Twyla Leach d/b/a Home Care Staffing v. Minnesota Department of Human Services

Background

Plaintiff Twyla Leach (Martin), doing business as Home Care Staffing, is enrolled as a Minnesota Health Care Programs provider approved to deliver housing stabilization services. Defendant Minnesota Department of Human Services (DHS) is the state agency that administers Medicaid in Minnesota. Defendants UCare Minnesota and HealthPartners, Inc. are managed-care organizations that contract with DHS to administer payments to vendors.

In summer 2025, DHS determined there was a credible allegation of fraud against the plaintiff for overbilling and opened an investigation. DHS also referred the matter to law enforcement for a parallel criminal investigation. On August 1, 2025, DHS sent the plaintiff a Notice of Payment Withhold, suspending Medicaid payments until the investigation concludes or legal proceedings are completed. Federal and state law — specifically 42 C.F.R. § 455.23(a)(1) and Minn. Stat. § 256B.064 — require DHS to withhold payments under these circumstances. Because DHS placed a hold on the plaintiff, UCare and HealthPartners were legally required to suspend their payments to her as well.

The plaintiff submitted written evidence seeking to have the withhold lifted; DHS reviewed the materials and upheld it. This lawsuit followed. In her Amended Complaint, the plaintiff alleged unjust enrichment, violations of federal Medicaid laws, a due process violation against DHS, breach of contract against UCare and HealthPartners, and tortious interference with contract against DHS. She moved for emergency injunctive relief, styled as a temporary restraining order (TRO). Because the defendants received notice and had the opportunity to respond, the court treated the motion as one for a preliminary injunction under Federal Rule of Civil Procedure 65.

Standing as to UCare and HealthPartners

UCare argued that the plaintiff lacked Article III standing to bring claims against it because UCare's suspension of payments was ministerial — required by law after DHS placed a hold — and therefore the plaintiff's injury was not fairly traceable to UCare's conduct. The plaintiff did not respond to this argument and, according to the court, appeared to have waived any objection.

The court agreed that the plaintiff failed to establish standing against either UCare or HealthPartners. Because standing is a threshold requirement of Article III jurisdiction, its absence deprives the court of subject-matter jurisdiction. The court dismissed the claims against UCare and HealthPartners on this basis and found their separate motions to dismiss moot.

Younger Abstention

UCare and HealthPartners also argued that the Younger abstention doctrine — which generally bars federal courts from interfering with pending state proceedings involving important state interests — required the court to decline to act. The court disagreed. The Younger doctrine requires: (1) ongoing state proceedings involving the same or related matters; (2) those proceedings must implicate important state interests; and (3) the plaintiff must have an adequate opportunity to raise federal questions in the state proceedings. The court found that while DHS and law enforcement were investigating the plaintiff, no underlying state judicial proceeding existed at the time. Additionally, DHS lacks authority under Minn. Stat. § 256.01 to adjudicate constitutional claims. Accordingly, Younger abstention was inapplicable.

The court separately noted that a legal citation in the plaintiff's supplemental brief contained a quotation that could not be found in the cited case or anywhere else, raising concerns about the use of artificial intelligence in legal research. The court extended leniency because the plaintiff is proceeding pro se (without an attorney), but warned that future submissions containing what appear to be fabricated ("hallucinated") citations or quotations would be stricken and may result in further sanctions.

Preliminary Injunction Analysis (Dataphase Factors)

1. Likelihood of Success on the Merits

The court found the plaintiff demonstrated no likelihood of success on any claim. The plaintiff did not dispute that she is under investigation for fraud. Federal law (42 C.F.R. § 455.23(a)(1)) mandates suspension of Medicaid payments to a provider when DHS determines there is a credible allegation of fraud and an investigation is pending, unless there is good cause not to do so. The plaintiff offered no legal authority supporting the court's power to grant injunctive relief in contradiction of this statutory mandate.

Beyond that, the Amended Complaint failed to plead the elements of the claims asserted. The plaintiff offered no support for the proposition that 42 U.S.C. § 1396a or the federal regulations she cited provide a private right of action (i.e., a right for a private individual to sue to enforce those provisions). She provided no support for the position that Medicaid providers hold a constitutionally protected property interest in Medicaid payments during an active fraud investigation. She also failed to allege that UCare and HealthPartners — private entities — acted under color of state law, which would be required to bring constitutional claims against them. The court found this factor decisively against the plaintiff.

2. Irreparable Harm

Irreparable harm requires that the threatened injury be certain, great, and imminent such that monetary damages could not adequately compensate the plaintiff. The court found the plaintiff did not meet this standard.

The plaintiff argued economic harm: unpaid claims, lost revenue, and potential business failure. The court noted that economic loss alone generally does not constitute irreparable harm unless it threatens the very existence of the business. Since the withhold began, the plaintiff had submitted 36 new claims totaling $9,936.13, and the withhold did not prevent her from continuing to provide services. The court characterized the plaintiff's projection that her business could fail as speculation. Importantly, if the investigation concludes without a fraud finding, all withheld payments are to be released to the plaintiff.

The plaintiff also argued her clients were suffering due to loss of housing services. The court rejected this on the ground that irreparable harm analysis focuses on the moving party, not third parties.

3. Balance of Harms and Public Interest

The court found both remaining Dataphase factors weighed sharply against the plaintiff. The plaintiff offered no persuasive reason why the difficulties arising from her business decisions outweighed the harm to the defendants if payments were ordered released. The public interest, the court held, strongly favors protecting against fraud in government programs and enforcing the statutory framework designed to do so.

Motion to Amend (Supplement Pleadings)

The plaintiff also moved to supplement her Amended Complaint under Federal Rule of Civil Procedure 15(d), which permits supplemental pleadings addressing transactions or events occurring after the original pleading. The plaintiff sought to add documents drafted after the lawsuit began, expert reports created for the litigation, and a summary document she appeared to have prepared herself. The court found these were not the type of post-filing events or transactions contemplated by Rule 15(d) and denied the motion.

Disposition

The court: (1) denied the motion for a temporary restraining order/preliminary injunction; (2) dismissed the claims against UCare Minnesota and HealthPartners, Inc. for lack of subject-matter jurisdiction; (3) found UCare and HealthPartners' motions to dismiss moot; and (4) denied the motion to amend/supplement the pleadings. The case continues as to the claims against DHS.