Idaho AG’s office only ordered to pay part of attorney fees in grant investigation lawsuits

BOISE (Idaho Capital Sun) – An Idaho judge only required Attorney General Raúl Labrador’s office to pay a small share of attorney fees in lawsuits connected to an investigation into a scrutinized child care grant program.

Idaho 4th District Judge Lynn Norton last week largely denied requests by current and former Idaho Department of Health and Welfare officials to have Labrador’s office pay $186,000 in attorneys fees. Instead, Idaho’s top attorney’s office must pay $9,500.

The health officials filed two lawsuits in March 2023 seeking to block civil subpoenas Labrador served on the officials for sweeping information related to the Idaho Attorney General’s Office investigation into $72 million of child care grants.

But after a legislative audit last summer found flaws in how those funds were distributed, a prosecutor appointed by Labrador withdrew those civil subpoenas last fall, saying the audit answered key questions. But that special prosecutor, Christopher Boyd, has stressed that the investigation into the grants is ongoing. Norton dismissed the lawsuits soon after the demands were withdrawn.

Norton hadn’t previously concluded whether the Idaho Attorney General’s Office “was authorized to serve” the subpoenas, which are formally called civil investigative demands, the judge wrote in a ruling released March 19.

“(T)his court did not address whether the (demands) were an appropriate function of the Attorney General’s Office or whether the Attorney General’s Office was authorized to serve these (demands) pursuant to the statutes identified,” Norton wrote. “A decision on fees and costs is not the proper place for this court to now determine complicated legal issues that were raised in the petition but never actually adjudicated in this litigation.”

Labrador, in a statement, called the rulings a “resounding victory.”

“This outcome further demonstrates that my office will never be deterred from protecting the public and demanding accountability,” Labrador told the Idaho Capital Sun.

Idaho health department spokesperson Greg Stahl wrote in a statement the court concluded it couldn’t grant the other requests for attorney fees because the demands were canceled before the court could weigh in on if “the attorney general exceeded his statutory authority” in issuing the demands.

“The court ordered Attorney General Labrador to pay a portion of the attorney’s fees incurred by the (health) officials because the court recognized the attorney general’s litigation was factually and legally unsupported,” Stahl told the Sun.

The demands, served to top health agency officials, asked for records on the program and information about former and current state health department employees that worked on the program, including about charitable organizations they work for, volunteer for or donate to.

“The legislative branch ultimately received the information needed from the department. Unfortunately, the people of Idaho bear the costs of the investigation by the Attorney General,” Stahl said.

Labrador lacked ‘reasonable basis’ to dispute disqualification, Idaho judge ruled

Norton’s rulings required the Attorney General’s Office to pay roughly $9,500 in fees. That was limited to attorney fees that Idaho health officials had accrued in their motion to disqualify Labrador.

Norton in August 2023 barred Labrador from pursuing the civil investigative demands, citing a conflict of interest since his office had previously provided legal advice to the health department on the grants. But the ruling still allowed Labrador to oversee the grants investigation, the Idaho Capital Sun previously reported. Labrador’s office later withdrew the legal advice.

Labrador said his office disagreed with the order for a “de minimis award of unrelated fees,” but said it was “otherwise pleased the court ruled in our favor.”

“The court’s decision is a resounding victory and puts to rest the petitioners’ claim that they were prevailing parties in this matter,” Labrador wrote. “The court held that the (demands) were not filed frivolously and without a reasonable basis as claimed by the petitioners.”

The judge didn’t require Labrador’s office to pay the rest of attorney fees requested by the health officials and Ericka Rupp, a former health official who managed the grants program. She had a separate lawsuit from the three health officials.

Norton found Labrador “did not have a reasonable basis in either law or fact” to object to the health officials motion to disqualify Labrador from the case.

“(S)ince petitioners were current employees of the IDHW, the attorney general did not have a reasonable basis in either law or fact to object to the petitioners’ request to disqualify the Attorney General’s Office from taking a position adverse to his prior legal opinions that were issued to IDHW as a client,” Norton wrote.

Norton wrote that determining if a claim is reasonably based in law “is based in large part on the substantive decisions reached during the litigation.”

Even if the health officials “were the prevailing party,” Norton wrote, “they would not be entitled to fees … for showing a frivolous defense or a claim without a reasonable basis in law or fact.”

Norton wrote she did not not find Labrador “completely lacked a reasonable basis in fact and law that would support an award of fees” for Rupp’s attorneys’ motion to disqualify.

Special prosecutor Christopher Boyd, appointed following the judge’s order, told the Sun he appreciated the court’s ruling. Boyd said parties have over a month to appeal the decision.

Rupp’s attorney, Scott McKay, declined to comment on the attorney fees rulings.

Health department paid legal bills. But policymakers could decide long-term payment, official says.

The health department has paid all attorney fees for Rupp and the three health officials who sued to block the civil investigative demands, Stahl said. That includes $119,000 for the three health officials and $68,000 for Rupp, Stahl said. The health officials had requested Labrador’s office pay those attorney fees in the litigation.

But Stahl said policymakers could still decide if Labrador’s office should pay those bills.

“The Legislature or State Board of Examiners may still address whether the attorney general must pay the fees the court was unable to award,” Stahl said.

Rupp left the agency in December 2022, Stahl previously told the Sun. Former Idaho Department of Health and Welfare Director Dave Jeppesen retired in December.

Labrador, by Idaho law, is required to represent the state health department and other state agencies. But since the former congressman took over as the state’s top attorney in January, he has engaged in high profile legal clashes with some of the state’s largest agencies — including the state health department in this case and the State Board of Education, which his office sued alleging open meeting law violations with the University of Idaho’s attempted acquisition of University of Phoenix.

An Idaho judge rejected Labrador’s lawsuit against the board in January. Labrador appealed that decision.

Idaho health department submits action plan following critical grants audit

Jeppesen, the previous Idaho Department of Health and Welfare director, had disagreed with all findings of a critical state audit that found flaws in how the grants were distributed. He also refused to submit a corrective action plan.

But under a new interim director, Dean Cameron, the agency promised to reform its grant processes.

Cameron detailed the reform plans in an email to a state auditor, shared on Jan. 11 with lawmakers who serve on the Idaho Legislature’s powerful budget committee, the Joint Finance-Appropriations Committee or JFAC.

The next day, JFAC announced plans to freeze funds for the Idaho Department of Health and Welfare’s budget that funds the director’s office, along with other services, until corrective action is taken.

Without a corrective plan to address the findings, “it calls into question our ability to appropriate funds for the agency,” budget committee co-chair Rep. Wendy Horman, R-Idaho Falls, told reporters at the time.

But JFAC funded that budget area in a March 15 budget setting hearing. Cameron in February submitted a seven-page action plan, detailing timelines for grant reforms following the audit.

Horman told the Sun last week Cameron “has been incredible to work with,” and that “he understands the seriousness of the audit findings.”

“We were unable to get a response from the previous administration on some very serious audit findings,” Horman said in an interview. “And until we received that response, it called into question our ability to appropriate funds to that entire agency. And that was our way of helping to ensure they knew we were serious — that an audit response and a corrective action plan was required.”

But the investigation and the audit were separate, Horman stressed. “Regardless of what happens in court, the audit findings still need to be resolved,” she said.

When Boyd said in October that he’d withdraw the civil subpoenas amid the ongoing grants investigation, he also said he’d look to appoint a special inquiry judge on the matter.

It still isn’t clear if that judge appointment happened.

Boyd, who serves as Adams County prosecuting attorney, has since declined to say if such a judge has been appointed. He said last week he couldn’t confirm that. Stahl also said the Idaho Department of Health and Welfare couldn’t confirm whether a special inquiry judge had been appointed.

A separate lawsuit, from 36 organizations who received the funds who also sued over the subpoenas, is on appeal to the Idaho Supreme Court.

Boyd and Greg Chaney, a former lawmaker and attorney who represents the suing organizations, have filed to run for Canyon County prosecuting attorney.