State v. Farrell
2013 ND 55
N.D.2013Background
- HIT, Inc. provides individualized supported living arrangements for individuals with developmental disabilities and receives DHS reimbursements for direct service costs.
- Reimbursements are issued before services based on HIT’s projections to minimize year-start cost gaps, with an end-of-year audit to ensure funds aligned with actual costs.
- Regulations require payback of excess direct service reimbursements when the margin exceeds the department policy threshold, with the entire overpayment refunded.
- Provider handbook sets the margin at 5% of actual costs and explains why allowing a higher retention (up to 4.99%) would distort costs.
- For FY 2008, HIT received $1,841,001.80 in reimbursements and had allowable costs of $1,750,302.00, creating a $90,699.80 excess; the Department deemed this exceedance over 5% and sought repayment.
- The ALJ recommended the Department’s interpretation; the district court affirmed the administrative order demanding HIT repay the excess reimbursements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| How is the 5% margin calculated under the regulation? | HIT argues margin should be 5% of reimbursements. | Department asserts 5% margin is 5% of actual costs. | Margin calculated as 5% of actual costs; Department’s method correct. |
| May an ALJ defer to agency interpretation of its regulations? | ALJ erred by deferring to agency interpretation if the language is clear. | Deference appropriate in technical matters and when interpretation competes with complexity. | Deference upheld; ALJ’s deference harmless error. |
Key Cases Cited
- Industrial Contractors, Inc. v. Workforce Safety & Ins., 2009 ND 157 (ND) (court reviews agency interpretations with deference to expert agency judgment in technical matters)
- Stein v. Workforce Safety & Ins., 2006 ND 34 (ND) (principles of statutory construction guide agency interpretations)
- Martin v. Stutsman Co. Social Services, 2005 ND 117 (ND) (clear statutory language requires adherence to its letter)
- North Dakota State Bd. of Medical Examiners-Investigative Panel B v. Hsu, 2007 ND 9 (ND) (agency expertise warrants deference in technical matters)
- Northern Excavating Co., Inc. v. Sisters of Mary of Presentation Long Term Care, 2012 ND 78 (ND) (ambiguity in statute allows rational interpretations)