Twyla Leach d/b/a Home Care Staffing v. Minnesota Department of Human Services
Twyla Leach (Martin) d/b/a Home Care Staffing v. Minnesota Department of Human Services, UCare Minnesota, and HealthPartners, Inc.
- Paul Magnuson
- 0:25-cv-03220
- U.S. District Court · District of Minnesota
- 10
In Twyla Leach (Martin) d/b/a Home Care Staffing v. Minnesota Department of Human Services, UCare Minnesota, and HealthPartners, Inc., Judge Magnuson denied the plaintiff's request for emergency relief to stop the withholding of Medicaid payments during a fraud investigation, dismissed the claims against the two managed-care companies for lack of standing, and denied the plaintiff's motion to add new documents to her complaint.
Medicaid providers who have had payments suspended due to a credible allegation of fraud under investigation, particularly small or solo home care businesses; pro se litigants who may use AI tools for legal research; managed-care organizations acting on state agency directives.
What happened
In Twyla Leach (Martin) d/b/a Home Care Staffing v. Minnesota Department of Human Services, UCare Minnesota, and HealthPartners, Inc., the plaintiff, a Minnesota Medicaid provider of housing stabilization services, sued after the Minnesota Department of Human Services (DHS) suspended payments to her business following a determination that there was a credible allegation of fraud and an ongoing investigation into overbilling. The two managed-care organizations—UCare Minnesota and HealthPartners, Inc.—also stopped paying her as required by law once DHS placed a hold on her account. The plaintiff asked the federal court to order the payments released immediately, stop investigators from contacting her clients, and declare the payment hold unconstitutional.
The court first found that the plaintiff lacked standing—the legal right to sue—against UCare and HealthPartners because their suspension of payments was simply required by law and was not an independent injury traceable to those companies. As a result, those claims were dismissed for lack of jurisdiction. The court also declined to apply a legal doctrine called Younger abstention (which normally prevents federal courts from interfering with ongoing state proceedings) because no state court case had yet been filed, but it sharply warned the plaintiff—who is representing herself—that a legal brief she submitted appeared to contain a fabricated case quotation, likely generated by an artificial intelligence tool, and cautioned that future such submissions could be struck and could lead to further consequences.
On the core request for emergency injunctive relief against DHS, Judge Magnuson denied the motion on all four required factors. The court found the plaintiff showed no realistic chance of winning her case because federal law actually requires DHS to withhold payments when there is a credible fraud allegation under investigation, and the plaintiff provided no legal basis to override that requirement. The court also found no irreparable harm, noting that economic losses alone are generally not enough, the payment hold does not stop her from serving clients, and if the investigation ends without finding fraud, all withheld payments would be returned to her. The balance of harms and the public interest in protecting against Medicaid fraud also weighed against granting relief. Finally, the court denied the plaintiff's motion to add new documents to her complaint because the documents she sought to add—including materials she created herself for the lawsuit—do not qualify as supplemental pleading material under the applicable court rule.
The detailed version
- Twyla Leach (Martin) d/b/a Home Care Staffing v. Minnesota Department of Human Services, UCare Minnesota, and HealthPartners, Inc., Civ. No. 25-3220 (PAM/SGE)
- Paul A. Magnuson, United States District Court Judge
- October 17, 2025
Background
Plaintiff Twyla Leach (Martin), doing business as Home Care Staffing, is enrolled as a Minnesota Health Care Programs provider authorized to provide housing stabilization services. Defendant Minnesota Department of Human Services (DHS) administers Medicaid in Minnesota. Defendants UCare Minnesota and HealthPartners, Inc. are managed-care organizations (MCOs) that contract with DHS to administer payments to vendors and seek Medicaid reimbursements.
In summer 2025, DHS determined there was a credible allegation of fraud against Plaintiff for overbilling and initiated an investigation. DHS also referred the matter to law enforcement. On August 1, 2025, DHS issued a Notice of Payment Withhold, and because DHS placed a hold on Plaintiff, both UCare and HealthPartners suspended payments as required by law. Plaintiff submitted written evidence challenging the withhold; DHS reviewed and upheld it.
Plaintiff filed suit and moved for emergency injunctive relief. She also moved to supplement her amended complaint. Her claims include unjust enrichment, violations of federal Medicaid laws, due process violations against DHS, breach of contract against UCare and HealthPartners, and tortious interference with contract against DHS. She sought to (1) enjoin the withholding of payments, (2) order immediate release of withheld funds, (3) enjoin investigators from contacting her clients, and (4) obtain a declaratory judgment that the withhold violates the Due Process Clause and federal Medicaid law.
Preliminary Injunction Standard vs. TRO
Because Defendants received notice and had an opportunity to respond, the court treated the motion as one for a preliminary injunction under Federal Rule of Civil Procedure 65(a)–(b), not a temporary restraining order.
Standing as to UCare and HealthPartners
The court found Plaintiff failed to establish Article III standing against UCare and HealthPartners. To establish standing, a plaintiff must show (1) a concrete, particularized, actual or imminent injury in fact; (2) that the injury is fairly traceable to the defendant's conduct; and (3) that a favorable court decision would likely redress the injury. UCare argued—and the court agreed—that its ministerial compliance with DHS's legal mandate to withhold payments does not constitute an injury traceable to UCare or HealthPartners. Plaintiff did not respond to UCare's standing argument, which the court treated as a waiver. Because the court lacked subject-matter jurisdiction, Plaintiff's claims against UCare and HealthPartners were dismissed (without specification of whether with or without prejudice, though it was on jurisdictional grounds), and the MCOs' pending motions to dismiss were found moot.
Younger Abstention
The court declined to apply the Younger abstention doctrine—which generally requires federal courts to refrain from interfering with pending state proceedings involving important state interests—because no underlying state judicial proceeding had been filed (only investigations were ongoing). The court also noted that DHS lacks authority to adjudicate the constitutional claims Plaintiff raised. However, the court independently flagged serious concerns about Plaintiff's pro se briefing: a legal citation in her supplementary memorandum contained a quotation not found in the cited case and not locatable elsewhere, suggesting possible use of an artificial intelligence tool that generated a fabricated ('hallucinated') citation. The court extended leniency given Plaintiff's pro se status but warned that future such submissions would be stricken and could result in further sanctions.
Preliminary Injunction Analysis (Dataphase Factors)
1. Likelihood of success on the merits: The court found Plaintiff showed no fair chance of prevailing. Federal law at 42 C.F.R. § 455.23(a)(1) mandates suspension of Medicaid payments upon a credible allegation of fraud while an investigation is pending. Plaintiff provided no authority supporting a court order overriding that mandate. Additionally, the amended complaint failed to identify the elements of any claim or specific conduct by any Defendant. Plaintiff provided no support for a private right of action under 42 U.S.C. § 1396a or relevant regulations, no support for a protected property interest in Medicaid payments during an active fraud investigation, and no basis for constitutional claims against the private MCO defendants (no allegation of state action or acting under color of law). Plaintiff's motion and reply focused only on bald conclusions rather than the actual claims.
2. Irreparable harm: Plaintiff argued economic injuries (unpaid claims, lost revenue, business hardship) and harm to her clients. The court held that economic loss alone does not constitute irreparable harm unless it threatens the very existence of the business, and Plaintiff's projection of potential business failure was speculative. The court also noted that the withhold does not prevent Plaintiff from providing services—it only delays Medicaid reimbursement—and that all withheld payments would be released if the investigation concludes without a fraud finding. As to harm to Plaintiff's clients, the court held that the irreparable-harm analysis focuses on the moving party, not third parties. Failure to show irreparable harm is independently sufficient to deny a preliminary injunction.
3. Balance of harms and public interest: Both factors weighed against Plaintiff. The court found no reason why Plaintiff's business difficulties outweighed the harm to Defendants if payments were improperly released during an active fraud investigation. The court also found the public interest strongly favored protecting Medicaid programs from fraud and upholding statutory authority to do so.
Motion to Amend/Supplement
Plaintiff moved under Federal Rule of Civil Procedure 15(d) to supplement her complaint with documents created after the lawsuit began, including expert reports prepared for the litigation and a 'Report on Exhibits J-S for Supplemental Critical Evidence' she appeared to have drafted herself. The court denied the motion because Rule 15(d) only permits supplemental pleadings addressing transactions, occurrences, or events that happened after the original pleading—not litigation documents created for the case.
Orders:
- Plaintiff's motion for a temporary restraining order/preliminary injunction is DENIED.
- Claims against UCare Minnesota and HealthPartners, Inc. are DISMISSED for lack of subject-matter jurisdiction.
- UCare's and HealthPartners' motions to dismiss are found MOOT.
- Plaintiff's motion to amend/supplement is DENIED.
Reviewer note from the AI+
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.