GG Fire Sprinklers v.Bradshaw

• Decision Date: 23 February 2000
• Docket Number: N,No. 96-55194,96-55194
• Parties: (9th Cir. 2000) G & G FIRE SPRINKLERS, INC., Plaintiff-Appellee, v. VICTORIA L. BRADSHAW, an individual, in her capacity as Labor Commissioner of the State of California; LLOYD W. AUBRY, JR., an individual in his official capacity as Director of the Department of Industrial Relations of the State of California; DANIEL DELLAROCCA, an individual, in his official capacity as Deputy Labor Commissioner of the State of California; ROGER MILLER, an individual in his official capacity as Deputy Labor Commissioner of the State of California; ROSA FRAZIER, an individual in her capacity as Deputy Labor Commissioner of the State of California, Defendants-Appellants. G & G FIRE SPRINKLERS, INC., Plaintiff-Appellee, v. VICTORIA L. BRADSHAW, an individual in her official capacity as Labor Commissioner of the State of California; LLOYD W. AUBRY, JR., an individual in his official capacity as Director of the Department of Industrial Relations of the State of California; DANIEL DELLAROCCA, an individual in his official capacity as Deputy Labor Commissioner of the State of California; ROGER MILLER, an individual in his official capacity ORDER as Deputy Labor Commissioner of the State of California; ROSA FRAZIER, an individual in her official capacity as Deputy Labor Commissioner of the State of California; DIVISION OF LABOR STANDARDS ENFORCEMENT, an agency of the State of California; DEPARTMENT OF INDUSTRIAL RELATIONS, an agency of the State of California, Defendants-Appellants. o. 95-56639
• Court: U.S. Court of Appeals — Ninth Circuit

Page 941

204 F.3d 941 (9th Cir. 2000)

G & G FIRE SPRINKLERS, INC., Plaintiff-Appellee, v. VICTORIA L. BRADSHAW, an individual, in her capacity as Labor Commissioner of the State of California; LLOYD W. AUBRY, JR., an individual in his official capacity as Director of the Department of Industrial Relations of the State of California; DANIEL DELLAROCCA, an individual, in his official capacity as Deputy Labor Commissioner of the State of California; ROGER MILLER, an individual in his official capacity as Deputy Labor Commissioner of the State of California; ROSA FRAZIER, an individual in her capacity as Deputy Labor Commissioner of the State of California, Defendants-Appellants.

G & G FIRE SPRINKLERS, INC., Plaintiff-Appellee, v. VICTORIA L. BRADSHAW, an individual in her official capacity as Labor Commissioner of the State of California; LLOYD W. AUBRY, JR., an individual in his official capacity as Director of the Department of Industrial Relations of the State of California; DANIEL DELLAROCCA, an individual in his official capacity as Deputy Labor Commissioner of the State of California; ROGER MILLER, an individual in his official capacity ORDER as Deputy Labor Commissioner of the State of California; ROSA FRAZIER, an individual in her official capacity as Deputy Labor Commissioner of the State of California; DIVISION OF LABOR STANDARDS ENFORCEMENT, an agency of the State of California; DEPARTMENT OF INDUSTRIAL RELATIONS, an agency of the State of California, Defendants-Appellants.

No. 96-55194, No. 95-56639

UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

Argued and Submitted September 14, 1999

On Remand from the United States Supreme Court April 19, 1999

Filed February 23, 2000

Before: Stephen Reinhardt, Alex Kozinski and Michael Daly Hawkins, Circuit Judges.

Order; Dissent by Judge Kozinski

ORDER

In G&G Fire Sprinklers, Inc. v. Bradshaw, 156 F.3d 893 (9th Cir. 1998), we held that California Labor Code provisions authorizing the state to seize money and impose penalties for a subcontractor's failure to comply with prevailing wage requirements violated the Due Process Clause of the Fourteenth Amendment. See id. at 904. The Supreme Court granted certiorari, vacated our judgment, and remanded "for further consideration in light of American Manufacturers Mutual Insurance Company v. Sullivan, 119 S. Ct. 977 (1999)." Bradshaw v. G&G Fire Sprinklers, Inc., 119 S. Ct. 1450 (1999). Having determined that Sullivan is fully consistent with our analysis, we reinstate the judgment and opinion.

DISCUSSION

Sullivan involved the Pennsylvania Workers' Compensation Act, under which an employer or its insurer must pay for all "reasonable" and "necessary" medical treatment for workrelated injuries. See 119 S. Ct. at 982. Under the Pennsylvania scheme, an insurance company could withhold payment for medical treatment if it disputed the reasonableness or necessity of that treatment. See Pa. Stat. Ann S 531(5) ("All payments to providers for treatment . . . shall be made within thirty (30) days of receipt of such bills and records unless the employer or insurer disputes the reasonableness or necessity of the treatment."). The Sullivan plaintiffs claimed that the failure to pay their contested benefit claims within thirty days, before a process was provided to resolve the dispute about the "reasonableness" of their treatment, amounted to a deprivation of due process.

Sullivan dealt with two questions: (1) whether the insurance company's decision to withhold payment for disputed medical treatment was fairly attributable to the State so as to subject insurers to the constraints of the Fourteenth Amendment, 119 S. Ct. at 984; and (2) whether the Due Process Clause requires workers' compensation insurers to immediately pay disputed medical bills prior to a determination that the medical treatment was reasonable and necessary. Id. at 985.

The first question concerns whether there is state action, since the Fourteenth Amendment does not reach private acts or actors. Sullivan repeats a familiar calculus to determine the presence of state action: there must be some deprivation of a constitutional right and the party charged with the deprivation must be fairly said to be a state actor. Id. at 986. The second question turns on whether the claimant has a property interest in the matter complained of.

The Supreme Court found that the Sullivan plaintiffs did not possess a property interest in the immediate , unconditional payment for all medical treatment under the Pennsylvania statute. Nevertheless, the Court stated that the plaintiffs did have an interest in payment of "reasonable" medical costs, see Sullivan, 119 S. Ct. at 990, and went out of its way to make clear that its holding did not upset previous Supreme Court precedent supporting the conclusion that the plaintiffs had a property interest in their claims for payment. See id. at n.13 ("Respondents do not contend that they have a property interest in their claims for payment, as distinct from the payments themselves, such that the State, the arguments goes, could not finally reject their claims without affording them appropriate procedural protections.") (citing Logan v. Zimmerman Brush Co., 45 U.S. 422, 430-31 (1982)). Justice Ginsburg, who provided the fifth vote necessary to make the due process discussion in Sullivan an opinion of the Court, further clarified this distinction in her concurrence:

I join Part III of the Court's opinion on the under standing that the Court rejects specifically, and only, respondent's demands for constant payment of each medical bill, within 30 days of receipt, pending determination of the necessity or reasonableness of the medical treatment. I do not doubt, however, that due process requires fair procedures for the adjudica tion of respondents' claims for workers' compensa tion benefits, including medical care.

Sullivan, 119 S. Ct. at 991 (emphasis added) (citation omitted).

Our opinion adopts the approach explicitly preserved by the Sullivan majority and unequivocally adopted in Justice Ginsburg's concurrence. We specifically held that G&G did not have a right to payment of the disputed funds pending the outcome of whatever kind of hearing would be afforded to determine whether G&G complied with the California prevailing wage laws. See G&G Fire Sprinklers, 156 F.3d at 903-04. To the contrary, we explicitly authorized the withholding of payments pending the hearing. See id. G&G's due process rights were violated, we held, not because it was denied immediate payment, but because the California statutory scheme afforded no hearing at all when state officials directed that payments be withheld.¹ See id. at 904. Nor can there be any doubt whether the action at issue here was compelled by the State. The withholding in Sullivan was carried out by a private insurer exercising its discretion in a way permitted by State law. The withholding here was specifically directed by State officials in an environment where the withholding party has no discretion at all. Moreover, in their complaint the plaintiffs directly attack the notices of withholding issued by the state agency, alleging that they were issued "arbitrarily and unreasonably."

Because our holding is not contrary to the Court's ruling in Sullivan, and because our opinion's reasoning fits comfortably within the analytic framework set forth in Sullivan, we REINSTATE the judgment and the opinion reported at 156 F.3d 893 (9th Cir. 1998).

Note:

KOZINSKI, Circuit Judge, dissenting:

I dissented from the original opinion in this case because I do not believe that relations among contracting parties are governed by the Due Process Clause merely because one of the parties happens to be a state. See G&G Fire Sprinklers, Inc. v. Bradshaw, 156 F.3d 893, 908 (1998) (Kozinski, J., dissenting). I continue to adhere to that view. But the Supreme Court has now directed us to reconsider our opinion in light of American Mfrs. Mut. Ins. Co. v. Sullivan, 119 S. Ct. 977 (1999). See Bradshaw v. G&G Fire Sprinklers, Inc., 119 S.Ct. 1450, (1999). In response, the majority reinstates its original opinion without amendment, claiming that its reasoning "fits comfortably within the analytic framework set forth in Sullivan." Reinstatement Order at 1970. I must dissent once again, because Sullivan fits the majority's rationale about as comfortably as Cinderella's slipper on the wicked step-sister's foot.

Sullivan teaches that, to state a claim for relief under section 1983, G&G must identify both an alleged constitutional deprivation and a state actor who is responsible for it. See Sullivan, 119 S. Ct. at 985 (rejecting the argument that "we need not concern ourselves with `the identity of the defendant' "). In deciding whether G&G has succeeded in this, Sullivan explains that we must begin "by identifying `the specific conduct of which the plaintiff complains.' " Id. at 985 (quoting Blum v. Yaretsky, 457 U.S. 991, 1004 (1982)). Here the only deprivation alleged by G&G was effected by the prime contractor, who withheld funds which G&G claims under a contract.¹ There's no state action.

The majority waves a magic wand by asserting that"[t]he withholding here was specifically directed by state officials in an environment where the withholding party has no discretion at all." Reinstatement Order at 1970. This would be true had the prime contractor been ordered, under penalty of law, to withhold funds from G&G. It was not. The only entity "specifically directed" to withhold funds was the awarding body, which withheld funds only from the prime contractor, not from G&G. While the challenged provision authorized-even encouraged--the prime to withhold an equivalent amount from G&G, the prime was free to pay G&G the full amount specified by the contract. Sullivan clearly holds that mere authorization and encouragement do not render a private entity's decisions "fairly attributable" to the state. 119 S. Ct....