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R&B Receivables Management, Corp. v. United States Department of Health And Human Services

United States District Court, N.D. Illinois, Eastern Division

September 23, 2016




         R&B Receivables Management Corp. (R&B) alleges that the Department of Health and Human Services Centers for Medicare & Medicaid Services and their employees, Julia Dreier and several John Does, wrongfully denied R&B access to grant funds it had been awarded through the Navigator program under the Affordable Care Act (ACA). R&B alleges this denial violated its rights under the Fifth Amendment's Due Process and Takings Clauses, and it also challenges the denial under the Administrative Procedures Act (APA). R&B seeks to recover compensatory damages for the constitutional rights violations, and it seeks declaratory and injunctive relief under the APA

         Gian Johnson, the current acting director of the Consumer Support Group at CMS, has been substituted for Dreier as a defendant on the official-capacity claim. Defs.' Mem. in Supp. of Mot. to Dismiss 1 n.1. The defendants have moved to dismiss R&B's complaint under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. The Court dismisses certain claims but not others for the reasons stated below.


         R&B is an Illinois corporation that helps uninsured and underinsured individuals apply for Medicaid and other healthcare options. In 2013, R&B applied to participate in the Navigator program established by the ACA. This program requires state healthcare exchanges to award grants to selected participants who will educate the public about qualified health plans under the ACA and facilitate enrollment in such plans. The ACA provides some eligibility standards for navigators and otherwise directs the Secretary of the Department of Health and Human Services (DHHS) to establish standards. The funds for grants under this program come from the exchanges' operational funds and not from federal funds provided to establish the exchanges. The Centers for Medicaid and Medicare Services (CMS) implement and oversee the Navigator program.

         At the time of R&B's navigator application in 2013, the company was in Chapter 11 reorganization, having filed for bankruptcy in 2012. The grant application did not request information about bankruptcy, and R&B did not provide it. CMS awarded R&B $104, 520 to conduct navigator activities in Wisconsin. The terms and conditions of the award included a provision that required R&B to notify CMS within five days should it enter into bankruptcy. The state of Wisconsin required an additional application to receive a navigator license. This application included questions regarding bankruptcy. R&B provided this information and then notified CMS of its bankruptcy status. According to R&B, CMS indicated that as long as R&B reported it to Wisconsin and the State approved its licensing, the bankruptcy would not present a problem. R&B received a license from Wisconsin and provided navigator services for the 2013-14 grant period.

         In 2014, R&B again applied for the Navigator program, this time to provide services in Illinois, Iowa, Indiana, North Carolina, and Wisconsin. At this time, R&B was still in Chapter 11 reorganization proceedings. R&B was awarded a grant to serve as a navigator in Illinois, Iowa, Indiana, and North Carolina. R&B was included on the list of grant recipients published online on September 8, 2014.

         On September 12, Julia Dreier, the director of the Navigator Program at CMS, advised R&B that to keep its grant, it would need to provide proof that it had exited bankruptcy. R&B provided Dreier with a copy of a court order approving a reorganization plan and ending R&B's court supervision. On September 15, Dreier notified R&B that it would no longer receive a 2014-15 grant. Dreier claimed that R&B violated the terms and conditions of its 2013 grant by failing to notify CMS within five days that it had entered into bankruptcy. Dreier cited this violation and CMS's concern with R&B's financial stability as the reasons for the grant revocation.

         R&B says that it entered bankruptcy in 2012-not in 2014-and therefore did not violate the terms of its 2013 grant. It brought suit against CMS and Dreier (now substituted by Johnson) and several "John Does" in their individual and official capacities. R&B alleges that CMS's revocation of its 2014 award violated its right to due process under the Fifth Amendment, constituted a taking without just compensation, and is subject to challenge under the APA. The defendants argue that the Court of Federal Claims has exclusive jurisdiction over these claims and, in the alternative, that R&B has failed to state any viable claim.


         When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court accepts the complaint's well-pleaded facts as true and draws reasonable inferences in favor of the plaintiff. Roberts v. City of Chicago, 817 F.3d 561, 564 (7th Cir. 2016). The plaintiff is required to allege "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A complaint does not need detailed factual allegations but must raise the claim above a speculative level. Bonnstetter v. City of Chicago, 811 F.3d 969, 973 (7th Cir. 2016).

         A. Claims 1 and 3

         The Court begins with R&B's due process claim (claim 1) and its "inalienable rights" claim (claim 3). The latter claim does not cite any statute or constitutional provision, and it appears to be coextensive with R&B's due process claim. In its response to defendants' motion, R&B requests leave to amend its complaint to include a Fourteenth Amendment due process claim, which tends to confirm that the claim is coextensive with the Fifth Amendment claim asserted in claim 1. The Court will assess claim 3 as if it were a due process claim. R&B also requests leave to add DHHS Secretary Burwell as a named party. This amendment would not impact the Court's analysis.

         1. ...

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