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Date: 07-05-2022

Case Style:

William H. Morgan, III v. Justin Brown, et al.

Case Number: 22-CV-316

Judge: Stephen P. Friot

Court: United States District Court for the Western District of Oklahoma (Oklahoma County)

Plaintiff's Attorney:

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Defendant's Attorney: John R. Pettifer for Justin Brown

David William Bryan and Joshua J. Holloway

Description: Oklahoma City, Oklahoma civil rights lawyers represented Plaitniff, who sued Defendants seeking a declaratory judgment under 42 U.S.C. 1983, that he is eligible for Medicaid benefits.

William H. Morgan III (Morgan) is an 88-year-old resident of the Community Health Center located in Wakita, Oklahoma. He was admitted to the nursing facility in February of 2015.[2] Several months prior to his admission, Morgan executed a Durable Power of Attorney, naming his son, William H. Morgan IV, as his attorneyin-fact.

On January 6, 2016, Morgan transferred all his assets, except for his checking account, to Gayle Warren (Warren) in exchange for a promissory note in the amount of $401,000.00. The amount of Morgan's assets totaled $397,874.10. The transferred assets included Morgan's home valued at $225,000, mineral rights valued at $84,000, and cash in the amount of $88,874.10. Warren executed a replacement promissory note on March 9, 2016 (2016 note), which called for six annual installments of $70,337.68, commencing on March 9, 2017. Upon default, the entire unpaid principal balance was to bear interest at a specified rate per annum.

Morgan applied for receipt of Medicaid benefits for nursing home care. On June 13, 2016, the Oklahoma Department of Human Services (DHS)[3] approved Morgan's application for Medicaid benefits, with an effective date of March 9, 2016.[4]

Prior to and ending March 9, 2017, Warren paid Morgan the first payment due under 2016 note.[5] On March 15, 2017, Morgan loaned $55,500 to Warren in exchange for a promissory note. Warren executed a replacement note (2017 note) which called for six annual installments of $9,924.91, commencing on March 15, 2018. Upon default, the entire unpaid principal balance was to bear interest at a specified rate per annum.

On April 14, 2017, DHS issued a notice of closure, advising Morgan that his Medicaid benefits would end on May 1, 2017, because it determined the 2017 note represented a $55,500 transfer since it did not meet all the requirements to make it exempt. In addition, it determined the execution of the 2017 note constituted a deferral of the amount due by Warren under the terms of the 2016 note or in the alternative, the payment/note transaction could be viewed as no payment of all. DHS concluded that Warren had placed the 2016 note in default and the 2016 note constituted a countable resource for determining Medicaid eligibility. After receipt of new information from Morgan, DHS issued a revised notice of closure, advising that there was no change to the May 1, 2017 closure date. DHS concluded the principal balance of the 2016 note, totaling $391,897.10, was a countable resource to Morgan for determining Medicaid eligibility.

Morgan challenged the revised notice of closure by filing a request for a fair hearing. An administrative law judge found DHS acted correctly and properly closed Morgan's case, concluding the execution of the 2017 note constituted a deferral of the 2016 note and placing the 2016 note in default, thus making Morgan ineligible for Medicaid benefits. The record indicates that finding was affirmed by a designee of DHS and then by the District Court of Grant County, Oklahoma in 2018.

On January 11, 2021, Morgan reapplied for Medicaid benefits. DHS denied Morgan's application on April 27, 2021, claiming he had transferred $266,000 in assets without receiving fair market value for them. DHS determined that the $266,000 was the amount owed by Warren on both promissory notes in 2020 and 2021, which had not been paid by her, and those non-payments constituted a transfer of resources without commensurate return. DHS also imposed a penalty from January 12, 2021 through February 1, 2025 as to eligibility for Medicaid benefits. Morgan appealed. On November 24, 2021, an administrative law judge granted summary judgment in favor of DHS, finding that DHS correctly determined Morgan was ineligible for Medicaid benefits based on the transfer of available resources for less than fair market value within 60 months prior to his January 11, 2021 application, due to the failure to enforce or collect payments due on the promissory notes and the prior findings of improper deferral and non-bona fide status of the promissory notes.

In a letter dated April 5, 2022, Community Health Center advised Morgan's attorney-in-fact that Morgan would be discharged from the nursing facility on May 6, 2022, as Morgan's account had an outstanding balance of $66,808.05 as of April 1, 2022.

Shortly thereafter, Morgan commenced this action under 42 U.S.C. § 1983, claiming DHS's determinations regarding his January 11, 2021 application contradict federal law, specifically, the Medicaid Act, 42 U.S.C. § 1396, et seq.

* * *

“A preliminary injunction is ‘an extraordinary remedy never awarded as of right[.]'” Harmon v. City of Norman, Oklahoma, 981 F.3d 1141, 1146 (10th Cir. 2020) (quoting Benisek v. Lamone, 138 S.Ct. 1942 (2018), quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008)). “[I]t is ‘the exception rather than the rule[.]'” Id. (quoting United States ex rel. Citizen Band Potawatomi Indian Tribe v. Enter. Mgmt. Consultants, Inc., 883 F.2d 886, 888 (10th Cir. 1989)). To obtain a preliminary injunction, Morgan must show four factors weigh in his favor: “‘(1) [he] is substantially likely to succeed on the merits; (2) [he] will suffer irreparable injury if the injunction is denied; (3) [his] threatened injury outweighs the injury the opposing party will suffer under the injunction; and (4) the injunction would not be adverse to the public interest.'” Awad v. Ziriax, 670 F.3d 1111, 1125 (10th Cir. 2012) (quoting Beltronics USA, Inc. v. Midwest Inventory Distrib., LLC, 562 F.3d 1067, 1070 (10th Cir. 2009)).

Under Tenth Circuit precedent, some preliminary injunctions are disfavored and require a strong showing by the movant. These include “‘(1) preliminary injunctions that alter the status quo; (2) mandatory preliminary injunctions; and (3) preliminary injunctions that afford the movant all the relief that it could recover at the conclusion of a full trial on the merits.'” Awad, 670 F.3d at 1125 (quoting Summum v. Pleasant Grove City, 483 F.3d 1044, 1048-49 (10th Cir. 2007), rev'don other grounds, 555 U.S. 460 (2009)). In seeking such injunction, the movant must “‘make[] a strong showing both with regard to the likelihood of success on the merits and with regard to the balance of harms.'” Beltronics USA, Inc., 562 F.3d at 1071 (quoting O Centro Espirita Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 976 (10th Cir. 2004) (en banc)).

Morgan requests a preliminary injunction that directs the defendants to place him in Medicaid pay status for the pendency of this action. Because this injunction would alter the status quo[6] between the parties, the court concludes it is a disfavored injunction requiring Morgan to make the required strong showing.

To show a substantial likelihood of success on the merits, plaintiff has “‘to make a prima facie case showing a reasonable probability that [he] will ultimately be entitled to the relief sought.'” Norman, 981 F.3d at 1146 (quoting Automated Mktg. Sys., Inc. v. Martin, 467 F.2d 1181, 1183 (10th Cir. 1972)).

* * *

Morgan asserts that he sold all his assets on January 6, 2016, more than 60 months before he filed his January 11, 2021 application. And he maintains that neither he nor anyone on his behalf gave away or sold any assets to the present date. Morgan maintains that the only asset he owned after January 6, 2016 was his checking account, having a balance less than $2,000, and all transfers from that account were for his benefit. Although the defendants allege a transfer occurred when Warren failed to make payments to him under the promissory notes, Morgan contends that the failure of Warren to make those payments does not amount to giving away or selling assets. Morgan contends that neither he nor anyone on his behalf, transferred or bestowed, as those terms are defined by Black's Law Dictionary, any assets after January 6, 2016.

Outcome: Accordingly, Plaintiff's Motion for Preliminary Injunction is DENIED.

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