SALAZAR EX REL. SALAZAR v. District of Columbia, No. 08-7100.

• Decision Date: 09 April 2010
• Docket Number: No. 08-7100.
• Citation: 602 F.3d 431
• Parties: Oscar SALAZAR, by his Parents and Next Friends, Adela and Oscar SALAZAR, et al., Appellees v. DISTRICT OF COLUMBIA, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

602 F.3d 431

Oscar SALAZAR, by his Parents and Next Friends, Adela and Oscar SALAZAR, et al., Appellees v. DISTRICT OF COLUMBIA, et al., Appellants.

No. 08-7100.

United States Court of Appeals, District of Columbia Circuit.

Argued October 5, 2009.

Decided April 9, 2010.

Richard S. Love, Senior Assistant Attorney General, Office of the Attorney General for the District of Columbia, argued the cause for appellants. With him on the briefs were Peter J. Nickles, Attorney General, Todd S. Kim, Solicitor General, and Donna M. Murasky, Deputy Solicitor General. Robert C. Utiger, Senior Assistant Attorney General, entered an appearance.

Kathleen L. Millian argued the cause for appellees. With her on the brief were Bruce J. Terris and Jane M. Liu.

Before: GARLAND and GRIFFITH, Circuit Judges, and EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge EDWARDS.

EDWARDS, Senior Circuit Judge:

In 1993, appellee Medicaid recipients brought suit against the District of Columbia ("the District") alleging various violations of Title XIX of the Social Security Act ("SSA"), 79 Stat. 343, as amended, 42 U.S.C. § 1396 et seq. (2000 ed. and Supp. III), and its accompanying regulations. In October 1996, the District Court held that the District was liable under 42 U.S.C. § 1983 for violating federal Medicaid requirements. Salazar v. District of Columbia, 954 F.Supp. 278 (D.D.C.1996). While judgment was pending on an appeal by the District, the parties negotiated a comprehensive settlement agreement setting forth detailed requirements for the District's operation of its Medicaid program in compliance with the law. The District Court adopted the agreement with an order issued on January 25, 1999. Salazar v. District of Columbia, Civ. Action No. 93-452, Order Modifying the Amended Remedial Order of May 6, 1997 and Vacating the Order of March 27, 1997 at 1-49 (D.D.C. Jan. 25, 1999) ("Settlement Order"), reprinted in Joint Appendix ("J.A.") 264-312.

On March 19, 2003, after repeated failures by the District to comply with various requirements and deadlines under the Settlement Order and related court orders, appellees moved to establish a prospective, per diem penalty schedule of fines for future violations. The District Court granted appellees' motion on July 10, 2006. Salazar v. District of Columbia, Civ. Action No. 93-452, order at 1-3, slip op. at 1-4 (D.D.C. Jul. 7, 2006) ("2006 Order"), reprinted in J.A. 484-90. The 2006 Order directed appellees to file a praecipe with the District Court every fiscal quarter, documenting any penalties allegedly accrued during that three-month period.

Between 2006 and 2008, appellees filed five quarterly praecipes documenting penalties allegedly accrued by the District. Each praecipe was opposed by the District. On August 13, 2008, the District Court ruled on all five outstanding praecipes and issued an order assessing $931,050 in penalties against the District. Salazar v. District of Columbia, Civ. Action No. 93-452, order at 1-2, slip op. at 1-15 (D.D.C. Aug. 13, 2008) ("2008 Order"), reprinted in J.A. 618-35. The 2008 Order addressed each of the praecipes separately. With respect to the fourth praecipe, covering the third quarter of 2007, the District Court, inter alia, assessed $370,500 in penalties for the District's alleged failure to "negotiate in good faith," as required by ¶ 80 of the Settlement Order.

On August 27, 2008, the District filed a motion for partial reconsideration. The sole argument raised in that motion was that the sanctions imposed for the District's failure to timely provide blood lead corrective action plans ("CAPs") should be vacated because the relevant underlying order had not been violated. This motion was denied. On appeal, the District has raised numerous issues that were never raised with the District Court in the first instance, including, inter alia, claims that the District Court (1) erred in imposing criminal contempt sanctions in a civil proceeding and (2) erred in imposing excessive penalties based on a misapplication of ¶ 80 of the Settlement Order. Appellees, in turn, argue that this court lacks jurisdiction to hear this appeal.

First, we hold that the 2008 Order is final and appealable under 28 U.S.C. § 1291. We also hold that the 2006 Order is reviewable to the extent that it is "`inextricably bound up with'" the 2008 Order. See Hartman v. Duffey, 19 F.3d 1459, 1464 (D.C.Cir.1994) (quoting Wagner v. Taylor, 836 F.2d 578, 585 (D.C.Cir.1987)).

Second, we affirm the District Court's judgment on all but one issue. The District failed to raise and preserve most of the claims that it now raises on appeal. "Courts of appeals have discretion to address issues raised for the first time on appeal," but exercise it "only in exceptional circumstances," Flynn v. Comm'r, 269 F.3d 1064, 1069 (D.C.Cir.2001), or when the trial court has committed "plain error," United States v. Olano, 507 U.S. 725, 736-37, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) (citing Connor v. Finch, 431 U.S. 407, 421 n. 19, 97 S.Ct. 1828, 52 L.Ed.2d 465 (1977) (civil appeal)). Because we find neither exceptional circumstances nor plain error, we hold that the District has forfeited most of the issues that it has raised with this court. The one exception relates to the question regarding the misapplication of ¶ 80. On this issue, we hold that the District Court committed error in subjecting the District to a 126-day contempt fine for its failure to negotiate with appellees under ¶ 80 of the Settlement Order. Although the 2006 Order states that the "deadlines" enforceable through per diem fines "include the negotiation requirement in paragraph 80," it does not say that per diem fines can be imposed for a failure to negotiate beyond, rather than within, the 10-day window specified in ¶ 80. The District Court erred in finding otherwise; the error affected the District's substantial rights and offended the fairness and integrity of the proceedings under review. It also constituted a miscarriage of justice.

For the reasons outlined below, we affirm in part and reverse in part. The case will be remanded to the District Court for further proceedings consistent with this opinion.

I. BACKGROUND

The Medicaid program entails joint federal and state funding of medical care for individuals who cannot afford to pay their own medical costs. The program was launched in 1965 with the enactment of Title XIX of the SSA. See Ark. Dep't of Health & Human Servs. v. Ahlborn, 547 U.S. 268, 275, 126 S.Ct. 1752, 164 L.Ed.2d 459 (2006). "States are not required to participate in Medicaid, but all of them do. The program is a cooperative one; the Federal Government pays a percentage of the costs the State incurs for patient care, and, in return, the State pays its portion of the costs and complies with certain statutory requirements for making eligibility determinations, collecting and maintaining information, and administering the program." Id. (footnote omitted); see also 42 U.S.C. § 1396a; 42 C.F.R. § 430.10 (requiring participating states to act "in conformity with the specific requirements" of the federal Medicaid statute and applicable federal regulations). The District participates in the Medicaid program on the same terms as the states, because the statute "treats the District ... as a State." See D.C. Hosp. Ass'n v. District of Columbia, 224 F.3d 776, 777 (D.C.Cir.2000); 42 U.S.C. § 1396d(b) (Supp. III 1997).

In 1993, a number of Medicaid recipients brought suit under § 1983 against the District, alleging violations of Title XIX and its accompanying regulations. After the District Court found the District liable, Salazar v. District of Columbia, 954 F.Supp. at 334, an appeal was taken. While the appeal was pending, the parties reached a settlement which was adopted by the District Court in the 1999 Settlement Order. Over time, additional orders imposing additional requirements on the District were added to the Settlement Order.

In March 2003, after the District had repeatedly violated the terms of the Settlement Order, appellees filed a motion with the District Court for the establishment of a per diem penalty schedule of fines for future violations. The motion was granted on July 10, 2006, with the court's issuance of the 2006 Order. This order set forth a progressive, escalating fine schedule for missed deadlines that compounds the total penalty for noncompliance based on the number of days elapsed. See 2006 Order, order at 2, J.A. 485. The 2006 Order also directed appellees to file a praecipe with the District Court every fiscal quarter, documenting any penalties allegedly accrued by the District during that three-month period. The District could file an opposition and appellees could file a reply. The District Court indicated that it would consider the praecipes and any mitigating circumstances, and then decide whether or not to impose fines.

Between 2006 and 2008, appellees filed five quarterly praecipes documenting the penalties allegedly accrued by the District. Each was opposed by the District. On August 13, 2008, the District Court ruled on all five outstanding praecipes at the same time and assessed $931,050 in penalties against the District. See 2008 Order, slip op. at 1-15, J.A. 621-35.

In the first praecipe, covering the third quarter of 2006, the District Court assessed $1,500 in penalties for the District's failure to provide discovery until nine days after the required deadline. In the second praecipe, covering the fourth quarter of 2006, the District Court assessed $39,500 in penalties for the District's failure to distribute a dental brochure by a deadline set forth in a 2004 order; the court also assessed a penalty of $300 for the District's failure to seek a timely extension of time. In the third praecipe, covering the second quarter of 2007, the District Court (1) assessed $13,500 in penalties for the District's failure to timely provide blood level...