CORRECTED: September 27, 2018 RENDERED: SEPTEMBER 27, 2018 TO BE PUBLISHED
2016-SC-000529-DG
COMMONWEALTH OF KENTUCKY, APPELLANT CABINET FOR HEALTH AND FAMILY SERVICES, DEPARTMENT FOR MEDICAID SERVICES
ON REVIEW FROM COURT OF APPEALS V. CASE NO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
LETTIE SEXTON, BY AND THROUGH HER APPELLEES AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC.; AND COVENTRY HEALTH AND LIFE INSURANCE D/B/A COVENTRYCARES, INC.
AND 2016-SC-000534-DG
COVENTRY HEALTH AND LIFE APPELLANT INSURANCE D/B/A COVENTRYCARES, INC.
ON REVIEW FROM COURT OF APPEALS V. CASENO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
LETTIE SEXTON, BY AND THROUGH HER APPELLEES AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC., AND COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES
AND 2016-SC-000540-DG
LETTIE SEXTON, BY AND THROUGH HER APPELLANT AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC.
ON REVIEW FROM COURT OF APPEALS V. CASE NO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
COMMONWEALTH OF KENTUCKY, APPELLEES CABINET FOR HEALTH AND FAMILY SERVICES AND COVENTRY HEALTH AND LIFE INSURANCE D/B/A COVENTRYCARES, INC.
AND 2017-SC-000095-DG
COVENTRY HEALTH AND LIFE APPELLANT INSURANCE
ON REVIEW FROM COURT OF APPEALS V. CASE NO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
LETTIE SEXTON, BY AND THROUGH HER APPELLEES AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC., AND COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES
OPINION OF THE COURT BY CHIEF JUSTICE MINTON
REVERSING, VACATING, AND REMANDING
This case requires us to consider whether the courts of Kentucky can
undertake a statutorily created judicial review of an administrative agency’s
final order when the person appealing that final order does not have a concrete
injury. Our resolution requires us to apply the doctrine of constitutional 2 standing, and, in doing so, we hold as a matter of first impression that the
existence of a plaintiffs standing is a constitutional requirement to prosecute
any action in the courts of this Commonwealth, adopting the United States
Supreme Court’s test for standing as espoused in Lujan v. Defenders of
Wildlife.1 Because this case reaches us via an interlocutory appeal from the
circuit court’s review of an agency ruling, we further hold that all of Kentucky’s
courts have the responsibility to ascertain, upon the court’s own motion if the
issue is not raised by a party opponent, whether a plaintiff has constitutional
standing, an issue not waivable, to pursue the case in court. Under that test,
we conclude that Medicaid beneficiary Lettie Sexton, the putative petitioner in
the present case, does not have the requisite constitutional standing to pursue
her case in the courts of the Commonwealth. So, we reverse the decision of the
Court of Appeals, vacate the ruling of the circuit court, and remand this case to
the circuit court with instructions to dismiss the case.
I. BACKGROUND.
Lettie Sexton, a Medicaid beneficiary, was admitted to Appalachian
Regional Healthcare (“ARH”), complaining of chest pain. ARH sent a request for
preauthorization of medical services to Coventry Health and Life Insurance,
d/b/a Coventry Cares, Inc. (“Coventry”), a managed-care organization that had
contracted with the Kentucky Cabinet for Health and Human Services
(“Cabinet”) to provide reimbursement to hospitals for certain services provided
to Medicaid beneficiaries. Coventry approved a 23-hour observation stay at
ARH. Sexton, through ARH, her designated representative for any disputed
1504 U.S. 555, 560-561 (1992). 3 claims, requested that the observation stay at ARH be extended 15 more hours
for a cardiology consultation. Coventry denied reimbursement for this request.
Sexton was eventually hospitalized at ARH for approximately 38 hours.
ARH then requested an internal review by Coventry of its denial of
reimbursement for the 15 hours of additional hospitalization. After review,
Coventry upheld its denial. ARH, ostensibly acting for Sexton, then requested a
Medicaid Fair Hearing to challenge Coventry’s denial. A hearing officer for the
administrative-services branch of the Cabinet conducted that hearing and
ruled that Sexton lacked standing to pursue an appeal of Coventry’s denial of
reimbursement to ARH because Sexton herself had no stake in the outcome of
the dispute between ARH and Coventry. The hearing officer’s ruling was based
upon the fact that because Medicaid had paid ARH for the services rendered to
Sexton, she would owe nothing at all to ARH for the extended hospital stay.2 In
due course, the Cabinet Secretary adopted the hearing officer’s
recommendation as the Cabinet’s final order.
ARH, acting as Sexton’s representative, then sought judicial review under
Kentucky Revised Statute (KRS) 13B.140 of the Cabinet’s final order by timely
filing a petition for review in the Harlan Circuit Court. The Cabinet filed a
motion to dismiss the petition, alleging that: (1) Sexton lacked standing; (2)
ARH was not Sexton’s authorized representative; (3) venue did not lie in Harlan
County; and (4) that the petition was barred by the doctrine of sovereign
2 This argument is a reoccurring one used by several managed-care organizations that has resulted in numerous pending cases in the Court of Appeals. 4 immunity because it did not strictly comply with the requirements of KRS
13B.140. Coventry joined in the Cabinet’s motion on the same grounds.
Following a hearing, the circuit court denied the motion to dismiss. On
the issue of standing, the circuit court found that the individual ARH
employees who had been authorized by Sexton to represent her interests were
sufficiently identified in the exhibits to the petition to provide standing and to
comply substantially with the requirements of KRS 13B. 140. As for venue and
subject-matter jurisdiction, the circuit court ruled that the addresses for
Sexton’s designated representatives were the address of the ARH hospital
employees located in Harlan County, thus fixing venue there in accordance
with KRS 13B.140. On the issue of sovereign immunity, the circuit court
determined that this argument was based upon the proposition that a failure
strictly to comply with KRS 13B.140 eliminated waiver of sovereign immunity.
But since the circuit court found the petition to be otherwise sufficient, the
limited waiver of immunity was not eliminated. So, the circuit court denied
Coventry’s and the Cabinet’s motions to dismiss the petition.
Because the circuit court denied the Cabinet and Coventry’s sovereign-
immunity argument, they each filed an interlocutory appeal in the Court of
Appeals. ARH initially sought a dismissal of the appeal, claiming that the
circuit court’s order was not final and appealable.
On ARH’s motion to dismiss the appeal, the Court of Appeals found that
the circuit court’s rulings on sovereign immunity were immediately appealable,
and therefore denied ARH’s motion to dismiss the appeal. The Court of Appeals
also found that there was no requirement that KRS 13B.140 be strictly followed
for the waiver of sovereign immunity to apply. But the Court of Appeals also 5 found that in Medicaid reimbursement cases like this one, sovereign immunity
has been waived by the overwhelming implication of statutory language,
including KRS 45A.235.3 *Additionally, the Court of Appeals found that the
statutes governing the state Medicaid program, KRS 205.510-645, indicate
that sovereign immunity had been waived.
Finally, the Court of Appeals found that venue, as provided in the
Kentucky Model Procurement Code, specifically KRS 45A.245, mandated that
an aggrieved person, firm, or corporation who has a valid written contract must
bring an enforcement action in Franklin Circuit Court. Because the petition
was filed in Harlan Circuit Court, the Court of Appeals held that the circuit
court’s ruling denying the motion to dismiss based on improper venue should
be vacated and directed that the parties may make a motion to transfer the
case to Franklin Circuit Court or file a new petition for review in Franklin
Circuit Court.
Both parties then filed discretionary-review petitions, which we granted.
II. ANALYSIS.
A. Reviewability of the Issues.
From the outset of our analysis, it is important to note that this case is
before us at this juncture as an interlocutory appeal because of the lower
courts’ rulings on the sovereign immunity issue. And we recently held in Baker
v. Fields “that the scope of appellate review of an interlocutory appeal of the
trial court’s determination of the application of qualified official immunity is
limited to the specific issue of whether the immunity was properly denied and
3 All parties now agree that the Court of Appeals erred by applying KRS 45A.235 to this case. 6 nothing more.”4 Although the case before us today involves a circuit court’s
ruling on an issue of sovereign-immunity, not qualified official immunity, the
principle is the same—the scope of appellate review of an interlocutory appeal
of the trial court’s determination of the application of sovereign immunity is
limited to that issue and nothing more.
Such a rule grounds itself in this Court’s analysis of issues that can and
cannot be decided via interlocutory appeal in Breathitt County Bd. of Educ. v.
Prater.5 At the risk of simply restating our analysis in that case and in Baker v.
Fields, we simply note that interlocutory appeals are a vehicle to be used
rarely, only to decide a few, enumerated issues.
Admittedly, the question of whether the issue of standing can be reached
on an interlocutory appeal has never been before this Court. But a nationwide
review of relevant case law reveals a trend that parties, themselves, may not
raise the issue of standing by interlocutory appeal.6 Most consistently, federal
appellate courts hold “that a district court’s denial of a motion to dismiss on
justiciability grounds is not immediately appealable under the collateral-order
< 543 S.W.3d 575, 578 (Ky. 2018). s 292 S.W.3d 883 (Ky. 2009). 6 See, e.g., Summit Med. Assocs., P.C. v. Pryor, 180 F.3d 1326, 1334-35 (11th Cir. 1999) (holding that a party may not take an immediate appeal of a trial court’s decision regarding standing because appealing such issue fails the collateral order doctrine); compare SCI Texas Funeral Servs, Inc. v. Hijar, 214 S.W.3d 148, 153 (Tx. App. 2007) (holding that a party may take an immediate appeal of a trial court’s decision regarding standing for the purposes of class certification). 7 doctrine.”7 “Under the ‘collateral order doctrine,’ also called the ‘Cohen7 8
doctrine,’ a limited set of district court orders are reviewable though short of
final judgment.”9 And in Breathitt County, we aligned Kentucky’s stance on
interlocutory appeals with that of federal law’s collateral-order doctrine.10
The rare use of interlocutory appeals in Kentucky, the absence of legal
precedent in Kentucky allowing an interlocutory appeal of a trial court’s ruling
on the issue of standing, the uniform federal legal precedent prohibiting an
interlocutory appeal on the issue of standing, this Court’s “compelling interest
in maintaining an orderly appellate process,”11 and the general rule that a
nonfinal order cannot be immediately appealed, all converge to satisfy us of the
value of a rule that prohibits an interlocutory appeal of a trial court’s decision
regarding the plaintiffs standing to sue.
Therefore, we hold that a trial court’s ruling on the issue of constitutional
standing, in and of itself, does not give rise to an immediate right to an appeal,
i.e. an interlocutory appeal. But such prohibition against interlocutory appeal
on solely the issue of standing should not constrain the power of the appellate
court, at the instance of a party-opponent or acting upon on its own motion,
from inquiring into whether a plaintiff has the requisite standing to sue when
7 Pryor, 180 F.3d at 1334 (11th Cir. 1999); see Crymes v. DeKalb County, 923 F.2d 1482, 1484-85 (11th Cir. 1991) (holding the same in the specific context of ripeness); see also Children’s Healthcare Is a Legal Duty, Inc. v. Deters, 92 F.3d 1412, 1418 (6th Cir. 1996); Triad Assocs., Inc. v. Robinson, 10 F.3d 492, 496-97 n.2 (7th Cir. 1993); Shanks v. City of Dallas, 752 F.2d 1092, 1099 n. 9 (5th Cir. 1985); City of Detroit v. Grinnell Corp., 495 F.2d 448, 474-75 (2d Cir. 1974). 8 Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949). 9 36 C.J.S. Federal Courts § 432. 10 Breathitt County, 292 S.W.3d at 886-87. 11 Ready v. Jamison, 705 S.W.2d 479, 482 (Ky. 1986). 8 an interlocutory appeal is properly before an appellate court on an issue
recognized as immediately appealable.
In Harrison v. Leach, we held that an appellate court errs when it raises
the issue of standing on its own motion because standing is a waivable
defense.12 But Harrison crafted this rule while analyzing the issue of statutory,
not constitutional, standing.13 To clarify the differences among the standing
concepts, we find helpful this explanation offered by the U.S. Court of Appeals
for the Third Circuit:
Though all are termed “standing,” the differences between statutory, constitutional, and prudential standing are important. Constitutional and prudential standing are about, respectively, the constitutional power of a . . . court to resolve a dispute and the wisdom of so doing. Statutory standing is simply statutory interpretation: the question it asks is whether [the legislature] has accorded this injured plaintiff the right to sue the defendant to redress his injury.14
Put differently, “The question whether a plaintiff can sue for violations of [a
statute] is a matter of statutory standing, ‘which is perhaps best understood as
not even standing at all.’. . . Dismissal for lack of statutory standing is
properly viewed as dismissal . . . for failure to state a claim [upon which relief
may be granted].”15
In this case, by contrast, constitutional standing is at issue because
Coventry and the Cabinet are not alleging that the federal or state Medicaid
12 323 S.W.3d 702, 703 (Ky. 2010). 13 This Court in Lawson v. Office ofAtty. Gen. recognized this to be the case. 415 S.W.3d 59, 67 (Ky. 2013). 14 Graden v. Conexant Sys., Inc., 496 F.3d 291, 295 (3d Cir. 2007). 15 13A Fed. Prac. 8b Proc. Juris. § 353 (3d ed.) (quoting CGM, LLC v. BellSouth Telecomms., Inc., 664 F.3d 46, 51-53 (4th Cir. 2011)). 9 statutes and regulations do not afford Sexton relief, i.e. that these laws make
no provision for Sexton to bring suit; rather, Coventry and the Cabinet are
alleging that Kentucky courts cannot hear this case because no justiciable
cause—a. constitutional predicate to maintaining a case in Kentucky courts—
exists. We hold that all Kentucky courts have the constitutional duty to
ascertain the issue of constitutional standing, acting on their own motion, to
ensure that only justiciable causes proceed in court, because the issue of
constitutional standing is not waivable.16 Our holding conforms to the general
understanding of constitutional standing as a predicate for a court to hear a
case and the ability of a court, acting on its own motion, to address that
issue.17
In this case, the procedurally proper interlocutory-appeal issue before
this Court is whether the doctrine of sovereign immunity bars Sexton from suit.
Our holding today is not an affirmation that sovereign immunity exists in this
16 “Because [constitutional] standing to sue is an essential aspect of. . . courts’. . . jurisdiction, it cannot be waived. It may be challenged for the first time at any time during the pendency of the proceedings and, if none of the parties raises it, the . . . courts (both trial and appellate) may, and indeed have a duty to, raise the issue sua sponte if there is any doubt about it.” Joan Steinman, Shining a Light in a Dim Comer: Standing to Appeal and the Right to Defend a Judgment in the Federal Courts, 38 Ga. L. Rev. 813 (2004) (citing Adarand Constructors, Inc. v. Mineta, 534 U.S. 103, 110 (2001); Boeing Co. v. Van Gemert, 444 U.S. 472, 488 n.4 (1980) (Rehnquist, J., dissenting); Juidice v. Vail, 430 U.S. 327, 331 (1977)). 17 See Adarand Constructors, Inc. v. Mineta, 534 U.S. 103, 110 (2001) (“We are obliged to examine standing sua sponte where standing has erroneously been assumed below.”); see also, e.g., Community First Bank v. National Credit Union Admin., 41 F.3d 1050, 1053 (6th Cir. 1994) (“Standing is not an affirmative defense that must be raised at risk of forfeiture. Instead, it is a qualifying hurdle that plaintiffs must satisfy even if raised sua sponte by the court.”) ; Bench Billboard Co. v. City of Cincinnati, 675 F.3d 974, 983 (6th Cir. 2012) (“The issue of standing, however, may be raised sua sponte”). Judge Batchelder of the Sixth Circuit wrote an extremely persuasive concurring opinion in Children’s Healthcare is a Legal Duty, Inc. v. Deters explaining why a court should raise the issue of standing sua sponte on an interlocutory appeal. 92 F.3d 1412, 1418-20 (6th Cir. 1996). 10 case to bar Sexton from suit—we do not reach the merits of that argument
because Sexton lacks the constitutional standing necessary for us to reach any
of the other potential issues in this case. A party need not be correct on the
merits of its interlocutory appeal issue for an appellate court to raise the issue
of constitutional standing. But a party must have a facially valid and
procedurally proper interlocutory appeal for an appellate court to reach the
issue of standing.18 Because we have determined that this case is properly
before this Court on interlocutory appeal, we now turn to the constitutional
standing issue in this case.
B. The principle of constitutional standing in Kentucky. An elementary principle of the federal and state governmental structure
is the division of power among three branches of government: the legislature,
the executive, and the judiciary.19 The United States Supreme Court has
interpreted the United States Constitution as providing a “series of limits on
the federal judicial power.”20 Identified as the “justiciability doctrines,” these
limits on the federal judicial power derive from Article III, Section 2, Clause 1 of
the U.S. Constitution, which states, “The judicial Power shall extend to all
18 For example, a private bakery, acting as the sole defendant, who may have a legitimate argument that the plaintiff does not possess the requisite standing to bring suit, would not be able to file a facially valid and procedurally proper interlocutory appeal on the basis of sovereign immunity, and the appellate court hearing the case would not be able to reach the issue of standing. 19 See Ky. Const. § 27 (“The powers of the government of the Commonwealth of Kentucky shall be divided into three distinct departments, and each of them be confined to a separate body of magistracy, to wit: Those which are legislative, to one; those which are executive, to another; and those which judicial, to another.”); Ky. Const. § 28 (“No person or collection of persons, being of one of those departments, shall exercise any power properly belonging to either of the others, except in the instances hereinafter expressly directed or permitted.”). 20 Erwin Chemerinsky, Constitutional Law, 40 (Vicki Been et al. eds., 5th ed. 2013). 11 Cases . . . [and] Controversies . . ..”21 A federal court cannot adjudicate a case
that does not meet the requirements of the justiciability doctrines.
The U.S. Supreme Court has identified five major justiciability doctrines:
(1) the prohibition against advisory opinions, (2) standing, (3) ripeness, (4)
mootness, and (5) the political-question doctrine.22 The Court has also
distinguished between justiciability requirements that are “constitutional,”
meaning that Congress by statute cannot override them, and “prudential,”
meaning that they are based on prudent judicial administration and can be
overridden by Congress since they are not constitutional requirements.23 Of
most concern in this case is the standing requirement and the constitutional
limitations, if any, the standing requirement imposes.
“In essence the question of standing is whether the litigant is entitled to
have the court decide the merits of the dispute or of particular issues.”24
Federal constitutional standing has three requirements: the plaintiff must
allege that 1) he or she has suffered or imminently will suffer an injury; 2) the
injury is fairly traceable to the defendant’s conduct; and 3) a favorable federal
court decision is likely to redress the injury.25 In addition to these federal
constitutional requirements, two major federal prudential standing principles
exist: (1) a party generally may assert only his or her own rights and cannot
raise the claims of third parties not before the court, i.e. the prohibition against
21 (emphasis added). 22 Chemerinsky, at 40. 23 Id. 24 Warth v. Seldin, 422 U.S. 490, 498 (1975). 25 Chemerinsky, at 45.
12 “third-party standing”; and (2) a plaintiff may not sue as a taxpayer who shares
a grievance in common with all other taxpayers, i.e. the prohibition against
“generalized grievances.”26
To be clear, these standing requirements as outlined above are discussed
in the context of application to the limit on federal judicial power, not state
judicial power. Under principles of federalism, “[l]ong-established precedent
holds that Article III standing requirements do not apply in state courts and
courts of the territories.”27 So we now examine Kentucky’s current standing
doctrine.
A recently published law journal article28 aptly summarizes Kentucky’s
standing doctrine:
In Kentucky, standing is not a constitutional doctrine, but appears to be a self-imposed restraint based on a prohibition against generalized grievances as a “fundamental” principle of adjudication. Kentucky courts have offered limited explanation of their standing doctrine. The source of the doctrine appears to be a 1957 case challenging an alcohol board’s decision to increase the number of licenses available.29 There, [Kentucky’s highest Court] held that “[i]t is fundamental that a person may attack a proceeding of this nature by independent suit only if he can show that his legal rights have been violated.”30 This was based on the principle that “[a] public wrong or neglect or breach of a public duty cannot be redressed in a suit in the name of an individual whose interest in the right asserted does not differ from that of the
Id. 27 John W. Curran, Who’s Standing in the District After Grayson v. AT&T Corp.? The Applicability of the Case-or-Controversy Requirement in D.C. Courts, 62 Am. U. L. Rev. 739, 740 (2012) (citing N.Y. State Club Ass’n v. City of New York, 487 U.S. 1, 8 n.2 (1988) (“[T]he special limitations that Article III of the Constitution imposes on the jurisdiction of the federal courts are not binding on the state courts.”)). 28 Wyatt Sassman, A Survey of Constitutional Standing in State Courts, 8 Ky. J. Equine, Agric. 86 Nat. Resources L. 349, 369-70 (2016). 29 Lexington Retail Beverage Dealers Ass’n v. Dep’t of Alcoholic Beverage Control Bd., 303 S.W.2d 268, 269-70 (Ky. 1957). 30 Id.
13 public generally, or who suffers injury only in common with the general public.”31
Under the modem Kentucky test, “[t]o have standing to sue, one must have a judicially cognizable interest in the subject matter of the suit” that is not “remote and speculative,” but “a present and substantial interest in the subject matter.”32 Kentucky courts have not adopted the Lujan test, but have adopted elements of federal decisions on associational standing, which have seen substantially more elaboration than general standing doctrine in the Kentucky courts.33
Kentucky courts have seemingly created a judicially—as opposed to
constitutionally—imposed standing requirement. At the federal level, where
standing is partly grounded in Article III, Section 2, Clause 1 of the U.S.
Constitution, while “[the legislature] may enact statutes creating legal rights,
the invasion of which creates standing, even though no injury would exist
without the statute,”34 “[i]t is, of course, true that ‘[the legislature] may not
confer jurisdiction on . . . courts to render advisory opinions [J”*35 Federal law’s
constitutional standing requirement is a safeguard against the overreach of
judicial, legislative, and executive power. To ascertain what, if any,
constitutional standing requirements exist in Kentucky, we turn to the
Kentucky Constitution first and foremost.
Id. (citing Wegener v. Wehrman, 227 S.W.2d 997, 998 (Ky. 1950)). 32 Bailey v. Pres. Rural Roads of Madison Cnty., Inc., 394 S.W.3d 350, 355 (Ky. 2011). 33 See Bailey, 394 S.W.3d at 356; see also Interactive Gaming, 425 S.W.3d at 112-15. Kentucky does recognize taxpayer standing in specific circumstances. See Price v. Commonwealth, Transp. Cabinet, 945 S.W.2d 429, 432-33 (Ky. App. 1996) (citing Rosembalm v. Commercial Bank, 838 S.W.2d 423 (Ky. App. 1992) (collecting cases where “Kentucky has consistently recognized taxpayer standing”)). 34 Linda R.S. v. Richard D., 410 U.S. 614, 617 n.3 (1973) (citing Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 212 (1972) (White, J., concurring); Hardin v. Kentucky Utilities Co, 390 U.S. 1,6 (1968)). 35 Linda R.S., 410 U.S. at 617 n.3 (quoting Sierra Club v. Morton, 405 U.S. 727, 732 n.3 (1972)). 14 Section 109 of the Kentucky Constitution states, “The judicial power of
the Commonwealth shall be vested exclusively in one Court of Justice which
shall be divided into a Supreme Court, a Court of Appeals, a trial court of
general jurisdiction known as the Circuit Court and a trial court of limited
jurisdiction known as the District Court.” The Kentucky Constitution then goes
on to outline the various levels of courts in Kentucky and their respective
powers.
Most importantly, “The Circuit Court shall have original jurisdiction of all
justiciable causes not vested in some other court. It shall have such appellate
jurisdiction as may be provided by law.”36 “The Court of Appeals shall have
appellate jurisdiction only . . except in certain situations not relevant in this
case.37 “The Supreme Court shall have appellate jurisdiction only . . ” except in
certain situations not relevant to this case.38 “The district court shall be a court
of limited jurisdiction and shall exercise original jurisdiction as may be provided
by the General Assembly.”39
Notably, § 109 of the Kentucky Constitution, describing the judicial
power in Kentucky, does not contain the same case or controversy language
contained in Article III, Section 2, Clause 1 of the U.S. Constitution, nor does
any other provision of the Kentucky Constitution discussing judicial power in
the various levels of courts. This case or controversy language in the U.S.
Constitution is the lynchpin for all justiciability doctrines, including standing.
36 Ky. Const. § 112(5) (emphasis added). 37 Ky. Const. § 111(2) (emphasis added). 38 Ky. Const. § 110(2)(a) (emphasis added). 39 Ky. Const. § 113(6) (emphasis added). 15 Most notably, however, § 112(5) of the Kentucky Constitution grants circuit
courts original jurisdiction over all justiciable causes not vested in some other
court.
The standing doctrine is said to have its origins in the U.S. Supreme
Court case of Fairchild v. Hughes, a decision written by Justice Brandeis and
rendered in 1922.40 The U.S. Supreme Court later expounded on the doctrine:
If a party does not have the requisite standing to bring suit, the case is said to
be nonjusticiable; if a party does have the requisite standing to bring suit, the
case is said to be justiciable.41 The first appearance of the justiciable causes
phrase in § 112(5) appears in the 1974 Amendments to the Kentucky
Constitution. By limiting the circuit court’s jurisdiction to adjudicating
justiciable causes only, § 112(5) appears to have adopted some notion of the
justiciability doctrines articulated by the U.S. Supreme Court.
We have recognized the justiciable causes phrase as a constitutional
limitation on Kentucky courts’judicial power before; “‘Standing,’ of course, in
its most basic sense, refers to an integral component of the ‘justiciable cause’
requirement [in Ky. Const. § 112(5)] underlying the trial court’s jurisdiction.”42
Lawson also provided a potential constitutional test for Kentucky courts to
examine standing: “To invoke the court’s jurisdiction, the plaintiff must allege
40 258 U.S. 126 (1922). 41 See Flast v. Cohen, 392 U.S. 83, 95 (1968) (“[N]o justiciable controversy is presented when . . . there is no standing to maintain the action.”) (emphasis added) (citing TUeston v. Ullman, 318 U.S. 44 (1943); Frothingham v. Mellon, 262 U.S. 447 (1923)); Steel Co. v. Citizens for a Better Envt, 523 U.S. 83, 102 (1998) (“Standing to sue is part of the common understanding of what it takes to make a justiciable case.”) (emphasis added). 42 Lawson v. Office ofAtty. Gen, 415 S.W.3d 59, 67 (Ky. 2013) (citing Ky. Const. § 112) (emphasis added); Rose v. Council for Better Education, 790 S.W.2d 186 (Ky. 1989)). 16 [1] an injury [2] caused by the defendant [3] of a sort the court is able to
redress.”43 The emphasized words in the sentence quoted from Lawson—injury,
causation, and redressability—are the three constitutional standing
requirements as outlined by the U.S. Supreme Court in Lujan.44 To provide
clarity to Kentucky’s standing doctrine, we formally adopt the Lujan test as the
constitutional standing doctrine in Kentucky as a predicate for bringing suit in
Kentucky’s courts.
So, at bottom, for a party to sue in Kentucky, the initiating party must
have the requisite constitutional standing to do so, defined by three
requirements: (1) injury, (2) causation, and (3) redressability. In other words, “A
plaintiff must allege personal injury fairly traceable to the defendant’s allegedly
unlawful conduct and likely to be redressed by the requested relief.”45 “[A]
litigant must demonstrate that it has suffered a concrete and particularized
injury that is either actual or imminent. . ..”46 “The injury must be . . . ‘distinct
and palpable,’ and not ‘abstract’ or ‘conjectural’ or ‘hypothetical.’”47 “The injury
must be ‘fairly’ traceable to the challenged action, and relief from the injury
must be likely’ to follow from a favorable decision.”48
While the justiciable causes language only appears in § 112(5), which
specifically and only enumerates Kentucky circuit-court jurisdiction, the
43 Lawson, 415 S.W.3d at 67 (emphasis added) (citing Ky. Const. § 112; Rose, 790 S.W.2d at 186). 44 504 U.S. at 560-61. 45 Allen v. Wright, 468 U.S. 737, 751 (1984) (overruled by Lexmark Intern., Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1386 (2014) on other grounds). 46 Massachusetts v. EPA, 549 U.S. 497, 517 (2007) (citing Lujan, 504 U.S. at 578). 47 Allen, 468 U.S. at 751. 43 Id.
17 standing doctrine applies to cases brought before all Kentucky courts. Section
112(5) places original jurisdiction over a case in the circuit court; this means
that all cases, not expressly designated by a rule of law to be heard by another
court, must appear before the circuit court, the trial court of general
jurisdiction. And recall that the circuit court “shall have original jurisdiction of
all justiciable causes.” If a case is not justiciable, specifically because the
plaintiff does not have the requisite standing to sue, then the circuit court
cannot hear the case. And because both this Court and the Court of Appeals
“shall have appellate jurisdiction only,” logically speaking, neither court can
adjudicate a case on appeal that a circuit court cannot adjudicate because the
exercise of appellate jurisdiction necessarily assumes that proper original
jurisdiction has been established first at some point in the case.49
Therefore, if a circuit court cannot maintain proper original jurisdiction
over a case to decide its merits because the case is nonjusticiable due to the
plaintiffs failure to satisfy the constitutional standing requirement, the Court
of Appeals and this Court are constitutionally precluded from exercising
appellate jurisdiction over that case to decide its merits. This is so because the
exercise of appellate jurisdiction to decide the merits of a case necessarily
assumes that proper original jurisdiction in the circuit court first exists. Stated
more simply, establishing the requisite ability to sue in circuit court is a
necessary predicate for continuing that suit in appellate court. In this way, the
justiciable cause requirement applies to cases at all levels of judicial relief.
49 Black’s Law Dictionary defines “Appellate Jurisdiction” as, “The power of a court to review and revise a lower court’s decision.” (10th ed. 2014). In contrast, Black’s Law Dictionary defines “Original Jurisdiction” as, “A court’s power to hear and decide a matter before any other court can review the matter.” 18 Having outlined Kentucky’s standing doctrine, we now turn to
determining whether Lettie Sexton has the requisite standing to sue in this
case.
C. Sexton lacks standing to sue. Simply stated, Sexton, by and through her authorized representative,
ARH, lacks the requisite standing to sue in this case. We emphasize the crucial
determinative fact—because Sexton, not ARH, is the true plaintiff in this case,
we must examine the standing requirement through the lens of Sexton’s, not
ARH’s, purported satisfaction.
Sexton has not and will not suffer an “injury” in this case. Under
Medicaid statutes and regulations, and as conceded by both parties, Sexton is
not financially interested in any way whatsoever in the outcome of this dispute,
which, at its core, is over whether ARH can pursue a reimbursement claim
from Coventry through the Medicaid administrative process at the Cabinet.50
Additionally, Sexton has not alleged that she did not receive all the proper
medical care she needed. Nor has she alleged that she will be precluded from
receiving medical care in the future.
At oral argument, a suggestion was made that in some broad sense
Sexton and other Medicaid beneficiaries may have been or might be potentially
harmed if ARH decided to withhold future medical care from Sexton because of
Coventry’s refusal to reimburse ARH for such care, absent administrative
oversight of that decision. But the fear of ARH denying future medical care, a
“conjectural” and “hypothetical” injury, cannot establish the requisite injury
50 See 42 C.F.R. § 447.15.
19 component to satisfy the standing doctrine. Additionally, “[plaintiffs] cannot
manufacture standing merely . . . based on their fears of hypothetical future
harm that is not certainly impending.”51
Nor can Medicaid beneficiaries’ purported interest in maintaining the
integrity of the system satisfy the standing requirement. This is exactly the type
of “abstract, conjectural, and hypothetical injury” that fails the injury-in-fact
standing requirement: “[I]t would exceed [constitutional] limitations if, at the
behest of [the legislature] and in the absence of any showing of concrete injury,
we were to entertain citizen suits to vindicate the public’s nonconcrete interest
in the proper administration of the laws. . . . The party bringing suit must
show that the action injures him in a concrete and personal way.”52
Additionally, it has been argued that federal and state Medicaid statutes
and regulations themselves create standing for Sexton to sue in court because
they mandate a Medicaid State Fair Hearing be conducted to ascertain
misconduct on the part of Coventry and that no such hearing was conducted.
But, “deprivation of a procedural right without some concrete interest that is
affected by the deprivation—a procedural right in vacuo—is insufficient to
create . . . standing. Only a ‘person who has been accorded a procedural right
51 Clapper v. Amnesty Intern. USA, 568 U.S. 398, 416 (2013) (“We hold that respondents lack Article III standing because they cannot demonstrate that the future injury they purportedly fear is certainly impending . . ..”) (citing Pennsylvania v. New Jersey, 426 U.S. 660, 664 (1976)). 52 Summers v. Earth Island Inst., 555 U.S. 488, 497 (2009) (quoting Lujan, 504 U.S. at 580-81 (Kennedy, J., concurring)) (emphasis in original). 20 to protect his concrete interests can assert that right without meeting all the
normal standards for redressability and immediacy.’”53
If a court were to instruct the Cabinet to conduct an administrative
hearing regarding Coventry’s denial of reimbursement to ARH, nothing in
Sexton’s life would change. Regardless of the outcome of this administrative
hearing, Sexton would be no better or worse off than before the hearing was
conducted. Furthermore, “[i]t is settled that [the legislature] cannot erase
[constitutional] standing requirements by statutorily granting the right to sue
to a plaintiff who would not otherwise have standing.”54 The U.S Supreme
Court has additionally instructed:
[The legislature’s] role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in- fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. [Constitutional] standing requires a concrete injury even in the context of a statutory violation. For that reason, [a plaintiff] could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.55
Sexton’s lack of standing becomes clearer when one looks at the root of
what is being sought in this case. ARH is using Sexton as the front to redress
its own potential loss. Coventry denied reimbursement to ARH in this case—
ARH seeks to recover that reimbursement in some way circuitous or at least
53 Summers, 555 U.S. at 496 (quoting Lujan, 504 U.S. at 572 n.7) (emphasis in original). 54 Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547-48 (2016) (quoting Raines v. Byrd, 521 U.S. 811, 820 n.3 (1997)); see also Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 100 (1979) (“In no event. . . may Congress abrogate the Art. Ill minima.”). 55 Spokeo, 136 S.Ct. at 1549 (citing Summers, 555 U.S. at 496) (“[Deprivation of a procedural right without some concrete interest that is affected by the deprivation . . . is insufficient to create [constitutional] standing.”)). 21 establish some process to appeal from the decisions of managed-care
organizations not to reimburse providers for patient care. These are the true
injuries in this case, having nothing to do with Sexton.
We acknowledge two important points. First, the legislature has amended
Kentucky’s legislative Medicaid reimbursement scheme to provide ARH redress
should this situation arise again.56 Second, it appears ARH can seek, and has
sought, redress of its reimbursement grievances against MCOs by filing its own
lawsuit.57
Concern has been raised over the limited, if not completely absent,
oversight over the decisions of managed-care organizations that fail to provide
reimbursement to hospitals for coverage provided to Medicaid beneficiaries.
Such a concern begs legislative, not judicial, redress.
Our decision today is not that the Cabinet correctly decided that Sexton
did not have the requisite standing to seek redress through an administrative
agency hearing; rather, it is that Sexton does not have the requisite standing to
seek redress for this alleged injury in a Kentucky court. Whether a party has
the requisite standing to seek redress through an administrative agency is an
56 See KRS 205.646(2) (eff. Apr. 8, 2016); see also KAR 17:035E, 040E. 57 In fact, ARH has sued Coventry elsewhere, in federal court, for, in part, essentially the true relief it seeks here—obtaining reimbursement, or the chance to obtain reimbursement, for the services it provides to patients. See, e.g., Appalachian Reg’I Healthcare, Inc. v. Coventry Health & Life Ins. Co., 214 F.Supp.3d 606 (E.D. Ky. 2016) (dismissing ARH’s complaint); Appalachian Reg’l Healthcare, Inc. v. Coventry Health & Life Ins. Co., 970 F.Supp.2d 687 (E.D. Ky. 2013) (notably, holding that ARH itself has standing to sue Coventry). 22 entirely different question than whether a party has the requisite standing to
seek redress through a Kentucky court.58
If Sexton had the requisite standing to afford this Court the ability to
hear her case on the merits, then we would analyze the issue of whether she
had the requisite standing to have her case heard by the Cabinet, an
administrative agency. But because Sexton does not have the requisite
standing to sue, because the legislature does not have the power to confer
constitutional standing where none exists, and because the standing issue
summarily decides this case, we need not reach the sovereign immunity issue,
nor any of the other issues raised in this case.
III. CONCLUSION.
We hold that it is the constitutional responsibility of all Kentucky courts
to consider, even upon their own motion, whether plaintiffs have the requisite
standing, a constitutional predicate to a Kentucky court’s adjudication of a
case, to bring suit. We adopt the United States Supreme Court’s test for
standing as announced in Lujan v. Defenders of Wildlife.59 Under that test, we
hold that Sexton lacks the requisite standing to sue in this case. Therefore, we
reverse the Court of Appeals, vacate the decision of the trial court, and remand
this case to the trial court with instructions to dismiss Sexton’s petition for
judicial review.
58 For a discussion of this distinction, see 13B Fed. Prac. & Proc. Juris. § 3531.13 (3d ed.). We leave the issue of standing in an administrative agency adjudication for another day. 59 504 U.S. at 560-561. 23 All sitting. Minton, C.J., Cunningham, Hughes, Keller, VanMeter and
Venters, JJ., concur. Wright, J., dissents by separate opinion.
WRIGHT, J., DISSENTING: The majority opinion concludes that Lettie
Sexton lacks standing to bring a cause of action in the courts and orders that
the trial court’s decision be vacated and the petition for judicial review
dismissed. Constitutional standing has three requirements: (1) injury, (2)
causation, and (3) redressability.
Sexton was denied treatment for a heart condition to which she claims
she had a right under Medicaid. The denial of the right to coverage and danger
to her life is an injury. Coventry Health and Life Insurance, Inc. (Coventry)
denied Sexton’s request for additional observation and testing which was a
denial of her alleged right to treatment and increased danger to her life.
Coventry’s denial of Sexton’s claim for medical treatment left her dependent
upon the charity of strangers. The alleged injury is redressable by ordering
Coventry to pay Sexton for the value of any treatment wrongfully denied.
The majority’s position is that since Sexton was fortunate enough to
receive charity to cover the treatment, this destroyed her standing to sue in the
courts of the Commonwealth to address the alleged wrongful denial of her right
to treatment. The fact that the danger to Sexton was so severe that the doctor
and the hospital gave her the treatment when they knew it was extremely
unlikely they would be paid does not alter the fact that she was denied
treatment by Coventry (causation) for which she had an alleged right (injury).
Therefore, I dissent from the determination that Sexton lacked standing to sue
in the courts of the Commonwealth.
24 Medicaid prohibits a health care provider from collecting any payment for
treatment beyond what is paid by Medicaid. The patient who has been denied
a treatment has two options: (1) request a hearing on the denial or (2) pay for
the treatment herself and then request a hearing on the denial. If a person has
enough money to pay for the treatment, the second would be a possibility. If
the person is poor and unable to pay for the treatment, her only option is to
forgo the treatment and request a hearing on the denial. This is a reasonable
option unless the condition is life-threatening. If Sexton was unable to pay and
postponed the treatment until a hearing could be had, then the critical life-
threatening period would pass before a hearing could be had on the issue. If
she was still alive when the hearing came about, then the hospitalization and
treatment would obviously be unnecessary. If she died before the hearing, the
hospitalization and treatment would be unnecessary, and she would lack
standing to sue in the courts of the Commonwealth. A person who is rich
enough to pay for her treatment and then appeal would have the option of
obtaining potentially life-saving treatment. The person who is too poor to pay
for her treatment is discriminated against by a denial of her potentially life
saving treatment merely because she is too poor to pay for the treatment.
A third option occurred in Sexton’s case: the doctors and hospital were
strongly of the opinion that hospitalization and treatment for additional time
were necessary. Their determination of need was so strong that they provided
the treatment even when they were aware that it would foreclose them from
being paid. This treatment by the doctors and hospital was provided after
Coventry denied coverage for the treatment (injury and causation). After
Coventry had caused the alleged injury of denying Sexton potentially life-saving 25 treatment, then the doctors and hospital treated her out of charity. The
majority’s position is that this act of charity destroyed Sexton’s standing and
ability to seek redress in the courts of the Commonwealth.
Unfortunately, Sexton lacked the ability to pay and when she received
charity from the doctors and hospital the majority’s opinion would deny her
access to justice due to her financial condition of only being able to receive a
potentially life-saving treatment as a result of charity. The majority effectively
slams the courthouse doors in Sexton’s face due to her economic condition—
creating an access to justice issue for our most vulnerable population. As
William Blackstone stated centuries ago, “it is a settled and invariable principle
. . . that every right when withheld must have a remedy, and every injury its
proper redress.” Commentaries on the Law of England, note 42 at 109 (1765).
Here, Sexton’s right was withheld, and she sustained an injury. However, she
is afforded neither remedy nor redress due to her socioeconomic status.
The majority opinion holds that Sexton lacks standing because: (1) she
received the treatment the treating physician said she needed so the treatment
is no longer needed; (2) the hospital and doctors are prohibited from suing a
Medicaid patient for the services provided and cannot sue Sexton; and (3) since
she received the treatment and is immune to suit for the cost of the treatment
she lacks an injury to give her standing to sue in the courts of the
Commonwealth.
If Sexton had enough money to have paid for her treatment she would
have been able to have an administrative hearing and standing in the courts.
Because Sexton was not rich enough to pay for her treatment and was
dependent upon the charity of strangers, she was denied an administrative 26 hearing and is now being denied standing to have her case heard in the courts.
The only difference between Sexton and a patient who is rich enough to pay for
their treatment is that Sexton’s treatment was paid for by the charity of others.
The problem with the majority’s position is that the injury occurred when
Sexton was denied coverage for treatment which allegedly should have been
paid by her Medicaid coverage. The charity from the hospital and doctors
occurred later in time and was not a factor in the denial of coverage. It is a
dangerous precedent to say that the courts will not hear a party who has been
injured if the party receives charity to give them what they are already entitled
to.
If Sexton had been able to pay for her own treatment, then she could
have requested a hearing and, if denied, sought redress in the courts of the
Commonwealth. If Sexton’s relatives had given her the money for the
treatment, would she lack standing to sue in the courts of the Commonwealth
of Kentucky? Since the money for the treatment would be a gift, Sexton’s
relatives would lack the ability to require her to repay it. Under the majority’s
position, if Sexton received the treatment and could not be legally required to
repay her relatives, then she would not have an injury. Therefore, Coventry’s
denial of coverage would not be an injury and she would lack standing in the
courts.
It is important to understand where the majority’s position might lead us
in the future. Suppose Sexton had purchased a car to travel to the hospital for
dialysis treatment rather than being denied Medicaid, then a dispute arose over
the purchase agreement and the car dealer refused to give her the car. If her
neighbors were so concerned that they raised the money and gave Sexton a car 27 that was as good as or better than the one that she was purchasing, the car
would be a gift, and the neighbors would lack the legal right to require her to
repay the money or return the car. In the current case, Sexton claims she has
a right to coverage under Medicaid. In this example, she would be claiming a
right to possession of the car under her purchase agreement. Under the
majority’s position, Sexton would lack an injury and standing to sue the dealer
for the car under her purchase agreement. Are we really going to say that a
subsequent act of charily would deprive someone of the ability to go to court
and establish their rights?
How remote does the act of charity have to be before we will allow the
economically disadvantaged into the courts? The majority would deny Sexton’s
access to the courts if the charity was given by the doctors or hospital. A
logical extension of the majority’s position would deny her access to the courts
if the money to pay for the treatment was given by her relatives. The majority’s
ruling would also deny her access to the courts due to charity from her friends
and neighbors. The simple fact is that she is injured if Coventry denies her
coverage without regard to whether she received charity from someone—or
when that charity happens to occur.
Coventry caused Sexton’s alleged injury by denying her treatment under
her Medicaid coverage. The injury occurred prior to the doctors and hospital
deciding (even though they were very unlikely to be paid) to give her the
treatment. The fact that Sexton received the treatment does not change the
fact that she was denied coverage to which she alleges she had a right. The
injury occurred when she was denied coverage and the subsequent charity
from the doctors and hospital does not change the fact that she was injured. 28 COUNSEL FOR COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES, DEPARTMENT FOR MEDICAID SERVICES APPELLANTS:
Catherine Elaine York Cabinet for Health and Family Services
COUNSEL FOR LETTIE SEXTON, BY AND THROUGH HER AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC.:
Virginia Hamilton Snell Carole Douglas Christian Amanda Warford Edge Wyatt, Tarrant & Combs, LLP
COUNSEL FOR COVENTRY HEALTH AND LIFE INSURANCE D/B/A COVENTRYCARES, INC.:
Joyce Ann Merritt Samantha Nance Embry Merritt Shaffar Womack, PLLC
Miguel Estrada Lucas C. Townsend Gibson, Dunn & Crutcher LLP
29 2G16-SC-000529-DG
COMMONWEALTH OF KENTUCKY, APPELLANT CABINET FOR HEALTH AND FAMILY SERVICES, DEPARTMENT FOR MEDICAID SERVICES
ON REVIEW FROM COURT OF APPEALS V. CASE NO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
LETTIE SEXTON, BY AND THROUGH HER APPELLEES AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC.; AND COVENTRY HEALTH AND LIFE INSURANCE D/B/A COVENTRYCARES, INC.
COVENTRY HEALTH AND LIFE APPELLANT INSURANCE D/B/A COVENTRYCARES, INC.
ON REVIEW FROM COURT OF APPEALS V. CASE NO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
LETTIE SEXTON, BY AND THROUGH HER APPELLEES AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC., AND COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES
LETTIE SEXTON, BY AND THROUGH HER APPELLANT AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC.
ON REVIEW FROM COURT OF APPEALS V. CASE NO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
COMMONWEALTH OF KENTUCKY, APPELLEES CABINET FOR HEALTH AND FAMILY SERVICES AND COVENTRY HEALTH AND LIFE INSURANCE D/B/A COVENTRYCARES, INC.
ON REVIEW FROM COURT OF APPEALS V. CASE NO. 2015-CA-000246 HARLAN CIRCUIT COURT NO. 14-CI-00542
LETTIE SEXTON, BY AND THROUGH HER APPELLEES AUTHORIZED REPRESENTATIVE, APPALACHIAN REGIONAL HEALTHCARE, INC., AND COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES
ORDER CORRECTING
The Opinion of the Court rendered September 27, 2018, is corrected on
its face by substitution of the attached Opinion in lieu of the original Opinion.
Said correction does not affect the holding of the original Opinion of the
ENTERED: September 27, 2018