Robert Atkinson, Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A16-1688

Robert Atkinson,
Appellant,

vs.

Minnesota Department of Human Services,
Respondent,

and

Scott County Social/Human Services Agency,
Respondent.

Filed June 5, 21017
Affirmed
Johnson, Judge

Scott County District Court
File No. 70-CV-15-21321

Jennifer M. Moore, Moore Family Law, Plymouth, Minnesota (for appellant)

Lori Swanson, Attorney General, Patricia Sonnenberg , Ali Patrick Afsharjavan, Assistant
Attorneys General, St. Paul, Minnesota (for respondent)

Considered and decided by Johnson, Presiding Judge; Larkin, Judge; and Reilly,
Judge.

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U N P U B L I S H E D O P I N I O N
JOHNSON, Judge
Robert Atkinson’s daughter, who has a developmental disability, received services
through a state program that assesses a fee on parents based on their taxable income, using
progressive rates. Atkinson experienced a spike in income in a single year because he
received money from a lump-sum settlement of an employment-discrimination lawsuit. As
a result, Atkinson paid fees on the lump-sum settlement at a higher rate than he would have
paid if he had received that income over multiple years. He challenges the constitutionality
of the statutory scheme by which the fee was calculated, arguing that the use of progressive
rates in his particular circumstances violates his constitutional rights to substantive due
process and equal protection. We conclude that the state’s application of the governing
statute does not violate Atkinson’s constitutional rights. Therefore, we affirm.
FACTS
Atkinson and his wife have three children, including a daughter who was born in
1997 with Down s yndrome. She requires constant supervision and assistance with all
aspects of daily life. When she was of eligible age, some of her “significant and expensive
ongoing medical care” was provided by the state’s Medical Assistance (MA) program. The
cost of the MA-provided services that were not covered by insurance was approximately
$75,000 per year.
Under state law, children with developmental disabilities are entitled to receive
services through the MA program regardless of family income. See Minn. Stat. § 252.27,
subd. 1 (2016). But the department of human services (DHS) is required to recoup a portion
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of the costs of the program from parents of children receiving services . See Minn. Stat.
§ 252.27, subd. 2 (2016). A family’s “ability to pay” is determined by reference to “the
adjusted gross income of the natural or adoptive parents determined according to the
previous year’s federal tax form.” Id., subd. 2a(d) (2016). Using a parent’s adjusted gross
income (AGI), DHS calculates the parent’s fee by applying a rate determined by statute ,
which is progressive in that parents with higher incomes are assessed fees at higher rate s.
Id., s ubd. 2a(b). For example, a parent with income at the poverty level would pay a
nominal fee of $4 per month, a parent with income of five times the poverty level would
pay a fee equal to 7.5% of AGI, and a parent with income of ten times the poverty level
would pay a fee equal to 12.5% of AGI. See Minn. Stat. § 252.27, subd. 2a(b)(1) -(4)
(2012). During the relevant period, the federal poverty guidelines provided that a family
of five would be in poverty below an AGI of $27,010. Annual Update of the HHS Poverty
Guidelines, 77 Fed. Reg. 4034 (Jan. 26, 2012); see also 42 U.S.C. § 9902(2) (2012).
Parents of children receiving services through the program may reduce their income
for purposes of the parental -fee calculation in three specified circumstances . First, a
parent’s AGI is adjusted downward by $2,400 if the disabled child lives in the parent’s
home. Minn. Stat. § 252.27, subd. 2a(b). Second, a parent may apply for a “[v]ariance for
tax status” if the parent can show that “there is a gross disparity between the amount of
income . . . allocated to the parents and the amount of cash di stributions made to the
parents.” Minn. R. 9550 .6230, subp. 2 (2013) . And third, a parent may receive a
“[v]ariance for undue hardship” if certain expenditures were made to accommodate a
disabled child and were not reimbursed. Id., subp. 1a.
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In some years in the late 1990s and early 2000s , when the Atkinsons’ AGI was
approximately $50,000, they were assessed parental fees of only $25 per month (or $300
per year). In fiscal years 2007 through 2010, the Atkinsons were assessed parental fees of
approximately $950 per month (or $11,400 per ye ar) based on AGI numbers of
approximately $150,000. In fiscal year 2011, the Atkinsons were assessed a parental fee
of $1,638 per month (or $19,656 per year) based on an AGI of approximately $194,000.
In November 2010 , a class -action employment -discrimination lawsuit was
commenced against Atkinson’s former employer. The complaint alleged claims under the
federal Age Discrimination in Employment Act (ADEA) and the Minnesota Human Rights
Act (MHRA). The lawsuit was resolved by a settlement in 2012. Because he was a
member of the class, Atkinson received a lump-sum settlement payment of $ 195,149,
which increased the family’s 2012 AGI to $355,774.
In January 2015, DHS gave notice to the Atkinsons that their parental fee for fiscal
year 2014 (which ran from July 1, 2013, to June 30, 2014) would be $3,681 per month (or
$44,172 per year) based on the family’s 2012 AGI. Atkinson pursued an administrative
appeal. A DHS judge conducted four hearings over a period of approximately four months.
Atkinson provided amended tax returns, which resulted in a recalculation of the parental
fee, reducing it somewhat to $3,367 per month (or $40,400 per year). Atkinson argued, in
part, to the DHS judge that the settlement proceeds were “a one-time anomaly” that should
not be attributed to his income. DHS argued in response that the governing statute required
the agency to include the settlement proceeds in Atkinson’s income. In August 2015, the
DHS judge issued an order that states, “There is no legal authority to exclude the settlement
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income.” Accordingly, the DHS judge recommended that Atkinson’s parental fee be
upheld. The commissioner of DHS adopted the DHS judge’s recommendation. Atkinson
requested reconsideration, which was denied.
In October 2015, Atkinson commenced an action in the district court to seek judicial
review of the commissioner’s order. See Minn. Stat. § 256.045, subd. 7 (2016). Atkinson
argued to the district court that the commissioner’s decision was arbitrary and capricious
and that including the settlement proceeds in his income violated his constitutional rights
to substantive due process and equal protection . He requested a recalculation of his
parental fee for fiscal year 2014 based on his 2012 AGI without the settlement proceeds.
The district court reasoned that “[t]he settlement proceeds clearly qualify as income under
the statutory definition” and that “DHS did not act arbitrarily or capriciously by following
this clear statutory definition.” The district court also rejected Atkinson’s argument that
DHS’s inclusion of the settlement proceeds in his income violated his constitutional rights.
Accordingly, the district court affirmed the commissioner’s decision. Atkinson appeals.
D E C I S I O N
Our review in a case of this type is authorized by the Minnesota Administrative
Procedure Act. See Minn. Stat. § 14.63 (2016) ; Mammenga v. State Dep’t of Human
Servs., 442 N.W.2d 786, 789 (Minn. 1989); Kaplan v. Washington Cty. Cmty. Soc. Servs.,
494 N.W.2d 487, 489 (Minn. App. 1993). When we review a district court’s decision to
affirm or reverse an agency determination, we independently examine the agency’s
decision. Reserve Mining Co. v. Herbst , 256 N.W.2d 808, 824 (Minn. 19 77). We may
reverse or modify the agency decision if the agency exceeded its authority in making the
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decision or based the decision on unlawful procedure, if the decision was affected by an
error of law or was not supported by substantial evidence, or if the decision was arbitrary,
capricious, or in violatio n of the constitution. Minn. Stat. § 14.69 (2016) ; Estate of
Atkinson v. Minnesota Dep’t of Human Servs., 564 N.W.2d 209, 213 (Minn. 1997).
Atkinson argues that DHS’s method of calculating his income for purposes of his
2014 parental fee violates his constitutional rights to due process and equal protection. His
arguments are focused on the progressive nature of the rates that are used to determine the
parental fee in light of his irregular income. More specifically, he contends that he paid an
unduly large parental fee in fiscal year 2014 because his income in 2012 was increased by
his receipt of a lump -sum settlement, which was intended to compensate him for lost
income in multiple prior years, thereby causing more of his income to be subject to a higher
rate than if he had received a more consistent income stream during the relevant time
period. Atkinson does not attempt to quantify the specific amount by which he was
disadvantaged, but the district court did not dispute his assertion that he was disadvantaged,
and there is no such dispute on appeal. We note that “Minnesota statutes are presumed
constitutional.” State v. Fitch, 884 N.W.2d 367, 373 (Minn. 2016). We apply a de novo
standard of review to a district court’s ruling on the constitutionality of a statute. Gluba ex
rel. Gluba v. Bitzan & Ohren Masonry, 735 N.W.2d 713, 719 (Minn. 2007).
I. Due Process
Atkinson first argues that DHS’s method of calculating his income for purposes of
his 2014 parental fee violates his constitutional right to due process. He contends that the
progressive rate structure of the statute is “unfair” because it amplifies the effect of the age
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discrimination that he asserts was remedied by the lump-sum settlement. He does not base
his argument on the procedures used by DHS when determining his 2014 parental fee.
Accordingly, we construe his argument to be an assertion of his right to substantive due
process, as he argued below, not his right to procedural due process.
The doctrine of substantive due process is based on the Due Process Clause of the
Fourteenth Amendment to the United States Constitution. See U.S. Const. amend. XIV ,
§ 1. The doctrine “protects individual s from certai n arbitrary, wrongful government
actions regardless of the fairness of the procedures used to implement them.” In re
Linehan, 594 N.W.2d 867, 872 (Minn. 1999) (quotations omitted). In the context of a state
program conferring benefits on a person , “due process demands that a statute not be an
unreasonable, arbitrary or capricious interference and requires at minimum that the statute
bear a rational relation to the public purpose sought to be served.” Obara v. Minnesota
Dep’t of Health, 758 N.W.2d 873, 879 (Minn. App. 2008) (quotation omitted).
The first step of the analysis is to ask whether there is a fundamental right at stake.
See Northwest v. LaFleur, 583 N.W.2d 589, 591 (Minn. App. 1998), review denied (Minn.
Nov. 17, 1998). If so, “the state must show that its action serves a compelling government
interest.” Id. (citing In re Blodgett , 510 N.W.2d 910, 914 (Minn. 1994)). If there is no
fundamental right at stake, we ask whether the statute has a rational basis, which requires
the state to show only that the statute “is a reasonable means to a permissive object.” State
v. Bernard , 859 N.W.2d 762, 773 (Minn. 2015) (quotation omitted), aff’d sub nom. ,
Birchfield v. North Dakota, 136 S. Ct. 2160 (2016). The supreme court recently stated that
it is “reluctant to expand the concept of substantive due process because guideposts for
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responsible decision-making in this unchartered area are scarce and open-ended.” State v.
Hill, 871 N.W.2d 900, 905 -06 (Minn. 2015) (quotation omitted) ; see also Gustafson v.
Commissioner of Human Servs., 884 N.W.2d 674, 683 (Minn. App. 2016).
The district court reasoned that the “right to have certain funds exempt from a fee
sharing calculation is not a fundamental right” and applied rational-basis review. Atkinson
does not challenge that part of the district court’s reasoning. Accordingly, the question is
whether DHS’s method of calculating Atkinson’s income for purposes of his 2014 parental
fee is “a reasonable means to a permissive object.” See Bernard, 859 N.W.2d at 773.
The district court reasoned that, in general, the parental-fee statute serves the public
purpose of “limiting the overall cost of the program by collecting a fee from tho se who
benefit from the program” and that a progressive fee structu re ensures that “all disabled
children are able to receive the services they need” while requiring each family to pay an
amount that it can afford. Atkinson does not challenge the district court’s reasoning insofar
as it justifies a parental fee and the use of federal tax law to determine a parent’s income.
The district court also reasoned, more specifically, that using a parent’s AGI is
“rationally related to a public purpose” because “[t]he State should not have to reinvent the
wheel when there are already thousands of pages of federal code determining what should
be counted as income.” Atkinson challenges this part of the district court’s reasoning. He
contends that the statute is unconstitutional because it does not contain a “mechanism to
mitigate th[e] effect” of progressive rates on a person whose income over a multi -year
period is recognized for tax purposes in a single year.
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The district court’s reasons for rejecting Atkinson’s argument are valid . The
legislature and DHS created a limited number of exceptions to the AGI-based formula for
a limited number of unusual situations. See Minn. Stat. § 252.27, subd. 2a (2016); Minn.
R. 9550.6230, subp. 1a. Atkinson essentially questions the judgment of the legislature and
DHS in not going further by creating additional exceptions. As the district court reasoned,
it would be impractical, if not impossible, for the legislature or DHS to anticipate all
possible situations that might be encountered by parents of disabled children. The creation
of an exception for every unusual situation is not a constitutional imperative under the
doctrine of substantive due process . As this court has noted, “a statute is not rendered
unconstitutional simply because it ‘ is not made with mathematica l nicety or because in
practice it results in some inequality.’” Doll v. Barnell, 693 N.W.2d 455, 463 (Minn. App.
2005) (quoting Dandridge v. Williams, 397 U.S. 471, 485 , 90 S. Ct. 1153, 1161 (1970) ),
review denied (Minn. June 14, 2005 ). In this particular case, the absence of additional
exceptions is “a reasonable means to a permissive object.” See Bernard, 859 N.W.2d at
773.
Thus, the district court did not err by concluding that DHS’s method of calculating
Atkinson’s income for purpos es of his 2014 parental fee does not violate his right to
substantive due process.
II. Equal Protection
Atkinson also argues that DHS’s method of calculating his income for purposes of
his 2014 parental fee violates his constitutional right to equal protection. He contends that
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DHS’s method treats him differently than it treats parents who did not receive a lump-sum
settlement as compensation for previous lost income.
The Equal Protection Clause of the United States Constitution provides, “No State
shall . . . deny to any person within its jurisdiction the equal protection of the laws.” U.S.
Const. amend. XIV, § 1; see also Minn. Const. art. I, § 2. The federal and st ate equal-
protection doctrines are “analyzed under the same principles.” State v. Johnson , 813
N.W.2d 1, 11 (Minn. 2012) (quotation omitted). Neither doctrine absolutely “‘forbid[s]
classifications’”; both doctrines “‘keep[] governmental decisionmakers f rom treating
differently persons who are in all relevant aspects alike.’” Id. at 12 (quotation omitted). In
short, “similarly situated individuals shall be treated alike, but only invidious
discrimination is deemed constitutionally offensive.” State v. Garcia, 683 N.W.2d 294,
298 (Minn. 2004) (quotation omitted).
A threshold requirement of an equal-protection claim is that two classes of persons
are similarly situated but treated differently. Johnson, 813 N.W.2d at 12 ; Schatz v.
Interfaith Care Ctr., 811 N.W.2d 643, 656 (Minn. 2012). A challenger’s failure to satisfy
the threshold requirement is dispositive. Schatz, 811 N.W.2d at 656-57; State v. Cox, 798
N.W.2d 517, 521 (Minn. 2011); Doll, 693 N.W.2d at 462-63; cf. In re Guardianship o f
Durand, 859 N.W.2d 780, 784 & n.3 (Minn. 2015 ). If the threshold requirement is
satisfied, we ask whether there is a “rational basis” for the different treatment, unless the
statute implicates a “suspect classification or a fundamental right.” Garcia, 683 N.W.2d
at 298.
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The district court reasoned that Atkinson did not satisfy the threshold requirement
because the statute treats “all individuals the same by basing their fee on the adjusted gross
income reflected in thei r most recent year’s tax return ” and he “is not being treated
differently than any similarly situated individual .” On appeal, Atkinson appears to argue
that victims of employment discrimination who succeed in recouping damages from an
employer are similar to persons who are not victimized by emp loyment discrimination.
DHS argues in response that Atkinson and persons like him are not similar to parents who
have not experienced lost income due to discrimination because the two classes of persons
receive income at different times, which means that they have a dissimilar ability to pay a
parental fee in the following fiscal year. If income over a longer, multi -year period were
the inquiry, Atkinson might be able to show that the two classes of persons he has identified
are similarly situated. But t he parental fee is calculated annually, based on income in the
prior tax year. See Minn. Stat. § 252.27, subd. 2a. Given that method, Atkinson is not
situated similarly to a person who is continuously employed at relatively consistent levels
of income. Thus, Atkinson cannot satisfy the threshold requirement, which is a sufficient
reason to reject his equal-protection argument.
Even if Atkinson could satisfy the threshold requirement, he would need to
demonstrate that the state’s dissimilar treatment of similarly situated classes of persons is
not justified. “We apply strict scrutiny to a legislatively-created classification that involves
a suspect classification or a fundamental right.” Greene v. Commissioner of Minnesota
Dep’t. of Human Servs ., 755 N. W.2d 713, 725 (Minn. 2008). Under strict scrutiny, the
classification must be narrowly tailored to further a compelling government interest. Id.
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But if no suspect classification or fundamental right is involved, the statute need only have
a rational basis for the dissimilar treatment. Kolton v. County of Anoka, 645 N.W.2d 403,
411 (Minn. 2002). The district court reason ed that Atkinson’s proposed classification is
not a suspect classification, apparently because age is not a suspect classification . See In
re Estate of Turner, 391 N.W.2d 767, 769 (Minn. 1986) (citing Massachusetts Bd . of
Retirement v. Murgia, 427 U.S. 307, 312 -13, 96 S. Ct. 2 562, 2566 (1976) (other citation
omitted)). On appeal, Atkinson does not challenge this part of the district court’s
reasoning. Accordingly, the question would be whether DHS’s method of calculating
Atkinson’s income for purposes of his 2014 parental fee has a rational basis.
Under Minnesota law, a statute has a rational basis if:
(1) The distinctio ns which separate those included within the
classification from those excluded must not be manifestly
arbitrary or fanciful but must be genuine and substantial,
thereby providing a natural and reasonable basis to justify
legislation adapted to peculiar con ditions and needs; (2) the
classification must be genuine or relevant to the purpose of the
law; that is there must be an evident connection between the
distinctive needs peculiar to the class and the prescribed
remedy; and (3) the purpose of the statute must be one that the
state can legitimately attempt to achieve.

State v. Russell, 477 N.W.2d 886, 888 (Minn. 1991) (quotation omitted). In this case, the
statute would satisfy the first requirement of this test because t he distinctions between
parents who receive income consistently over a multi-year period and parents who receive
income in a lump-sum settlement are not “manifestly arbitrary or fanciful” but, rather, are
“genuine and substantial.” See id. The state’s use of AGI provides an objective measure
by which the state can readily calculate a parent’s ability to pay a fee. The statute also
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would satisfy the second requirement because the means of classification are genuine and
directly relevant to the purpose of the law in that there is a direct connection between AGI
and a parent’s ability to pay a fee. See id. In addition, the statute would satisfy the third
requirement because the purpose of the statute (to recover the costs of the program from
parents according to their ability to pay) is one that the state may “legitimately attempt to
achieve.” See id. In short, Atkinson cannot satisfy any of the requirements of Minnesota’s
rational-basis test. Accord Brainerd Area Civic Ctr . v. Commissioner of Revenue , 499
N.W.2d 468, 470 -72 (Minn. 1993) (concluding that graduated gross receipts tax on
gambling revenues did not violate right to equal protection). Thus, even if Atkinson were
able to satisfy the threshold requirement , his claim nonetheless would fail beca use the
statute has a rational basis.
Thus, the district court did not err by concluding that DHS’s method of calculating
Atkinson’s income for purposes of his 2014 parental fee does not violate his right to equal
protection.
Affirmed.