Cardenas v. Anzai, No. CIV.00-00320DAEKSCC.

• Decision Date: 18 January 2001
• Docket Number: No. CIV.00-00320DAEKSCC.
• Citation: 128 F.Supp.2d 704
• Parties: Cirilo B. CARDENAS, Sr., et al., Plaintiffs, v. Earl I. ANZAI, Attorney General, et al., Defendants.
• Court: Hawaii Supreme Court

128 F.Supp.2d 704

Cirilo B. CARDENAS, Sr., et al., Plaintiffs, v. Earl I. ANZAI, Attorney General, et al., Defendants.

No. CIV.00-00320DAEKSCC.

United States District Court, D. Hawai`i.

January 18, 2001.

Arthur Y. Park, Laurent J. Remillard, Jr., Park Park Yu & Remillard, Honolulu, HI, Wayne D. Parsons, Honolulu, HI, Antonio Ponvert, III, Koskoff Koskoff & Bieder PC, Bridgeport, CT, for Cirilo B. Cardenas, Sr., Alejandro M. Asprer, Margaret D. Palting, Lex A. Bautista, plaintiffs.

Charles F. Fell, Office of the Attorney General-Hawaii, Honolulu, HI, for Earl I Anzai, Neal Miyahara, Susan M. Chandler, Citibank, N.A., defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS COMPLAINT

DAVID ALAN EZRA, Chief Judge.

The court heard Defendants' Motion on November 27, 2000. Antonio Ponvert, III, Esq., Arthur Y. Park, Esq., Vernon Yu, Esq., and Wayne D. Parsons, Esq., appeared at the hearing on behalf of Plaintiffs; Deputy Attorney General Charles F. Fell appeared at the hearing on behalf of Defendants. After reviewing the motion and the supporting and opposing memoranda, the court GRANTS Defendant's Motion to Dismiss Complaint.

BACKGROUND

This case arises out of a lawsuit filed in state court on January 31, 1997, entitled State of Hawaii v. Brown & Williamson Tobacco Corporation, et al. In that case, the State of Hawaii sued tobacco manufacturers for smoking-related injuries suffered by the State's Medicaid recipients. The suit resulted in a settlement through a Consent Decree. The Master Settlement Agreement provides that the State will dismiss the suit in exchange for approximately 1.38 billion dollars,¹ payable over 25 years. Final judgment in that case has been entered, and the State received its first payment of $12,900,000 in January of 2000. Part of the settlement agreement is what is considered to be "excess recovery," meaning that the State will receive more money from the tobacco manufacturers than it actually paid to treat Medicaid recipients.

Plaintiffs are victims of smoking-related illnesses. In filing this suit, Plaintiffs seek declaratory and injunctive relief; they ask the court to direct the excess recovery of the future payments to the Medicaid recipients themselves rather than to the State. Plaintiffs argue that the State, as a participant in the Federal Medicaid program, must comply with Federal law, namely the Medicaid Act and its regulations, which directs the State to disburse its excess recovery to the Medicaid recipients.

Defendants Attorney General Earl I. Anzai, Director of the Department of Budget and Finance Neal Miyahara, and Director of the Department of Human Services Susan Chandler (collectively "State Defendants") filed this Motion to Dismiss Complaint on July 21, 2000, claiming that the suit is barred by the Eleventh Amendment and therefore the court lacks subject matter jurisdiction. Plaintiffs filed their Memorandum in Opposition to State Defendants' Motion to Dismiss on September 21, 2000. State Defendants filed a Reply Memorandum in Support of their Motion to Dismiss on October 6, 2000.

On October 13, 2000, Plaintiffs filed a Motion to Strike Arguments Numbered III and IV from Defendants' Reply Memorandum, claiming that the arguments were improperly made. Defendants responded with a Memorandum in Opposition to Plaintiffs' Motion to Strike Arguments Numbered III and IV from Defendants' Reply on November 13, 2000. Then, after receiving leave from the court to do so, Plaintiffs filed their Supplemental Memorandum in Opposition to Defendants' Reply Memorandum in Support of their Motion to Dismiss Complaint on November 15, 2000.²

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(1) provides that a party may move to dismiss a complaint if the court lacks jurisdiction over the subject matter in a case. Fed.R.Civ.P. 12(b)(1). In determining the sufficiency of an alleged jurisdictional basis, the plaintiff bears the burden of proof that subject matter jurisdiction does in fact exist. Thornhill Pub. Co. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir.1979). Moreover, "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983).

In a motion to dismiss based upon lack of subject matter jurisdiction under Rule 12(b)(1), the court employs the same standard under which it would review a motion for dismissal for failure to state a claim under Rule 12(b)(6). Bollard v. California Province of the Society of Jesus, 196 F.3d 940, 945 (9th Cir.1999) (citing Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir.1998)). At this stage in the proceedings, the court must take the allegations in Plaintiffs' complaint as true. Id. (citing Big Bear Lodging Ass'n v. Snow Summit, Inc., 182 F.3d 1096, 1099 (9th Cir.1999)).

DISCUSSION

State Defendants argue that the court should dismiss this case on the grounds that the court lacks subject matter jurisdiction because the Eleventh Amendment bars the suit. They assert that even though the Complaint is framed in terms of prospective injunctive and declaratory relief, the court should dismiss the suit because, in reality, Plaintiffs seek monetary damages which will retrospectively damage the State Treasury. The court finds merit in this argument.

The Eleventh Amendment to the United States Constitution states that

[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

U.S. Const., amend. XI. This Amendment has been read invariably through the years to stand for the notion that each state is a sovereign power within the federal system; the inherent nature of sovereignty is such that a state may not be amenable to suit without that state's consent. Seminole Tribe of Florida v. Florida, 517 U.S. 44, 54, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996). The United States Supreme Court has consistently reaffirmed that "federal jurisdiction over suits against unconsenting States was not contemplated by the Constitution when establishing the judicial power of the United States." Id. (citations omitted). Therefore, a State is immune from suit by an individual. Id.

There are exceptions to the sovereign immunity doctrine of the Eleventh Amendment. First, a state can expressly consent to suit. Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974); Micomonaco v. State of Washington, 45 F.3d 316, 319 (9th Cir.1995). If it does, it can be sued in federal court. Second, where a state's statutes or constitution so provide, a state will be deemed to have waived its sovereign immunity. Id. Third, Congress can expressly abrogates the states' sovereign immunity pursuant to a valid exercise of power. Seminole Tribe, 517 U.S. at 55, 116 S.Ct. 1114.

Finally, and most relevant here, a plaintiff may seek prospective injunctive relief from a state, if necessary to conform its conduct with Federal statutes or the constitution, even if it has an ancillary effect on the state treasury. Edelman v. Jordan, 415 U.S. 651, 668, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). This is true when the relief is sought in the form of a declaratory judgment, id., or through an injunction forcing a state officer to conform his conduct with the law and to prevent interference with federal rights. Papasan v. Allain, 478 U.S. 265, 277, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (stating that injunction exception only applies where "underlying authorization upon which the named official acts is asserted to be illegal"); Ex Parte Young, 209 U.S. 123, 157, 28 S.Ct. 441, 52 L.Ed. 714 (1908); Armstrong v. Wilson, 124 F.3d 1019, 1025 (9th Cir.1997). Therefore, the Eleventh Amendment does not preclude suit against a state official for "prospective relief for an ongoing violation of federal law." Children's Hospital and Health Center v. Belshe, 188 F.3d 1090, 1095 (9th Cir.1999).

The first question before the court, then, is whether, if taking the allegations in Plaintiffs' Complaint as true, the actions of the state officials in this suit constitute ongoing violations of federal law. Plaintiffs assert that the State Defendants will violate federal law if they actively decide to keep the excess recovery funds from the settlement for the State rather than distributing them to Plaintiffs. This allegation amounts to the assertion of an ongoing violation of federal law and, if true, is the proper type of violation for which an injunction may issue pursuant to Young and its progeny. See, e.g. Papasan, 478 U.S. at 281-82, 106 S.Ct. 2932 (stating that allegation in complaint sufficiently stated ongoing constitutional violation to warrant potential injunctive relief; therefore complaint was not barred by Eleventh Amendment).

The remaining issue before the court, then, is extremely complex. The court must determine whether the relief sought is "prospective." To so determine, the court must ascertain whether the State now owns the money and it is de facto contained in the State treasury. To state the issue another way, the court must decide whether the Master Settlement Agreement immediately vested in the State the right to an ascertainable amount of money so that an injunction would actually deprive the state treasury of money.³

State Defendants argue that the relief is retrospective because they have entitlement to the money. The money is, Defendants argue, already obligated to the State and therefore any judgment Plaintiffs seek will operate to attach the state treasury.⁴

Plaintiffs, on the other hand, assert that the money does not yet belong to the State. They use the following arguments to support their assertion: first, the exact amount to be received by the State is unknown,...