Indiana Family and Social Services Administration Jennifer Walthall, in Individual Capacity as Secretary of Indiana Family and Social Services v. Bonnie K. Anderson

• Court: Indiana Court of Appeals
• Decided: September 3, 2020
• Docket: 19A-PL-3039
• Status: Published

Opinion

ATTORNEYS FOR APPELLANTS ATTORNEY FOR APPELLEE IFSSA, JENNIFER WALTHALL, AND Michael T. Foster BARTHOLOMEW COUNTY DIVISION Greensburg, Indiana OF FAMILY RESOURCES Curtis T. Hill, Jr. Attorney General of Indiana FILED Sep 03 2020, 8:16 am

Benjamin M.L. Jones CLERK Indiana Supreme Court Deputy Attorney General Court of Appeals and Tax Court Indianapolis, Indiana

IN THE COURT OF APPEALS OF INDIANA

Indiana Family and Social September 3, 2020 Services Administration; Jennifer Court of Appeals Case No. Walthall, in Individual Capacity 19A-PL-3039 as Secretary of Indiana Family Appeal from the Bartholomew and Social Services Superior Court Administration; Bartholomew The Honorable Kathleen Tighe County Division of Family Coriden, Judge Resources; and Kindred Nursing Trial Court Cause No. Care Centers, Limited 03D02-1902-PL-1034 1 Partnership,

1 Although counsel for Kindred did not appear in this Court, and Kindred did not file a brief or participate in this appeal, Kindred is still a party on appeal. See Ind. Appellate Rule 17(A) (“A party of record in the trial court or Administrative Agency shall be a party on appeal.”).

Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 1 of 10 Appellants-Respondents,

v.

Bonnie K. Anderson by Kimberly J. Everroad, Personal Representative, Appellee-Petitioner.

Friedlander, Senior Judge.

[1] The Appellants the Indiana Family and Social Services Administration (FSSA);

Jennifer Walthall, the Secretary of FSSA; and the Bartholomew County

Division of Family Resources bring this interlocutory appeal from the trial

court’s order denying their motion to dismiss Bonnie Anderson’s petition for

judicial review and complaint for damages. We affirm in part and reverse in

part.

[2] The Appellants present three issues for our review, which we restate as one:

whether the trial court erred by denying the Appellants’ motion to dismiss.

[3] On February 2, 2006, Bonnie Anderson executed a Family Contract for Home

Healthcare authorizing reimbursement for family members who provided her

with care. In February 2015, Anderson entered a nursing home. She applied

for Medicaid and was eventually approved.

[4] In March 2016, the Anderson Family Supplemental Needs Trust was

established for Anderson’s benefit and was funded by Anderson’s farm

Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 2 of 10 property. This trust was an irrevocable trust and was to preserve any

governmental assistance Anderson was currently receiving or for which she

may have been eligible.

[5] Anderson passed away on July 31, 2018. In October 2018, the FSSA sent

notice that a transfer penalty was being imposed upon Anderson’s Medicaid

benefits from February 1, 2016 through March 27, 2019 on the basis that

property had been transferred for the purpose of rendering her eligible for

benefits.

[6] Anderson’s representative appealed the FSSA determination, and, after a

hearing, an ALJ reversed the imposition of the transfer penalty on January 2,

2019. The FSSA requested an agency review of the ALJ’s decision, notice of

which is dated January 14. On January 17, counsel for Anderson submitted a

document demanding that Anderson be reimbursed $80,000 that the trust had

been forced to pay to the nursing home because the FSSA incorrectly

considered the trust as an available resource of Anderson’s. The FSSA later

withdrew its request for agency review of the ALJ’s decision. Notice of such

withdrawal is dated January 24 and states that no further action will be taken

on the review.

[7] On February 22, Anderson filed in the trial court a petition for judicial review

challenging the ALJ’s decision and complaint seeking damages under 42

U.S.C. § 1983. She later amended the petition to, among other things, add

Kindred Nursing Care Centers as a defendant.

Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 3 of 10 [8] The Appellants moved to dismiss the petition/complaint on the grounds that

Anderson lacked standing to seek judicial review, had failed to exhaust her

administrative remedies before seeking judicial review, and had failed to state a

claim under §1983. The magistrate presided over a hearing on the Appellants’

motion, and the judge, relying on the magistrate’s notes from the hearing, later

denied the motion. The Appellants requested and were granted approval to file

this interlocutory appeal.

Lack of Standing

[9] The Appellants first contend their motion to dismiss should have been granted

because Anderson lacks standing to seek judicial review of the ALJ’s decision.

[10] “A claim of lack of standing is properly treated as a motion to dismiss under

Trial Rule 12(B)(6) for failure to state a claim upon which relief can be

granted.” Bellows v. Bd. of Comm’rs of Cty. of Elkhart, 926 N.E.2d 96, 113 (Ind.

Ct. App. 2010). When we review a ruling on a motion to dismiss under Trial

Rule 12(B)(6), the allegations of the complaint are required to be taken as true.

21stAmendment, Inc. v. Ind. Alcohol & Tobacco Comm’n, 84 N.E.3d 691 (Ind. Ct.

App. 2017), trans. denied (2018). Dismissal is appropriate only where it appears

there is no set of facts under which the plaintiff would be entitled to relief. Id.

“A successful 12(B)(6) motion alleging lack of standing requires that the lack of

standing be apparent on the face of the complaint.” Id. at 695. The question of

whether a party has standing is purely one of law and requires no deference to

the trial court’s determination; thus, our review of a ruling on a motion to

dismiss for lack of standing is de novo. Id. Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 4 of 10 [11] The Administrative Orders and Procedures Act (AOPA) specifies, in relevant

part, that only parties who have standing are entitled to judicial review of a final

agency action. See Ind. Code § 4-21.5-5-2(b) (1986). The doctrine of standing

focuses on whether the complaining party is the proper person to invoke the

court’s power. 21st Amendment, Inc., 84 N.E.3d 691. To that end, the AOPA

provides:

(a) The following have standing to obtain judicial review of an agency action:

(1) A person to whom the final agency action is specifically directed.

(2) A person who was a party to the proceedings of the ultimate authority that led to the final agency action, including the agency whose order was under review in the proceeding.

(3) A person eligible for standing under a law applicable to the final agency action.

(4) A person otherwise aggrieved or adversely affected by the final agency action.

Ind. Code § 4-21.5-5-3(a) (2014).

[12] Anderson clearly has standing under Section 4-21.5-5-3(a)(2). Nevertheless, the

Appellants argue that Anderson lacks standing because she prevailed in the

decision by the ALJ and “received complete relief from the ALJ.” Appellants’

Br. p. 14. While it is true the ALJ reversed the imposition of the transfer Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 5 of 10 penalty, Anderson hardly received complete relief. As explained in Anderson’s

petition for judicial review, the FSSA imposed a transfer penalty against her

Medicaid benefits because it determined that property was transferred in order

for her to become eligible for benefits. Upon hearing evidence regarding the

character of the property and the trust that were involved in the transfer, the

ALJ reversed the imposition of the transfer penalty. The ALJ’s decision,

however, omitted any determination or direction to the FSSA regarding

treatment of the property and the trust such that the FSSA “included the trust

estate of the Anderson Family Supplemental Needs Trust as available resources

of [Anderson] to determine . . . [t]hat [Anderson]’s resources exceed acceptable

limits.” Appellants’ App. Vol. 2, p. 43 (Amended Petition for Judicial Review).

The trial court did not err in denying the Appellants’ motion to dismiss based

upon Anderson’s alleged lack of standing.

Failure to Exhaust Administrative Remedies

[13] The Appellants next claim the trial court should have granted their motion to

dismiss because Anderson waived her right to judicial review by failing to

exhaust her administrative remedies—specifically agency review of the ALJ’s

decision—prior to petitioning for judicial review as is required under the

AOPA. See Ind. Code § 4-21.5-5-4(a), (b) (1986) (party may petition for judicial

review only after exhausting all administrative remedies; party that fails to

timely petition for review of order waives right to judicial review).

[14] The Appellants further cite Indiana Code section 4-21.5-3-29(d) (1986), which

requires that, to preserve an objection to an order of an ALJ for judicial review, Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 6 of 10 a party must object in a writing that identifies the basis of the objection with

reasonable particularity and is filed with the reviewing authority within fifteen

days after the order is served. Characterizing Anderson’s submission as a

“response” to their request for review, the Appellants claim Anderson failed to

make a request for agency review and therefore failed to exhaust her

administrative remedies.

[15] As noted above, the FSSA requested an agency review of the ALJ’s January 2

decision reversing the imposition of the transfer penalty, notice of which was

sent to Anderson and was dated January 14. On January 17, counsel for

Anderson submitted a document stating: “The Applicant demands that the

Indiana Family and Social Services Administration reimburse the Applicant for

the $80,000 which the Anderson Special Needs Trust was forced to pay to the

Kindred Nursing [H]ome in Columbus in June 2016 because the Anderson

Special Needs Trust was wrongfully treated as an available resource in

contravention of the ALJ Hearing Decision of January 2, 2019.” Appellants’

App. Vol. 2, p. 36 (Ex. C to Amended Petition for Judicial Review, p. 3).

Counsel included on the submission the case number, the hearing case number,

the date of the ALJ’s decision, and a request for the alternative remedy of

remand to the ALJ for an order of payment. The FSSA later withdrew its

request for review. Notice of that withdrawal was dated January 24 and was

sent to Anderson. The notice states, “Due to this dismissal, no further action

will be taken on this Review.” Id. at 34 (Ex. C to Amended Petition for Judicial

Review, p. 1).

Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 7 of 10 [16] Anderson’s submission is not a response to the Appellants’ request for review

but is a request for review in its own right. Anderson clearly sets out her

objection with reasonable particularity, even suggesting the alternative remedy

of remanding the case to the ALJ, and the Appellants do not suggest that the

objection was untimely filed. It is unclear why the agency did not address

Anderson’s submission, but once it issued the dismissal and stated it would take

no further action, Anderson had exhausted her administrative remedies. The

trial court did not err by denying the Appellants’ motion to dismiss on this

basis.

§ 1983 Claim

[17] A motion to dismiss under Rule 12(B)(6) tests the legal sufficiency of a

complaint. Trail v. Boys & Girls Clubs of Nw. Indiana, 845 N.E.2d 130 (Ind.

2006). As we observed above, this Court evaluates whether the allegations in

the complaint establish any set of circumstances under which a plaintiff would

be entitled to relief, and we accept as true the facts alleged in the complaint. Id.

[18] Anderson brought a § 1983 claim alleging that the Appellants wrongfully

denied her Medicaid benefits, causing her to incur irreparable financial losses.

The Appellants assert that the FSSA and Walthall, in her official capacity as

Secretary of the FSSA, are not subject to suit under § 1983.

[19] Section 1983 creates a civil action against any “person” who acts under color of

state law to deprive an individual of a federal right. 42 U.S.C.A. § 1983.

Although for § 1983 purposes the term “person” does include a state’s political

Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 8 of 10 subdivisions, the U.S. Supreme Court has held that the term does not include a

state or its administrative agencies. J.A.W. v. State, Marion Cty. Dep’t of Pub.

Welfare, 687 N.E.2d 1202 (Ind. 1997) (citing Will v. Mich. Dep’t of State Police,

491 U.S. 58, 109 S. Ct. 2304, 105 L. Ed. 2d 45 (1989)). Thus, Anderson cannot

maintain a § 1983 action against the FSSA and the Bartholomew County

Division of Family Resources, as they are administrative agencies of the state.

[20] We turn now to Secretary Walthall. Although Anderson’s petition/complaint

is captioned as “Jennifer Walthall, in Individual Capacity as Secretary of Indiana

Family and Social Services Administration,” Anderson states her claims are

against Walthall in her official capacity. Appellants’ App. Vol. 2, p. 40

(Amended Petition for Judicial Review) (emphasis added); Appellee’s Br. pp.

15-16.

[21] A state official in her official capacity is a “person” under § 1983 when sued for

injunctive (prospective) relief. Crouch v. State, 147 N.E.3d 1026 (Ind. Ct. App.

2020) (citing Will, 491 U.S. at 71, 109 S. Ct. at 2312). Anderson has not

requested injunctive relief; rather, she seeks an award of Medicaid benefits for

the nursing home costs, an award of attorney fees, reimbursement for the value

of the farm property, and an award for emotional distress. Appellants’ App.

Vol. 2, p. 46 (Amended Petition for Judicial Review). Accordingly, Anderson

cannot maintain a § 1983 claim against Walthall in her official capacity.

[22] Based on the foregoing, we conclude the trial court did not err by denying the

Appellants’ motion to dismiss Anderson’s petition for judicial review. We

Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 9 of 10 conclude it was error for the court to deny the Appellants’ motion to dismiss

Anderson’s complaint for damages setting out a § 1983 action because such

action may not be maintained against the FSSA, the Bartholomew County

Division of Family Resources, or Walthall in her official capacity.

[23] Judgment affirmed in part and reversed in part.

Bradford, C.J., and Najam, J., concur.

Court of Appeals of Indiana | Opinion 19A-PL-3039 | September 3, 2020 Page 10 of 10