Roberts v. Total Health Care, Inc.

FISCHER, Judge. Georgette Roberts and Saul E. Kerpelman, Esq., Roberts’s attorney, appeal from an order by the Circuit Court for ⁶³⁹ Baltimore City (Ward, J.) that granted Total Health Care, Inc.’s (Total Health Care) motion for summary judgment. The circuit court’s order required Roberts and Kerpelman to reimburse Total Health Care $59,880 for medical care received by Roberts’s children and paid for by Total Health Care. In appealing the circuit court’s summary judgment order, Roberts and Kerpelman present for our consideration the following issues, which we have reworded and reorganized: I. Did the circuit court err in holding that Md.Code (1982, 1994 Repl.Vol., 1995 Supp.), § 15-120 of the Health-General Article did not violate the due process of law?

II

Did the circuit court err by finding that Total Health Care had a right to reimbursement from Roberts? 1 FACTS Total Health Care is a health maintenance organization that provides medical services for its members. When the events of this case occurred, Total Health Care was under contract with the Department of Health and Mental Hygiene of the State of Maryland (the Department) to provide medical care for indigent individuals who qualified for medical assistance under the Maryland Medical Assistance Program (the Program) and who were enrolled with Total Health Care. 2 In return for providing these services, the Department paid Total Health Care a negotiated per capita payment. In addition to the per capita payment, the Department assigned Total Health Care its right to subrogate third party tort claims. The contract provides, in part: ⁶⁴⁰ a.

If an enroUee under the terms of this contract has a cause of action against a person, the HMO-MA [Total Health Care] shall be subrogated to that cause of action to the extent of any payments made, or costs incurred, by the HMO-MA on behalf of the enrollee that result from the occurrence that gave rise to' the cause of action. Costs incurred by the HMO-MA may be considered as including the HMO-MA’s reasonable and customary charges for services furnished by the HMO-MA’s own staff or that of subcontractors. b. The Department intended hereby to assign to the HMO-MA its right of subrogation under section 15-120, Health-General Article, Annotated Code, but only to the extent to which these rights are assignable under the laws of Maryland. The Department accepts no liability for the failure or inability of the HMO-MA to recover sums potentially available to it under the terms of this section.

Roberts, along with her two children, were members of Total Health Care when Roberts’s children suffered lead paint poisoning in 1987. The children were treated at Johns Hopkins Children’s Hospital with special medical treatment that Total Health Care could not provide in-house. Total Health Care paid for the services at Johns Hopkins, which totaled $59,880. In 1989 Roberts filed a suit against her landlord in 1988 in the circuit court for injuries suffered by her two children.

Total Health Care notified Roberts and Kerpelman on June 5, 1991, and again on July 23, 1991, that it was asserting its subrogation right. On October 28, 1993, Roberts’s civil suit settled for $330,000, which amount was to be held in a trust for the children. Kerpelman placed this money in his escrow account. 3 Following the settlement, Total Health Care again requested payment for the money expended on behalf of Roberts’s ⁶⁴¹ children. Roberts and Kerpelman refused to honor the request for payment.

Following the refusal to pay, Total Health Care filed a lawsuit in the circuit court to collect the $59,880. Total Health Care filed a motion for summary judgment against Roberts and Kerpelman based on its asserted statutory and common law subrogation rights. 4 Both sides filed memoranda before the circuit court conducted a hearing. After hearing from the parties, the circuit court granted Total Health Care’s motion for summary judgment and ordered Roberts and Kerpelman to pay Total Health Care $59,800. Following the circuit court’s grant of summary judgment, Roberts and Kerpelman filed this timely appeal.

DISCUSSION This case centers on Md.Code (1982, 1994 RepLVoL, 1995 Supp.), § 15-120 of the Health-General Article (HG), which details the Department’s right to establish a subrogation claim against persons enrolled in the Program (Program recipient). 5 Section 15-120 reads, in part, as follows: (a) In general.—If a Program recipient has a cause of action against a person, the Department shall be subrogated to that cause of action to the extent of any payments made by the Department on behalf of the Program recipient that result from the occurrence that gave rise to the cause of action. (b) Holding money for Department.—(1) Any Program recipient or attorney, guardian, or personal representative of a Program recipient who receives money in settlement of or under a judgment or award in a cause of action in which ⁶⁴² the Department has a subrogation claim shall, after receiving written notice of the subrogation claim, hold that money, for the benefit of the Department, to the extent required for the subrogation claim, after deducting applicable attorney’s fees and litigation costs. (2) A person who, after written notice of a subrogation claim and possible liability under this paragraph, disposes of the money, without the written approval of the Department, is liable to the Department for any amount that, because of the disposition, is not recoverable by the Department____ I. Roberts and Kerpelman argue that section 15-120 is unconstitutional because, in their opinion, it allows a subrogee to attach monetary awards of Program recipients without first complying with procedural due process safeguards. 6 Specifically, Roberts and Kerpelman maintain that Total Health Care’s right to subrogation established a lien against the money awarded to Roberts’s children without first providing notice and an opportunity to be heard. Total Health Care counters that section 15-120 does not establish a lien and thereby does not constitute a taking.

In the alternative, Total Health Care argues that even if section 15-120 amounts to a taking, Roberts and Kerpelman received sufficient notice and hearing to comply with procedural due process in accordance with constitutional requirements. ⁶⁴³ As with any constitutional challenge, the statute in question is presumed to be constitutional until proven otherwise by the challenger. Cider Barrel Mobile Home Court v. Eader, 287 Md. 571, 579 , 414 A.2d 1246 (1980). In this case, Roberts and Kerpelman have the burden of demonstrating to this Court that section 15-120 is unconstitutional on its face. Roberts and Kerpelman did not argue that the statute was unconstitutional as applied.

A. This Court and the Court of Appeals have consistently interpreted the Due Process Clause of the Fourteenth Amendment 7 and Article 24 of the Maryland Declarations of Rights 8 as complementary provisions that protect the same rights. Bureau of Mines v. George’s Creek, 272 Md. 143, 156 , 321 A.2d 748 (1974). Thus, the Supreme Court’s interpretations of the Fourteenth Amendment function as authority for the interpretation of Article 24. E.g., Pitsenberger v. Pitsenberger, 287 Md. 20, 27 , 410 A.2d 1052 , appeal dismissed, 449 U.S. 807 , 101 S.Ct. 52 , 66 L.Ed.2d 10 , rehearing denied, 449 U.S. 1028 , 101 S.Ct. 601 , 66 L.Ed.2d 491 (1980).

The due process protections contain both a substantive and a procedural component. Substantive due process protects persons from arbitrary or unreasonable actions. E.g., Planned Parenthood of Southeastern Pa. v. Casey, 505 U.S. 833, 846-847 , 112 S.Ct. 2791, 2804-2805 , 120 L.Ed.2d 674 (1992). “Procedural due process,” on the other hand, “imposes constraints on governmental decisions [that] deprive individuals of ‘liberty’ or ‘property’ interests within the meaning of ⁶⁴⁴ the Due Process Clause.” Mathews v. Eldridge, 424 U.S. 319, 332 , 96 S.Ct. 893, 901 , 47 L.Ed.2d 18 (1976). “At the core of the procedural due process right is the guarantee of an opportunity to be heard and its instrumental corollary, a promise of prior notice.” Lawrence Tribe, American Constitutional Law § 10-15, at 732 (2d ed.1988). Roberts and Kerpelman assert only a procedural due process argument.

In order to invoke procedural due process protections, the party asserting unconstitutionality must show that state action has been employed to deprive that party of a substantial interest in property. Fuentes v. Shevin, 407 U.S. 67, 84-85 , 92 S.Ct. 1983, 1996-1997 , 32 L.Ed.2d 556 (1972); Golden Sands Club v. Waller, 313 Md. 484, 488, n. 4 , 545 A.2d 1332 (1988); Pitsenberger, 287 Md. at 27 , 410 A.2d 1052 . Only if a constitutional taking involving state action is established can a court then apply the Mathews balancing test to determine what procedural due process is constitutionally required. Mathews, 424 U.S. at 332-335 , 96 S.Ct. at 901-903 ; Pitsenberger, 287 Md. at 28 , 410 A.2d 1052 .

In this case, we must focus our analysis on section 15-120 to determine whether it constitutes a taking without the benefit of due process. 9 B. Not every interference with a person’s “life, liberty, or property” constitutes a taking that would otherwise require compliance with the procedural due process safeguards. To qualify as an unconstitutional taking under the Constitution, the state’s actions must create a severe deprivation of property. Fuentes, 407 U.S. at 84 , 92 S.Ct. at 1996 . This deprivation of property must significantly interfere with the complainant’s property interest.

Id. at 84-85 , 92 S.Ct. at 1996-1997 ; ⁶⁴⁵ Barry Properties v. Fick Bros., 277 Md. 15, 23-27 , 353 A.2d 222 (1976). The creation and attachment of a lien, along with other possessory prejudgment remedies such as replevin and garnishment, constitutes a constitutional taking and is thereby “subject to the strictures of due process.” Peralta v. Heights Medical Center, Inc., 485 U.S. 80, 85 , 108 S.Ct. 896, 899 , 99 L.Ed.2d 75 (1988); e.g., Connecticut v. Doehr, 501 U.S. 1 , 111 S.Ct. 2105 , 115 L.Ed.2d 1 (1991) (striking down a Connecticut prejudgment attachment statute because it authorized attachment without notice and hearing); North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601 , 95 S.Ct. 719 , 42 L.Ed.2d 751 (1975) and Sniadach v. Family Finance Corp., 395 U.S. 337 , 89 S.Ct. 1820 , 23 L.Ed.2d 349 (1969) (finding that prejudgment garnishment statutes require compliance with due process); Fuentes, 407 U.S. at 80-86 , 92 S.Ct. at 1994-1997 (finding that a replevin action required compliance with due process); Golden Sands, 313 Md. at 488, n. 4 , 545 A.2d 1332 (agreeing with the circuit court’s determination that the Maryland Contract Lien Act, found in Md.Code (1996 Repl.Vol.), § 14-201 et seq. of the Real Property Article, involves a constitutional taking); Barry Properties, 277 Md. at 24 , 353 A.2d 222 (concluding that the then existing mechanics’ lien statute deprived an owner of a significant property interest and was therefore unconstitutional because it lacked adequate notice and hearing provisions). A lien is a “claim, encumbrance, or charge on property for payment of some debt, obligation or duty.” Black’s Law Dictionary 922 (6th ed.1990). The imposition of a lien or other possessory prejudgment remedy constitutes a constitutional taking because it deprives the person subject to the lien of a significant property interest.

These possessory prejudgment remedies are not causes of action, they are remedies for collecting money from a debtor. Section 15-120 is not a remedial statute that allows subrogees to encumber property to secure a debt previous to a judicial order. Instead, section 15-120 gives the Department ⁶⁴⁶ the legal cause of action to file a subrogation claim against a Program recipient who has received compensation for a tort claim. Section 15-120(b) and its request that parties hold subrogated money judgments or settlements or face potential liability for the money not recovered is not a taking that demands prior notice and hearing.

The section 15-120(b) obligation to hold and pay money differs from the aforementioned possessory prejudgment remedies in that section 15-120 neither vests in a subrogee a possessory interest in a Program recipient’s monetary award nor interferes with the Program recipient’s use and enjoyment of that monetary award. Instead of establishing a possessory interest, section 15-12003) merely serves to put a Program recipient on notice that it owes the Department a certain sum of money and that the Department has a right to file a claim to collect this money. Making parties liable for expenses paid by a subrogee is not the equivalent of having a party hold an enforceable lien on a piece of property or money judgment. Even after receiving notice of the subrogation claim, a Program recipient still has full possessory interest in that award and can do with the money whatever he or she wants..

In this case, Roberts, for her children, had full title and possessory interest in the money held by Kerpelman. She was free to place the money in trust for her children. Roberts and Kerpelman may question Total Health Care’s statutory right to collect fees under the subrogation language of section 15-120, but neither the United States Constitution nor Article 24 of the Maryland Declaration