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Advantageous Community Services, LLC v. King

United States District Court, D. New Mexico

November 19, 2019

ADVANTAGEOUS COMMUNITY SERVICES, LLC, ARMINDER KAUR, HARASPAL SINGH, and HARCHI SINGH, Plaintiffs,
v.
GARY KING, AMY LANDAU, ELIZABETH STALEY, MARC WORKMAN, CATHY STEVENSON, ORLANDO SANCHEZ, and WALTER RODAS, Defendants.

          MEMORANDUM OPINION AND ORDER

          LAURA FASHING, UNITED STATES MAGISTRATE JUDGE

         THIS MATTER comes before the Court on defendants Gary King, Amy Landau, Elizabeth Staley, Mark Workman, Cathy Stevenson, Orlando Sanchez, and Walter Rodas' (collectively “State Defendants”) Motion for Summary Judgment (Doc. 95), filed April 12, 2019. Plaintiffs filed their Response to Defendants' Motion (Doc. 98) on April 29, 2019. State Defendants filed their Reply in Support of Their Motion for Summary Judgment (Doc. 102) on May 20, 2019. The parties consented to my entering final judgment in this case. Docs. 6-14. Having read the submissions of the parties and being fully advised, and for the following reasons, the Court GRANTS the State Defendants' Motion for Summary Judgment.

         I. Statement of Facts[1]

         The New Mexico Human Services Department (“HSD”) is responsible for administering Medicaid and maintaining the managed care system for Medicaid recipients. UMF 8. The State Defendants assert, without any evidentiary support, [2] that the Medicaid Assistance Division (“MAD”) is a division within HSD that is responsible for executing Provider Participation Agreements to ensure that Medicaid providers are qualified under the Medicaid Act. UMF 9. HSD works under an interagency agreement with the New Mexico Department of Health (DOH) to administer a portion of the Medicaid program. UMF 10. HSD had primary responsibility for accepting claims for services rendered, reviewing claims to ensure accuracy, then paying the claims. Id.

         DOH provides program management and technical assistance to Medicaid programs, including enrolling providers and providing training to providers on how to provide services, as well as advising them of the rules and requirements of the Medicaid system. UMF 11. Plaintiff Advantageous Community Services, LLC, (“Advantageous”) is a New Mexico business that provided home-based care to Medicaid recipients pursuant to the Developmental Disabilities Waiver Program. Doc. 1-1 ¶ 16; Doc. 77 ¶ 16. Defendant Cathy Stevenson was the Acting Director of the Developmental Disabilities Supports Division (“DDSD”). UMF 12. DDSD reported to DOH. Id. The Division of Health Improvement-another division under DOH-was responsible for the criminal history screening of Medicaid providers' employees. UMF 13. DDSD was not responsible for conducting this screening. Id.

         The Medicaid Fraud Division is a division within the New Mexico Attorney General's Office charged with reviewing and prosecuting referrals of potential claims of Medicaid fraud. UMF 14. During the relevant time period, defendant Gary King was the New Mexico Attorney General, and defendant Amy Landau was an attorney in his office. Doc. 1-1 ¶¶ 6, 7; Doc. 77 ¶¶ 6, 7. Defendant Elizabeth Staley also was an attorney at the Attorney General's Office and was Director of the Medicaid Fraud and Elder Abuse Division there. Doc. 1-1 ¶ 8; Doc. 77 ¶ 8. Defendant Marc Workman was an investigator for the Attorney General's Office. Doc. 1-1 ¶ 9; Doc. 77 ¶ 9. Defendants Orlando Sanchez and Walter Rodas both were employees of DOH. Doc. 1-1 ¶¶ 11, 12; Doc. 77 ¶¶ 11, 12.

         On January 10, 2006, after completing a review of suspected fraudulent behavior, MAD referred “the issue” to the Medicaid Fraud Division, which opened an investigation into Advantageous' billing practices. UMF 1. On June 4, 2007, after approximately 15 months of investigation, the Medicaid Fraud Unit (“MFU”) of the New Mexico Attorney General's Office demanded repayment to the State of payments made to Advantageous for services provided by six Advantageous employees whom the MFU believed did not have required background clearances. UMF 3; see also Doc. 95-1 (Hughes depo at 45:2-51:7; explaining the MFU's claim for repayment); Doc. 95-2 (attachment showing MFU's claim). Advantageous did not respond to MFU's demand. UMF 3. DOH placed a moratorium on business with Advantageous. UMF 4; Doc. 98 at 2 (“Advantageous does not dispute that the Department of Health placed a moratorium on business with Advantageous, ” but it does dispute the reason for doing so.).

         More than three years after MAD made the referral to the Attorney General's Medicaid Fraud Division, on September 28, 2009, the State of New Mexico filed suit against Advantageous for Recovery of Medicaid Overpayments, Civil Penalties, and Breach of Contract (hereafter sometimes referred to as the “underlying complaint”). UMF 6. The underlying complaint alleged that Advantageous “submitted false, fraudulent, excessive, or incomplete billings to the State's Medicaid program” by submitting claims for services provided by individuals for whom Advantageous had not obtained criminal history screenings. Doc. 95-2 at 2, ¶ 8. The underlying complaint alleged that billing for services provided by such individuals entitled the State to recover all amounts paid for those services as well as civil penalties. See Id. at 2-3, ¶¶ 10-12. The underlying complaint also alleged that billing for services performed by individuals who “had not undergone a background check as required by state law” was a breach of Advantageous' contract with the State, and the State sought damages for that breach. Id. at 3-4, ¶¶ 13-15.

         On September 16, 2011, nearly two years after the State filed its lawsuit against Advantageous, Judge Shannon Bacon dismissed a similar lawsuit, State of New Mexico v. Behavioral Home Care, Inc., D-202-CV-201008273, for failure to state a claim. See UMF 7 (mistakenly stating that the case was dismissed on September 30, 2011); see also Doc. 98-6 at 3 (docket entry showing dismissal on September 16, 2011). The New Mexico Court of Appeals affirmed the dismissal on June 9, 2014 in a published opinion. UMF 7; see also State ex rel. King v. Behavioral Home Care, Inc., 2015-NMCA-035, 346 P.3d 377 (N.M. Ct. App. Jun. 9, 2014), cert. granted, 2014-NMCERT-008, 334 P.3d 425 (Aug. 15, 2014), cert. dismissed, 2015-NMCERT-004, 348 P.3d 695 (Apr. 3, 2015).

         Meanwhile, on October 28, 2011, about six weeks after Judge Bacon dismissed the suit against Behavioral Home Care, Judge Valerie Huling dismissed the state's case against Advantageous as a sanction for the Attorney General's Office's use of “document know to be false” in conjunction with a deposition. Doc. 98-1 (Judge Huling's opinion).[3] Judge Huling stated in her order that “[d]ismissal of the Complaint is warranted as a sanction considering the egregious nature of the actions of the State's investigator.” Doc. 98-1 at 5. Judge Huling also stated, “Summary Judgment is granted, ” but she did not analyze the merits of the State's case under the summary judgment standard. See id.; see also Romero v. Philip Morris Inc., 2010-NMSC-035, ¶¶ 7-11, 148 N.M. 713, 720-22, 242 P.3d 280, 287-89 (reviewing stringent summary judgment standard in New Mexico). On April 28, 2014, the New Mexico Court of Appeals affirmed Judge Huling's imposition of the sanction of dismissal with prejudice for the State's severe misconduct in using false documents to prosecute its case. State ex rel. King v. Advantageous Community Services, LLC, 2014-NMCA-076, 329 P.3d 738 (2014). The Court of Appeals did not address the State's argument that Judge Huling erred in granting summary judgment. Id., 2014-NMCA-076, ¶ 11, 329 P.3d at 741.

         II. Discussion

         A. Legal Standard for Summary Judgment

         Summary judgment will be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine dispute exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party” on the issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Id.

         The movant bears the initial burden of establishing that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). “[T]he movant need not negate the non-movant's claim, but need only point to an absence of evidence to support the non-movant's claim.” Kannady v. City of Kiowa, 590 F.3d 1161, 1169 (10th Cir. 2010) (quoting Sigmon v. CommunityCare HMO, Inc., 234 F.3d 1121, 1125 (10th Cir. 2000)). If this burden is met, the non-movant must come forward with specific facts, supported by admissible evidence, which demonstrate the presence of a genuine issue for trial. Celotex, 477 U.S. at 324. The non-moving party cannot rely upon conclusory allegations or contentions of counsel to defeat summary judgment. See Pueblo Neighborhood Health Ctrs., Inc. v. Losavio, 847 F.2d 642, 649 (10th Cir. 1988). Rather, the non-movant has a responsibility to “go beyond the pleadings and designate specific facts so as to make a showing sufficient to establish the existence of an element essential to [his] case in order to survive summary judgment.” Johnson v. Mullin, 422 F.3d 1184, 1187 (10th Cir. 2005) (alteration in original) (internal quotation marks omitted).

         At the summary judgment stage, the Court must view the facts and draw all reasonable inferences in the light most favorable to the non-movant. Scott v. Harris, 550 U.S. 372, 378 (2007). The Court's function “is not . . . to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477 U.S. at 249. There is no issue for trial “unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Id. Summary judgment may be granted where “the evidence is merely colorable, or is not significantly probative.” Id. at 249-50 (internal citations omitted).

         B. Section 1983 Claims and Qualified Immunity Generally

         Section 1983 states in relevant part:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State . . . subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.

42 U.S.C. § 1983. To establish a claim under § 1983, a plaintiff must allege that a defendant acted under color of state law to deprive the plaintiff of a right, privilege, or immunity secured by the Constitution or the laws of the United States. West v. Atkins, 487 U.S. 42, 48 (1988). The plaintiff also must identify an “affirmative link” between the alleged constitutional violation and each individual defendant. Gallagher v. Shelton, 587 F.3d 1063, 1069 (10th Cir. 2009).

         Qualified immunity shields government officials performing discretionary functions from liability for civil damages unless their conduct violates clearly established statutory or constitutional rights of which a reasonable person would be aware. Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). Under the Tenth Circuit's two-part test for evaluating qualified immunity, the plaintiff must show (1) that the defendant's conduct violated a constitutional or statutory right, and (2) that the law governing the conduct was clearly established when the alleged violation occurred. Baptiste v. J.C. Penney Co., 147 F.3d 1252, 1255 (10th Cir. 1998); accord Tonkovich v. Kan. Bd. of Regents, 159 F.3d 504, 516 (10th Cir. 1998). For a right to be clearly established, “[t]he contours of the right must be sufficiently clear that a reasonable official would understand that what he [or she] is doing violates that right.” Anderson v. Creighton, 483 U.S. 635, 640 (1987). Unless both prongs are satisfied, the defendant will not be required to “engage in expensive and time consuming preparation to defend the suit on its merits.” Siegert v. Gilley, 500 U.S. 226, 232 (1991).

         The Court is not required to address the two prongs of the test in order. Pearson v. Callahan, 555 U.S. 223, 236 (2009). The Supreme Court's decision in Pearson permits courts to grant qualified immunity without first deciding whether a constitutional violation occurred so long as the right claimed to be violated was not clearly established. Id. The right that is alleged to have been violated must be “clearly established” not just as a general proposition (for example, in the way the right to free speech is clearly established), but “in a more particularized . . . sense: The contours of the right must be sufficiently clear that a reasonable official would understand that what he [or she] is doing violates that right.” Anderson, 483 U.S. at 640. Stating the right too broadly would destroy the balance that the Supreme Court has sought to establish “between the interests in vindication of citizens' constitutional rights and . . . public officials' effective performance of their duties by making it impossible for officials reasonably to anticipate when their conduct may give rise to liability for damages.” Id. at 639 (quotation and citation omitted).

         “Ordinarily, in order for the law to be clearly established, there must be a Supreme Court or Tenth Circuit decision on point, or the clearly established weight of authority from other courts must have found the law to be as the plaintiff maintains.” Fogarty v. Gallegos, 523 F.3d 1147, 1161 (10th Cir. 2008) (internal quotations omitted). “The plaintiff is not required to show, however, that the very act in question previously was held unlawful . . . to establish an absence of qualified immunity.” Weigel v. Broad, 544 F.3d 1143, 1153 (10th Cir. 2008) (internal quotations omitted). The degree of specificity required depends on the egregiousness of the challenged conduct; “[t]he more obviously egregious the conduct in light of prevailing constitutional principles, the less specificity is required from prior case law to clearly establish the violation.” Pierce v. Gilchrist, 359 F.3d 1279, 1298 (10th Cir. 2004). “Qualified immunity gives government officials breathing room to make reasonable ...


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