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November 12, 1980


The opinion of the court was delivered by: Foreman, Chief Judge:


Before the Court is a litigation in which nursing home patients seek to assert their rights under federal law and regulations, the Constitution and state law. Plaintiffs Beatrice Roberson and Maggie Derringer were elderly residents of the Skilled Nursing Facility (SNF) at Four Fountains Convalescent Center (Four Fountains), a division of Four Fountains, Inc. Sometime in August 1978, Jim Wood, the Administrator of Four Fountains decided to terminate the SNF there. He sent letters to the families of Roberson and Derringer explaining his intent to terminate the provider agreement with the Illinois Department of Public Aid (IDPA) supporting the SNF and informing them of the necessity of transferring the residents out by August 31, 1978. The residents, Wood stated, could go to a new nursing care facility of their choice. The reason given for the termination was the need to free up scarce beds for other patients. Similar letters were allegedly sent to twenty other residents or their families.

On August 30, 1978, plaintiffs Roberson and Derringer filed a complaint on behalf of a class of residents who were to be transferred from Four Fountains against Jim Wood, Four Fountains and Arthur Quern, the Director of the IDPA. Plaintiffs argued that medicaid patients could be transferred only for reasons specified at 42 C.F.R. § 405.1121(k)(4), and since they were to be transferred for other reasons, this violated the federal regulations; that as third party beneficiaries of the contract between the Department of Health and Human Services and IDPA, they could complain that Four Fountains was not in compliance with the contract; that 42 U.S.C. § 1396a(a)(3) and 45 C.F.R. § 205.10 required notice and a hearing before transfer since the transfer was "action affecting that recipient's claim to Medicaid benefits"; that failure to give notice and hearing before transfer in any case violated due process guaranteed by the Fourteenth Amendment and 42 U.S.C. § 1983; and that the Department was supposed to have written policies under 42 C.F.R. § 405.1121(1)(1) affecting termination and transfer and it had none. Plaintiffs requested relief including (1) certification of the class; (2) a declaration under 28 U.S.C. § 2201 that defendants were in violation of 42 U.S.C. § 1396a(a)(19) and 42 C.F.R. § 405.1121(k)(4) and an order enjoining them from making the transfers; (3) a declaration that Quern and Four Fountains had breached the contract between them; (4) a declaration that Quern had violated 45 C.F.R. § 205.10, 42 U.S.C. § 1396a(a)(3) and 1983; (5) a declaration that defendants violated 42 U.S.C. § 1396a(a)(19) and 42 C.F.R. § 405.1121(1)(1) by failing to give pre-transfer aid; and (6) damages for each named plaintiff of $15,000.

A motion for a temporary restraining order was filed on the same day and the TRO issued the next day on August 31, 1978, preventing transfer of the patients. On September 8, 1978, the TRO lost force and effect, but the parties reached an agreement on patient transfer. All defendants filed motions to dismiss based on lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6). This Court denied those motions in an order of January 18, 1979, No. CV 78-4321. In that order, the Court decided that the statute and regulations gave plaintiffs a legitimate property interest in continued residency at the facility of their choice. The Court also decided that the breach of contract count was a proper object of pendent jurisdiction and that the Medicaid Act granted plaintiffs an implied federal claim cognizable under 28 U.S.C. § 1331.

Subsequently, on February 14, 1979, defendants Wood and Four Fountains filed a new Motion to Dismiss, alleging that since Four Fountains was now going to allow the natural termination of its provider agreement on February 28, 1979, and thereafter withdraw completely from the Medicaid program, there would be no jurisdiction over them. It alleged that it had never received federal funds in the construction of Four Fountains, and thus, was not bound to the federal government under any law such as the Hill-Burton Act, U.S.C. § 42 U.S.C. § 291, et seq. Plaintiffs responded on March 23, 1979, arguing that the lawfulness of defendant's actions in the first place were still viable issues and that new IDPA rules passed pursuant to the Residents Bill of Rights, 42 C.F.R. § 405.1211(1)(1), imposed new obligations on Four Fountains.

In the meantime, the parties exchanged motions concerning a preliminary injunction, class certification and amendment of complaint and other matters. On May 15, 1979, the Court entered on order denying class certification, denying Wood's and Four Fountain's Motion to Dismiss, and denying plaintiffs' Motion to Proceed Without Revealing the Plaintiff's True Name. The parties agreed to allow amendment of plaintiffs' complaint and in course the defendants answered the amended and supplemental complaint. On September 21, 1979, Wood and Four Fountains filed a cross-claim against defendant Quern as Director of the IDPA in two counts. Count I alleged that the IDPA was in violation of 42 U.S.C. § 1396a(a)(13)(E) by not reimbursing the provider homes in a sufficient amount for the cost of SNF care. Count II cited the new rules put into effect by the IDPA on February 13, 1979, which provide as follows:

    Recipients for whom the Department makes payment
    under the medicaid program to group care facilities
    are protected by the "Patients' Bill of Rights"
    described in 42 Code of Federal Regulation Section
    405.1121(k) and Section 442.311(c). No such
    recipient may be required by the facility under
    such regulation to leave the facility for reasons
    other than those enumerated in that regulation. If
    such a group care facility informs the Department
    in writing that it intends to stop participating in
    the Department Medicaid program, the Department
    shall not authorize additional recipients to be
    placed in the facility. The Department shall
    continue to pay for the care of recipients who
    continue to reside in such a facility or provided
    that payment is not terminated by operation of
    Rules 4.1401, 4.1402, or 4.1403.
    If the Department continues to pay for a recipient
    in a group care facility with which the Department
    no longer has a currently effective provider
    agreement, the terms of the provider agreement
    previously in force shall be deemed to continue in
    force for the purpose of governing the relationship
    between the provider and the Department in respect
    to the recipient or recipients remaining in the
    facility for as long as the patient remains in that
    facility as a recipient.

Four Fountains claimed that it informed the IDPA of its intent on January 26, 1979, not to renew its provider agreement when it expired on February 28, 1979, and that it was not going to be bound under these new rules to continue to care for the patients since these provisions would illegally modify their previous contract. Ancillary jurisdiction was alleged to lay over this claim and to lie directly under 28 U.S.C. § 1331.

Quern filed a Motion to Dismiss the cross-claim and the Court dismissed Count I in an order of March 19, 1980. Count II, however, survived the Motion to Dismiss.

Subsequently, papers were filed including the motions now before the Court: (1) Four Fountains' Motion to Dismiss four through nine of plaintiffs' claims for relief; (2) Motion for Appointment and Substitution of Special Administrator; (3) Motion to Dismiss or for Summary Judgment by defendant IDPA Director Miller; (4) Motion to Deny Substitution and Dismiss Complaint of Four Fountains; and (5) Motion for Judgment on the Pleadings of Four Fountains.


Claims four through nine of plaintiffs' complaint, as set forth in the prayer for relief, paragraphs (c), (d), (e), (f), (g), (h) and (i), requested declaratory relief only. Defendant Four Fountains moved to dismiss claims four through nine on April 7, 1980, asserting that declaratory claims are purely personal and that since all plaintiffs are now deceased, those claims have abated.

Federal Rule of Civil Procedure 25(a) provides that "[i]f a party dies and the claim is not thereby extinguished, the court may order substitution of the proper parties." Fed.R.Civ.P. 25(a). Rule 25(a) is strictly procedural. It does not ...

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