Kane v. N.C. Teachers & State Emps. Comprehensive Major Med. Plan

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NO. COA13-73 NORTH CAROLINA COURT OF APPEALS Filed: 3 September 2013 ELIZABETH A. KANE, Plaintiff/Petitioner, v. Wake County No. 11 CVS 10938 NORTH CAROLINA TEACHERS AND STATE EMPLOYEES COMPREHENSIVE MAJOR MEDICAL PLAN, a/k/a THE STATE HEALTH PLAN, Defendants/Respondents. Appeal by Plaintiff from order entered 17 September 2012 by Judge Paul C. Ridgeway in Wake County Superior Court. Heard in the Court of Appeals 5 June 2013. Allen, Pinnix & Nichols, P.A., by M. Jackson Nichols and Catherine E. Lee, for Plaintiff. Attorney General Roy Cooper, by Special General Heather H. Freeman, for Defendant. Deputy Attorney STEPHENS, Judge. Procedural History and Factual Background This appeal arises from an insurer s denial of an insured s requests for prescriptions. reimbursement for medical procedures and In late 2007, Plaintiff Elizabeth A. Kane, a forty-one-year-old employee of the State of North Carolina, -2determined that children. Because Plaintiff was not in a romantic relationship with a male artificial she wanted partner, she insemination to have one anticipated to become or more using biological donor pregnant. sperm and Plaintiff s gynecologist referred her to Carolina Conceptions, a fertility clinic, for Plaintiff consultation. that she had Doctors low at potential the clinic fertility informed due to low ovarian function and recommended hormonal treatments via several prescription medications. also underwent 2010. In Plaintiff related addition, underwent Plaintiff took these medications and fertility at several intrauterine procedures points between during insemination 2008 this and period, ( IUI ) in an attempt to conceive. As a state employee, Plaintiff was covered by Defendant North Carolina Teachers and State Employees Comprehensive Major Medical Plan, a/k/a The State Health Plan ( SHP ). SHP denied Plaintiff s claims for reimbursement for the cost of the medications and procedures which were followed by IUI. Plaintiff s total unreimbursed expenditures were $14,726.83 for medications and $9,000.00 for procedures. It is undisputed that SHP will reimburse for fertility medications and procedures used in conjunction with attempts to conceive via natural -3intercourse. However, in an affidavit, Tracy D. Stephenson, Director of Pharmacy Benefits for SHP, stated that medications and services used in conjunction with artificial reproductive technologies (ART) . . . were excluded under the State Health Plan as part of the implementation of cost containment measures and determination of medical policies enumerated in Chapter 135 of the North Carolina General Statutes. On 5 January 2009, Plaintiff filed an internal appeal of the denial of medication reimbursements with SHP. On 9 January 2009, SHP denied Plaintiff s appeal, stating that SHP does not cover services, supplies, medically necessary[.] drugs[,] or charges that are not SHP further informed Plaintiff that she could request a 2nd level grievance review. Plaintiff requested such a review. On 30 June 2009, On 14 July 2009, however, SHP informed her that it was closing the matter and that it had inadvertently given [her] 2nd level grievance review rights in error. SHP also notified Plaintiff that she had sixty days to appeal the SHP decision to the Office of Administrative Hearings ( OAH ). In Plaintiff did not timely appeal to the OAH. mid-July 2011, Plaintiff filed declaratory judgment action against SHP. a complaint and Plaintiff alleged that SHP s reimbursement denial constituted breach of contract and -4that SHP s interpretation and application of its policy terms violated the equal protection and due process clauses of the United States and North Carolina Constitutions and the Exclusive Emoluments Clause of the North Carolina Constitution.1 On 11 August claims 2011, Defendant moved to dismiss Plaintiff s pursuant to North Carolina Rules of Civil Procedure 12(b)(1) and 12(b)(6). By order entered 4 October 2011, the trial court dismissed Plaintiff s breach of contract claim based upon her failure to exhaust her administrative remedies, but denied the remainder of Defendant s motion. On 3 July 2012, Defendant moved for summary judgment on Plaintiff s declaratory judgment and constitutional claims. Following a hearing, on 17 September 2012, the trial court granted summary judgment to Defendant and dismissed Plaintiff s two remaining claims. Discussion On appeal, Plaintiff argues that the trial court erred in dismissing her breach of contract claim, and granting summary 1 Plaintiff s request for a declaration based on the alleged constitutional violations was labeled as her second claim for relief, while her direct constitutional claims made up her third claim. For clarity, Plaintiff s direct constitutional claims will be referred to as Corum claims in this opinion, although Plaintiff s complaint does not explicitly cite that decision. See Corum v. Univ. of N.C., 330 N.C. 761, 413 S.E.2d 276, cert. denied, 506 U.S. 985, 121 L. Ed. 2d 431 (1992). -5judgment for SHP on her declaratory judgment and Corum claims. We affirm. Standard of Review We review a trial court s order for summary judgment de novo to determine whether there is a genuine issue of material fact and whether matter of law. either party is entitled to judgment as a Robins v. Town of Hillsborough, 361 N.C. 193, 196, 639 S.E.2d 421, 423 (2007) (citation and quotation marks omitted; italics added). The standard of review on a motion to dismiss under Rule 12(b)(1) is de novo. The standard of review on a motion to dismiss under Rule 12(b)(6) is whether, if all the plaintiff s allegations are taken as true, the plaintiff is entitled State, to 188 recover N.C. under App. some 712, legal 714, 656 theory. S.E.2d 619, Rowlette 621 v. (2008) (citations and quotation marks omitted). Jurisdiction to Review Order Dismissing Plaintiff s Breach of Contract Claim We begin by noting that, although Plaintiff s notice of appeal does not designate the 4 October 2011 order dismissing Plaintiff s breach of contract claim for failure to exhaust her administrative remedies, this Court nonetheless has jurisdiction to review that order. Appellate Rule 3(d) states in pertinent -6part, the notice of appeal required to be filed and served by subsection (a) of this rule shall . . . designate the judgment or order from which appeal is taken and the court to which appeal is taken. However, upon an appeal from a judgment, the court may review any intermediate order involving the merits and necessarily affecting the judgment. Therefore, our Court may still have jurisdiction to review an intermediate order even if an appellant omits a certain order from the notice of appeal where three conditions are met: (1) the appellant must have timely objected to the order; (2) the order must be interlocutory and not immediately appealable; and (3) the order must have involved the merits and necessarily affected the judgment. An order involves the merits and necessarily affects the judgment if it deprives the appellant of one of the appellant s substantive legal claims. Sellers v. FMC Corp., __ N.C. App. __, __, 716 S.E.2d 661, 665 (2011) (citations, omitted), (2012). quotation disc. review denied, marks, brackets, and ellipsis 366 N.C. 250, 731 S.E.2d 429 Further, [u]nder [N.C. Gen. Stat. §] 1A-1, Rule 46(b), with respect to rulings and orders of the trial court not directed to admissibility of evidence, no formal objections or exceptions are necessary, it being sufficient to preserve an exception that the party, at the time the ruling or order is made or sought, makes known to the court his objection to the action of the court or makes known the action which he desires the court to take and his ground therefor. -7Inman v. Inman, 136 N.C. App. 707, 711-12, 525 S.E.2d 820, 823 (2000) (citation omitted; emphasis added). Here, the record includes the memorandum of law in opposition to Defendant s motion to dismiss filed by Plaintiff in the trial court, which makes known the action which [s]he desire[d] the court to take and h[er] ground therefor[,] and thus serves as a timely exception. Id. In addition, the order dismissing of contract Plaintiff s breach interlocutory and not immediately appealable. N.C. App. at __, 716 S.E.2d at 665. claim was See Sellers, __ Finally, the order dismissing the breach of contract claim involves the merits of Plaintiff s case because it deprived Plaintiff of one of her three causes of action. Id. Thus, the 4 October 2011 order meets all three requirements as set forth in Sellers, permitting this Court to reach the merits of Plaintiff s first argument. Failure to Exhaust Administrative Remedies After careful review, we conclude that Plaintiff s failure to exhaust her administrative remedies or, in the alternative, to properly plead the inadequacy of those administrative remedies, bars all of her claims against SHP. While Procedures Plaintiff Act is ( APA ) correct does not that the preclude Administrative entirely the -8possibility of judicial review by use of the declaratory judgment act or other procedures outside the [APA,] High Rock Lake Assoc. v. N.C. Envtl Mgmt. Comm n, 39 N.C. App. 699, 707, 252 S.E.2d 109, 115 (1979), [s]o long as the statutory procedures provide an effective means of review of the agency action, the courts will administrative remedies. require parties to exhaust their Porter v. Dep t. of Ins., 40 N.C. App. 376, 381, 253 S.E.2d 44, 47 (emphasis added), disc. review denied, 297 N.C. 455, 256 S.E.2d 808 (1979) (citation omitted). As a general rule, it is the policy of this State that disputes between its administrative agencies and its citizens be resolved pursuant to the provision of the Administrative Procedure Act, [N.C. Gen. Stat.] § 150B-22, and that judicial review of an administrative decision may be had only after all administrative remedies have been resolved. Five requirements must generally be satisfied before a party may ask a court to rule on an adverse administrative determination: (1) the person must be aggrieved; (2) there must be a contested case; (3) there must be a final agency decision; (4) administrative remedies must be exhausted; and (5) no other adequate procedure for judicial review can be provided by another statute. Whether one has standing to obtain judicial review of an administrative decision is a question of subject matter jurisdiction. Jackson v. N.C. Dep t of Human Res., 131 N.C. App. 179, 182-83, -9505 S.E.2d 899, 901-02 (1998) (emphasis added), disc. review denied, 350 N.C. 594, 537 S.E.2d 213 (1999). When the General Assembly provides an effective administrative remedy by statute, that remedy is exclusive and the party must pursue and exhaust it before resorting to the courts. Id. at 186, 505 S.E.2d at 903. Our Courts have upheld the requirement of exhaustion when the claims asserted allege constitutional violations. See N. Buncombe Ass n of Concerned Citizens v. Rhodes, 100 N.C. App. 24, 30-31, 394 S.E.2d 462, 466-67, appeal dismissed and disc. review denied, 327 N.C. 484, 397 S.E.2d 215 (1990). Further, our Supreme Court [has] confirmed that, even in a declaratory judgment action, [w]hen an effective exclusive. N.C. App. administrative remedy exists, that remedy is Wake Cares, Inc. v. Wake Cnty Bd. of Educ., 190 1, 13, Charlotte-Mecklenburg 660 S.E.2d Hosp. 217, Auth. v. 224-25 N.C. (2008) Indus. (citing Comm n, 336 N.C. 200, 209, 443 S.E.2d 716, 722 (1994) and Lloyd v. Babb, 296 N.C. 416, 428, 251 S.E.2d omitted). 843, 852 (1979)) (quotation marks On the other hand, if the remedy established by the []APA is inadequate, exhaustion is not required. Jackson, 131 N.C. App. at 186, 505 S.E.2d at 903. Plaintiff urges that, [w]here an aggrieved party -10challenges the administrative constitutionality remedies are of a deemed exhaustion thereof is not required. regulation to be or statute, inadequate and Shell Island Homeowners Ass n v. Tomlinson, 134 N.C. App. 217, 224, 517 S.E.2d 406, 412 (1999) (citation omitted). is constitutional or However, whether the claim asserted arises from contract, [t]he burden of showing inadequacy is on the party claiming inadequacy, who must include such allegations in the complaint. App. at 186, 505 S.E.2d Jackson, 131 N.C. at 904 (emphasis added) (discussing claims for injunctive and monetary relief and for a declaratory judgment arising from constitutional claims); see also Snuggs v. Stanly Cnty Dep t. of Pub. Health, 310 N.C. 739, 740, 314 S.E.2d 528, 529 (1984) ( When the defendants motions are viewed as motions brought under Rule 12(b)(6), they must be allowed since the plaintiffs have failed to allege that they do not have adequate remedies under State law which provide due process. ) (emphasis added; citations omitted); Justice for Animals, Inc. v. Robeson Cnty, 164 N.C. App. 366, 373, 595 S.E.2d 773, 777 (2004) (affirming dismissal of claims for injunctive relief where the plaintiffs complaint fail[ed] to allege either the inadequacy or the futility of the administrative remedy provided); Huang v. N.C. State Univ., 107 N.C. App. 710, 715-16, -11421 S.E.2d 812, 815-16 (1992) (vacating an order of summary judgment for the plaintiff where the complaint alleging breach of contract failed to raise the issue of inadequacy of administrative remedies and thus the complaint should have been dismissed by the trial court ). For example, in Jackson, the plaintiff s complaint alleged that [e]xhaustion of any purported administrative appeals was, and is, futile, pointless, and inadequate because they cannot provide the remedies sought and because they facially violate due process of law guaranteed by the state constitution and law. Jackson, 131 N.C. App. at 186, 505 S.E.2d at 904. Moreover, the plaintiff in Jackson acknowledge[d] that she had the burden of pleading futility administrative remedy . . . . or inadequacy of the Id. Here, Plaintiff acknowledges that she failed to exhaust her administrative remedies. Before the trial court and this Court, she advanced eloquent and compelling arguments that exhaustion would have been futile and, thus, was not required because OAH has no review jurisdiction reveals, declaratory to resolve however, judgment action that constitutional issues. Our Plaintiff s complaint and contains no allegation that her administrative remedies were inadequate, and thus, all of her -12claims should have been dismissed pursuant to Rule 12(b)(6). Although the precedent discussed above requires this panel to affirm the trial court s orders, we are compelled to observe that imposition of the requirement to allege futility or inadequacy in this case appears both illogical and a subversion of the very intent remedies requirement: behind the exhaustion of administrative judicial economy. The exhaustion rule serves a legitimate state interest in requiring parties to exhaust administrative remedies before proceeding to court, thereby preventing an overworked court from considering issues and remedies that were available through administrative channels. It also encourages the use of more economical and less formal means of resolving disputes and is credited with promoting accuracy, efficiency, agency autonomy, and judicial economy. 2 Am. Jur. 2d Administrative Law § 474 (2013). judicial economy likewise futility/inadequacy requiring exhaustion led exception of to to the the administrative This focus on development exhaustion remedies of rule, is but the as a purposeless waste of time and resources if the remedy sought cannot be obtained via administrative appeals. Certainly, the requirement that this exception be specifically alleged in a complaint makes sense where the futility of an administrative remedy is not readily apparent and the defendant could be taken -13by surprise or somehow prejudiced by the later raising of such an allegation. not currently Here, however, all parties agree that SHP does permit reimbursement taken in conjunction with ART. explicit prohibition of for fertility treatments This bar on reimbursements is an SHP, and there is no discretion, exception, or flexibility regarding coverage of these treatments for women such as Plaintiff. Neither Plaintiff nor Defendant has suggested that there was any possibility that, had Plaintiff undertaken the further administrative review available to her, relief she sought could have been given. Rather, everyone involved in this matter was aware from the start that Plaintiff would not prevail at any level of administrative review. put, Plaintiff s definition of administrative futility, and remedies there is were neither Simply the very suggestion nor proof that SHP was prejudiced by Plaintiff s failure to allege futility in requirement her that complaint. Plaintiff In sum, plead the imposition futility here of the serves no purpose, aids no party or court, and acts as nothing more than a pedantic technicality preventing resolution of Plaintiff s claims on their merits. Nevertheless, mindful that [w]here a panel of the Court of Appeals has decided the same issue, albeit in a different case, -14a subsequent panel of the same court is bound by that precedent, unless it has been overturned by a higher court[,] In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989) (citations omitted), both the 4 October 2011 order dismissing her breach of contract claim and the 17 September 2012 order granting summary judgment to SHP and dismissing with constitutional claims must be AFFIRMED. Judges BRYANT and DILLON concur. prejudice Plaintiff s

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