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she testified that she would have sought veterinary care if D.J.
became sick. Van Kleek alone exercised control over D.J.’s
position relative to the outside world. That she did not breach
a duty of care by, for example, carelessly leaving the gate open
or bringing D.J. into “the public domain where third parties
reside,”35 does not mean that she owed no duty.
CONCLUSION
Van Kleek was an insured under the policy because she
was “legally responsible” for the Chapmans’ dog. As an
insured, the unambiguous terms of the policy exclude cover-
age of her injury. Accordingly, Farmers is entitled to sum-
mary judgment.
Affirmed.
35
Brief for appellant at 17.
Delores Shaffer, as Guardian and next friend of
Brian Shaffer, an incapacitated person, appellee, v.
Nebraska Department of Health and Human
Services and Vivianne M. Chaumont, director,
Division of Medicaid and Long-Term Care,
appellees, and Coventry H ealth Care
of Nebraska, I nc., appellant.
___ N.W.2d ___
Filed December 19, 2014. No. S-14-165.
1. Administrative Law: Final Orders: Appeal and Error. A judgment or
final order rendered by a district court in a judicial review pursuant to the
Administrative Procedure Act may be reversed, vacated, or modified by an appel-
late court for errors appearing on the record.
2. Administrative Law: Judgments: Appeal and Error. When reviewing an
order of a district court under the Administrative Procedure Act for errors
appearing on the record, the inquiry is whether the decision conforms to the
law, is supported by competent evidence, and is not arbitrary, capricious,
or unreasonable.
3. Judgments: Appeal and Error. Whether a decision conforms to law is by defi-
nition a question of law, in connection with which an appellate court reaches a
conclusion independent of that reached by the lower court.
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4. Administrative Law: Statutes: Appeal and Error. The meaning and interpreta-
tion of statutes and regulations are questions of law for which an appellate court
has an obligation to reach an independent conclusion irrespective of the decision
made by the court below.
5. Judgments: Jurisdiction: Appeal and Error. When a jurisdictional question
does not involve a factual dispute, its determination is a matter of law, which
requires an appellate court to reach a conclusion independent of the decisions
made by the lower court.
6. Actions: Parties: Standing. To have standing, a litigant must have a legal or
equitable right, title, or interest in the subject matter of the controversy.
7. Parties: Judgments: Appeal and Error. An appeal is generally available only
to persons who were parties to the case below, although in a proper case a non-
party may be sufficiently interested in a judgment to permit him or her to take an
appeal from it.
8. Parties: Jurisdiction: Waiver. The presence of necessary parties to a suit is a
jurisdictional matter that cannot be waived by the parties; it is the duty of the
plaintiff to join all persons who have or claim any interest that would be affected
by the judgment.
9. Administrative Law: Words and Phrases. An administrative agency is a neutral
factfinding body when it is neither an adversary nor an advocate of a party.
10. Administrative Law: Parties. When an administrative agency acts as the pri-
mary civil enforcement agency, it is more than a neutral factfinding body.
11. ____: ____. An administrative agency that is charged with the responsibility of
protecting the public interest, as distinguished from determining the rights of
two or more individuals in a dispute before such agency, is more than a neutral
factfinding body.
Appeal from the District Court for Lancaster County: Paul
D. Merritt, Jr., Judge. Vacated and dismissed.
Thomas J. Kenny, Kathryn E. Jones, and Edward M. Fox II,
of Kutak Rock, L.L.P., for appellant.
Alan E. Peterson and Thomas J. O’Neill for appellee Delores
Shaffer.
On brief, Douglas J. Peterson, of Keating, O’Gara, Nedved
& Peter, L.L.O., for appellee Delores Shaffer.
Heavican, C.J., Wright, Connolly, Stephan, McCormack,
and Cassel, JJ.
Stephan, J.
This is an appeal from an order of the district court for
Lancaster County which reversed a determination by the
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Nebraska Department of Health and Human Services (the
Department) that Brian Shaffer was ineligible for certain
Medicaid benefits. The appellant, Coventry Health Care of
Nebraska, Inc. (Coventry), participated in the administra-
tive proceedings and advocated the determination eventually
reached by the Department, but it was not named as a party in
the appeal to the district court. Coventry contends that it was
a necessary party to the district court appeal and that because
it was not joined, the district court was without jurisdiction to
reverse the Department’s determination in its favor. We con-
clude that Coventry has standing to appeal and was a necessary
party in the appeal to the district court.
I. BACKGROUND
Shaffer is a 33-year-old man with severe autism and chemi-
cal sensitivities. He has many environmental, food, and drug
allergies. He resides with his mother, Delores Shaffer, who is a
licensed practical nurse.
Coventry is a managed care organization (MCO) which
contracts with the Department to provide Medicaid services.1
Coventry receives a capitation payment, which is a fee “paid
by Medicaid to an MCO on a monthly basis for each client
enrolled with the physical health or behavioral health plan. The
fee covers all services required to be provided by the MCO to
the client, regardless of whether the client receives services or
not.”2 This type of care program is different from a fee-for-
service program in that Coventry receives from the Department
a set rate for each person enrolled in its program.3 Coventry
then provides the requested services.4
Until October 2011, Delores was paid to provide 18 hours
a day of private duty nursing (PDN) care to Shaffer. This pay-
ment came from a Medicaid provider other than Coventry. In
October 2011, Shaffer’s Medicaid coverage was then trans-
ferred to Coventry. In April 2012, Delores asked Coventry
1
See 471 Neb. Admin. Code App. 471-000-122 (2010).
2
482 Neb. Admin. Code, ch. 1, § 002 (2013).
3
Id.
4
482 Neb. Admin. Code, ch. 4, § 001 (2012).
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to approve her to continue to provide PDN to Shaffer for 18
hours each day. Coventry denied this request after determin-
ing the nursing services were not medically necessary. Shaffer
filed a first-level appeal with Coventry, which was denied.
Shaffer then filed a second-level appeal with Coventry, which
was also denied. Shaffer then requested a State fair hearing
with the Department pursuant to 482 Neb. Admin. Code, ch. 7,
§ 003 (2010).
The fair hearing was held on January 22, 2013, before a
hearing officer. Shaffer was represented by legal counsel.
Teresa Engel, Coventry’s supervisor of the appeals department,
appeared for Coventry. At the commencement of the hearing,
the hearing officer asked the “parties” to enter into a stipula-
tion regarding the redaction of certain information from the
exhibits which were to be offered. Engel and Shaffer’s counsel
agreed to the stipulation, which was made a part of the record.
Engel also acknowledged that Coventry had received copies of
all exhibits “from the State.”
The hearing officer noted it was customary to “have the
Department or its representative or contractor in this case,
Coventry, put on [its] testimonial evidence first.” Shaffer’s
counsel indicated he had no objection to this procedure, and
both Engel and Shaffer’s counsel declined the hearing officer’s
invitation to make opening statements. Engel was then sworn
as Coventry’s first witness. Engel presented narrative testi-
mony explaining Coventry’s reasons for denying the requested
Medicaid benefits and describing the first- and second-level
appeal determinations made by Coventry. She was cross-
examined by Shaffer’s counsel, after which she stated Coventry
was resting its case but “may . . . pose additional questions at
the end.”
Shaffer’s counsel then called both Delores and Shaffer’s
allergist. Both testified that in their opinion, continuation of
the PDN care which Delores had been providing to Shaffer
was medically necessary. The hearing officer permitted both
Engel and Dr. Debra Esser, Coventry’s vice president of medi-
cal affairs, to cross-examine both witnesses. On behalf of
Coventry, Engel made a relevancy objection during Delores’
direct examination, which the hearing officer overruled.
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After Delores and Shaffer’s allergist concluded their testi-
mony, Esser was sworn and testified on behalf of Coventry,
apparently as a rebuttal witness. Esser, a board-certified family
practice physician, stated in response to questions posed by
Engel that the PDN services for Shaffer were not medically
necessary. She was cross-examined by Shaffer’s counsel.
The hearing officer asked both Engel and Shaffer’s coun-
sel if they wished to offer any additional evidence, and when
they responded in the negative, the hearing officer announced,
“[b]oth parties have rested.” Shaffer’s counsel made a closing
statement, to which Engel responded.
On April 9, 2013, Vivianne M. Chaumont, who was then the
director of the Division of Medicaid & Long-Term Care of the
Department, entered an order based upon the record made at
the State fair hearing. The order noted that Engel and Esser had
appeared at the fair hearing on behalf of Coventry, that “[t]he
parties” had entered into a stipulation regarding exhibits, and
that “[a]ll parties were provided proper notice of the adminis-
trative hearing.” After discussing the evidence adduced at the
fair hearing, the order concluded the PDN services at issue
were not medically necessary.
Delores, as Shaffer’s guardian and next friend, filed a peti-
tion in the district court for Lancaster County seeking judicial
review of this order pursuant to the Administrative Procedure
Act (APA).5 The petition named the Department and Chaumont
in her official capacity as respondents, but did not name
Coventry. The district court conducted a de novo review of the
administrative record and reversed the order of the Department,
finding the PDN services which Delores provided to Shaffer
were medically necessary, because there was a significant
probability that Shaffer could develop medical complications
“virtually immediately” without such services.
The Department did not appeal, but Coventry did. We moved
the appeal to our docket on our own motion pursuant to our
5
See Neb. Rev. Stat. §§ 84-901 to 84-920 (Reissue 2014).
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statutory authority to regulate the caseloads of the appellate
courts of this state.6
II. ASSIGNMENTS OF ERROR
Coventry assigns, consolidated and restated, that the district
court erred in (1) failing to find Coventry was a necessary
party to the district court appeal; (2) failing to join Coventry
as a necessary party, because the Department was statutorily
precluded from being a party; and (3) finding the PDN services
were medically necessary.
III. STANDARD OF REVIEW
[1-3] A judgment or final order rendered by a district court
in a judicial review pursuant to the APA may be reversed,
vacated, or modified by an appellate court for errors appear-
ing on the record.7 When reviewing an order of a district court
under the APA for errors appearing on the record, the inquiry
is whether the decision conforms to the law, is supported by
competent evidence, and is not arbitrary, capricious, or unrea-
sonable.8 Whether a decision conforms to law is by defini-
tion a question of law, in connection with which an appellate
court reaches a conclusion independent of that reached by the
lower court.9
[4] The meaning and interpretation of statutes and regula-
tions are questions of law for which an appellate court as an
obligation to reach an independent conclusion irrespective of
the decision made by the court below.10
[5] When a jurisdictional question does not involve a
factual dispute, its determination is a matter of law, which
6
Neb. Rev. Stat. § 24-1106(3) (Reissue 2008).
7
Holmes v. State, 275 Neb. 211, 745 N.W.2d 578 (2008); Stejskal v.
Department of Admin. Servs., 266 Neb. 346, 665 N.W.2d 576 (2003).
8
Id.
9
Id.
10
Betterman v. Department of Motor Vehicles, 273 Neb. 178, 728 N.W.2d
570 (2007).
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746 289 NEBRASKA REPORTS
requires an appellate court to reach a conclusion independent
of the decisions made by the lower court.11
IV. ANALYSIS
1. Coventry’s Standing
to A ppeal
[6] A threshold issue in this case is whether Coventry has
standing to bring this appeal from the order of the district
court, despite the fact that it did not participate in the district
court proceedings. The APA provides that an “aggrieved party”
may seek appellate review of a district court’s order or judg-
ment in an appeal from an administrative agency.12 Because
the phrase “aggrieved party” is not defined by the APA, we
have addressed the issue as a matter of standing.13 To have
standing, a litigant must have a legal or equitable right, title,
or interest in the subject matter of the controversy.14 The “party
aggrieved” concept must be given a practical rather than hyper-
technical meaning.15
[7] An appeal is generally available only to persons who
were parties to the case below, although in a proper case a
nonparty may be sufficiently interested in a judgment to per-
mit him or her to take an appeal from it.16 Here, Coventry
successfully contested Shaffer’s claim at the fair hearing.
Coventry contends it has a financial interest in the outcome
of this litigation and that as an MCO, it was a necessary party
to the APA appeal under federal Medicaid regulations.17 The
district court’s order acknowledges that “[Shaffer’s] cover-
age with [Coventry] became effective on October 1, 2011,”
11
Id.
12
§ 84-918(1).
13
See, In re Application of Metropolitan Util. Dist., 270 Neb. 494, 704
N.W.2d 237 (2005); Stoneman v. United Neb. Bank, 254 Neb. 477, 577
N.W.2d 271 (1998).
14
See In re Application of Metropolitan Util. Dist., supra note 13.
15
Id.
16
Rozmus v. Rozmus, 257 Neb. 142, 595 N.W.2d 893 (1999).
17
See 42 C.F.R. § 438.408(f)(2) (2013).
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and it utilized the definition of “medical necessity” set out in
Coventry’s “Handbook of Covered Services” in reaching its
determination. We are satisfied that Coventry has alleged a
sufficient legal right and interest in the matter in controversy
to confer standing to appeal from the final order of the dis-
trict court.
2. Necessary Parties
[8] Generally, the presence of necessary parties to a suit is a
jurisdictional matter that cannot be waived by the parties; it is
the duty of the plaintiff to join all persons who have or claim
any interest that would be affected by the judgment.18 Here,
Shaffer’s petition for review filed in the district court named
only the Department and the Medicaid director as respondents.
Coventry contends there was a defect of parties before the dis-
trict court for two reasons: (1) the Department was not a proper
party to the appeal and (2) Coventry was a necessary party that
was not joined.
Our resolution of both contentions begins with the provi-
sion of the APA which requires that in proceedings for judicial
review of a final decision by an administrative agency in a
contested case,
[a]ll parties of record shall be made parties to the pro-
ceedings for review. If an agency’s only role in a con-
tested case is to act as a neutral factfinding body, the
agency shall not be a party of record. In all other cases,
the agency shall be a party of record.19
(a) The Department
[9-11] Coventry contends that the Department was not a
proper party to the district court appeal because it served
only as a “neutral factfinding body” in the contested case.
Recently, in McDougle v. State ex rel. Bruning,20 we summa-
rized the principles which guide the determination of whether
an administrative agency acts solely as a neutral factfinding
18
Pestal v. Malone, 275 Neb. 891, 750 N.W.2d 350 (2008).
19
§ 84-917(2)(a)(i).
20
McDougle v. State ex rel. Bruning, ante p. 19, 853 N.W.2d 159 (2014).
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body, or serves a broader role. An administrative agency is a
neutral factfinding body when it is neither an adversary nor
an advocate of a party.21 In contrast, when an administrative
agency acts as the primary civil enforcement agency, it is
more than a neutral factfinding body.22 Also, an administrative
agency that is charged with the responsibility of protecting the
public interest, as distinguished from determining the rights
of two or more individuals in a dispute before such agency, is
more than a neutral factfinding body.23
We have not previously addressed the nature of the
Department’s role in a contested case involving eligibility for
Medicaid benefits. We have held that in other contexts, the
Department or its predecessor served in a broader role and was
therefore a “party of record” in judicial review proceedings
under the APA. McDougle involved a proceeding to revoke
the license of a mental health practitioner and alcohol and
drug counselor. We held the Department’s Division of Public
Health acted as more than a neutral factfinder, because it was
the primary civil enforcement agency for credentialing viola-
tions pertaining to the health care professions and possessed
broad statutory powers to protect the public and regulate the
professions. Similarly, in Beatrice Manor v. Department of
Health,24 we held that the Department of Health was a neces-
sary party in proceedings to review its determination, through
the Nebraska Health Care Certificate of Need Appeal Panel, to
deny a health care facility permission to add more beds, given
its responsibility for protecting the public interest as distin-
guished from determining the rights of two or more individ
uals in a dispute before the agency.
Applying these principles, we conclude that the Department
was a party of record in this case. The Department has broad
regulatory power, oversight of the Medicaid program, and
21
Id.
22
Id.
23
Id.
24
Beatrice Manor v. Department of Health, 219 Neb. 141, 362 N.W.2d 45
(1985).
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a stake in the contract with Coventry. It is charged with
administering the Nebraska Medicaid program.25 The pur-
pose of the program is to provide medical assistance to eli-
gible residents.26 Pursuant to this authority, the Department is
authorized to “adopt and promulgate rules and regulations.”27
This is comparable to the Division of Public Health in
McDougle, which also had broad powers to establish rules
and regulations.28
Additionally, the Department is authorized to provide medi-
cal assistance for eligible recipients by utilizing managed
care contracts.29 The Department is responsible for processing
and determining the eligibility of each applicant for medical
assistance.30 It is also responsible for establishing “premiums,
copayments, and deductibles,” as well as limits on those serv
ices.31 Clearly, it is charged with protecting the public interest
with respect to Medicaid, which it accomplishes in part by con-
tracting with and paying MCO’s such as Coventry. Because of
the Department’s broad authority and responsibility for admin-
istering the Medicaid program in Nebraska, its role at a State
fair hearing is far more expansive than simply adjudicating
disputes between parties regarding Medicaid eligibility. Thus,
in this case, it was a “party of record” within the meaning of
§ 84-917(2)(a)(i).
(b) Coventry
Whether Coventry was a necessary party to the district
court appeal is likewise dependent upon whether it was a
“party of record” at the State fair hearing.32 Coventry contends
that it was not a “party of record,” but should have been. We
25
Neb. Rev. Stat. § 68-908(1) (Cum. Supp. 2014).
26
Neb. Rev. Stat. § 68-905 (Reissue 2009).
27
§ 68-908(2)(b).
28
McDougle, supra note 20.
29
Neb. Rev. Stat. § 68-910(2) (Reissue 2009).
30
Neb. Rev. Stat. § 68-914(1) (Cum. Supp. 2014).
31
Neb. Rev. Stat. § 68-912(1)(a) (Cum. Supp. 2014).
32
See § 84-917(2)(a)(i).
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c onclude that the question of whether Coventry was a “party
of record” at the State fair hearing and thus a necessary party
in the district court appeal is a jurisdictional issue which
does not involve a factual dispute; thus, we must resolve the
question independently on the basis of the record and appli-
cable law.33
The bill of exceptions from the State fair hearing proceed-
ings does not specifically identify any “parties of record.”
While this creates some ambiguity on the point, the failure
of the Department to make this important determination on
the record in the administrative proceeding does not resolve
the jurisdictional issue. As we noted in McDougle,34 there is
no statutory directive that the phrase “parties of record” for
purposes of judicial review of an administrative determination
is limited to those parties named in the underlying administra-
tive proceeding.
This position is consistent with holdings by other state
courts. In an Oklahoma case, the court found that even though
two entities were not named and joined as parties in the caption
of the administrative action, they both appeared, participated,
and were entitled by law to participate; thus, they were parties
of record and failure to join them on appeal was a jurisdic-
tional defect.35 Similarly, a Washington court defined a party of
record as a person “‘to whom the agency action is specifically
directed,’” or a person “‘named as a party to the agency pro-
ceeding or allowed to intervene or participate as a party in the
agency proceeding.’”36
For two principal reasons, we conclude Coventry was a
“party of record” at the State fair hearing. First, as an MCO,
Coventry was required by federal law to be a party to the State
fair hearing. Because Nebraska has elected to participate in the
33
See McDougle, supra note 20.
34
Id.
35
Oklahoma Foundation v. Dept. of Central, 180 P.3d 1 (Okla. Civ. App.
2007).
36
Litowitz v. Growth Management Bd., 93 Wash. App. 66, 69, 966 P.2d
422, 423 (1998) (emphasis supplied). See Wash. Rev. Code Ann.
§ 34.05.010(12)(a) and (b) (West Cum. Supp. 2015).
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federal Medicaid program, it must comply with standards and
requirements imposed by federal statutes and regulations.37 A
federal Medicaid regulation governing resolution of grievances
and appeals specifically provides: “The parties to the State fair
hearing include the MCO . . . as well as the enrollee and his or
her representative . . . .”38
Second, it is clear from the administrative record that
Coventry participated in the State fair hearing and was treated
as a party by the hearing officer. Pursuant to § 84-909, the
Department has adopted rules and regulations governing the
appeals process in Medicaid cases.39 Pursuant to these regu-
lations, a Medicaid client may request a State fair hearing
after denial or limitation of an authorization,40 as Shaffer did
in this case. The parties to the fair hearing include “the peti-
tioner or person by whom a contested case is brought and the
Department or other decision maker whose decision is subject
to appeal or a person or party granted leave to intervene.”41
The “decision . . . subject to appeal” was Coventry’s deci-
sion to deny Shaffer’s request for coverage of PDN care to be
provided by Delores. Coventry appeared at the fair hearing to
explain and defend its decision. Its representatives presented
evidence, cross-examined witnesses, entered into stipulations,
and presented arguments. At the beginning and conclusion
of the hearing, the hearing officer referred to Shaffer and
Coventry as the “parties.”
We conclude as a matter of law that Coventry was a “party
of record” at the State fair hearing and therefore a necessary
party pursuant to § 84-917(2)(a)(i) in the subsequent appeal to
the district court. Coventry prevailed at the administrative pro-
ceeding, but was not given an opportunity to participate in or
be heard in the district court appeal that resulted in a reversal
37
See, Thorson v. Nebraska Dept. of Health & Human Servs., 274 Neb. 322,
740 N.W.2d 27 (2007); Neb. Rev. Stat. § 68-906 (Cum. Supp. 2014).
38
42 C.F.R. § 438.408(f)(2).
39
465 Neb. Admin. Code, ch. 6 (1995); 482 Neb. Admin. Code, ch. 7 (2010).
40
482 Neb. Admin. Code § 7-003(2).
41
465 Neb. Admin. Code § 6-004.02.
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of the administrative decision. Because the presence of a nec-
essary party is jurisdictional, the failure to make Coventry a
party to the appeal deprived the district court of jurisdiction.
In light of this determination, we are required to vacate the
judgment of the district court and therefore do not address
Coventry’s third assignment of error.
V. CONCLUSION
For the foregoing reasons, we vacate the order of the district
court and dismiss the appeal.
Vacated and dismissed.
Miller-Lerman, J., not participating.