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Bailey-Null v. ValueOptions - 4/7/2009

Arizona Court of Appeals Division One Holds That Exhaustion of Remedies Doctrine Does Not Apply to Patient’s Civil Action Seeking Money Damages Against State Contractor Providing Behavioral Health Services.

Plaintiff Mikayla Bailey-Null received psychiatric treatment from ValueOptions, a “Regional Behavioral Health Authority” that contracted with the Arizona Department of Health Services (“the Department”) to provide behavioral health services to Maricopa County residents. She filed a grievance against ValueOptions in October 2004 alleging that she was improperly chemically restrained and that her right to treatment on a voluntary basis, her right to privacy, and other civil rights pertaining to behavioral health services were violated. 

ValueOptions issued a decision, finding most of Bailey-Null’s allegations unsubstantiated.  She appealed this decision to the Arizona Department of Health Services, Division of Behavioral Health Services (“the Division”).  Her appeal was denied, and Bailey-Null then requested an administrative hearing with the Division.  The Administrative Law Judge issued an extensive ruling in July 2006.  The ALJ found that Bailey-Null’s civil and privacy rights were violated, but found that there was “not sufficient evidence to fashion a good remedy” and noted that the violations had been “confirmed” and made part of ValueOption’s records – the main remedy Bailey-Null sought.  On August 30, 2006, the ALJ’s decision was certified as a final administrative decision.  On September 28, 2006, Bailey-Null filed a motion for rehearing or review of the ALJ’s decision.  On October 30, 2006, the Division declined review of the ALJ’s decision and affirmed it. 

On September 11, 2006, Bailey-Null commenced a civil action against ValueOptions in Superior Court, asserting four causes of action:  (1) abuse/neglect of a vulnerable adult; (2) violations of the Arizona Civil Rights Act and discrimination under the Arizonans with Disabilities Act; (3) assault and battery; and (4) medical malpractice.  ValueOptions moved to dismiss for failure to exhaust administrative remedies.  The court granted the motion, and Bailey-Null appealed.

The Arizona Appeals Court reversed and remanded.  The Court noted that to determine whether a litigant is required to exhaust her administrative remedies, “a court must first decide whether an administrative agency has original jurisdiction over the subject matter of the claims.”  An agency has original jurisdiction if it is “specifically empowered to act by the Legislature.”  In the absence of original jurisdiction, the exhaustion of remedies doctrine does not apply. 

The Court examined the authority of the Department, which is directed by statute (A.R.S. § 36-3413) to require service providers such as ValueOptions to implement a grievance and appeal process for individuals who receive services.  Pursuant to the statutory mandate, the Department adopted Title 9, Chapter 21 of the Arizona Administrative Code (“the regulations”), which sets forth that process.  The court found “nothing in Chapter 21 to suggest that the legislature intended to vest the Department with jurisdiction to entertain civil damage claims.”  The Court then considered each of Bailey-Null’s four civil causes of action, and found in each instance that neither § 36-3413 nor the regulations give the Department the authority to award money damages, “the only remedy Bailey-Null seeks for the alleged [violations].”  As such, the Department lacked original jurisdiction over those claims and the exhaustion of remedies doctrine did not apply to them.

Judge Swann authored the opinion; Judge Orozco and Judge Irvine concurred.

Posted On: 4/23/2009