Greenless v. Almond

• Decision Date: 02 October 2001
• Docket Number: No. 01-1410,01-1410
• Citation: 277 F.3d 601
• Parties: (1st Cir. 2002) BLANCHE E. GREENLESS, on behalf of herself and all others similarly situated, Plaintiff, Appellant, v. LINCOLN C. ALMOND, in his capacity as Governor of the State of Rhode Island; CHRISTINE FERGUSON, in her capacity as Director of the Department of Human Services for the State of Rhode Island; and SHELDON WHITEHOUSE, in his capacity as Attorney General for the State of Rhode Island, Defendants, Appellees. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 601

277 F.3d 601 (1st Cir. 2002)

BLANCHE E. GREENLESS, on behalf of herself and all others similarly situated, Plaintiff, Appellant, v. LINCOLN C. ALMOND, in his capacity as Governor of the State of Rhode Island; CHRISTINE FERGUSON, in her capacity as Director of the Department of Human Services for the State of Rhode Island; and SHELDON WHITEHOUSE, in his capacity as Attorney General for the State of Rhode Island, Defendants, Appellees.

No. 01-1410

United States Court of Appeals For the First Circuit

Heard Oct. 2, 2001

Decided January 28, 2002

Amended February 7, 2002

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND. Hon. Mary M. Lisi, U.S. District Judge

Antonio Ponvert III, with whom Michael A. St. Pierre, James E. Kelleher, Revens, Revens & St. Pierre, and Koskoff, Koskoff & Bieder, P.C., were on brief for appellant.

Neil F. X. Kelly, Special Assistant Attorney General, with whom Sheldon Whitehouse, Attorney General, was on brief for appellees.

Before Lynch, Circuit Judge, Coffin, Senior Circuit Judge, and Young,^* District Judge.

LYNCH, Circuit Judge.

This case concerns claims made on the allocation of monies to the states, specifically Rhode Island, from the 1998 Master Settlement Agreement in the tobacco litigation.

Blanche E. Greenless appeals the dismissal of her suit under 42 U.S.C. § 1983 for declaratory and injunctive relief against the Governor of Rhode Island and various other state officials, all in their official capacities. Greenless seeks to represent all of Rhode Island's Medicaid recipients who have suffered damages from the use of tobacco. She claims that federal law requires Rhode Island to pay that class a portion of the proceeds from the settlement of its claims against the tobacco industry, and that Rhode Island is wrongfully converting what are essentially Medicaid recovery collections.

The district court dismissed Greenless's suit without a hearing as barred by the doctrine of state sovereign immunity embodied in the Eleventh Amendment. We affirm the dismissal of the action, but on different grounds, holding that Greenless has failed to state a claim on which relief can be granted due to a recent amendment of the Medicaid statute. We do not reach the difficult question whether a claim of the sort Greenless asserts, if provided by federal law, would be barred by the Eleventh Amendment.

I.

A. Facts

During the 1990s, more than forty of the fifty states, including Rhode Island, filed suits against the major manufacturers of tobacco products. See State v. Brown & Williamson Tobacco Corp., No. 97-3058 (R.I. Sup. Ct. Dec. 17, 1998) (consent decree and final judgment). The exact theories of recovery varied from state to state. Generally, the states alleged that the tobacco industry had misled the public by concealing the risks of cigarette smoking and had therefore caused the states to spend vast sums of public money on providing health care for those made ill by tobacco. Unlike prior attempts to hold tobacco manufacturers liable for smoking-related illnesses or deaths, the states' suits resulted in a lucrative settlement, recorded by the Master Settlement Agreement. See National Association of Attorneys General, Master Settlement Agreement, at http://www.naag.org/tobac/cigmsa.rtf (Nov. 23, 1998). According to Greenless, under the Agreement Rhode Island will receive approximately $1.408 billion.¹

The expenditures on health care on which the state's suits relied arose in significant part through the Medicaid program. The Medicare and Medicaid programs are the two largest sources of public funding for health care in the United States. Medicare, which provides health care primarily to the elderly and to some individuals with disabilities, receives funds exclusively from the federal government. Medicaid, which provides health care primarily to the indigent, receives funds from both the federal government and the states. State Medicaid expenditures consume large portions of states' budgets; in fiscal year 2000, Rhode Island spent 22.6% of its budget on Medicaid. Rhode Island Department of Human Services, Annual Report: Fiscal Year 2000: Rhode Island Medicaid Program 13, available at http://www.dhs.state.ri.us/dhs/reports/ma2000.pdf. When the states sought to recover funds spent on health care made necessary by smoking, some of their alleged damages were Medicaid expenditures. So stated Rhode Island's complaint at the time.

The recovery of Medicaid expenditures from the tobacco industry arguably brought into play certain aspects of the federal Medicaid statute. When a state agrees to participate in Medicaid by enacting a statute, it must create a plan that meets requirements specified by Congress. That state Medicaid plan must "provide that, as a condition of eligibility for medical assistance under the State plan . . . the individual is required -- (A) to assign the State any rights . . . to payment for medical care from any third party." 42 U.S.C. § 1396k(a) (1994).

Moreover, when a state, acting on an individual's assignment of his or her rights, has recovered from a third party compensation for state expenditures to provide health care via Medicaid, the state may not necessarily keep all of the money. Instead,

[s]uch part of any amount collected by the State under an assignment made under the provisions of this section shall be retained by the State as is necessary to reimburse it for medical assistance payments made on behalf of an individual with respect to whom such assignment was executed (with appropriate reimbursement of the Federal Government to the extent of its participation in the financing of such medical assistance), and the remainder of such amount collected shall be paid to such individual.

Id. § 1396k(b) (emphasis added).² After the state and federal governments are reimbursed, any excess is paid to the individual, "who is usually a person of limited resources." 45 Fed. Reg. 8982, 8983 (Feb. 11, 1980).

If these provisions apply to the Master Settlement Agreement (Rhode Island claims they do not because the suit was brought not as a § 1396k assignment but under different theories) then at least some of the money that the tobacco industry paid the states under the Agreement belongs to the federal government as appropriate reimbursement within the meaning of § 1396k(b). If, as well, the states received more money from the tobacco industry under the Agreement than was necessary to reimburse both the state and federal governments for medical assistance payments made on behalf of smokers, then the remainder belongs to the smokers on whose behalf those payments were made. Greenless's claim rests on this theory.

Congress has recently amended the statute. The 1999 Emergency Supplemental Appropriations Act exempts from the normal procedures by which the federal government takes its share of state recoveries "any amount recovered or paid to a State as part of the comprehensive settlement of November 1998 between manufacturers of tobacco products . . . and State Attorneys General." Pub. L. No. 106-31, § 3031, 113 Stat. 57 103-04 (1999) (codified at 42 U.S.C. § 1396b(d)(3)(B)(i) (Supp. V 1999)). It furthermore provides, with an exception irrelevant to this case, that "a State may use amounts recovered or paid to the State as part of a comprehensive . . . settlement . . . described in [the prior] clause . . . for any expenditures determined appropriate by the State." Id., 113 Stat. at 104 (codified at 42 U.S.C. § 1396b(d)(3)(B)(ii)).

The parties agree that this new language removes any claim to the states' tobacco settlement money by the federal government. The question presented by this appeal is whether the language also removes any possible claim to that money under federal law by the individuals whose illnesses caused the states to spend the money.

B. History

Greenless filed this suit in the District of Rhode Island against the various defendants in their official capacities, claiming that Rhode Island must pay her and the members of her class the amount by which the tobacco settlement exceeds its actual costs. She alleged this amount to be substantial. For her cause of action she relied on 42 U.S.C. § 1983 and its broad-ranging remedies for violations of federal rights under color of state law. She asked for declaratory and injunctive relief to compel Rhode Island's officials to pay her the alleged excess.

The defendants moved to dismiss on two grounds. First, they argued that Greenless's suit is barred under the Eleventh Amendment by state sovereign immunity as a suit for, in effect, money damages against the treasury of a state. Second, they argued that Greenless has no cause of action under § 1983 because her rights under the Medicaid statute have not been and will not be violated. Greenless in response claimed that her suit does not run afoul of the Eleventh Amendment because the state is not a party, only state officials, and because she seeks only prospective relief permissible under the doctrine of Ex parte Young, 209 U.S. 123 (1908), as explained in Edelman v. Jordan, 415 U.S. 651 (1974). She also responded to the defendants' statutory arguments. On February 26, 2001, the district court dismissed the case in a seven-page opinion addressing only the question of state sovereign immunity. Greenless v. Almond, C.A. No. 00-037ML (D.R.I. Feb. 26, 2001). This appeal followed. The defendants make on appeal both sets of arguments presented to the district court in support of the judgment.

II.

Our review of the district court's judgment in this case is de novo. See Mills v. Maine, 118 F.3d 37, 41 (1st Cir. 1997) (reviewing de novo a dismissal on Eleventh Amendment grounds); Garita Hotel Ltd. P'ship v. Ponce Fed. Bank, F.S.B., 958 F.2d 15, 17 (1st Cir. 1992) (same for failure to state a claim). As always, we may affirm a district court's judgment on any grounds supported by the record. Doe v. Anrig, 728 F.2d 30, 32 (1st Cir....