Cardenas v. Anzai

• Decision Date: 18 November 2002
• Docket Number: No. 01-15297.,01-15297.
• Citation: 311 F.3d 929
• Parties: Cirilo B. CARDENAS, Sr.; Alejandro M. Asprer; Margaret D. Palting; Lex A. Bautista, on Behalf of Themselves and Others Similarly Situated, Plaintiffs-Appellants, v. Earl I. ANZAI, Attorney General, State of Hawai`i, in his Official Capacity; Neal Miyahara, Director, Department of Budget and Finance, State of Hawai`i, in His Official Capacity; Susan M. Chandler, Ph.D., Director, Department of Human Services, State of Hawai`i, in Her Official Capacity, Defendants-Appellees, and Citibank, N.A., Defendant.
• Court: U.S. Court of Appeals — Ninth Circuit

311 F.3d 929

Cirilo B. CARDENAS, Sr.; Alejandro M. Asprer; Margaret D. Palting; Lex A. Bautista, on Behalf of Themselves and Others Similarly Situated, Plaintiffs-Appellants, v. Earl I. ANZAI, Attorney General, State of Hawai`i, in his Official Capacity; Neal Miyahara, Director, Department of Budget and Finance, State of Hawai`i, in His Official Capacity; Susan M. Chandler, Ph.D., Director, Department of Human Services, State of Hawai`i, in Her Official Capacity, Defendants-Appellees, and Citibank, N.A., Defendant.

No. 01-15297.

United States Court of Appeals, Ninth Circuit.

Argued November 6, 2001.

Submitted June 24, 2002.

Filed November 18, 2002.

COPYRIGHT MATERIAL OMITTED

Antonio Ponvert, III, Bridgeport, Connecticut, for the plaintiffs-appellants.

Charles Fell, Deputy Attorney General, Honolulu, Hawai`i, for the defendants-appellees.

Appeal from the United States District Court for the District of Hawai`i; David A. Ezra, District Judge, Presiding. D.C. No. CV-00-00320-DAE.

Before THOMPSON, O'SCANNLAIN and BERZON, Circuit Judges.

Opinion by Judge THOMPSON; Concurrence by Judge O'SCANNLAIN.

OPINION

DAVID R. THOMPSON, Circuit Judge.

This case arises from the comprehensive settlement agreement reached in 1998 among major American tobacco companies and 46 states, including Hawai`i, that sued them for reimbursement of Medicaid and other costs attributable to smoking. Pursuant to the settlement agreement, Hawai`i will receive approximately $1.38 billion over the next 25 years. The plaintiffs are Medicaid recipients¹ who suffer from smoking-related illnesses. The plaintiffs assert that to the extent the settlement funds to be received by the State of Hawai`i exceed the State's actual expenditures for tobacco-related illnesses on behalf of Medicaid recipients (hereafter the "overage"), the State of Hawai`i is required by 42 U.S.C. § 1396k(b) to distribute that "overage" to Medicaid recipients. Although the plaintiffs sued Hawai`i state officials in their official capacities, not the State of Hawai`i directly, the district court dismissed the lawsuit, determining it was barred by sovereign immunity under the Eleventh Amendment.

We conclude, pursuant to the doctrine of Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), that the suit is not barred by sovereign immunity. We further conclude, however, that the claims the plaintiffs allege are precluded by Congress's 1999 amendment to the Medicaid statute, which provides that tobacco settlement funds received by a state may be used "for any expenditures deemed appropriate by the State." See 42 U.S.C. § 1396b(d)(3)(B)(ii). Thus, we affirm the district court's dismissal on that basis.

I.

On January 31, 1997, Hawai`i sued the major domestic tobacco companies, seeking damages for costs related to tobacco-related injuries suffered by its Medicaid recipients. Hawai`i's lawsuit was based upon a variety of theories including false advertising, fraudulent and negligent misrepresentation, civil conspiracy, negligence, products liability, and restitution for health care costs for recipients of public assistance. On November 23, 1998, Hawai`i, along with 45 other states that had filed similar actions against the tobacco companies, entered into a "global" settlement. Under the Master Settlement Agreement ("MSA"), which memorialized the "global" settlement, the tobacco companies agreed to take steps aimed at reducing or eliminating tobacco use by minors and educating the public at large about the dangers of tobacco use. MSA, at 18-47, available at http://www.library.ucsf.edu/ tobacco/litigation (Nov. 1998). The tobacco companies also agreed to pay various sums to the settling states over 25 years, in amounts to be calculated based upon a complex formula. Id. at 112-114. It is estimated that at the end of the 25-year payout, the State of Hawai`i will have received as much as $1.38 billion.

Hawai`i has established the Hawai`i Tobacco Settlement Special Fund, into which its share of the tobacco settlement proceeds will be deposited. Under related state legislation, effective July 1, 2002, the settlement funds received by Hawai`i will be allocated as follows: (1) twenty-four and one-half percent to the emergency and budget reserve fund; (2) thirty-five percent to the Department of Health for funding the children's health insurance program and the department's health promotion and disease prevention programs; (3) twelve and one-half percent to the Hawai`i Tobacco Prevention and Control Trust Fund; and (4) twenty-eight percent to the university revenue-undertakings fund for the payment, as may be necessary, of principal and interest on revenue bonds issued to finance construction of a health and wellness center, including a new medical school facility, at the University of Hawai`i on the Island of Oahu. Haw.Rev.Stat. § 328L-2 (2001).

The plaintiffs are Hawai`i Medicaid recipients who suffer from tobacco-related illnesses. They filed this lawsuit against officials of the State of Hawai`i, alleging that the officials violated, and continue to violate, the federal disbursement rules for Medicaid recovery set forth in 42 U.S.C. § 1396k(b). Specifically, the plaintiffs assert that a portion of M.S.A. funds received by the State of Hawai`i constitute amounts previously assigned to the State by them and other recipients of public assistance upon receipt of medical benefits for their tobacco-related illnesses. They allege that the state officials are thus required to: (1) determine what portion of the M.S.A. funds are attributable to their Medicaid assigned claims; (2) ascertain how much money the State has spent for treatment of tobacco-related illnesses on behalf of recipients of public assistance; and (3) distribute the "overage", if any, to eligible Medicaid recipients. The plaintiffs seek declaratory and injunctive relief requiring the state officials to comply with the federal Medicaid distribution rules set forth in 42 U.S.C. § 1396k(b).

The defendants moved to dismiss the complaint solely on the ground of sovereign immunity under the Eleventh Amendment. The district court granted that motion, and did not consider the merits of the plaintiffs' claims. This appeal followed.

II.

The defendants argue that the district court lacked subject matter jurisdiction because the plaintiffs lack standing and their claims are not ripe for adjudication. Because standing and ripeness are threshold requirements, without which neither the district court nor this court has jurisdiction, we address these issues first. See Pritikin v. Dep't of Energy, 254 F.3d 791, 796 (9th Cir.2001).

"[T]o satisfy Article III's standing requirements, a plaintiff must show (1)[he] has suffered an `injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). The defendants contend that the plaintiffs' injuries are not concrete and particularized because the 1999 amendment to the Medicaid statute, codified at 42 U.S.C. § 1396b(d)(3)(B)(ii), removed any stake the plaintiffs might have had in the settlement funds. Additionally, the defendants argue that because the settlement funds resulting from the M.S.A. will be paid out over 25 years, the plaintiffs' asserted injuries are too speculative.

"At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice...." Lujan, 504 U.S. at 561, 112 S.Ct. 2130. In this case, the plaintiffs allege that, pursuant to the MSA, Hawai`i will receive the settlement proceeds through annual payments over the next 25 years and that the state officials will cause all of those proceeds to be used for the state's own purposes, depriving its Medicaid recipients of any "overage" which is payable to them under 42 U.S.C. § 1396k(b). These allegations are sufficient to allege both that a concrete injury actually occurred, and that a future injury will likely occur. See Nelsen v. King County, 895 F.2d 1248, 1250-51 (9th Cir.1990) (citing City of Los Angeles v. Lyons, 461 U.S. 95, 101-02, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983), and O'Shea v. Littleton, 414 U.S. 488, 491, 496, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974)). Whether the 1999 amendment to the Medicaid statutes frees Hawai`i to do with the proceeds as it sees fit is a question of law that does not affect the plaintiffs' standing to bring this suit. See Davis v. Passman, 442 U.S. 228, 239 n. 18, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979) (noting that question of whether a plaintiff has standing to bring suit, and thus whether the court has jurisdiction to hear the controversy, is separate from the question of whether a plaintiff has a cause of action). The plaintiffs have standing.

We also conclude that the plaintiffs' claims are ripe for adjudication. "A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all." (internal quotation marks omitted). Texas v. United States, 523 U.S. 296, 300, 118 S.Ct. 1257, 140 L.Ed.2d 406 (1998) (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-581, 105 S.Ct. 3325, 87 L.Ed.2d 409 (1985) (quoting 13A CHARLES A. WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3532, at 112 (1984))). The defendants contend that the plaintiffs' claims are not ripe for adjudication because too many speculative contingencies must be fulfilled before the plaintiffs can successfully challenge the allocation of the M.S.A. funds. For example, the defendants argue that, until the end of the 25-year...