Ginger Elder v. Cindy Gillespie

United States Court of Appeals

For the Eighth Circuit

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No. 21-1826

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Ginger P. Elder; Benjamin Taylor; Jacquelyn A. Dearmore

lllllllllllllllllllllPlaintiffs - Appellees

v.

Cindy Gillespie, Director, Arkansas Department of Human Services, in her official

and individual capacity; Jerald Sharum, Director, Division of Provider Services

and Quality Assurance, Arkansas Department of Human Services, in his official

capacity; Richard Rosen, Managing Attorney, Office of Chief Counsel, Arkansas

Department of Human Services, in his official and individual capacity; David W.

Sterling, Chief Counsel, Arkansas Department of Human Services, in his official

and individual capacity; Craig Cloud, Former Director, Division of Provider

Services and Quality Assurance, Arkansas Department of Human Services, in his

individual capacity; Mark White, Deputy Director, Division of Aging, Adult and

Behavioral Health Services/Chief of Staff to Gillespie and Chief Legislative and

Intergovernmental Affairs Officer, Arkansas Department of Human Services, in

his official and individual capacity

lllllllllllllllllllllDefendants - Appellants

John Does, in their official and individual capacities

lllllllllllllllllllllDefendant

____________

Appeal from United States District Court

for the Eastern District of Arkansas - Northern

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Submitted: January 13, 2022

Filed: December 9, 2022

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Before SMITH, Chief Judge, WOLLMAN and ERICKSON, Circuit Judges.

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SMITH, Chief Judge.

Ginger Elder, Jacqueline Dearmore, and Benjamin Taylor (collectively,

“plaintiffs”) sued various officials of the State of Arkansas alleging that these

officials1 (collectively, “ADHS defendants”) violated their due process rights under

the Fourteenth Amendment. The officials moved to dismiss the complaint with

prejudice. The district court2 denied the motion. We affirm.

I. Background

Medicaid is a federal medical insurance program available to individuals with

limited economic resources. The federal Center for Medicaid and Medicare Services

(CMS) is the agency charged with administering the federal Medicaid program.

Arkansas has elected to participate in the federal Medicaid program.

1

The lawsuit named Cindy Gillespie, Director of the Arkansas Department of

Human Services (ADHS), in her official and individual capacity; Craig Cloud,

Director of Division of Provider Services and Quality Assurance of ADHS, in his

individual capacity; Richard Rosen, Managing Attorney of the Office of Chief

Counsel of ADHS, in his official and individual capacity; Jerald Sharum, Director of

the Division of Provider Services and Quality Assurance of ADHS, in his official

capacity; David Sterling, Chief Counsel of ADHS, in his official and individual

capacity; Mark White, Chief of Staff to Gillespie and Chief Legislative and

Intergovernmental Affairs Officer of ADHS, in his official and individual capacity;

and John Does, in their official and individual capacities

2

The Honorable Kristine G. Baker, United States District Judge for the Eastern

District of Arkansas.

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Arkansas’s Medicaid program is administered solely through ADHS. The

Medicaid program includes other optional services provided through Home and

Community-Based Services (HCBS) programs. The HCBS programs provide an

alternative for individuals who, without such programs, would likely require

placement in a long-term care facility. The premiere HCBS program in Arkansas is

ARChoices. ARChoices provides attendant-care services, home-delivered meals, and

a personal-emergency response system. It also provides a range of state plan

Medicaid services.

At least annually, ADHS conducts an eligibility assessment to determine

whether individuals remain eligible for its services and the amount of services to

allocate to them. Historically, ADHS relied on the professional discretion of an

ADHS registered nurse to determine an individual’s eligibility. In January 2016,

ADHS switched to a computer-based system that used an algorithm called Resource

Utilization Groups (RUGs). Following the switch, almost half of the ARChoices

beneficiaries received a service reduction in their benefits.

Beginning in January 2019, ADHS began using a new assessment tool known

as the Arkansas Independent Assessment (ARIA).3 After completing the assessment,

an ARChoices Person-Centered Service Plan (PCSP) is generated to allocate the

appropriate services to eligible individuals. Beneficiaries and applicants are notified

of their eligibility results once they receive a copy of the PCSP along with a Notice

of Action from an ADHS nurse. The Notice of Action triggers a person’s right to an

appeal.

3

ARIA involves home visits to applicants or beneficiaries by a nurse employed

by a company called Optum. The nurses ask questions using the ARIA assessment

tool. The responses provided are then run through an algorithm to determine

eligibility in a tier system.

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Federal and state Medicaid regulations require ADHS to notify beneficiaries

of an adverse action at least ten days before the date that the adverse action takes

effect. And if the beneficiary timely appeals, then ADHS may not reduce or terminate

their benefits until after the outcome of a hearing.

The plaintiffs each have different disabilities but were all beneficiaries of the

ARChoices Medicaid program; they all received in-home care services for many

years.4 Prior to implementation of ARIA, each of the plaintiffs received between 30

to 33 hours of in-home care services per week. After its implementation, Dearmore’s

and Taylor’s services were reduced, while Elder’s services were terminated

completely. The plaintiffs allege that the Notice of Actions provide insufficient notice

and lack rationality for the reductions imposed. They assert that ADHS’s computer

systems are programmed to terminate or reduce beneficiaries’ benefits either

immediately or no later than the tenth day following notification of an adverse action.

ADHS terminated or reduced the plaintiffs’ benefits5 despite their requests that

the benefits continue without interruption, pending the outcome of their hearing.

ADHS concedes this occurred but states that it was done mistakenly. ADHS restored

the plaintiffs benefits once they sued or their attorney contacted ADHS.

Management and supervision of the ARChoices program involves several

ADHS divisions and offices6 that handle the termination or reduction of services. All

4

The services varied from attendant care to doing their laundry, helping them

with personal hygiene, and accompaniment to medical appointments.

5

Both Dearmore and Taylor went without services for approximately three

months, and Elder went without services for approximately two months.

6

The plaintiffs complaint alleges that these offices may be involved in the

process of terminating or reducing ARChoices beneficiaries services: Office of Long-

Term Care (OLTC), an office within the Division of Provider Services and Quality

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appeal requests are processed through the Office of Appeals and Hearings (OAH).

The plaintiffs allege that staff in OAH, OLTC, DMS, and the general counsel section

failed to review requests for appeals to determine whether they were filed timely to

avoid benefit interruption. The plaintiffs further allege an undue delay before

DAAS/DAABHS staff were assigned to review appeal requests. And the plaintiffs

maintain that at least 30 beneficiaries timely appealed, but ADHS failed to continue

their benefits until legal counsel contacted ADHS.

The plaintiffs brought claims against the ADHS defendants in their official and

individual capacities, claiming that their rights under the Due Process Clause of

Fourteenth Amendment were violated. Dearmore also brought claims against the

ADHS defendants in their official and individual capacities for violations of her right

to adequate notice under the Due Process Clause of the Fourteenth Amendment. The

plaintiffs requested, among other things, a temporary restraining or preliminary

injunction, a declaratory judgment, a permanent injunction, and a money judgment.

The plaintiffs alleged that the ADHS officials are involved in the review and

approval process for the ARChoices program. The plaintiffs alleged that “ADHS

assesses program participants at least once every year to determine their functional

eligibility and, if eligible, to develop an updated person-centered service plan” and

that “[b]eneficiaries can be subject to re-assessment more than once a year if they

experience a change in status or service needs.” R. Doc. 31, at 15–16. The plaintiffs

further alleged that “ADHS has no plans to switch to a different assessment tool,

allocation methodology, or notice of action than those now used.” Id. at 16. However,

the plaintiffs acknowledged that the COVID-19 pandemic delayed their reassessment.

Assurance (DPSQA); the Division of Aging, Adult, and Behavioral Health Sciences

(DAABHS), which was formerly the Division of Aging and Adult Services (DAAS);

the Division of Medical Services (DMS); and the Division of County Operations

(DCO).

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The ADHS defendants responded to the complaint with a motion to dismiss.

In the motion, they argued that (1) they are entitled to sovereign immunity and that

the plaintiffs’ claims against the ADHS defendants in their official capacities are not

subject to the Ex Parte Young7 exception; (2) the plaintiffs failed to state a claim for

relief because the plaintiffs’ benefits were restored pending appeal, meaning that

there was no ongoing constitutional violations; (3) the plaintiffs failed to demonstrate

future injury and are not entitled to equitable relief; (4) the plaintiffs failed to show

that they realistically face a future, temporary interruption of the ARChoices benefits,

meaning that they have not met the requirements for seeking injunctive relief in

federal court; (5) the allegations in support of Dearmore’s due-process and adequate-

notice claims are conclusory and insufficient, and Dearmore’s request for injunctive

relief is not cognizable against the ADHS defendants in their individual capacities;

and (6) the ADHS defendants are entitled to qualified immunity in their individual

capacities.

The plaintiffs replied that the relief they seek will prevent an ongoing

deprivation of constitutional rights. They contended that their complaint allegations

regarding ADHS’s practices for terminating benefits and processing appeals

sufficiently allege entitlement to equitable relief.

The district court denied the motion to dismiss. It concluded that the plaintiffs

had alleged sufficient facts in their consolidated complaint to support their claims

against the ADHS defendants in their official capacities. According to the court, the

complaint adequately alleged entitlement to prospective injunctive relief to remedy

ongoing violations of federal law and to overcome the ADHS defendants’ assertion

of sovereign immunity. The court also found that the plaintiffs had alleged sufficient

facts to support an injury in fact. Specifically, they faced future, temporary

interruption of their ARChoices benefits. Thus, the district court found that the

7

Ex parte Young, 209 U.S. 123 (1908).

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plaintiffs have standing to bring their claims, including but not limited to their

official-capacity continuation-of-benefits claims.

Applying the principles of Mathews v. Eldridge, 424 U.S. 319 (1976), the

district court also concluded that Dearmore adequately alleged a violation of her due

process rights to adequate notice. The district court noted that Dearmore is a

Medicaid recipient with limited resources like the plaintiffs in Bliek v. Palmer, 102

F.3d 1472 (8th Cir. 1997), and Goldberg v. Kelly, 397 U.S. 254, 267–68 (1970). The

district court reasoned that Dearmore likely lacks the financial resources to hire an

attorney to assist her in interpreting the notice that she received from ADHS.

Ultimately, the district court concluded “that plaintiffs sufficiently plead[ed] that Ms.

Dearmore’s notice was not complete, not stated in plain language, and not reasonably

calculated to afford Ms. Dearmore an opportunity to raise her objections to ADHS’s

proposed actions.” R. Doc. 38, at 28.

The district court also determined that the plaintiffs sufficiently stated claims

against each of the ADHS defendants in their individual capacities for liability under

42 U.S.C. § 1983 and that the ADHS defendants were not entitled to judgment as a

matter of law or dismissal of the plaintiffs’ claims against them in their official or

individual capacities.

The district court denied qualified immunity to the ADHS defendants on the

plaintiffs’ individual-capacity claims, stating, “Plaintiffs’ consolidated complaint

states facts showing that they will plausibly be able to establish violations of their

constitutional rights with respect to their continuing benefits claims and that those

rights were clearly established.” Id. at 33. The district court ruled similarly with

respect to Dearmore, concluding that Dearmore had a clearly established right to

notice detailing the proposed termination of her ARChoices benefits and the reasons

for the proposed termination.

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Finally, the district court rejected the ADHS defendants’ argument that the

plaintiffs failed to state a claim on “count one which alleges claims against all

defendants in their official capacity for continuation of benefits and plaintiffs’ count

two which alleges claims against all defendants in their official capacity for their

alleged failure to provide Ms. Dearmore with due process and adequate notice.” Id.

at 41 (citing Fed. R. Civ. P. 12(b)(6)). The court concluded that the plaintiffs alleged

sufficient facts which, if accepted as true, state a claim for relief against the ADHS

defendants in their official capacities. This appeal followed.

II. Discussion

The ADHS defendants ask this court to reverse the district court’s denial of

their motion to dismiss. They argue that (1) sovereign immunity bars the plaintiffs’

official-capacity claims; (2) the plaintiffs lack Article III standing to pursue their

claims for equitable, declaratory, and injunctive relief; and (3) the ADHS defendants

are entitled to qualified immunity on the plaintiffs’ individual-capacity claims.

We review the district court’s denial of the ADHS defendants’ motion to

dismiss de novo. Lane v. Nading, 927 F.3d 1018, 1022 (8th Cir. 2019). If a defense

of qualified immunity is raised, we reverse if the ADHS defendants are entitled to

immunity on the face of the complaint. Id.

A. Sovereign Immunity

On appeal, the ADHS defendants argue that the Eleventh Amendment bars

suits by individuals brought against a state or its agencies or departments, regardless

of the relief sought.

The Eleventh Amendment to the United States Constitution states that “[t]he

judicial power of the United States shall not be construed to extend to any suit in law

or equity, commenced or prosecuted against one of the United States by Citizens of

another State, or by Citizens or Subjects of any Foreign State.” “While the

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Amendment by its terms does not bar suits against a State by its own citizens, [the]

[Supreme] Court has consistently held that an unconsenting State is immune from

suits brought in federal courts by her own citizens as well as by citizens of another

State.” Edelman v. Jordan, 415 U.S. 651, 662–63 (1974). But “the Supreme Court

[has also] recognized sovereign immunity does not bar ‘certain suits seeking

declaratory and injunctive relief against state officers in their individual capacities’

based on ongoing violations of federal law.” Kodiak Oil & Gas (USA) Inc. v. Burr,

932 F.3d 1125, 1131 (8th Cir. 2019) (quoting Idaho v. Coeur d’Alene Tribe of Idaho,

521 U.S. 261, 269 (1997)). “The Ex parte Young doctrine rests on the premise ‘that

when a federal court commands a state official to do nothing more than refrain from

violating federal law, he is not the State for sovereign-immunity purposes.’” Id.

(quoting Virginia Office for Prot. & Advocacy v. Stewart, 563 U.S. 247, 255 (2011)).

While the ADHS defendants concede the Ex Parte Young doctrine could

potentially subject the ADHS defendants to a lawsuit in their official capacity, they

maintain that to do so would require the plaintiffs to show an ongoing violation of

federal law and to seek only prospective injunctive relief. The ADHS defendants

assert that “allegations of past illegal conduct do not establish a present case or

controversy regarding injunctive relief unless accompanied by continuing, present

effects.” Appellants’ Br. at 27. The ADHS defendants further contend that the

plaintiffs are not presently suffering from a violation of federal law and thus they

cannot overcome ADHS’s sovereign immunity.

We disagree. The plaintiffs’ ARChoices benefits must be reassessed each year

and, according to the plaintiffs’ allegations, “ADHS has no plans to switch to a

different assessment tool, allocation methodology, or notice of action than those now

used.” R. Doc. 31, at 16. The very harm alleged remains likely to recur barring a

change in the state’s operation of the program or judicial intervention. Under these

circumstances, we conclude that sovereign immunity does not bar this suit.

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B. Standing

The ADHS defendants argue that even if sovereign immunity does not bar the

plaintiffs’ claims, the plaintiffs still lack standing because they do not face a real,

immediate threat of future injury.

A motion to dismiss for lack of standing presents a jurisdictional question that

is properly analyzed under Federal Rule of Civil Procedure 12(b)(1). See Disability

Support All. v. Heartwood Enters., LLC, 885 F.3d 543, 547 (8th Cir. 2018).

[T]o seek injunctive relief, a plaintiff must show that he is under threat

of suffering ‘injury in fact’ that is concrete and particularized; the threat

must be actual and imminent, not conjectural or hypothetical; it must be

fairly traceable to the challenged action of the defendant; and it must be

likely that a favorable judicial decision will prevent or redress the injury.

Missourians for Fiscal Accountability v. Klahr, 830 F.3d 789, 794 (8th Cir. 2016)

(alteration in original) (quoting Summers v. Earth Island Inst., 555 U.S. 488, 493

(2009).

The ADHS defendants argue that the plaintiffs do not face a real, immediate

threat of future injury because all the plaintiffs have had their benefits restored. On

that basis, they contend that there is no prospective relief for the court to award. They

assert that the past suspension of the plaintiffs’ benefits does not show a present

violation.

The district court rejected the ADHS defendants’ argument, concluding that the

conduct leading to the present case is repeatable because all of the plaintiffs’ benefits

will be reassessed per an unchanged ADHS policy.

As the ADHS defendants point out, Dearmore and Taylor have already been

re-assessed and neither has received a notice indicating that their care hours are

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affected. But even assuming they lack standing, Elder does not because her benefits

have not been reassessed. And, in this case, “the presence of one party with standing

is sufficient to satisfy Article III’s case-or-controversy requirement.” Rumsfeld v. F.

for Acad. & Institutional Rts., Inc., 547 U.S. 47, 52 n.2 (2006); see also Brandt by &

through Brandt v. Rutledge, 47 F.4th 661, 668 (8th Cir. 2022) (“Constitutional

standing requires that at least one plaintiff demonstrate [standing] . . . .”). The

plaintiffs’ complaint is consolidated, their positions are nearly identical, and there is

no guarantee that under the present system, the conduct that led to both Dearmore and

Taylor’s benefits interruption will not occur again. See Sec’y of the Interior v.

California, 464 U.S. 312, 319 n.3 (1984) (standing existing for one plaintiff was

sufficient for all plaintiffs where their positions in the case were identical). Therefore,

we hold that the plaintiffs have standing.

C. Qualified Immunity

The ADHS defendants argue that they are entitled to qualified immunity in

their individual capacities on Dearmore’s notice claim and the plaintiffs’ supervisory

liability claims.

“We review de novo the denial of a motion to dismiss on the basis of qualified

immunity. To prevail at this stage of the proceedings, defendants must show that they

are entitled to qualified immunity on the face of the complaint.” Bradford v.

Huckabee, 394 F.3d 1012, 1015 (8th Cir. 2005). Government officials claiming a

qualified immunity defense are protected “from liability for civil damages 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).

1. Dearmore’s Notice Claim

The ADHS defendants assert that the notice accompanying Dearmore’s

reduction in care hours does not violate Dearmore’s due process rights under the

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Fourteenth Amendment. Alternatively, they contend that even if the notice that

Dearmore received is constitutionally deficient, Dearmore’s right to a more

particularized notice is not clearly established.

“To set forth a procedural due process violation, a plaintiff, first, must establish

that his protected liberty or property interest is at stake. Second, the plaintiff must

prove that the defendant deprived him of such an interest without due process of

law.” Gordon v. Hansen, 168 F.3d 1109, 1114 (8th Cir. 1999) (per curiam) (citation

omitted). “Adequate notice is integral to the due process right to a fair hearing, for the

‘right to be heard has little reality or worth unless one is informed.’” Bliek v. Palmer,

102 F.3d 1472, 1475 (8th Cir. 1997).

In Jacobs v. Gillespie, the district court held that DHS provided deficient

notice to ARChoices beneficiaries under the RUGs methodology. 3:16-cv-119-DPM

(E.D. Ark. Nov. 1, 2016). The court ordered that the notice “be in plain and clear

terms,” “explain why benefits are being reduced,” “explain the benefit reduction with

specific references (as applicable) to” the methodology, and “be as specific as

reasonably practicable about the beneficiary’s health conditions and reduced

benefits.” Id.; see also K.W. ex rel. D.W. v. Armstrong, 789 F.3d 962, 970–74 (9th

Cir. 2015) (affirming district court’s grant of preliminary injunction on due process

grounds where the notice of a Medicaid budget reduction “did not specify why

individual budgets had decreased”); Baker v. State, 191 P.3d 1005, 1008 (Alaska

2008) (reversing trial court’s denial of preliminary injunction on due process grounds

where the notice of Medicaid personal care hours reduction based on an assessment

tool failed to “show how and why” the agency reached the decision); L.S. by &

through Ron S. v. Delia, No. 5:11-cv-354-FL, 2012 WL 12911052, at *14 (E.D.N.C.

Mar. 29, 2012) (granting preliminary injunction on due process grounds to Medicaid

beneficiaries whose annual services were being reduced pursuant to an assessment

system because beneficiaries “did not understand the score” or “how the score was

reached”); M.A. v. Norwood, 133 F. Supp. 3d 1093, 1100 (N.D. Ill. 2015) (denying

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motion to dismiss a claim of inadequate notice of Medicaid in-home nursing cuts

where the notice stated only that the cut was “[b]ased on the individual assessment

and the medical documents provided” (alteration in original)).

Here, the consolidated complaint alleges that, as a matter of policy, practice,

or procedure, ADHS automatically terminates or reduces the services of Medicaid

beneficiaries. These beneficiaries are subject to adverse agency actions regardless of

the timing of any appeal request, which the consolidated complaint maintains is a

violation of their Fourteenth Amendment due process rights. Further, the consolidated

complaint alleges that, as a matter of policy, practice, or procedure, ADHS provides

insufficient notice of the reasons for the reduction in services. This limited notice

hampers beneficiaries’ ability to counter ADHS’s reasons. The consolidated

complaint alleges that the notice that Dearmore received failed to inform her of what

steps she should take to continue receiving the 143 hours of care per month that she

received before the reduction.

We conclude that beneficiaries have a clearly established right to be provided

adequate notice of reduction, loss, or termination of benefits. No fundamental

difference exists between this case and Jacobs: in both cases, beneficiaries suffered

a loss of benefits under ARChoices. Dearmore has sufficiently pleaded that ADHS

violated her right to notice.

2. Plaintiffs’ Supervisory Liability Claims

The ADHS defendants argue that they are entitled to qualified immunity on the

plaintiffs’ supervisory liability claims. Specifically, they argue that (1) “none of the

consolidated [c]omplaint allegations plausibly allege the existence of a formal policy

. . . that violates [the plaintiffs] [d]ue [p]rocess rights,” Appellants’ Br. at 59, and that

(2) the plaintiffs’ complaint fails to establish deliberate indifference and the

conclusory allegations of failure to train and failure to supervise do not overcome the

ADHS defendants’ qualified immunity.

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To state a claim under § 1983, the plaintiff must plead that a government

official has personally violated the plaintiff’s constitutional rights.

While the doctrine of respondeat superior does not apply to § 1983

cases, a supervisor may still be liable under § 1983 if either his direct

action or his failure to properly supervise and train the offending

employee caused the constitutional violation at issue. Even if a

supervisor is not involved in day-to-day operations, his personal

involvement may be found if he is involved in creating, applying, or

interpreting a policy that gives rise to unconstitutional conditions. In

requiring a plaintiff to allege that each defendant was personally

involved in the deprivation of his constitutional rights, we assess each

defendant relative to his authority over the claimed constitutional

violation.

Jackson v. Nixon, 747 F.3d 537, 543 (8th Cir. 2014) (cleaned up).

Both parties cite Jackson in support of the proposition that a supervisor can

only be liable for creating, applying, or interpreting a policy that gives rise to

unconstitutional conditions. In Jackson we held a prison warden had qualified

immunity when an inmate sued, claiming a treatment program unlawfully imposed

religion on him. The inmate claimed that the warden was personally responsible

because he “knew or should have known changes in Constitutional matters

concerning the facility in which he presides.” Id. at 544 (cleaned up). We disagreed,

holding that the inmate had to “plead facts that plausibly show direct involvement by

the warden in the formation, implementation, or enforcement of that policy.” Id. at

545.

Here, the complaint alleges the existence of a policy that violated the plaintiffs’

constitutional rights. The consolidated complaint alleged that ADHS terminated or

reduced the plaintiffs’ services despite each of them requesting both an administrative

hearing and having their services maintained pending the outcome of that hearing. In

addition, the consolidated complaint alleged this to be a custom, policy, or practice

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of ADHS. The consolidated complaint further alleged that this policy also provided

for resuming the benefits if a beneficiary had an attorney or care worker reach out to

ADHS within the ten-day appeal period.

The plaintiffs have also alleged involvement by each ADHS defendant in

creating, applying, or interpreting this policy. In addition to the allegations above, the

plaintiffs alleged that each of the ADHS defendants knew that the continuing benefits

systems had early reduction or termination issues prior to January 2019. The plaintiffs

also alleged that each ADHS defendant failed to remedy these issues. Additionally,

the plaintiffs alleged that each ADHS defendant was involved in either developing,

authorizing, or implementing the new process for continuing benefits.

Jackson is distinguishable because the plaintiffs here have alleged facts

showing the ADHS defendants’ direct involvement in the formation, implementation,

or enforcement of the alleged policy. The ADHS defendants may at some point

demonstrate that qualified immunity applies to the plaintiffs’ claims, but at this initial

pleadings stage, the plaintiffs have adequately alleged facts to survive a dismissal

motion raising the defense.

III. Conclusion

Accordingly, we affirm the district court’s denial of the motion to dismiss.

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