th Cir. 2006) (district court may take judicial notice of " facts which are a matter of public record" without converting a 12(b)(6) motion into a summary judgment motion).
II. LEGAL FRAMEWORK
This case arises out of the many statutes, regulations, and judicial decisions governing Medicaid. Understanding that legal framework is necessary to understand Plaintiffs' asserted facts and legal theories.
A. Federal Medicaid Law
Title XIX of the Social Security Act, 42 U.S.C. § § 1396 et seq., establishes the Medicaid program generally. Medicaid is a federal-state partnership: the federal government pays at least 50% of the costs for patient care " and, in return, [each] State pays its portion of the costs and complies with certain statutory requirements." Ark. Dep't of Health & Human Servs. v. Ahlborn, 547 U.S. 268, 275, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006). One of those requirements is that the state must investigate and pursue reimbursement when it pays Medicaid benefits flowing from injuries to beneficiaries caused by third parties. 42 U.S.C. § 1396a(a)(25)(A)--(B). Moreover, each state must enact a law by " which, to the extent that payment has been made under the State plan for medical assistance for health care items or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any [third] party for such health care items or services." Id. § 1396a(a)(25)(H). The state must also require Medicaid beneficiaries " to assign the State any rights . . . to payment [received] for medical care from any third party." Id. § 1396k(a)(1)(A). A state's claim for reimbursement from money received by the beneficiary from a third party is commonly known as a " Medicaid lien." See, e.g., I.P. ex rel. Cardenas v. Henneberry, 795 F.Supp.2d 1189, 1195--96 (D. Colo. 2011).
Medicaid liens have prompted some thorny questions. For example, consider a Medicaid beneficiary who brings a lawsuit against a tortfeasor for various types of damages (medical expenses, pain and suffering, lost wages, etc.) and settles the lawsuit for $100,000. The beneficiary and the tortfeasor agree (or a court orders) that $30,000 of that amount is attributable to medical expenses. The state, however, incurred $50,000 in Medicaid expenses on the beneficiary's behalf. May the state recover its entire $50,000, or is it limited to $30,000, or something else? And what if the beneficiary settles for a lump sum, with no allocation of specific dollars to specific types of damages?
Recent Supreme Court decisions have resolved these questions to some extent. In Ahlborn, supra, the state asserted a Medicaid lien of more than $215,000 on a $550,000 settlement, but stipulated that only about $35,000 of that settlement " constituted reimbursement for medical payments made." 547 U.S. at 274. The Supreme Court held that the state could not claim any amount above that $35,000 because the relevant federal statutes provide " no more than the right to recover that portion of a settlement that represents payments for medical care." Id. at 282.
A few years after Ahlborn, the Supreme Court addressed the lump-sum settlement situation, where the amount of the settlement attributable to medical expenses is unresolved. In Wos v. E.M.A. ex rel. Johnson, 133 S.Ct. 1391, 185 L.Ed.2d 471 (2013), the Court invalidated North Carolina's statutory presumption that one-third of all such recoveries represent medical expenses. See id. at 1398--99. Such a presumption, the Court held, could allow the state to recover more than the amount fairly attributable to medical expenses, which would violate Ahlborn 's directive that the state can recover only from amounts attributable to medical expenses and nothing else. See id. The Court further held that " a judicial or administrative proceeding would be necessary" to determine the amount of the settlement attributable to medical expenses. Id. at 1399. Later in its opinion, however, the Court partly backed off the requirement for case-by-case determinations: " [I]f States are concerned that case-by-case judicial allocations will prove unwieldy, they may . . . be able to adopt ex ante administrative criteria for allocating medical and nonmedical expenses, provided that these criteria are backed by evidence suggesting that they are likely to yield reasonable results in the mine run of cases." Id. at 1402.
B. Colorado Medicaid Law
The Department administers Colorado's Medicaid program pursuant to various statutes and regulations. See, e.g., Colo. Rev. Stat. § 25.5-4-101 et seq.; 10 Colo. Code Regs. § 2505-10. Of particular relevance here is Colorado Revised Statute § 25.5-4-301(5)(a), which gives the Department a lien on judgments and settlements obtained by beneficiaries from third parties:
When the state department has furnished [Medicaid benefits] . . . for which a third party is liable, the state department shall have an automatic statutory lien for all such medical assistance. The state department's lien shall be against any judgment, award, or settlement in a suit or claim against such third party and shall be in an amount that shall be the fullest extent allowed by federal law as applicable in this state, but not to exceed the amount of the medical assistance provided.
Four years ago, a Medicaid beneficiary asked this Court to declare the foregoing statute invalid in light of Ahlborn because the statute could theoretically allow the Department to recover more than the amount allocated to medical expenses. See Henneberry, 795 F.Supp.2d at 1193--94. This Court rejected that argument, finding that the phrase " in an amount that shall be the fullest extent allowed by federal law" automatically required the Department to comply with Ahlborn's directive that Medicaid liens may attach only to amounts designated as compensation for medical expenses. Id. at 1194--96.
With this background on the relevant statutes and case law, the Court now turns to the facts alleged in this case.
III. FACTUAL BACKGROUND
As alleged in the complaint, all Plaintiffs share a common situation:
o each was injured by the alleged negligence of a third party (ECF No. 1 ¶ ...