Broselow v. Fisher, 01-3933.

• Decision Date: 11 February 2003
• Docket Number: No. 01-3933.,01-3933.
• Citation: 319 F.3d 605
• Parties: Peter BROSELOW, on His Own Behalf and on Behalf of All Others Similarly Situated; Mary A. Broughton, on Her Own Behalf and on Behalf of All Others Similarly Situated; Alfonso Broughton, on His Own Behalf and on Behalf of All Others Similarly Situated, Appellants v. D. Michael, FISHER, Attorney General; Feather O. Houston, Secretary of the Pennsylvania Department of Public Welfare; Peg Dierkers, Deputy Secretary for Public Welfare for Medical Assistance Programs; Citibank N.A.
• Court: U.S. Court of Appeals — Third Circuit

319 F.3d 605

Peter BROSELOW, on His Own Behalf and on Behalf of All Others Similarly Situated; Mary A. Broughton, on Her Own Behalf and on Behalf of All Others Similarly Situated; Alfonso Broughton, on His Own Behalf and on Behalf of All Others Similarly Situated, Appellants v. D. Michael, FISHER, Attorney General; Feather O. Houston, Secretary of the Pennsylvania Department of Public Welfare; Peg Dierkers, Deputy Secretary for Public Welfare for Medical Assistance Programs; Citibank N.A.

No. 01-3933.

United States Court of Appeals, Third Circuit.

Argued August 1, 2002.

Filed February 11, 2003.

Antonio Ponvert, III (Argued), Koskoff, Koskoff & Bieder, PC, Bridgport, CT, Edward B. McDaid, McDaid, Flum & Bloom, Philadelphia, PA, for Appellants.

Mike Fisher, Attorney General, Joel M. Ressler (Argued), Chief Deputy Attorney General, Chief, Tobacco Enforcement Section, Office of Attorney General, Harrisburg, PA, for Appellees.

Before ROTH, AMBRO and RENDELL,^* Circuit Judges.

OPINION OF THE COURT

ROTH, Circuit Judge.

In 1998, a number of States, including the Commonwealth of Pennsylvania, settled their lawsuits against the major tobacco companies. Under the Tobacco Settlement, the Tobacco Companies agreed to pay the Commonwealth of Pennsylvania more than $11 billion. Plaintiffs, a class of Pennsylvania Medicaid recipients who have various smoking-related illnesses, believe that a provision of the Medicaid Act, 42 U.S.C. § 1396k, entitles them to part of the Tobacco Settlement. They contend that the Commonwealth recovered the Tobacco Settlement funds under an assignment from them. Accordingly, they assert that pursuant to the provisions of § 1396k(b) they are individuals to whom the remainder of the amount collected should be paid.

The District Court dismissed plaintiffs' action against the Commonwealth, finding that the Eleventh Amendment barred the suit. We will affirm that dismissal, but not on Eleventh Amendment grounds.

I. Procedural History

On January 27, 2000, plaintiffs filed a complaint in the United States District Court for the Eastern District of Pennsylvania, pursuant to 42 U.S.C. § 1983. They named as defendants three officers of the Commonwealth of Pennsylvania and Citibank N.A. They sought declaratory and injunctive relief to compel the officers of the Commonwealth to comply with 42 U.S.C. § 1396k(b), which they contend requires the Commonwealth to pay them whatever portion of the Tobacco Settlement is not used to reimburse the Commonwealth for its Medicaid expenses.

On April 27, 2001, the District Court granted the Commonwealth's motion to dismiss for failure to state a claim, Fed. R.Civ.P. 12(b)(6), on the grounds that the Eleventh Amendment barred the suit. The court also denied plaintiffs' motion for reconsideration.

II. Jurisdiction and Standard of Review

Because these claims were brought pursuant to 42 U.S.C. § 1983 and the Medicaid Act, the District Court had subject matter jurisdiction under 28 U.S.C. § 1331. We have appellate jurisdiction under 28 U.S.C. § 1291.

We exercise plenary review over decisions to grant a motion to dismiss. See Malia v. General Electric, 23 F.3d 828, 830 (3d Cir.1994). If, in this appeal, accepting all well pleaded allegations in the complaint as true, we find that the plaintiff is not entitled to relief, we will affirm.

III. Discussion

As the District Court concluded, before plaintiffs can prevail in this suit they must demonstrate that the relief they seek is not barred by the Eleventh Amendment of the United States Constitution, which generally bars suits brought by individuals against state officers acting in their official capacity. See MCI Telecommunication Corp. v. Bell Atlantic Pennsylvania, 271 F.3d 491, 503 (3rd Cir.2001). Before we address the difficult Eleventh Amendment issues, however, we can consider whether there are alternative grounds, logically antecedent to the Eleventh Amendment inquiry, upon which we can base a decision in favor of the State. See Amchem Prods. v. Windsor, 521 U.S. 591, 612, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). The Supreme Court has specifically held, for example, that it is appropriate to decide whether a statute permits a cause of action against a State before deciding whether the Eleventh Amendment bars the suit. See Vermont Agency of Natural Res. v. United States, 529 U.S. 765, 779-80, 120 S.Ct. 1858, 146 L.Ed.2d 836. We will, therefore, bypass the issue of the Eleventh Amendment bar because we conclude that, for two antecedent reasons, plaintiffs' action fails to state a claim for which relief can be granted. See Strawser v. Atkins, 290 F.3d 720, 729 (4th Cir.2002) (holding, in appeal of Medicaid recipients' actions against the States of West Virginia, North Carolina, and South Carolina, that actions could be dismissed on basis of 1999 amendment to Medicaid statute without resolving Eleventh Amendment bar).

As to the first of these antecedent grounds, we have determined that § 1396k(b) does not authorize the relief plaintiffs seek because the funds from the Tobacco Settlement were not collected under an assignment from plaintiffs. Second, even if the funds were collected on assignment, a 1999 amendment to the Medicaid Act bars plaintiffs' claims to any portion of the Tobacco settlement. See 42 U.S.C. § 1396b(d)(3)(B)(ii). That amendment allows the States to use the funds from the Tobacco Settlement for any purpose the States find appropriate. Thus, even if § 1396k(b) had given the plaintiffs a right to some of the Tobacco Settlements funds, the amendment absolved the Commonwealth of the obligation to pass on any of the funds to Medicaid beneficiaries. We note that our sister circuit courts of appeals that have considered these claims by Medicaid beneficiaries for Tobacco Settlement funds have come to the same conclusion. See Cardenas v. Anzai, 311 F.3d 929, 937-40 (9th Cir.2002) (holding § 1396b(d)(3)(B)(ii) expressly allowed State to use all Tobacco Settlement funds for any purpose); Strawser, 290 F.3d at 730-31 (same); Greenless v. Almond, 277 F.3d 601, 608 (1st Cir.2002) (same); Tyler v. Douglas, 280 F.3d 116, 123 (2d Cir.2001) (same); Harris v. Owens, 264 F.3d 1282, 1295 (10th Cir.2001) (same); Watson v Texas, 261 F.3d 436, 444-45 (5th Cir.2001) (holding complaint did not plead an assignment from Medicaid beneficiaries under § 1396k(b)); cf. Barton v. Summers, 293 F.3d 944 (6th Cir.2002) (holding Medicaid beneficiaries' claims barred by Eleventh Amendment but, even if not barred, plaintiffs had no implied private right of action under § 1983 and § 1396b(d)(3)(B)(ii) permits use of Tobacco Settlement funds as States determine appropriate).

We turn first to the question whether the funds were collected on assignment from plaintiffs.

A. Does § 1396k(b) Entitle Plaintiffs to a Portion of the Tobacco Settlement Funds?

Subsection (a) of § 1396k requires Medicaid recipients to assign to the State their right to recover medical expenses from a third party. Subsection (b) provides that whenever a State recovers Medicaid costs from a third party under such an assignment, it must distribute that recovery, first, to itself to pay for its share of Medicaid expenses and, next, to the federal government to pay for the federal share of Medicaid expenses. The State must pay any remainder to the Medicaid recipient whose illness prompted the Medicaid expenditure.¹ Section 1396k(b) applies, however, only when the recovery is made "under an assignment" from the Medicaid recipient.

Our review of the complaint in the Commonwealth of Pennsylvania's action against the Tobacco Companies indicates that the Tobacco Settlement funds were not collected "under an assignment" from Medicaid recipients. Instead, the Commonwealth recovered those funds by suing the Tobacco Companies directly, under a parens patriae theory. That theory allows a state to bring suit on its own behalf to protect the well-being of its residents. See Alfred L. Snapp & Son, Inc. v. Puerto Rico, ex rel., Barez, 458 U.S. 592, 102 S.Ct. 3260, 73 L.Ed.2d 995 (1982).

There is substantial evidence in the Commonwealth's complaint that the Commonwealth proceeded against the Tobacco Companies under a parens patriae theory. The Commonwealth expressly invoked this theory as the basis for its complaint. It also attempted to defuse any statute of limitations issues by invoking the doctrine of nullum tempus occurrit regi, a doctrine that exempts a State from the statute of limitations when the State brings suit itself to protect the public's rights. See Dept. of Trans. v. J.W. Bishop & Co., 497 Pa. 58 439 A.2d 101, 104 (1981). This exemption from the statute of limitations would not exist for claims assigned to the State by Medicaid beneficiaries, and, indeed, the claims of many of these beneficiaries would have been barred by the statute of limitations.

In the form of pleading the Commonwealth chose for the Complaint, as to each cause of action, the Commonwealth made clear that one item of damage it was seeking was the Medicaid expenditures it had paid out. The Commonwealth does not claim a right to recover all the medical expenditures by and for Medicaid beneficiaries. For each cause of action, the Complaint cites, as a direct and foreseeable result of defendants' wrongful conduct, that the "Commonwealth has paid and will continue to be required to pay medical costs of Medicaid ... incurred because of tobacco-related disease."

Plaintiffs point out, nevertheless, that the Commonwealth, in Paragraph 9 of the Damages and Injunctive Relief Requested, prays for "restitution, including, but not limited to, health care costs of Medicaid and state medical assistance recipients for diagnosis and treatment of tobacco-related disease." This language is broader and could be read to refer not only to the Commonwealth's share of expenditures but also to the federal government's and that of the Medicaid recipients. In view, however, of the specific description of damage in...