Nursing Home Reform v. Bonta

• Decision Date: 08 January 2003
• Docket Number: No. A097107.,A097107.
• Citation: 129 Cal.Rptr.2d 228,105 Cal.App.4th 127
• Court: California Court of Appeals Court of Appeals
• Parties: CALIFORNIA ADVOCATES FOR NURSING HOME REFORM et al., Plaintiffs and Appellants, v. DIANA M. BONTA, as Director, etc., et al., Defendants and Respondents.

129 Cal.Rptr.2d 228

105 Cal.App.4th 127

CALIFORNIA ADVOCATES FOR NURSING HOME REFORM et al., Plaintiffs and Appellants, v. DIANA M. BONTA, as Director, etc., et al., Defendants and Respondents.

No. A097107.

Court of Appeal, First District, Division 2.

January 8, 2003.

As Modified January 23, 2003.

Rehearing Granted February 7, 2003.

Amitai Schwartz, Emeryville, for Appellants.

Bill Lockyer, Attorney General, Charlton G. Holland III, Senior Assistant Attorney General, James M. Humes, Deputy Attorney General, for Respondent.

KLINE, P.J.

Appellants allege that written and unwritten policies, procedures and guidelines of the Department of Health Services interpreting federal and state statutes relating to the Medicaid¹ program, which the department administers, constitute regulations within the meaning of the Administrative Procedure Act (Gov.Code, § 11340 et seq.) (APA) and are therefore void because they were not promulgated in accordance with the APA. The trial court disagreed and granted summary judgment for the department. We agree with appellants that the department failed to dispositively demonstrate the absence of a triable issue of material fact or that appellants' claim lacks legal merit. Accordingly, we shall reverse the judgment.

I. FACTUAL AND PROCEDURAL BACKGROUND

This litigation was commenced by California Advocates for Nursing Home Reform (CANHR), a California not-for-profit corporation which advocates on behalf of individuals eligible for benefits under the federal Medicaid program and their families, and Patricia McGinnis, the executive director of CANHR (collectively, appellants), against Diana M. Bonta, the Director of the Department of Health Services, as well as other department officials, all of whom are sued in their official capacities, as well as the department itself (collectively, DHS or the department).

The issues appellants have raised all relate to an aspect of the Medicaid program known as "estate recovery," which is later described. Appellants' central claim is that the "skeletal regulations" relating to this subject which DHS properly promulgated pursuant to the APA (set forth in §§ 50960-50965 of tit. 22 of the Cal. Code Regs.) do not address or include DHS' current policies, choices and practices regarding the subject. According to appellants, the policies, choices and practices DHS actually employs "exist instead in written and unwritten procedures, rules, guidelines, even in e-mail messages from the Department's estate recovery managers. They have not been noticed to the public. They have not been published in the California Code of Regulations. They have not been submitted to the OAL [Office of Administrative Law] for approval. They are house rules—underground regulations upon which defendants rely in demanding repayment of thousands of dollars from the modest estates of deceased Medi-Cal recipients."

The complaint, filed on September 15, 2000, alleges that respondents'"underground guidelines and criteria" violate not just the APA but also provisions of the Welfare and Institutions Code relating to estate recovery because they conflict with published regulations on that subject which were validly enacted. The complaint sought declaratory and injunctive relief, restitution, and a peremptory writ of mandate pursuant to Code of Civil Procedure section 1085.

On July 13, 2001, the parties filed competing motions for summary judgment. Two months later, on September 17, the court denied appellants' motion and granted that of respondents. On that basis, the court entered judgment in favor of the department on November 9, 2001. This timely appeal followed.

II. DISCUSSION

A. Standard of Review.

In order to prevail, a defendant who has filed a motion for summary judgment must "`show[ ] that one or more elements of the cause of action . . . cannot be established' by the plaintiff. [Citation.] In other words, all that the defendant need do is to show that the plaintiff cannot establish at least one element of the cause of action— for example, that the defendant cannot prove element X. Although he remains free to do so, the defendant need not himself conclusively negate any such element—for example, himself prove not X." (Aguilar v. Atlantic Richfield (2001) 25 Cal.4th 826, 853-854, 107 Cal.Rptr.2d 841, 24 P.3d 493, fn. omitted.) Once the moving defendant has met its burden, the burden shifts to the plaintiff to show that a triable issue of fact exists as to the cause of action or the defense thereto. (Code Civ. Proa, § 437c, subd. (o)(2); id. at p. 849,107 Cal.Rptr.2d 841, 24 P.3d 493.) On appeal, this court exercises its independent judgment in determining whether there are triable issues of material fact and whether the moving party is entitled to judgment as a matter of law. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334-335, 100 Cal.Rptr.2d 352, 8 P.3d 1089.)

As will be seen, the trial court did not grant summary judgment for DHS solely on the ground that there is no triable issue as to any material fact; indeed, it implicitly acknowledged the truth of many of appellants' factual assertions. Summary judgment was granted in large part on the ground that certain internal policy directives which DHS indisputably issued were not "regulations" within the meaning of the APA because they were "unnecessary." The trial court therefore determined not only that there was no material issue of fact to be tried, but also that appellants' action had no merit on the undisputed facts, a purely legal issue. (See Burke Concrete Accessories, Inc. v. Superior Court (1970) 8 Cal.App.3d 773, 775, 87 Cal.Rptr. 619.)

DHS suggests that in assessing the adequacy of its rulemaking we are obliged to defer to its determination. Relying on Evidence Code section 664 ("It is presumed that official duty has been regularly performed") and Western Oil & Gas Ass'n. v. Air Resources Board (1984) 37 Cal.3d 502, 509, 208 Cal.Rptr. 850, 691 P.2d 606 ("[a] reviewing court will not substitute its policy judgment for the agency's in the absence of an arbitrary decision"), DHS maintains that principles of separation of powers and respect for agency expertise require us to extend "substantial deference" to its determination that its rulemaking fully complies with the APA. We disagree. As appellants correctly point out, the effect of the rebuttable presumption created by section 664 is merely "to impose upon the party against whom it operates the burden of proof as to the nonexistence of the presumed fact." (Gee v. California State Personnel Bd. (1970) 5 Cal.App.3d 713, 718, 85 Cal.Rptr. 762.) DHS's reliance on Western Oil & Gas Ass'n. v. Air Resources Board, supra, is unjustified because that case related to an agency's substantive policy decisions in its area of expertise (air quality standards), not to whether the agency's rulemaking process complied with the APA, a matter as to which the agency has no greater expertise than the courts.

The APA was designed in part to prevent the use by administrative agencies of "underground" regulations (Kings Rehabilitation Center, Inc. v. Premo (1999) 69 Cal.App.4th 215, 217, 81 Cal.Rptr.2d 406), and it is the courts, not administrative agencies, which enforce that prohibition. "[Ajgencies are normally not empowered to determine, in an authoritative way, the decision-making criteria that relevant statutes require them to consider when they formulate and adopt rules. As a result, courts must review wholly de novo the propriety of the decision-making criteria utilized by agencies when they make rules. That is, in almost every instance involving the judicial review of a rule, courts are entitled to substitute their judgments for those of the agencies on this question of law. They need not defer to any extent to the judgment of the agencies on such matters. The same is true with respect to compliance by agencies with applicable procedural requirements. Agencies are not normally delegated power to determine authoritatively whether they complied with generally applicable rule-making procedures, . . . As a result, courts may usually determine the lawfulness of agencies' compliance with those rule-making procedures entirely de novo, simply substituting their judgment on that question for that of the agencies." (Bonfield, State Administrative Rule Making (1986) § 9.2.12, at p. 582.)

B. Pertinent Provisions of the Administrative Procedure Act.

The APA provides that "[n]o state agency shall issue, utilize, enforce, or attempt to enforce any guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule, which is a regulation as defined in [Government Code] Section 11342.600, unless the guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule has been adopted as a regulation and filed with the Secretary of State. . .." (Gov.Code, § 11340.5, subd. (a).)²

"Regulation" is defined in the APA as "every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any rule, regulation, order, or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure, . . .." (Gov.Code, § 11342.600.) "A regulation subject to the APA thus has two principal identifying characteristics. (See Union of American Physicians & Dentists v. Kizer (1990) 223 Cal.App.3d 490, 497, ) First, the agency must intend its rule to apply generally, rather than in a specific case. The rule need not, however, apply universally; a rule applies generally so long as it declares how a certain class of cases will be decided. (Roth v. Department of Veterans Affairs (1980) 110 Cal. App.3d 622, 630, ) Second, the rule must `implement, interpret, or make specific the law enforced or administered by [the agency], or . . . govern [the agency's] procedure.' (Gov.Code, § 11342, subd. (g).)" (Tidewater...