Foster v. Missouri Department of Health & Senior Services

United States Court of Appeals

For the Eighth Circuit

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No. 12-3887

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Essie G. Foster, individually, and as majority shareholder in a closely held

corporation, Y. I. W. Inc. Home Healthcare, Inc.; Ralph Foster, individually and as

a major shareholder of a closely held corporation, Y.I.W. Inc. Home Healthcare,

Inc.; Y.I.W. Home Healthcare, Inc., a Missouri Corporation

lllllllllllllllllllll Plaintiffs - Appellants

v.

Missouri Department of Health and Senior Services, a Missouri State Agency;

Debbie Hanson, individually and in her representative capacity as a Supervisor of

the Employee Disqualification Unit of Defendant Missouri Department of Health

and Senior Services; Patricia M. Watkins, individually and in her representative

capacity as Investigator/Counsel for Employee Disqualification Unit of Defendant

Missouri Department of Health and Senior Services; Missouri Department of

Social Services Missouri Health Net Division, Formerly doing business as

Division of Medical Services, a Missouri State agency

lllllllllllllllllllll Defendants - Appellees

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Appeal from United States District Court

for the Eastern District of Missouri - St. Louis

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Submitted: September 25, 2013

Filed: November 13, 2013

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Before MURPHY, MELLOY, and SHEPHERD, Circuit Judges.

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MURPHY, Circuit Judge.

Essie Foster, her husband, and their jointly owned company brought this action

under 42 U.S.C. § 1983 against Debbie Hansen and Patricia Watkins, two employees

of the Missouri Department of Senior and Health Services, alleging violations of their

due process rights. The district court1 granted summary judgment to Hansen and

Watkins on the basis of qualified immunity, and the Fosters appeal. We affirm.

I.

Essie Foster and her husband Ralph Foster own Y.I.W. Home Healthcare

Services, Inc., a company which provides home health care services to Medicaid

recipients for the Missouri Department of Health and Senior Services. While Foster

was an employee of the company, the Department notified her that a patient had filed

a credible complaint of financial exploitation against her and that it had begun

proceedings to place her on a list it maintains of persons disqualified from working

for a variety of state agencies and private home health care entities.

Foster filed an administrative appeal of the listing proceedings, which she later

abandoned after entering into a settlement agreement with Hansen, the director of the

unit in charge of maintaining the disqualification list, and Watkins, the unit's counsel.

They agreed to stay her placement on the list as long as she took certain actions.

These included making monthly payments to the complaining patient's daughter and

completing the Department's training program for home health care providers. The

agreement stated that Foster's failure to "abide by the terms of this agreement," would

result in her "immediate" placement on the disqualification list "without further

hearing or appeal."

1

The Honorable Rodney W. Sippel, United States District Judge for the Eastern

District of Missouri.

Although Foster made payments, she made them late, to the wrong person, and

in amounts that were fractionally too large. Department attorney Watkins sent Foster

three letters notifying her of her failure to comply with the agreement. Foster did not

respond, and Watkins sent a fourth letter requiring Foster to comply before a given

deadline or be placed on the disqualification list. Foster wrote to Hansen and

Watkins protesting that she had "substantially performed" the agreement and asking

them to reopen her appeal of the listing proceedings. Hansen and Watkins did not

respond to her letter, but instead instructed a Department employee to call the Y.I.W.

Home Healthcare office and notify Foster that she was being placed on the list. The

same employee told a person working for Y.I.W. Home Healthcare that Foster was

being placed on the list and then, after being transferred to Foster, told Foster directly

that the Department would contact her. The parties dispute whether anyone in the

Department attempted to contact Foster again. Hansen did place Foster's name on the

list, and she later testified that the unit's practice at the time was to notify individuals

orally of their placement and to ask their employers to confirm in writing that the

disqualified employees had been terminated.

At the time of Foster's placement on the disqualification list, Y.I.W. Home

Healthcare was applying to renew its service provider agreement with the

Department. Missouri law prohibits the Department from granting provider contracts

to companies employing individuals on the disqualification list. Hansen and Watkins

notified HealthNet, the unit in charge of reviewing provider applications, when

Foster's name was listed. Although Foster had retired from her employee position at

Y.I.W. Home Healthcare before her listing, she remained one of its owners.

Department and HealthNet agents were aware of her retirement, but they denied the

company's renewal application because Foster continued to be named as a company

director.

In late 2010, the Fosters and Y.I.W. Home Healthcare brought this action under

42 U.S.C. § 1983 against the Department, HealthNet, and Hansen and Watkins in

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their official and individual capacities. They alleged the Department failed to provide

Essie Foster with actual notice of her placement on the disqualification list and thus

deprived the Fosters and their company of due process. They also alleged state

claims of tortious interference with contract expectancy, malicious prosecution, and

abuse of process. The Department, HealthNet, and Hansen and Watkins moved for

summary judgment.

In August 2012 the district court granted their motion in part, dismissing the

federal claims against the Department, HealthNet, and Hansen and Watkins in their

official capacities. The court decided that the claims were either barred by the

Eleventh Amendment or by Missouri's sovereign immunity statute. In November

2012 the district court granted a second motion for summary judgment, dismissing

the Fosters' individual capacity claim against Hansen and Watkins on the basis of

qualified immunity and declining to exercise supplemental jurisdiction over the state

law claims.

The Fosters appeal only the district court's grant of summary judgment to

Hansen and Watkins on their individual capacity claims, arguing that the two were

collaterally estopped from asserting qualified immunity and that there were

deficiencies in the notice that the Fosters received before Essie was placed on the list.

As a preliminary matter, we reject the Fosters' collateral estoppel claim. This court

ordinarily "will not consider arguments raised for the first time on appeal." Wiser v.

Wayne Farms, 411 F.3d 923, 926 (8th Cir. 2005) (citations omitted) (internal

quotation marks omitted). The Fosters did not raise collateral estoppel before the

district court, and we decline to consider it now.

This court reviews a grant of summary judgment de novo. Argenyi v.

Creighton Univ., 703 F.3d 441, 446 (8th Cir. 2013). Facts must be construed

favorably for the losing party, and the Fosters are to be given the benefit of all

reasonable inferences in the record. Id. Summary judgment is appropriate only if

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there is no genuine dispute "as to any material fact and the movant is entitled to

judgment as a matter of law." Id. When reviewing a grant of summary judgment on

qualified immunity grounds, we determine, "(1) whether the facts shown by the

plaintiff make out a violation of a constitutional or statutory right, and (2) whether

that right was clearly established at the time of the defendant's alleged misconduct."

Winslow v. Smith, 696 F.3d 716, 731 (8th Cir. 2012). To be "clearly established,"

the "contours of the right [must be] sufficiently clear that a reasonable official would

understand that what he is doing violates that right." Id. at 738. Although officials'

specific actions need "not previously have been held unlawful," a "general

constitutional rule already identified in the decisional law" must apply to the "specific

conduct in question." Id. The court "may decide which determination to make first."

Pearson v. Callahan, 555 U.S. 223, 235–36 (2009).

The Fosters argue that their procedural and substantive due process rights were

violated when Hansen and Watkins placed Essie on the disqualification list without

providing her final oral notice or requesting written confirmation from Y.I.W. Home

Healthcare's that it had terminated her. They allege that Essie's placement on the list

deprived them of her protected interest in employment and their company's interest

in a renewal of its provider contract with the Department. The Fourteenth

Amendment provides that "[n]o State . . . shall . . . deprive any person of life, liberty,

or property, without due process of law." U.S. Const. amend. XIV § 1. Due process

has both a procedural and substantive component. Schmidt v. Des Moines Pub. Sch.,

655 F.3d 811, 816–17 (8th Cir. 2011).

We first address the Fosters' claim that their procedural due process rights were

violated. Procedural due process entitles a person to "predeprivation notice and

hearing" where "deprivations of property are authorized by an established state

procedure." Keating v. Neb. Pub. Power Dist., 562 F.3d 923, 928 (8th Cir. 2009)

(emphasis added). The notice requirement of due process is satisfied by actual notice,

Hroch v. City of Omaha, 4 F.3d 693, 696 (8th Cir. 1993), and the hearing requirement

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is met by providing an opportunity for a hearing at a meaningful time and in a

meaningful manner. Keating, 562 F.3d at 928.

The record indicates that Hansen and Watkins provided Essie Foster with

actual notice of her placement on the list. Their original letter notified her that the

patient complaint had triggered listing proceedings against her. The settlement

agreement stated that Essie would be immediately listed without further hearing or

appeal if she violated its terms. After Essie failed to perform the agreement's required

actions, Watkins sent her three letters warning her that she was in breach. When

Essie did not respond, Watkins sent a fourth letter stating that she had breached the

settlement agreement and notifying her that her name would be listed unless she cured

the breach by a specific date. The deadline passed, and a unit employee called Y.I.W.

Home Healthcare's office and told the employee who answered that Essie's name was

being listed. Essie also had an opportunity to be heard in a meaningful time and

manner because she exercised her statutory right to appeal the listing proceedings that

Hansen and Watkins had initiated. She nevertheless chose to abandon her appeal and

enter into a settlement agreement which would have kept her name permanently off

the disqualification list had she complied with it.

The Fosters also provide no evidence that the failure to give Essie additional

notice and request written confirmation of her termination violated their substantive

due process rights. Substantive due process violations occur where there are

"violations of personal rights so severe, so disproportionate to the need presented, and

so inspired by malice or sadism rather than a merely careless or unwise excess of zeal

that it amounted to brutal and inhumane abuse of power." Winslow, 696 F.3d at 736.

There is no evidence in this record that Hansen and Watkins were inspired by

"malice" or "sadism," or that their failure to provide the Fosters extra notice

"amounted to a brutal and inhumane abuse of power." Id.

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We can find no authority or "general constitutional rule," see id. at 731,

requiring Hansen and Watkins to provide Foster final oral notice or request written

confirmation of her termination in addition to the notice and opportunity for hearing

they had already provided. We conclude that placing Essie Foster on the

disqualification list in these circumstances was not a deprivation of the Fosters'

clearly established due process rights and that Hansen and Watkins are thus entitled

to qualified immunity on the Fosters' individual capacity claims against them.

The Fosters also argue that the Department violated their due process rights by

denying its renewal of Y.I.W. Home Healthcare's provider agreement because of

Essie's disqualification and her continued involvement with the company. This claim

against Hansen and Watkins is without merit because the decision to deny the

company's application was not made by them, but by other agents of the Department.

II.

Because Hansen and Watkins were entitled to qualified immunity on the

§ 1983 claims brought by the Fosters, we affirm the judgment of the district court.

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