United States v. Gustavo Villa-Maldonado

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 10-3025
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Greta Arlene Hudson, *
*
Plaintiff, *
*
H. Donald Hudson; David A. Hudson, * Appeal from the United States
Personal Representatives of the Estate * District Court for the
of Greta Arlene Hudson, * Western District of Missouri.
*
Appellants, *
*
v. *
*
Alyson F. Campbell; Ronald J. Levy, *
*
Appellees. *
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Submitted: September 19, 2011
Filed: December 15, 2011
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Before WOLLMAN, BYE, and SHEPHERD, Circuit Judges.
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WOLLMAN, Circuit Judge.
The district court 1 dismissed Greta Arlene Hudson’s § 1983 claim against the
Directors of the Missouri Family Support Division and Department of Social Services
1The Honorable Nanette K. Laughrey, United States District Judge for the
Western District of Missouri.

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(the Division) based on the abstention doctrine set forth in Younger v. Harris, 401
U.S. 37 (1971). Hudson 2 appeals, contending that the district court should not have
abstained from hearing her claim. Because under Alleghany Corp. v. McCartney, 896
F.2d 1138 (8th Cir. 1990), abstention is appropriate in administrative proceedings like
Hudson’s, we hold that the district court did not err in abstaining.
I.
The Division denied Hudson’s application for Medicaid benefits on the grounds
that she had transferred property in 2005-2006 valued at $340,000. Hudson requested
and was granted a hearing to contest the denial of both her application for Medicaid
health insurance and her application for Medical Assistance vendor benefits. The
hearing initially was scheduled for November 4, 2009, but was continued to December
23, 2009, to allow the Division’s eligibility specialist to obtain counsel. During the
continuance, Hudson received a notice of case action indicating that the Division was
relying upon a different reason for denying Hudson’s application for Medicaid
benefits. Because the hearing officer believed that he lacked subject matter
jurisdiction to hear an appeal from the withdrawn reason for denial, Hudson was
informed that she needed to file a second hearing request. Her original request for
hearing was withdrawn at the Division’s request.3 Hudson did not file a second
hearing request but instead filed this § 1983 action in the Western District of Missouri
seeking declaratory and injunctive relief. It is from the district court’s dismissal of
this action that Hudson now appeals.
II.
2 Greta Arlene Hudson passed away during this appeal, and her estate is now
party to this action. We will refer to Hudson’s estate as Hudson throughout this
opinion.
3Whether Missouri law allows the State to withdraw from a hearing on its own
motion is not before us on this appeal.
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We review a district court’s decision to abstain for abuse of discretion, with
underlying legal determinations receiving plenary review. Aaron v. Target Corp., 357
F.3d 768, 774 (8th Cir. 2004) (citing Cedar Rapids Cellular Tel., L.P. v. Miller, 280
F.3d 874, 878 (8th Cir. 2002)).
The Younger abstention doctrine derives from notions of federalism and
comity. Younger itself held that, absent extraordinary circumstances, federal courts
should not enjoin pending state criminal prosecutions. See Younger, 401 U.S. at 54.
The Supreme Court later extended Younger abstention to state noncriminal judicial
proceedings, including administrative proceedings, if the proceeding: (1) involves an
ongoing state judicial proceeding, (2) implicates an important state interest, and (3)
provides an adequate opportunity to raise constitutional challenges in the state
proceeding. Middlesex Cnty. Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423,
432 (1982).
Putting aside for the moment the question whether Hudson’s underlying state
proceeding is ongoing, we turn to Hudson’s contention that Younger abstention is
inapplicable when the administrative proceedings are remedial rather than coercive.
Other circuits recognize a distinction between coercive and remedial actions and
require exhaustion of state appellate remedies only in those that are coercive in nature.
See, e.g., Brown v. Day, 555 F.3d 882, 889 (10th Cir. 2009); Moore v. City of
Asheville, 396 F.3d 385, 388 (4th Cir. 2005); Majors v. Engelbrecht, 149 F.3d 709,
712 (7th Cir. 1998); O’Neill v. City of Philadelphia, 32 F.3d 785, 791 (3d Cir. 1994);
Kercado-Melendez v. Aponte-Roque, 829 F.2d 255, 261 (1st Cir. 1987). The
coercive-remedial distinction stems from Ohio Civil Rights Commission v. Dayton
Christian Schools, Inc., 477 U.S. 619 (1986). In that case, the Court reconciled its
decision that the district court should have abstained from hearing Dayton’s § 1983
claim with its decision in Patsy v. Board of Regents of the State of Florida, 457 U.S.
496 (1982), which held that exhaustion of state administrative remedies is not a
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prerequisite to a § 1983 action. In a footnote, the Court stated that “[u]nlike Patsy, the
administrative proceedings here are coercive rather than remedial, began before any
substantial advancement in the federal action took place, and involve an important
state interest.” Dayton Christian Sch., 477 U.S. at 627 n.2.
Determining whether a proceeding is coercive or remedial does not always lend
itself to a clear-cut answer. For example, the divided Tenth Circuit panel in Brown
v. Day disagreed whether the underlying Medicaid administrative proceeding involved
in that case was coercive or remedial. The majority ruled that because the action had
been initiated by the plaintiff to seek relief from the state’s allegedly unlawful conduct
in terminating her Medicaid benefits, the proceeding was remedial rather than
coercive. Brown, 555 F.3d at 889. Dissenting, Judge Tymkovich characterized the
underlying Medicaid administrative proceedings as coercive, because “the
proceedings represented [the state’s] efforts at enforcing state Medicaid law against
Brown.” Id. at 897 (Tymkovich, J., dissenting).
Although we have recognized the existence of the coercive-remedial distinction
in other of our abstention cases, see Planned Parenthood of Greater Iowa, Inc. v.
Atchison, 126 F.3d 1042, 1047 (8th Cir. 1997); Peery v. Brakke, 826 F.2d 740, 745-
46 (8th Cir. 1987); Ronwin v. Dunham, 818 F.2d 675, 678 n.7 (1987), we have not
considered the distinction to be outcome determinative. We noted in McCartney that
the Supreme Court has held that Younger requires a district court to abstain from
intervening in a state proceeding between two private parties. See Pennzoil Co. v.
Texaco, 481 U.S. 1, 17 (1987). We observed that Pennzoil “broadens the
applicability of Younger abstention beyond state enforcement proceedings[,]”
McCartney, 896 F.2d at 1145, and we afforded Younger deference to the state
administrative proceedings without classifying the proceeding as coercive or remedial.
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Hudson’s case is procedurally identical to McCartney, in which the state of
Nebraska denied Alleghany’s application for regulatory approval to buy stock in a
Nebraska insurance company. 896 F.2d at 1140. Alleghany then brought a § 1983
action in federal district court seeking declaratory and injunctive relief. Id. Like the
federal plaintiff in McCartney, Hudson is not in violation of any state statute. Hudson
and Alleghany both initiated state administrative proceedings. When their requests
were denied at the administrative level, both plaintiffs attempted to bring § 1983
actions in federal district court rather than pursuing state appellate remedies.
In McCartney, we required exhaustion of the state appellate remedies even in
the absence of a pending state enforcement proceeding against the plaintiff, stating
that “a party cannot avoid Younger by choosing not to pursue available state appellate
remedies” McCartney, 896 F.2d at 1144 (citing Huffman v. Pursue, Ltd., 420 U.S.
592, 608; Pennzoil, 481 U.S. at 16-17; Coley v. Clinton, 635 F.2d 1364, 1371 (8th
Cir. 1980)), and finding to be without merit the argument that “Younger abstention
applies only where there is a pending state enforcement proceeding.” Id. at 1145.
Missouri law provides for administrative, circuit court, and appellate review of
Medicaid eligibility decisions, see Mo. Rev. Stat. §§ 208.080, 208.100, and 208.110,
remedies that Hudson has not yet exhausted, and thus Hudson’s underlying state
proceeding is ongoing.
We turn to the question whether Missouri has an important state interest in
administering its Medicaid program. See Middlesex, 457 U.S. at 432. Hudson argues
that Missouri has no important state interest in administering its Medicaid program
because Medicaid involves a pervasive federal regulatory scheme. True enough, but
while Medicaid is regulated at the federal level, “[t]he Act ‘confers broad discretion
on the States to adopt standards for determining the extent of medical assistance,
requiring only that such standards be ‘reasonable’ and ‘consistent with the objectives’
of the Act.’” Smith v. Rasmussen, 249 F.3d 755, 759 (8th Cir. 2001) (quoting Beal
v. Doe, 432 U.S. 438, 444 (1977)). Moreover, Medicaid is financed in part by state
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governments. Children’s Healthcare Is a Legal Duty, Inc. v. Min De Parle, 212 F.3d
1084, 1088 (8th Cir. 2000) (citing 42 U.S.C. §§ 1396, 1396(a)). In 2010, Missouri
budgeted $7.1 billion for its Medicaid program. Missouri Office of Administration,
A New Day for Missouri: The Missouri Budget and Legislative Priorities, 18 (Jan.
27, 2009), available at http://www.oa.mo.gov/bp/bib2010. Further, it is the states
that determine Medicaid applicants’ eligibility. 42 U.S.C. § 1396a(a)(5). In light of
these fiscal and administrative obligations, Missouri Medicaid has an important
interest in administering benefits in a manner that ensures that those of its citizens
who are in need of and who are eligible for those benefits receive them. See also
Trainor v. Hernandez, 431 U.S. 434, 444 (1977) (recognizing the important state
interest in “safeguarding the fiscal integrity of [the welfare] program”).
Our final consideration is whether Hudson had an adequate opportunity at the
state level to raise her constitutional questions. See Middlesex, 457 U.S. at 432. “[I]t
is sufficient under Middlesex that constitutional claims may be raised in state-court
judicial review of the administrative proceeding.” Dayton Christian Sch., 477 U.S.
at 629 (internal citation omitted). As set forth above, Missouri law provides for
administrative, circuit court, and appellate review of Medicaid eligibility decisions,
an appellate process that would allow Hudson to raise her due process claims in the
Missouri courts.
III.
Because all three elements for Younger abstention are satisfied, we affirm the
district court’s decision to abstain from exercising jurisdiction over Hudson’s claims.
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