K.W. ex rel. D.W. v. Armstrong, 2014 WL 1247771

Background

Plaintiffs are developmentally disabled Medicaid beneficiaries in Idaho’s DD Waiver program who received annual individualized budgets generated by IDHW’s budget tool based on assessments by Independent Assessment Providers (IAPs).
IDHW sent budget reduction notices beginning July 1, 2011; plaintiffs sued, alleging the notices lacked adequate individualized explanations and thus violated procedural due process and Medicaid notice regulations. The court previously enjoined reductions for named plaintiffs and required approved notices and access to budgeting materials before further reductions.
Parties consolidated two related suits and plaintiffs sought class certification, extension of the preliminary injunction to the class, and permission to file a consolidated complaint; IDHW sought court approval of a revised notice form.
The court reviewed the budget-setting process (Inventory of Individual Needs → Individualized Budget Calculation → automated budget tool → notice), the service-plan and hearing procedures, and concluded IDHW’s new notice form remained insufficiently specific to satisfy Goldberg due process requirements.
The court certified a Rule 23(b)(2) class of all DD Waiver participants/applicants who undergo annual eligibility determination or reevaluation, denied IDHW’s motion to approve the notice, and extended the preliminary injunction classwide, including remedial relief rolling back improper reductions (restoring affected members to either pre-July 1, 2011 levels or to the highest budget since that date) and ordering disclosure of budget tools and records.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Adequacy of notice for budget reductions	Notices must explain individualized reasons for budget changes so recipients can challenge them	IDHW’s form + attached IBC/Inventory suffice; recent notices comply with regulations	Court held IDHW’s latest notice inadequate under Goldberg and 42 C.F.R. §431.210 — it is too general and shifts burden to recipient to infer reasons
Class certification under Rule 23	Systemic procedures (budget methodology, notice form, hearing process) affect all participants and support a (b)(2) class	IDHW disputed commonality, typicality, adequacy, and that relief could be granted classwide	Court certified the class (numerosity, commonality, typicality, adequacy satisfied) and found Rule 23(b)(2) appropriate for programmatic injunctive relief
Scope of preliminary injunction (restoration of benefits) & Eleventh Amendment	Injunctive relief restoring budgets prospectively to pre-July 1, 2011 (or highest since) is prospective and necessary to end ongoing due-process violations	Restoring budgets would be retrospective money relief barred by Eleventh Amendment; IDHW also argued no ongoing violation because recent notices are sufficient	Court rejected Eleventh Amendment bar here, finding relief prospective; ongoing inadequate notices established; injunction extended classwide with rollbacks as specified
Right to discovery/records (budget tool, assessments, SIB-R)	Plaintiffs sought access to unredacted budget tools, inventories, assessment materials to challenge budget computations	IDHW resisted disclosure of certain materials (e.g., SIB-R) and sought to limit scope	Court ordered broad disclosure of budget tools and participant files for class members and public records requests, but reserved resolution of SIB-R discoverability and declined to grant other requests beyond clarification

Key Cases Cited

Ball v. Rodgers, 492 F.3d 1094 (9th Cir. 2007) (favoring community-based services and cost/quality rationale)
Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (U.S. 2011) (Rule 23 commonality/rigorous analysis)
Goldberg v. Kelly, 397 U.S. 254 (U.S. 1970) (due process requires adequate individualized pre-termination notice)
Edelman v. Jordan, 415 U.S. 651 (U.S. 1974) (Eleventh Amendment: distinction between prospective and retrospective relief)
Milliken v. Bradley, 433 U.S. 267 (U.S. 1977) (prospective relief with ancillary fiscal impact may be allowed)
Papasan v. Allain, 478 U.S. 265 (U.S. 1986) (focus relief on purpose — end present violation vs. compensate past injury)
Winter v. Natural Res. Def. Council, 555 U.S. 7 (U.S. 2008) (preliminary injunction standard)
Carey v. Piphus, 435 U.S. 247 (U.S. 1978) (denial of due process is an injury even absent loss of benefits)
Walters v. Reno, 145 F.3d 1032 (9th Cir. 1998) (class members need not all be aggrieved for (b)(2) relief)
Jamie S. v. Milwaukee Pub. Schs., 668 F.3d 481 (7th Cir. 2012) (denial of class where individualized inquiries predominated)
LeBeau v. Spirito, 703 F.2d 639 (1st Cir. 1983) (boilerplate notice upheld for broad legislative change context)
Ortiz v. Eichler, 794 F.2d 889 (3d Cir. 1986) (requiring detailed individualized pre-termination notices)
Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012) (commonality analysis and class action standards)
Doe v. Lawrence Livermore Nat’l Lab., 131 F.3d 836 (9th Cir. 1997) (prospective reinstatement to prevent ongoing violations)
Buckhanon v. Percy, 708 F.2d 1209 (7th Cir. 1983) (prospective relief restoring welfare benefits allowed)
Coalition for Basic Human Needs v. King, 654 F.2d 838 (1st Cir. 1981) (similar principle for Medicaid-related relief)
Kimble v. Solomon, 599 F.2d 599 (4th Cir. 1979) (Medicaid benefits restoration where notice deficient)