633 F. App'x 607
5th Cir.2016Background
- Med RX/Systems (Plaintiff) was a Texas WIC vendor under annual vendor agreements that incorporated state WIC policies (including WV:01.0) and agreed to submit invoices and accept DSHS determinations regarding unsubstantiated WIC sales.
- DSHS audited Plaintiff’s records for Aug 1, 2011–July 31, 2012, initially found ~$42,000 in unsubstantiated sales, then after additional review adjusted the amount to roughly $125,000 and notified Plaintiff of disqualification and recovery; it limited post-determination administrative review consistent with federal regulation 7 C.F.R. § 246.18(a)(1)(iii)(J).
- Plaintiff requested rescission and an administrative review hearing; a hearing occurred and the hearing officer found approximately $126,863 in unsubstantiated sales, excluded evidence challenging the state’s vendor-claim determination, and upheld the sanction.
- Plaintiff sued in state court asserting procedural due process and Contract Clause claims under 42 U.S.C. § 1983 (seeking damages and injunctive/declaratory relief); defendants removed to federal court and moved for judgment on the pleadings; the district court granted the motion.
- On appeal the Fifth Circuit reviewed de novo and affirmed, holding (1) § 1983 damages claims against the State and state officials in official capacity were barred, (2) Plaintiff waived a statutory-interpretation argument under 42 U.S.C. § 1786(n), (3) Plaintiff’s due process claim failed because the vendor agreements and federal regulation foreclosed an administrative appeal and the contractual opportunity to submit invoices satisfied procedural protections, and (4) the Contract Clause claim failed because the contract expressly included the no-review provision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1983 allows money damages against DSHS and Commissioner in official capacity | Med RX sought damages under §1983 for constitutional violations | State and official-capacity claims for retrospective monetary relief are barred because a State and its arms are not "persons" under §1983 | Damages barred; official-capacity injunctive relief still theoretically available but Plaintiff did not state a viable prospective claim |
| Whether 42 U.S.C. § 1786(n) requires administrative review for unsubstantiated-sale determinations | Med RX argued §1786(n) shows Congress intended review be available | DSHS relied on federal regulation and contract terms denying review; also argued Med RX waived this statutory argument below | Issue waived on appeal for failure to raise in district court; court did not reach statutory interpretation |
| Whether denial of administrative review violated procedural due process | Med RX contended it had a property interest in WIC payments/participation and was entitled to administrative appeal and hearing | DSHS argued the vendor contracts and federal regulation eliminated appellate review for vendor-claim disputes and provided the limited opportunity to submit invoices, which occurred here | No due process violation: contract defined the property interest and expressly limited review; opportunity to submit invoices satisfied procedural protections |
| Whether the no-review policy violated the Contract Clause by impairing contractual obligations | Med RX argued the policy impaired its vendor agreements | DSHS argued there was no impairment because the agreements expressly incorporated the no-review policy | No impairment: the vendor agreements included the challenged no-review provision; Contract Clause claim fails |
Key Cases Cited
- Will v. Michigan Dept. of State Police, 491 U.S. 58 (States are not "persons" under § 1983 for money damages)
- Lapides v. Board of Regents, 535 U.S. 613 (clarifying state-removal/immunity principles)
- Howlett v. Rose, 496 U.S. 356 (arms-of-the-state and official-capacity suit principles)
- LaChance v. Erickson, 522 U.S. 262 (procedural due process notice and opportunity-to-be-heard standards)
- Bd. of Regents v. Roth, 408 U.S. 564 (property interests are defined by existing rules or contract terms)
- Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400 (Contract Clause substantial-impairment framework)
- Great Plains Trust Co. v. Morgan Stanley Dean Witter, 313 F.3d 305 (standard of review for Rule 12(c) motions)