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decided: November 3, 1989.


Appeal from Common Pleas Court, Allegheny County; Honorable Silvestri Silvestri, Judge.


Jason W. Manne, Asst. Counsel, Pittsburgh, for appellant.

William R. Caroselli, Caroselli, Spagnolli & Beachler, Pittsburgh, for appellees.

Craig and Palladino, JJ., and Narick, Senior Judge. Crumlish, Jr., President Judge, and Barry, Colins, McGinley and Smith, JJ. Craig, Judge, dissenting. Barry and McGinley, JJ., join in this dissent.

Author: Palladino

[ 129 Pa. Commw. Page 472]

The Commonwealth of Pennsylvania, Department of Public Welfare (DPW) appeals from an order of the Court of Common Pleas of Allegheny County (trial court) sustaining the preliminary objections of Irving Portnoy, John Quinn, and Evans, Rosen, Portnoy, Quinn, and Donohue (collectively, Appellees) and dismissing the complaint of DPW without leave to amend. For the reasons set forth below, we affirm.

On March 2, 1988, DPW filed a complaint in equity with the trial court, alleging that Appellees currently represent, and have represented in the past, numerous medical assistance recipients in actions to recover damages, for personal injuries, from third party tortfeasors or their insurers. DPW pleaded that, under section 1409(b) of the Public Welfare Code (Code),*fn1 it has a right to a first lien on the proceeds of any judgment, award or settlement which reimburses a medical assistance recipient for medical bills incurred for the treatment of personal injuries for which another person was responsible. DPW further averred that section 1409(b) of the Code, 62 P.S. § 1409(b), requires attorneys representing medical assistance recipients to give notice to DPW of the commencement of suits against third party tortfeasors or their insurers, as well as notice of any settlement, judgment, or award. Finally, DPW alleged that attorneys are required to give DPW an opportunity to perfect its lien prior to the satisfaction of any judgment, award or settlement.

DPW averred that Appellees were aware of the foregoing notice provisions yet knowingly and intentionally failed to give DPW the requisite notice of suit, judgments/awards/settlements, and opportunity to perfect its liens. DPW alleged that Appellees' failure to so notify DPW was an attempt to defraud DPW of monies to which it was entitled. DPW alleged that it became aware of some cases in which Appellees had failed to notify DPW as

[ 129 Pa. Commw. Page 473]

    required by section 1409.*fn2 DPW further averred that because of Appellees' continued violation of section 1409, it could not ascertain the exact number of cases in which Appellees failed to give notice or the amount of money paid to recipients by third party tortfeasors or insurers in those unknown cases. Finally, DPW alleged that it has been unable to obtain reimbursement totaling $25,360.89 from four named assistance recipients who had been represented by Appellees. DPW's first amended complaint, paragraph 13.

In its prayer for relief, DPW sought: (1) a declaratory judgment that Appellees were required to comply with section 1409(b) of the Code, 62 P.S. § 1409(b); (2) an injunction prohibiting Appellees from failing to give the requisite notices to DPW and from distributing any proceeds from personal injury actions to medical assistance recipients without first affording DPW an opportunity to perfect a lien; (3) a mandatory injunction compelling Appellees to disclose to DPW those cases in which they distributed proceeds without complying with section 1409(b); (4) damages (including punitive damages) in excess of $20,000; and (5) interest, costs, and attorneys fees.

On March 10, 1988, Appellees filed preliminary objections to the complaint, including a preliminary objection in the nature of a demurrer.*fn3 DPW thereafter filed a first amended complaint on March 14, 1988. On April 4, 1988, Appellees filed a second set of preliminary objections, which set forth the same objections as their original objections and, in addition, contained a motion to strike because of a change in the party plaintiff without leave of court or consent of Appellees.

[ 129 Pa. Commw. Page 474]

By order dated May 3, 1988, the trial court sustained Appellees' preliminary objection in the nature of a demurrer and dismissed DPW's first amended complaint without leave to amend.*fn4 The trial court determined that disregarding the paragraphs of the complaint containing conclusions of law, expressions of opinion, and argumentative allegations, DPW failed to allege facts sufficient to state a cause of action. Further, the trial court declined to permit DPW to amend its complaint, noting that the Code did not provide for civil or criminal sanctions against attorneys for failure to comply with the notice provisions of section 1409(b), 62 P.S. § 1409(b). Finally, the trial court concluded that DPW was not entitled to declaratory or injunctive relief.

On appeal to this court, DPW argues that it should have been permitted to maintain a cause of action against Appellees for damages where it has alleged that it is unable to obtain reimbursement of medical assistance payments as a result of Appellees' knowing and intentional failure to comply with section 1409(b) of the Code, 62 P.S. § 1409(b). DPW also asserts that the trial court erred in concluding that attorney's fees, costs, and punitive damages could not be awarded to DPW. DPW also contends that the absence of a statutory remedy against attorneys in section 1409(b) should not preclude an action in equity to enjoin Appellees from intentionally failing to comply with the notice requirements. Finally, DPW asserts that it alleged facts sufficient to state a cause of action*fn5 or, in the alternative, that the

[ 129 Pa. Commw. Page 475]

    trial court should have permitted amendment of the complaint.

Initially, we note that preliminary objections in the nature of a demurrer will be sustained only where a complaint is clearly insufficient to establish any right to relief; any doubt must be resolved in favor of the pleader. County of Allegheny v. Commonwealth of Pennsylvania, 507 Pa. 360, 490 A.2d 402 (1985). A demurrer admits as true all well-pleaded facts, but does not admit conclusions of law, unwarranted inferences from facts, argumentative allegations, or expressions of opinion. Martin v. Commonwealth, 124 Pa. Commonwealth Ct. 625, 556 A.2d 969 (1989). In order to review DPW's claims for relief in this case of first impression, we must first examine Article XIV of the Code, 62 P.S. §§ 1401-1411, the statutory framework under which DPW seeks relief.


Article XIV of the Code, entitled "Fraud and Abuse Control," sets forth a detailed scheme of provider prohibited acts and recipient prohibited acts.*fn6 Section 1407(a) of the Code, 62 P.S. § 1407(a), enumerates the various provider prohibited acts. Section 1407(b) states that a violation of any of the provisions of subsection (a), with the exception of subsection (a)(11), shall constitute a felony of the third degree, with a maximum penalty of a fine of fifteen thousand ($15,000) dollars and seven years imprisonment. 62 P.S. § 1407(b)(1). Section 1407(b) also provides that any person convicted under subsection (a) shall be ineligible to participate in the medical assistance program for a period of

[ 129 Pa. Commw. Page 476]

    five (5) years from the date of conviction. 62 P.S. § 1407(b)(3). Finally, section 1407(c)(1) of the Code, 62 P.S. § 1407(c)(1) provides that if DPW determines that a provider has committed any prohibited act or has failed to meet any requirement under subsection (a), DPW has the authority, upon notice to the provider, to terminate the provider agreement and to institute civil proceedings for twice the amount of excess benefits or payments plus legal interest from the date of the violation(s).

Section 1408 of the Code, 62 P.S. § 1408, sets forth recipient prohibited acts, including the concealment or failure to disclose to DPW the occurrence of any event affecting the recipient's initial or continued right to any benefit or payment, with the intention of fraudulently securing such benefit or payment either in a greater amount or quantity than is due or when no payment or benefit is authorized. 62 P.S. § 1408(a)(2); see also section 481 of the Code, 62 P.S. § 481 (criminal penalties for securing assistance or food stamps by means of willfully false statement, misrepresentation, or impersonation). Section ...

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