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Todd v. Jones

United States District Court, D. North Dakota

May 6, 2018

Mary Todd as Trustee of the Ruby Chelson West Residuary Trust, Plaintiff,
v.
Christopher D. Jones, in his official capacity as Executive Director of the North Dakota Department of Human Services, Defendant.

          ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

          DANIEL L. HOVLAND, CHIEF JUDGE

         Before the Court is a motion to dismiss filed by Christopher Jones as Executive Director of the North Dakota Department of Human Services (“the Department”) on August 27, 2018. See Doc. No. 8. Mary Todd, as Trustee of the Ruby Chelson West Residuary Trust (“Todd”), filed a response on September 25, 2018. See Doc. No. 10. The Department filed a reply on October 16, 2018. See Doc. No. 11. Todd filed a notice of supplemental authority on March 21, 2019. See Doc. No. 13. The Department filed a response to Todd's notice on March 25, 2019. See Doc. No. 14. For the following reasons, the Court grants the Department's motion to dismiss.

         I. BACKGROUND

         This controversy arises from the Department's attempts to recover assets for Medicaid benefits allegedly paid in error on behalf of the late Terry David West (“West”). Todd's complaint asserts the following allegations. West was a ward of the State of North Dakota and received Medicaid benefits. West's mother, Ruby Chelson West, died testate with a will that created a testamentary trust (“the Trust”). West was a beneficiary of the Trust, which contained a spendthrift provision limiting West's ability to direct the trustee's actions and control the trust assets. Ruby West died in April of 2001, her will was probated, and the Trust was funded. In November of 2017, the Department obtained Letters of Administration for West's estate. The North Dakota State Hospital filed claims against the estate totaling $831, 591.20. See In the Estate of Terry David West, No. 09-2017-PR-00366. As personal representative of the estate, the Department sued Todd in state district court alleging she breached fiduciary duties she owed West by not paying him benefits during his life as the Trust supposedly required. See Estate of Terry West v. Todd, No. 08-2018-cv-01934.

         Todd filed this federal action for declaratory and injunctive relief on July 17, 2018. The state court stayed its proceedings pending the resolution of this lawsuit. Todd's complaint, relying on the Court's federal question jurisdiction as set forth at 28 U.S.C. § 1331, asserts two claims:

[The Department] is violating 42 U.S.C. §§ 1396a(a)(10)(C)(i), (r)(2)(B) and the federal regulations and policies relating to treatment of trusts, because the Department's unwritten policy for considering trusts with valid spendthrift provisions as available assets establishes a more restrictive evaluation of Mr. West's resources than the methodology use [sic] by the SSI program, for which relief is available pursuant to 42 U.S.C. § 1983.
[The Department] is violating 42 U.S.C. § 1396p(b), because the Department is seeking to recover from the Trust, which is not part of Mr. West's estate, for which relief is available pursuant to 42 U.S.C. § 1983.

See Doc. No. 1, p. 7. Todd requests the Court grant declaratory relief and permanently enjoin the Department from acting in the above-described manner. The Department filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure on August 27, 2018. See Doc. No. 8.

         II.LEGAL DISCUSSION

         The Department argues Todd's first claim-that the Department's Medicaid eligibility policy is improperly more restrictive than the Supplemental Security Income (“SSI”) eligibility rules-fails to state a claim for which relief can be granted. The Department asserts that under federal law, North Dakota can in fact apply eligibility requirements that are more restrictive than the SSI rules. As to the second claim-that the trust is not part of West's probate estate-the Department urges the Court to abstain from deciding the issue because it is a probate matter and the pending state court litigation will answer the question. The Court agrees with the Department on both claims.

         A. TODD'S CLAIM THAT NORTH DAKOTA'S MEDICAID ELIGIBILITY POLICY IS IMPROPERLY MORE RESTRICTIVE THAN SSI RULES

         Todd relies on 42 U.S.C. §§ 1396a(a)(10)(C)(i) and (r)(2)(B) to support her argument that the Department is violating federal law by considering a trust with a valid spendthrift provision as an available resource. Section 1396(a)(10)(C)(i) requires Medicaid eligibility criteria be “no more restrictive” than the criteria used to determine SSI eligibility. Section 1396(r)(2)(B) defines the term “no more restrictive” in this context. However, as explained below, Congress has provided states with a limited exception-termed the “209(b) option”-that exempts states from this requirement. See 42 U.S.C. § 1396a(f).

         The Department has moved to dismiss Todd's first claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Rule 12(b)(6) mandates dismissal of a complaint if it fails to state a claim upon which relief can be granted. To determine whether dismissal is warranted, the court must assume the complaint's factual allegations are true and draw all reasonable inferences in the plaintiff's favor. Monson v. Drug Enf't Admin., 589 F.3d 952, 961 (8th Cir. 2009.). Conclusory legal allegations need not be accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         Title XIX of the Social Security Act of 1965 established the Medicaid program. See 42 U.S.C. § 1396 et seq. The Medicaid program provides federal funds to reimburse states for the cost of providing healthcare to persons who cannot afford it. Savage v. Toan, 795 F.2d 643, 644 (8th Cir. 1986). State Medicaid plans must comply with federal law. Id. When it comes to determining whether an individual is eligible for Medicaid, there are two types of states: SSI states and ...


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