Jennings v. Alexander

Citation715 F.2d 1036
Decision Date04 August 1983
Docket NumberNo. 81-5629,81-5629
PartiesRosier JENNINGS b/n/f; Kathleen Jennings; Hershel Choate; Wilma Ann Hyder; Clyde Vaughn b/n/f; Edith Vaughn; Paul Ramone Parsons b/n/f; Lou Ann Bradley; Rebecca West b/n/f; Paulette West; Michaelle Ogle b/n/f; Linda Sue Ogle; Eldon Kerr; Stella Karris; Sadie I. Owens; Margaret Betty; Charles Baldwin; Carrie Clemmons, Plaintiffs-Appellants, v. Lamar ALEXANDER; Eugene Fowinkle; Ben Crim; Carolyn Hale, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

G. Gordon Bonnyman, Jr., Nashville, Tenn., Susan Garner (argued), Murfreesboro, Tenn., Robert L. Ray, Nashville, Tenn., James J. Barrett, III, Rural Legal Services of Tenn., Inc., Cookeville, Tenn., for plaintiffs-appellants.

William M. Leech, Jr., Atty. Gen. of Tenn., Frank Scanlon, Asst. Atty. Gen. (argued), Nashville, Tenn., for defendants-appellees.

Before KEITH, MERRITT and JONES, Circuit Judges.

KEITH, Circuit Judge.

Appellants, Medicaid recipients from the State of Tennessee, challenge the State's attempt to restructure its Medicaid Plan. Appellants contend that Tennessee's proposed reduction in the number of hospital days covered by Medicaid from twenty to fourteen per annum violates Section 504 of the Rehabilitation Act, 29 U.S.C. § 794 and Section 1902(a)(19) of the Medicaid Act, 42 U.S.C. § 1396a(a)(19). They also argue that any reduction must be approved by the Secretary of Health and Human Services. After a bench trial, the district court dismissed each of Appellants' claims. For the reasons set forth below, we vacate the district court's order and remand this case for further consideration not inconsistent with this opinion.

This action was originally brought in the United States District Court for the Middle District of Tennessee on behalf of all the State's Medicaid recipients. It challenged an array of proposed reductions by the State designed to save money on the State's share of Medicaid expenditures. 1 The proposed reductions included, inter alia, deletion of certain drugs from the Medicaid formulary, reductions in the level of reimbursement for health care providers, reduction of inpatient hospitalization coverage, and reduction of outpatient hospitalization services. Appellants also sought to enjoin the proposed reductions because they had not been approved by a valid Medicaid Medical Care Advisory Committee as prescribed by federal regulations. 42 C.F.R. § 431.12.

On September 3, 1980, the district court enjoined the State's promulgation of the proposed reductions until a validly constituted Medical Care Advisory Committee had reviewed them. On December 12, 1980, the State petitioned the district court to set aside the preliminary injunction. The State argued that a properly constituted committee had not acted after having sufficient time to do so. The court did not rule on this motion.

By the time of the March 13, 1981 bench trial, the validity of only two proposed reductions were at issue: the deletion of certain drugs from the Medicaid formulary and the reduction in the number of inpatient days for which Medicaid would pay. Prior to the district court's opinion on June 17, 1981, the parties settled the former issue. Only the validity of the State's reduction in hospitalization coverage remained to be resolved by the court.

In its opinion, the district court held (1) that the proposed reduction did not violate Section 504 of the Rehabilitation Act of 1973, (2) that the proposed reduction was not inconsistent with the best interests of the recipients in contravention of 42 U.S.C. § 1396a(a)(19), and (3) approval from the Secretary of Health and Human Services was not needed to implement the changes. However, the court found that the State had failed to comply with the procedures outlined in 42 C.F.R. § 447.205 which establish guidelines for providing public notice of proposed changes. Therefore, the court refused to set aside its September 3, 1980 preliminary injunction.

I.

The initial question for review is whether the district court erred in holding that the proposed reduction from twenty to fourteen days per annum does not violate Section 504. The district court held that the appellants had not made a showing of discrimination against the handicapped because there had been no showing of disparate impact upon handicapped persons. Furthermore, the court held that even if Appellants had proved disparate impact, the disparate impact was not discrimination against the handicapped as contemplated by the Rehabilitation Act of 1973. We disagree.

A.

29 U.S.C. § 794 provides in relevant part:

No otherwise qualified handicapped individual in the United States, as defined in section 706(7) of this title, shall, solely by reason of his handicap, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service. 2

The courts which have considered the issue have uniformly held that Section 504 creates a private cause of action for those who are its intended beneficiaries. See infra note 4 and accompanying text. Although the Supreme Court did not address this issue in Southeastern Community College v. Davis, 442 U.S. 397, 99 S.Ct. 2361, 60 L.Ed.2d 980 (1981), its actions in several cases suggest that the Court has assumed that a private cause of action exists in Section 504 cases. Id. 3

Though a thorough examination of this issue has already been provided by several circuit courts, we note our agreement that sound judicial analysis supports implying a private cause of action for injunctive relief. In its discussion of the Technical and Clarifying Amendments to the Rehabilitation Act, the Senate Report explained:

Section 504 was patterned after and is almost identical to, the antidiscrimination language of section 601 of the Civil Rights Act of 1964, 42 U.S.C. 2000d-1 (relating to race, color, or national origin) and section 901 of the Education Amendments of 1972, 42 U.S.C. 1683 (relating to sex). The section therefore constitutes the establishment of a broad government policy that programs receiving Federal financial assistance shall be operated without discrimination on the basis of handicap. It does not specifically require the issuance of regulations or expressly provide for enforcement procedures, but it is clearly mandatory in form, and such regulations and enforcement are intended.

The language of section 504, in following the above-cited Acts, further envisions the implementation of a compliance program which is similar to those Acts, including promulgation of regulations providing for investigation and review of recipients of Federal financial assistance, attempts to bring non-complying recipients into voluntary compliance through informal efforts such as negotiation, and the imposition of sanctions against recipients who continue to discriminate against otherwise qualified handicapped persons on the basis of handicap. Such sanctions would include, where appropriate, the termination of Federal financial assistance to the recipient or other means otherwise authorized by law. Implementation of section 504 would also include pre-grant analysis of recipients to ensure that Federal funds are not initially provided to those who discriminate against handicapped individuals. Such analysis would include pre-grant review procedures and a requirement for assurances of compliance with section 504. This approach to implementation of section 504, which closely follows the models of the above-cited anti-discrimination provisions, would ensure administrative due process (right to hearing, right to review), provide for administrative consistency within the Federal government as well as relative ease of implementation, and permit a judicial remedy through a private action.

S.Rep. No. 1297, 93d Cong., 2d Sess. reprinted in 1974 U.S.CODE CONG. & AD.NEWS 6373, 6390-91.

The guidelines enunciated in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975) for implying a private cause of action are clearly met. First, Section 504 was enacted for the special benefit of handicapped persons as defined in the Rehabilitation Act. Second, there is express language in the legislative history which supports a congressional intent to imply a private cause of action. Third, the structure and underlying purpose of the Act is consistent with the implication of a private judicial remedy. Finally, the cause of action is not one generally relegated to the states and inappropriate for federal law. We, therefore, agree with the other circuits that have considered the issue and hold that Section 504 creates a private cause of action for its intended beneficiaries. 4

B.

Section 504 is "part of the general corpus of discrimination law." New York State Association for Retarded Children v. Carey, 612 F.2d 644 (2d Cir.1979). It is predicated on Title VI of the Civil Rights Act, 42 U.S.C. § 2000d et seq., and is intended to prohibit the expenditure of public funds in programs that discriminate against the handicapped. See Sen.Rep. 1297, supra. Courts have generally applied the same tests of discrimination law to Section 504 as are applied to Title VI.

In N.A.A.C.P. v. The Medical Center, Inc., 657 F.2d 1322 (3d Cir.1981) (en banc ), the Third Circuit exhaustively considered the evidence needed to prove a prima facie violation of Title VI. Having concluded that Title VI requires only that a plaintiff prove disparate impact in the application of federal funds, the court concluded, "The Rehabilitation Act and the Age Discrimination Act of 1975 provide equally strong cases for application of an impact test since both are patterned after Title VI." Id. at 1331. See also Bryan v. Koch, 627 F.2d 612, 621 (2d Cir.1980).

Both Bryan and The...

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