ARRM v. Emily Johnson Piper

Background

ARRM and the Minnesota Organization for Habilitation and Rehabilitation are Minnesota nonprofit associations whose members include providers of home- and community-based waiver services. Four individual plaintiffs receive waiver services through guardians. They sued Emily Johnson Piper in her official capacity as Commissioner of the Minnesota Department of Human Services, seeking to stop a planned elimination of a cumulative 7% increase in Minnesota waiver-service payment rates.

The plaintiffs’ amended complaint asserted four counts: procedural and substantive due process violations under the Fourteenth Amendment, an equal-protection violation, a violation of Title II of the Americans with Disabilities Act, and a violation of the Rehabilitation Act. The Commissioner moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which addresses subject-matter jurisdiction, and Rule 12(b)(6), which addresses failure to state a legally sufficient claim.

Standing of the Individual Plaintiffs

The court concluded that the four individual plaintiffs lacked standing to seek either injunctive or declaratory relief. Standing requires an injury that is concrete, particularized, and actual or imminent, along with a connection to the challenged conduct and a likelihood that the requested relief would remedy the injury.

The court found that the alleged injuries to Marder and Smith would not occur, if at all, until December 31, 2019. The court considered those injuries too remote and speculative because administrative, legislative, or judicial action might prevent them. Clapper and Pedrelli alleged that reductions had begun affecting their services, but the amended complaint did not allege that providers had discontinued or limited the particular services they received, or that such action was imminent. Pedrelli also had a pending request for a rate exception.

Because the individual plaintiffs had not shown that their possible future injuries were certainly impending, the court held that they lacked the required standing and that the court lacked subject-matter jurisdiction over their claims. The court dismissed the individual plaintiffs’ claims without prejudice.

Standing of the Organizational Plaintiffs

The court held that the organizations lacked standing to pursue the Americans with Disabilities Act and Rehabilitation Act claims. The organizations did not allege a direct injury to themselves, so they had to show associational standing on behalf of their members.

The amended complaint alleged that members were subject to licensing and enrollment requirements and had used the 7% increase for initiatives said to be required by those laws. But it did not identify the initiatives, allege that they had been discontinued, or allege that any member had been disciplined or suffered another adverse consequence for noncompliance. The court therefore found no concrete, particularized, or imminent harm to the members arising from an alleged violation of either statute. It dismissed Counts III and IV without prejudice for lack of subject-matter jurisdiction.

Failure to State a Claim

The court separately considered the organizations’ constitutional claims under Rule 12(b)(6).

Due Process

For procedural due process, the organizations argued that their members had a protected property interest in the 7% payment increase. The court rejected that argument. It relied on decisions holding that providers participating voluntarily in Medicaid or similar reimbursement programs do not have a constitutionally protected property interest in a particular reimbursement rate. The amended complaint did not allege that the members were involuntary participants. The court also noted that Minnesota law gave the Commissioner discretion and competing responsibilities in operating the waiver program. The organizations therefore failed to state a procedural due process claim.

For substantive due process, the organizations argued that the reduction “shocks the conscience.” The court found that they had not identified a fundamental constitutional right connected to receiving a particular reimbursement rate and had offered only conclusory allegations about conscience-shocking conduct. Even assuming the reduction was legally unauthorized, the court said the allegations showed at most a choice between conflicting statutory obligations, not conduct intended to injure without a justifiable government interest or conduct so egregious that it violated substantive due process. The court dismissed Count I without prejudice.

Equal Protection

The organizations argued that the Commissioner treated their members differently from skilled nursing facilities and intermediate care facilities for people with developmental disabilities. The court applied rational-basis review because the claim did not involve a suspect classification or a fundamental right.

The court concluded that the identified comparison facilities were not similarly situated in all relevant respects. They provided non-DWRS services and used different payment-rate formulas, while the organizations’ members provided services subject to the Disability Waiver Rate System and received an automatic inflationary adjustment under that system. The court therefore held that the organizations failed to state an equal-protection claim and dismissed Count II without prejudice.

Disposition

The court ordered that the Commissioner’s motion to dismiss be GRANTED and that the plaintiffs’ amended complaint be DISMISSED WITHOUT PREJUDICE. Judgment was to be entered accordingly.