from the Iowa District Court for Polk County, Karen A.
Department of Human Services appeals, and Terri Endress
cross-appeals, the district court's ruling on judicial
review. AFFIRMED IN PART, REVERSED IN PART, AND
J. Miller, Attorney General, and Tabitha J. Gardner,
Assistant Attorney General, for appellant.
W. Nelson of Sellers Galenbeck & Nelson, Des Moines, for
Considered by Vogel, C.J., and Potterfield and Doyle, JJ.
appeal, like Pfaltzgraff v. Iowa Department of Human
Services, No. 18-0189, 2019 WL__, at *__ (Iowa Ct. App.
June 19, 2019), also filed today, concerns attempts by the
Iowa Department of Human Services (DHS) to recoup payments to
childcare providers under the Child Care Assistance Program
(CCAP). The district court granted Terri Endress's
petition for judicial review after determining the DHS
violated Endress's procedural due process rights and
exceeded its statutory authority in promulgating the
recoupment rules, which it determined are unconstitutionally
vague. The DHS appeals. Endress cross-appeals the district
court's determination that she is not entitled to
Background Facts and Proceedings.
was a registered childcare provider who had signed an
agreement allowing the DHS to pay her directly for childcare
services she provided to families eligible for the CCAP. In
July 2014, the DHS sent a notice to Endress stating it would
cancel the agreement because she submitted claims for which
she was not entitled. Specifically, the DHS alleged that on
three occasions, Endress had more children present in her
daycare than was allowed under her child home development
registration. Endress appealed the decision to cancel her
CCAP agreement. The agency issued a final decision in
November 2014, affirming the cancellation.
her appeal was pending, Endress elected to continue receiving
CCAP payments. Both the notice of cancellation of her CCAP
agreement and the notice of her appeal set out her right to
continue receipt of CCAP payments during the appeal process
but cautioned, "Any benefits you get while your appeal
is being decided may have to be paid back if the
Department's action is correct."
April 3, 2017, the DHS sent Endress a notice alleging she
owed in excess of $16, 000 for CCAP payments made from July
2014 to November 2014 while her appeal was pending. Endress
appealed, and the agency affirmed the computation of the
overpayment. She petitioned for judicial review, and
the district court granted her petition after determining the
DHS exceeded its statutory authority in promulgating the
recoupment provisions of its administrative rules, the rules
are unconstitutionally vague, and the rules violated
Endress's procedural due process rights. However, it
denied Endress's request for attorney fees.
Scope and Standard of Review.
a judicial review action on appeal, our job is to determine
whether in applying the applicable standards of review under
section 17A.19(10) [(2017)], we reach the same conclusions as
the district court." Colwell v. Iowa Dep't of
Human Servs., 923 N.W.2d 225, 238 (Iowa 2019),
reh'g denied (Mar. 8, 2019).
We can grant relief from agency action if the action is
"[u]nconstitutional on its face or as applied or is
based upon a provision of law that is unconstitutional on its
face or as applied." We do not give any deference to the
agency with respect to the constitutionality of a statute or
administrative rule because it is entirely within the
province of the judiciary to determine the constitutionality
of legislation enacted by other branches of government.
Accordingly, we review constitutional issues in agency
proceedings de novo.
NextEra Energy Res. LLC v. Iowa Utils. Bd., 815
N.W.2d 30, 44 (Iowa 2012) (alteration in original) (internal
Procedural Due Process.
Fourteenth Amendment's procedural protection of property
is a safeguard of the security of interests that a person has
already acquired in specific benefits." Bd. of
Regents v. Roth, 408 U.S. 564, 576 (1972). The district
court concluded the DHS violated Endress's right to
procedural due process by seeking recoupment without
providing adequate notice. The DHS challenges this
Existence of a Property Right.
analyzing a procedural due process claim, we first look to
see if a protected liberty or property interest is at issue.
See Bowers v. Polk Cty. Bd. of Supervisors, 638
N.W.2d 682, 691 (Iowa 2002). The district court determined
that the DHS has a statutorily created obligation to pay for
provider services during an appeal. The DHS challenges this
determination, contending no property right is at issue
because Endress was not entitled to the CCAP payments.
interests "are created and their dimensions are defined
by existing rules or understandings that stem from an
independent source such as state law- rules or understandings
that secure certain benefits and that support claims of
entitlement to those benefits." See Roth, 408
U.S. at 576. Such sources include "statutes,
regulations, and ordinances, or express or implied
contracts." Lee v. Halford, 540 N.W.2d 426, 429
(Iowa 1995) (quoting Orloff v. Cleland, 708 F.2d
372, 377 (9th Cir. 1983)). A statute or administrative
regulation creates a property interest if it contains
"explicit mandatory language," such as
"specific directives to the decisionmaker that if the
regulations' substantive predicates are present, a
particular outcome must follow." Kentucky Dep't
of Corrections v. Thompson, 490 U.S. 454, 463 (1989)
(addressing the existence of a liberty interest); see
also Town of Castle Rock v. Gonzales, 545 U.S.
748, 756 (2005) (citing Thompson for the proposition
that "a benefit is not a protected entitlement if
government officials may grant or deny it in their
discretion" in addressing the existence of a property
interest); Washington Legal Clinic for the Homeless v.
Barry, 107 F.3d 32, 36 (D.C. Cir. 1997) ("To
determine whether a particular statute creates a
constitutionally protected property interest, we ask whether
the statute or implementing regulations place
'substantive limitations on official
discretion.'"). "When a government must follow
mandatory laws or regulations which limit its discretion to
make a decision in any way or for any reason, those laws or
regulations can create a property right which is deprived if
those regulations are not followed." Brands v.
Sheldon Comm. School Dist., 671 F.Supp. 627,
631 (N.D. Iowa 1987) (citing Hewitt v. Helms, 459
U.S. 460, 471-72 (1983)).
Iowa Code section 237A.13(4) states:
The department's billing and payment provisions for the
program shall allow providers to elect either biweekly or
monthly billing and payment for child care provided under the
program. The department shall remit payment to a provider
within ten business days of receiving a bill or claim for
services provided. However, if the department determines that
a bill has an error or omission, the department shall notify
the provider of the error or omission and identify any
correction needed before issuance of payment to the provider.
The department shall provide the notice within five business
days of receiving the billing from the provider and shall
remit payment to the provider within ten business days of
receiving the corrected billing.
of the term "shall" indicates the legislature is
imposing a duty. Iowa Code § 4.1(30); Kopecky v.
Iowa Racing & Gaming Comm'n, 891 N.W.2d 439,
443-44 (Iowa 2017). Accordingly, section 237A.13 requires the
DHS to either (1) notify providers of an error in billing
within five days of receipt a bill and before issuing payment
or (2) pay for the services provided within ten business days
of receipt of the bill. The language of section 237A.13(4)
contains an explicit mandate and limits the DHS's
exercise of official discretion, as is required to create a
the DHS's own regulations require that it pay for
services provided pending a final decision on appeal from a
proposed adverse action. See Iowa Admin. Code r.
441-7.9. On this basis, both state law and
administrative regulation create a property interest in the
payments made under the CCAP.
notes that section 237A.13(8) states:
Nothing in this section shall be construed as or is intended
as, or shall imply, a grant of entitlement for services to
persons who are eligible for assistance due to an income
level or other eligibility circumstance addressed in this
section. Any state obligation to provide services pursuant to
this section is limited to the extent of the funds
appropriated for the purposes of state child care assistance.
argues this provision makes it clear that the legislature did
not intend to direct the DHS to make CCAP payments, only to
ensure that the payments were timely reconciled once bills
were submitted to the DHS. Although we agree that section
237A.13(8) provides the DHS with discretion concerning which
families it provides CCAP benefits, this discretion does not
extend to the payments made to CCAP providers. This
subsection addresses "persons who are eligible for
assistance," not providers. Iowa Code § 237A.13(8).
Once the DHS has exercised its discretion under section
237A.13(8) to determine which ...