Independent Living Ctr., So. Cal. v. Maxwell-Jolly
| Citation | 572 F.3d 644 |
| Decision Date | 09 July 2009 |
| Docket Number | No. 08-56422.,No. 08-56554.,08-56422.,08-56554. |
| Parties | INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC., a nonprofit corporation; Gray Panthers of Sacramento, a nonprofit corporation; Gray Panthers of San Francisco, a nonprofit corporation; Gerald Shapiro, Pharm. D. doing business as Uptown Pharmacy and Gift Shoppe; Sharon Steen doing business as Central Pharmacy; Mark Beckwith; Margaret Dowling; Tran Pharmacy, Inc., doing business as Tran Pharmacy; Jason Young, Petitioners-Appellees, Sacramento Family Medical Clinics, Inc.; Theodore Mazer M.D.; Ronald B. Mead; Acacia Adult Day Services, Interveners-Appellees, v. David MAXWELL-JOLLY, Director of the Department of Health Care Services, State of California, Respondent-Appellant. Independent Living Center of Southern California, Inc., a nonprofit corporation; Gray Panthers of Sacramento, a nonprofit corporation; Gray Panthers of San Francisco, a nonprofit corporation; Gerald Shapiro, Pharm. D. doing business as Uptown Pharmacy and Gift Shoppe; Sharon Steen doing business as Central Pharmacy; Mark Beckwith; Margaret Dowling; Tran Pharmacy, Inc., doing business as Tran Pharmacy; Jason Young Petitioners-Appellants, Sacramento Family Medical Clinics, Inc.; Theodore Mazer M.D.; Ronald B. Mead; Acacia Adult Day Services, Interveners, v. David Maxwell-Jolly, Director of the Department of Health Care Services, State of California, Respondent-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Richard T. Waldow and Jennifer M. Kim, Supervising Deputy Attorneys General, Carmen D. Snuggs, Tara L. Newman, Andrew Dhadwal, and Sara Ugaz, Deputy Attorneys General, Office of the Attorney General of the State of California, Los Angeles, CA, for respondent-appellant/appellee David Maxwell-Jolly, Director of the Department of Health Care Services for the State of California.
Lynn S. Carman, Medicaid Defense Fund, Novato, CA, and Stanley L. Friedman, Los Angeles, CA, for appellees-appellees/appellants Independent Living Center of Southern California, et al.
Craig J. Cannizzo, Felicia Y. Sze, Hooper, Lundy & Bookman, Inc., San Francisco, CA, and Lloyd A. Bookman, Byron J. Gross, Jordan B. Reveille, Hooper, Lundy & Bookman, Inc., Los Angeles, CA, for interveners Sacramento Family Medical Clinics, Inc. et al.
William A. Gould, Jr., Kevin C. Khasigian, Wilke, Fleury, Hoffelt, Gould & Birney, LLP, Sacramento, CA, for Amicus Curiae California Optometric Association.
Rochelle Bobroff and Harper Jean Tobin, Washington, DC, for Amicus Curiae National Senior Citizens' Law Center.
Jane Perkins, Chapel Hill, NC, for Amicus Curiae National Health Law Program, Inc.
Barbara A. Jones, Pasadena, CA, for Amicus Curiae AARP Foundation Litigation.
Appeal from the United States District Court for the Central District of California, Christina A. Snyder, District Judge, Presiding. D.C. No. 2:08-cv-03315-CASMAN.
Before: STEPHEN REINHARDT, W. FLETCHER, and MILAN D. SMITH, JR., Circuit Judges.
Petitioners-Appellees/Appellants (Independent Living), a group of pharmacies, health care providers, senior citizens' groups, and beneficiaries of the State's Medicaid program, Medi-Cal,1 seek to enjoin the California Department of Health Care Services (Department) Director, David Maxwell-Jolly (Director)2 from implementing state legislation reducing payments to certain medical service providers under Medi-Cal by ten percent. We hold that the district court did not abuse its discretion in granting Independent Living's motion for a preliminary injunction, because the Director failed to "rely on responsible cost studies, its own and others," Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1496 (9th Cir.1997), in determining the effect of the rate cuts mandated by AB 5 on the statutory factors of efficiency, economy, quality, and access to care before implementing those cuts. We also hold that the district court's preliminary injunction should be modified to cover payments for medical services provided on or after July 1, 2008, because the Director waived the State's sovereign immunity in both state and federal court.
On February 16, 2008, the California Assembly passed AB 5, which added §§ 14105.19 and 14166.245 to the California Welfare and Institutions Code. Section 14105.19 reduces payments under the Medi-Cal fee-for-service program to physicians, dentists, pharmacies, adult health care centers, clinics, health systems, and other providers by ten percent. Section 14166.245 similarly reduces payments for inpatient services provided by acute care hospitals not under contract with the State by ten percent. Both of these rate reductions were scheduled to take effect on July 1, 2008.
On April 22, 2008, Independent Living filed a verified petition for a writ of mandamus in Los Angeles County Superior Court, seeking to enjoin the Director from implementing AB 5.3 Independent Living argued that the ten percent rate reduction violates Title XIX of the federal Social Security Act (the Medicaid Act), 42 U.S.C. § 1396 et seq., and is therefore invalid under the Supremacy Clause.4 Specifically, Independent Living alleged that AB 5 is inconsistent with 42 U.S.C. § 1396(a)(30)(A) (hereafter § 30(A)), which requires that a state plan
provide such methods and procedures relating to the utilization of, and payment for, care and services available under the plan ... as may be necessary ... to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.
On May 19, 2008, the Director removed this action to federal court based on federal question jurisdiction. On May 30, 2008, Independent Living filed a motion for a preliminary injunction. The district court heard argument on June 23, 2008. Two days later, the court entered an order denying the motion, holding that Independent Living had not demonstrated a likelihood of success on the merits of their preemption claim because § 30(A) did not create any judicially enforceable "rights."
Independent Living then sought emergency relief from this court. After full briefing and argument, we vacated the district court's order, holding that Independent Living could bring suit directly under the Supremacy Clause to enjoin a state law allegedly preempted by federal law. See Indep. Living Ctr. v. Shewry, 543 F.3d 1050 (9th Cir.2008). We remanded to the district court for reconsideration of Independent Living's motion for a preliminary injunction.
On remand, the district court issued an order granting in part and denying in part Independent Living's motion for a preliminary injunction. The district court held that Independent Living had demonstrated a likelihood of success on the merits of its Supremacy Clause claim, as the Director failed to provide any evidence that the Department had considered the impact of the ten percent rate reduction on quality and access to care, as required by § 30(A). The court also held that Independent Living had demonstrated a risk of irreparable injury as to some—but not all—of the challenged Medi-Cal services. The district court thus granted the motion "to the extent that it seeks to enjoin enforcement of Cal. Welf. & Inst.Code § 14105.19(b)(1), which reduces by ten percent payments under the Medi-Cal fee-for-service program for physicians, dentists, pharmacies, adult day health care centers, clinics, health systems, and other providers for services provided on or after July 1, 2008." The court denied the motion to enjoin enforcement of the rate reductions for managed care plans and non-contract acute care hospitals, as Independent Living had not shown a risk of irreparable injury as to those services.
On August 27, 2008, the Director filed a motion "to alter or amend, and clarify" the August 18 order. The Director argued that the injunction should apply only to payments for services provided on or after August 18, because requiring full reimbursement for services provided prior to the court's order would violate the State's Eleventh Amendment sovereign immunity. The Director also argued that the order was vague and ambiguous and that the Ninth Circuit had yet to rule on the Director's petition for rehearing and rehearing en banc regarding the Supremacy Clause right of action issue.5 The district court granted the motion in part the same day, issuing an order in chambers modifying the preliminary injunction to apply only to payments "for services provided on or after August 18, 2008." Although the order itself did not provide any explanation for the modification, the district court later stated that it was its "intention only to issue an order that would provide for prospective relief," and that it agreed with the Director "that the order as it was phrased violates the Eleventh Amendment." The district court also indicated that it would not grant the Director's request for a stay and that Independent Living's request for a contempt citation was premature.6 The district court did not afford Independent Living an opportunity to respond to the Director's argument before issuing its order.
The August 18 order, as modified, generated three appeals, two of which remain before us. In case number 08-56422, the Director appeals the district court's decision to grant the motion for preliminary injunction in part, arguing primarily that the analysis of AB 5 conducted by the Department was legally sufficient and Independent Living therefore cannot demonstrate a likelihood of success on the merits.7 In case number 08-56554, Independent Living appeals the district court's August 27 order modifying the injunction to apply only to payments for services provided on or after August 18, arguing that the...
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