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Kenyon v. Otter

United States District Court, D. Idaho

September 28, 2016

KENDRA KENYON, Plaintiff,
v.
C.L. “BUTCH” OTTER, Governor of Idaho, in his individual capacity, et al., Defendants. SARAH E. SCOTT, Plaintiff,
v.
C.L. “BUTCH” OTTER, Governor of Idaho, in his individual capacity, et al., Defendants.

          MEMORANDUM DECISION AND ORDER

          Honorable Ronald E. Bush Chief U.S. Magistrate Judge

         Currently pending before Court are Defendants' Motions to Dismiss (Dkts. 9, 28) in this consolidated case. Having heard oral argument and being otherwise advised, the Court enters the following memorandum decision and order.

         BACKGROUND

         A. Older Americans Act and the Idaho Commission on Aging

         The federal Older Americans Act (“OAA”) requires states to designate a state agency as a “state unit on aging”. (Kenyon v. Otter, Case No. 1:15-cv-00060, Complaint, Dkt. 1 “Kenyon Compl.”, ¶¶ 10-12.) In Idaho, that is the Idaho Commission on Aging (the “Commission”) in the Executive Office of the Governor. (Id. at ¶ 12.) In turn, the Commission designates “Area Agencies on Aging” (“AAAs”) for each “Planning and Service Area” (“PSA”) within a state. (Id. at ¶¶ 11, 13.) Six Planning and Service Areas are designated in Idaho, of which “PSA III” is the largest. PSA III consists of ten counties in southwest Idaho. (Id. at ¶ 14.) The designated AAA for PSA III since approximately 1972 (and until the events underlying this lawsuit) had been the Idaho Council of Governments (“ICOG”)[1], an Idaho non-profit corporation. (Id. at ¶ 15.)

         As the Area Agency on Aging for PSA III, ICOG received both federal and state funding to deliver services under the Older Americans Act and the Idaho Senior Services Act. (Id. at ¶ 16.) The allotment of funds the Commission receives from the federal Administration on Aging is based upon Idaho's proportion of the total U.S. population aged 60 or older, but cannot be less than a minimum set by statute. (Id. at ¶ 18.) The amount of funding provided by the Commission to ICOG and other AAAs in Idaho is determined through application of the federally required “Intrastate Funding Formula” (the “Formula”). (Id. at ¶ 20.)

         B. Idaho's Intrastate Funding Formula

         Plaintiff Kendra Kenyon (“Kenyon”), who was President of ICOG during the relevant time frame, and Plaintiff Sarah Scott (“Scott”), Director of ICOG during the relevant time frame (collectively, “Plaintiffs”), contend that Idaho's Formula failed to comply with federal law in that it failed to properly consider the geographical distribution of older individuals in the state and failed to properly consider the distribution of individuals aged 60 and older with physical and mental disabilities, all in violation of Section 305(a)(2)(C) of the OAA.[2] (Id. at ¶ 22.) Plaintiffs allege that Idaho's Formula calculation fails to include the general population of Idahoans aged 60 and older and makes inaccurate funding of AAAs, other than PSA III, in Idaho where the per capita cost is higher, meaning that fewer seniors are serviced in Idaho overall. (Id. at ¶¶ 23, 25.) Plaintiffs further allege that Idaho's Formula is a matter of broad public concern because PSA III, as well as other PSAs, are underfunded and have been required to maintain waiting lists for persons seeking services. (Id. at ¶ 26.) It is further contended that ICOG Directors and staff have long been concerned that Idaho's Formula does not comply with federal law and that the Commission spends too much funding on administration, rather than providing money to various state AAAs. (Id. at ¶ 27.)

         C. 2014 Budget and Concerns Over the Formula

         ICOG submitted its SFY 2014 budget to the Commission on June 27, 2013. (Id. at ¶ 28.) The budget called for PSA III to pay 35% of Kenyon's (ICOG's President) salary from AAA administrative funds received from the Commission. (Id.) The Commission, through its director, Defendant Sam Haws, approved this budget on June 30, 2013. (Id.) In the past, the Commission had approved budgets with a much higher percentage of the PSA III President's salary coming from AAA administrative funds. (Id.)

         In June and July of 2013, Kenyon attempted to raise with Haws the issue of the allegedly non-compliant Formula and the excessive administrative funds retained by the Commission. (Id. at ¶¶ 29-30.) Kenyon met several times with Patrick Sullivan of Sullivan and Reberger, an Idaho lobbying and campaign consulting firm. (Id. at ¶ 32.) In these meetings, Kenyon explained her allegations regarding the non-compliant Formula and excessive administrative funds retained by the Commission. (Id.) Mr. Sullivan then discussed Kenyon's concerns with Tammy Perkins, the Senior Special Assistant for Health and Social Services with the Office of the Governor, as well as David Hensley, Chief of Staff to the Governor. (Id.). Haws learned about Kenyon's meetings with Mr. Sullivan and his subsequent contact with Ms. Perkins and Mr. Hensley. (Id.) On July 11, 2013, Kenyon and Scott had a meeting with Haws in which Kenyon again tried to discuss the Formula. Haws insisted that such matters were for the Commission's decision alone. (Id. at ¶ 31.)

         On August 23, 2013, Kenyon and Scott met with Haws and her deputy, Jeff Weller, and various ICOG staff and board members. They raised these issues again. (Id. at ¶ 34.) Haws said she would get back to ICOG personnel but never did. (Id.)

         D. Reduction in Contribution to ICOG President's Salary and Aftermath

         On September 16, 2013, Haws sent ICOG's Director of Finance an email. She said that the Commission's AAA contribution to Kenyon's salary was being reduced to 10%. (Id. at ¶ 35.) In response, the ICOG Board of Directors sent a letter to the Governor addressing their concerns regarding the actions of Haws. (Id. at ¶ 36.) Kenyon and Scott drafted the letter, and several drafts circulated to the ICOG Board of Directors before the final version, dated November 14, 2013, was provided to the Governor (hereafter, the “November Letter”). In part, the Board of Directors said:

In addition we are offended by Ms. Haws' baseless reduction of ICOG's President's percentage allocation of time in our AAA budget. Our President's percentage allocation as set forth in our AAA budget was initially approved in writing by Ms. Haws on June 27, 2013. During at meeting at our office on August 23, 2013, our Board Chair and President attempted to discuss with Ms. Haws and her deputy a variety of issues, including the statutorily non-compliant intrastate funding formula. Soon thereafter, apparently in retaliation for asking these questions, Ms. Haws arbitrarily and without foundation reduced our President's time allocation (funding) so significantly that we are being forced to terminate our President's employment effective January 1, 2014.
It is alarming that the reduction in funding resulting in the loss of this executive's employment happened only after potential statutory violations were brought to [the Commission]'s attention. For decades, the allocation was never an issue, and for the year in question the budget had already been approved. There is a clear nexus between what appears to be legitimate AAA advocacy activities and Ms. Haws' tortious interference with the contractual expectation of this executive and her right to free speech. . .
We believe the senior citizens in southwest Idaho would be outraged that our region is not receiving the funding to which it is entitled under the Older Americans Act and that [the Commission] is making unilateral decisions that are not in the best interests of Idaho's aging network and those we serve.
We respectfully request that you appoint to the critical position of [Commission] Administrator someone who has the passion, educational background, and expertise needed to serve our valued senior citizens.

(Id. at ¶¶ 36-38.)

         This letter was signed by the Board chair and vice-chair, and 19 Board Members and Members-at-Large. (Id., Ex. B.) This list did not include Kenyon and Scott. Defendant Haws and Commissioner Defendants Carey Spears, David Pankey, Lorraine Elfering, David Maestas, Sharon Sturm, Coleen Erickson, and Victor Watson (collectively, the “Commissioner Defendants”) were provided a copy of the November Letter and are alleged to have known of Plaintiffs' role in drafting the letter. (Id. at ¶ 40.)

         After delivery of the November Letter to the Governor, Scott prepared “talking points” regarding the Formula, which were distributed to seniors in PSA III and to others asking them to advocate for correction of the formula (“the Constituent Talking Points”). (Id. at ¶ 44.)

         Allegedly because of the reduction in the Commission's contribution to her salary, ICOG terminated Kenyon's employment effective January 1, 2014. (Id. at ¶ 41.) On January 14, 2014, ICOG entered into a Consultant Agreement with Kenyon by which she continued to provide services to ICOG, although unrelated to its role as the PSA III Area Agency on Aging. She was paid much less. (Id. at ¶ 42.)

         On or about January 8, 2014, Scott submitted a public records request to the Commission relating to the data utilized in development of the Formula. (Scott v. Otter et al., Case No. 1:15-cv-00061-REB, Compl., Dkt. 1, “Scott Compl.” ¶ 42.) Prior to the Commission's presentation to the Idaho Legislature's Joint Finance and Appropriations Committee (“JFAC”) on January 17, 2014, Scott prepared and delivered separate “talking points” to JFAC members in a letter dated January 13, 2014. (Id. at ¶ 43.)

         On January 30, 2014, Scott and other ICOG Board Members met with Lt. Governor Brad Little and Tammy Perkins of the Office of the Governor. (Id. at ¶ 47.) Defendant Little indicated that Governor Otter had asked him to address the issues raised in the November Letter. (Id.) During this meeting, Defendant Little said he was displeased by Scott's Public Records Request. (Id.)

         On February 6, 2014, the Commissioner Defendants met at a quarterly meeting, which Scott attended. Based on a report Haws submitted to the Commissioner Defendants regarding the November Letter, the Commissioner Defendants voted to demand that the ICOG Board dismiss or sanction Scott. (Id. at ¶ 48.) Scott then made under another Public Records Request for an audio recording of the February 6, 2014 meeting. (Id. at ¶ 49.)

         Between January and May, 2014, Haws allegedly unduly delayed approval of budget amendments, arbitrarily varied the processes by which Scott and ICOG were required to seek other approvals, made excessive and repeated demands on Scott and ICOG for information, and subjected Scott and ICOG's operations and procedures to examination and standards not required of other AAAs. (Id. at ¶ 50.)

         E. Dedesignation[3] of ICOG

         On May 30, 2014, Defendant Haws notified ICOG by letter that the Idaho Commission on Aging was not renewing the AAA Performance Based Agreement with PSA III and further was initiating a proceeding to withdraw PSA III's designation as an AAA (referred tp as a “Notice of Proposed Dedesignation”). (Answer, Ex. E, Dkt. 7-6.) The dedesignation was to take effect at the end of June 30, 2014. (Id.) Several grounds were offered as justification: (1) ICOG's activities were inconsistent with the statutory mission of the OAA and in conflict with the requirement that it function only as an area on aging; (2) there was substantial failure in the provisions and administration of ICOG's approved area plan to comply with the Older Americans Act, and misallocated funds to administration, thereby reducing available funds for services; and (3) ICOG had failed to timely submit the documentation necessary to obtain an approved area plan. (Id.) ICOG was told it could request a public hearing with the Commission on the de-designation action and appeal the decision to the Assistant Secretary for Aging. (Id.)

         On July 1, 2014, the Commission took over what was previously PSA III's responsibility for services under the OAA. (Scott Compl., § 56.) Scott's involvement with ICOG was terminated on November 8, 2014. (Id. at ¶ 56.)

         STANDARD OF REVIEW MOTION TO DISMISS/JUDGMENT ON THE PLEADINGS

         Scott and Kenyon bring § 1983 claims[4] against Defendants Haws, Governor Otter, Spears, Pankey, Elfering, Maestas, Strum, Erickson, and Watson. Scott also brings a § 1983 claim against Defendant Lieutenant Governor Little; state law claims of interference with contract and intentional interference with prospective economic advantage against Defendant Haws; and a reckless and/or negligent supervision claim against Defendants Otter, Little, Spears, Pankey, Elfering, Maestas, Strum, Erickson, and Watson.

         Motions for a judgment on the pleadings fall under by Federal Rule of Civil Procedure 12(c). The principal difference between Rule 12(b) and Rule 12(c) motions is the time of filing. Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). A party may move for judgment on the pleadings at any point after the pleadings close. Fed.R.Civ.P. 12(c). “Because the motions are functionally identical, the same standard of review applicable to Rule 12(b) motions applies to its Rule 12(c) analog.” Id.

         Both the Rule 12(b)(6) and 12(c) motions challenge the legal sufficiency of a plaintiff's claims. Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011). The inquiry asks whether the plaintiff's allegations are sufficient under Rule 8(a), which contains the minimum pleading requirement that the plaintiff provide a “short and plain statement of the claim showing that the pleader is entitled to relief, ” and “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         When reviewing a motion to dismiss, all non-conclusory, factual (not legal) allegations made in the complaint are accepted as true, Ashcroft v. Iqbal, 565 U.S. 662, 678-79 (2009); Erickson v. Pardus, 551 U.S. 89 (2007), and all reasonable inferences are drawn in favor of the non-moving party, Mohamed v. Jeppesen Dataplan, Inc., 579 F.3d 943, 949 (9th Cir. 2009). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Iqbal, 565 U.S. at 678 (citing Twombly, 550 U.S. at 555). A complaint must contain sufficient factual allegations to provide plausible grounds for entitlement to relief. Twombly, 550 U.S. at 555-56. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 565 U.S. at 678.

         As a general rule, evidence outside the pleadings is not considered unless the motion is converted to a summary judgment motion. See Fed. R. Civ. P. 12(b); United States v. Ritchie, 342 F.3d 903, 907-908 (9th Cir. 2003). The exceptions to that general rule include that the court may “consider certain materials or documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment.” Id. at 908 (citing Van Buskirk v. CNN, 284 F.3d 977, 980 (9th Cir. 2002); Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994); 2 James Wm. Moore et al., Moore's Federal Practice § 12.34[2] (3d ed.1999)).[5]

         DISCUSSION[6]

         A. Claims Based on the Dedesignation are Barred by Absolute Immunity

         Defendant Haws seeks the umbrella of absolute immunity from liability for her involvement in the “Notice of Proposed Dedesignation” and “Order of Withdrawal of AAA Designation.” Absolute immunity is generally accorded to judges and prosecutors functioning in their official capacities. Stump v. Sparkman, 435 U.S. 349, 364 (1978); Imbler v. Pachtman, 424 U.S. 409, 430-31 (1976). Courts have extended the protections of absolute immunity to some state officials, in particular circumstances, when those officials are sued under 42 U.S.C. § 1983. Miller v. Gammie, 335 F.3d 889, 895-96 (9th Cir. 2003). Further, absolute immunity is also available in some circumstances to government agency representatives performing functions analogous to those of a prosecutor or judge. Id. at 898. Such immunity protects the independence of executive officials acting in a quasi-judicial capacity, allowing them to exercise their adjudicative discretion without fear of intimidation or harassment. Butz v. Economou, 438 U.S. 515-17, (1978).

         Whether an executive official is entitled to absolute immunity is determined by examining similarities and dissimilarities of an agency's functions with that of the judicial process, by using a “functional approach.” Cleavinger v. Saxner, 474 U.S. 193, 201 (1985) (citing Harlow v. Fitzgerald, 457 U.S. 800, 810 (1982)). In shorthand, the question is whether the official's actions are “functionally comparable” to that of a judge or prosecutor. Butz, 438 U.S. at 513. In Cleavinger, the Supreme Court described such characteristics of the judicial process in this manner:

[(a)] the need to assure that the individual can perform his functions without harassment or intimidation; (b) the presence of safeguards that reduce the need for private damages actions as a means of controlling unconstitutional conduct; (c) the [agency's] insulation from political influence; (d) the importance of precedence; (e) the adversary nature of the process; and (f) the correctability of error on appeal.”

Cleavinger, 474 U.S. at 202.

         The Ninth Circuit has issued a decision upon similar facts to this case, also involving an Idaho executive branch agency. See, Olsen v. Idaho State Board of Medicine, 363 F.3d 916 (9th Cir. 2004), which is discussed to follow. After considering the holding in such decisions against the factual record of this case as they pertain to the Dedesignation Notice, the Court is persuaded ...


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