Estate of Velma Lea Schultz v. Brown ( 2021 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 19, 2021
_________________________________
Christopher M. Wolpert
Clerk of Court
THE ESTATE OF VELMA LEA
SCHULTZ,
Plaintiff - Appellant,
v. No. 20-6079
(D.C. No. 5:19-CV-00217-JD)
JUSTIN BROWN, Director of the (W.D. Okla.)
Oklahoma Department of Human Services;
KEVIN CORBETT, Chief Executive
Officer of the Oklahoma Health Care
Authority,
Defendants - Appellees.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before HARTZ, HOLMES, and PHILLIPS, Circuit Judges.
_________________________________
The Estate of Velma Schultz appeals the dismissal of its lawsuit challenging
Oklahoma’s Medicaid appeals process. For the reasons below, we affirm.
BACKGROUND
After the Oklahoma Department of Human Services (DHS) denied Velma
Schultz’s application for Medicaid benefits, Schultz appealed the decision to a DHS
hearing officer. Unfortunately, Schultz died while her appeal was pending. About two
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
months after her death, the hearing officer reversed DHS’s decision. When DHS
appealed the hearing officer’s decision to the DHS Director, Schultz’s Estate filed
this case in federal district court against the Director and the head of another agency
that administers Oklahoma’s Medicaid program, the Oklahoma Health Care
Authority (collectively, Defendants).
The Estate’s suit challenges the validity of Oklahoma’s process for reviewing
denied Medicaid applications. The challenge centers on a federal requirement that
Medicaid review hearings like Schultz’s “be conducted . . . [b]y one or more
impartial officials . . . who have not been directly involved in the initial
determination” of an applicant’s eligibility for benefits. 42 C.F.R. § 431.240(a)(3).
According to the Estate, Oklahoma’s review process violates that requirement
because the same DHS official who makes the initial Medicaid eligibility
determination also represents DHS at the hearing, supervises the hearing officer, and
helps the Director draft opinions reviewing the hearing officer’s decisions. By
subjecting Schultz to this purportedly biased system, the Estate alleged, Defendants
violated her right under federal law to a fair hearing. To remedy that violation, the
Estate seeks (1) an injunction ordering Defendants to end their appeal of the hearing
officer’s decision and to “implement an impartial hearing system,” and (2) a
declaration that Defendants “have violated and continue to violate federal law.” App.
13.
Within weeks of the Estate’s federal lawsuit, the Director reversed the hearing
officer’s decision and remanded for a new hearing. The hearing officer then reversed
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its earlier decision, this time finding that DHS properly denied Schultz’s application.
About one year later, the district court dismissed the Estate’s complaint for two
reasons: (1) Defendants were immune from suit under the Eleventh Amendment, and
(2) Schultz’s death mooted the case and deprived the court of jurisdiction under
Article III of the U.S. Constitution. The Estate appeals.
DISCUSSION
The Estate disputes both grounds on which the district court dismissed the
complaint. We address those grounds in turn, reviewing the district court’s decision
de novo. Collins v. Daniels, 916 F.3d 1302, 1315 (10th Cir. 2019) (noting de novo
review of sovereign-immunity issues); Brown v. Buhman, 822 F.3d 1151, 1168 (10th
Cir. 2016) (stating that we review Article III jurisdictional issues de novo).
The Estate first challenges the district court’s determination that the Eleventh
Amendment bars the Estate’s claims against Defendants. The Eleventh Amendment
generally precludes federal courts from hearing cases against state officials acting in
their official capacities. Collins, 916 F.3d at 1315. But as it did in the district court,
the Estate invokes an exception to this rule from Ex parte Young, 209 U.S. 123(1908). Under this exception, federal courts may hear cases against state officials for
prospective relief to remedy ongoing violations of federal law. Hill v. Kemp, 478
F.3d 1236, 1255–56, 1259 (10th Cir. 2007). By contrast, the exception does not apply
to retrospective relief aimed at remedying past wrongs. See id. at 1259–60. We
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examine each form of relief the Estate seeks with this distinction in mind.1
At the outset, some relief the Estate requests is plainly retrospective. For
example, the complaint seeks a declaration that Defendants “have violated” Schultz’s
right to a fair hearing under federal law. App. 13. Ex parte Young does not cover
declarations that a state official’s past conduct violated a plaintiff’s rights. Collins,
916 F.3d at 1316. Nor does it cover the Estate’s demand for an injunction ordering
Defendants to end their appeal of the hearing officer’s original decision. That original
decision is no longer in effect and the appeal is no longer pending; the hearing officer
issued a new decision after the Director reversed the first one. So the district court
could not order Defendants “to abide by the [first] order,” App. 7, as the complaint
requests, without changing the past—it would have to nullify the second order and
reinstate the first one. Such a request “is precisely the type of retroactive equitable
relief prohibited under the Ex [p]arte Young doctrine.” Opala v. Watt, 454 F.3d 1154,
1160 (10th Cir. 2006). Accordingly, the district court rightly concluded that the
Eleventh Amendment precludes these retrospective remedies.
The Estate did request some prospective relief, though. In particular, the
complaint requests an injunction ordering Defendants “to implement an impartial
hearing system” and a declaration that they “continue to violate federal law” by not
1
We do not separately consider whether Ex parte Young covers the Estate’s
request for attorney fees and costs under 42 U.S.C. § 1988. For Eleventh Amendment
purposes, the district court could only award fees and costs “ancillary to prospective
relief.” Missouri v. Jenkins ex rel. Agyei, 491 U.S. 274, 279 (1989). The availability
of fees and costs, then, hinges on how we classify the other relief requested in the
complaint.
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doing so. App. 13. Unlike the relief discussed so far, these requests “seek[] to
preclude only the future enforcement” of an allegedly unfair appeal process. Hill, 478
F.3d at 1260. That kind of relief presents “a run[-]of[-]the[-]mill Ex parte Young
suit.” Id. at 1258 & n.27. The problem is that, as explained below, Schultz’s death
negates the Estate’s ability to seek this prospective relief.2
The district court called this problem mootness—the second ground for
dismissal—but it is more accurately described as standing. Both doctrines are
jurisdictional rules tied to Article III of the United States Constitution, which limits
federal jurisdiction to “[c]ases” or “[c]ontroversies”; they ensure that federal courts
decide only live disputes between adverse parties. Brown, 822 F.3d at 1163. Standing
does so at a case’s inception, asking “whether a plaintiff’s action qualifies as a case
or controversy when it is filed.” Id. Mootness, on the other hand, kicks in once the
case gets going, ensuring that a live dispute exists throughout the case and until “a
court renders its decision.” Id. If a party lacks standing or the mootness doctrine
applies, federal courts lose jurisdiction to hear the case. Id. at 1164.
According to the district court, Schultz’s death mooted the Estate’s claims
even if they were construed as seeking prospective relief. But mootness applies when
an event that destroys the live dispute between the parties occurs after the plaintiff
2
The district court construed all relief requested in the complaint as
retrospective—even the forward-looking injunction and declaration just mentioned.
We need not address its reasons for doing so, however, because the district court
provided an alternative basis for dismissal “[e]ven if the claims [were] construed as
seeking prospective relief.” App. 106.
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files suit. Id. at 1165. Here, Schultz died before the Estate filed the complaint, so any
Article III problem caused by that event existed at the case’s inception. As a result,
the proper framework for this analysis is whether the Estate has standing.
Despite the district court’s inaccurate phrasing, the Estate lacks standing to
seek prospective relief for the same reason that the district court found that the case
was moot. To have standing to seek prospective relief, “the plaintiff must be
suffering a continuing injury or be under a real and immediate threat of being injured
in the future.” Tandy v. City of Wichita, 380 F.3d 1277, 1283 (10th Cir. 2004). The
Estate’s alleged injury stems from a violation of Schultz’s right to a fair Medicaid
review hearing. That violation was ongoing while Schultz lived and pursued her
appeal. But Schultz is no longer with us; she no longer experiences whatever
unfairness exists in Oklahoma’s Medicaid appeals process. To state the obvious, “the
civil rights of a person cannot be violated once that person has died.” Silkwood v.
Kerr-McGee Corp., 637 F.2d 743, 749 (10th Cir. 1980). And so, as the district court
recognized, Schultz’s injury also cannot reoccur: “once dead, [a plaintiff] is no
longer under a real and immediate threat of repeated injury.” Tandy, 380 F.3d at
1290. Thus, the Estate cannot allege the continuing or impending harm required to
pursue prospective relief.
Naming the Estate as the plaintiff does not fix this standing problem. The
Estate alleges no independent injury it suffers or suffered that would support Article
III standing. Its sole attempt to do so is a string cite to cases recognizing that
applicants for government benefits may have a constitutionally protected interest in
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those benefits. E.g., Holbrook v. Pitt, 643 F.2d 1261, 1278 (7th Cir. 1981)
(“Applicants who have met the objective eligibility criteria of . . . government[]
programs have been held to be entitled to protection under the due[-]process
clause.”). But Schultz—not the Estate—applied for Medicaid benefits, so any
protected interest belonged to her. The Estate merely seeks to redress a violation of
Schultz’s rights on her behalf.3
Indeed, throughout this litigation, the Estate has recognized its representative
role. In the complaint, the Estate acknowledges that it “is pursuing this action on
behalf of . . . Schultz.” App. 8. And in opposing Defendants’ motion to dismiss, the
Estate argued that federal law allows it to obtain retroactive Medicaid benefits “on
h[er] behalf.” 42 U.S.C. § 1396a(a) (34). It repeats this point on appeal: “§
1396a(a)(34) even allows an estate of a deceased Medicaid applicant to file a
Medicaid application o[n] her behalf.” Aplt Br. 28 (emphasis added). Likewise, the
Estate cites cases to show that Schultz’s claims survive her death under Oklahoma
law. For instance, in Hopkins v. Oklahoma Public Employees Retirement System,
Oklahoma law provided that the plaintiff’s claims survived his death. 150 F.3d 1155,
1159 (10th Cir. 1998). In so doing, the court recognized that the plaintiff’s widow,
like the Estate here, never “s[ought] relief for her own . . . interest” and was involved
3
At times, the Estate also purports to sue on behalf of all Medicaid applicants
in Oklahoma who are subject to the challenged appeals process. Of course, the Estate
lacks standing to litigate the injuries of those unknown third parties. See Collins, 916
F.3d at 1312 (allowing third-party standing only if plaintiff has “close relationship”
with third party who faces “a hindrance to [that party’s] ability to protect [its] own
interests”).
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in the case “solely from her role as the personal representative of [the] estate.” Id. at
1159 n.4. In short, the Estate’s own arguments confirm that it lacks standing to seek
prospective relief.
Any doubt about that conclusion is resolved by Pecha ex rel. Pecha-Weber v.
Lake, 700 F. App’x 840 (10th Cir. 2017) (unpublished). Although Pecha is
nonprecedential, we find it persuasive. See 10th Cir. R. 32.1(A) (“Unpublished
decisions are not precedential[] but may be cited for their persuasive value.”). There,
the plaintiff sought an order declaring him eligible for Medicaid benefits and
awarding three months’ retroactive benefits. 700 F. App’x at 842. The plaintiff died
after filing suit, and a representative of his estate sought to substitute herself as the
plaintiff. Id. The district court instead dismissed the case as moot, finding that the
plaintiff’s death “render[ed] prospective injunctive relief impossible.” Id. (quoting
App. 469). On appeal, the majority and concurring opinions clashed on whether to
substitute the personal representative for the plaintiff even though the district court
never ruled on the substitution motion. Compare id. at 843 (conducting “analysis as
though [plaintiff]”—and not his estate—“were the sole plaintiff before us”), with 864
F.3d 1100, 1102–03 (Hartz, J., concurring) (criticizing majority’s approach). But
both opinions agreed that the plaintiff’s death meant he could not show the
continuing or impending harm required to obtain prospective relief. 700 F. App’x at
845 (majority opinion) (“[T]he dead are not susceptible to continuing or future harm;
therefore, claims for prospective . . . relief brought by deceased plaintiffs ordinarily
are moot.”); 864 F.3d at 1103 (Hartz, J., concurring) (finding prospective relief moot
8
based on representative’s “conce[ssion] that no future Medicaid benefits c[ould] be
due”). For the concurrence, that was true even if the estate were substituted as the
plaintiff. 864 F.3d at 1105.
The Estate’s attempts to distinguish Pecha fall short. It first points out that
there, the plaintiff died after suing, while here, Schultz died before the Estate filed
suit. As explained above, that distinction affects which doctrine (standing or
mootness) deprived the district court of jurisdiction but has no impact on whether the
district court lacked jurisdiction. The district court here should have framed its
analysis in standing terms, but the rationale it applied from Pecha holds true all the
same—“the dead are not susceptible to continuing or future harm.” 700 F. App’x at
845; see also 864 F.3d at 1105 (Hartz, J., concurring) (“Because [plaintiff] has
died[,] there could be no continuing violation of federal law.”). For that reason, the
timing of the deaths here and in Pecha is not a meaningful distinction.
Nor is the difference between the requested relief. The Estate emphasizes that,
unlike in Pecha, the complaint here seeks no determination of Schultz’s Medicaid
eligibility. That’s true, but both cases still share the same Article III problem: the
death ends any ongoing injury and makes it impossible for that injury to reoccur.
Here, the injury is the denial of a fair hearing; there, it was the denial of benefits. In
both cases, the applicant’s death cuts off any chance at prospective relief in federal
court. Pecha only strengthens our conclusion that the Estate lacks standing.
CONCLUSION
The district court properly dismissed the Estate’s complaint on Eleventh
9
Amendment and Article III grounds. The Ex parte Young exception to sovereign
immunity does not allow for the retrospective relief sought in the complaint. And
although the Estate requests some prospective relief, it has not alleged an ongoing or
impending injury as required to support standing for that relief. Every injury the
Estate alleges stems from one suffered by Schultz, who is no longer with us and thus
not experiencing any harm. As such, the Estate lacks standing to seek the only relief
that is not barred by the Eleventh Amendment. For these reasons, we affirm.
Entered for the Court
Gregory A. Phillips
Circuit Judge
10
20-6079, Estate of Schultz v. Brown
HARTZ, J., Circuit Judge, concurring
I concur in the judgment, but not all the reasoning of the majority opinion.
I fail to understand why the majority thinks that the Estate lacks standing to seek
injunctive relief. The Estate seeks both declaratory and injunctive relief. The declaratory
relief would state that the manner in which Medicaid appeals are handled by the state
agency violates federal requirements of procedural due process. Armed with such a
declaration, the Estate would attempt to set aside (in state proceedings) the adverse
decision by the agency on the claim originally filed by Ms. Schultz for nearly $80,000 in
unpaid Medicaid benefits. If that decision is set aside, the Estate would then seek a
rehearing before the agency. It is at this point that the claim for injunctive relief comes
into play, because the injunction sought by the Estate would require the agency rehearing
to comply with the Estate’s view of the demands of federal law. A failure to properly
conduct the rehearing would violate the rights of the Estate in pursuing its claim.
Perhaps there is a reason why the Estate’s interest in rehearing procedures is
insufficient to provide standing. But I am puzzled by what that reason might be. The
Estate is the successor to Ms. Schultz’s claim for unpaid Medicaid benefits. After her
death her rights to those benefits pass to the Estate. To obtain those benefits, the Estate
must first set aside the adverse ruling against Ms. Schultz and then must prevail at a
rehearing. As the Estate stated in district court, it “can still benefit from the outcome of
this pending litigation by recovering Medicaid benefits through [the] Medicaid appeals
system if the system is conducted fairly and [in] compliance with federal law.” Aplt.
App. at 71.
The panel majority appears to think it dispositive that in the Medicaid proceedings
the Estate is formally acting “on behalf” of the decedent. See, e.g., 42 U.S.C.
§ 1396a(a)(34) (referring to application for benefits that were due to a deceased person as
being “made on his behalf”). But, of course, any payment on the $80,000 claim would be
made to the Estate. The Estate would suffer injury to a legally protected interest if it is
subjected to an unlawful rehearing. It therefore has standing to seek to enjoin the state
agency from conducting a rehearing in violation of federal law.
The problem with the injunctive relief sought by the Estate for itself is that such
relief is barred by the Eleventh Amendment, as construed in Green v. Mansour, 474 U.S.
64 (1985), because ultimately all the Estate is seeking is a retroactive benefit. See Pecha
ex rel. Pecha-Weber v. Lake, 864 F.3d 1100, 1103–05 (10th Cir. 2017) (Hartz, J.,
concurring). Green does not bar the possibility of injunctive relief for others. But if any
injunctive relief for the Estate is barred, then it has no standing to seek that relief for
others.
2