CUSHING v. JACOBS

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

JANE CUSHING

Plaintiff, 20-cv-130

v.

OPINION

JENNIFER LANGER JACOBS, as Assistant

Commissioner of the Division of Medical

Assistance and Health Services of the New

Jersey Department of Human Services, and

CAROLE JOHNSON, as Commissioner of the

Department of Human Services,

Defendants.

WILLIAM J. MARTINI, U.S.D.J.:

This matter arises out of Plaintiff Jane Cushing’s (“Plaintiff’) denial of Medicaid

benefits by the New Jersey Division of Medical Assistance and Health Services (“DMHS”),

overseen by Defendant Jennifer Langer Jacobs, which is part of the New Jersey Department

of Health and Human Services, overseen by Defendant Carole Johnson (with Jacobs,

‘“Defendants”). The matter comes before the Court on Plaintiff's motion for a preliminary

injunction, ECF No. 5 (“Plaintiff's Motion”), and Defendants’ cross motion for summary

judgment, ECF No. 13 (“Defendants Motion”). For the reasons set forth below, Plaintiffs

motion is converted into one for Summary Judgment under FRCP 56 and GRANTED.

Defendants’ motion is DENIED.

I. BACKGROUND

To qualify for Medicaid benefits, Plaintiff may not have more than $2,000 in countable

assets. Annuities purchased by Medicaid applicants are not countable assets if they meet

certain criteria, including irrevocability. See 42 U.S.C. § 1396p(c)(1)(G)(ii). On June 12,

2019, Plaintiff purchased a single-premium, immediate payout annuity (“Annuity”) from the

Croatian Fraternal Union of America (“Croatian”). The Annuity is explicitly irrevocable.

Compl. Ex. C at 6, ECF No. 1-3. However, it is also subject to a provision that the “National

President or Secretary/Treasurer of the Croatian Fraternal Union of America may, in writing.

make or change a contract or waive any of its rights or requirements.” /d. at 10.

On September 19, 2019, DMHS informed Plaintiff that they were “no longer

accepting” annuities issued by Croatian. Compl. Ex. E. It was (and is) DMHS’s position that

due to the power of the President, Sectary, or Treasurer of Croatian to change the Annuity’s

terms, it is revocable, and thus included in the calculation of Plaintiff's resources. As the

Annuity pushed Plaintiff’s resources above the $2,000 cap for Medicaid eligibility, she is

purportedly ineligible. Plaintiff received notice that her existing benefits would end at the

end of September or beginning of October, 2019. Jd. Exs. E & F.

Il. STANDARD OF REVIEW

While Plaintiff moves for a preliminary injunction, she volunteers to convert her

motion into one for summary judgment, so long as no material facts are in dispute. Pl. Mot.

at 13. Defendants cross-move for summary judgment and agree no material facts are in

dispute. Def. Mot. at 2. Accordingly, the summary judgment standard is appropriate for

speedy adjudication of this matter, which presents a single issue of law. As no material facts

are in dispute, another recitation of the well-known standard applicable to motions under

FRCP 56 is unnecessary. See FRCP 56(a).

Il. DISCUSSION

The issue presented by the cross motions is whether a provision allowing the President,

Secretary, or Treasurer of Croatian to waive or change the Annuity’s terms (“Amendment

Provision”) renders the Annuity “revocable,” and thus qualified as a resource under New

Jersey’s Medicaid regime. Plaintiff argues that New Jersey’s Medicaid evaluations may not

be more restrictive than resource evaluations under the Supplemental Security Income

Program (“SSI”), and the Annuity does not qualify as a resource under those provisions. In

opposition, Defendants cite a prior administrative decision discussing another Croatian

annuity containing identical terms. They also argue DMHS is entitled to deference.

A. Deference to State Agency

Buried in a footnote, Defendants intonate that some level of deference to DNHS is

appropriate. See Def. Mot. at 11 n.4. Rather than provide an analysis (or even an applicable

level of deference), Defendants state simply “[a]s to that deference in New Jersey, see □□□□ v.

Division of Medical Assistance and Health Services, 434 N.J. Super. 250, 260-61 (App. Div.

2014).” Jd. The Court has reviewed R.S., and the most relevant portion states that courts are

“in no way bound by the agency’s interpretation of a statute or its determination of a strictly

legal issue.” R.S., 434 N.J. Super. at 261. Whether the Annuity at issue is considered

“revocable” under the Federal SSI standards—the most restrictive standards permissible to

determine Medicaid eligibility—is a strictly legal issue. See 42 U.S.C. § 1396a(r)(2)(A).

B. Interpretation of Annuity Contract

As relevant here, 42 U.S.C. § 1396p(c)(1)(G)(ii) provides that a purchased annuity is

considered an “asset” unless the annuity 1s (1) irrevocable and nonassignable, (2) actuarially

sound, and (3) provides for payments in equal amounts during the term or the annuity, with

no deferral or balloon payments. At issue here is irrevocability.

“The Court must first make a determination as to whether an ambiguity exists, which

is an issue of law.” Aromando v. State Farm Life Ins. Co., \7-cv-2418, 2017 WL 5496356,

at *2 (D.N.J. Nov. 15, 2017) (cleaned up). Like all contracts, if the terms of the Annuity are

clear, “the court must enforce it as written.” Cty. of Morris v. Fauver, 153 N.J. 80, 103 (1998).

Two other principles of New Jersey contract law are applicable here. First, a contract

“should not be interpreted to render one of its terms meaningless.” Cumberland Cty.

Improvement Auth. v. GSP Recycling Co., 358 N.J. Super. 484, 497 (App. Div. 2003).

Second, to the extent “general and specific clauses conflict, the specific clause governs the

meaning of the contract.” 11 Williston on Contracts § 32:10 (4th ed.); Bawman v. Royal

Indem. Co., 36 N.J. 12, 22 (1961) (“In the interpretation of a contractual instrument, the

specific is customarily permitted to control the general and this ordinarily serves as a sensible

aid in carrying out its intendment.” (citing Williston on Contracts)).

As to revocability, the Annuity contract specifically provides:

Irrevocable. This contract: (1) is irrevocable and immediate (2) may not be

transferred, assigned, surrendered or commuted; and (3) has not cash or loan

value. The Annuitant may not be changed... .

Annuity Contract at 6, ECF No. 1-3 (“Irrevocability Clause”). But as discussed above, the

entire Annuity is subject to the Amendment Provision, which provides Croatian’s “National

President or Secretary/Treasurer . . . may, in writing, make or change a contract or waive any

of its rights or requirements.” Jd. at 10.

The Court finds the contract unambiguous on the issue of revocability. The clearly-

drafted Irrevocability Clause renders the Annuity irrevocable, notwithstanding the general

Amendment Provision. See Fauver, 153 N.J. at 103. To the extent further analysis is

necessary, interpreting the Annuity in the manner proposed by Defendants—as revocable—

would render the irrevocability clause meaningless. But see GSP Recycling Co., 358 N.J.

Super. at 497 (mandating otherwise). Finally, such an interpretation would have the general

Amendment Provision govern over the specific Irrevocability Clause. But see Bauman, 36

N.J. at 22 (finding interpretation of specific over general is sensible aide in finding parties”

intent). Such an interpretation is contrary to New Jersey’s rules of contract construction.

Accordingly, the Annuity contract, as clearly drafted, is irrevocable.

C. The Prior Agency Decision Does Not Mandate Otherwise

In their motion, Defendants primarily rely on an Administrative Law Judge’s opinion

in M.M. v. Division of Medical Assistance and Health Services, OAL Docket No. HMA 1057-

2019 (“ALJ Decision,” ECF No. 1-8), which was adopted in its entirety by the acting director

of DMHS’s Final Agency Decision (“Final Decision,” ECF No. 1-7). In 4.M., DMHS denied

benefits to another applicant with a Croatian annuity containing the same terms at issue here.

ALJ Decision at 2-3. When the applicant reapplied, she had a different annuity from Croatian

which she purchased by “reroute[ing]” the funds from her first Croatian annuity, even though

both were allegedly “irrevocable.” /d. at 3-4. Croatian’s president “explained that his

authority to change the terms” came from the Amendment Provision. /d. at 4. Citing

Croatian’s president’s prior willingness to change the terms of an “irrevocable” annuity on

request, the ALJ found that the new annuity was an available resource despite the

Irrevocability Clause. /d. at 7-8. Accordingly, M.M. was ineligible for Medicaid benefits.

There are many reasons not to blindly apply 7M. to the case at bar. First, Plaintiff

was not a party to that suit and had no ability to intervene. Second, M.M. actually adjusted

her first “irrevocable” annuity from Croatian, whereas here, Plaintiff has not attempted to do

so. Third, even if Plaintiff tried, she has no actual power to make an adjustment. Rather than

provide her with any rights or authority, the Amendment Provision actually limits who

Plaintiff can petition to the president, secretary, or treasurer of Croatian. See Annuity Contract

at 10. While Plaintiff could ask Croatian’s president for a change, she could similarly do so

without the Amendment Provision. Croatian’s obligation to comply is the same in both

scenarios—none. Cf Final Decision at 3 (finding resource available when individual has

“right, authority, or power to the resource.” (citing N.J.A.C. 10:71-4.1(c)). Given the context

in which the Amendment Provision appears, it was likely intended to identify agents with

contracting authority for Croatian, not provide an amendment protocol. See id. (discussing

“a contract” and not “the contract”); see also P|. Mot. Ex. C.

Fourth, adopting Defendants’ interpretation of the Annuity as revocable—despite the

term explicitly stating otherwise—would render the contract misleading. But pursuant to New

Jersey law, the Division of Banking and Insurance Regulations reviewed the Annuity contract

to ensure it was not misleading. See N.J.A.C. §§ 11:4-40.3 & 40.5(a). Thus, Defendants

would have the Court adopt their dubious interpretation over the opinion of the state agency

charged with ensuring such contracts do not mislead investors.

Fifth and finally, the ALJ Decision relies on 42 U.S.C. § 1382b(e)(3)(B)' for the

proposition that if there are circumstances that payment from the Annuity could be made to

or for the benefit of the individual, then it is countable as a resource. ALJ Decision at 7. But

42 U.S.C. § 1382b(e)(3)(B) explicitly applies to irrevocable trusts and “[t]he term ‘trust’...

includes an annuity only to such extent and in such manner as the [HHS] Secretary specifies.”

42 U.S.C. § 1396p(d)(6). “[B]ecause the Secretary to date has not so specified, it follows that

[annuities] cannot be treated as trusts.” Zahner v. Sec'y Pa. Dep't of Human Servs., 802 F.3d

497, 510 (3d Cir. 2015). Thus, the ALJ Decision erroneously relies on an inapplicable law.

D. Younger Abstention

Defendants argue something akin to Younger abstention should apply here because

there is a pending administrative matter. However, Defendants openly admit that Younger

Abstention “is not strictly required,” Def. Mot. at 15, and fail to respond to Plaintiffs

argument in opposition that Sprint Communications, Inc. v. Jacobs makes clear that Younger

does not apply, Pl. Opp. at 3-4, ECF No. 15 (quoting Sprint Communications, Inc. v. Jacobs,

571 U.S. 69, 73 (2013) (Circumstances fitting within the Younger doctrine, we have stressed,

are ‘exceptional’”). Accordingly, Defendants have waived their abstention argument, and

their motion is DENIED. See, e.g., Sportscare of Am., P.C. v. Multiplan, Inc., 10-cv-4414,

2011 WL 589955, at *1 (D.N.J. Feb. 10, 2011) (“failure to respond in an opposition brief to

an argument put forward in an opening brief constitutes waiver”).”

' The ALJ Decision cites 42 U.S.C. § 1328b(3)(B), but that section of the U.S. Code does not exist

and the quoted language comes from 42 U.S.C. § 1382b(e)(3)(B).

* Defendants also list failure to exhaust administrative remedies as an affirmative defense, Answer at

7, ECF No. 12, but do not present the matter in their briefing. Accordingly, the Court has no occasion

to determine whether Plaintiffs failure to exhaust her administrative remedies would have

necessitated dismissal. See James v. Richman, 547 F.3d 214, 218 (3d Cir. 2008) (finding action for

injunctive relief under Section 1983 permissible without exhaustion of administrative remedies). In

any event, Plaintiff demonstrated that they will suffer an irreparable injury without court intervention,

given the limited look-back period for Medicaid benefits and the state’s Eleventh Amendment

IV. CONCLUSION

For the reasons set forth above, Plaintiff's motion, ECF No. 5, is converted into one

for summary judgment pursuant to FRCP 56 and GRANTED. Defendants’ motion, ECF

No. 13, is DENIED. An appropriate order follows.

Date: March 25, 2020 J. MARTINI, U.S.D.J.

immunity. See Sorber v. Velez, 09-cv-3799, 2009 WL 3491154, at *4 (D.N.J. Oct. 23, 2009).