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Rinehart v. Director, Central Eligibility Unit

United States District Court, S.D. Indiana, Indianapolis Division

March 16, 2018

STEPHEN RINEHART and RACHEL RINEHART, on their own behalves, and N.P., by his next friend and guardian, Stephen Rinehart, Plaintiffs,
DIRECTOR, CENTRAL ELIGIBILITY UNIT, in his or her official capacity, TERRY STIGDON, [1] Director, INDIANA DEPARTMENT OF CHILD SERVICES, in her official capacity, TAMARA, WILSON, Staff Attorney, in her individual and official capacities, and DIRECTOR, ADMINISTRATIVE SERVICES DIVISION, in his or her official capacity, Defendants.



         This matter is before the Court on the Motion to Dismiss Plaintiffs' Second Amended Complaint Pursuant to Rules 12(b)(1) and 12(b)(6) (Filing No. 29) and the Motion to Strike Portions of Plaintiffs' Second Amended Complaint Pursuant to Rule 12(f) (Filing No. 32) filed by Defendants the Director of the Central Eligibility Unit, Terry Stigdon as Director of the Indiana Department of Child Services, Tamara Wilson (“Wilson”) as Staff Attorney, and the Director of the Administrative Services Division (collectively, “Defendants”). In this lawsuit, the Plaintiffs seek relief against the Defendants, who are all state officials who have or had a role in Indiana's implementation of the federal Adoption Assistance Program which, generally, provides monetary benefits designed to assist adopting parents in meeting the financial needs of their adopted child.

         Before the court are two motions-Defendants' Motion to Dismiss and their Motion to Strike. They seek to dismiss the Plaintiffs' Second Amended Complaint (Filing No. 24) on the grounds that: (1) the official capacity claims are deficient because (i) the Plaintiffs may not seek money damages against the state and (ii) the Plaintiffs do not have standing to seek injunctive or declaratory relief and, (2) the personal capacity claim against Defendant Tamara Wilson is deficient because she is entitled to qualified immunity.

         The Defendants' Motion to Strike asks the Court to strike certain allegations from the Second Amended Complaint on the ground they make unsupportable and scandalous claims.

         As addressed below, the Motion to Dismiss is granted and the Motion to Strike is denied.

         I. DISCUSSION

         A. Motion to Strike

         Motions to strike allegations from a pleading should be denied unless the allegations have no possible connection to the controversy and may cause significant prejudice to a party. See Charles Wright & Arthur Miller, Federal Practice and Procedure, 1380 (2004). The paragraphs of the Second Amended Complaint at issue (56, 81, 85, 86, and 87) allege that government officials, or Indiana's Department of Child Services (“DCS”) in general, routinely interfere or attempt to interfere with adoptive parents' rights to obtain fair assistance payments under the federal Adoption Assistance Act. The Court cannot find that these allegations cause significant prejudice to a party. The Defendants are accused of wrongful conduct in their roles as government officials and a citizen's statements about what he or she perceives as government malfeasance should not generally be characterized as scandalous. The Court is confident that any reasonable reader of the Second Amended Complaint would recognize that the Plaintiffs' allegations are just that-the request for redress against government officials. The Court therefore denies the Defendants' Motion to Strike (Filing No. 32).

         B. Motion to Dismiss

         The Court now turns to the Defendants' Motion to Dismiss. The Court first outlines the allegations of the Plaintiffs' Second Amended Complaint, sets forth the guiding standard of review, and then evaluates the Second Amended Complaint's allegations in light of the causes of action to determine whether, as against any of the Defendants, the Second Amended Complaint states a claim upon which relief may be granted.

         1.The Second Amended Complaint

         The Plaintiffs are N.P., a child, and the parents who adopted him, Stephen Rinehart and Rachel Rinehart (“the Rineharts”). N.P. is a special needs child. The second amended complaint pertains to the Rineharts' application for Title VI-E adoption assistance payments and other benefits from DCS, their navigation of the administrative process to obtain benefits, and the negotiation of an agreed payment amount for N.P.

         Some background about the Title IV-E program is helpful to understanding the context of the Rineharts' claims. The Title IV-E program is Congress's Adoption Assistance and Child Welfare Act of 1980, 42 U.S.C. 670 et seq., and is codified at Title IV-E of the Social Security Act. This background is derived from governing statutes and regulations, and the Court takes judicial notice of the general administrative process in the Title IV-E program. The State of Indiana receives federal funding in implementing a plan that has been approved by the federal government to provide child adoption assistance benefits. The federal government pays a percentage of the State's expenses. The State administers its plan through DCS.

         Adoptive parents of special needs children who meet statutory eligibility requirements under 42 U.S.C. § 673 can apply for adoption assistance payments to be made through DCS. Adoption assistance payments can include a one-time payment for non-recurring costs and periodic “per diem” payments until the child is 18 years old that are based on the child's age and the severity of his or her needs. Prospective adoptive parents who wish to seek adoption assistance benefits are required to enter into an adoption assistance agreement with DCS before the adoption can be finalized. 45 C.F.R. § 1356.40(b)(1). If the parents and DCS do not agree, then DCS issues a Final Offer Letter to the parents, stating the amount of benefits DCS is willing to provide.[2]Parents who disagree with the offer can seek administrative review; they can even enter into an adoption assistance agreement with DCS while the amount of benefits is under administrative review. Within 60 days after DCS's Hearings and Appeals section receives the request for review, an administrative review decision is made and communicated to the adoptive parents. If the parents are dissatisfied with the decision, they can request an administrative hearing. When a timely request for hearing is made, a hearing is held before an administrative law judge. If the administrative law judge decides that the parents have met a burden of proof that the amount of assistance benefits should be changed, then the administrative law judge remands the matter to DSC for further proceedings. DCS and the parents then negotiate again to see if an agreement can be reached.

         If an agreement is not reached, then DCS issues a post-remand Offer Letter to the parents. If the parents disagree with that offer, they again may seek administrative review, and the decision entered on this second level of administrative review constitutes final agency action that is subject to judicial review under the Indiana Administrative Order and Procedures Act.

         2.The Plaintiffs' Lawsuit

         The Plaintiffs' Second Amended Complaint alleges the following. In October 2015, the Rineharts arranged with private adoption agencies to adopt N.P., who has Down Syndrome and other disabilities. They applied to the Adoption Assistance Program and in February 2016 were deemed eligible for adoption assistance payments from DCS, as well as Medicaid eligibility for N.P., and a one-time, non-recurring adoption expense payment of $1, 500.00. N.P. also had been awarded Social Security disability benefits. After the Rineharts were deemed eligible for assistance payments, they entered the negotiation phase of the administrative process. DCS assigned one of its staff attorneys, Defendant Wilson, to negotiate the amount of N.P.'s Title IV-E adoption assistance per diem.

         The Rineharts contend that the negotiations were not conducted in good faith by Wilson. First, they allege that despite their full cooperation with DCS and provision of information in response to DCS's many requests, DCS “fell silent for many months.” Second, they allege that in response to their request for $69.30 as an appropriate per diem based on N.P.'s needs and the Rineharts' income and financial resources, DCS offered $0.00 in adoption assistance payments and was willing to pay only a one-time expense payment of $1, 500.00 and provide Medicaid eligibility. DCS stated that its offer was based on the fact N.P. was receiving Social Security disability benefits and “the IV-E AA [adoption assistance payments] and SSI [Social Security disability] will offset each other as they come out to the same fund.” Filing No. 24 at 13.

         In response, the Rineharts' lawyer rejected DCS's $0.00 adoption assistance payments offer, lowered the Rineharts' demand to $63.84 per day (from $69.30), and expressed his view that the payments could not legally be offset by SSI payments. DCS then issued a Final Offer Letter that included the three items it previously offered: $0.00 in assistance payments, a one-time benefit of $1, 500.00, and Medicaid eligibility. The letter explained that in DCS's view, N.P.'s disability benefits ...

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