Federal lawsuit over NC foster care mental health in settlement talks

North Carolina Department of Health and Human Services Secretary Kody Kinsley (Image from ncdhhs.gov)

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  • Settlement talks are under way in a federal lawsuit challenging North Carolina's use of in-patient psychiatric treatment for children in foster care.
  • Lawyers on both sides of the case filed paperwork Monday seeking a 60-day delay in court proceedings.
  • US District Judge William Osteen issued an order in March rejecting state officials' motion to dismiss the lawsuit.

A settlement could be on the way for a federal lawsuit challenging North Carolina’s use of in-patient psychiatric treatment for children in foster care. Lawyers on both sides of the dispute filed paperwork Monday seeking to delay court proceedings through July 15.

“On May 14, 2024, the Parties held productive, preliminary settlement discussions,” according to the court filing. “The Parties have agreed to continue the discussions and have scheduled the first of many negotiation sessions.”

“In order to focus their resources on these settlement discussions, the Parties jointly request a sixty (60)-day stay of proceedings,” the lawyers wrote. “Should both Parties wish to continue focusing exclusively on settlement discussions, the Parties would jointly seek to extend the stay in mutually agreed upon intervals.”

US District Judge William Osteen issued a March 29 order rejecting state officials’ motion to dismiss the lawsuit.

Plaintiffs filed a class-action lawsuit in December 2022. They compared the state’s psychiatric residential treatment facilities to solitary confinement. Critics want the state to shift its focus away from the treatment centers to provide more support services in the children’s home communities.

“Plaintiffs allege ‘Defendant has a pervasive, system-wide practice of unnecessarily segregating children in its care in PRTF institutions instead of providing care and placement for them in their communities,’” Osteen wrote. “While Defendant ‘ostensibly offers community-based placements and services,’ the availability of such services is too limited — fueling an overreliance on placement in PRTFs.”

“Children with disabilities in North Carolina’s child welfare system face significant barriers to accessing community-based placements and services, including ‘shortages or waitlists for intensive in-home services, crisis intervention services, outpatient mental health and substance abuse services, and inadequate transportation to and from such services,’” Osteen added. “However, instead of addressing these barriers and expanding community-based placements and services, Defendant sends children to PRTFs ‘because it has nowhere else to put them.’”

The five named plaintiffs are among 572 children placed in the treatment facilities during the state’s 2020-21 budget year. Disability Rights North Carolina and the state NAACP support the lawsuit. Osteen’s order rejected the state’s attempt to dismiss those groups from the case.

The suit argues that services provided in the in-patient treatment centers are “at best, inadequate, and, at worst, highly abusive,” Osteen wrote.

State Health and Human Services Secretary Kody Kinsley filed a motion to dismiss the suit in March 2023. Federal officials filed their own court documents in April 2023 noting the US government’s interest in the case.

Osteen’s order rejected the state’s argument “that it is not the court’s role to overhaul North Carolina’s foster care system.”

“This argument implicates many competing concerns, including comity and respect for states and their institutions,” the judge wrote. “However, these concerns and difficulties associated with institution-wide reforms do not mean that it is not appropriate for this court to consider such claims at all.”

“While Defendants raise a compelling issue — the court’s role, if any, in mandating change in the foster care system — this court will ‘cross the bridge of remedies only when the precise contours of the problem have been established’ later in these proceedings,” Osteen added.

The order noted that plaintiffs claim state officials have discussed moving them out of in-patient treatment. “These factual allegations are consistent with Plaintiffs’ claims that Plaintiffs are frequently institutionalized not because it is required or appropriate, but because of a lack of community-based alternatives,” Osteen wrote. “These factual allegations are sufficient to allege that community-based placement is appropriate for Named Plaintiffs.”

“Here, Plaintiffs allege community-based placements and services yield better outcomes and are less costly to provide,” Osteen added. “They also allege waitlists pose a barrier to receiving community-based services.”

“[W]hether Defendant has an effectively working plan, including a waiting list that moves at a reasonable pace, is a fact-specific inquiry not appropriate for determination at the motion to dismiss stage,” the judge wrote.

US Attorney Sandra Hairston’s office filed a statement of interest in the case in 2023. The statement arrived one month after Kinsley asked Osteen to dismiss the suit.

Hairston’s statement addressed the legal standard for suing under Title II of the Americans with Disabilities Act and Section 504 of the Rehabilitation Act.

“Title II of the ADA and Section 504 both require public entities to administer their services,
programs, and activities to people with disabilities in the most integrated setting appropriate to their needs. This requirement is known as the ‘integration mandate,’” according to the statement signed by Assistant US Attorney Cassie Crawford.

“The amended complaint in this case alleges that children with disabilities who are in the custody of North Carolina’s child welfare system are routinely and unnecessarily segregated, or placed at serious risk of segregation, in psychiatric residential treatment facilities (“PRTFs”), in violation of the integration mandate,” according to the statement. “Plaintiffs bring this action on behalf of a putative class of all children with disabilities in child welfare custody.”

“The amended complaint alleges that children in foster care enter PRTFs when they could be served in the community, and languish in PRTFs for extended periods of time because community-based placements and services are unavailable,” the statement continued. “The amended complaint further alleges that these children could live in their communities in family-based placements with appropriate services, including mental and behavioral health services.”

The US attorney’s statement rebutted arguments in Kinsley’s motion to have the case thrown out.

“Defendant argues that Named Plaintiffs fail to state a claim under the integration mandate because they do not allege that state treatment professionals determined that community placement is appropriate for them,” according to the statement. “But federal district courts have ‘universally rejected’ the argument that an assessment from a state treatment professional is required to state a claim under the integration mandate.”

“To the extent any parent or guardian consented to a foster child’s placement in a PRTF, that prior consent has no bearing on whether the parent or guardian opposes community-based treatment under the integration mandate,” the US attorney argued. “Whether a person consents to institutional treatment is an entirely different inquiry from whether the person would accept community-based services if those services were available.”

“A decision by DHHS or its agents to place a foster child in a PRTF also does not defeat an integration mandate claim,” according to the statement. “A state cannot abdicate its obligation to provide services in integrated settings to children in its custody simply by asserting that it chose institutional placement for those children. … [C]ourts routinely hold that it would be ‘illogical to make plaintiffs suing a state rely on an opinion from that state’s professionals,’ and the same reasoning applies here. Allowing a public entity to defeat an integration mandate claim by arguing that it selected institutionalization for children in its custody would render the integration mandate meaningless for those children.”

The statement suggested that the plaintiffs challenging DHHS rules have met the legal standard for the case to proceed.

“These allegations are enough to establish a causal connection between DHHS’s actions and Named Plaintiffs’ resulting segregation or risk of segregation,” the U.S. attorney’s office argued. “Plaintiffs have likewise cleared the low bar for pleading redressability, because an injunction requiring DHHS to modify its service system — so that community-based services are actually available to children who need them — would more than likely address Named Plaintiffs’ injuries.”

Kinsley, the named defendant in the suit, took over DHHS’ top job in January 2022.

“Within a month of his appointment, Secretary Kinsley reorganized the Department to create a new Division of Child and Family Well-Being, bringing together programs and staff operating across multiple department divisions to support the physical, behavioral and social needs of children,” according to a memorandum filed in March 2023. “In March 2022, the Child Welfare and Family Well-Being Transformation Team released a ‘Coordinated Action Plan for Better Outcomes’ focused on what it recognized as an ‘urgent crisis of the growing number of children with complex behavioral health needs who come into the care of child welfare services.’”

Kinsley cited “improving services for children with behavioral health needs in the foster care system” as one of his top priorities during a confirmation hearing in June 2022.

“It is a long-term, herculean effort, in which DHHS plays an important, but not solitary, role,” according to Kinsley’s lawyers.

“Before any of these efforts could bear fruit – indeed, before Secretary Kinsley had been in his position for even a year – Plaintiffs brought suit,” the memo continued. “Plaintiffs claim that DHHS has a ‘policy or practice’ of discriminating against foster children with mental health impairments; of ‘prioritizing or permitting’ placement of foster youth with severe behavioral and mental health needs in psychiatric residential treatment facilities; of ‘permitting shortages’ of community-based placements and services; and of failing to make ‘reasonable modifications’ to those policies and practices that would enable more foster children with behavioral health needs to be served in the community.”

“In other words, the Complaint alleges that the DHHS is failing to address the issues on which Secretary Kinsley, DHHS, and other stakeholders across the State have been working tirelessly over the last 14 months,” the secretary’s lawyers wrote.

Kinsley argued that the plaintiffs’ allegations under the Americans with Disabilities Act and Rehabilitation Act fail “to state a claim upon which relief can be granted.” He also argued that state courts already have ruled on whether it was necessary to place the named plaintiffs in the psychiatric treatment facilities.

“Finally, the only relief sought in the Complaint is systemic change: an increase in placement options and treatment services that will likely take years to fully fund and develop,” according to the memorandum. “The individual Named Plaintiffs have not asked for individual relief, and cannot demonstrate that the injury they have purportedly suffered would likely be redressed were the Court to grant that systemic relief. Accordingly, under fundamental precepts of federal court jurisdiction, they do not have standing.”