Sanchez v. Johnson

Decision Date02 August 2005
Docket NumberNo. 04-15228.,04-15228.
Citation416 F.3d 1051
PartiesStephen SANCHEZ, by and through his mother and next friend, Joyce Hoebel; Kory Nigian, by and through his mother and next friend, Irene Ybarra; Kathy Tobiason, by and through her mother and next friend, Sandra Nash; Scott De Santo; Grace Ewalt, a minor, by and through her mother, Suzanne Ewalt; Scott Crose, by and through his mother and conservator, Janice Crose; Edward Eddie Compton, by and through his parents and next friends, Edward and Elaine Compton; Autism Society of Los Angeles; California Rehabilitation Association; California Coalition of United Cerebral Palsy Associations; Easter Seals California; Systems Reform, Inc.; Tierra Del Sol, Inc., Plaintiffs-Appellants, v. Grantland JOHNSON, in his official capacity as Secretary of the California Department of Health and Human Services; Clifford Allenby, in his official capacity as Director of the California Department of Developmental Services; Diane M. Bonta, in her official capacity as Director of the California Department of Health Services; B. Timothy Gage, in his official capacity as Director of the California Department of Finance, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Thomas K. Gilhool, The Public Interest Law Center of Philadelphia, Philadelphia, PA, argued the cause for the appellants. Michael Churchill, Judith A. Gran, and James Eiseman, Jr., of The Public Interest Law Center of Philadelphia, and Arlene Mayerson and Larisa M. Cummings, of the Disability Rights Education & Defense Fund, Berkeley, CA, were on the briefs.

Susan M. Carson, Deputy Attorney General, State of California, argued the cause for the appellee. Bill Lockyer, Attorney General, Teresa Stinson, Supervising Deputy Attorney General, and Elizabeth Edwards, Deputy Attorney General, State of California, and Henry S. Hewitt, Todd Boley, and Clarisa R. Canady, of Erickson, Beasley, Hewitt & Wilson LLP, Oakland, CA, were on the briefs.

Appeal from the United States District Court for the Northern District of California; Claudia Wilken, District Judge, Presiding. D.C. No. CV-00-01593-CW.

Before: O'SCANNLAIN, COWEN,* and BEA, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must decide whether developmentally disabled recipients of Medicaid funds and their service providers have a private right of action against state officials to compel the enforcement of a federal law governing state disbursement of such funds. We are also asked to decide, separately, whether the State of California has unlawfully discriminated by allegedly paying community-based service providers lower wages and benefits than it pays employees in state institutions.

I

In May, 2000, seven named plaintiffs representing a class of developmentally disabled individuals, and six organizations that advocate for, or provide community-based services to, the developmentally disabled, brought this action against California officials who manage and administer various state programs for the developmentally disabled.

The class (collectively referred to by reference to the first named plaintiff as "Sanchez") consists of those individuals who would be capable of living in the community with properly funded support services but who now live in, or are at risk of living in, state institutions because community-based services are inadequately funded. All members of the class are entitled to services under Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (the "Medicaid Act"), and are "qualified individual[s] with a disability" under § 504 of the Rehabilitation Act ("§ 504"), 29 U.S.C. § 794(a), and under Title II of the Americans with Disabilities Act, 42 U.S.C. §§ 12131-12134 (the "ADA").

The organizational plaintiffs (the "Providers") are not part of the class, but receive reimbursement from the State of California under the Medicaid Act for providing services to the developmentally disabled.

The state officials are, respectively, officials of California's Department of Health and Human Services, Department of Health Services, Department of Developmental Services ("DDS") and Department of Finance. These departments administer and oversee services funded, in part, through the Medicaid Act. Generally, the Department of Health and Human Services ensures that the services of the other departments are provided in compliance with state and federal law; the Department of Health Services directs, organizes and administers California's medical assistance programs, including Medi-Cal, California's Medicaid program; DDS directs, organizes and administers California's developmental disabilities services program; and the Department of Finance oversees all of the State's financial and business policies, including health care funding.

A

Under the Medicaid Act, the federal government distributes funds to participating states to help them provide health care services for the poor and needy. Because California accepts Medicaid funds, it must administer its state Medicaid program, Medi-Cal, in compliance with a state plan that has been pre-approved by the U.S. Department of Health and Human Services. The Medicaid Act sets out the requirements for a state plan at 42 U.S.C. § 1396a(a)(1)-(65).

In 1981, in response to the fact that a disproportionate percentage of Medicaid resources were being used for long-term institutional care and studies showing that many persons residing in Medicaid-funded institutions would be capable of living at home or in the community if additional support services were available, Congress authorized the Home and Community Based Services ("HCBS") waiver program. The HCBS program allows a variety of noninstitutional care options for persons who would otherwise be eligible for Medicaid benefits in an institution, but who would prefer to live at home or in the community.1 To obtain a HCBS waiver for a qualified person, the State must certify that the cost of placing that individual through the waiver program will be less than or equal to the cost of his care in an institution. See generally Olmstead v. L.C., 527 U.S. 581, 601-02, 119 S.Ct. 2176, 144 L.Ed.2d 540 (1999).

B

Sanchez and the Providers claim that, because California pays wages to community-based service providers participating in the HCBS waiver program at a lower rate than it pays employees in state institutions, the State is in violation of the provision of the Medicaid Act that requires that

A State plan for medical assistance — [must] provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan . . . as may be necessary to . . . assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area[.]

42 U.S.C. § 1396a(a)(30)(A) ("§ 30(A)"). They further claim that the lower pay in community-based programs has resulted in some developmentally disabled persons remaining unnecessarily institutionalized, which, they allege, constitutes discrimination against them in violation of the ADA and § 504. Sanchez and the Providers seek injunctive relief requiring the state officials to increase wages and benefits for community-based service providers to match substantially the wages and benefits of employees in state institutions.

C

The state officials moved for judgment on the pleadings with respect to the § 30(A) claim, on the ground that § 30(A) does not provide a private right of action enforceable under 42 U.S.C. § 1983 ("§ 1983"), and for summary judgment with respect to the ADA and § 504 claims, on the ground that Sanchez and the Providers failed to provide sufficient facts to establish a prima facie case for discrimination.

The district court initially granted the state officials' summary judgment motion, but denied the motion for judgment on the pleadings with respect to the § 30(A) claim. The state officials subsequently filed a motion for reconsideration of the § 30(A) claim in light of the Supreme Court's intervening decision in Gonzaga v. Doe, 536 U.S. 273, 122 S.Ct. 2268, 153 L.Ed.2d 309 (2002), which clarified the standard for evaluating whether a statute creates a private right of action.2 The district court granted the motion and, by opinion and order dated January 5, 2004, reversed its earlier decision. Applying the Supreme Court's guidance in Gonzaga, the district court concluded that neither Sanchez nor the Providers could bring suit under § 1983 for a violation of § 30(A).

Sanchez and the Providers timely appeal from the district court's adverse decisions with respect to both their § 30(A) and their ADA and § 504 claims.

II

Both Sanchez and the Providers claim that § 30(A) creates an individual right enforceable by them under § 1983. Their interests, however, though similar, are not congruent. Sanchez's claim requires us to decide whether § 30(A) creates a private right of action for recipients of Medicaid funding; the Providers' claim requires us to decide the same question with respect to providers of Medicaid services. Both claims require us to consider the current state of the Supreme Court's private right of action and § 1983 jurisprudence.

A

In Maine v. Thiboutot, 448 U.S. 1, 100 S.Ct. 2502, 65 L.Ed.2d 555 (1980), the Supreme Court held for the first time that § 1983 permits suits against state officials to enforce statutes enacted pursuant to Congress's spending power. Id. at 4-5, 100 S.Ct. 2502. The scope of these new remedies available under § 1983 was clarified in Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981), in which the Court explained that Thiboutot did not alter the fact that "the typical remedy for state...

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