United States District Court, D. New Jersey
MERCER COUNTY CHILDRENS MEDICAL DAYCARE, LLC, et al. Plaintiffs,
MARY O'DOWD, et al. Defendants.
ANNE E. THOMPSON, District Judge.
This matter appears before the Court on the motion to dismiss brought by Defendant Mary O'Dowd and others, (Doc. No. 32), and the motion to dismiss brought by Defendant Carlisle, (Doc. No. 30). The Court has issued the Opinion below based upon the written submissions of the parties and after oral argument. For the reasons stated herein, the Court grants the first motion, (Doc. No. 32), in part and denies in part, and the Court denies the motion of Defendant Carlisle, (Doc. No. 30).
This action stems from regulations and administrative actions taken by the State of New Jersey, its officials, and its departments that have had the effect of reducing the number of patients Plaintiff Mercer County Children's Medical Daycare ("Mercer") can treat. (Doc. No. 1, 2). Mercer is a New Jersey L.L.C. licensed to provide pediatric medical day care services in New Jersey. (Doc. No. 1, 3). In addition to Mercer, ten children ("Children") who have been denied pediatric medical day care services as a result of these regulations are also plaintiffs. (Doc. No. 1, 3). The 14 defendants represented by the New Jersey Attorney General's Office bringing the present motion can be grouped into two categories: (1) "State Defendants" and 2) "State Officials." (Doc. No. 1, 6). Carlisle, an L.L.C. that provides consulting and business development services, is also a defendant. (Doc. No. 1, 7).
Plaintiffs bring federal claims against State Defendants and State Officials under 42 U.S.C. § 1983, claiming violations of Equal Protection, Due Process, and the Takings Clause. Plaintiffs also claim violations of Medicaid and the Supremacy Clause. The state law claims concern common law fraud against State Officials, State Defendants, and Carlisle.
On February 25, 2003, the Office of Legislative Services released an audit report of the Pediatric Medical Daycare Center ("PMDC") programs, finding that the regulations governing PMDC licenses were incompatible. (Doc. No. 1, 16-18). At the time, NJDOH issued licenses on a 30-square-feet-per-patient basis. However, the NJDHS regulations set an absolute maximum of 27 visiting patients per facility per day. (Doc. No. 1, 16).
In June 2003, Mercer received a PMDC license based on the square foot regulation for between 70 and 72 slots. (Doc. No. 1, 16). On November 3, 2003, NJDOH informed PMDC providers that the 27-child limitation would be enforced and that the agencies erred in issuing licenses for more than 27 children. In April 2005, NJDOH reminded Mercer that it must comply with the 27-child limit. However, after a hearing before the Office of Administrative Law, Mercer was allowed to continue providing service to up to 70 children a day. (Doc. No. 1, 16-21).
On November 3, 2008, NJDOH proposed regulations N.J.A.C. 8:87 and 8:43, which included a 27-patient-per-day limitation. On March 2, 2011, NJDOH did the following: (1) found that Mercer was not complying with the 27-patient limitation; (2) placed Mercer on admissions curtailment; (3) ordered Mercer to engage a Consultant Administrator to oversee compliance; and (4) fined Mercer $1.5 million. (Doc. No. 1, 22). On March 8, 2011, NJMFD and Anderson issued Mercer a notice of claim for $12 million in excess payments and treble damages for serving children that were not entitled to services between March 22, 2004 and December 8, 2010. On August 1, 2011, NJDOH amended Mercer's 70-child license to 27. (Doc. No. 1, 33).
In September 2011, NJDOH fined Mercer $53, 000 for providing services to an ineligible patient. In June 2012, Mercer disregarded the order and began admitting new patients, in response to which NJDOH and Gottlieb issued a penalty of $13, 500. As a result of these actions, Plaintiffs brought the following claims:
Count I: Failure to Administer the Medicaid Program in Compliance with Federal Law
Count II: Preemption (Medicaid)
Count III: Equal Protection
Count IV: Violation of Due Process
Count V: Violation of Takings Clause
Count VI: Fraud against State Defendants
Count VII: Fraud against Defendant Carlisle
The Court will first take notice of the applicable legal standard for motions to dismiss, and then examine whether any Defendants are entitled to immunity before dealing with each Count.
1. Legal Standard
A motion under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). The defendant bears the burden of showing that no claim has been presented. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). When considering a Rule 12(b)(6) motion, a district court should conduct a three-part analysis. See Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). "First, the court must take note of the elements a plaintiff must plead to state a claim.'" Id. (quoting Ashcroft v. Iqbal, 56 U.S. 662, 675 (2009)). Second, the court must accept as true all of a plaintiff's wellpleaded factual allegations and construe the complaint in the light most favorable to the plaintiff. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). The court may disregard any conclusory legal allegations. Id. Finally, the court must determine whether the "facts are sufficient to show that plaintiff has a plausible claim for relief.'" Id. at 211 (quoting Iqbal, 556 U.S. at 679). Such a claim requires more than a mere allegation of an entitlement to relief or demonstration of the "mere possibility of misconduct;" the facts must allow a court reasonably to infer "that the defendant is liable for the misconduct alleged." Id. at 210, 211 (quoting Iqbal, 556 U.S. 678-79).
After determining which claims are barred by immunity, the Court will deal with the merits of each Count with respect to the remaining Defendants.
a. Sovereign Immunity
Absent a waiver, sovereign immunity shields the Federal Government and its agencies from suit. F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994). Claims under 42 U.S.C. §1983 are subject to this sovereign immunity bar. Will v. Michigan Dept. of State Police, 491 U.S. 58, 66 (1989). "This bar exists whether the relief sought is legal or equitable." Papasan v. Allain, 478 U.S. 265, 276 (1986). Sovereign immunity extends to arms of the state-including agencies, departments, and officials-when the state is the real party in interest. See Pa. Fed'n of Sportsmen's Clubs, Inc. v. Hess, 297 F.3d 310, 323 (3d. Cir. 2002). To determine whether the state is the real party in interest, the Court considers three factors: (1) whether payment of a judgment resulting from the suit would come from the state treasury; (2) the status of the entity under state law; and (3) the entity's degree of autonomy. See Fitchik v. New Jersey Transit Rail Operations, Inc., 873 F.2d 655, 659 (3d Cir. 1989) (en banc).
Viewing the facts in the light most favorable to Plaintiffs, the Court finds that State Defendants are immune. See Fla. Department of Health and Rehabilitative Servs. v. Fla. Nursing Home Assn., 450 U.S. 147 (1981) (agencies of state governments, such as the department of health or treasury, are part of the State for the Eleventh Amendment purposes). Accordingly, all 42 U.S.C. §1983 claims against State Defendants are dismissed. Furthermore, all 42 ...