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ANDREE v. COUNTY OF NASSAU

March 26, 2004.

ASHLEY ANDREE an infant, by her Mother and Natural Guardian, Christine Andree, and on behalf of all persons similarly situated, Plaintiff, FRANKLIN MORONTA, an infant, by his Mother and Natural Guardian, Regina Vargas, and on behalf of all persons similarly situated, Intervenor-Plaintiff, -against- THE COUNTY OF NASSAU and RICHARD SHERMAN, Individually and As Commissioner of the NassauCounty Department of Social Services, Defendants.


The opinion of the court was delivered by: ARTHUR SPATT, District Judge Page 2

MEMORANDUM OF DECISION AND ORDER

At issue here are the allegations of the plaintiffs that Nassau County has a policy of unlawfully imposing Medicaid liens on personal injury awards for reimbursement of moneys paid for pre-school and school based special education and related services to disabled children, which are mandated by the law to be provided free of charge.

  The amended complaint asserts, among other things, violations of the Individuals with Disabilities Education Act, the Rehabilitation Act, and the Due Process and Equal Protection Clauses of the Fourteenth Amendment. Among other requests for relief, the amended complaint also seeks a declaratory judgment pursuant to 42 U.S.C. § 1983 and 28 U.S.C. § 2001, stating that Nassau County's past and present policy of fixing, calculating and asserting Medicaid liens is unlawful and that the defendants may not assert any lien for monies paid through the Medicaid program for pre-school and school-based special education and related services provided pursuant to a disabled child's Individualized Education Program.

  The plaintiff Christine Andree ("Andree") and the intervenor-plaintiff Regina Vargas ("Vargas") (collectively, the "plaintiffs") bring this action on behalf of their respective children, Ashley Andree ("Ashley") and Franklin Moronta ("Franklin") and all persons similarly situated. The plaintiffs allege that the County of Nassau and Richard Sherman ("Sherman"), individually and as Commissioner of the Nassau County Department of Social Page 3 Services (collectively, the "defendants"), inflated their Medicaid liens on the judgments of Ashley and Franklin in their respective personal injury actions. The plaintiffs allege that the defendants violated, among other things, the Individuals with Disabilities Education Act, § 601 et seq., as amended 20 U.S.C. § 1400 et seq. (the "IDEA"), the Rehabilitation Act, 29 U.S.C. § 794, and the Fourteenth Amendment.

  Presently before the Court is a motion to dismiss the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Fed. R. Civ. P.") for failure to state a claim upon which relief can be granted.

  I. BACKGROUND

  The facts are taken from the amended complaint unless otherwise noted. The parties are as follows: Ashley is a 14 year old girl; Andree is Ashley's mother and appointed guardian; Regina Vargas is the mother and natural guardian of Franklin; the County of Nassau is a municipal corporation in New York State that maintains the Nassau County Department of Social Services (the "DSS"); the DSS administers, among other things, Nassau County's programs for public assistance, Medicaid and child protective services; and Sherman is the Commissioner of the DSS.

  The Medicaid program is a jointly-funded federal and state medical assistance program under Title XIX of the Social Security Act (the "Act"). New York State has implemented the Act pursuant to Article 5, Title 11 of the New York State Social Services Page 4 Law (the "SSL"). Pursuant to the Medicaid program, the DSS reimburses health care providers for care rendered to Medicaid recipients. The DSS also uses Medicaid funds to pay claims submitted by local school districts> and other educational service providers for a variety of services that they furnish to Medicaid recipients.

 A. Facts Relating to Ashley Andree

  The plaintiff contends that on July 4, 1989, the day Ashley was born, she suffered serious and permanent physical injuries due to the negligence of the attending physician at Winthrop University Hospital in Mineola, New York ("Winthrop"). In November, 1994, Andree, on behalf of Ashley, filed a medical malpractice action against the attending physician and Winthrop in Supreme Court, Nassau County. A jury found in favor of the plaintiff against the attending physician. The claims against Winthrop were dismissed. In August, 1999, the state court entered judgment against the attending physician in the sum of $5,473,338 (the "Andree Judgment"). In August, 2001, the attending physician's insurers made a partial payment of $2,316,161.08.

  From the date of her birth to her receipt of the partial payment, Ashley received Medicaid benefits. The payment in partial satisfaction of the Andree Judgment, rendered Ashley ineligible to receive further Medicaid benefits. During the time that Ashley was eligible to receive Medicaid benefits, the DSS provided Ashley with medical assistance for the injuries that she sustained at birth. Pursuant to SSL § 104-b(1), the DSS filed a notice of Page 5 lien in the Nassau County Clerk's office claiming a lien in the sum of $92,451.98 on the proceeds of the judgment against the attending physician. On November 26, 2001, the Nassau County Surrogate's Court ordered that the sum of $92,451.98 be held in an interest-bearing escrow account pending settlement or adjudication of the Medicaid lien of DSS.

  From the time that Ashley has been enrolled in school, she has been a "child with a disability" as defined under 20 U.S.C. § 1401(3). As such, beginning in 1998, Ashley's local school districts> provided her with supportive services, also known as "related services" under the IDEA, so that she can receive a proper education pursuant to an Individualized Education Plan ("IEP"). The related services included physical therapy, occupational therapy and transportation to and from school (the "Related Services").

  The amended complaint alleges that Ashley's local school districts> submitted claims to the DSS for Medicaid payments to cover the cost for some or all of the supportive services they furnished to Ashley. In turn, the DSS reimbursed the local school districts> for those expenses. Subsequently, the DSS filed a lien on the proceeds of the judgment in the amount of $92,451.98 for reimbursement of the amount of money the DSS paid for the amount of care and assistance it furnished to Ashley.

  The amended complaint acknowledges that DSS was entitled to a lien on the proceeds of the judgment to the extent that DSS seeks reimbursement for claims paid for Page 6 Ashley's medical treatment for the injuries she sustained at birth and those incidental or collateral expenses, such as rehabilitative equipment and transportation related to her medical care and treatment. However, the amended complaint alleges that the DSS may not assert a lien for reimbursement of the "Related Services" provided to Ashley because these services are to be provided at no cost under the IDEA. Thus, by including those claims for reimbursement that were related to Ashley's IEP, DSS allegedly inflated its Medicaid lien on the Andree Judgment by not less than $5,038.93

 B. Facts Relating to Franklin Moronta

  On June 12, 1992, Franklin was diagnosed with childhood lead poisoning as a result of exposure to lead in excess of regulatory limits in his apartment building (the "Building"). In or about January, 1996, Vargas, on behalf of her son Franklin, commenced an action in the Supreme Court of the State of New York, County of Nassau against the owners of the Building. In or about June, 2000, another action was filed in Supreme Court, Nassau County against an individual who purchased the Building during Franklin's occupancy. At all times when Franklin has been enrolled in school, he has been, and currently is, a "child with a disability" as defined in 20 U.S.C. § 1401(3).

  Thereafter, similar to the facts alleged by Ashley, the DDS asserted liens on the proceeds from Vargas's actions, dated June 11, 2001 and June 28, 2001 in the amount of $56,634.04 representing the sum total of medical assistance furnished to Franklin. On Page 7 November 6, 2002, an Infant Compromise Order (the "ICO") was entered by the Supreme Court, Nassau County settling the action. As a result of the settlement, Franklin received a total of $235,000 as his share of the recovery. The ICO provided, inter alia, that $56,634.04 of the settlement funds, representing the amount of the lien asserted by DSS be deposited in an interest bearing account pending the determination of the lien.

  The plaintiffs allege that the DSS wrongfully included claims for school-based and related services furnished to Franklin which were to be provided at no cost under the IDEA. These liens allegedly improperly inflated the amount of recovery to which DSS is entitled for Medicaid expenditures, ...


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