United States District Court, S.D. New York
December 10, 2004.
NOEL MEJIA, An Infant, by his Mother and Natural Guardian, EUFEMIA RAMIREZ, DANIEL BENITEZ, An Infant, by his Mother and Natural Guardian, TERESA BENITEZ, and ANTHONY PENA, An Infant, by his Mother and Natural Guardian, OFELIA PENA, Plaintiffs,
THE CITY OF NEW YORK, by its Human Resources Administration Defendant.
The opinion of the court was delivered by: GEORGE DANIELS, District Judge
Plaintiffs, by their mothers, bring suit against defendant
alleging violations of their federal rights under
42 U.S.C. §§ 1396k and 1396a(a)(25) and of their constitutional rights under
the New York State Constitution and the Fourteenth and Fifth
Amendments. Defendants move to dismiss pursuant to Fed.R. Civ.
P. 12(b)(6) for failure to state a claim and under Fed.R. Civ.
P. 12(b)(1) for lack of subject matter jurisdiction. For the
reasons stated below, defendant's motion to dismiss is granted in
part and denied in part.
Plaintiffs Noel Mejia, Daniel Benitez and Anthony Pena are
infant recipients of Medicaid assistance from defendant New York
City. Medicaid, a jointly funded federal and state medical
assistance program, pays the medical costs of qualifying indigent
individuals whose income and resources are insufficient to meet
the costs of their medical care. Established under Title XIX of
the Social Security Act, 42 U.S.C. § 1396 et seq. and
implemented in New York State by the Social Services Law § 267
et seq., Medicaid is administered in New York City by the Human Resources Administration ("HRA") under the supervision of the New
York State Department of Health.
Under Title XIX, New York State is obligated to develop its own
Medicaid plan and establish a rates-and-methods schedule. The
State must also "take all reasonable measures to ascertain the
legal liability of third parties . . . to pay for care and
services available under the plan" and must seek reimbursement
from such third parties. 42 U.S.C. § 1396a(a)(25)(A) and (B).
This requirement furthers the ultimate goal that Medicaid "be the
payer of last resort." Sen. Rep. No. 146, 99th Cong., 2d Sess.,
312, reprinted in 1986 U.S. Code Cong. & Admin.News 42, 279; see
Matter of Steuben County Dept. of Social Servs. v. Deats,
76 N.Y.2d 451, 455, 560 N.Y.S.2d 404, 560 N.E.2d 760 (N.Y. 1990).
Pursuant to this goal, Medicaid recipients are required to assign
to New York State the right to seek reimbursement from any third
party up to the amount of medical assistance paid.
42 U.S.C. § 1396k(a)(1)(A); N.Y.S. Social Services Law § 366(4)(h)(1);
18 NYCRR 360-7.4(a)(4).
In New York State, therefore, the local social services
district is subrogated, to the extent of its expenditures for
medical care furnished, to any rights a Medicaid recipient may
have to third party reimbursement. N.Y.S. Social Services Law §
367-a (2)(b); 18 NYCRR 360-7.4(a)(6). Pursuant to this assignment
and subrogation scheme, New York State "obtains all of the rights
that the recipient has as against the third party to recover for
medical expenses, including the ability to immediately pursue
those claims against the third party." Cricchio v. Pennisi,
supra, 90 N.Y.2d 296, 307, 660 N.Y.S.2d 679, 683 N.E.2d 301
As an alternative to suing the responsible third party
directly, the State, through the appropriate agency, may pursue
reimbursement by placing a lien on personal injury suits brought by a Medicaid recipient against the responsible party. See
N.Y.S. Social Services Law § 104-b. Under N.Y.S. Social Services
Law § 104-b(3) and (7), a Medicaid lien "shall attach to any
verdict, decision, decree, judgment, award or final order in any
suit, action or proceeding in any court or administrative
tribunal of this state respecting such injuries, as well as the
proceeds of any settlement thereof," and continues until
discharged by the public welfare official.*fn1
In the present case, plaintiffs suffer from long term physical
and mental disabilities for which they received Medicaid
assistance that covered the costs of their medical care. In
individual state court actions, plaintiffs brought medical
malpractice lawsuits that resulted in settlement offers.
Subsequent to these settlements, HRA, pursuant to N.Y.S. Social
Services Law § 104-b, asserted liens against the settlement
amounts received by each plaintiff. In their complaint,
plaintiffs do not contest the assignment of their right to third
party reimbursement to the Social Services agency. Nor do they
question the propriety of Medicaid's lien against their
settlement recovery. Plaintiffs challenge, however, the amount
that the City alleges is owed to them for the cost of medical
care. Specifically, plaintiffs claim that when the City
reimburses certain health care providers, the City also pays
these providers additional amounts, called allowances and/or
surcharges, in excess of the actual cost of the medical care
pursuant to N.Y.S. Public Health Law §§ 2807-c et seq.,
including a Graduate Medical Education ("GME") Surcharge, a Bad
Debt and Charity Care ("BDCC") Surcharge, and charges for
educational services including "assistive technology services"
and "related services."*fn2 Plaintiffs argue that the GME and BDCC surcharges are not medical care expenditures
and, therefore, should not be included in the amount sought by
HRA in their lien. Plaintiffs further argue that defendant
wrongly includes in their lien the cost of educational services.
Plaintiff claims that this cost must be provided free of charge
under the Individuals with Disabilities Education Act ("IDEA").
Plaintiffs allege that after Benitez recovered $2,250,000 in
settlement proceeds before the Justice Joseph Levine of the New
York State Supreme Court, HRA placed a lien against Benitez's
settlement in the amount of $443, 437.68. Complaint at 7, ¶ 36.
Plaintiffs dispute this amount, alleging that it includes a GME
surcharge, a BDCC surcharge and charges for educational and
related services that are not "medical care" and, therefore,
should be exempt from HRA's asserted lien. See Complaint at
4-8, ¶¶ 18, 35-41. "On February 16, 2001, Justice Joseph Levine
of the Supreme Court of the State of New York entered an order
directing that, inter alia, a portion of the Benitez Settlement
funds, equal to the amount of the disputed lien asserted by HRA,
be paid into an escrow account pending final adjudication of the
lien dispute." Id. at 8, ¶ 42.*fn3 Benitez seeks a
determination of the amounts asserted by HRA for the GME
surcharge, the BDCC surcharge and the cost of the educational and
related services. Id. at 19, ¶¶ 1, m.
Plaintiff Pena recovered $3,000,000 in his medical malpractice
lawsuit from which HRA claimed a lien in the amount of
$358,271.63. Id. at 8, ¶ 35. On December 6, 2000, Justice Gerald Esposito of the Supreme Court of the State of New York
signed an Order directing that $225,000.00 be paid to HRA in full
payment of its claim for Medicaid. Justice Esposito further
ordered that the "amount of $139,407.79 was to be held in trust
and invested in United States Treasury Bonds for a three-year
period, to be paid to HRA, if, within the said three-year period
(i) a Supplemental Needs Trust were established or (ii) an
application for Medicaid benefits were filed on behalf of Anthony
Pena; otherwise, the amount would be added to the corpus of the
"Anthony Pena Structured Settlement Pour Over Trust." Id. at 9,
¶ 46.*fn4 Pena seeks a rescission of the portion of this
agreement that includes amounts asserted by HRA for the GME
surcharge, the BDCC surcharge and the cost of the educational and
related services. Id. at 19, ¶¶ l-o.
Plaintiff Mejia settled his lawsuit for $3,000,000 from which
HRA asserted a lien in the amount of $311,424.89. Complaint at 6,
¶¶ 28-29.*fn5 Mejia also seeks a determination of the amount
of the GME surcharge, the BDCC surcharge and the cost of
educational and related services that is included in HRA's
Plaintiffs allege that by asserting these liens in the amounts
in question, defendant violated their federal and constitutional
rights under 42 U.S.C. § 1983. Plaintiffs claim that "[t]he
defendant's collection of the Surcharges from class members'
recoveries deprives class members of property without due process
of law, in violation of the Fourteenth Amendment to the
Constitution of the United States and in violation of
42 U.S.C. §§ 1396a(a)(25) & 1396k." Id. at 14, ¶ 68. Plaintiffs maintain
that the "defendant's collection of the Surcharges from class
members' recoveries takes class members' property for public use
without just compensation, in violation of the Fifth and Fourteenth Amendments to the
Constitution of the Unites States." Id. at 14, ¶ 69. Plaintiffs
further allege that the defendant's collection of the cost of
educational services, including related services, from the
plaintiffs' recoveries violates the Individuals with Disabilities
Education Act, 20 U.S.C. § 1400(c), the Rehabilitation Act,
29 U.S.C. § 794, as well as the Fifth and Fourteenth Amendments.
Plaintiffs also claim that the defendant's actions deprive them
of state constitutional rights guaranteed under Article I, §§ 6,
7 and Article XVII, § 1 of the New York State Constitution.
Furthermore, plaintiffs allege that the defendant has "been
unjustly enriched" and "[i]n equity and good conscience,
defendant should not be allowed to retain or seek that money."
Complaint at 17, ¶¶ 88-89. Lastly, plaintiffs claim that in
making representations that the amounts claimed are the actual
cost of the health care provided, defendant committed fraud
because "the amounts claimed include the Surcharges and the cost
of educational services, including related services, to which
children with disabilities are entitled under the IDEA." Id. at
17, ¶ 92.
Plaintiffs seek: (1) a determination of the amount of
Surcharges included in defendant's subrogation claims; (2) a
determination of the amounts included in the subrogation claims
which defendant asserts against the representative plaintiffs
which represent the cost of educational services, related
services, assistive devices or any other goods or services to
which they are entitled under the provisions of the IDEA; (3) a
determination of the amount the defendant is entitled to collect;
(4) rescission of that part of the Pena-HRA Compromise involving
payment to HRA above and beyond the actual cost of medical care.
Complaint at 19, ¶¶ l-p.
Defendant does not deny the collection of these surcharges or
allowances. Rather, defendant argues that: (1) the plaintiffs have no private right
of action under the provisions cited in the Medicaid statute,
namely 42 U.S.C. §§ 1396a(a)(25) and 1396k; (2) there has been no
violation of the 14th Amendment because the plaintiffs have
an adequate remedy at state law; and (3) plaintiffs have failed
to state a claim under IDEA.*fn6 Furthermore, the defendant
moves to dismiss the complaint by plaintiffs Benitez and Pena for
lack of subject matter jurisdiction under the Rooker-Feldman
and/or Younger abstention doctrines.
Federal Rule of Civil Procedure 12(b)(6) allows a party to move
to dismiss a complaint where the complaint "fail[s] . . . to
state a claim upon which relief can be granted[.]" FED. R. CIV.
P. 12(b)(6). In reviewing a motion to dismiss, this Court accepts
the allegations in the complaint as true and draws all reasonable
inferences in favor of the non-moving party. See Patel v.
Searles, 305 F.3d 130, 134-35 (2d Cir. 2002). A motion to
dismiss will only be granted if the plaintiff can prove no set of
facts in support of its claim that would entitle it to relief.
See Citibank, N.A. v. K-H Corp., 968 F.2d 1489, 1494 (2d Cir.
1992). A court may look at the complaint and any documents attached to, or incorporated
by reference in, the complaint. See Dangler v. New York City
Off Track Betting Corp., 193 F.3d 130, 138 (2d Cir. 1999).
A. Plaintiff's § 1983 Claims
In order to be entitled to relief under § 1983, a plaintiff
must allege: (i) a violation of a Constitutional right and (ii)
must show that the alleged deprivation was committed by a person
"acting under the color of state law." See West v. Atkins,
487 U.S. 42, 48, 108 S.Ct. 2250, 101 L.Ed.2d 40 (1988); Flagg
Bros., Inc. v. Brooks, 436 U.S. 149, 155, 98 S.Ct. 1729,
56 L.Ed.2d 185 (1978). Plaintiff asserts five claims under § 1983: a
violation of his property rights under the Fifth Amendment's
Takings Clause; a violation of his due process rights under the
Fourteenth Amendment; and a violation of his federal rights under
42 U.S.C. §§ 1396a(a)(25) and 1396k, under 20 U.S.C. § 1400(c)
and under 29 U.S.C. § 794.
1. Fifth Amendment
The Takings Clause of the Fifth Amendment provides "nor shall
private property be taken for public use, without just
compensation." U.S. CONST. AMEND. V. The purpose of the Takings
Clause is to prevent the government "from forcing some people
alone to bear public burdens which, in all fairness and justice,
should be borne by the public as a whole." Armstrong v. United
States, 364 U.S. 40, 49, 80 S.Ct. 1563, 4 L.Ed.2d 1554 (1960).
The Clause is applicable to the states through the Fourteenth
Amendment. See, e.g., Webb's Fabulous Pharmacies, Inc. v.
Beckwith, 449 U.S. 155, 160, 101 S.Ct. 446, 450, 66 L.Ed.2d 358
(1980). In order to state a claim under the Takings Clause, a
plaintiff must first demonstrate that he possesses a property
interest that is constitutionally protected. See Ruckelshaus
v. Monsanto Co., 467 U.S. 986, 1000-01, 104 S.Ct. 2862,
81 L.Ed.2d 815 (1984); see also Penn Central Transp. Co. v. New York, 438 U.S. 104, 125, 98 S.Ct. 2646,
57 L.Ed.2d 631 (1978).
Plaintiffs allege that the defendant's collection of surcharges
from their settlement proceeds constitutes a taking of their
private property in violation of the Fifth Amendment. Complaint
at 14, ¶ 69. Defendant argues, however, that plaintiffs' takings
claim must be dismissed for failing to demonstrate the
deprivation of a protected property interest. Specifically,
defendant argues that under 42 U.S.C. § 1396a(a)(25), the New
York State Social Services Law §§ 366(4)(h)(1) and 366-a(2)(b)
and New York State caselaw, plaintiffs "do not have a property
right in the settlement proceeds and the amount of the liens
asserted thereto. In fact, any rights they did have in the
settlement against the third party were assigned to Medicaid as a
condition of the receipt of benefits." Defendant's Brief at 13.
Defendant's point to Cricchio v. Pennisi, 90 N.Y.2d 296 (N.Y.
1997) for the proposition that "settlement proceeds are not the
resources or the property of the Medicaid recipient." Defendant's
Brief at 13. In Cricchio, the New York State Court of Appeals
found that the Department of Social Services ("DSS") was entitled
to the satisfaction of its Medicaid liens before settlement
proceeds could be transferred to plaintiff's supplemental needs
fund. The Court of Appeals holding, however, is not inconsistent
with plaintiffs' asserted possession of a protected property
interest in the disputed amounts. In the present case, it is
undisputed that plaintiffs' right to their settlement proceeds
were assigned to Medicaid as a condition of the receipt of their
benefits and that they had no protected property interest in the
amount used for medical care. HRA's lien, however, is limited to
the recovery for "medical expenses," nothing more, nothing less.
"As the Medicaid recipient's assignee . . ., DSS obtains all of
the rights that the recipient has as against a third party to
recover medical expenses. . . ." Id. at 307 (emphasis added). Taking as true for the purposes of this motion
plaintiffs' allegation that the additional amounts deemed
surcharges are not "medical expenses," plaintiffs did not assign
that money to Medicaid. Rather, they retained their property
interests in the disputed amounts. Plaintiffs, therefore, have
properly claimed the deprivation of a protected property
Given their interest in that portion of the settlement
proceeds, the Court must next examine whether plaintiffs' taking
claims are ripe for review. The ripeness doctrine is drawn both
from Article III limitations on judicial power and from
prudential reasons for refusing to exercise jurisdiction. Reno
v. Catholic Social Services, Inc. 509 U.S. 43, 58 n. 18,
113 S.Ct. 2485, 125 L.Ed. 2d 38 (1993). In Williamson County
Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172,
105 S.Ct. 3108, 87 L.Ed.2d 126 (1985), the Supreme Court set forth a
two-pronged test for assessing the ripeness of takings-type
claims. First, plaintiff must allege that the government entity
charged with enforcing the regulations at issue rendered a "final
decision." Id. at 185-186, 105 S.Ct. 3108. Second, plaintiff
must allege that he sought compensation if the state provides a
"reasonable, certain and adequate provision for obtaining
compensation." Id. at 194, 195, 105 S.C.t. 3108. On this basis,
plaintiffs have failed to state a Takings claim under the Fifth
First, as to plaintiff Mejia, plaintiffs have failed to allege
that a taking has even occurred. Plaintiffs make no allegation
that any money was taken from Mejia by New York State. Defendant,
without challenge from Mejia, asserts that "[n]o payment has yet
been made by plaintiff [Mejia or his mother, Eufemia] Ramirez.
Defendant's Memorandum of Law in Support of their Motion to
Dismiss ("Defendant's Brief") at 4. Plaintiff Mejia's Taking
claim, therefore, is dismissed as unripe for judicial review.
See Long Island Lighting Co. v. Cuomo, 666 F.Supp. 370, 395
(N.D.N.Y. 1987) (finding that "[u]ntil an actual taking has occurred,
an action under the takings clause does not lie.") Id.
Similarly, plaintiff Benitez, who was ordered by Justice Levine
to pay $443, 437.68 into an escrow account "pending final
adjudication of the lien dispute," Complaint at 8, ¶ 42, has also
failed to state a Taking claim. It is undisputed that there has
not been a final resolution of the defendant's claim to the
disputed amount of plaintiff Benitez's settlement funds.
Plaintiffs themselves aver that the "insurance representatives
for the defendants in the Benitez Tort Action have, to date, not
yet made the court-ordered payment." Id. at 8, ¶ 43. Plaintiff
Benitez's Taking claim, therefore, is also dismissed as unripe
for judicial review.
Plaintiff Pena, however, has sufficiently pled that a final
decision has been reached in his case. Plaintiffs allege that
On December 6, 2000, an Infant's Compromise Order
(the "Order") was signed by the Hon. Gerald Esposito.
The Order compromised HRA's claim as follows. It
directed that $225,000.00 be paid to HRA in full
payment of its claim for Medicaid. The amount of
$139,407.79 was to be held in trust and invested in
United States Treasury Bonds for a three-year period,
to be paid to HRA, if, within the said three-year
period (i) a Supplemental Needs Trust were
established or (ii) an application for Medicaid
benefits were filed on behalf of Anthony Pena;
otherwise, the amount would be added to the corpus of
the "Anthony Pena Structured Settlement Pour Over
Id. at 9, ¶ 46. Pena, therefore, has satisfied the first prong
of the Williamson test and alleged a claim that is ripe for
judicial review. The Court must next examine whether Pena
satisfies the second prong of the Williamson test requiring
that plaintiff seek compensation if the state provides a
"reasonable, certain and adequate provision for obtaining
compensation." Williamson, 473 U.S. at 194, 195,
105 S.Ct. 3108.
Defendants assert that plaintiffs have not pursued state
procedures to seek just compensation. "The nature of the
constitutional right requires that a property owner utilize state procedures for obtaining compensation before bringing a 1983
action." Lake Minnewaska Mountain Houses, Inc. v. Lehman, 1988
WL 142769, *8 (N.D.N.Y. 1988) (citing Williamson,
473 U.S. at 195, 105 S.Ct. 3108, n. 13). "[I]f a state provides an adequate
procedure for seeking just compensation, the property owner
cannot claim a violation of the Just Compensation Clause until it
has used the procedure and been denied just compensation."
Williamson, 473 U.S. at 195, 105 S.Ct. 3108.*fn7 Defendant
argues that "New York law provides a sufficient post-deprivation
remedy for the alleged violation, in the form of an Article 78
proceeding." Defendant's Brief at 13. Indeed, Article 78
proceedings have been instituted by plaintiffs claiming
governmental takings under the Fifth Amendment. See Brusco v.
New York State Div. of Housing and Community Renewal,
181 A.D.2d 514, 580 N.Y.S.2d 360 (App.Div. 1992) (Article 78 proceeding
filed by landlord alleging violation of Fifth Amendment takings
clause); see also Gazza v. New York State Dept. of
Environmental Conservation, 89 N.Y.2d 603, 679 N.E.2d 1035,
657 N.Y.S.2d 555 (N.Y. 1997) (landowner brought Article 78 proceeding
alleging a taking under the Fifth Amendment). Plaintiffs,
however, do not allege that they have initiated any
post-deprivation procedures to recover their lost property.
Plaintiffs' complaint is devoid of any allegation that plaintiffs
sought and were denied just compensation for the alleged taking
under New York State's available procedures. Furthermore,
plaintiffs make no allegation that these available state
procedures were unreasonable, uncertain or inadequate.
Plaintiffs, therefore, have failed to satisfy the second prong of
the Williamson test and their taking claims under the Fifth Amendment must be dismissed as unripe for
2. Fourteenth Amendment
The Fourteenth Amendment provides, in pertinent part, "No
person shall . . . be deprived of life, liberty, or property
without due process of law." An essential principle of due
process is that a deprivation of life, liberty, or property, "be
preceded by notice and an opportunity for a hearing appropriate
to the nature of the case." Mulane v. Central Bank of Hanover &
Trust Co., 339 U.S. 306, 313, 70 S.Ct. 652, 656 (1950). In order
to state a Fourteenth Amendment claim, therefore, plaintiff must
allege the essential elements: a deprivation of his property
interest without notice and the opportunity to be heard.
Plaintiffs allege that the defendant's collection of surcharges
deprives them of property without due process of law in violation
of the Fourteenth Amendment. Defendant, however, reiterates that
plaintiffs do not possess a property right in the settlement
proceeds. Secondly, defendant claims that even assuming that
plaintiffs possessed a property right, plaintiffs' Fourteenth
Amendment claims should be dismissed under the rule set forth by
the Supreme Court in Hudson v. Palmer, 468 U.S. 517,
104 S.Ct. 3194, 82 L.Ed.2d 393 (1984). Having previously determined that
plaintiffs do, in fact, possess a property interest in the
disputed amount of the settlement proceeds, the Court now turns
its attention to defendant's second argument.
In Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908,
68 L.Ed.2d 420 (1981), the Supreme Court found that the due process
clause of the Fourteenth Amendment is not violated when a state
employee negligently deprives an individual of property, provided
that the state makes available a meaningful post-deprivation
remedy. The Court, in Hudson v. Palmer, 468 U.S. 517, 104 S.Ct. 3194, extended its finding in Parratt to intentional
deprivations of property, finding that an unauthorized
intentional deprivation of property by a state employee did not
constitute a violation of the due process clause because
meaningful post-deprivation remedies for the loss were available
under state law. Id. 468, U.S. at 534, 104 S.Ct. 3194.
Defendant argues that the Hudson/Parratt rule applies to the
present case, arguing that "plaintiffs could have challenged the
lien amounts asserted by the defendant in an Article 78
proceeding." Defendant's Brief at 15 (internal quotations
omitted). Defendant asserts that because a meaningful
post-deprivation remedy existed, plaintiffs' due process claims
must be dismissed.
Defendant's argument, however, proves unavailing. "The
underlying rationale of Parratt is that when deprivations of
property are effected through random and unauthorized conduct of
a state employee, predeprivation procedures are simply
"impracticable" since the state cannot know when such
deprivations will occur. . . . Arguably, intentional acts are
even more difficult to anticipate. . . ." Hudson,
468 U.S. at 533, 104 S.Ct. 3194. Plaintiffs' allegations, however, do not
suppose random and unauthorized acts by state employees depriving
them of their property. Indeed, plaintiffs' claims are based on
"a systematic practice of seizing money to which the City is not
entitled." Plaintiffs' Brief at 18, See Complaint at 5-6, ¶¶
21-27. Furthermore, plaintiff alleges that the defendant collects
the surcharges pursuant to a municipal policy or custom. Id.,
Complaint at 14, ¶ 71. Defendant does not deny these allegations.
Rather, defendant argues that
the decision regarding the amount of lien asserted
against a third-party is a decision which is made on
a case-by-case basis. . . . The decision about
whether to reduce or discharge a lien is not based
upon City policy or custom. Instead, for each lien, a
decision is made by the local public welfare official
whether to seek full reimbursement or partial
reimbursement. . . . Clearly, such discretion by a
local public welfare official gives rise to a random
act. Defendant's Reply Brief at 7. Plaintiffs'
allegations, however, are directed toward HRA's
practice of asserting liens that include not only
medical costs, but also additional surcharges.
Plaintiffs' allegations do not question the
individual decisions made by a local public welfare
official, they question the alleged and undisputed
practice by HRA to charge Medicaid recipients for
additional surcharges. The Hudson/Parratt rule
cited by the defendant does not apply in the present
case and, therefore, defendant's motion to dismiss
plaintiffs' Fourteenth Amendment claims is denied.
See Pangburn v. Culbertson, 200 F.3d 65, 71 (2d
Cir. 1999) (finding that Hudson and Parratt apply
only where the deprivation complained of is random
and unauthorized); see also Alexandre v.
Cortes, 140 F3d. 406, 411 (2d Cir. 1998) (finding
that an adequate post-deprivation remedy is a defense
to a Section 1983 due process claim only where the
deprivation is random and unauthorized and not where
the deprivation complained of results from the
operation of established state procedures). Id.
3. Federal Rights
In addition to asserting Fifth and Fourteenth Amendment claims
under 42 U.S.C. § 1983, plaintiffs also assert a violation of
rights created by 42 U.S.C. §§ 1396a(a)(25) and 1396k. These
sections of the Medicaid statute, inter alia, provide for the
recoupment of Medicaid costs by participating states. As
discussed supra, Congress intended the Medicaid program to be
"be the payer of last resort." Sen. Rep. No. 146, 99th Cong., 2d
Sess., 312, reprinted in 1986 U.S. Code Cong. & Admin.News 42,
279. Pursuant to this goal, Section 1396a(a)(25) mandates that
the State "take all reasonable measures to ascertain the legal
liability of third parties . . . to pay for care and services
available under the plan" and then to seek reimbursement from
such third parties. 42 U.S.C. § 1396a(a)(25). Section 1396k,
meanwhile, outlines the conditions and requirements Medicaid recipients must agree to prior to receiving
Medicaid assistance. Mainly, Section 1396k requires recipients to
assign to the State any rights to support and payment for medical
care from any third party and provides for the enforcement and
collection of these rights. Plaintiffs argue that these sections
confer upon them a federal right, the violation of which is
actionable under 42 U.S.C. § 1983. Defendants, however, challenge
whether Sections 1396a(a)(25) and 1396k confer upon the
plaintiffs any federal rights for which plaintiffs can assert a
private right of action.
Section 1983 provides a cause of action to a plaintiff against
anyone who, under the color of state law, deprives a person "of
any rights, privileges, or immunities secured by the Constitution
and laws" of the United States. 42 U.S.C. § 1983. Section 1983
claims, however, can only be instituted by plaintiffs asserting a
"violation of a federal right, not merely a violation of federal
law." Blessing v. Freestone, 520 U.S. 329, 340, 117 S.Ct. 1353,
1359, 137 L.Ed.2d 569 (1997).
The Supreme Court in Wilder v. Virginia Hospital Ass'n,
496 U.S. 498, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990) and Blessing v.
Freestone, 520 U.S. 329, 117 S.Ct. 1353, applied a three-part
test to determine whether a plaintiff's claims involve violations
of federal rights as opposed to violations of federal law.
First, Congress must have intended that the provision
in question benefit the plaintiff. Second, the
plaintiff must demonstrate that the right assertedly
protected by the statute is not so "vague and
amorphous" that its enforcement would strain judicial
competence. Third, the statute must unambiguously
impose a binding obligation on the States. In other
words, the provision giving rise to the asserted
right must be couched in mandatory, rather than
Blessing, 520 U.S. at 340-41, 117 S.Ct. 1353 (citations
omitted); see also Wilder, 496 U.S. at 509, 110 S.Ct. 2510. Furthermore, in applying the Blessing
test, a plaintiff must point to a specific provision within a
statute and clearly articulate the rights they claim are provided
under that provision. See Golden State Transit Corp. v. Los
Angeles, 493 U.S. 103
, 106, 110 S.Ct. 444, 448, 107 L.Ed.2d 420
(1989) (asking whether the "provision in question" was designed
to benefit the plaintiff); see also Blessing,
520 U.S. at 342, 110 S.Ct. 2510 (stating that plaintiffs must "identify with
particularity the rights they claimed, since it is impossible to
determine whether [the statute in question], as an
undifferentiated whole, gives rise to undefined rights.") Id.
(internal quotations omitted). Furthermore, once a plaintiff
establishes an allegation involving a violation of a federal
right, "there is only a rebuttable presumption that the right is
enforceable under § 1983," because Congress may have expressly or
impliedly foreclosed a remedy under § 1983. Blessing,
520 U.S. at 341, 117 S.Ct. 1353. The burden to demonstrate that Congress
has expressly withdrawn the remedy is on the defendant.*fn8
Golden State Transit Corp. v. City of Los Angeles,
493 U.S. at 107, 110 S.Ct. 444.
A review of Section 1396a(a)(25) shows that the intended
beneficiary is the federal government. Section 1396a(a)(25), on
its face, requires states to pursue remedies against responsible
third parties, instead of relying on the federal government's
assistance in paying citizens' medical bills. The Second Circuit,
in Wesley Health Care Center, Inc. v. DeBuono, M.D.,
244 F.3d 280, 284 (2d Cir. 2001), held that 42 U.S.C. § 1396a(a)(25) was
intended to benefit the Medicaid program itself.
[O]n its face, the statute seeks to protect the Medicaid
program from paying for health care in situations where a third party has a legal obligation to
pay for the care. . . . If any doubt remained over who the
beneficiary of the statute and its regulations is, the [Health
Care Financing Administration] states: "The overall purpose of
State Medicaid third party liability . . . programs is to ensure
that Federal and State funds are not misspent for covered
services to eligible Medicaid recipients when third parties exist
that are legally liable to pay for those services."
Id. at 284, 285 (quoting Medicaid Programs: State Plan
Requirements and Other Provisions Relating to State Third Party
Liability Programs, 55 Fed. Reg. 1423, 1424 (1990). Other Courts
that have reviewed this provision have concurred. See Barton
v. Summers, 293 F.3d 944, 953 (6th Cir. 2002) (finding that the
focus of §§ 1396a(a)(25) 1396k is facilitating federal recoupment
of Medicaid costs and concluding that the intended beneficiary is
the federal government), Id.; see also Harding v. Summit
Medical Center, 41 Fed.Appx. 83 (9th Cir. 2002) (finding that
Medicaid recipient had no private right of action under §
1396a(a)(25)(C)). Plaintiffs, however, cite Mallo v. The Public
Health Trust of Dade County, Florida, 88 F.Supp.2d 1376 (S.D.
Fla. 2000) which held that 42 U.S.C. § 1396a(a)(25)(C) confers a
benefit upon Medicaid recipients. The issue before the District
Court was whether Congress intended to benefit the Medicaid
recipient in the event they settle with a third-party tortfeasor
for an amount in excess of the amount Medicaid disbursed to the
health care provider for the patient's care. Finding in favor of
the Medicaid recipient, the District Court found that §
1396a(a)(25)(C) limits health care providers from seeking
reimbursement from plaintiff or third party tortfeasors in excess
of the amount paid to them by Medicaid. The issue sub judice is
whether Medicaid can seek from recipients amounts for specific
surcharges which plaintiffs claim is in excess of their medical
A review of § 1396k, however, supports plaintiff's position.
Section 1396k mandates the assignment, enforcement and collection of claims, specifically
outlining that after recovering from a third party under such an
assignment, the State must first distribute that recovery to
itself to pay for its share of "medical assistance payments" and,
next, to the federal government to pay "its participation in the
financing of such medical assistance." The statute then clearly
mandates that "the remainder of such amount collected shall be"
paid to the Medicaid recipient. Therefore, although § 1396k was
meant to benefit both the state and the federal government, this
section also explicitly requires that the Medicaid recipient
receive their share of whatever is leftover. Construing
plaintiffs' allegations as true, if the portion kept by the state
agency for themselves and the federal government exceeds its
share of "medical assistance payments," then defendant is
violating § 1396k by reimbursing plaintiffs with less than "the
remainder of such amount." As such, § 1396k was intended to
benefit Medicaid recipients as well as the federal government.
The second Blessing step requires that the rights sought to
be enforced by the plaintiff be neither vague nor amorphous.
Id., 520 U.S. at 340-41, 117 S.Ct. 1353. Defendant submits no
argument to support its contention that plaintiffs' claims do not
satisfy this step. The Court finds that plaintiffs have clearly
articulated a clear set of rights they seek to be enforced. Their
complaint alleges a violation of their federal rights by seeking
to enforce, and in plaintiff Pena's case, actually receiving,
lien amounts against the plaintiffs' settlements in excess of
that allowed by law.
The third step in the Blessing analysis is to determine
whether the statute imposes a binding requirement on the States.
Blessing, 520 U.S. at 340-41, 117 S.Ct. 1353. This step is
undisputed as the Medicaid Act is binding on the states once they
have agreed to participate. The Court therefore grants
defendant's motion to dismiss plaintiffs' claims under 42 U.S.C.
§ 1396a(a)(25), but denies their motion to dismiss plaintiffs'
claims under 42 U.S.C. § 1396k.
Defendant also claims that the Rooker-Feldman doctrine operates
to deprive this Court of subject matter jurisdiction over the
claims alleged by plaintiffs Benitez and Pena. Specifically,
defendant argues that plaintiffs' action is a direct challenge to
the decisions of the New York State Supreme Court ordering either
the payment of the lien or placement of lien funds in escrow.
Under the Rooker-Feldman doctrine, District Courts lack subject
matter jurisdiction over actions that: (1) directly challenge a
state court holding or decision; or (2) indirectly challenge a
state court holding or decision by raising claims in federal
court that are inextricably intertwined with the state court
judgment. District of Columbia Court of Appeals v. Feldman,
460 U.S. 462, 486, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); Rooker v.
Fidelity Trust, 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923);
Moccio v. New York State Office of Court Administration,
95 F.3d 195 (1996).
The pertinent allegation in plaintiffs' complaint states that
"[o]n February 16, 2001, the Hon. Joseph Levine entered an order
directing that, inter alia, a portion of the Benitez Settlement
funds, equal to the amount of the disputed lien asserted by HRA,
amounting to $443,437.68, be paid into an escrow account pending
final adjudication of the lien dispute." Complaint at 8, ¶ 42.
Defendant does not indicate which state court holding or decision
is being challenged by this allegation. In fact, plaintiff's
allegation, which defendant does not dispute, is clearly that
there has not been a final adjudication as to the amount of the
lien owed to Medicaid. With regards to plaintiff Benitez,
therefore, the Rooker-Feldman doctrine does not apply. Plaintiff Pena, however, specifically asks this Court for
"rescission of that part of the Pena-HRA Compromise involving
payment to HRA above and beyond the actual cost of medical care
and collection by HRA of the cost of educational services and
related services which Anthony Pena was entitled to receive free
of charge." Complaint at 19, ¶ o. Under the Rooker-Feldman
Doctrine, however, this Court cannot provide plaintiff Pena with
the relief he seeks. Justice Esposito's Infant's Compromise Order
explicitly directs Pena to pay "$225,000.00 to the New York City
Human Resources Administration in full payment of its claim for
Medicaid reimbursement." If plaintiff desires a review of that
order, he must seek relief through the appropriate forum, the New
York State court system.*fn9 See Fariello v. Campbell,
860 F.Supp 54, 65 (S.D.N.Y. 1994) (finding that a plaintiff may
not "seek a reversal of a state court judgment simply by
recasting his complaint in the form of a civil rights action
pursuant to 42 U.S.C. § 1983").*fn10 III. Conclusion
Defendant's motion to dismiss plaintiff's 42 U.S.C § 1983
claims under the Fifth Amendment and 42 U.S.C § 1396a(a)(25) is
granted. Defendant's motion to dismiss plaintiffs' Fourteenth
Amendment claim and claims under 42 U.S.C § 1396k is denied.
Defendant's motion to dismiss plaintiff Pena's claims for lack of
subject matter jurisdiction based on the Rooker-Feldman doctrine
is granted. Defendant's motion to dismiss plaintiff Benitez's
claims for lack of subject matter jurisdiction based on the
Rooker-Feldman doctrine is denied.