McClendon v. Georgia Dept. of Community Health

• Citation: 261 F.3d 1252
• Decision Date: 17 August 2001
• Docket Number: No. 00-15005,00-15005
• Parties: (11th Cir. 2001) Niccie McCLENDON, Individually and as Administrator of the Estate of Alton McClendon and on behalf of those similarly situated, Bessie Hogan, individually and on behalf of those similarly situated, et al., Plaintiffs-Appellants, v. GEORGIA DEPARTMENT OF COMMUNITY HEALTH, Russell Toal, in his official capacity as Commissioner of the Department of Community Health, et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1252

261 F.3d 1252 (11th Cir. 2001)

Niccie McCLENDON, Individually and as Administrator of the Estate of Alton McClendon and on behalf of those similarly situated, Bessie Hogan, individually and on behalf of those similarly situated, et al., Plaintiffs-Appellants, v. GEORGIA DEPARTMENT OF COMMUNITY HEALTH, Russell Toal, in his official capacity as Commissioner of the Department of Community Health, et al., Defendants-Appellees.

No. 00-15005.

United States Court of Appeals, Eleventh Circuit.

August 17, 2001.

Appeal from the United States District Court for the Northern District of Georgia.

Before CARNES, COX and NOONAN^*, Circuit Judges.

CARNES, Circuit Judge:

This lawsuit is an attempt by Medicaid recipients in Georgia who have been injured by the use of tobacco products to obtain from the State a portion of the proceeds that it is due to receive under the $206 billion "Master Settlement Agreement" consummated by the tobacco industry and 46 states in 1998. Georgia is scheduled to receive $4.8 billion under that agreement, and the plaintiffs contend that the Medicaid Act, 42 U.S.C. §§ 1396 et seq., entitles them to some of that money. The defendants, who are various Georgia officials and a State agency, think otherwise. The district court held that the lawsuit was barred by the Eleventh Amendment. We affirm that holding as to the state agency, but do not reach the more difficult issue of whether the Eleventh Amendment bars the lawsuit insofar as the state officials are concerned, because we conclude that it lacks merit anyway.

I. BACKGROUND

On August 19, 1997, the State of Georgia and two State officials filed suit in the superior court of Fulton County against six cigarette manufacturers and others ("tobacco companies"), alleging that they had "unlawfully shifted the financial responsibility" to the State for the health care costs attributable to their "addictive, injurious, and unreasonably dangerous products." The complaint contained eleven counts alleging violations of state law and requesting monetary and equitable relief.¹ It sought restitution "in excess of 2.78 billion dollars" for medical assistance that the State estimated it had paid on behalf of Medicaid recipients who suffered from tobacco-related injuries and illnesses.

The lawsuit was settled. On November 23, 1998, Georgia, and 45 other states, entered into an agreement with the Tobacco companies known as the "Master Settlement agreement." As part of that agreement, the tobacco companies agreed to pay Georgia an estimated $4.8 billion over the course of 25 years, with the first payment of $58.9 million coming in December of 1999.

The settlement agreement stipulates that the payments are in settlement of "antitrust, consumer protection, common law negligence, statutory, common law and equitable claims for monetary, restitutionary, equitable and injunctive relief" brought by the settling states against the tobacco companies. It defines "Released Claims" as follows:

(1) for past conduct, acts or omissions (including any damages incurred in the future arising from such past conduct, acts, or omissions), those Claims directly or indirectly based on, arising out of or in any way related, in whole or in part, to (A) the use, sale, distribution, manufacture, development, advertising, marketing or health effects of, (B) the exposure to, or (C) research, statements, or warnings regarding, Tobacco Products (including, but not limited to, the Claims asserted in the actions identified in Exhibit D, or any comparable Claims that were, could be or could have been asserted now or in the future in those actions or in any comparable action in federal, state or local court brought by a Settling State or a Releasing Party (whether or not such Settling State or Releasing Party has brought such action)), except for claims not asserted in the actions identified in Exhibit D for outstanding liability under existing licensing (or similar) fee laws or existing tax laws (but not excepting claims for any tax liability of the Tobacco-Related Organizations or of any Released Party with respect to such Tobacco-Related Organizations, which claims are covered by the release and covenants set forth in this Agreement);

(2) for future conduct, acts or omissions, only those monetary Claims directly or indirectly based on, arising out of or in any way related to, in whole or in part, the use of or exposure to Tobacco Products manufactured in the ordinary course of business, including without limitation any future Claims for reimbursement of health care costs allegedly associated with the use of or exposure to Tobacco Products.

The settlement agreement also defines the "Releasing Parties":

(pp) "Releasing Parties" means each Settling State and any of its past, present, and future agents, officials acting in their official capacities, legal representatives, agencies, departments, commissions and divisions; and also means, to the full extent of the power of the signatories hereto to release past, present, and future claims, the following: (1) any Settling State's subdivisions (political or otherwise, including, but not limited to, municipalities, counties, parishes, villages, unincorporated districts and hospital districts), public entities, public instrumentalities and public educational institutions; and (2) persons or entities acting in a parents patriae, sovereign, quasi-sovereign, private attorney general, qui tam, taxpayer, or any other capacity, whether or not any of them participate in this settlement, (A) to the extent that any such person or entity is seeking relief on behalf of or generally applicable to the general public in such Settling State or the people of the State, as opposed solely to private or individual relief for separate and distinct injuries or (B) to the extent that any such entity (as opposed to an individual) is seeking recovery of health-care expenses (other than premium or capitation payments for the benefit of present or retired state employees) paid or reimbursed, directly or indirectly, by a Settling State.

As the quoted provisions indicate, by entering into the settlement agreement Georgia released its past and future claims against the tobacco companies relating to the manufacture and use of tobacco products, but it did not purport to release private or individual claims based on separate and distinct injuries; those were expressly excepted from release.

The plaintiffs in this case are individuals who suffer or have suffered from a variety of illnesses caused by the use of tobacco products, and who have been recipients of medical assistance payments under Georgia's federally supported Medicaid program. They brought this putative class action in January 27, 2000 on behalf of themselves and others similarly situated, alleging violations of the Medicaid Act and the Fifth and Fourteenth Amendments to the United States Constitution. They contend that federal law, 42 U.S.C. § 1396k(b), entitles them to that amount of the settlement proceeds Georgia is scheduled to receive which exceeds the amount the State has actually expended on medical assistance. The defendants are the Georgia Department of Community Health, which, through its Division of Medical Assistance, is responsible for administering Georgia's Medicaid program,² as well as various State officials.

The complaint in this case asks for declaratory and injunctive relief, specifically requesting that orders be issued requiring the defendants "to disburse to the Plaintiffs ... that portion of the tobacco litigation settlement proceeds that belong to the Plaintiffs," and enjoining the defendants "to provide to each and every member of the plaintiff class due process of law concerning all property previously taken," including notice, information and documents regarding each plaintiff's share of the settlement proceeds, and hearings to allow individual plaintiffs to challenge denials of those proceeds. The complaint includes claims that the defendants violated the Medicaid Act, 42 U.S.C. § 1396a(25)(A)-(B), by failing to seek reimbursement from third parties for medical assistance payments made by the State, and that the defendants "have violated and are violating federal law" by failing to distribute a portion of the settlement proceeds to the plaintiffs. However, at least before this Court, the plaintiffs have abandoned any claims about past violations of federal law, and insist that they seek only "future compliance with federal law at each future point when the federal law becomes applicable to collected funds." Brief for Appellant at 26, McClendon v. Ga. Dept. of Cmty. Health, ___ F.3d ____ (11th Cir.2001) (No. 00-15005).

The district court granted the defendants' motion to dismiss on the ground that, under the Eleventh Amendment, the court lacked subject-matter jurisdiction to entertain the plaintiffs' suit.

II. CONTENTIONS OF THE PARTIES

The plaintiffs contend that notwithstanding the dictates of the Eleventh Amendment, their suit is permissible under the doctrine announced in Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). The Young doctrine permits federal courts to entertain suits against state officers seeking prospective equitable relief to end continuing violations of federal law. See Summit Med. Assocs., P.C. v. Pryor, 180 F.3d 1326, 1336 (11th Cir.1999), cert. denied, 529 U.S. 1012, 120 S.Ct. 1287, 146 L.Ed.2d 233 (2000) ("Summit Medical "). According to the plaintiffs, the relief they seek is prospective because the defendants will not violate federal law, 42 U.S.C. § 1396k(b), until some time in the future, when Georgia receives settlement proceeds from the tobacco companies in excess of the State's actual medical assistance payments, and unlawfully fails to disburse those excess proceeds to them. The plaintiffs claim that point has not yet been reached and will not be reached until years in the future.

The defendants argue that the...