Commonwealth v. Samaritan Alliance, LLC
2014 Ky. App. LEXIS 27
| Ky. Ct. App. | 2014Background
- Samaritan Alliance (operator of Samaritan Hospital) contracted with the Cabinet for Health and Family Services as a Medicaid provider; disputes arose over the Cabinet’s reimbursement calculations for outpatient services beginning in 2003.
- Samaritan filed administrative Dispute Resolution Meetings (DRMs) over multiple years; the Cabinet held one DRM, then issued a Final Order dismissing Samaritan’s appeal as untimely; other appeals went unanswered.
- In April 2007 the Cabinet sent a letter claiming a $241,687 overpayment; Samaritan filed bankruptcy shortly thereafter and disputed the recoupment.
- During litigation Samaritan obtained internal Cabinet emails suggesting the Cabinet knew it had underpaid providers when it later claimed an overpayment; Samaritan amended to add a fraud claim.
- The trial court denied the Cabinet’s motion to dismiss breach of contract and fraud claims on sovereign-immunity grounds, finding the Medicaid Provider Agreement waived immunity; the Cabinet brought an interlocutory appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether sovereign immunity bars Samaritan’s breach-of-contract claim | Samaritan: KRS 45A.245 and its written Medicaid Provider Agreement permit suit; seeks declaratory relief/enforcement | Cabinet: Sovereign immunity remains; Agreement did not waive immunity or is not a binding contract for waiver purposes | Court: KRS 45A.245 waives sovereign immunity for written contracts with the Commonwealth; Samaritan may pursue contract-based declaratory relief (but recovery of damages is outside DJA scope) |
| Whether sovereign immunity bars Samaritan’s fraud claim (tort/damages) | Samaritan: KRS 13B.150 gives the court authority to consider fraud and therefore allows a claim | Cabinet: Sovereign immunity bars intentional tort claims like fraud absent express statutory waiver | Court: KRS 13B.150 permits courts to consider extrinsic evidence of fraud in administrative appeals but does not constitute a waiver permitting an independent tort damages claim against the Commonwealth |
| Scope of relief available under waiver | Samaritan: waiver allows full contract remedies including damages | Cabinet: waiver is limited; plaintiff must proceed within statutory/administrative framework | Court: Waiver allows declaratory and enforcement relief under the contract; direct recovery of contractual damages is not available via Declaratory Judgment Act in this posture |
| Appropriateness of interlocutory review for other defenses (timeliness, exhaustion) | Samaritan: those defenses are procedural and should remain in trial court | Cabinet: sought interlocutory review of multiple defenses | Court: Only sovereign-immunity denial is immediately appealable; procedural defenses (timeliness, exhaustion) are not properly before this interlocutory appeal |
Key Cases Cited
- Commonwealth v. Kentucky Retirement Systems, 396 S.W.3d 833 (Ky. 2013) (statutory/contractual scheme can create an overwhelming implication waiving sovereign immunity; KRS 45A.245 waives immunity for contract actions)
- Yanero v. Davis, 65 S.W.3d 510 (Ky. 2001) (sovereign immunity bars intentional tort claims like fraud absent waiver)
- Rowan County v. Sloas, 201 S.W.3d 469 (Ky. 2006) (sovereign immunity protects not only from liability but from the burdens of defense; denial of immunity is immediately appealable)
- Breathitt County Bd. of Educ. v. Prater, 292 S.W.3d 883 (Ky. 2009) (denial of absolute immunity is immediately appealable)
- Maggard v. Board of Examiners of Psychology, 282 S.W.3d 301 (Ky. 2008) (courts may receive extrinsic evidence of fraud in administrative appeals under statutory review provisions)
- RAM Engineering & Construction, Inc. v. Louisville Arena Authority, 415 S.W.3d 671 (Ky. App. 2013) (statutory waiver of immunity must be read narrowly and applies to claims based on written contracts)