Estate of Sandra Cunningham v. State of Illinois

OPINION

BURNS, J.

This cause coming before the Court on the Respondent’s Motion for Summary Judgment. The Claimant filed a Response, and the Respondent filed a Reply. The Court having read the pleadings and being fully advised finds as follows.

INTRODUCTION

This is a claim against the Respondent’s Department of Human Services (DHS) for litigation expenses pursuant to Section 10-55(a) of the Illinois Administrative Procedures Act (the “APA”), 5 ILCS 100/10-55(a). This Court has jurisdiction of this claim under Section 8(i) of our Act. 705 ILCS 505/8.

Claimant seeks reimbursement of $13,360.84 in attorney’s fees and expenses, as well as $14,816.00 for related collection efforts, incurred in successfully litigating an appeal of DHS’s denial of her right to certain benefits. For the reasons set forth below, the claim must be denied.

FACTS

On November 10, 2014, Claimant filed an application with DHS for long term care benefits under the Aid to the Aged, Blind and Disabled Program. The application was approved but contained a calculation error as to the amount of her available income to be put toward the cost of her care. Claimant filed an administrative appeal to correct the income calculation.

While her appeal was pending, Claimant was notified that in reviewing her application and supplemental documents, the Department of Healthcare and Family Services, Office of Inspector General (“HFS-OIG”)1 had determined that certain transfers Claimant had made to a pooled trust prior to filing her application for benefits constituted a non-allowable transfer of assets under the Illinois administrative code. Due to these transfers, the Claimant would be subject to the imposition of a penalty period of ineligibility for medical assistance benefits from August 1, 2014, to February 28, 2015.

HFS is the Illinois Medicaid agency charged with administering Medicaid’s various programs, and works in conjunction with DHS on matters of eligibility.

[*136] On September 16, 2015, Claimant filed another appeal and request for hearing to review the decision by DHS to impose a penalty period of ineligibility for medical assistance due to her asset transfers. This appeal included the issue regarding the original calculation error. DHS conducted a hearing and on April 6, 2016, issued a final administrative decision finding the transfers at issue were per se not allowable under Illinois law and affirming the imposition of a penalty period on the Claimant based upon the agency’s reading and application of Illinois law.

On May 10, 2016, Claimant filed a complaint for administrative review in the Circuit Court of Cook County.

On April 25, 2017, with both parties having briefed the issues, the circuit court agreed with Claimant and reversed the DHS decision to impose a penalty on the Claimant. Specifically, the court found that DHS’s reliance on state law conflicted with relevant federal statutes and, thus, the final administrative decision was contrary to law. However, the Court noted, “this did not necessarily mean that the transfer of assets at issues was exempt under federal law.” In addition, the court stated that because the final administrative decision had concluded that the transfers at issue were per se not allowable under Illinois law, there was no finding on the two remaining issues of whether the Claimant was a “disabled person” under the relevant federal statute or on whether the transfers were for fair market value under federal law. These determinations, the court wrote, should be made by the administrative agency. Thus, the court remanded the case “for further proceedings in accordance with this court’s order.”

On May 2, 2017, the DHS Bureau of Hearings registered a remand appeal on the underlying case. Claimant was notified of this in a letter dated June 30, 2017. The letter contained the same case number as in the previous proceedings before the agency (91-200-00-FC2233) and informed her that her “appeal” would be heard at a certain time and date, while instructing her “if you have withdrawn this appeal, please disregard this letter.”

The parties then underwent a lengthy process over the next 10 months involving various hearings and evidence before a hearing officer. This time, the hearing officer found in favor of the Claimant based on the circuit court’s holding that federal law prevailed regarding the transfers at issue. On April 24, 2018, DHS adopted the findings of its hearing officer and issued a final administrative decision affirming the circuit court’s ruling and reversing the agency’s imposition of the penalty. The decision also noted that the parties had stipulated that the Claimant was a “disabled person” under the federal statute and that DHS had failed to conduct an analysis to determine whether the transfers were for fair market value under federal law. Due to the lack of analysis, the case was remanded to HFS to recalculate the penalty amount.

On May 11, 2018, a revised Notice of Decision was issued removing the penalty amount and period in total from the Claimant’s approved application.

Claimant then made a written demand to DHS for the payment of attorney’s fees and expenses from April 25, 2017, through May 11, 2018, the period covering the remanded appeal. When DHS did not agree to pay the legal fees generated in the remanded case, the Claimant filed the instant case in the Court of Claims.

[*137] ANALYSIS

Summary judgment is appropriate when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is not genuine issue as to material fact and that the moving party is entitled to a judgment as a matter of law. 735 ILCS 5/2-1005(c).

Section 10-55(a) of the APA allows a claimant to be reimbursed for litigation expenses in certain cases brought under the APA. The statute reads as follows:

(a) In any contested case initiated by any agency that does not proceed to court for

judicial review and on any issue where a court does not have jurisdiction to

make an award of litigation expenses under Section 2-611 of the Civil Practice

Law, any allegation made by the agency without reasonable cause and found to

be untrue shall subject the agency making the allegation to the payment of the

reasonable expenses, including attorney's fees, actually incurred in defending

against that allegation by the party against whom the case was initiated. A

claimant may not recover litigation expenses when the parties have executed a

settlement agreement that, while not stipulating liability or violation, requires

the claimant to take corrective action or a monetary sum.

Thus, in order to state a claim under Section 10-55(a), a Claimant must satisfy all four elements set forth above: (1) there must be a contested case initiated by an agency that does not proceed to the Court for judicial review, (2) there must be an allegation made by the agency without reasonable cause, (3) that allegation must be found to be untrue, and (4) there must be no stipulation by the claimant which requires the claimant to take corrective action or pay a monetary sum. Zezulak v. State, 65 Ill. Ct. Cl. 174, 176 (2011).

A claimant in a matter brought pursuant to 10-55(a) bears the burden of strict proof and persuasion on each element to recover. Lake Environmental, Inc. v. State, 54 Ill. Ct. Cl. 408, 414 (2001). Moreover, statutes that allow recovery of attorney fees are in derogation of the common law and must be strictly construed by the Court. McHugh v. State, 45 Ill. Ct. Cl. 235, 240 (1992).

Here, Claimant argues that she has met all the requirements for recovery under Section 10- 55(a) because DHR initiated the proceedings that took place after May 2, 2017, those proceedings did not proceed to court for judicial review, and the DHR ultimately found that the allegation regarding the asset transfers was untrue. Claimant asserts DHR acted unreasonably by refusing to accept the circuit court’s holding that the agency’s reliance on state law conflicted with federal law and instead re-litigated the issue in those same hearings.

We disagree that the proceedings that took place after May 2, 2017, qualify as “a contested case initiated by an agency,” and thus find that the Claimant cannot meet the first element needed to sustain a claim under Section 10-55(a).

The circuit court’s Order of April 27, 2017, expressly states that it is remanding the case back to the agency for “further proceedings in accordance with this court’s order.” It explained that while the Illinois Administrative Code sections relied on by DHR conflicted with federal law, [*138] “this does not necessarily mean that the transfer of assets at issue was exempt under federal law.” It noted that two determinations were still needed to make the ultimate decision as to whether the transfers at issue were exempt under federal law, namely whether the Claimant was a “disabled” person under the relevant federal statute and as to whether the transfers were for fair market value under federal law. These decisions, the circuit court wrote, “should be made by the administrative agency, not this court.”

Thus, the proceedings that subsequently took place after May 2, 2017, were not a new case, but rather a continuation of the Claimant’s initial appeal of September 15, 2016. As the circuit court stated, the earlier proceedings had not yet determined the complete legal issue. The parties had to go back to the administrative agency for proper resolution, which they did once DHS registered the remand appeal.

The fact that the remanded proceedings were a continuation of the original appeal is fatal to Claimant’s claim. This is true because in order to qualify for an award of litigation fees under section 10-55(a), there has to be a “contested case initiated by any agency that does not proceed to court for judicial review.” Here, the contested case initiated by DHS proceeded to judicial review. The only way Claimant can meet the initial threshold element of section 10-55(a) then is to show that the remanded proceedings that took place after May 2, 2017, were a new and separate contested case. The record establishes, however, that the remanded proceedings were, as stated above, a continuation of the Claimant’s appeal in this case, involving the same parties, the same application for benefits, and the same legal issues as the original appeal.

We note as well that Illinois Supreme Court Rule 137(c) allows for the circuit court to issue sanctions against the State of Illinois or any state agency in the same manner as any other party. Ill. Sup. R 137(c). Where the litigation involves review of a determination of an administrative agency, the court may include in its award for expenses an amount to compensate a party for costs actually incurred by that party in contesting on the administrative level an allegation or denial made by the State without reasonable cause and found to be untrue. Id. Thus, Claimant here may have been able to petition the circuit court for the same award it seeks here if it had asked the circuit court to retain jurisdiction over the matter and the circuit court had agreed to such a request.

At any rate, the Claimant cannot meet her burden to show that the proceedings that took place after May 2, 2017, upon remand from the circuit court, were part of a separate contested case initiated by DHS that did not proceed to judicial review, and, thus, she fails the first element required to trigger the fee-shifting provision in section 10-55(a). Respondent is thereby entitled to judgment as a matter of law.

Though not necessary for the disposition of this matter, we note as well that a claimant seeking to prove that an agency acted without reasonable cause in a contested matter before its own tribunal is a high threshold. This Court has long applied section 10-55 strictly, and even denied fee claims where the agency had no legal right and should have known it had no legal right to bring charges against a claimant. Gallaher v. State, 2015CC2487, at 3 (2018), citing to Haas Baking Co. v. State, 54 Ill. Ct. Cl. 296 (2001).

[*139] In Haas Baking, a St. Louis area baker brought a claim for attorney fees under section 10- 55(a) after successfully challenging various determinations by the Illinois Department of Employment Security (IDES) that the company owed taxes on certain drivers in Illinois that had been designated by the company as independent contractors. Id. The hearing officer at the administrative hearing found in favor of the baker on all claims, including a claim that IDES had filed one of its determinations beyond the statute of limitations. In denying the Claimant’s petition for attorney’s fees, this Court noted that the legislative history of section 10-55(a) makes clear that the statute was intended to be interpreted strictly and this Court is “simply not empowered by the statute to sanction state agencies for sloppy or incompetent or incomplete analysis, or for obnoxiousness, or for vexatious investigation or litigation conduct…” Haas Baking Co., 54 Ill. Ct. Cl. at 302.

Similarly here, the Claimant has raised legitimate concerns as to whether DHS needlessly prolonged the proceedings on remand by attempting to re-litigate the preemption issue in apparent disregard for the legal doctrine of res judicata. However, we believe it unlikely she would prevail on this element even if she had been able to meet the first element. For one, there were two other unresolved issues that needed to be addressed on remand in addition to the federal-state law conflict. For another, Haas Baking establishes that the mere fact that an agency had no legal right to bring a particular charge is not enough on its own to satisfy an award of attorney's fees under section 10-55(a).

At any rate, we are not forced to confront the issue of “reasonable cause” in this case because the Claimant cannot meet the required element to show that the remanded proceedings for which she seeks fees under section 10-55 were part of a contested case initiated by DHS that did not proceed to court for judicial review.

For the foregoing reasons, IT IS HEREBY ORDERED, that the Respondent’s Motion for Summary Judgment is GRANTED.