State of Delaware Department of Health and Social Services, Division of Medicaid & Medical Assistance v. United States Department of Health and Human Services ( 2017 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
STATE OF DELAWARE
DEPARTMENT OF HEALTH AND
SOCIAL SERVICES, DIVISION OF
MEDICAID & MEDICAL
ASSISTANCE,
Plaintiff,
Civil Action No. 16-1734 (CKK)
v.
UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES,
et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
(August 8, 2017)
The pending case raises a thicket of regulatory and jurisdictional issues. Plaintiff is
the entity charged with administering Delaware’s Medicaid program. Due to a
technological limitation, Delaware’s computer systems were unable to separately report
certain collections that the State made from third-parties. Part of these collections were
owed to the federal government. Plaintiff addressed this technological limitation by simply
netting these collections from its Medicaid expenditures, and only seeking federal funding
based on the net amount. The federal government issued two reports warning Delaware
that this approach was unacceptable, principally because there was insufficient evidence
that the relevant collections were actually being netted, and that the federal government
was receiving due credit. Not long after the second report was issued, the federal
government “disallowed” $10,080,378 in federal funding, equal to what it viewed as the
amount that Delaware had failed to credit the federal government from third-party
collections. Delaware sees this is a manifest injustice, believing that it has already credited
the federal government with this amount, and must now double pay.
1
Despite this indignation, however, Delaware missed the deadline to seek
administrative review of the disallowance determination by two weeks. After a lengthy
period during which Delaware allegedly sought a retroactive extension of the filing
deadline, Delaware filed an appeal with the Departmental Appeals Board (the “Board”),
which summarily rejected the appeal for untimeliness. Plaintiff sought review of the
rejection before this Court, and Defendants moved to dismiss, principally on the basis that
judicial review was unavailable. Upon consideration of the pleadings, 1 the relevant legal
authorities, and the record as a whole, the Court shall GRANT-IN-PART and DENY-IN-
PART the motion to dismiss.
The Court finds that it has subject-matter jurisdiction under 42 U.S.C. §
1316(e)(2)(C) to exert judicial review over the Board’s decision to reject Plaintiff’s appeal,
and that under a standard of review set by the Administrative Procedure Act (“APA”),
Plaintiff has stated a plausible claim that the Board’s decision was arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law. Given the availability of an
adequate remedy at law, however, Plaintiff’s common law claims for unjust enrichment
and for money had and received are dismissed without prejudice because they sound in
equity, among other considerations.
1
The Court’s consideration has focused on the following documents:
• Defs.’ Mem. Of Points & Authority in Supp. of. Defs.’ Mot. to Dismiss, ECF No.
13-1 (“Defs.’ Mem.”);
• Delaware’s Mem. of Points & Authorities in Opp’n to Defs.’ Mot. to Dismiss,
ECF No. 14 (“Pl.’s Opp’n”); and
• Mem. in Reply to Pl.’s Opp’n to Defs.’ Mot. to Dismiss, ECF No. 16 (“Defs.’
Reply”).
2
Finally, the alleged APA violations were pled only against Defendants United
States Department of Health and Human Services (“HHS”) and the Secretary of the United
States Department of Health and Human Services (the “Secretary”). See Compl., Counts
I–III. Only the common law claims were brought against the other two Defendants, the
Centers for Medicare and Medicaid Services (“CMS”), and the Administrator for the
Centers for Medicare and Medicaid Services (the “Administrator”). Id., Counts IV–V.
Accordingly, CMS and the Administrator are dismissed from this lawsuit without
prejudice.
I. BACKGROUND
A. Statutory and Regulatory Background
1. Medicaid
Medicaid is a cooperative federal-state program through which the federal
government provides financial assistance for States to furnish medical care to low-income
families and individuals. Wilder v. Virginia Hosp. Ass’n, 496 U.S. 498, 502 (1990). In
order to participate in Medicaid, a State must first develop a Medicaid plan “describing
conditions of eligibility and covered services.” Bowen v. Massachusetts, 487 U.S. 879, 883
(1988). That plan must then be approved by CMS. 42 U.S.C. § 1396a.
Once approved, the federal government pays the State on a quarterly basis for a
specified percentage of the State’s Medicaid expenditures. Id. § 1396b. This financial
contribution is called the “federal financial participation” (“FFP”). The quarterly federal
contribution is made as an advance payment “based on the State’s estimate of its
anticipated future expenditures.” Bowen, 487 U.S. at 883–84. Then, within 30 days after
the end of the quarter, the State must submit a Form CMS-64, entitled the Quarterly
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Medicaid Statement of Expenditures for the Medical Assistance Program (“QSE”), on
which the State reports its actual expenditures for the quarter. See 42 C.F.R. §§
430.30(c)(1)–(2).
Because the Medicaid program is a payor of last resort, the State is responsible for
recovering payments from third-parties that were legally obligated to cover medical care
that was ultimately paid for the by the State. 42 U.S.C. § 1396a(a)(25)(A). If the State
receives federal funds for services for which it later recovers monies from third-parties, the
corresponding federal contributions are considered “overpayments” and the State must
refund those amounts to the federal government. 42 U.S.C. § 1396b(d)(2)(B). The State
must report and refund overpayments through a credit to the federal government on its
quarterly QSE. 42 C.F.R. § 433.320(a)(1). If a State does not credit the federal government
with overpayments, then CMS “will disallow expenditures equal to the determined
overpayment amount.” Compl. ¶ 20; see 42 U.S.C. § 1316(d); 42 C.F.R. § 430.42(a)
(describing disallowance procedure).
2. Reconsideration and Appeals Process
Section 1316(e) and accompanying regulations set forth two routes for the State to
contest a disallowance determination. The first route is the reconsideration process, which
allows the State to request “reconsideration of the disallowance, provided that such request
is made during the 60-day period that begins on the date the State receives notice of the
disallowance.” 42 U.S.C. § 1316(e)(1). Within 60 days of receiving the request for
reconsideration, the Administrator “shall . . . issue a written decision or a request for
additional information . . . .” Id. § 430.42(c)(2). If the State is required to submit additional
information, the Administrator “shall issue a written decision, within 60 days from the due
4
date of such information.” Id. § 430.42(c)(5). The final written decision “shall constitute
final CMS administrative action on the reconsideration.” Id. § 430.42(b)(6). If the State
receives an adverse reconsideration decision, it may then appeal “during the 60-day period
that begins on the date the State receives notice of . . . the unfavorable reconsideration . . .
to the Departmental Appeals Board.” 42 U.S.C. § 1316(e)(2)(A); 42 C.F.R. § 430.42(b)(5)
(“The State may . . . seek reconsideration, and following the reconsideration decision,
request a review from the Board.”).
The second option—the appeal route—permits the State to bypass the
reconsideration process and appeal the disallowance decision directly to the Departmental
Appeals Board. 42 U.S.C. § 1316(e)(2)(A) (“A State may appeal a disallowance . . . during
the 60-day period that begins on the date the State receives notice of the disallowance . . .
by filing a notice of appeal with the Board.”); 42 C.F.R. § 430.42(b)(4) (“The State is not
required to seek reconsideration before seeking review from the Departmental Appeals
Board.”). The State may pursue either the reconsideration route or the appeal route, but
may not pursue both at the same time. If the State “elects reconsideration, the
reconsideration process must be completed or withdrawn before requesting review by the
Board.” 42 C.F.R. § 430.42(b)(6).
Whether on direct appeal, or following the reconsideration process, the statute
directs the Board to “conduct a thorough review of the issues, taking into account all
relevant evidence.” Id. The Board’s decision of an appeal is “the final decision of the
Secretary.” 42 U.S.C. § 1316(e)(2)(B). Either party may then move the Board to reconsider
its “final decision” within 60 days of the Board’s decision “upon a motion by either party
that alleges a clear error of fact or law.” Id.; 42 C.F.R. § 430.42(f).
5
Finally, a State may “obtain judicial review of a decision of the Board by filing an
action in any United States District Court located within the appealing State . . . or the
United States District Court for the District of Columbia,” by filing such an action within
60 days of the Board’s decision. 42 U.S.C. § 1316(e)(2)(C).
B. Factual and Procedural Background
Plaintiff is the agency charged with administering Delaware’s Medicaid program.
Compl. ¶ 23. As a result, Plaintiff is required to collect payments from third-parties who
are legally obligated to pay the expenses of Medicaid participants who have received
government funding. Id. ¶ 24. Such recoveries are treated as overpayments, and must
therefore be credited to the federal government on Delaware’s quarterly QSEs. Id. ¶¶ 24–
25.
Overpayments are supposed to be separately reported on the QSEs. Id. ¶ 25.
However, the computer system that Delaware used to track collections from third-parties
was unable to distinguish between overpayments and other types of collections. Id. To
address this technological limitation, Delaware simply netted all of its collections from
third-parties against its total Medicaid expenditures, and reported the net amount as its
claim for federal assistance. Id. In Delaware’s view, this approach resulted in the federal
government receiving full credit for overpayments collected by the State, even though they
were not separately reported on the quarterly QSEs. Id.
The HHS Office of Inspector General (“OIG”) disagreed. First, in 2004, OIG issued
a report finding that Delaware had not separately reported overpayments on its quarterly
QSEs. Id. ¶ 27 (citing Review of Delaware’s Accounts Receivable System for Medicaid
Provider Overpayments (Oct. 2004) (“2004 OIG Report”), available at
6
https://oig.hhs.gov/oas/reports /region3/30400205.pdf ). The report found that Delaware
had not “accurately report[ed] provider overpayments” and recommended that Delaware
“establish an adequate integrated accounting system that records, ages and accurately
reports overpayments . . . .” 2004 OIG Report, at 5–6. Although Delaware decided to
implement changes to its computer system, the new system was not expected to become
operational until January 2017. Compl. ¶ 28.
OIG issued another report in 2012. Id. ¶ 29 (citing Delaware Did Not Comply with
Federal Requirements To Report All Medicaid Overpayment Collections (June 2012)
(“2012 OIG Report”), available at https://oig.hhs.gov/oas/reports/region3/31100203.
pdf”). As relevant here, the second report found that Delaware had failed to report
$10,080,378 in overpayments that were owed to the federal government. 2012 OIG Report,
at 3. OIG recognized that Delaware netted its aggregate collections from third-parties
against expenditures, and reported only the net amount of expenditures to the federal
government. Id. at 5. However, it concluded that State officials “could not provide support
for this explanation,” and that the State “did not have internal controls to verify or track
the collections once they entered the” computer system. Id.; see also id. at 7 (finding that
Delaware “did not support that the specific Medicaid overpayments [that OIG] reviewed
had, in fact, been carried through to the netted expenditures”). Delaware disputes this
finding, contending that it was “certain that net expenditures reported . . . reflect
overpayment collections.” Id. App’x (Letter from Rosanne Mahaney to Stephen
Virbitksky, dated Mar. 14, 2012).
On September 24, 2014, based principally on the findings of the 2012 OIG Report,
CMS sent Plaintiff “an official notice of a disallowance in the amount of $10,082,769.”
7
Defs.’ Mem., Ex. A, ECF No. 13-2, at 2. Although Plaintiff sought reconsideration of the
disallowance, it concedes that it missed the 60-day deadline for filing a request for
reconsideration by approximately two weeks, allegedly “[d]ue to the press of . . . other
matters . . . .” Compl. ¶ 35. In December 2014, Plaintiff “initiated efforts to secure an
extension of the reconsideration period from CMS . . . .” Id. ¶ 36. More than one year later,
on January 20, 2016, “CMS informed [Plaintiff] that it would not reconsider the
disallowance.” Id. ¶ 39. On March 11, 2016, Plaintiff filed an appeal with the Board, 2 and
simultaneously “moved to extend the appeal deadline in the event that the Board considered
the appeal to be untimely.” Compl. ¶ 40.
A “Rejection of Appeal for Untimeliness” was issued to Plaintiff on July 1, 2017
by Constance B. Tobias, Chair of the Departmental Appeals Board. Compl., Ex. A
(“Rejection Letter”). The Chair found that Plaintiff had filed its appeal “more than one year
and three months after Delaware’s notice of appeal was due,” and consequently well past
the 60-day deadline for filing an appeal directly with the Board. Rejection Letter, at 1–2.
The Chair also rejected Plaintiff’s request for an extension of the filing deadline, holding
that Plaintiff had “not given a good reason for its protracted delay.” Id. at 3. Within 60 days
of the issuance of the Rejection Letter, Plaintiff filed this action.
2
Although Plaintiff alleges in the complaint that it filed the appeal on March 1, 2016,
Defendants point out that the correct date was March 11, 2016. Defs.’ Mem. at 9 n.3 (citing
Compl., Ex. A, at 1). However, either date falls within 60 days of January 20, 2016, the
date on which Plaintiff alleges CMS informed Plaintiff that it would not reconsider the
disallowance. Compl. ¶ 39.
8
II. LEGAL STANDARD
A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
To survive a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(1), Plaintiff bears the burden of establishing that the Court has subject-matter
jurisdiction over its claims. Moms Against Mercury v. FDA, 483 F.3d 824, 828 (D.C. Cir.
2007); Ctr. for Arms Control & Non-Proliferation v. Redd, No. CIV.A. 05-682 (RMC),
2005 WL 3447891, at *3 (D.D.C. Dec. 15, 2005). A court’s decision regarding its “subject-
matter jurisdiction necessarily precedes a ruling on the merits . . . .” Ruhrgas AG v.
Marathon Oil Co., 526 U.S. 574, 584 (1999).
In determining whether there is jurisdiction, the Court may “consider the complaint
supplemented by undisputed facts evidenced in the record, or the complaint supplemented
by undisputed facts plus the court’s resolution of disputed facts.” Coal. for Underground
Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (internal quotation marks
omitted); see also Charles Alan Wright & Arthur R. Miller, 5B Federal Practice &
Procedure § 1350 (3d ed. 2017) (noting the “wide array of cases from the four corners of
the federal judicial system involving the district court’s broad discretion to consider
relevant and competent evidence on a motion to dismiss for lack of subject matter
jurisdiction to resolve factual issues”). “Although a court must accept as true all factual
allegations contained in the complaint when reviewing a motion to dismiss pursuant to
Rule 12(b)(1),” the factual allegations in the complaint “will bear closer scrutiny in
resolving a 12(b)(1) motion than in resolving a 12(b)(6) motion for failure to state a claim.”
Wright v. Foreign Serv. Grievance Bd., 503 F. Supp. 2d 163, 170 (D.D.C. 2007) (internal
quotation marks omitted).
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B. Motion to Dismiss for Failure to State a Claim
Defendants also move to dismiss the Complaint for “failure to state a claim upon
which relief can be granted” pursuant to Federal Rule of Civil Procedure 12(b)(6). “[A]
complaint [does not] suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 557 (2007)). Rather, a complaint must contain sufficient factual
allegations that, if accepted as true, “state a claim to relief that is plausible on its face.”
Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678.
In deciding a Rule 12(b)(6) motion, a court may consider “the facts alleged in the
complaint, documents attached as exhibits or incorporated by reference in the complaint,”
or “documents upon which the plaintiff’s complaint necessarily relies even if the document
is produced not by the plaintiff in the complaint but by the defendant in
a motion to dismiss.” Ward v. District of Columbia Dep’t of Youth Rehab. Servs., 768
F. Supp. 2d 117, 119 (D.D.C. 2011) (internal quotation marks omitted). The court may also
consider documents in the public record of which the court may take judicial notice. Abhe
& Svoboda, Inc. v. Chao, 508 F.3d 1052, 1059 (D.C. Cir. 2007).
III. DISCUSSION
A. The Court Has Subject-Matter Jurisdiction Under Section 1316(e)
Plaintiff has presented a multitude of alleged jurisdictional bases in the complaint
and the briefing on the pending motion to dismiss. These include mandamus (28 U.S.C. §
1361), equity, general federal question jurisdiction (28 U.S.C. § 1331), and the APA. The
10
Court, however, sees the jurisdictional question through a narrower lens. Section
1316(e)(2)(C) provides for judicial review of Board decisions:
A State may obtain judicial review of a decision of the Board by filing an
action in . . . the United States District Court for the District of Columbia.
Such an action may only be filed . . . if no motion for reconsideration was
filed within the 60-day period specified in subparagraph (B), during such
60-day period.
42 U.S.C. § 1316(e)(2)(C). Accordingly, for the Court to exert judicial review, Plaintiff
must have received “a decision of the Board” and must have brought an action in this
district within 60 days of the date on which the decision was rendered. The parties agree
that this action was filed within the applicable time period. They only disagree over
whether the Rejection Letter constitutes “a decision of the Board.”
There is a paucity of case law on section 1316(e)(2)(C). Fortunately, the United
States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) has provided
substantial guidance with respect to an analogous statute in the Medicare context. Under
the Medicare statute, 42 U.S.C. § 1395 et seq., “providers are reimbursed for the cost of
the services they provide to qualified Medicare beneficiaries” based on agreements with
HHS. Athens Community Hospital v. Schweiker, 686 F.2d 989, 991 (D.C. Cir. 1982). HHS
has appointed a “fiscal intermediary” who “acts as the Secretary’s agent for the purpose of
reviewing claims and awarding reimbursement.” Id. (citing 42 U.S.C. § 1395h). At the end
of the fiscal year, the fiscal intermediary reviews the providers’ claims and awards
reimbursement. Id. If the provider disagrees with the reimbursement award, it may appeal
to the Provider Reimbursement Review Board (“PRRB”). The PRRB will review
determinations of the fiscal intermediary “only if (1) the provider has filed a timely cost
report; (2) the amount in controversy is $10,000 or more, and (3) the appeal is filed within
11
180 days.” Id. (citing 42 U.S.C. § 1395oo(a)). Section 1395oo(f)(1) provides for judicial
review with respect to the PRRB:
Providers shall have the right to obtain judicial review of any final decision
of the [PRRB], or of any reversal, affirmance, or modification by the
Secretary, by a civil action commenced within 60 days of the date on which
notice of any final decision by the [PRRB] or of any reversal, affirmance,
or modification by the Secretary is received . . . . Such action shall be
brought in the district court of the United States for the judicial district in
which the provider is located or in the District Court for the District of
Columbia and shall be tried pursuant to the applicable provisions under
chapter 7 of Title 5 . . . .
42 U.S.C. § 1395oo(f)(1).
In Athens, the D.C. Circuit considered whether a decision by the PRRB not to assert
jurisdiction constituted a “final decision” subject to judicial review pursuant to section
1395oo(f)(1). Athens, 686 F.2d at 993. Relying principally on the out-of-circuit authority
Cleveland Memorial Hospital, Inc. v. Califano, 444 F. Supp. 125 (E.D.N.C. 1978), aff’d,
594 F.2d 993 (4th Cir. 1979), the court held that such a decision was “final” and that the
court therefore had subject-matter jurisdiction. First, the court found persuasive the
argument that “if a refusal by the PRRB to exercise jurisdiction were not reviewable, the
PRRB could effectively preclude any judicial review of its decisions simply by denying
jurisdiction of those claims that it deems to be non-meritorious.” Id. (internal quotation
marks and citations omitted). Second, the court found persuasive the analogy between
judicial review of the PRRB’s decision and the authority of the courts of appeals to review
“final decisions” of the district courts, noting that dismissals for lack of jurisdiction by
district courts have “consistently been understood as ‘final decisions.’” Id. The D.C. Circuit
concluded that:
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[A] decision by the PRRB refusing to exercise jurisdiction is, for the
purpose of 42 U.S.C. § 1395oo(f)(1), a final decision sufficient to permit
judicial review. The reasoning of the court in Cleveland Memorial is
especially persuasive. Moreover, while the Medicare Act and, in particular,
42 U.S.C. § 1395oo(f)(1) are structured so as to limit judicial review, there
is nothing in either the statute or the legislative history which suggests that
such review is limited exclusively to substantive issues. Thus, if the
threshold requirements of 42 U.S.C. § 1395oo(f)(1) are met, a court has
jurisdiction to review a decision by the PRRB that it lacks jurisdiction to
review a determination of the fiscal intermediary.
Id. (emphasis added).
This issue was revisited by the D.C. Circuit in Auburn Regional Medical Center v.
Sebelius, 642 F.3d 1145 (D.C. Cir. 2011), rev’d on other grounds, 568 U.S. 145, 157
(2013). In Auburn, Medicare providers contested the rate at which they had been
reimbursed for the fiscal years 1987–1994 based on a discovery in an unrelated case that
CMS had miscalculated rates for similar providers during that time period. Id. at 1147. The
providers petitioned the PRRB in 2006, significantly outside of the 180-day appeals
window. Id. The PRRB held that the providers’ “untimely” claim was beyond its
jurisdiction and declined to review the merits of the claim. Id. In assessing whether it had
subject-matter jurisdiction, the district court relied on Athens, and read that case to hold
that “a plaintiff may obtain judicial review of a PRRB refusal to exercise jurisdiction only
if an administrative appeal has been filed within the 180-day limitations period.” Auburn
Regional Medical Center v. Sebelius, 686 F. Supp. 55, 64 (D.D.C. 2010). On this issue, the
D.C. Circuit reversed the district court, reaffirming the holding in Athens that “a decision
of the PRRB denying jurisdiction is a final decision subject to judicial review,” reasoning
that “[s]uch a dismissal is final in any sense of the word. It is not pending, interlocutory,
tentative, conditional, doubtful, unsettled or otherwise indeterminate. It is done.” Auburn,
642 F.3d at 1148. For purposes of assessing the availability of judicial review, the D.C.
13
Circuit held that it was irrelevant whether plaintiff had filed its PRRB petition within the
180-day period set by statute, holding that section “1395oo(f)(1) only requires that ‘a civil
action [be] commenced within 60 days’ of the PRRB’s ‘final decision.’ It says nothing
about the 180–day limitations period [for appealing to the PRRB].” Id. at 1147 (first
alternation in original).
In light of these authorities, the question before the Court is a narrow one: are the
threshold requirements of section 1316(e)(2)(C) satisfied such that the Court can exert
judicial review. As already noted, the parties do not dispute that this action was filed within
the 60-day period for seeking judicial review. Rather, they differ over whether the
Rejection Letter constitutes a Board “decision” subject to judicial review. Defendants
principally rely on the fact that the Rejection Letter was issued solely by the Chair of the
Board, and not by three board members. As support, Defendants point to the regulations
under section 1316(e). One of these provides that “[e]ach decision is issued by three Board
members (see § 16.5(b)) . . . .” 45 C.F.R. § 16.21(a). Section 16.5(b), in turn, provides that
“[e]ach decision of the Board is issued by the presiding Board member and two other Board
members.” 45 C.F.R. § 16.5(b).
However, Defendants have not explained why the Court should defer to the
agency’s interpretation of the word “decision” in section 1316(e)(2)(C). The D.C. Circuit,
for one, has held that “an agency’s interpretation of a statutory provision defining the
jurisdiction of the court [is not] entitled to . . . deference under Chevron.” Fox Television
Stations, Inc. v. FCC, 280 F.3d 1027, 1038 (D.C. Cir. 2002) (citing Adams Fruit Co. v.
Barrett, 494 U.S. 638, 649 (1990) (“even if [the] language establishing a private right of
action is ambiguous, we need not defer to the Secretary of Labor’s view of the scope of
14
[the statute] because Congress has expressly established the Judiciary and not the
Department of Labor as the adjudicator of private rights of action arising under the
statute”)). Furthermore, the regulations are not as clear as Defendants would have. The
definitional section provides that “[r]eference . . . to an action of the Board means an action
of the Chair, another Board member, or Board staff acting at the direction of a Board
member.” 45 C.F.R. § 16.2(a). Furthermore, the specific regulation regarding the action at
issue in this case—the rejection of Plaintiff’s appeal—provides as follows:
Within ten days after receiving the notice of appeal, the Board will send an
acknowledgment, enclose a copy of these procedures, and advise the
appellant of the next steps. The Board will also send a copy of the notice of
appeal, its attachments, and the Board’s acknowledgment to the respondent.
If the Board Chair has determined that the appeal does not meet the
conditions of § 16.3 or if further information is needed to make this
determination, the Board will notify the parties at this point.
45 C.F.R. § 16.7(b) (emphasis added). Contrary to the position taken by Defendant, this
regulation suggests that a rejection of an appeal is a type of Board action, and not merely
an action by the Chair of the Board.
As a more substantive matter, however, the reasoning of Athens and Auburn apply
directly to the jurisdictional question in this case. Were the Court to hold that a decision to
decline jurisdiction over an appeal was not subject to judicial review under section
1316(e)(2)(C), then the Board would be free to escape judicial review by dismissing
appeals on jurisdictional grounds, rather than on the merits—that is, the exact concern
raised by the D.C. Circuit in Athens and Auburn. Furthermore, regardless of whether such
a decision is issued by three members of the Board, or solely by the Chair, there is no real
disagreement over the fact that the decision is final and ripe for judicial review. The
15
Rejection Letter, for instance, has all the hallmarks of a final legal decision and makes no
mention of further administrative proceedings.
Finally, contrary to Defendants’ assertions, Auburn makes clear that the availability
of subject-matter jurisdiction in this case does not hinge upon whether Plaintiff complied
with administrative filing deadlines in the proceedings below. Auburn, 642 F.3d at 1147
(holding that judicial review was available so long as the threshold requirements of the
statute providing for judicial review were met, regardless of whether an administrative
filing deadline had been met); compare Def.’s Mem. at 3 (claiming that “judicial review
under the Medicaid statute is available only to States that exhaust their administrative
remedies”). Accordingly, the Court concludes that the Rejection Letter is a “decision of the
Board,” and that Plaintiff filed this action within 60 days of the issuance of the Rejection
Letter. This means that the “threshold requirements” of section 1316(e)(2)(C) have been
met, and consequently that the Court has subject-matter jurisdiction pursuant to section
1316(e)(2)(C) to exert judicial review over the Board’s decision to decline jurisdiction over
Plaintiff’s appeal, as memorialized in the Rejection Letter. Athens, 686 at 993.
Because the Court finds that it has subject-matter jurisdiction pursuant to section
1316(e)(2)(C), Plaintiff’s other arguments regarding subject-matter jurisdiction are left
unaddressed.
B. Plaintiff Has Stated a Plausible Claim
The parties agree that the APA provides the appropriate standard of review for
assessing a claim under section 1316(e)(2)(C). Defs.’ Reply at 9 (“the APA supplies the
standard of review for . . . judicial review under 42 U.S.C. § 1316”); Pl.’s Mem. at 12–13
(contending that section 1316(e)(2)(C) merely codified the prior practice of Board
16
decisions being reviewed pursuant to the APA). Furthermore, the analogous Medicare
statute—section 42 U.S.C. § 1395oo(f)(1)—expressly provides that judicial review should
be conducted pursuant to the APA.
Section 706(2)(A) of the APA empowers courts to “hold unlawful and set aside
agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law . . . .” 5 U.S.C. § 706(2)(A). Plaintiff
has stated a plausible claim that the decision of the Board was “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law . . . .” Plaintiff alleges that
although it missed the deadline for seeking reconsideration of the disallowance
determination by two-weeks, CMS improperly rebuffed its request to reconsider that
determination because it erroneously held that “the agency does not have the authority to
allow reconsideration beyond the 60 day time period allowed by statute.” Compl. ¶ 38
(internal quotation marks and alterations omitted). The Supreme Court has held that an
analogous filing deadline in the Medicare statute discussed above is not jurisdictional,
meaning that the Secretary was permitted to extend the Medicare deadline for “good cause
shown.” Sebelius v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 149 (2013). Plaintiff alleges
that the Rejection Letter failed to recognize CMS’s error in holding that the time-limit for
seeking reconsideration was jurisdictional and that it lacked authority to grant an extension,
Compl. ¶ 43, and that the Rejection Letter further erred because it failed to recognize that
once Delaware “elected to seek reconsideration, [it was required] to complete or withdraw
from the process before seeking Board review,” Compl. ¶ 42 (citing 42 C.F.R. §
430.42(b)(6)).
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As a result of these errors, Plaintiff alleges that the Board improperly determined
that Plaintiff filed its appeal “more than one year and three months late.” Compl. ¶ 42
Under Plaintiff’s interpretation of the law, the appeal to the Board was timely because it
was filed within 60 days of CMS’s final determination to not allow for reconsideration, Id.
¶ 40; and although the request for reconsideration was late, it was only two weeks late, and
Plaintiff contends that CMS had authority to provide for a good cause extension of the
reconsideration deadline. Notably, the Rejection Letter recognized the availability of a
good cause extension, but found that it was unavailable in part due to the substantial length
of the delay—in the Board’s view, one year and three months. Rejection Letter, at 3
(“Delaware claims it had good reason to delay its appeal for 15 months based on the
following grounds . . . . An extension of the appeal deadline would not be justified here
because Delaware has not given a good reason for its protracted delay.” (emphasis added)).
If the actual delay is as Plaintiff claims—only two weeks—then the Board’s decision
seemingly rests on a patently erroneous determination. Finally, the Court is unmoved by
Defendants’ contention that Plaintiff has not stated a viable claim because it failed to
properly exhaust its administrative remedies. See Defs.’ Reply at 16. The very nature of
Plaintiff’s claim is that Defendants erred in not affording it administrative relief. Were the
Court to hold otherwise, then no challenge could be brought based on an agency’s refusal
to hear a claim for untimeliness, which would be contrary to the D.C. Circuit’s holdings in
Athens and Auburn. As a result, Plaintiff has plausibly alleged that the Rejection Letter was
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,”
and accordingly, has stated a plausible claim under section 1316(e)(2)(C) with respect to
the Board’s decision to decline jurisdiction over Plaintiff’s appeal due to untimeliness.
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C. Common Law Claims
Because the Court finds that Plaintiff has stated a viable claim under section
1316(e)(2)(C) and the applicable APA standard of review, Plaintiff’s unjust enrichment
claim, which sounds in equity, shall be dismissed without prejudice. “It is a basic doctrine
of equity jurisprudence that courts of equity should not act when the moving party has an
adequate remedy at law and will not suffer irreparable injury if denied equitable relief.”
Morales v. Trans World Airlines, Inc., 504 U.S. 374, 381 (1992) (internal quotation marks
and alterations omitted). Here, the Court finds that adequate relief at law may be available
pursuant to section 1316(e)(2)(C), and consequently, Plaintiff is not yet faced with a
situation in which it lacks “an adequate remedy at law.” This, Plaintiff appears to recognize,
if not concede. Pl.’s Opp’n at 22 (“While Defendants are correct that an adequate remedy
at law may defeat an equitable claim, such a claim cannot be defeated by the availability
of any remedy at law.” (emphasis in original)).
This leaves Plaintiff’s claim for “money had and received.” See Compl., Count V.
Plaintiff contends that this is not an equitable claim, but rather one at law. See Pl.’s Opp’n
at 23. The Supreme Court has noted that “‘a court of the United States will not sustain a
bill in equity to obtain only a decree for the payment of money by way of damages, when
the like amount can be recovered at law in an action . . . for money had and received.’”
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 47–48 (1989) (citing Buzard v. Houston,
119 U.S. 347, 352 (1886)). Plaintiff also cites an out-of-circuit authority, which states that
“[i]t is not clear that all jurisdictions would deem this claim an equitable one or impose a
requirement that no adequate alternative remedy at law exist for recovery for money had
and received.” Turney v. Dz Bank AG Deutsche Zentral Genossenschaftsbank, No. 09-
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2533-JWL, 2010 WL 3735757, at *9 (D. Kan. Sept. 20, 2010). Plaintiff, however, has
provided no choice-of-law analysis, and the law of the District of Columbia makes no
distinction between actions for unjust enrichment and for money had and received. Chase
Manhattan Bank v. Burden, 489 A.2d 494, 497 n.8 (D.C. 1985) (holding that the two causes
of action are “essentially the same”). In any event, regardless of whether an action for
money had and received is “at law” in some general sense, the claim in this case sounds in
equity. The Complaint seeks only equitable relief and contains no money demand. See
Compl., Request for Relief. And if there were a money demand, it is unclear that this Court
would have jurisdiction over the claim. Plaintiff has espoused no theory as to how
Defendants have waived their sovereign immunity for money damages, rather than
equitable relief. United States v. White Mountain Apache Tribe, 537 U.S. 465, 472 (2003)
(“[j]urisdiction over any suit against the Government requires a clear statement from the
United States waiving sovereign immunity”); Pl.’s Opp’n Mem. at 22 (contending that
waiver of sovereign immunity against Defendants is supplied by the APA, but then noting
that such waiver applies to suits “seeking relief other than money damages” (citing 5
U.S.C. § 702)). Finally, jurisdiction for a pure money damages claim would likely lie only
with the United States Court of Federal Claims. The Tucker Act provides that court with
“exclusive” jurisdiction, where the amount sought exceeds $10,000, “to render judgment
upon any claim against the United States founded . . . upon any express or implied contract
with the United States, or for liquidated or unliquidated damages in cases not sounding in
tort.” Kidwell v. Dep’t of Army, Bd. for Correction of Military Records, 56 F.3d 279, 283
(D.C. Cir. 1995) (internal quotation marks omitted; citing 28 U.S.C. § 1491); cf. Bowen,
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487 U.S. at 910 n.48 (noting that jurisdiction would not lie solely with the Court of Federal
Claims where monetary relief is sought incident to other forms of relief under the APA).
Accordingly, Plaintiff’s claims for unjust enrichment and for money had and
received are dismissed without prejudice.
IV. CONCLUSION AND ORDER
For the foregoing reasons, Defendants’ [13] Motion to Dismiss is GRANTED-IN-
PART and DENIED-IN-PART. The Court has subject-matter jurisdiction under 42
U.S.C. § 1316(e)(2)(C) to exert judicial review over the Board’s decision to reject
Plaintiff’s appeal. Furthermore, under a standard of review set by the APA, Plaintiff has
stated a plausible claim that the Board’s decision was arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law. However, Plaintiff’s common law
claims for unjust enrichment and for money had and received are dismissed without
prejudice. Finally, given the composition of the remaining claims, Defendants CMS and
the Administrator are dismissed from this lawsuit without prejudice.
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
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