Petties v. District of Columbia

District Court, District of Columbia April 10, 2013

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) NIKITA PETTIES, et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 95-0148 (PLF) ) DISTRICT OF COLUMBIA, et al., ) DIAGNOSTIC CONSULTANTS, LLC ) Defendants. ) _______________________________________ )

OPINION AND ORDER

This matter is before the Court on the Report and Recommendations of the

Special Master, filed on November 11, 2011, regarding an invoice dispute between Diagnostic

Consultants, LLC (“DiCon”) and defendants, the District of Columbia Public Schools (“DCPS”)

and the Office of the State Superintendent of Education (“OSSE”). 1 On December 5, 2011,

DCPS filed objections to certain portions of the Report and Recommendations. Class plaintiffs

responded and requested that the Report and Recommendations be adopted in full, and DiCon

requested that the Court disregard DCPS’ objections as untimely. Upon review of the Report

and Recommendations, the parties’ papers, and the entire record in this case, the Court will

consider the objections on their merits and adopt and affirm the Report and Recommendations

in its entirety. 2

1 OSSE’s appearance in the Special Master proceeding was terminated on February 2, 2011, when DiCon abandoned the only claim that involved OSSE. Report and Recommendations at 4. 2 The papers reviewed in connection with this matter include the following: Report and Recommendations of the Special Master in the Matter of Diagnostic Consultants, LLC I. BACKGROUND

At the time that the disputed invoices were issued, payments by the defendants to

private providers of special education services such as DiCon were made pursuant to this Court’s

August 5, 2009 Payment Order. See Order Regarding Payment for Services to Class Members

(“Payment Order”) [Dkt. No. 1676]. 3 The Payment Order details a highly structured payment

scheme and delineates resolution procedures for disputes that arise concerning submitted

invoices. After a provider submits an invoice, if the defendants dispute any charges, “defendants

shall . . . provide a written dispute notice . . . to the provider no later than twenty (20) calendar

days after the invoice was received,” containing a “detailed description of the basis for the

dispute, including any and all policies relied upon[.]” Payment Order ¶ V(a). The dispute notice

must also include “sufficient documentation to support the reasons for disputing any outstanding

amount(s).” Id.

If a provider disagrees with the amount disputed by the defendants, it must submit

written objections with supporting documentation to DCPS’ Office of Special Education or to

OSSE. Payment Order ¶ V(b). After the provider supplies its response, if defendants continue to

(“Report and Recommendations”), Nov. 11, 2011 [Dkt. No. 1951]; Objection to the Report of the Special Master (“Def.’s Objections”) [Dkt. No. 1959]; Plaintiffs’ Response to Defendants’ Objections and Motion to Adopt the Report and Recommendations of the Special Master (“Class Pls.’ Response”) [Dkt. No. 1960]; Response of Plaintiff DiCon to Untimely Exceptions of Defendant District of Columbia (“DiCon Response”) [Dkt. No. 1967]; DCPS’ Reply to Response of Plaintiff DiCon to Objections (“Reply to DiCon Response”) [Dkt. No. 1969]; Supplemental Report of the Special Master in the Matter of Diagnostic Consultants, LLC (“Supplemental Report”) [Dkt. No. 1978]; Report and Recommendations of the Special Master Re: Diagnostic Consultants, LLC (“Second DiCon Report and Recommendation”), Nov. 14, 2011 [Dkt. No. 1953]. 3 That Order was vacated as of November 1, 2012, as resolution of these payment disputes is now governed by regulations issued by OSSE. Petties v. District of Columbia, Civ. Action No. 95-0148,

2012 WL 4755053

, at *1 (D.D.C. Oct. 4, 2012). The Court, however, retained authority to address the resolution of the dispute involving DiCon. Id. at *2.

2 dispute the invoices, defendants must issue a written rejection. Id. ¶ V(c). That written rejection

constitutes a final administrative decision. Id. ¶ V(d). If a provider is not satisfied with this

decision, it may file a request for review by the Office of the Special Master. Id. ¶ VI(a). Upon a

timely request by a provider, the Special Master shall hold a hearing on the matter, see id.

¶ VI(b), and issue a report with findings and recommendations for resolving the dispute. Id.

¶ VI(c).

After the Special Master issues her report and recommendation, the defendants

and plaintiffs are permitted under the Payment Order and Rule 53 of the Federal Rules of Civil

Procedure to raise with the Court “any objections or defenses [to the Special Master’s written

report] that are warranted.” Payment Order ¶ VI(d); see also FED. R. CIV. P. 53(f)(2). Upon

review of any such objections, “the Court will decide whether . . . to affirm the Special Master’s

recommendations or take some other action.” Payment Order ¶ VI(d).

The Report and Recommendations in this case examines the following disputed

invoices for services provided by DiCon: 29P, 30P, 33P, 36P, 36NP, 37P, 38P, 39P, 40P, 41P,

43P, 45P, 48P, 49P, 50P and 51P. Report and Recommendations at 1. On February 24, 2011,

the Special Master conducted an evidentiary hearing relating to the following three issues:

(1) whether the fees invoiced by DiCon for Vocational Evaluations (“VEs”) and Functional

Behavioral Assessments (“FBAs”) were unreasonably high; (2) whether DCPS’ objections to

invoices 37P and 50P complied with the timeline set forth in the Payment Order; 4 and

(3) whether social history assessments were part of comprehensive psychological evaluations,

and thus could not be billed as separate assessments when performed contemporaneously with

4 On March 7, 2011, DCPS announced that it would pay the disputed amount in connection to invoice 37P because it was unable to provide documentation to support its claim that the final administrative decision was timely. Report and Recommendations at 10.

3 comprehensive evaluations. Id. at 5-11. On November 11, 2011, the Special Master issued her

Report and Recommendations. On the first issue, she found in favor of DiCon, concluding that

DCPS did not properly invoke the dispute mechanism outlined in the Payment Order to contest

the VE and FBA invoices and therefore was obligated to pay the amount charged by DiCon. Id.

at 15-16. She found in favor of DCPS on the second and third issues, concluding that DCPS’

objection to invoice 50P was timely, id. at 18, and that social history assessments and

comprehensive psychological evaluations constituted one billable evaluation when performed

contemporaneously. Id. at 13.

II. DISCUSSION

A. Whether DCPS Properly Objected to Rates Charged by DiCon

DCPS objects to the Special Master’s recommendation that DiCon be awarded

the disputed amount of the invoices for VEs and FBAs. Def.’s Objections at 1. As a threshold

matter, DiCon asks the Court to disregard DCPS’ objections as untimely. DiCon Response at

1. DiCon points out that DCPS’ objections, filed on December 5, 2011, were filed 24 days

after the Report and Recommendations was issued. Id. at 1. Rule 53(f) provides that “[a]

party may file objections to — or a motion to adopt or modify — the master’s order, report, or

recommendations no later than 21 days after a copy is served, unless the court sets a different

time.” FED. R. CIV. P. 53(f)(2) (emphasis added). The timeliness requirement, however, is not

absolute, as the Court retains discretion to excuse a party’s failure to seek timely review. See

FED. R. CIV. P. 53 advisory committee’s note (2003 amendments to Subdivision (g)).

Although DCPS contends that its objections were timely filed, see DCPS’

Reply to DiCon Response, the Court concludes that the objections were filed three days after

the deadline. As the Special Master points out, it appears that this tardiness resulted from

4 DCPS’ confusion of the Report and Recommendation, filed on November 11, 2011, with a

report relating to a separate DiCon matter, filed three days later on November 14, 2011. See

Second DiCon Report and Recommendation; Supplemental Report at 2 (“Though the filing

referenced document 1953, its substance addressed document 1951.”) DCPS’ three day delay

seems to have stemmed from administrative error, rather than bad faith or neglect. The Court

therefore will excuse DCPS’ failure and consider its objections on the merits.

The Special Master concluded that the amount invoiced by DiCon for VEs and

FBAs must be paid because DCPS failed to comply with the dispute procedures provided in

the August 5, 2009 Payment Order. Report and Recommendations at 15-16. In its objections,

DCPS does not meaningfully address this conclusion; it instead argues that DiCon failed to

carry its burden of establishing or documenting the reasonableness of its fees associated with

the VEs and FBAs authorized by DCPS. Def.’s Objections at 1. This argument is misplaced.

Under the Payment Order, only if DCPS has properly invoked the dispute procedure will the

Court consider whether a provider has satisfied its burden of demonstrating reasonableness.

See Payment Order ¶ V(a), (d). DCPS failed to provide adequate explanation and

documentation for its initial objections to DiCon’s invoices, as required by the Payment Order.

See id. ¶ V(a). The Court agrees with the Special Master that this constituted a failure to

invoke the dispute mechanism.

Although DCPS routinely paid private providers to perform VEs and FBAs at

the time these services were performed by DiCon, DCPS had not publicly announced rates that

it would pay for these evaluations. Report and Recommendations at 15. 5 The Special Master

5 The Interim Independent Educational Evaluation Directive of October 2008 (“Chancellor’s Directive”) lists the maximum rates DCPS will pay for Independent Educational Evaluations (“IEE”) at public expense based on prevailing market rates in the District of

5 found, however, that DCPS had internally set acceptable rates for these evaluations but never

published those rates. See Report and Recommendations at 14-16. When DiCon submitted

invoices charging fees above these rates, DCPS rejected DiCon’s fees as unreasonable without

providing any documentation or explanation.

As discussed supra at 2-3, the Payment Order delineates a highly structured

resolution process for disputes that arise concerning submitted invoices. See Payment Order

¶¶ V-VI. If DCPS disputes a charge contained in an invoice, it must provide a written dispute

notice. Id. That dispute notice “shall include a detailed description of the basis for the dispute,

including any and all policies relied upon . . . and sufficient documentation to support the

reasons for disputing any outstanding amount(s).” Id. ¶ V(a) (emphasis added). The

consequence of a failure to adhere to this process is the acceptance of the disputed fees: “If the

defendants fail to provide a timely and complete dispute notice (including related

documentation), the amount invoiced by the provider will be considered accepted by the

defendants and no longer in dispute.” Id. (emphasis added).

DCPS sought to invoke the dispute procedure by objecting to DiCon’s bill of

$4,500 per VE and $4,800 per FBA. 6 The only support DCPS appended to its dispute notice,

however, was a billing sheet annotated with the following comment: “[E]xceeds reasonable

and documented fees.” Feb. 24, 2011 Hearing Transcript, Report and Recommendations

Ex. 14 at 94-95. DCPS’ position is that “[t]his statement more than satisfies the requirement of

the August 5, 2009 Payment Order requiring a ‘description of the basis of the dispute.’” Def.’s

Objections at 6 (quoting Payment Order ¶ V(a)). The Special Master disagreed, finding that

Columbia. Office of the Special Assistant to the Chancellor, Individual Education Evaluation Policy II.D.1 (July 9, 2008). VEs and FBSs were not included in the Chancellor’s Directive. 6 DCPS consistently paid $3,000 for VE, and $1,800 for FBAs. See Class Pls.’ Response at 2.

6 DCPS’ statement was insufficient to discharge its burden under the Payment Order. Report

and Recommendations at 15-16. The Court agrees with the Special Master.

The Payment Order clearly and unambiguously requires DCPS to submit a copy

of any and all policies relied on as the basis for its objection. See Payment Order ¶ V(a). As

noted above, the Special Master found that DCPS had developed a policy on VE and FBA

rates, despite the fact that no policy had been articulated in any official published document

and no notice had been given to providers. See Report and Recommendations at 15-16. DCPS

essentially conceded that an internal policy existed when it asserted that DiCon could have

contacted OSSE “before conducting [sic] the invoice to verify the rate paid for specific

assessments” or checked its records “to determine DCPS’ pattern of payments.” Id. at 16

(quoting DCPS Response to DiCon’s Closing Brief, Report and Recommendations Ex. 16 at

6). But under the Payment Order, that is not the provider’s responsibility. The Court therefore

agrees with the Special Master that DCPS was obligated to attach to its dispute notice

supporting documentation reflecting its policy when it challenged DiCon’s rates as

unreasonable. See Payment Order ¶ V(a).

The Special Master concluded that because DCPS did not comply with the

dispute procedures established by the Payment Order to contest the VE and FBA invoices, it

must pay the amount invoiced by DiCon. Report and Recommendations at 15-16. The Court

adopts this conclusion, as the consequence of filing an incomplete dispute notice is that “the

amount invoiced by the provider will be considered accepted by the defendants and no longer

in dispute.” Payment Order ¶ V(a); see also Report and Recommendations of the Special

Master in the Matter of Interdynamics, Inc. at 4, Sept. 25, 2008 [Dkt. No. 1538] (requiring

DCPS to pay invoices where DCPS failed to properly invoke dispute mechanism outlined in

7 prior payment order by not providing supporting documentation); Memorandum Opinion and

Order at 3, Mar. 3, 2009 [Dkt. No. 1600] (adopting Interdynamics Report and

Recommendations); cf. Report and Recommendations of the Special Master Regarding

Changes in Rates and Retroactivity of Hearing Officers’ Determinations at 4, Apr. 18, 2005

[Dkt. No. 1273] (placing burden on the provider to establish reasonableness of rates after

dispute mechanism was properly invoked); Order, May 19, 2005 [Dkt. No. 1278] (adopting

Report and Recommendations Regarding Changes in Rates). Since DCPS did not properly

invoke the dispute mechanism in conformity with the Payment Order, it must pay the amount

invoiced by DiCon.

B. Other Findings by the Special Master

The parties do not object to the Special Master’s conclusions regarding the

timeliness of the dispute notices for invoice 50P or the integrated nature of the social history

assessment and comprehensive psychological evaluations. See Report and Recommendations

at 11-13, 16-18. The Court therefore adopts and affirms the Special Master’s conclusions that

DCPS timely objected to invoice 50P and that the social history assessments and

comprehensive psychological evaluations constitute one billable assessment when performed

contemporaneously.

For the foregoing reasons, it is hereby

ORDERED that the Report and Recommendations of the Special Master in the

Matter of Diagnostic Consultants, LLC [Dkt. No. 1951] is ADOPTED AND AFFIRMED in

its entirety; it is

FURTHER ORDERED that the District of Columbia shall pay Diagnostic

Consultants, LLC (“DiCon”) within fifteen (15) calendar days following the date of this

8 Order the sum of $51,820.00, representing the full amount in dispute for services not

appearing on the Chancellor’s Directive but authorized to be performed by DiCon for

students from the District of Columbia, and billed to defendant on invoices 29P, 33P, 36P,

38P, 39P, 40P, 43P, 45P, 48P, 49P and 51P; it is