Adkisson v. Eagleson

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

JOHN ADKISSON, WYRINE ROGERS,

and KEISHAN SHY, Individually

and as the representatives of a

class of similarly situated

persons,

Plaintiffs,

v.

THERESA A. EAGLESON, in her

official capacity as Director of

the Illinois Department of

Healthcare and Family Services, Case No. 22 C 63

201 South Grand Avenue East

Springfield, IL 62763, Judge Harry D. Leinenweber

and

GRACE B. HOU, in her official

capacity as Secretary of the

Illinois Department of Human

Services, 100 South Grand Avenue

East, Springfield, IL 62762,

Defendants.

MEMORANDUM OPINION AND ORDER

I. BACKGROUND

The underlying facts of this matter concern the Medicaid long-

term care application, approval, and payment disbursement

processes for residents in Illinois nursing homes. These processes

bear a brief explanation.

The Illinois Department of Healthcare and Family Services

(“HFS”) and the Illinois Department of Human Services (“DHS”)

(collectively, the “Defendants”) are the state agencies that

administer federal Medicaid programs in Illinois. To receive long-

term care benefits at a nursing home, the resident is required to

submit a two-part application process. First a resident must

submit a general application to receive Medicaid benefits, which

is processed by HFS and results in approval or denial. Second,

and separate from the general-eligibility determination is a long-

term care request, the approval for which results in nursing home

care coverage. In addition to the Medicaid and long-term care

application process for individual patients, there is a separate

application for nursing homes – which are responsible for providing

long-term care services – to receive financial reimbursements from

HFS and DHS. The parties refer to this separate application

process as the MEDI (which stands for “Medical Electronic Data

Interchange”) system. Specifically, nursing homes must submit

what is called a MEDI “admission packet” to HFS for every resident

who receives long-term care benefits. This is required regardless

of whether a resident was approved for Medicaid long-term care

services before or after entering the nursing home; either way,

when the resident enters a nursing home and begins to receive long-

term care, a MEDI admission packet must be submitted for each

resident.

If the MEDI admission is approved, then the nursing home

presumably receives reimbursements for any long-term care services

provided by the nursing home beginning on the date that the

beneficiary was “admitted” into the facility. But Plaintiffs

allege the MEDI admissions are frequently denied for a variety of

reasons. When these denials happen, the individual applicants are

not given notice or an opportunity to appeal their MEDI admission

denial. After a rejection, a new MEDI admission packet with the

correct information must be submitted for the resident, and if the

later application is approved, the reimbursements begin on the

later date. Plaintiffs allege that these MEDI rejections, coupled

with the lack of notice and opportunity to be heard, functionally

allow the Defendants “to avoid paying for care for Medicaid-

approved beneficiaries.” (Dkt. No. 5. (“Am. Compl.”) at 2.)

The original five Named Plaintiffs (“Plaintiffs”) were

Illinois nursing-home residents and had been approved for general

Medicaid, but their MEDI packets were denied. (Id. ¶¶ 92, 108,

124, 140.) Plaintiffs filed their original Complaint alleging

violations of due process under 28 U.S.C. § 1983 and claims under

the several provisions of Federal Medicaid Act, 42 U.S.C. § 1396.

Plaintiffs sought declaratory and injunctive relief, and included

Theresa Eagleson and Grace Hou, the Director of HFS and Secretary

of DHS, respectively, as named Defendants. Plaintiffs alleged

that HFS and DHS, by failing to give residents notice of or

opportunity to appeal such denial, violated the residents’ due

process rights as well as certain provisions of the Medicaid Act.

As a result of the benefits denial, Plaintiffs were allegedly

billed personally for the costs of their care by their nursing

homes. They also allegedly became subject to collections referrals

or other legal actions for the uncovered long-term care that

Defendants did not reimburse the nursing homes, despite

Plaintiffs’ eligibility for such care and despite having Medicaid

approval.

Plaintiffs then filed an Amended Class Action Complaint on

February 4, 2022, indicating their intent to bring the claims on

behalf of similarly situated persons. (Dkt. No. 5.) During the

pendency of the litigation, Defendants settled the claims with one

Plaintiff and one other Plaintiff died, leaving three Plaintiffs

left. The next year on May 1, 2023, Plaintiffs filed a Motion for

Class Certification. [Dkt. No. 31.] Although the timing of when

the remaining three Plaintiffs’ claims were mooted is disputed,

that they were at some point mooted by Defendants paying

Plaintiffs’ outstanding long-term care balances is not in dispute.

On July 26, 2023, Intervenors Salvatore Arcidiacono, and William

Brown (the “Substitute Plaintiffs”) filed a Motion to Intervene

and substitute for the Plaintiffs as class representatives. (Dkt.

No. 37.) These Intervenors seek the same relief as the Named

Plaintiffs.

As Plaintiffs highlight in their briefs, this is the second

suit filed to adjudicate the legality and constitutionality of

Defendants’ denial of the MEDI submissions on the basis of alleged

non-compliance. In Daly v. Eagleson, thirteen plaintiffs brought

claims that were virtually identical to those asserted in the

current suit. 2021 WL 4439428 (N.D. Ill. Sept. 27, 2021) (Chang,

J.) This previous case was ultimately dismissed because Defendants

mooted out some of the plaintiffs by paying their outstanding

invoices, while the remainder died pending resolution of their

claims. Id.

Before the Court is Plaintiffs’ Motion for Class

Certification [Dkt. No. 31], Unnamed Putative Class Members’

Motion to Intervene as Named Party Plaintiffs [Dkt. No. 37], and

Motion to Strike Defendants’ Affidavit [Dkt. No. 42]. For the

reasons stated herein, Plaintiff’s Motion to Strike is denied, and

the case is dismissed as Plaintiffs’ claims became moot in November

2022. Plaintiffs’ Motion for Class Certification and Unnamed

Putative Class Members’ Motion to Intervene are therefore

dismissed as moot.

II. ANALYSIS

On July 26, 2023, Intervenors Salvatore Arcidiacono and

William Brown filed their Motion to Intervene as party-plaintiffs

under Federal Rule of Civil Procedure 24(b). Rule 24(b) authorizes

a Court to permit anyone to intervene, on timely motion, who “has

a claim or defense that shares with the main action a common

question of law or fact.” Both parties agree that Defendants paid

the outstanding claims of the remaining three Plaintiffs thereby

mooting their claims. Intervenors moved to intervene to replace

these Plaintiffs as representatives of the putative class.

Primax Recoveries, Inc. v. Sevilla governs whether and the

extent to which the claims of the unnamed members of the putative

class are moot when the named plaintiffs’ claims become moot. 324

F.3d 544 (7th Cir. 2003). The Seventh Circuit in Primax held that

the mooting of the named plaintiffs’ claims in a putative class

action does not moot the entire action “so long as a motion for

class certification has been made and not ruled on, unless . . .

the movant has been dilatory.” Id. at 546-47. Thus, the timing of

when the named plaintiffs’ claims become moot vis-à-vis the filing

of a motion for class certification is important.

Defendants argue that the Plaintiffs’ claims were all moot by

November 2022, six months before Plaintiffs filed their Motion for

Class Certification in May 2023. Defendants submit an affidavit

from Elizabeth Lithila (“Lithila”) [Dkt. No. 39-1] to support this

timeline. Plaintiffs contend that it was not until May 2023 that

the last of the Plaintiffs’ claim became moot, after Plaintiffs

filed their Motion for Class Certification. Plaintiffs also allege

that the parties were not able to come to an agreement that the

outstanding invoices were paid until mid-June 2023.

A. Motion to Strike

Before deciding on the Motion to Intervene, the Court must

decide Plaintiff’s Motion to Strike Lithila’s affidavit, as this

concerns the timeline of when the claims became moot. Plaintiff

moved to strike the affidavit of Lithila under Rule 12(f) which

permits a court to “strike from a pleading an insufficient defense

or any redundant, immaterial, impertinent, or scandalous matter.”

F. RULE. CIV. P. 12(f). Plaintiffs request the Court strike the

affidavit because Defendants never disclosed Lithila in their

initial Rule 26(a)(1) disclosures, nor supplemented or corrected

their Rule 26(a)(1) disclosures, as required by Rule 26(e). FED.

R. CIV. P. 26(e)(1)(A). Federal Rule of Civil Procedure 37 prohibits

a party from using a witness to supply evidence when that witness

has not been disclosed unless that failure to disclose is

substantially justified or is harmless. FED. R. CIV. P. 37(c)(1).

Here, discovery has been stayed and there was no deadline by

which Defendants were required to supplement disclosures.

Further, Plaintiffs have not been prejudiced because of their

opportunity to respond to the affidavit through a reply brief.

See Berman v. Stryker, 2013 WL 5348324, at *2 (N.D. Ill. Sept. 24,

2013) (refusing to strike supplemental affidavit because “through

its reply, defendant has had a full opportunity to address the

supplement and affidavit.”); Ballard v. Zimmer, 2015 WL 110146, at

*8 (N.D. Ill. Jan. 7, 2015) (same). Nor did Plaintiffs provide

any evidence that the last of Plaintiffs’ outstanding invoices had

not been paid until May 2023, despite their opportunity to submit

such evidence on reply. The Court accordingly denies Plaintiffs’

Motion to Strike Lithila’s affidavit. As a result, the Court will

take at face value the timeline as stated in the affidavit, namely

that all of the claims were mooted by November 2022, six (6) months

before Plaintiffs filed their Motion to certify the class.

B. Motion to Intervene and Motion for Class Certification

Now to the merits of the Motion to Intervene. Defendants argue

the action should be dismissed (and Motion to Intervene and Motion

for Class Certification mooted) because Plaintiffs’ claims became

moot before the filing of the Motion for Class Certification.

Primax, 324 F.3d 544 (7th Cir. 2003). The cases this Court has

observed on this issue deal with defendants’ offers for settlements

under Federal Rule of Civil Procedure 68. Such offers are not at

issue here, but the state of this law is important to review at a

high level as a guide to this Court’s approach.

For several years before being overruled, the Seventh Circuit

in Damasco v. Clearwire Corp. held that Defendants’ mere offers to

settle mooted Plaintiffs’ claims by stripping the Court of

Article III jurisdiction, unless there was a pending Motion for

Class Certification. 662 F.3d 891 (7th Cir. 2011). It also held

that merely filing a class action complaint would not suffice to

keep the case in federal court if the plaintiffs had not also

already filed a motion for class certification. Id. at 896. The

Damasco Court acknowledged that defendants buying off plaintiffs’

claims by making these settlement offers before plaintiffs filed

a class certification motion was a risk, but that it ultimately

did not want to “forge a new rule that runs afoul of Article III.”

Id. at 895. The court offered “[a] simple solution to the buy-off

problem . . .: Class-action plaintiffs can move to certify the

class at the same time that they file their complaint. The

pendency of that motion protects a putative class from attempts to

buy off the named plaintiffs.” Id.

After Damasco, it became “common practice” for plaintiffs to

file a “placeholder” motion to certify a class to protect the

putative class from attempts to buy off the named plaintiff(s).

Fauley v. Royal Canin U.S.A., Inc., 143 F.Supp. 3d 763, 764 (N.D.

Ill. 2016). This changed after the Seventh Circuit in Chapman v.

First Index, Inc. overruled Damasco “to the extent [it held] that

a defendant’s offer of full compensation moots the litigation or

otherwise ends the Article III case or controversy.” 796 F.3d

783, 787 (7th Cir. 2015). The Court reasoned that a “fleeting

offer could not reasonably be equated to full compensation.” Id.

at 788. The Supreme Court confirmed Chapman’s holding in Campbell-

Ewald v. Gomez, 136 S.Ct. 663 (2016). Chapman thus presumably

left intact Damasco’s holding that “[t]o allow a case, not

certified as a class action and with no motion for class

certification even pending, to continue in federal court when the

sole plaintiff no longer maintains a personal stake defies the

limits on federal jurisdiction expressed in Article III.” Damasco,

662 F.3d at 896.

The “buy-off” concern is worth addressing here. As Plaintiffs

note, this very case is a byproduct of the defendants mooting

plaintiffs’ claims in the Daly case. Courts in the Supreme Court

and the Seventh Circuit do caution against authorizing defendants’

tactical maneuvers to buy off plaintiffs. See, e.g., Deposit

Guaranty Nat. Bank v. Roper, 445 U.S. 326, 339 (noting defendants’

“picking off” of plaintiffs’ claims, “before an affirmative ruling

on class certification” [] “would frustrate the objectives of class

actions” and “invite waste of judicial resources by stimulating

successive suits”); see also Primax, 324 F.3d at 547. And while

Defendants’ payments of the outstanding claims are admittedly more

difficult to label a “tactical maneuver” as they were acting

according to their authorized agency responsibilities, the

payments raise the same delay and efficiency concerns against which

courts have cautioned.

Yet despite this buy-off concern, the Court cannot find a way

in which Plaintiffs avoid the pitfalls of mootness under Primax.

Defendants’ payments of the outstanding balances moot Plaintiffs’

claims by extinguishing their injuries required for standing. This

Court adopts Judge Chang’s conclusion in Daly that Plaintiffs’

standing rests on the injury of the outstanding balances on their

accounts at the nursing homes. Daly v. Eagleson, 2021 WL 4439428

at *3 (N.D. Ill. Sept. 27, 2021) (Chang, J.) (finding plaintiffs’

injuries for standing resulting from the rejected MEDI admissions

to be the collections proceedings and bills for uncovered care).

Thus, without outstanding balances, Plaintiffs’ injuries-in-fact

required for standing are extinguished and the claims become moot.

United States Parole Comm'n v. Geraghty, 445 U.S. 388, 397 (1980)

(action becomes moot unless standing continues to exist at every

stage of review). Unlike settlement offers at the center of cases

like Chapman, Plaintiffs here were not afforded the opportunity to

wait on or “reject” Defendants payment of their outstanding

balances at their nursing homes. The payments outright moot

Plaintiffs claims.

The Court understands Plaintiffs to be requesting in part

that the Court find the claims did not become moot until Plaintiffs

were able to confirm the payments with each nursing home.

Unfortunately, the Court does not see how Plaintiffs’ confirmation

could change the fact that as of November 2022 when the final

payment was made, Plaintiffs no longer had outstanding invoices,

and thus no longer had standing.

Plaintiffs also cite to Parks v. Pavkovic for the proposition

that until Defendants “communicate” the mootness to Plaintiffs,

the claims are not moot. 753 F.2d 1397, 1403-1404 (7th Cir. 1985).

But the point the Court made in Parks was that a party cannot

“secretly conclude[]” to settle or moot the claims. Id. at 1404.

There, the State gave no indication that it was agreeing to pay

plaintiffs’ claims. Here, Defendants took specific action that

mooted the claims. Plaintiffs also cite to the Fifth Circuit

(though to no specific Fifth Circuit case) for the proposition

that merely filing a class action complaint should suffice to

preserve potential class members’ claims even if a motion for class

certification has not yet been filed. Unfortunately, the part of

Damasco’s holding left untouched by Chapman explicitly prohibits

this. Damasco, 662 F.3d at 896 (“That the complaint identifies

the suit as a class action is not enough by itself to keep the

case in federal court.”)

What does this mean for Plaintiffs going forward should they

decide to file another suit? This Court is hesitant to breathe

life into the Damasco “placeholder” motion solution in light of

the fact that Courts have considerably walked back from this tactic

after Campbell. In fact, the Court has not found a single case

that has held that Damasco’s recommended placeholder motion

strategy survives and is necessary after Chapman. Rather, to the

extent that placeholder motions are permissible, they are

“discouraged as they come with administrative costs and create an

unhelpful drag on efficiency and judicial economy.” Fauley v. Drug

Depot, Inc., 2016 WL 17309, at *2 (N.D. Ill. Aug. 16, 2016). But

Damasco’s placeholder solution has not technically been overruled,

and the context in which it has been walked back has been in

relation to Rule 68 offers for settlement. Because the same buy-

off concern that animated Damasco’s initial placeholder suggestion

is also at issue here, the Court finds it appropriate to reinstate

this suggestion.

Plaintiffs’ proposed solution was to file each plaintiff

under “John Doe” status to ensure Defendants cannot moot their

claims. Though not necessary to decide this request now, the Court

will note the lack of authority cited in support of using a John

Doe pseudonym under circumstances such as these. It will also

underscore the impracticality concerns Defendants raised that

arise from this degree of shielding the case from Defendants.

IIL. CONCLUSION

For the reasons stated herein the Court denies Plaintiffs’

Motion to Strike Lithila’s affidavit. Named Plaintiffs’ claims

were moot as of November 2022, six (6) months before Named

Plaintiffs filed a Motion for Class Certification. Under Primax,

the potential class members’ claims were thus not preserved and

Plaintiffs’ Motion for Class Certification and Unnamed Putative

Class Members’ Motion to Intervene are dismissed as moot. 324 F.3d

544, 546-47 (7th Cir. 2003). The case is dismissed without

prejudice.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge

United States District Court

Dated: 8/29/2023

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