marcia-lee-stresemann-dba-affiliated-counseling-center-llc-v-lucinda ( 2014 )


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  •                        This opinion will be unpublished and
                           may not be cited except as provided by
                           Minn. Stat. § 480A.08, subd. 3 (2012).
    
                                STATE OF MINNESOTA
                                IN COURT OF APPEALS
                                      A13-1967
    
                                  Marcia Lee Stresemann,
                          d/b/a Affiliated Counseling Center, LLC,
                                         Respondent,
    
                                            vs.
    
                                       Lucinda Jesson,
                Commissioner of the Minnesota Department of Human Services,
                        in her individual and official capacity; et al.,
                                         Appellants.
    
                                   Filed August 4, 2014
                                         Reversed
                                      Johnson, Judge
    
                                Anoka County District Court
                                 File No. 02-CV-13-1154
    
    
    John M. Degnan, Scott M. Flaherty, Daniel M. White, Briggs and Morgan, P.A.,
    Minneapolis, Minnesota (for respondent)
    
    Lori Swanson, Attorney General, Scott H. Ikeda, Uzodima Franklin Aba-Onu, Assistant
    Attorneys General, St. Paul, Minnesota (for appellants)
    
    
          Considered and decided by Rodenberg, Presiding Judge; Johnson, Judge; and
    
    Chutich, Judge.
                             UNPUBLISHED OPINION
    
    JOHNSON, Judge
    
           The Medicaid Fraud Control Unit of the Office of the Attorney General
    
    investigated allegations of fraudulent billing practices by a clinic that provides mental-
    
    health counseling services. The investigation included the execution of a warrant for the
    
    search of business records possessed by the clinic and a subsequent review of those
    
    records. In this civil lawsuit, the owner of the clinic claims that an employee of the
    
    Office of the Attorney General and two others violated her Fourth Amendment rights and
    
    committed common-law torts. The defendants moved to dismiss the amended complaint.
    
    The district court granted the motion in part and denied it in part. In this interlocutory
    
    appeal, the defendants seek reversal of the district court’s partial denial of their motion to
    
    dismiss. We conclude that the district court erred by not granting the motion to dismiss
    
    in its entirety. Therefore, we reverse.
    
                                              FACTS
    
           The Affiliated Counseling Center, LLC (ACC), provides mental-health counseling
    
    services. Marcia Lee Stresemann, a licensed professional clinical counselor, is the sole
    
    owner of ACC.
    
           Medica Insurance Company contracts with the Minnesota Department of Human
    
    Services (DHS) to facilitate health-care services to Medicaid and Medicare recipients in
    
    Minnesota.    Medica also contracts with health-care providers, such as ACC, which
    
    provide health-care services to Medicaid and Medicare recipients, and the health-care
    
    providers submit claims for reimbursement to Medica.
    
    
                                                  2
          A person anonymously contacted Medica to report possible fraudulent billing by
    
    ACC. A Medica investigator contacted ACC, requested certain records, and conducted a
    
    preliminary investigation. In August 2011, the Medica investigator referred the matter to
    
    the Medicaid Fraud Control Unit (MFCU) of the Office of the Attorney General (OAG).
    
          Catharine Morton-Peters is employed by the OAG as the chief investigator of the
    
    MFCU. After receiving the referral from Medica, Morton-Peters conducted a review of
    
    the information and documents provided by Medica.         She reviewed reimbursement
    
    claims that ACC submitted to DHS between January 1, 2009, and October 10, 2012. She
    
    also interviewed a former ACC psychiatrist, a former ACC nurse practitioner, two former
    
    ACC employees who had responsibility for billing, and a clinical psychologist who
    
    knows Stresemann but had not been employed by ACC. Morton-Peters suspected that
    
    ACC had been significantly overpaid on Medicaid and Medicare claims and further
    
    suspected that ACC had fraudulently submitted claims in violation of state law. See
    
    Minn. Stat §§ 609.466, .52, .527 (2010).
    
          In October 2012, Morton-Peters prepared an application for a warrant to conduct a
    
    search of ACC’s premises for evidence relevant to the suspected violations of law. To
    
    establish probable cause, the 22-page warrant application described the investigative
    
    steps performed thus far and summarized the tentative conclusions of the investigation.
    
    The application requested a warrant for a search of documents possessed by ACC,
    
    including employee records, patient files, and billing and reimbursement records. The
    
    application also requested permission to remove patient files from ACC’s premises,
    
    
    
    
                                               3
    which would allow OAG investigators to review records at an off-site location, retain
    
    relevant records, and return irrelevant records.
    
           In October 2012, an Anoka County District Court judge approved the application
    
    and issued the search warrant in the form requested by Morton-Peters. The Fridley
    
    Police Department executed the search warrant and seized records from ACC’s office. In
    
    January 2013, Stresemann sent a letter to three persons demanding the return of the
    
    seized records: Morton-Peters; Ron Nail, the manager of the Surveillance and Integrity
    
    Review Section of the Office of the Inspector General of DHS; and a person employed by
    
    the United States Department of Health and Human Services.             The OAG promptly
    
    responded that it had returned, and would continue to return, records that were irrelevant
    
    to the investigation but that it would retain records that were relevant to the investigation
    
    and allow ACC to photocopy such records.
    
           In February 2013, Stresemann commenced this action on behalf of ACC. Her
    
    amended complaint names three persons as defendants: Morton-Peters; Nail; and Lucinda
    
    Jesson, the commissioner of DHS. The amended complaint alleges five causes of action:
    
    (1) a violation of Minn. Stat. § 144.298, subd. 2 (2012), which protects the privacy of
    
    patient health-care records; (2) a claim arising under 42 U.S.C. § 1983 (2012) based on
    
    unspecified violations of her Fourth Amendment rights; (3) a violation of article I, section
    
    10, of the Minnesota Constitution; (4) conversion; and (5) trespass to chattels.
    
           In May 2013, the three defendants moved to dismiss the amended complaint for
    
    failure to state a claim on which relief can be granted. See Minn. R. Civ. P. 12.02(e). In
    
    September 2013, the district court granted the motion in part by dismissing counts 1 and
    
    
                                                  4
    3 but denied the motion in part with respect to counts 2, 4, and 5. Morton-Peters, Nail,
    
    and Jesson appeal, seeking interlocutory review of the district court’s partial denial of
    
    their motion to dismiss. See McGovern v. City of Minneapolis, 
    475 N.W.2d 71
    , 72
    
    (Minn. 1991).1
    
                                         DECISION
    
                                            I. Count 2
    
           Appellants argue that the district court erred by denying their motion to dismiss
    
    with respect to count 2 of the amended complaint, which alleges a claim or claims arising
    
    under section 1983 of title 42 of the United States Code, which authorizes a private cause
    
    of action for “the deprivation of any rights, privileges, or immunities secured by the
    
    Constitution and laws.” See Connick v. Thompson, 
    131 S. Ct. 1350
    , 1359 (2011); see
    
    also L.K. v. Gregg, 
    425 N.W.2d 813
    , 817 (Minn. 1988).
    
           We begin by attempting to identify with particularity the allegations against each
    
    of the three appellants. In the portion of her amended complaint that relates specifically
    
    to count 2, Stresemann alleges only that appellants “subjected or caused to be subjected
    
    [Stresemann] to the deprivation of [her] rights and privileges secured by the Fourth
    
    Amendment.” The allegations against Morton-Peters are fairly easy to discern because
    
    
           1
            Some of appellants’ arguments for reversal are based on immunity principles, and
    some are based on principles of pleading and a plaintiff’s obligation to state a prima facie
    case. Stresemann has not raised any issue as to whether all of appellants’ arguments are
    appropriate for interlocutory review. If the question were raised, we likely would
    conclude that appellants’ immunity arguments and non-immunity arguments are
    inextricably intertwined. See Aon Corp. v. Haskins, 
    817 N.W.2d 737
    , 741-42 (Minn.
    App. 2012); see also Swint v. Chambers Cnty. Comm’n, 
    514 U.S. 35
    , 51, 
    115 S. Ct. 1203
    ,
    1212 (1995).
    
                                                 5
    the allegations in other portions of the amended complaint are focused primarily on her
    
    alleged conduct. The allegations against Nail and Jesson are not so easy to discern. At
    
    oral argument, Stresemann’s appellate counsel clarified the factual bases of the section
    
    1983 claims against each of the three appellants. Because Stresemann makes distinct
    
    allegations against each of the three appellants, we will separately analyze each
    
    appellant’s respective appellate argument.
    
    A.    Section 1983 Claim Against Morton-Peters
    
          Stresemann contends that Morton-Peters violated her constitutional rights when
    
    Morton-Peters applied for a warrant for the search of ACC records.          The amended
    
    complaint appears to allege that Morton-Peters violated the Fourth Amendment on the
    
    ground that the scope of the search warrant was impermissibly broad. In the district
    
    court, however, Stresemann presented her claim somewhat differently by arguing that
    
    Morton-Peters violated the Fourth Amendment by submitting a warrant application that
    
    contained statements that were false or made with reckless disregard for the truth. See
    
    Franks v. Delaware, 
    438 U.S. 154
    , 171-72, 
    98 S. Ct. 2674
    , 2684-85 (1978). The district
    
    court denied appellants’ motion with respect to count 2 for the following reasons:
    
                 Plaintiffs’ Amended Complaint alleges, “Defendants caused a
                 deprivation of a constitutional or statutory right by unlawfully
                 searching and seizing ACC’s privileged medical records
                 . . . .” Being required to accept that allegation as true,
                 Plaintiffs have sufficiently alleged Defendants deprived ACC
                 of its Fourth Amendment right while acting under color of
                 law.
    
                        Accepting Plaintiffs’ allegation that Defendants
                 deprived ACC of its Fourth Amendment right as true
    
    
    
                                                 6
                   precludes Defendants’ claim of qualified immunity at this
                   time.
    
             This reasoning does not reflect a proper analysis of appellants’ motion. A district
    
    court considering a motion to dismiss filed pursuant to rule 12 must assume that the
    
    historical facts alleged in the complaint are true. See Hebert v. City of Fifty Lakes, 
    744 N.W.2d 226
    , 229 (Minn. 2008). But a district court is not required to assume that the
    
    alleged historical facts state a claim for relief. “We are not bound by legal conclusions
    
    stated in a complaint when determining whether the complaint survives a motion to
    
    dismiss for failure to state a claim.” Id. at 235; see also Bahr v. Capella Univ., 
    788 N.W.2d 76
    , 80 (Minn. 2010). The purpose of a rule 12 motion is to determine whether
    
    the facts pleaded state a viable claim. See id. To determine whether a claim survives a
    
    motion to dismiss, a district court must “consider only the facts alleged in the complaint,
    
    accepting those facts as true and must construe all reasonable inferences in favor of the
    
    nonmoving party.” Bodah v. Lakeville Motor Express, Inc., 
    663 N.W.2d 550
    , 553 (Minn.
    
    2003).
    
             Morton-Peters first contends that Stresemann did not actually plead the claim that
    
    she argued to the district court and continues to argue on appeal.             In response,
    
    Stresemann points to a paragraph of the amended complaint in which she quoted a
    
    portion of Morton-Peters’s warrant application with the following preface: “Incredibly,
    
    buried at [paragraph] 10 of the Application for Search Warrant and Supporting Affidavit
    
    the following was made: . . . .”       Stresemann contends that the use of the word
    
    
    
    
                                                  7
    “incredibly” implies that Morton-Peters’s warrant application contained a knowingly
    
    false statement.
    
           Stresemann’s claim fails for four reasons. First, it is not in the form of a short,
    
    plain statement of fact. See Minn. R. Civ. P. 8.01; Hardin Cnty. Sav. Bank v. Housing &
    
    Redevelopment Auth. of City of Brainerd, 
    821 N.W.2d 184
    , 191 (Minn. 2012); Hansen v.
    
    Robert Half Int’l, Inc., 
    813 N.W.2d 906
    , 917-18 (Minn. 2012). The amended complaint
    
    uses the word “incredibly” in a rhetorical manner, as a way of characterizing the long
    
    quotation that follows. The amended complaint does not plainly state that Morton-Peters
    
    made a statement that was knowingly false or made with reckless disregard for the truth.
    
    The amended complaint does not reflect the specificity and particularity necessary for a
    
    section 1983 claim. See Elwood v. County of Rice, 
    423 N.W.2d 671
    , 676 (Minn. 1988)
    
    (affirming grant of summary judgment on section 1983 claim because plaintiff failed to
    
    establish Fourth Amendment violation).
    
           Second, even if the amended complaint were construed in the manner urged by
    
    Stresemann, the amended complaint nonetheless would fail to allege that Morton-Peters
    
    made a statement that was knowingly false or made with reckless disregard for the truth.
    
    Stresemann claims that Morton-Peters’s warrant application is false in two ways: (1) by
    
    stating that patient files “may be co-mingled” with other records, and (2) by stating that
    
    records would be promptly reviewed and irrelevant records promptly returned. The
    
    amended complaint fails to allege the first part of the claim because it does not allege that
    
    Morton-Peters had any information to suggest that patient files were not commingled
    
    with other records, and the amended complaint is silent with respect to whether patient
    
    
                                                 8
    files actually were commingled with other records. The amended complaint fails to
    
    allege the second part of the claim because it concerns a future event and, thus, cannot be
    
    proved false at the time it was made. See Belisle v. Southdale Realty Co., 
    283 Minn. 537
    ,
    
    539-40, 
    168 N.W.2d 361
    , 363 (1969) (rejecting fraud claim based on “represented act or
    
    event [that] did not take place” instead of “false representation of a past or existing
    
    material fact”); see also Carlon v. Thaman (In re NationsMart Corp. Sec. Litig.), 
    130 F.3d 309
    , 320 (8th Cir. 1997), cert. denied, 
    524 U.S. 927
     (1998).
    
              Third, the amended complaint fails to allege a section 1983 claim against Morton-
    
    Peters because the warrant application would establish probable cause even if the alleged
    
    false statement were omitted. To establish a Franks violation, a plaintiff must show that
    
    “(1) the affiant officer knowingly and intentionally, or with reckless disregard for the
    
    truth, included a false or misleading statement in, or omitted information from, the
    
    affidavit in support of the warrant; and (2) the affidavit would not establish probable
    
    cause if the allegedly false information is ignored or the omitted information is
    
    supplemented.” United States v. Cowling, 
    648 F.3d 690
    , 695 (8th Cir. 2011) (quotation
    
    omitted), cert. denied, 
    132 S. Ct. 1905
     (2012).        The alleged misstatements are not
    
    contained in the probable-cause portion of the warrant application but, rather, in the
    
    portion of the application that concerns the manner of execution of the warrant. Thus, the
    
    alleged false statements had no effect on the judge’s determination of probable cause.
    
    See id.
    
              Fourth, the amended complaint fails to allege a section 1983 claim against
    
    Morton-Peters because it does not allege that Morton-Peters’s alleged misstatements are
    
    
                                                  9
    contrary to clearly established precedent. The doctrine of qualified immunity protects
    
    “government officials performing discretionary functions . . . from liability for civil
    
    damages insofar as their conduct does not violate clearly established statutory or
    
    constitutional rights of which a reasonable person would have known.”          Harlow v.
    
    Fitzgerald, 
    457 U.S. 800
    , 818, 
    102 S. Ct. 2727
    , 2738 (1982). Although the Franks
    
    doctrine is well established, Stresemann has not cited any caselaw arising from
    
    circumstances similar to this case so as to show that Morton-Peters’s conduct violated her
    
    clearly established rights. See Elwood, 423 N.W.2d at 676; Electric Fetus Co. v. City of
    
    Duluth, 
    547 N.W.2d 448
    , 452 (Minn. App. 1996), review denied (Minn. Aug. 6, 1996).
    
           Thus, Stresemann has not stated a claim for relief on her section 1983 claim
    
    against Morton-Peters.
    
    B.     Section 1983 Claim Against Nail
    
           Stresemann’s amended complaint does not plainly state the actions or omissions of
    
    Nail that should cause him to be liable under section 1983.           At oral argument,
    
    Stresemann’s attorney clarified that her section 1983 claim against Nail is based on his
    
    involvement in Morton-Peters’s investigation. But the amended complaint does not
    
    allege any such involvement.     The amended complaint alleges only that Nail is an
    
    employee of DHS. The amended complaint does not allege that DHS was involved in
    
    Morton-Peters’s investigation. The amended complaint obviously does not state facts
    
    that would support a conclusion that Nail violated Stresemann’s Fourth Amendment
    
    rights. Thus, Stresemann has not stated a claim for relief on her section 1983 claim
    
    against Nail.
    
    
                                               10
    C.     Section 1983 Claim Against Jesson
    
           Stresemann’s amended complaint also does not plainly state the actions or
    
    omissions of Jesson that should cause her to be liable under section 1983. At oral
    
    argument, Stresemann’s attorney clarified that her section 1983 claim against Jesson is
    
    based on her failure to supervise Morton-Peters’s investigation.          But the amended
    
    complaint does not contain any such allegation. The amended complaint alleges only that
    
    Jesson is the commissioner of DHS. The amended complaint does not allege that DHS
    
    was involved in Morton-Peters’s investigation. The amended complaint obviously does
    
    not state facts that would support a conclusion that Jesson violated Stresemann’s Fourth
    
    Amendment rights.       Furthermore, the premise that Jesson had responsibility for
    
    supervising Morton-Peters is implausible; the amended complaint alleges that Morton-
    
    Peters is employed by the OAG, not DHS. Thus, Stresemann has not stated a claim for
    
    relief on her section 1983 claim against Jesson.
    
           For these reasons, the district court erred by denying appellants’ motion to dismiss
    
    with respect to count 2 of the amended complaint.
    
                                        II. Counts 4 and 5
    
           Appellants also argue that the district court erred by denying their motion to
    
    dismiss with respect to counts 4 and 5 of the amended complaint, which allege state-law
    
    tort claims of conversion and trespass to chattels. “‘One who dispossesses another of a
    
    chattel is subject to liability in trespass for the damage done.        If the dispossession
    
    seriously interferes with the right of the other to control the chattel, the actor may also be
    
    
    
    
                                                 11
    subject to liability for conversion.’” Herrmann v. Fossum, 
    270 N.W.2d 18
    , 20-21 (Minn.
    
    1978) (quoting Restatement (Second) of Torts § 222 (1965)).
    
           In the portion of her amended complaint that relates specifically to counts 4 and 5,
    
    Stresemann alleges that “ACC has a property interest in its patient charts,” that
    
    “Defendant [sic] deprived ACC of that interest by unlawfully seizing those patient
    
    charts,” and that “Defendants deprived ACC of that interest by losing or destroying those
    
    patient charts.” We again will separately analyze the appellants’ respective arguments.
    
    A.     State Tort Claims Against Morton-Peters
    
           Morton-Peters argues that the district court erred by concluding that she is not
    
    entitled to prosecutorial immunity or official immunity.      The district court rejected
    
    Morton-Peters’s prosecutorial-immunity argument on the ground that “there is no
    
    evidence that any of the Defendants were involved in the filing and maintaining of any
    
    charges against Plaintiffs.”
    
           In Barry v. Johnson, 
    350 N.W.2d 498
     (Minn. App. 1984), review denied (Minn.
    
    Sept. 12, 1984), this court affirmed a district court’s grant of summary judgment to a
    
    county attorney’s investigator on the basis of prosecutorial immunity. Id. at 499. We
    
    reasoned that prosecutorial immunity protects an investigator from liability if the
    
    investigator “acts at the direction of the prosecuting attorney” and “act[s] within the
    
    scope of his official duties.” Id. Similarly, in Hyland v. State, 
    509 N.W.2d 561
     (Minn.
    
    App. 1993), review denied (Minn. Feb. 24, 1994), this court affirmed a district court’s
    
    grant of summary judgment on the basis of prosecutorial immunity to MnDOT
    
    employees who investigated statutory violations allegedly committed by a limousine
    
    
                                                12
    service. Id. at 565. We reasoned that the MnDOT employees were immune from suit
    
    because their actions were taken “pursuant to their statutory authority,” which included
    
    both the investigation and prosecution of the motor-carrier safety laws. Id. at 564.
    
           In this case, the MFCU has statutory authority to investigate and prosecute
    
    violations relating to the Medicaid program. See 42 U.S.C. § 1396b(q) (2012); Minn.
    
    Stat. § 256B.12 (2012). In light of the allegations in the amended complaint and the
    
    arguments presented by the parties, there is no dispute that Morton-Peters is the chief
    
    investigator of the MFCU and that she investigated allegations of fraud by ACC pursuant
    
    to that statutory authority.   Accordingly, Morton-Peters is entitled to prosecutorial
    
    immunity. See Hyland, 509 N.W.2d at 564.
    
           The district court relied on this court’s opinion in Erickson v. County of Clay, 
    451 N.W.2d 666
     (Minn. App. 1990), in which we affirmed the district court’s denial of a
    
    motion to dismiss claims against a county attorney’s investigator because the
    
    investigator’s “involvement in the grand jury proceedings did not involve initiation and
    
    maintenance of prosecution.” Id. at 671. The Erickson opinion did not be hold that a
    
    person who is not an attorney never is entitled to prosecutorial immunity; such a holding
    
    would be inconsistent with this court’s prior opinion in Barry. The particular facts
    
    concerning the investigator’s actions in Erickson are not apparent from the opinion,
    
    which makes it difficult for Stresemann or this court to distinguish it from Barry. See
    
    Erickson, 451 N.W.2d at 671. In any event, Hyland provides a clear basis for applying
    
    prosecutorial immunity in this case based on statutory authority to investigate and
    
    prosecute a particular type of violation of law. See Hyland, 509 N.W.2d at 564.
    
    
                                                13
           Thus, Morton-Peters is entitled to prosecutorial immunity.         In light of that
    
    conclusion, we need not analyze Morton-Peters’s argument that she is entitled to official
    
    immunity.
    
    B.     State Tort Claims Against Nail and Jesson
    
           The amended complaint makes no express allegation that Nail or Jesson ever
    
    possessed the ACC records that were seized. Accordingly, the amended complaint does
    
    not allege facts that Nail or Jesson either seized ACC’s patient charts or lost or destroyed
    
    them. Thus, Stresemann has not stated a claim for relief on her state-law tort claims
    
    against Nail and Jesson.
    
           For these reasons, the district court also erred by denying appellants’ motion to
    
    dismiss with respect to counts 4 and 5 of the amended complaint.
    
           Reversed.
    
    
    
    
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