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State ex rel. Caldwell v. Molina Healthcare, Inc.

Supreme Court of Louisiana

May 8, 2019

THE STATE OF LOUISIANA, EX REL. JAMES D. "BUDDY" CALDWELL, ATTORNEY GENERAL
v.
MOLINA HEALTHCARE, INC.; MOLINA INFORMATION SYSTEMS, L.L.C. D/B/A MOLINA MEDICAID SOLUTIONS; PARAMAX SYSTEMS CORPORATION; AND UNISYS CORPORATION

          ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FIRST CIRCUIT, PARISH OF EAST BATON ROUGE

          WEIMER, Justice.

         The writ application was granted in this matter to review the correctness of the appellate court's ruling, sustaining an exception of no right of action for the Attorney General's lawsuit against the defendants, which are corporate entities allegedly serving as the state's fiscal intermediary for the Medicaid program. By statute, the Louisiana Department of Health has the capacity to sue and be sued for programs that it administers, such as Medicaid. However, because the Louisiana Department of Health has delegated-and the defendants allegedly contractually accepted-some of the administrative functions of the state's Medicaid program, we find that the Attorney General has the capacity, and hence a right of action, to prosecute this lawsuit.

         BACKGROUND

         The state, represented by its Attorney General, filed this lawsuit on June 26, 2014, against defendants, Molina Healthcare, Inc., Molina Information Systems, L.L.C. d/b/a Molina Medicaid Solutions, and Unisys Corporation. As described in the state's petition, "[o]ver the last thirty ("30") years, the Defendants have been the fiscal agent responsible for processing Louisiana's Medical pharmacy provider reimbursement claims." Pursuant to a contract to which the state itself is allegedly a party, "the Defendants assumed operational liability" of a "customizable" computerized system known as the Louisiana Medicare Management Information System ("LMMIS"). As part of defendants' duties, they are "responsible for the operation and maintenance of LMMIS, as well as creating and implementing design changes to the LMMIS that comply with State and federal mandates."

         As further described in the state's petition, since January 1984, Unisys has engaged in the business of operating, maintaining, implementing, and managing LMMIS. In May 2010, the Molina defendants acquired Unisys' Health Information Management Division, and the Unisys defendant became a subcontractor of the Molina defendants. Unisys continues to work with the Molina defendants to operate LMMIS. For simplicity's sake, given the defendants' alleged corporate affiliation and noting the state's representation in brief that "Molina has been dismissed from the suit," this opinion will refer to the defendants collectively as "Unisys."[1]

         The crux of the state's allegations in this lawsuit is that Unisys caused the Louisiana Department of Health ("LDH") to overpay Medicaid pharmacy providers through Unisys' improper operation and management of LMMIS. Under theories of fraud, breach of contract, negligence, and negligent misrepresentation, the state contends that it is entitled to recover from Unisys the amounts LDH overpaid to the pharmacy providers as far back as 1989.[2] The state's petition also proposes statutory theories of recovery under Louisiana's Unfair Trade Practices Act ("LUTPA," La. R.S. 51:1401, et seq.) and Louisiana's Medical Assistance Programs Integrity Law ("MAPIL," La. R.S. 46:437.1, et seq.); however, these statutory theories of recovery were earlier dismissed on Unisys' exceptions of no cause of action. See State ex rel. Caldwell v. Molina Healthcare, Inc., 15-0492 (La.App. 1 Cir. 1/22/16) (unpublished writ action; 2016 WL 10771114).

         As the state further describes its remaining contract-based claims, Unisys has served as "the fiscal agent responsible for processing Louisiana Medicaid's pharmacy provider reimbursement claims." LMMIS has been "the core tool" used by Unisys while serving as the state's Medicaid "fiscal agent." Louisiana's Medicaid program maintains a drug formulary as part of the "State Plan," and LMMIS should select reimbursement prices from the lowest price point in the state's formulary. These reimbursement prices are then paid by the state to medical providers, including pharmacies. However, according to the state, Unisys "fail[ed] to process the State's reimbursements according to the reimbursement formula set forth in the State Plan. Instead, the Defendants adjudicated claims based on a formula that failed to adhere to both State and federal policies concerning reimbursement." As a result, the state has overpaid "excessive amounts" on reimbursement for drugs dispensed by pharmacies.

         According to the state, the state was unaware until recently of the excessive reimbursements. In contrast, the state alleges "nearly two-hundred thirty … highly trained professionals, including programmer analysts and engineers" are employed by Unisys, which is "responsible for implementing" a system that conforms with the Louisiana Medicaid program.

         In the same pleading whereby Unisys obtained dismissal of the state's statutory claims brought under LUTPA and MAPIL, Unisys also sought dismissal of the state's contract-based claims.[3] Nevertheless, the state's contract-based claims were untouched, and remained viable, under the appellate court's ruling dismissing the statutory claims. See Molina Healthcare, Inc., supra.

         Unisys revisited its exception of no right of action, however, after the appellate court found the state had no right of action regarding Medicaid drug payments in State v. Abbott Laboratories., Inc., 15-1626 (La.App. 1 Cir. 10/21/16), 208 So.3d 384, 390, writs denied, 17-0149, 17-0125 (La. 3/13/17), 216 So.3d 802, 808, overruled in part on other grounds by State, by and through Caldwell v. Astra Zeneca AB, 16-1073 (La.App. 1 Cir. 4/11/18), 249 So.3d 38. The district court denied Unisys' exception of no right of action, explaining:

After carefully reviewing and considering the memoranda together with the law in this case, and specifically State v. Abbott Laboratories, Inc., 2015-1626 (La.App. 1 Cir. 10/21/16), 208 So.3d 384, writ denied, 2017-0125, 2017-[01]49 (La. 3/13/17), 2017 WL 1075533, 2017 WL 1076464, the Court finds that the State of Louisiana is a party to the contract and indeed the enforcing body which gives the State a real and actual interest in this litigation. In other words, the State of Louisiana has standing. …

         Unisys sought supervisory review from the same appellate court that decided Abbott Laboratories, Inc. Largely in reliance on Abbott Laboratories, Inc., and because LDH had a statutory right to sue and be sued, the appellate court agreed with Unisys that the state had no right of action:

WRIT GRANTED. Under our de novo review, we find that the [district] court erred in denying the exception raising the objection of no right of action as to the State of Louisiana's claims of breach of contract, fraud, negligence, and negligent misrepresentation. State v. Abbott Laboratories, Inc., 2015-1626 (La.App. 1st Cir. 10/21/16), 208 So.3d 384, reh'g denied, (Dec. 22, 2016), writs denied, 2017-0149 (La. 3/13/17), 216 So.3d 802 & 2017-0125 (La. 3/13/17), 216 So.3d 808. The State of Louisiana, itself, is not a party to any of the contracts at issue and has no claim for the breach thereof. Dennis v. Copelin, 94-2002 (La.App. 4th Cir. 2/1/96), 669 So.2d 556, 561, writ denied, 96-1012 (La. 6/21/96), 675 So.2d 1079. The right belongs to the party to the contracts at issue, [LDH], which is a body corporate with the power to sue and be sued. La. R.S. 36:251(A); also see Abbott Laboratories, Inc., 208 So.3d 384. The State of Louisiana has no interest in judicially enforcing the rights asserted in the petition. Jenkins v. City of Baton Rouge, 2014-1235 (La.App. 1st Cir. 3/9/15), 166 So.3d 1032, 1035. Accordingly, the [district] court's judgment denying the defendant's exception of no right of action is reversed, the exception of no right of action is sustained, and the matter is dismissed, with prejudice.

State ex rel. Caldwell v. Molina Healthcare, Inc., 17-0778 (La.App. 1 Cir. 8/14/18), (unpublished writ action; 2018 WL 3913330).

         The state filed a writ of certiorari with this court, which was granted. State ex rel. Caldwell v. Molina Healthcare, Inc., 18-1768 (La. 1/18/19), ___ So.3d ___.

         LAW and DISCUSSION

         Generally, a legal action can be brought only by a person having a real and actual interest in doing so. See La. C.C.P. art. 681. "When the facts alleged in the petition provide a remedy under the law to someone, but the plaintiff who seeks the relief is not the person in whose favor the law extends the remedy, the proper objection is no right of action, or want of interest in the plaintiff to institute the suit." Howard v. Administrators of Tulane Educ. Fund, 07-2224, p. 16 (La. 7/1/08), 986 So.2d 47, 59 (citing 1 Frank L. Maraist & Harry T. Lemmon, Louisiana Civil Law Treatise: Civil Procedure § 6.7, 121 (1999)). Such an objection is presented as a peremptory exception of no right of action raised by the defendant or noticed by the court on its own motion, in either the trial or appellate court. See La. C.C.P. arts. 927 and 2163. "The function of the peremptory exception is to have the plaintiff's action declared legally nonexistent, or barred by effect of law, and hence this exception tends to dismiss or defeat the action." La. C.C.P. art. 923.

         "The burden of showing that the plaintiff has stated no cause of action is upon the exceptor." City of New Orleans v. Bd. of Directors of Louisiana State Museum, 98-1170, p. 9 (La. 3/2/99), 739 So.2d 748, 755. "On the trial of the peremptory exception [of no right of action] pleaded at or prior to the trial of the case, evidence may be introduced to support or controvert any of the objections pleaded, when the grounds thereof do not appear from the petition." La. C.C.P. art. 931. In instances when "evidence [has been] introduced at the hearing" on a peremptory exception, "the trial court's findings of fact ... are subject to the manifest error-clearly wrong standard of review." London Towne Condominium Homeowner's Ass'n v. London Towne Co., 06-401, p. 4 (La. 10/17/06), 939 So.2d 1227, 1231.

         In other respects, "[t]he determination of whether a plaintiff has a legal right to bring an action raises a question of law, which requires de novo review." Rebel Distributors Corp., Inc. v. LUBA Workers' Comp., 13-0749, p. 10 (La. 10/15/13), 144 So.3d 825, 833 (citing, inter alia, Holly & Smith Architects, Inc. v. St. Helena Congregate Facility, Inc., 06-0582, p. 9 (La. 11/29/06), 943 So.2d 1037, 1045. "An appellate court considering an exception of no right of action should focus on whether the particular plaintiff has a right to bring the suit and is a member of the class of persons that has a legal interest in the subject matter of the litigation, assuming the petition states a valid cause of action for some person." Rebel Distributors, 13-0749 at 10, 144 So.3d at 833. If doubt exists about the appropriateness of an objection of no right of action, it is to be resolved in favor of the plaintiff. Rebel Distributors, 13-0749 at 10, 144 So.3d at 833.

         In the instant case, as noted earlier, only non-statutory claims, stemming from Unisys' contract to allegedly serve as the fiscal intermediary for Louisiana's Medicaid program, remain viable against Unisys. Unisys' exception to those contract-based claims is primarily based on La. R.S. 36:251(A), which, in pertinent part, provides: "[LDH] is created and shall be a body corporate with the power to sue and be sued." According to Unisys, the power of LDH to sue and be sued is consistent with powers ascribed to LDH's secretary. See, e.g., La. R.S. 36:254(D)(1)(a)(i) (LDH's "secretary shall direct and be responsible for the Medical Assistance Program."); id. (D)(2)(ii)(d) (generally empowering LDH's secretary to "[f]ile suit on behalf of the Medical Assistance Program").

         Unisys renewed its exception of no right of action in light of Abbott Laboratories, Inc., in which the court cited inter alia La. R.S. 36:251 and ruled: "In the absence of constitutional or statutory provisions to the contrary, the State cannot bring a cause of action that is the property of one of its political subdivisions which has the right to sue and be sued." Abbott Laboratories, Inc., 15-1626 at 6, 208 So.3d at 388. Based on Abbott Laboratories, Inc., Unisys presently contends that La. R.S. 36:251(A) vests LDH with the exclusive power to file suit and, thus, the state and its Attorney General have no right of action.

         The state responds that "[t]he fact that one department may have a right of action does not preclude others from also having one." The state emphasizes that La. Const. art. IV, § 8[4] describes the powers of the Attorney General: "As necessary for the assertion or protection of any right or interest of the state, the attorney general shall have authority (1) to institute, prosecute, or intervene in any civil action or proceeding … ."[5] According to the state, the legislature's conferring juridical capacity on LDH did not sever LDH from the larger state "body politic." Relatedly, the contract with Unisys was not for LDH alone but rather, "the entire purpose of the contract was to benefit the State by establishing a cost-effective administration for the State Medicaid program."

         As an initial observation, focusing-as our civil law methodology requires-on the statutory text, La. R.S. 36:251(A), relied on by Unisys, does not use the term "exclusive," or words to that effect, when describing LDH's right to file suit. Even so, not every governmental entity has been statutorily authorized as having the right to sue and be sued. A cardinal rule of statutory interpretation directs that presumptively "every word, sentence, or provision in a law was intended to serve some useful purpose, that some effect is to be given to each such provision, and that no unnecessary words or provisions were employed." Louisiana Fed'n of Teachers v. State, 13-0120, p. 39 (La. 5/7/13), 118 So.3d 1033, 1057-58. Also, "a statute more specifically directed to the matter at issue must prevail as an exception to a statute more general in character." Esteve v. Allstate Ins. Co., 351 So.2d 117, 121 (La. 1977). If these were the only principles at issue, the analysis would be likely be complete and Unisys would prevail because the court would be constrained to hold that the authorization in La. R.S. 36:251(A) for LDH to sue and be sued is a more specific law than the authorization in La. R.S. 13:5036 for the Attorney General to file lawsuits. However, and unlike Abbott Laboratories, Inc., the Attorney General not only relies on the statutory authority to file suit under La. R.S. 13:5036, but also relies on the constitutional authority to do so under La. Const. art. IV, § 8.[6]

         To restate the analysis to this point, Unisys relies on LDH's statutory right to sue and be sued, whereas the Attorney General relies on the constitutional right of the Attorney General to file civil lawsuits. Unisys contends that the fact the legislature expressly conferred a right to sue on LDH means that LDH's right is exclusive and precludes the Attorney General from filing lawsuits innvolving the Medicaid program administered by LDH. The state contends that the Attorney General's constitutional authority to file lawsuits is broad, if not unfettered, and enables the Attorney General to bring the instant lawsuit. However, the legislature has seen fit to specifically authorize the Attorney General to file lawsuits in certain causes of action. For example, one need look no further than this case, in which the Attorney General's petition cites statutes conferring authority to the Attorney General to bring actions under LUTPA and MAPIL. The legislature's express grant of authority in certain causes of action tends to undermine the breadth that the Attorney General would have this court now interpret La. Const. art. IV, § 8 to confer. Therefore, it might be said that La. R.S. 36:251(A) (conferring on LDH the right to sue and be sued) and La. Const. art. IV, § 8 (describing the Attorney General's right to file lawsuit) are in conflict. However, this court is tasked with ascertaining whether a conflict between the cited provisions is merely superficial and whether the substance of these laws can be harmonized. "[B]ecause it is presumed that the legislature acts within its constitutional authority in enacting legislation, this court must construe a statute so as to preserve its constitutionality when it is reasonable to do so." City of New Orleans v. Louisiana Assessors' Ret. & Relief Fund, 05-2548, pp. 12-13 (La. 10/1/07), 986 So.2d 1, 12-13.

         Our analysis continues accordingly, with an aim to harmonize, if possible, the legislatively-ascribed status of the LDH as "a body corporate with the power to sue and be sued" and the constitution's direction that "[a]s necessary for the assertion or protection of any right or interest of the state, the attorney general shall have authority (1) to institute, prosecute, or intervene in any civil action or proceeding." See La. R.S. 36:251(A); La. Const. art. IV, § 8. This is the first time this court is called on to examine how these two specific laws relate, but, in a broader sense, this is not a novel issue. The jurisprudence provides significant and longstanding guidance in other instances in which a governmental entity has legislatively-conferred status to "sue or be sued," and the Attorney General sought to represent that entity.

         In State v. Tensas Delta Land Co., 126 La. 59, 52 So. 216 (1910), "the Attorney General in the name of the state" brought a lawsuit to rescind allegedly fraudulent land conveyances from Tensas Basin levee district. The targets of the lawsuit were nine nonresident defendants who allegedly conspired with levee district commissioners to buy land for "nominal" prices and resell the land for approximately four times the purchase price. Id. 52 So. at 217. The defendants lodged various exceptions, including an exception that the state "has no right, power, or authority to prosecute and maintain this action" in such capacity. Id. 52 So. at 218. As the Tensas Delta Land Co. defendants further urged, the state had "created the corporation known as the Board of Levee Commissioners of the Tensas Basin Levee District, and given it full power to sue and be sued." Id. Additionally, the state had "authorized the said board to contract with these defendants in regard to said lands and to sue to recover the same." Id.

         The Tensas Delta Land Co. court agreed that neither the Attorney General nor the state had a right of action that survived the legislature's conferring corporate status on a governmental entity with the right to sue and be sued. Id. 52 So. at 221. As a general proposition, the Tensas Delta Land Co. court rejected an argument for duplicative rights to sue, akin to the argument the Attorney General has raised in the instant case, explaining:

The argument that the said board is nothing more than a mere agency or instrumentality of the state, and that therefore the state may sue in every case where the said board might sue, contains a manifest non sequitur. Every city, town, and parish of the state is a mere agency or instrumentality of the state; but no one would venture to say that the Attorney General could ignore the existence of these corporations and enforce, in the name of the state, any cause of action which any of them might have.
The legislative control over corporations of the character of this levee board is much more complete than over municipal corporations proper and parish-it made them, and can at any time abolish them, so long as the obligations of their contracts are not thereby impaired-but these corporations have their existence and exercise their functions by and under the Constitution and statutes of the state, and so long as these established laws remain in force it is they which must regulate the property and other rights of said corporations and their modes of action, and the disposition of their property, and their rights to sue and to be sued. If one of these corporations have a right of action, the proper functionary to enforce same is the governing body of the corporation, and not the Attorney General, or the state.

Id. To the general proposition that the state and Attorney General have no right to sue duplicative of the statutory right to sue conferred on a governmental entity, this court provided an exception:

[I]t is true that if the governing body of one of these corporations fails in its duty to bring a suit which clearly it ought to bring, the courts may (only, however, under highly exceptional circumstances) allow any citizen or taxpayer of the district to bring the suit; and, in such a case, the same privilege might for the same reason ...

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