Court Dismisses Fraud Claim Against Company That Provides Assistance to Medicaid Applicants

A U.S. district court dismisses fraud claims based on the unauthorized practice of law against a New Jersey company that provides assistance to Medicaid applicants, ruling that the estate of a nursing home resident did not provide evidence that the company misled the estate about performing legal work for it. The Estate of Cotton v. Senior Planning Services, LLC (U.S. Dist. Ct., D. N.J., No. 19-8921 (FLW), Nov. 30, 2020).

After Lester Cotton was admitted to a nursing home, the facility referred Mr. Cotton’s daughter, Jennifer Cotton, to Senior Planning Services (SPS), a company that provided assistance to applicants applying for Medicaid, to assist Mr. Cotton in becoming Medicaid-eligible.  Under New Jersey law, non-attorney advisors cannot provide legal advice on strategies to become eligible for Medicaid benefits, including providing advice on spending down resources, so SPS contracted with a law firm to provide advice. SPS charged Ms. Cotton $6,500 and provided her with a “spend-down analysis” and requested an additional $6,500 to develop a long-term care strategy. Ms. Cotton ended her relationship with SPS and demanded a refund. 

After Mr. Cotton died, his estate filed a class action lawsuit against SPS and the law firm, alleging the company violated the New Jersey Consumer Fraud Act (NJCFA) as well as claims for violation of fiduciary duty and unjust enrichment. A family who used SPS’s services in Connecticut also joined the lawsuit. The estate argued that SPS committed fraud by deceptively claiming they were authorized to provide legal advice, claiming they were representing the consumer’s best interest when they were actually representing the long-term care facility, and concealing and omitting information about their conflict of interest with long-term care facilities. SPS filed a motion to dismiss. 

The United States District Court, District of New Jersey, grants the motion to dismiss in part, holding that the estate did not present evidence that SPS violated the NJCFA. According to the court, there was no evidence that SPS promised it would perform legal work on behalf of the estate and without “specific factual allegations demonstrating that SPS did, in fact, perform actions which could be construed as legal work, the Court cannot find that [the estate has] adequately alleged an unlawful practice sufficient to support their NJCFA claim.” The court granted the estate leave to file an amended complaint. 

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