Burtsell v. NH Dept. of Health and Human Services

2009 DNH 069

• Court: District Court, D. New Hampshire
• Decided: May 12, 2009
• Docket: 08-CV-455-JL
• Status: Published

Opinion

UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Jody Burtsell

v. Civil N o . 1:08-cv-0455-JL Opinion N o . 2009 DNH 069 Nicholas A . Toumpas, Commissioner New Hampshire Department of Health and Human Services

O R D E R

The plaintiff, a resident of New Hampshire, filed this

action for declaratory and injunctive relief asserting that the

defendant, the Commissioner of the New Hampshire Department of

Health and Human Services (HHS), failed to comply with federal

and state Medicaid laws by refusing to compromise its rights to

the proceeds of a tort settlement between the plaintiff and a

third party. The complaint also requests that this court

determine the proper apportionment of costs between the plaintiff

and HHS. See N.H. Rev. Stat. Ann. 167:14-a (Supp. 2008). HHS

moved to dismiss, alleging that this court lacks subject matter

jurisdiction over the controversy. See Fed. R. Civ. P.

12(b)(1)(2009). After oral argument, and for the reasons set

forth below, the court denies the motion to dismiss. I. APPLICABLE LEGAL STANDARD

In deciding a motion to dismiss for lack of subject-matter

jurisdiction, the court “construe[s] the [c]omplaint liberally

and treat[s] all well-pleaded facts as true, according the

plaintiff the benefit of all reasonable inferences.” Murphy v .

United States, 45 F.3d 5 2 0 , 522 (1st Cir. 1994). While the party

invoking federal jurisdiction--here, the plaintiff--bears the

burden of showing i t , see, e.g., Johansen v . United States, 503

F.3d 6 5 , 68 (1st Cir. 2007), that burden “is not onerous.”

Musson Theatrical, Inc. v . Fed. Express Corp., 89 F.3d 1244, 1248

(6th Cir. 1998); accord Sallen v . Corinthians Licenciamentos

LTDA, 273 F.3d 1 4 , 23 (1st Cir. 2001). Still, “a plaintiff

cannot rest a jurisdictional basis ‘merely on unsupported

conclusions or interpretations of law.’” Johansen, 503 F.3d at

68 (quoting Murphy, 45 F.3d at 522 (further internal quotation

marks omitted)).

II. BACKGROUND

The complaint alleges the following facts, which are

accepted as true for the purposes of this motion. See Gray v .

Evercore Restructuring L.L.C., 544 F.3d 3 2 0 , 323 (1st Cir. 2008).

In November 2004, the plaintiff underwent ulcer surgery, which he

claimed was performed negligently, at a New Hampshire hospital.

2 His state court malpractice action, alleging special damages

including medical expenses of $628,548.07, economic losses

totaling over $1,000,000, compensatory damages, emotional

damages, and certain hedonic damages, eventually settled for $850,000.1

After the settlement, the plaintiff resolved existing health

care liens on the settlement by a private insurer, Medicare, and

a hospital for less than the amount of each party’s lien. HHS

has an outstanding Medicaid lien totaling $75,892.30, and seeks

to recover the entire sum due. 2 See generally, N.H. Rev. Stat.

Ann. §167:14-a, I I I , III-a.

The plaintiff then filed this action alleging that the

“State’s failure and refusal to limit the recovery of Medicaid

benefits to that part of the third-party settlement attributable

to the recovery of medical costs violates the Supreme Court’s

decision in Ark. Dep’t. of Health and Human Servs. v . Ahlborn,

547 U.S. 268 (2006), 42 U.S.C. § 1396k(a)(1)(A), and the anti-

1 Complaint at ¶¶ 14 - 1 5 . It appears from the face of the complaint that the settlement agreement did not specify the amount of the payment representing medical expenses as opposed to other damages alleged. Further, it does not appear that counsel for the plaintiff informed HHS of the impending settlement, as required by N.H. Rev. Stat. 167:14-a, IV. 2 Complaint at ¶16.

3 lien provisions of the Medicaid statute, 42 U.S.C. 1396p(a)(1).”3

The plaintiff also requests that this court exercise its

supplemental jurisdiction over his claim for equitable

apportionment of the medical cost component of the settlement

pursuant to state law. See N.H. Rev. Stat. Ann. 167:14-a, IV.4

HHS moves to dismiss, alleging a lack of subject matter

jurisdiction, contending that the complaint presents no federal

issue for this court to resolve. The court disagrees.

III. ANALYSIS

Disposition of this motion requires a brief review of both

the interplay of state and federal Medicaid laws and the scope of

this court’s subject matter jurisdiction. C f . Montana v . Abbot

Labs., 266 F. Supp.2d 2 5 0 , 255 (D.Mass. 2003) (observing that

this type of subject matter jurisdiction question “requires

entering what the First Circuit has characterized as a remarkably

tangled corner of the law” (quotations omitted)).

Complaint at ¶17. 4 Complaint at ¶¶ 1 8 , 1 9 ; see also O b j . to P’s Mot. 3-4. N.H. Rev. Stat. Ann. 167:14-a, IV provides that if a dispute arises, either the commissioner or Medicaid recipient may apply for an order of equitable apportionment of the proceeds of a settlement in “the superior court or district court in which an action based upon the recipient’s claim could have been commenced.”

4 Under 28 U.S.C. §1331, “the district courts shall have

original jurisdiction of all civil actions arising under the

Constitution, laws, or treaties of the United States.” See

generally Grable & Sons Metal Prods., Inc. v . Darue Eng. & Manf.,

545 U.S. 3 0 8 , 312 (2005). To determine whether an action “arises

under” federal law, courts follow the “well-pleaded complaint

rule.” See Caterpillar, Inc. v . Williams, 482 U.S. 386, 392

(1987). Federal question jurisdiction arises “when it is

apparent from the face of the plaintiff’s complaint either that

the plaintiff’s cause of action was created by federal law, or if

the plaintiff’s claim is based on state law, a substantial,

disputed question of federal law is a necessary element of the

state law cause of action.” Mich. S . RR. Co., 287 F.3d at 573

(citations omitted); see also Grable & Sons Metal Prods., Inc.,

545 U.S. at 312-13. Still, pleading a substantial and disputed

federal issue is not to be viewed “as a password opening federal

courts to any state action,” Grable & Sons Metal Prods., Inc.,

545 U.S. at 314; rather, courts must assess whether jurisdiction

“is consistent with congressional judgment about the sound

division of labor between state and federal courts governing the

application of § 1331.” Id. at 313-314.

In sum, courts must look to the face of the complaint and

determine whether: (1) the plaintiff has properly pled a cause

5 of action created by federal law, id. at 3 1 2 , or (2) “does [the]

state law claim necessarily raise a stated federal issue,

actually disputed and substantial, which a federal forum may

entertain without disturbing any congressionally approved balance

of federal and state judicial responsibilities.” Id. at 313-314.

The Medicaid program, established by Title XIX of the Social

Security Act, see 42 U.S.C. § 1396 et seq. (2000 & Supp. 2005),

is a cooperative federal and state program providing payment for

medical services to eligible individuals and families who are

unable to pay for their own costs. Ahlborn, 547 U.S. at 275.

States that participate in the Medicaid program are reimbursed by

the federal government for a portion of payments made, provided

that they meet certain requirements established by the statute.

See id. at 275-276. One of the federal requirements is that

participating states enact statutes to identify third parties

legally liable for the medical expenses funded by the state, and

“seek reimbursement for such assistance to the extent of such

legal liability.” Id. at 276 (quotations omitted); see generally

42 U.S.C. § 1396a(a)(25)(B); N.H. Rev. Stat. Ann. 167:14-a, I I .

Further, federal law requires Medicaid recipients to assign

to the state any payments received from a third party for medical

care. See 42 U.S.C. § 1396k(a)(1)(A); N.H. Rev. Stat. Ann.

167:14-a, I . There are limits, however, on a state’s ability to

6 recover payments made under the Medicaid program. The Medicaid

statute’s anti-lien provision bars the state from imposing a lien

on certain property of the beneficiary. See 42 U.S.C. §

1396p(a). The statute further limits a state’s ability recover

the proceeds of a settlement of a legal claim against a third

party to the portion of that settlement representing payments for

medical care. Ahlborn, 547 U.S. at 282. In Ahlborn, the Supreme

Court explained:

[t]here is no question that the State can require an assignment of the right, or chose in action, to receive payments for medical care. So much is expressly provided for by §§ 1396a(a)(25) and 1396k(a). And we assume . . . that the State can also demand as a condition of Medicaid eligibility that the recipient “assign” in advance any payments that may constitute reimbursement for medical costs. To the extent that the forced assignment is expressly authorized by the terms of §§ 1396a(a)(25) and 1396k(a), it is an exception to the anti-lien provision [§1396p(a)]. But that does not mean that the State can force an assignment o f , or place a lien o n , any other portion of [a recipient’s] property. As explained above, the exception carved out by §§ 1396a(a)(25) and 1396k(a) is limited to payments for medical care. Beyond that, the anti-lien provision applies.

Id. at 284-85 (citations omitted).

In this context, the court must determine whether the

plaintiff has sufficiently pled a federal law claim to allow the

court to assert its jurisdiction under § 1331. Although the

plaintiff’s complaint is not a model of clarity or substance, the

burden placed on the plaintiff is not onerous, Musson Theatrical,

7 Inc., 89 F.3d at 1248, and he has made a sufficient showing to

support subject matter jurisdiction.

“Usually, a federal claim creates a federal question.”

Abbot Labs., 266 F. Supp.2d at 254. Read liberally, paragraph 17

of the complaint alleges that HHS, in violation of the federal

Medicaid laws as interpreted by Ahlborn, is attempting to recoup

money from the malpractice settlement that is intended to

compensate the plaintiff for non-medical costs. Put another way,

the plaintiff’s claim is that HHS is attempting to exceed its

authority granted under the federal Medicaid scheme. Although

mere “reference to a federal statute is not enough to create

federal question jurisdiction,” Able Sales Co., Inc. v . Mead

Johnson Puerto Rico, Inc., 420 F. Supp.2d 1 , 9 (D.P.R. 2006), the

issue raised by the complaint is whether apportionment of the

settlement to the state in an amount equal to the total Medicaid

lien, through the operation of state statute, violates federal

law because it encompasses monies intended for non-medical

expenses.5 Thus, the complaint necessarily involves a claimed

violation of the anti-lien provision, justifying federal subject

matter jurisdiction pursuant to § 1331. C f . Doran v . M o . Dep’t.

5 Indeed, the court notes that counsel for HHS stated at the hearing that it does not dispute that Ahlborn applies in this case. 8 of Soc. Servs., N o . 07-cv-04158-NKL, 2008 WL 4151617, at *10 (W.

D. M o . Sept. 2 , 2008)(holding that to the extent that state

collects its liens from non-medical portion of the settlement, it

violates the federal anti-lien provision).

HHS argues strenuously that this court does not have subject

matter jurisdiction because federal law is settled by the Ahlborn

case, and all that “remains is an allocation of the settlement in

light of Ahlborn.” D’s Mot. to Dismiss at 9. In this vein, HHS

contends that, although the relevant state statute “provides a

formula that, per Ahlborn, “would be partially unenforceable in

some cases” id. at 1 0 , see generally N.H. Rev. Stat. Ann. 167:14-

a , III-a, that is not so here because the dollar amount of the

settlement can “handily pay the entire Medicaid lien,” and thus

“the parties in the instant case disagree only on the allocation

of the settlement.” D’s Mot. to Dismiss at 9. This ignores,

however, the plaintiff’s claim that the state’s requested

allocation violates federal law by encompassing money intended to

compensate the plaintiff for non-medical expenses. That claim,

whatever its ultimate merits, presents a federal question.6

6 It is well-settled that a plaintiff’s likelihood of prevailing “is a separate question which does not bear on jurisdiction unless [the] claim is ‘wholly insubstantial and frivolous.’” Sallen, 273 F.3d at 23 (quoting Bell v . Hood, 327 U.S. 6 2 8 , 682-83 (1946)). The plaintiff’s claim is not.

9 Finally, HHS contends that this court does not have

jurisdiction to issue an order for equitable apportionment of the

settlement because state law confers that jurisdiction upon only

“the superior court or the district court in which an action

based upon the recipient’s claim could have been commenced.” See

N.H. Rev. Stat. 167:14-a, IV. The premise of this argument,

i.e., that state law impacts the subject-matter jurisdiction of

the federal courts, is fundamentally wrong. See Pusey & Jones

C o . v . Hanssen, 261 U.S. 4 9 1 , 498 (1923). Indeed, HHS appears to

recognize as much in stating that “the New Hampshire legislature

is unable to confer federal jurisdiction,” D’s Mot. to Dismiss at

12--the New Hampshire legislature is likewise unable to destroy

federal jurisdiction by specifying (if in fact that is what RSA

167:14-a, IV does) that certain remedies can be pursued only in

state courts. Because, as just explained, the plaintiff’s

challenge to the state’s requested apportionment presents a

federal question, this court has jurisdiction to resolve that

dispute by directing the proper apportionment.7

7 Insofar as the plaintiff’s claim for equitable apportionment presents a state-law claim independent of his federal claim--and that does not appear to be the case--this court would have supplemental jurisdiction over that state-law claim due to the presence of the related federal claim. See 28 U.S.C. § 1367.

10 IV. CONCLUSION

The court has subject-matter jurisdiction over the

plaintiff’s claims. The defendant’s motion to dismiss8 is

denied.

SO ORDERED.

Joseph ___ . _______ e United States District Judge

Dated: May 1 2 , 2009

cc: David P. Slawsky, Esq. Jason D. Reimers, Esq. Nancy J. Smith, Esq.

8 Document n o . 6.