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MORABITO v. BLUM

November 25, 1981

Katherine MORABITO, Juan Orellana, Lucy Rigoglioso, Ida Sandler, Florence Strzelesky, Barbara Bates, Rose Klotz, and Benigno Ortiz, individually and on behalf of all others similarly situated, and the Gray Panthers, Plaintiffs,
v.
Barbara BLUM, individually and in her capacity as Commissioner of the New York State Department of Social Services; Richard Schweiker, individually and in his capacity as Secretary of Health and Human Services; James Krauskopf, individually and in his capacity as Commissioner of the New York City Department of Social Services; and Noah Weinberg, as Director of the Rockland County Department of Social Services, Defendants



The opinion of the court was delivered by: WARD

This action challenges the State of New York's termination of an agreement ("the Section 1634 agreement") entered into by the State of New York and the Secretary of Health and Human Services pursuant to section 1634 of the Social Security Act, 42 U.S.C. § 1383c. It also contests the legality of certain amendments to the State of New York's Medicaid plan; these amendments prohibit Medicaid applicants and recipients from transferring assets in order to become or to remain financially eligible for Medicaid. Plaintiffs move (1) for an order certifying this action as a class action pursuant to Rule 23(c), Fed.R.Civ.P., and (2) for an order granting plaintiffs partial summary judgment pursuant to Rule 56(a), Fed.R.Civ.P. Defendant Barbara Blum, Commissioner of the New York State Department of Social Services, moves for an order dismissing this action either pursuant to Rule 12(b)(1), Fed.R.Civ.P., for lack of subject matter jurisdiction, or pursuant to Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim upon which relief can be granted. Alternatively, defendant Blum moves, pursuant to Rule 56(b), Fed.R.Civ.P., for an order granting partial summary judgment in her favor. Defendant James Krauskopf, Commissioner of the New York City Department of Social Services, moves for an order either (1) dropping him from this action, pursuant to Rule 21, Fed.R.Civ.P., on the ground that he is an improper party, or (2) dismissing this action in his regard, pursuant to Rule 12(b)(6), Fed.R.Civ.P., on the ground that plaintiffs have failed to state a claim against defendant Krauskopf upon which relief can be granted. For the reasons hereinafter stated, defendant Blum's motion to dismiss is denied, defendant Krauskopf's motion to dismiss is granted, plaintiffs' motion for partial summary judgment is granted, defendant Blum's motion for partial summary judgment is denied, and plaintiffs' motion for class certification is granted in part and denied in part.

BACKGROUND

This case involves the complex relationship between two programs that provide assistance to the poor. One program, federally funded and federally administered, provides cash benefits, known as Supplemental Security Income ("SSI"), to needy aged, blind, and disabled individuals. See 42 U.S.C. §§ 1381-1383c (statutory provisions governing SSI program). The SSI program is administered by the Social Security Administration under the auspices of the Department of Health and Human Services ("DHHS"). The second program provides medical assistance ("Medicaid") to the poor. See 42 U.S.C. §§ 1396-1396k (statutory provisions governing Medicaid program). The Medicaid program is funded and administered jointly by the federal government (through DHHS) and participating state governments.

 The statutory provisions governing the Medicaid program provide for federal reimbursement of state governments for a portion of the costs of providing medical assistance to the needy. These provisions also set out the basic requirements that state medical assistance programs must meet in order to receive such reimbursement. Generally, states wishing to receive reimbursement under the Medicaid program must at least provide medical assistance to any individual eligible for cash public assistance benefits under the Social Security Act. 42 U.S.C. § 1396a(a)(10)(A). In other words, Medicaid eligibility is, to a certain extent, determined by criteria set forth in federal law, namely, the Social Security Act. *fn1" An exception to this rule, enacted in section 209(b) of the Social Security Act Amendments of 1972, 42 U.S.C. § 1396a(f) ("Section 209(b)"), is that states may, if they choose to do so, make their own determinations whether SSI recipients (one of the two classes of persons that receive cash public assistance benefits under the Social Security Act) qualify for Medicaid. *fn2" States that choose the "Section 209(b) option" may use stricter standards to determine the Medicaid eligibility of SSI recipients than are used to determine SSI eligibility, subject to the limitation that a Section 209(b) state may not adopt eligibility criteria narrower than the standards that governed Medicaid eligibility in that state as of January 1, 1972. Id. *fn3"

 When the SSI program went into effect on January 1, 1974, the State of New York did not choose the Section 209(b) option. Instead, pursuant to the Section 1634 agreement, it agreed to accept federal determinations of SSI eligibility as determinative of Medicaid eligibility, and thus to provide Medicaid automatically to all SSI recipients living in New York. *fn4" Beginning in January 1974, then, New York SSI recipients received Medicaid without having to make separate Medicaid applications and without having to undergo periodic redeterminations of Medicaid eligibility.

 On April 30, 1980, defendant Blum notified DHHS that the State of New York intended to terminate the Section 1634 agreement as of August 29, 1980. By this action, the State of New York intended to put itself in a position to exercise the Section 209(b) option, under which it would be permitted to develop its own criteria for deciding the Medicaid eligibility of SSI recipients and to make its own determinations of Medicaid eligibility pursuant to such criteria. The State of New York desired to avail itself of the Section 209(b) option for the following reason. Under New York law, a person is eligible for medical assistance such as Medicaid only if he or she has not made "a voluntary transfer of property ... for the purpose of qualifying for such assistance." N.Y.Soc.Serv.Law § 366.1(e). The State of New York believed, in view of the fact that the federal statutes governing SSI eligibility contained no transfer-of-assets provision similar to that codified in N.Y.Soc.Serv.Law § 366.1(e), that New York's transfer-of-assets provision could only be enforced against Medicaid recipients and applicants by freeing the State of New York from the requirement that it accept federal determinations of SSI eligibility as determinative of Medicaid eligibility. *fn5" This could only be accomplished by terminating the Section 1634 agreement and exercising the Section 209(b) option.

 As noted, defendant Blum notified DHHS of the State of New York's intention to terminate the Section 1634 agreement in a letter dated April 30, 1980. In June 1980, defendant Blum sent DHHS the State of New York's proposed amendments to its Medicaid program, which amendments contained a transfer-of-assets provision based on N.Y.Soc.Serv.Law § 366.1(e). On July 8, 1980, defendant Blum notified the New York state legislature of the anticipated termination of the Section 1634 agreement and of the planned rule changes. Notice of these events was published in the New York State Register on July 23, 1980. The Section 1634 agreement was terminated, as planned, as of the close of business on August 29, 1980. The State of New York exercised the Section 209(b) option on September 2, 1980. Since that date, all Medicaid applications, including those filed by SSI recipients, have been determined solely by the State of New York pursuant to criteria set forth in the New York Social Services Law. In September 1980, the State of New York began subjecting all persons who formerly had been granted Medicaid eligibility on the basis of their SSI eligibility to a "recertification" process; this process is designed to ascertain whether these persons continue to enjoy Medicaid eligibility under the newly applicable criteria.

 The instant litigation, which was commenced as a class action by a complaint filed in this Court on August 8, 1980, is based on two distinct legal theories. First, plaintiffs contend that N.Y.Soc.Serv.Law § 366.1(e), insofar as it denies Medicaid eligibility to persons who transfer assets, is invalid and unenforceable. The Court does not reach this issue by today's decision. Second, plaintiffs challenge the manner in which defendant Blum, in order to enforce N.Y.Soc.Serv.Law § 366.1(e), terminated the Section 1634 agreement. The individual named plaintiffs are residents of New York who are at least sixty-five years of age, or blind, or disabled. They are recipients of SSI, or Medicaid, or both. The Gray Panthers, the other named plaintiff, is an organization of elderly citizens that includes in its membership many individuals who are eligible for SSI, or Medicaid, or both. The complaint names as defendants the Commissioner of the New York State Department of Social Services (Barbara Blum), the Secretary of DHHS (now Richard Schweiker), the Commissioner of the New York City Department of Social Services (now James Krauskopf), and the Director of the Rockland County Department of Social Services (Noah Weinberg). The action was dismissed as to defendant Weinberg by an order filed November 12, 1980.

 This case has been the subject of a substantial motion practice. In August 1980, plaintiffs filed a motion for an order certifying the action as a class action and for a preliminary injunction enjoining termination of the Section 1634 agreement and enforcement of the transfer-of-assets provision contained in N.Y.Soc.Serv.Law § 366.1(e). The Court deferred decision on the class action branch of plaintiffs' motion, and, in an oral decision rendered at the conclusion of a two-day hearing, denied the motion insofar as it sought a preliminary injunction. Morabito v. Blum, No. 80 Civ. 4584 (RJW) (S.D.N.Y. Aug. 27, 1980). Undaunted, plaintiffs promptly moved, pursuant to Rule 56(a), Fed.R.Civ.P., for an order granting plaintiffs partial summary judgment by upholding their claim that defendant Blum acted unlawfully in terminating the Section 1634 agreement. Defendant Blum responded by filing a motion for an order dismissing plaintiffs' complaint, either pursuant to Rule 12(b)(1), Fed.R.Civ.P., for lack of subject matter jurisdiction, or pursuant to Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim upon which relief can be granted. Alternatively, defendant Blum's motion sought an order pursuant to Rule 56(b), Fed.R.Civ.P., granting her partial summary judgment by rejecting plaintiffs' claim that defendant Blum acted unlawfully in terminating the Section 1634 agreement. Defendant Krauskopf moved (1) for an order, pursuant to Rule 21, Fed.R.Civ.P., dropping him from this action on the ground that he is an improper party, or (2) for an order, pursuant to Rule 12(b)(6), Fed.R.Civ.P., dismissing the action in his regard for failure to state a claim upon which relief can be granted. The class action branch of plaintiffs' original motion, together with all the subsequently filed motions, are the subjects of today's decision.

 DISCUSSION

 For the sake of convenience, the Court has determined not to deal with the motions presently before it in the order in which they were filed, but rather in the following sequence: (1) defendant Blum's motion to dismiss; (2) defendant Krauskopf's motion to dismiss; (3) plaintiffs' motion and defendant Blum's cross-motion for partial summary judgment; and (4) plaintiffs' motion for certification of this action as a class action.

 Defendant Blum's Motion to Dismiss

 As noted, defendant Blum moves for an order dismissing this action either pursuant to Rule 12(b)(1), Fed.R.Civ.P., for lack of subject matter jurisdiction, or pursuant to Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim upon which relief can be granted. In support of the first branch of her motion, defendant Blum argues that subject matter jurisdiction does not lie under 28 U.S.C. § 1331 because the amount in controversy does not exceed $ 10,000, and that 28 U.S.C. § 1343 is insufficient to form a basis for jurisdiction because the statute relied upon herein, the Social Security Act, is not a statute securing "equal rights" or "civil rights" within the meaning of 28 U.S.C. § 1343(3) & (4). Defendant Blum's Rule 12(b)(1) argument also relies on judicial precedent holding that subject matter jurisdiction is lacking under either 28 U.S.C. § 1331 or 28 U.S.C. § 1343 where the complaint fails to state a substantial federal claim.

 Subsequent to the filing of defendant Blum's motion, the Federal Question Jurisdictional Amendments Act of 1980, Pub.L.No. 96-486, 94 Stat. 2369 (1980), was enacted into law. This statute eliminated the amount-in-controversy requirement from 28 U.S.C. § 1331, rendering the statutory aspect of defendant Blum's subject-matter-jurisdiction argument meritless. *fn6" See id. § 2. Equally meritless is defendant Blum's contention that plaintiffs' complaint must be dismissed under Rule 12(b)(1) for failure to state a substantial federal claim. While there is judicial authority for the proposition that dismissal for lack of subject matter jurisdiction is appropriate where the complaint fails to allege a substantial federal claim, 13 C. Wright & A. Miller, Federal Practice and Procedure § 3564 (1975); see Hagans v. Lavine, 415 U.S. 528, 538, 94 S. Ct. 1372, 1379, 39 L. Ed. 2d 577 (1974), it is well settled that such dismissals should be confined to cases where the complaint on its face, without resort to extraneous matter, is so plainly insubstantial as to be devoid of any merit, enabling the court to conclude that the claim asserted is patently frivolous or wholly insubstantial. Bell v. Hood, 327 U.S. 678, 681-82, 66 S. Ct. 773, 775-76, 90 L. Ed. 939 (1946); Giulini v. Blessing, 654 F.2d 189, 192 (2d Cir. 1981). Given the Court's conclusion infra that plaintiffs are entitled to summary judgment with respect to a part of their claim, it goes without saying that the Court regards the complaint to state a substantial federal claim within the meaning of the above-cited cases.

 The second branch of defendant Blum's motion to dismiss contends that, for a variety of reasons, plaintiffs are without standing to present certain of the claims set forth in their complaint. Defendant Blum's standing argument does not suggest that no private right of action exists to challenge her alleged violations of the Social Security Act and the regulations promulgated thereunder; it is well settled that 42 U.S.C. § 1983, relied on by plaintiffs here, provides such a private right of action. See Maine v. Thiboutot, 448 U.S. 1, 4, 100 S. Ct. 2502, 2504, 65 L. Ed. 2d 555 (1980). Instead, defendant Blum argues that plaintiffs lack standing because they have not suffered a sufficient direct injury as the result of defendant Blum's allegedly unlawful conduct to be permitted to utilize the remedy concededly afforded by 42 U.S.C. § 1983. At the present time, it is only necessary for the Court to decide whether plaintiffs have standing to present the claim that is the subject of the motion and cross-motion for partial summary judgment pending before the Court. In other words, the immediate question for the Court is whether plaintiffs have standing to claim that defendant Blum acted unlawfully in terminating the Section 1634 agreement. The Court leaves until another day the question of plaintiffs' standing to challenge the enforceability of the transfer-of-assets provision contained in N.Y.Soc.Serv.Law § 366.1(e).

 The principles that guide the Court's determination of plaintiffs' standing to challenge the lawfulness of defendant Blum's termination of the Section 1634 agreement are familiar. The basic question when standing is at issue is whether the plaintiff has alleged "such a personal stake in the outcome of the controversy" as to warrant his or her invocation of federal-court jurisdiction, and to justify exercise of the court's remedial powers on his or her behalf. Baker v. Carr, 369 U.S. 186, 204, 82 S. Ct. 691, 703, 7 L. Ed. 2d 663 (1962). A federal court's jurisdiction can be invoked, then, only when the plaintiff himself or herself has suffered some threatened or actual injury resulting from the putatively illegal action. Warth v. Seldin, 422 U.S. 490, 499, 95 S. Ct. 2197, 2205, 45 L. Ed. 2d 343 (1975).

 Upon applying these principles to the facts of this case, the Court is convinced that all the named plaintiffs have standing to challenge the lawfulness of defendant Blum's termination of the Section 1634 agreement. Here, all of the nine individual named plaintiffs were eligible for Medicaid as of August 29, 1980. They have standing to challenge the validity of the termination of the Section 1634 agreement because, having been eligible for Medicaid on August 29, 1980, they have standing to present both claims pursuant to which plaintiffs contend that the termination was invalid. Specifically, they have standing to object to defendant Blum's alleged failure to consult with a properly constituted medical care advisory committee, and standing as well to object to defendant Blum's alleged failure to give the requisite public notice of the termination of the Section 1634 agreement, because both the consultation requirement and the public notice requirement exist to protect the interests of Medicaid recipients. As is noted at length infra in the Court's discussion of the parties' cross-motions for partial summary judgment, the courts have consistently allowed claims such as the instant challenge to the validity of the termination of the Section 1634 agreement to be raised by Medicaid recipients.

 Moreover, eight of the nine individual named plaintiffs are SSI recipients who had applied for and were receiving SSI as of August 29, 1980, meaning that, before termination of the Section 1634 agreement, these eight plaintiffs were automatically eligible to receive Medicaid. In the Court's view, the termination of the Section 1634 agreement worked a direct injury on these eight plaintiffs, as it did on all persons who formerly enjoyed automatic Medicaid eligibility on account of their SSI eligibility, merely by imposing on them the burden of having their Medicaid eligibility recertified. In other words, these plaintiffs, by alleging that the termination of the Section 1634 agreement has forced them to endure duplicative bureaucratic procedures that heretofore were not imposed on them, *fn7" have thereby alleged an injury that is sufficiently direct to permit them to challenge the validity of defendant Blum's termination of the Section 1634 agreement.

 The other named plaintiff is the Gray Panthers, an organization dedicated to helping the elderly of the United States. The membership of the Gray Panthers includes New York residents who, as of August 29, 1980, were recipients of SSI, or Medicaid, or both. Since the Gray Panthers has thereby alleged and proved that, under the principles set forth above, some of its members have standing to challenge the procedure by which defendant Blum terminated the Section 1634 agreement, the organization itself has standing to present this challenge. Schweiker v. Gray Panthers, 453 U.S. 34, 101 S. Ct. 2633, 2638 n.8, 69 L. Ed. 2d 460 (1981).

 In sum, the Court holds that it has subject matter jurisdiction over this action insofar as it challenges the lawfulness of defendant Blum's termination of the Section 1634 agreement, and further holds that all the named plaintiffs have standing to present this challenge. Defendant Blum's motion to dismiss is accordingly denied insofar as it seeks dismissal of plaintiffs' claim challenging the lawfulness of defendant Blum's termination of the Section 1634 agreement, and is denied without prejudice insofar as it seeks dismissal of any other claims set forth in plaintiffs' complaint.

 Defendant Krauskopf's Motion to Dismiss

 Defendant Krauskopf moves (1) for an order, pursuant to Rule 21, Fed.R.Civ.P., dropping him from this action on the ground that he is an improper party, or (2) for an order, pursuant to Rule 12(b)(6), Fed.R.Civ.P., dismissing the complaint in his regard for failure to state a claim upon which relief can be granted. The Court agrees that plaintiffs' complaint fails to state a claim against defendant Krauskopf. The complaint, which is forty-three pages long and contains 164 allegational paragraphs followed by an eleven-point decretal paragraph, specifically mentions defendant Krauskopf only in the caption, where he is named as a defendant, and in paragraph eighty-two, where he is identified as the Commissioner of the New York City Department of Social Services. Plaintiffs make no allegations whatsoever that defendant Krauskopf acted or omitted to act in any particular fashion. In short, the complaint provides no basis for anyone, including the Court and defendant Krauskopf, to ascertain why plaintiffs think that Krauskopf has violated the law in some manner or acted in some fashion so as to injure plaintiffs. The courts have consistently held that, where the complaint names a defendant in the caption but contains no allegations indicating how the defendant violated the law or injured the plaintiff, a motion to dismiss the complaint in regard to that defendant should be granted. Gutierrez v. Vergari, 499 F. Supp. 1040, 1052 (S.D.N.Y.1980); Holloway v. Carey, 482 F. Supp. 551, 553 (S.D.N.Y.1979); Child v. Beame, 417 F. Supp. 1023, 1025 (S.D.N.Y.1976). This rule accords with the principle that a complaint does not contain the "short and plain statement of the claim" required by Rule 8(a)(2), Fed.R.Civ.P., unless it contains something more by way of a claim for relief than a bare averment that the pleader wants relief and is entitled to it. 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, at 125 (1969). Accordingly, the Court grants defendant Krauskopf's motion, pursuant to Rule 12(b)(6), Fed.R.Civ.P., for an order dismissing the complaint in his regard. Plaintiffs shall have leave to replead with respect to defendant Krauskopf by serving and filing an amended complaint within thirty (30) days of the date of this decision. *fn8"

 Parties' Cross-Motions for Partial Summary Judgment

 As noted, plaintiffs have moved, pursuant to Rule 56(a), Fed.R.Civ.P., for an order granting plaintiffs partial summary judgment by upholding their claim that defendant Blum acted unlawfully in terminating the Section 1634 agreement. Defendant Blum has cross-moved, pursuant to Rule 56(b), Fed.R.Civ.P., for an order granting her partial summary judgment by rejecting plaintiffs' claim that defendant Blum acted unlawfully in terminating the Section 1634 agreement. Plaintiffs proffer two distinct legal theories in challenging the termination of the Section 1634 agreement. The first is that the decision to terminate was reached without proper consultation with the State of New York's medical care advisory committee. The second is that defendant Blum failed to publish timely public notice of the termination of the Section 1634 agreement. The Court discusses these theories in turn below.

 A. Consultation With the MAC

 Every state that wishes to participate in the Medicaid program is required to create a medical care advisory committee as a condition of its participation. 42 C.F.R. § 431.12(b). The State of New York has created such a committee, known as the Medical Advisory Committee ("the MAC") by statute. See N.Y.Soc.Serv.Law § 365-c. Plaintiffs' argument is (1) that defendant Blum had a duty to consult with the MAC in connection with the decision to terminate the Section 1634 ...


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