Residential and Community Support Services, Inc. v. Maine Department of Health and Human Services

STATE OF MAINE SUPERIOR COURT
KENNEBEC, ss. CIVIL ACTION
DOCKET NO. AP-23-10

RESIDENTIAL AND COMMUNITY
SUPPORT SERVICES, INC.,

Plaintiff/Petitioner,

V.

DECISION AND ORDER ON
MOTION TO DISMISS

MAINE DEPARTMENT OF HEALTH
AND HUMAN SERVICES,

and,

JEANNE LAMBREW, in her official
capacity as Commissioner of the Maine
Department of Health and Human
Services,

Defendants/Respondents.

Nee Ne ee ee ee Oe eee ee

Pending before the court is Defendants/Respondents Department of Health
and Human Services and Commissioner Jeanne Lambrew’s (collectively, “DHHS”)
motion to dismiss Count II of Plaintiff/Petitioner Residential and Community
Support Services’s (“RCSS”) first amended complaint. For the following reasons,
DHHS’s motion to dismiss is denied.

BACKGROUND AND PROCEDURE

RCSS is a MaineCare provider that offers residential services to adults who
are unable to care for themselves and require extra support. Pl.’s Am. Compl. {{ 7,
9. This case follows the final decision of Commissioner Lambrew ordering

recoupment of over 30 million dollars paid to RCSS as part of the MaineCare
program. DHHS’s primary basis for recouping these funds was RCSS8’s failure to
conduct proper background checks on employees who provided services to
MaineCare participants. Id. { 34.

RCSS commenced this action by petition and complaint dated February 10,
2023, and the court thereafter granted RCSS leave to amend its pleading.! The first
amended complaint asserts two counts. In Count I, RCSS requests judicial review of
DHHS’s recoupment decision pursuant to M.R. Civ. P. 80C and the Administrative
Procedures Act (“APA”). Pl.’s Am. Compl. 9 56-59. Count II, an independent claim,
seeks relief for alleged violations of RCSS’s state and federal procedural due process
rights pursuant to 42 U.S.C. § 1983 and 14 M.R.S. § 5951 et seq. Pl.’s Am. Compl.
{/{| 60-64.

According to the amended complaint, RCSS discovered during the
administrative proceedings that any money recouped by the agency would go
directly into DHHS’s budget as unrestricted funds. Id. {{ 51-52. Count II therefore
alleges that the Commissioner had an institutional financial interest in the
demanded recoupment, rendering her a biased decision-maker, Id. {{{ 63-64. It
further asserts that judicial deference to the Commissioner's findings of fact as

required by the APA, see 5 M.R.S. § 11007(3), would deprive RCSS of an unbiased

fact-finder in violation of due process. Id. § 65. Thus, among other relief, Count II

1 The original petition and complaint was the subject of an earlier motion to
dismiss and several other related motions. At oral argument held on December 8,
2023, the parties agreed that the motions submitted prior to the filing of the first
amended complaint have been mooted by the amended pleading and DHHS’s
cubsequently filed motion to dismiss.
requests that the court (1) declare 5 M.R.S. § 11007(3) unconstitutional as applied
to this case; and (2) conduct a nondeferential, de novo review of the agency record.

In the present motion, DHHS moves to dismiss Count II pursuant to M.R.
Civ. P. 12(b)(6) and 12(f). DHHS argues that dismissal is warranted for the
following reasons:

1. Count IT is barred by the exclusivity doctrine;

2. RCSS lacks a property interest that is protected by the Due Process
Clause;

3. RCSS was afforded all process due;

4. RCSS failed to properly preserve its due process claim at the agency level;
and

5. “[T]here is no right to due process regarding legislative enactments.”

The parties have fully briefed these issues, and the court heard oral
argument in this matter on December 8, 20238.

STANDARD OF REVIEW

A motion to dismiss tests the legal sufficiency of the complaint. Livonia v.
Town of Rome, 1998 ME 89, { 5, 707 A.2d 83. “For purposes of a Rule 12(b)(6)
motion, the material allegations of the complaint must be taken as admitted.” Id.
On review, the court examines the complaint “in the light most favorable to the
plaintiff to determine whether it sets forth elements of a cause of action or alleges
facts that would entitle the plaintiff to relief pursuant to some legal theory.” Oakes
v. Town of Richmond, 2023 ME 65, § 15, 303 A.38d 650 (quotation marks omitted).
“A dismissal should only occur when it appears beyond doubt that a plaintiff is
entitled to no relief under any set of facts that [she] might prove in support of [her]

claim.” Id. (quotation marks omitted) (alterations in original). Because Maine is a

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notice-pleading jurisdiction, “the level of scrutiny used to assess the sufficiency of a
complaint is ‘forgiving.” Id. 4 16.

DISCUSSION

I. Exclusivity Doctrine

DHHS first argues that Count II is barred by Maine’s exclusivity doctrine
because the claim is based on the same factual allegations and seeks the same relief
as the Rule 80C claim in Count I. DHHS’s Mot. Dismiss 7-13. RCSS counters that
Count II is distinct, and Rule 80C review is inadequate to redress its due process
claim that the Commissioner was unconstitutionally biased. RCSS’s Opp. Mot. 8.
According to RCSS, Count IT is essentially a precursor to Count I that seeks to
determine the process due to RCSS, should it prevail in demonstrating institutional
bias. That is, RCSS maintains that Count II is intended to establish the process and
standard of review that the court should follow in addressing the substantive claims
set forth in Count I. To that end, Count IT requests, inter alia, a de novo review of
the agency record by this court—relief RCSS says is unavailable within the context
of a Rule 80C appeal.

Maine’s exclusivity doctrine holds that when “direct review is available
pursuant to Rule 80B for 80C], it provides the exclusive process for judicial review
unless it is inadequate.” Gorham v. Androscoggin Cnty., 2011 ME 63, § 22, 21 A.3d
115 (emphasis added); see also Fisher v. Dame, 433 A.2d 366, 372 (Me. 1981). When
direct review pursuant to Rule 80B or 80C would not provide an “adequate remedy”
for the petitioner’s claim, the claim may be cognizable as an independent claim

separate from any administrative appeal. Gorham, 2011 ME 638, 4 25, 21 A.3d 115.
4
The central question the court must answer, then, is whether Rule 80C
review is adequate to redress the procedural due process violation claimed in Count
IJ—that the final recoupment determination was made by an agency fact-finder and
adjudicator who had an institutional financial interest in issuing a decision
unfavorable to RCSS. At this preliminary stage, the court is unable to conclude that
Rule 80C review would provide an adequate remedy for the constitutional violation
alleged.

It is well established that due process guarantees “an impartial fact-finder
and the right to a remedy should any violation of individual rights be found during
the course of the due process proceeding.” Geary v. Dep't of Behavioral &
Developmental Services, 2003 ME 151, § 19, 838 A.2d 1162. In many cases, parties
aggrieved by an allegedly biased agency decision-maker will find an adequate
remedy within the Rule 80C and APA framework, which provides a mechanism for
augmenting the record if necessary to show bias and which permits the court to
remand a case to the agency for a new hearing before a different and impartial
decision-maker. See M.R. Civ. P. 80C(e); 5 M.R.S. §§ 11006(1), 11007(4); see also
Adelman v. Town of Baldwin, 2000 ME 91, 9 6-7, 750 A.2d 577 (concluding that
the Superior Court acted within the bounds of its discretion by striking an
independent claim of bias as duplicative of the Rule 80B appeal). However, RCSS’s
assertion of bias is unique in nature, and the court does not share DHHS’s
confidence that Rule 80C’s procedures are sufficient to remedy the claim of bias

presented here. See Beal v. Town of Stockton Springs, 2017 ME 6, § 15, 153 A.8d
768 (“Due process will vary from case to case .. . to assure the basic fairness of each
particular action according to its circumstances.” (quotation marks omitted)).

Indeed, RCSS does not allege individual bias on the part of an agency
decision-maker, but rather asserts a claim of institutional bias. Specifically, Count
II alleges that the Commissioner had an institutional financial interest in the
demanded recoupment, a theory of bias for which there is legal support as
addressed more fully below. See infra pp. 11-12; Ward v. Village of Monroeville, 409
U.S. 57 (1972). While DHHS may disagree with RCSS’s challenge to the
Commissioner’s impartiality, RCSS’s allegations of institutional bias must be
accepted as true at this stage. Nadeau v. Frydrych, 2014 ME 154, 9{ 5, 8, 108 A.3d
1254. The court furthermore observes that the Commissioner, the decision-maker
RCSS claims is biased, has a statutory obligation to issue the final recoupment
decision and serves as the final agency decision-maker with fact-finding authority.
See 22 M.R.S. § 42(7)(E) (‘The recommendation of the hearing officer must be
forwarded to the commissioner for a final decision... . The commissioner shall
issue a final decision in writing... .”). In light of RCSS’s theory of bias and the
Commissioner’s statutory role in the decision-making process, an impartial
adjudication may not be possible at the agency level, and accordingly, a remand to
the agency for this purpose may not provide effective relief. See 5 M.R.S.

§ 11007(4).2

2 DHHS faults RCSS for failing to seek the Commissioner’s recusal pursuant
to 5 M.R.S. § 9063(1). However, as the First Circuit appropriately observed in Esso
Standard Oil Co. v. Cotto, “the Supreme Court has considered recusal mechanisms
For these reasons, RCSS asks the court to conduct the impartial review that
it allegedly cannot receive before the agency itself. To ensure that review accords
with due process, RCSS requests that the court review the agency record de novo,
giving no deference to the Commissioner’s findings of fact. See Pl.’s Am. Compl.

{| 65; see also Mutton Hill Estates, Inc. v. Town of Oakland, 468 A.2d 989, 993 (Me.
1983) (where Superior Court found that the plaintiff could not “get a fair, impartial,
and expeditious hearing and decision from the Planning Board,” a “nondeferential
review of the record created before the Planning Board” was appropriate, and the
“Superior Court’s decision not to remand [was] a reasonable means of according [the
plaintiff] its due process rights”). Rule 80C and the APA, however, do not permit a
de novo review of the agency record. Instead, the scope of the court’s review is
circumscribed by 5 M.R.S. § 11007(8), which provides that “[t]he court may not
substitute its judgment for that of the agency on questions of fact.” The Superior
Court’s review on a Rule 80C appeal is therefore “deferential and limited.” Friends
of Lincoln Lakes v. Bd. of Env’t Prot., 2010 ME 18, § 12, 989 A.2d 1128.

Presumably due to the APA’s inclusion of § 11007(3), the parties do not cite,
and the court’s own research does not reveal, any case where a Maine court
performed a nondeferential, de novo review of the agency record within the context

of a Rule 80C appeal. The most analogous case the court’s research has uncovered is

ineffective where, as here, the petitioner alleges structural bias that would not be
addressed by the substitution of particular adjudicators.” 389 F.3d 212, 225 n.12
(1st Cir. 2004) (citing Ward, 409 U.S. at 61).
Mutton Hill Estates, Inc. v. Town of Oakland—a Rule 80B appeal in which the Law
Court, acknowledging bias and other impropriety on the part of a town Planning
Board, ordered the Superior Court to conduct a “nondeferential review of the record
created before the Planning Board” to determine certain facts. 468 A.2d at 993.
Mutton Hill, however, was a Rule 80B appeal of a municipal decision and thus, the
APA, including § 11007(3), did not constrain the Law Court’s decision. See
Alexander, Maine Appellate Practice 313 (4th ed. 2013). Because Mutton Hill was
decided under a different legal scheme, that case does not provide authority to
disregard § 11007(8) and perform a nondeferential review within the Rule 80C and
APA framework. Thus, in the absence of any authority suggesting that § 11007(8)
may be overlooked, it appears that the court cannot lawfully conduct a de novo
review of the agency record as part of RCSS’s Rule 80C appeal; that relief would be
available only through an independent claim.

While the court does not take any position on the merits of RCSS’s due
process claim, it notes that “[d]ue process is not a static concept; rather, its
requirements vary to assure the basic fairness of each particular action according to
its circumstances.” In re Alexander D., 1998 ME 207, §] 13, 716 A.2d 222 (quotation
marks omitted). At this early juncture—and given RCSS’s unique theory of bias—
the court is unable to conclude, as a matter of law, that Rule 80C review is adequate

to afford RCSS the relief that due process may require under the circumstances.

3 The court’s review of the version of M.R. Civ. P. 80B in effect at the time
Mutton Hill was decided does not reveal any language similar to that in § 11007(8).

8
Accordingly, exclusivity principles do not bar RCSS from pursuing its due process
claim of bias as an independent claim in Count II.

II. Property Interest

DHHS argues that RCSS does not have a property interest that is protected
by the Due Process Clause, and therefore, Count II fails as a matter of law. See Am.
Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59 (1999) (“The first inquiry in every
due process challenge is whether the plaintiff has been deprived of a protected

9)

interest in ‘property’ or ‘liberty.””). The parties appear to agree that RCSS does not
have a protected property interest in continued participation in the MaineCare
program. Instead, RCSS claims a property interest in receiving and retaining
payment for the services it properly rendered. RCSS’s Opp. Mot. 12-13. DHHS
disputes this framing, countering that this case involves the recoupment of funds
that the agency ultimately found RCSS “was not entitled to receive.” DHHS’s Reply
1, 4. Thus, it says, “RCSS has not demonstrated it is entitled to constitutional
protections if, as alleged, RCSS failed to comply with the MaineCare Benefits
Manual.” Id. at 4.

Contrary to DHHS’s suggestions, the agency’s determination that RCSS was
“overpaid”—or any failure by RCSS to prove actual entitlement to the disputed
funds—is not determinative of whether a property interest exists. Property
interests do not rest upon actual entitlement, but upon “a legitimate claim of

entitlement.” Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972)

(emphasis added). Moreover, it is inaccurate to characterize RCSS’s claimed
property interest as an interest in payments it “was not entitled to receive” because
DHHS’s decision that RCSS was overpaid is not yet final. See Med-Cert Home Care,
LLC v. Azar, 365 F. Supp. 3d 742, 751 & n.3 (N.D. Tex. 2019). Indeed, RCSS has
appealed this very determination and may still prevail on its Rule 80C claim,
potentially resulting in RCSS’s entitlement to some or all of the funds subject to
recoupment.

Under these circumstances, the court concludes that RCSS offers the better
characterization of the property interest at stake: A property interest in receiving
and/or retaining payment for the services it properly rendered. DHHS does not
meaningfully dispute the notion that a provider enjoys a property interest in
payment for services it properly delivered. See id. at 751 (finding that plaintiff “has
a valid property interest in receiving Medicare payments for services rendered”);
Ron Group, LLC v. Azar, 574 F. Supp. 3d 1094, 1110-11 (M.D. Ala. 2021)
(concluding that plaintiff “adequately alleged a protected property interest in full
reimbursements for services rendered to Medicaid patients”). The court therefore
concludes that Count II adequately alleges a constitutionally cognizable property
interest.

III. Whether RCSS Received Due Process

DHHS next asks the court to dismiss Count II because RCSS was afforded
notice and a hearing and thus, received all the process it was due. DHHS’s Mot.
Dismiss 15-16. The court declines to dismiss on this basis, as the amended

complaint sufficiently alleges that RCSS was deprived of a critical component of

10
procedural due process: The right to an impartial decision-maker. See, e.g.,
Marshall v. Jerrico, Inc., 446 U.S. 238, 242 (1980) (“The Due Process Clause entitles
a person to an impartial and disinterested tribunal in both civil and criminal
cases’); Geary, 2003 ME 151, 4 19, 838 A.2d 1162; Zegel v. Bd. of Soc. Worker
Licensure, 2004 ME 31, ¥ 16 & n.3, 843 A.2d 18; Mutton Hill, 468 A.2d at 992.

While DHHS disputes RCSS’s claim of bias and references the basic
presumption of honesty and integrity that agency actors generally enjoy, see Mr. &
Mrs. V. ex rel. H.V. v. York Sch. Dist., 434 F. Supp. 2d 5, 12 (D. Me. 2006), it would
be improper for the court to rely on that presumption to dismiss the due process
claim in Count I. This matter appears before the court on a motion to dismiss, and
as mentioned above, the court must accept RCSS’s well-pled allegations of bias as
true. Nadeau, 2014 ME 154, 7§ 5, 8, 108 A.3d 1254.

Moreover, decision-makers may be disqualified for bias based not only on
their personal financial interests, but also upon the interests of the governmental
entities they serve. See Ward, 409 U.S. at 59-61; Brucker v. City of Doraville, 38
F.4th 876, 882 (11th Cir. 2022); Esso, 389 F.3d at 219 (“a pecuniary interest need
not be personal to compromise an adjudicator’s neutrality’). This so-called
“institutional” bias may arise when a decision-maker has executive responsibility
over an entity’s budget, and the entity stands to receive a significant financial
benefit from a decision adverse to the plaintiff. See Ward, 409 U.S. at 59-61. RCSS
cites cases suggesting that arrangements of this nature give rise to a “possible

temptation” of bias that is inconsistent with the requirements of due process. See

1]
Ward, 409 U.S. at 59-61 (finding a due process violation where the mayor who
adjudicated the appellant’s case had executive responsibility over his municipality’s
finances, and fines from his court contributed substantially to the municipal
budget); Esso, 389 F.3d at 219 (bias concerns implicated where an “adjudicative
body stands to benefit financially from the proceeding because any fine imposed
[would] flow directly to [its] budget”); see also Wolfram v. Town of N. Haven, 2017
ME 114, § 20, 168 A.3d 835 (“An administrative process may be infirm if it creates
an intolerable risk of bias or unfair advantage.”) (quotation marks omitted).

Thus, although RCSS does not allege that any agency actors were personally
biased, Count II asserts that the Commissioner, the executive official who oversees
DHHS, see 22-A M.R.S. § 204, had an institutional stake in the outcome of the
recoupment decision, as the money recouped would go directly into DHHS’s budget
as unrestricted funds. Pl.’s Am. Compl. (51-52, 63-64. These allegations are
sufficient to establish a procedural due process claim under Rule 12(b)(6)’s low

threshold standard.4 See Oakes, 2023 ME 65, ¢§ 15-16, 303 A.3d 650.

4 DHHS mentions that RCSS will be afforded due process through the Rule
80C review procedures, whereby the court will serve as the final decision-maker.
DHHS'’s Reply 2-3. It is true that post-deprivation procedures available at state law
may satisfy the federal Due Process Clause such that “no section 1983 action will
lie.” Gregory v. Town of Pittsfield, 479 A.2d 1304, 1308 (Me. 1984). However, to
satisfy the federal due process standard, the state law procedures must “provide[]
adequate redress to a plaintiff deprived of a constitutionally protected property
interest.” Id.; see also Bushey v. Town of China, 645 A.2d 615, 619 (Me. 1994). As
discussed above, see supra Part I, Rule 80C’s judicial review procedures may not
offer RCSS an adequate remedy for the due process violation claimed.

12
IV. Preservation/Waiver

As further grounds for seeking dismissal, DHHS asserts that RCSS did not
preserve, and thus waived, its bias-based procedural due process claim. DHHS’s
Mot. Dismiss 16-18; see also New England Whitewater Cir., Inc. v. Dep’t of Inland
Fisheries & Wildlife, 550 A.2d 56, 59-60 (Me. 1988) (noting that the preservation
rule in the administrative context “Is premised on the broader doctrine of
exhaustion of administrative remedies”). At oral argument, DHHS conceded that
independent claims are not subject to the preservation/exhaustion requirement.
That the requirement does not apply to independent claims is logical and appears to
be consistent with case law. See Gibson v. Berryhill, 411 U.S. 564, 574-75 (1978)
(where “clear purport of [the] complaint” was that the administrative process was
“unconstitutionally constituted and so did not provide ... an adequate
administrative remedy,” plaintiffs did not need to exhaust their administrative
remedies); see also id. at n. 14 (noting that “administrative remedies have been
deemed inadequate by federal courts and hence not subject to the exhaustion
requirement, on a variety of grounds’).

Thus, because the amended complaint sufficiently alleges that the
administrative process is inadequate and hence, states a plausible independent
claim, any failure by RCSS to preserve the issues or exhaust its administrative

remedies is not fatal to its claim in Count II.5

> The court would reject DHHS’s waiver and preservation arguments at this
stage, even assuming the preservation requirement applied. To fully engage with
DHHS’s contentions, the court would have to look beyond the four corners of the

13
V. Due Process and Legislative Enactments

DHHS finally argues that RCSS’s due process claim “is barred because there
is no right to due process regarding legislative enactments.” DHHS’s Mot. Dismiss
7, 18-20. The court disagrees.

It is axiomatic that “legislation which violates an express mandate of the
constitution is invalid even though it is expedient or is otherwise in the public
interest.” Maine Beer & Wine Wholesalers Ass’n v. State, 619 A.2d 94, 97 (Me. 1993).
This principle is no less applicable to statutory provisions that purport to deprive a
person of property without due process of law. Harrington v. Harrington, 269 A.2d
310, 315 (Me. 1970). That a statutory provision may authorize a particular agency
action does not preclude RCSS from challenging the statute on due process grounds

or otherwise asserting a due process claim.®

complaint to the administrative record, which the court declines to do at this time.
See Greif v. Indep. Fabrication, Inc., 2019 ME 142, § 4, 215 A.3d 1289 (the “court
may not consider matters outside the pleadings on a motion to dismiss, except in
hmited circumstances not applicable here”). Moreover, RCSS plausibly argues that
an exception to the preservation/exhaustion requirement is applicable. See Houlton
Band of Maliseet Indians v. Boyce, 1997 ME 4, { 11, 688 A.2d 908 (observing that
the exhaustion requirement may be relaxed “[w]hen a party seeks relief that is
beyond the jurisdiction of the administrative agency” and when it would be futile for
the party to pursue the claim at the agency level (quotation marks omitted)).

8 The authority DHHS cites, Crispin v. Town of Scarborough, is not to the
contrary. 1999 ME 112, 736 A.2d 241. Although Crispin used broad language to
describe the applicability of due process protections to “legislative acts of
government,” id. { 18 (“[glenerally, members of the public are not entitled to
protection under the Due Process Clause when their property rights are adversely
affected by the legislative acts of government”), a closer reading of the case places
this language in its proper context. Based on the facts and the authority the Crispin
court references, it is evident that the Law Court intended to reiterate the basic
principle that there is no pre-enactment due process right to notice and a hearing on

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CONCLUSION

Based on the foregoing, DHHS’s motion to dismiss Count II of the first
amended complaint is denied.

The clerk is directed to schedule this matter for a telephonic status
conference to discuss the future course of proceedings. See M.R. Civ. P. 80C(i).

The clerk is directed to incorporate this order on the docket by reference

pursuant to M.R. Civ. P. 79(a).

DATED: 2/26 (> Ch. mM Zev

Julia y Lipez /N\
Justice, Superior Cour

whether a particular law should be passed. See id. {{| 17-27. The court does not
understand Crispin to preclude a party from mounting an as-applied due process
challenge to an already-enacted statute.

15