Metro Weekly

South Dakota to Pay Trans Group $300,000 for Contract Breach

State apologizes for a health services contract that was cancelled after Gov. Kristi Noem was questioned about it by a conservative news outlet.

The Prism Community Center in Sioux Falls, where The Transformation Project’s services are housed – Photo: Facebook

The state of South Dakota has issued an apology letter and paid $300,000 to a transgender advocacy group for abruptly canceling a state Department of Health contract with the group.

The payment and apology are part of an agreement reached between South Dakota and The Transformation Project to settle a federal lawsuit alleging that the state discriminated against the organization in violation of provisions contained in the Affordable Care Act prohibiting anti-LGBTQ discrimination. 

The Transformation Project had signed a $136,000 contract with the state, paid for with federal funds, to provide community health worker services to the LGBTQ community from its Sioux Falls headquarters. 

But Republican Gov. Kristi Noem canceled the contract on December 16, 2022, after being questioned about it by a reporter from The Daily Signal, a publication of the conservative Heritage Foundation. 

The reporter had been asking about a “Gender Identity Summit” that the group had planned to host with rural healthcare provider Sanford Health. The summit was intended to examine the unique healthcare concerns of transgender patients and the mental and physical services they might need. The aim would be to improve communication between patients and doctors.

At the time, a spokesperson for Noem claimed that the governor was unaware of the group or the contract and denounced the organization’s mission of providing services to the transgender community.

Due to conservative furor over contracting with a transgender advocacy group, South Dakota Department of Health Secretary Joan Adam abruptly announced her retirement days later, though neither she nor the state would confirm the reasons for her departure.

The South Dakota Department of Health subsequently released a statement alleging that The Transformation Project had failed to uphold its end of the contract by failing to file proper status update reports.

The Transformation Project denied those accusations and sued the state for breach of contract, calling the allegations false and “an attempt to apply a thin gloss of contract law to the State’s discriminatory actions” in the lawsuit.

It also accused Noem of caving to political pressure in order to pander to conservatives, who have embraced opposition to transgender identity as an issue that galvanizes the Republican base.

“South Dakota’s decision to cancel the Contract was based purely on national politics,” lawyers for The Transformation Project wrote in the lawsuit. “The State knew about and initially supported TTP’s mission; in fact, the State told TTP to request more money than it originally sought.”

The other plaintiff in the lawsuit, Jack Fonder, is a community health worker hired using the funds from the contract, under which The Transformation Project agreed to assist members of the transgender community with health system navigation, health promotion, coaching, and educational services.

The grant that provided the funding had been earmarked specifically for certain targeted groups historically marginalized or lacking in health literacy, including members of the LGBTQ community. 

The organization has sought other ways to fund Fonder’s position, including asking for donations.

According to the South Dakota Searchlight, the settlement agreement reached between the state and The Transformation Project spells out the rationale for the $300,000 payment, which is more than double the amount of the canceled contract and can be used to cover attorneys’ fees associated with the cost of bringing the lawsuit.

Under the agreement, South Dakota agrees “not to discriminate against the Transformation Project in violation of state or federal law with respect to any service, program, or activity that the State provides.” However, the state does not admit liability for the claims made in the lawsuit. Instead, it must only admit that it treated The Transformation Project differently from other similarly situated community organizations providing health services.

To comply with the terms of the settlement, Melissa Magstadt, the current secretary of the South Dakota Department of Health, wrote an apology letter to Fonder and Susan Williams, the director of The Transformation Project. 

“On behalf of the State of South Dakota, I apologize that the Transformation Project’s contract was terminated and for treating the Transformation Project differently than other organizations awarded Community Health Worker contracts,” Magstadt wrote in the letter, dated January 17.

“I want to emphasize that all South Dakotans are entitled to equal treatment under the law — regardless of their race, color, national origin, religion, disability, age, or sex,” Magstadt continued. “South Dakota is committed to ensuring that no person is excluded from participation in, denied the benefits of, or subject to discrimination under any program, activity, or service it providers.”

The Transformation Project celebrated the settlement.

“We are vindicated as the government has acknowledged what we knew the very day we learned of our contract’s cancellation: that we did not break any procedures and we did not fail to meet the terms of the CHW contract in any way,” Williams said in a statement. “To put it simply, the government canceled our contract because of the very population we serve —  the transgender community.”

Williams added that The Transformation Project will continue applying for future contracts with the state.

“When our organization became a target of discrimination, we knew that we had to fight back, not just on behalf of our Community Health Worker, but on behalf of the entire population of transgender people across South Dakota,” Williams said.

“This settlement sends some clear and strong messages: that discrimination against transgender people will not be tolerated in South Dakota, and that when the government discriminates against transgender people, there are consequences. We hope that this is a message that reverberates across our state.”

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