Opinion
CAUSE NO. IP02-0771-C-B/S
March 30, 2004
ENTRY
Golden Years Homestead, Inc. ("GYH") is a certified nursing facility located in Alien County, Indiana. Defendants, C. Angela Buckland, Deane Nilson, Julie Wagoner, Angela Strass, Brenda Meredith, Marie Owens, Susie Scott, Suzanne Hornstein, and Gregory A. Wilson, M.D. ("the individual defendants") are or were, during applicable time periods, employees and officials of the Indiana State Department of Health ("ISDH"). Among its many responsibilities, the ISDH is the state agency responsible for inspecting or surveying nursing facilities to determine if they are in compliance with Medicaid participation requirements.
In April of 2000 the ISDH sent a team of its employees to GYH for purposes of investigating a complaint which it had received as well as to conduct the required periodic licensing and recertification survey. The survey yielded a report and citation of certain deficiencies. ISDH surveyors returned to GYH in July of 2000 and again reported certain deficiencies. An additional post-survey visit was conducted in September 2000 and, again, deficiencies were reported.
As a result of the initial survey in 2000, ISDH imposed the sanction of discontinuing GYH's nurse aid training program for two years. The July 2000 follow-up report resulted in ISDH requiring GYH to conduct certain in-service training sessions and a bar on medicaid payments for new admissions until there was confirmed compliance with all standards. Further in-service programs were directed following the September visit and the ISDH indicated it would revoke GYH's Medicaid certification if it did not come into compliance with all federal regulations by mid-October. GYH came into compliance by September 28, 2000, at which time the revocation threat was lifted and payments for new admissions was reinstated.
GYH has taken appropriate steps under state procedure for appealing or otherwise resolving the deficiency citations. At this point the final ISDH decision relative to the survey and follow-up visits has been through an appeal at the state Circuit Court level and is currently before the Indiana Court of Appeals. In this action, GYH hopes to obtain an injunction, declaratory relief and damages. It is pursuing the Indiana State Health Commissioner, an ISDH director, supervisors and surveyors as individual defendants as well as the Centers for Medicare and Medicaid Services ("CMS"), a division of the federal Department of Health and Human Services. Additionally, GYH has named as John Doe defendants, the individual employees of CMS who train the ISDH surveyors and supervisors on how to conduct surveys of nursing facilities. GYH asserts that the defendants, conspired to and did violate its constitutional right to due process and its right to be free from unreasonable searches. GYH also complains of statutory violations, in the form of unfair reporting, which deprived it of a fair survey. Finally, GYH has included state common law and statutory claims for malicious prosecution, abuse of process and frivolous litigation.
This case has moved forward in fits and starts, the product of both the parallel state proceedings and periodic efforts at a mediated resolution with assistance from the Magistrate Judge. As a result, we have seen two amended complaints, the addition of CMS and some of its employees as defendants and four separate motions to dismiss. This entry will address the three motions to dismiss filed by the individual defendants. These motions are focused on the court's exercise of jurisdiction and whether or not GYI has asserted claims upon which relief can be granted. The first was filed July 3, 2002, the second on March 26, 2003 and the third on July 15, 2003.
WHETHER THE COURT MAY EXERCISE JURISDICTION
The first motion to dismiss, filed by the individual defendants in response to the First Amended Complaint, asks the court to decline to hear the case pursuant to the Younger abstention doctrine. In Younger v. Harris, 401 U.S. 37 (1971) the Supreme Court ruled that a federal court may not accept jurisdiction of a case which seeks to restrain a criminal proceeding. Since then, the Younger doctrine has been refined and extended to apply to federal interference with state civil and administrative proceedings in some circumstances. Middlesex County Ethics Committee v. Garden State Bar Ass'n, 457 U.S. 423 (1982). The individual defendants maintain that abstention is appropriate because GYH has pursued contemporaneous review of the state administrative adjudication resulting from the deficiency citations. According to defendants, GYH has already pursued the exclusive means of judicial review of an agency action in Indiana and the pursuit of an additional inquiry into the agency investigation through this federal lawsuit is inappropriate.
The test for Younger abstention has four elements: 1) the state proceedings said to be threatened by potential federal interference must be judicial in nature; 2) those proceedings must entail important state interests; 3) such proceedings must allow for an adequate review of constitutional claims; and, 4) there should be no extraordinary circumstances such as bias or harassment which would auger against abstention. Middlesex, 457 U.S. at 433-35. In the case at bar, we find the first element, or at least the crux of it, lacking.
Though both the state administrative appeal and this lawsuit are born of the surveys conducted by ISDH personnel, GYH's pursuit of this suit does not interfere with the state proceedings. Without regard to merit, the emphasis of GYH's claim in this lawsuit is the pursuit of damages from the individual defendants under 42 U.S.C. § 1983. The injunctive relief sought is prospective only. Retaliation and "sour grapes"-based intimidation against individual government employees performing regulatory tasks are not far-fetched; even so, in this case, we are unable to conclude that the traditional notions of comity and federalism, which are at the core of the Younger doctrine, are implicated. Simply stated, the Plaintiff is not seeking to interrupt, halt or challenge the state proceedings. Younger is a narrow exception to the general "unflagging obligation" of the federal courts to exercise properly conferred jurisdiction. New Orleans Public Service, Inc. v. Council of New Orleans, 491 U.S. 350, 358 (1989). Having found the first element of Younger abstention lacking, we need not address each of the additional prerequisites, though we note GYH has presented a reasoned challenge to them as well.
A not-too distant cousin to the Younger abstention doctrine is the Rooker-Feldman doctrine, which the individual defendants press as well. They do so in their most recent motion to dismiss, which was filed following the filing of the Second Amended Complaint. Under the Rooker-Feldman doctrine, decisions of state courts may not be challenged through a § 1983 action. Rather, the aggrieved party must await final determination from the state system and then seek certiorari under 28 U.S.C. § 1257. See, Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983).
The Rooker-Feldman doctrine does not apply here. The state appellate proceedings have not been completed. The individual defendants are not parties to the administrative action and review. Indeed, GYH is not seeking to overturn the results of the administrative procedure in this case. It is pursuing damages for the manner in which the survey was conducted. The pivotal inquiry when considering the application of Rooker-Feldman is whether the federal plaintiff seeks to set aside a state court judgment or whether the claim being pursued is actually independent. Rizzo v. Sheahan, 266 F.3d 705, 713 (7th Cir. 2001). No state court judgment is at issue here.
Next, we address the somewhat half-hearted argument of Eleventh Amendment immunity also raised by the individual defendants in their July 15, 2003 Motion to Dismiss. In short, the Eleventh Amendment to our Constitution does not bar suits against state officials or employees in their individual capacities. Brunken v. Lance, 807 F.2d 1325, 1329 (7th Cir. 1986). Nor does the Eleventh Amendment bar a suit for injunctive or declaratory relief against state officials in their official capacities. Williams v. Wisconsin, 336 F.3d 576, 580-81 (7th Cir. 2003). GYH's Second Amended Complaint fairly outlines these distinctions in the prayers for relief which accompany each count pled. It seeks damages against individual defendants in their individual capacities and injunctive and declaratory relief with respect to the defendants as state officials. We therefore refuse the defense's invitation to decline jurisdiction based on the Eleventh Amendment.
QUALIFIED IMMUNITY
In the briefs supporting both their second and third motions to dismiss, the individual defendants raise qualified immunity as a basis for dismissing the claims against them. Qualified immunity protects governmental officials performing discretionary functions "insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). In order to determine if a defendant is entitled to qualified immunity with respect to a § 1983 claim, we follow a two-part analysis: we ask if the plaintiff has shown a violation of constitutional rights and, if so, whether the constitutional rights were so clearly established at the time of the defendant's action that as a reasonable official the defendant would understand that his or her action violated those rights. Dunn v. City of Elgin, 347 F.3d 641, 648 (7th Cir. 2003). However, this is such a fact intensive inquiry that a court isn't usually compelled to make it until the summary judgment stage of the litigation.
In this case, the individual defendants assert that they were required to conduct the surveys and were also required to record their findings in accordance with specific survey procedures, as trained by CMS officials. Those findings had to be placed on particular forms as indicated in an applicable operations manual. All of this was mandated by CMS pursuant to 42 U.S.C. § 1396r and 42 C.F.R. § 488.26. According to the defendants, the plaintiffs have not adequately set out a constitutional right that has been violated and can not establish that the individual defendants could have reasonably anticipated that following these federal requirements would have caused them to violate a constitutional right. In hopes that the court might scuttle GYH's claims at this stage, the individual defendants point to the paragraphs of GYH's Second Amended Complaint which they allege show GYH's own affirmation that the defendants were required to follow the mandates of the federal agency.
As intellectually appealing as that argument may be, it is premature at this point. The defendant's seek a dismissal based on the pleadings, and therefore must overcome all reasonable inferences from the facts pled being made in favor of the plaintiff. Dawson v. General Motors Corp., 977 F.2d 369, 372 (7th Cir. 1992). As GYH points out, when an answer has yet to be filed we can not simply assume that the individual defendants followed the federal mandates. Indeed, Count III of GYH's Second Amended Complaint alleges that the defendants did not follow appropriate survey reporting requirements under 42 C.F.R. § 488. At this stage, we must assume that such an allegation has been made with knowledge of some evidentiary support as required by Fed.R.Civ.P. 11(b)(3). If it turns out later not to be the case, defendants may have reason to pursue more than just a summary judgment.
The case relied upon by the defense, which involves similar claims of unfair nursing home inspections in violation of constitutional rights, confirms that the timing of this challenge is premature. In Blue v. Koren, 72 F.3d 1075 (2nd Cir. 1995) the Second Circuit Court of Appeals reversed the district court's ruling denying defendants motion for summary judgment, which was based in part on qualified immunity. The Second Circuit found that "upon a motion for summary judgment" in an action where a government official's conduct is facially reasonable but an unconstitutional intent is asserted, to defeat the application of the Younger doctrine plaintiff must proffer particularized evidence for the district court to review in reaching its decision. Id. at 1084. Inferentially, where the pleadings have yet to be joined and all there is to review are the allegations of the complaint, we have yet to reach the stage where such an evidentiary proffer or judicial decision should be made.
FAILURE TO STATE A CLAIM
In each of their two later dismissal motions, the individual defendants ask us to enter judgment in their favor on certain issues if the court does assert jurisdiction. As GYH points out, the defendants' approach is peculiar. Although Fed.R.Civ.P. 12(c) is not cited, defendants argue as though they are seeking judgment on the pleadings. Of course, they would be required to answer the Second Amended Complaint before a motion under rule 12(c) would be appropriate, so we must assume that their citation to Fed.R.Civ.P. 12(b)(6) is accurate despite the tenor of their request. Seber v. Unger, 881 F. Supp. 323 (N.D. Ill. 1995).
A Rule 12(b)(6) motion to dismiss for failure to state a claim tests the sufficiency of the complaint, not the merits of the suit. Triad Associates., Inc. v. Chicago Housing Authority, 892 F.2d 583, 586 (7th Cir. 1989), cert. denied, 498 U.S. 845 (1990). In considering a Rule 12(b)(6) motion, we must accept all well-pleaded facts as true, draw all reasonable inferences in favor of the plaintiff, and resolve all ambiguities in favor of the plaintiff. Dawson, 977 F.2d at 372. Our notice pleading system does not favor dismissal for failure to state a claim. Gray v. Dane County, 854 F.2d 179, 182 (7th Cir. 1988). The only question for the court under Rule 12(b)(6) is whether relief is possible under any set of facts that could be established consistent with the allegations. Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992).
The individual defendants argue that GYH's assertion that it has a right to be free from unreasonable search and seizure under the Fourth Amendment is without merit, as courts have routinely upheld the regulatory framework that grants the government the right to conduct unannounced and unexpected surveys of nursing homes. Citing Blue and Beverly California Corp. v. Shalala, 78 F.3d 403 (8th Cir. 1996), they argue that the privilege of Medicaid or Medicare certification eliminates any expectation of privacy on the part of a nursing facility.
While Beverly and Blue do. indeed, hold in favor of the governmental officials and entities in cases where plaintiffs raise issues under 42 U.S.C. § 1983 similar to those in this case, they do so only after weighing the evidence. Such reliance on a developed record demonstrates, again, that defendants' dismissal motions are premature.
In Beverly, the Eighth Circuit reviewed the district court's decision on an administrative appeal. A key to its own decision was expressed as follows: "[A]lthough the parties disagree about what standards, if any, the federal survey team was obliged to follow, it is clear from the record that the federal surveyors conducted the . . . survey in substantial accordance with the regulations governing state surveys." Beverly, 78 F.3d at 408 . So, the court in Beverely sought support from the evidentiary record in reaching its conclusion. In Blue, the Second Circuit reversed the lower court's refusal to grant summary judgment to the defendant employees of the New York State Department of Health, finding "no allegation or proffer of evidence" that suggested a valid Forth Amendment claim. Blue, 72 F.3d at 1081. The inference is clear that had the record contained evidence of a search conducted outside the regulatory standards, the decision could have been different.
GYH says it does not question the authority of the defendants to conduct the surveys at issue. It alleges that the surveys were conducted in a manner which was outside the statutory and regulatory guidelines. Certainly, a search can be unreasonable in manner or effect, though the authority to conduct it is unquestioned. See, Wilson v. Layne, 526 U.S. 603 (1999) (Bringing media representatives into a home to record the execution of a warrant was a Fourth Amendment violation). As pled, the Second Amended Complaint is adequate to assert a § 1983 claim for a Fourth Amendment violation.
The individual defendants also advance very broad and vague arguments regarding the appropriateness of a ruling in their favor on plaintiff's claim of a Fourteenth Amendment violation. With barn-sized brush strokes, defendants assert that GYH was clearly provided with due process as evidenced by its participation in the informal dispute resolution process as well as the administrative review and appeal process. No citation to supporting case law accompanies the defendants argument.
Plaintiff asserts that its right to substantive, as opposed to procedural, due process includes the right to be free from arbitrary abuse of power by the government. And, it is true that actions which are fundamentally unfair or shock the reasonable person's conscious can support § 1983 relief. White v. Rochford, 592 F.2d 381, 385 (7th Cir. 1979). While not immediately impressed with the likelihood that the results of a nursing facility survey that was prompted, in part, by a formal complaint to the ISDH would amount to an arbitrary abuse of the agency's authority, we are not yet at a stage of the litigation where this court weighs the evidence. The allegations of the Second Amended Complaint are sufficient to allow plaintiff to proceed.
The afore-referenced rulings notwithstanding, the individual defendants' motions to dismiss are not totally devoid of merit. Count III of the Second Amended Complaint alleges a § 1983 claim for violation of the plaintiff's statutory rights. The statute GYH alleges was violated is 42 U.S.C. § 1395i-3 and corresponding federal regulations at 42 C.F.R. § 488. Defendants point out that 42 U.S.C. § 1395i-3 applies to Medicare providers as opposed to Medicaid providers. GYH alleges that it was certified to provide services under the Medicaid program, not Medicare. More importantly, defendants argue that the statute at issue is clearly intended to benefit the patients at the nursing facility as opposed to the nursing facility itself. Although it does not admit to providing the incorrect statutory citation and argues that its lack of certification as a Medicare provider assumes facts outside the pleadings, GYH also responds by pointing out that another statute, 42 U.S.C. § 1396r(g), applies to Medicaid providers and is nearly identical to the statute cited in the Second Amended Complaint, an interesting coincidence, but nevertheless irrelevant here.
While we would be reluctant to dismiss based upon an apparent mistaken statutory citation, we are persuaded that neither 42 U.S.C. § 1395i-3 nor 42 U.S.C. § 1396r is a statute intended to benefit plaintiff. The statutes set forth the "requirements" for nursing facilities participating in the Medicare and Medicaid programs and the manner in which those requirements are to be monitored. The statutes clearly address benefits intended to be achieved for patients, as opposed to the facility. In order to pursue a § 1983 claim based upon a statutory violation, the statute at issue must have been intended to benefit the plaintiff. Wilder v. Virginia Hospital Association, 496 U.S. 498, 509 (1990). That is not the case here. Accordingly, Count III of the Second Amended Complaint, must be dismissed.
Count III of the Second Amended Complaint alleges a conspiracy on the part of all the defendants to violate the constitutional rights of GYH. In their second motion to dismiss, the individual defendants challenge the viability of such a claim in light of the lack of any allegation of class-based discriminatory animus and also challenge the count under the "intra-corporate conspiracy" doctrine. GYH does not provide any substantive response to these arguments.
Claims of conspiracies to effect deprivations of civil or constitutional rights may be brought in federal court under 42 U.S.C. § 1985(3). Such claims require proof of a racial or otherwise class-based discriminatory animus behind the conspirators' actions. Griffin v. Breckenridge, 403 U.S. 88 (1971); Munson v. Frisks, 754 F.2d 683 (7th Cir. 1985). There is no such claim of class-based animus in this action and it would be difficult to imagine such allegations in light of the plaintiff's status as a corporate entity.
The intra-corporate conspiracy doctrine recognizes that managers of the same corporation or supervisors and employees of the same governmental unit or agency should not be considered separate persons for the purposes of establishing a conspiracy. Wright v. Illinois Dept. of Children Family Services, 40 F.3d 1492, 1508 (7th Cir. 1994). Because the conspiracy claim does not survive due to a lack of any allegation of a class discriminatory animus, there is no need to determine if GYH's inclusion of individual defendants from both state and federal agencies is sufficient to circumvent the shield of the intra-corporate conspiracy doctrine. We do credit defendants' argument regarding the lack of any factual allegations of true joint action or concerted effort in the Second Amended Complaint, noting that the pleading has nothing more than a conclusory insertion of the term "conspiracy", which is insufficient to establish a factual basis for, or adequately give notice of, the basis of the conspiracy claim. Young v. Murphy, 90 F.3d 1225, 1233 n. 5 (7th Cir. 1996). Therefore, we dismiss the conspiracy claim of Count II.
CONCLUSION
The court has considered all of the many and varied arguments for dismissal raised in the three motions filed by the individual defendants. Based upon the analysis set forth in this entry, the motion filed on March 26, 2003 is GRANTED IN PART insofar as Counts II and III of Plaintiff's Second Amended Complaint are dismissed. Said motion is DENIED in all other respects. The motions filed on July 3, 2002 and July 15, 2003 are also DENIED.
It is so ORDERED.