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Morehead v. State

Court of Appeals of Oklahoma, Division III

November 17, 2017

JOAN ELLEN MOREHEAD, individually and as Personal Representative of the Estate of Henry Andrew Morehead, deceased, and on behalf of all others similarly situated; BETTY RUTH LOVE, individually and as successor in interest to the Estate of Claud H. Love, deceased; and RUTH MAYNARD as Guardian of George O. Taylor, Plaintiffs/Appellees,
v.
STATE OF OKLAHOMA, ex rel. OKLAHOMA HEALTH CARE AUTHORITY, Defendant/Third-Party Plaintiff/Appellant, and R. KENNETH KING, ESQ., an individual; SOUTHWEST PROPERTY INVESTMENTS, LLC, an Oklahoma Limited Liability Company; BLUE HORIZON PROPERTIES, LLC, an Oklahoma Limited Liability Company; SOUTHWEST PROPERTY HOLDINGS #1, LLC, an Oklahoma Limited Liability Company; SOUTHWEST PROPERTY HOLDINGS #2, LLC, an Oklahoma Limited Liability Company; SOUTHWEST PROPERTY HOLDINGS #3, LLC, an Oklahoma Limited Liability Company; SOUTHWEST PROPERTY HOLDINGS #4, LLC, an Oklahoma Limited Liability Company; SOUTHWEST PROPERTY HOLDINGS #5, LLC, an Oklahoma Limited Liability Company; SOUTHWEST PROPERTY HOLDINGS #6, LLC, an Oklahoma Limited Liability Company; SOUTHWEST PROPERTY HOLDINGS #7, LLC, an Oklahoma Limited Liability Company; XYZ CORP. 1; XYZ CORP. 2; XYZ CORP. 3; XYZ CORP. 4; XYZ CORP. 5; XYZ CORP. 6; JOHN DOE 1; JOHN DOE 2; JANE DOE 1; JANE DOE 2, Defendants, STATE OF OKLAHOMA, ex rel. OKLAHOMA DEPARTMENT OF HUMAN SERVICES, Third-Party Defendant.

          Mandate Issued: 04/11/2018

          APPEAL FROM THE DISTRICT COURT OF CLEVELAND COUNTY, OKLAHOMA HONORABLE THAD BALKMAN, JUDGE

          Philip W. Redwine, Douglas B. Cubberley, LAW OFFICES OF REDWINE & CUBBERLEY, Norman, Oklahoma, and Robert N. Naifeh, Jr., DERRYBERRY & NAIFEH, LLP, Oklahoma City, Oklahoma, for Plaintiffs/Appellees,

          Nicole M. Nantois, Susan L. Eads, OKLAHOMA HEALTH CARE AUTHORITY, Oklahoma City, Oklahoma, for Defendant/Third-Party Plaintiff/Appellant State of Oklahoma, ex rel. Oklahoma Health Care Authority, John J. Dewey, Travis Smith, OKLAHOMA DEPARTMENT OF HUMAN SERVICES, Oklahoma City, Oklahoma, for Third-Party Defendant.

          Kenneth L. Buettner, Chief Judge

         ¶1 Defendant/Third-Party Plaintiff/Appellant State of Oklahoma, ex rel. Oklahoma Health Care Authority (the OHCA) appeals from the trial court's order granting Plaintiffs/Appellees Joan Ellen Morehead, individually and as Personal Representative of the Estate of Henry Andrew Morehead, deceased, and on behalf of all others similarly situated; Betty Ruth Love, individually and as successor in interest to the Estate of Claud H. Love, deceased; and Ruth Maynard's, as Guardian of George O. Taylor, (collectively, Plaintiffs) motion for class certification. After de novo review, we hold Plaintiffs have failed to demonstrate numerosity for the subclass of all Medicaid recipients who received compensated inpatient nursing home care funded by Medicaid and whose homestead property have been subjected to liens filed by the OHCA, which liens were sold and assigned by the OHCA to third parties, including the representatives, heirs, and devisees, of any such individual (Subclass C). We also hold Plaintiffs have failed to demonstrate they will fairly and adequately protect the interests of the class of Medicaid recipients who received medical assistance for inpatient nursing home care upon whose homestead a Medicaid lien was filed by the OHCA, including their heirs, devisees, and representatives (Subclasses A, B, and C). We reverse the trial court's order granting Plaintiffs' motion for class certification and remand for further proceedings. REVERSED and REMANDED.

         ¶2 Plaintiffs filed this class action June 22, 2007. Plaintiffs claim the OHCA violated 63 O.S.Supp.1996 § 5051.3 in administering its Medicaid lien program. Medicaid, inter alia, provides inpatient nursing home care to Oklahomans. Individuals who apply for nursing home care under Medicaid must meet certain income and resource limitations to be eligible to receive payments of medical assistance. A homestead is an asset and considered a resource, absent certain exceptions not relevant here. After entering a nursing home funded by Medicaid, an individual has up to one year to dispose of their homestead. [1] The federal government requires states to recoup the cost of inpatient nursing home care by filing claims in the estates of deceased patients or placing pre-death liens on their homesteads. Oklahoma law enables the OHCA to file and enforce pre-death liens against the homesteads of patients who cannot reasonably be expected to be discharged and returned home. See 63 O.S. § 5051.3 (A).

         ¶3 Plaintiffs claim Medicaid liens were filed and calculated in violation of 63 O.S. § 5051.3. Section 5051.3 provides, in pertinent part:

A. Pursuant to the provisions of this section, the Oklahoma Health Care Authority is authorized to file and enforce a lien against the homestead of a recipient for payments of medical assistance made by the Authority to the recipient who is an inpatient of a nursing home if the Authority, upon competent medical testimony, determines the recipient cannot reasonably be expected to be discharged and returned home. A one-year period of compensated inpatient care at a nursing home or nursing homes shall constitute a determination by the Authority that the recipient cannot reasonably be expected to be discharged and returned home.
B. Upon certification for Title XIX of the federal Social Security Act payments for nursing home care, the Authority shall provide written notice to the recipient that:
1. A one-year period of compensated inpatient care at a nursing home or nursing homes shall constitute a determination by the Authority that the recipient cannot reasonably be expected to be discharged and returned home;
2. A lien will be filed against the homestead of the recipient pursuant to the provisions of this section and that the amount of the lien shall be for the amount of assistance paid by the Authority after the expiration of one (1) year from the date the recipient became eligible for compensated inpatient care at a nursing home or nursing homes until the time of the filing of the lien and for any amount paid thereafter for such medical assistance to the recipient; and
3. The recipient is entitled to a hearing with the Authority prior to the filing of the lien pursuant to this section.
The notice shall also contain an explanation of the lien and the effect the lien will have on the ownership of the homestead of the recipient and any other person residing in the homestead. The notice shall be signed by the recipient or the legal guardian of the recipient acknowledging that the recipient or the legal guardian of the recipient understands the notice and the effect that the payment of medical assistance on the recipient's behalf will have upon the homestead of the recipient.
C. The lien filed pursuant to subsection E of this section shall be for the amount of assistance paid beginning one (1) year after the recipient has received inpatient care from a nursing home or nursing homes and has received payment of medical assistance by the Authority until the time of the filing of the lien and for any amount paid thereafter for the medical assistance to the recipient.

63 O.S.Supp.1996 § 5051.3 (A)-(C) (emphasis added). Specifically, Plaintiffs claim liens were placed on the homesteads of Medicaid recipients who received less than one year of compensated care in violation of § 5051.3(A). Plaintiffs argue other liens were placed on the homesteads of Medicaid recipients who received more than one year of compensated care, but the lien amounts were calculated to include the costs of the first year of compensated care in violation of § 5051.3(C). [2] Plaintiffs also contend the OHCA failed to provide notice pursuant to § 5051.3(B) and that, since 2004, the OHCA sold and assigned the liens to third parties pursuant to an informal policy without any statutory authority and in violation of the Administrative Procedures Act.

         ¶4 The lawsuit moved forward sporadically with long periods of inactivity. Plaintiffs filed a Motion for Class Certification November 4, 2013. The trial court dismissed the case for lack of venue May 20, 2014. Plaintiffs appealed. The Court of Civil Appeals, in Case No. 112, 946, reversed the trial court's decision and remanded the matter for further proceedings. [3] The trial court had a hearing on Plaintiffs' Motion for Class Certification September 27, 2016. On December 20, 2016, the trial court entered an order granting Plaintiffs' Motion for Class Certification. The trial court certified a class of Medicaid recipients who received medical assistance for inpatient nursing home care upon whose homestead a Medicaid lien was filed by the OHCA, including their heirs, devisees, and representatives. The trial court also certified three subclasses:

A. All Medicaid recipients who received less than twelve (12) months of compensated inpatient nursing home care funded by Medicaid and whose homestead property have been subjected to liens filed by the OHCA, including the representatives, heirs, or devisees, of any such individual ("Subclass A");
B. All Medicaid recipients who received more than twelve (12) months of compensated inpatient nursing home care funded by Medicaid and whose homestead property have been subjected to liens for the first twelve months of compensated care filed by the OHCA, including the representatives, heirs, or devisees, of any such individual ("Subclass B");
C. All Medicaid recipients who received compensated inpatient nursing home care funded by Medicaid and whose homestead property have been subjected to liens filed by the OHCA, which liens were sold and assigned by the OHCA to third parties, including the representatives, heirs, or devisees, of any such individual ("Subclass C").

         The trial court also appointed Plaintiffs as class representatives and appointed class counsel. The OHCA appeals.

         ¶5 Class certification is reviewed de novo. See 12 O.S.Supp.2013 § 2023 (C)(2). Under the de novo standard of review, we "review the record and apply the same standard as the trial court in determining whether the action will be maintained as a class action." Panola Indep. Sch. Dist. No. 4 v. Unit Petroleum Co., 2012 OK CIV APP 94, ¶ 10, 287 P.3d 1033.

         ¶6 Class action lawsuits are governed by 12 O.S. § 2023, which provides, in pertinent part:

A. PREREQUISITES TO A CLASS ACTION. One or more members of a class may sue or be sued as representative parties on ...

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