RALPH F. BOYD, JR.

Assistant Attorney General

Civil Rights Division

JOHN L.WODATCH

Section Chief

RENEE M. WOHLENHAUS

Deputy Section Chief

PHILIP L. BREEN

Special Legal Counsel

M. CHRISTINE FOTOPULOS

Trial Attorney

United States Department of Justice

Disability Rights Section -- NYAV

950 Pennsylvania Avenue, N.W.

Washington, D.C. 20530

\(202\) 305-7475

\(202\) 304-9775 (fax)

MICHAEL G. HEAVICAN

United States Attorney

SALLY R. JOHNSON

Chief, Civil Division

First National Federal Building

1620 Dodge Street, Suite 1400

Omaha, NE 68102

\(402\) 221-4774

Counsel for Plaintiff-Intervenor

United States of America

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

JOHN DOE et. al, )

) CASE NO. 4: CV 95-3381

Plaintiffs, )

) **UNITED STATES' BRIEF**

UNITED STATES OF AMERICA, ) **IN OPPOSITION TO DEFENDANTS'**

> Plaintiff-Intervenor, ) **RENEWED MOTION FOR SUMMARY**
>
> ) **JUDGMENT**
>
> v\. )
>
> )

STATE OF NEBRASKA, et. al., )

Defendants. )

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_)

**INTRODUCTION**

This case challenges the unlawful discrimination of the State of
Nebraska's Department of Health and Human Services (DHHS) against the
late GayLynn Brummett and her family when the DHHS attempted to block
her efforts to adopt a foster care child solely on the ground that she
was HIV-positive. The case, which began more than six years ago, is
scheduled to go to trial before this Court on April 8, 2002. The State
defendants (hereinafter, the "State") have alleged that the State is
immune from suit under the Eleventh Amendment because its waiver of
immunity under Section 504 of the Rehabilitation Act of 1973 (Section
504) was not voluntary, but "coerced," based on the amount of federal
funding the DHHS receives. The United States argues that the law of this
circuit -- and indeed the law of this case -- is that Section 504\'s
waiver condition is [not]{.underline} unconstitutionally coercive as a
matter of law, and that since Section 504 allows state agencies to
control not only the amount of their federal funding but also the scope
of their waivers of immunity, unconstitutional coercion cannot be shown
by an individual agency's reliance on federal funds.

**PROCEDURAL BACKGROUND**

On January 13, 1998, the State filed a Motion for Summary Judgment,
asserting that it was immune from suit under the Eleventh Amendment of
the U.S. Constitution. On November 25, 1998, this Court denied that
motion, holding that both Title II of the Americans with Disabilities
Act of 1990 (ADA) and Section 504 were valid exercises of Congress's
power to enforce the Fourteenth Amendment, and therefore validly
abrogated States' Eleventh Amendment immunity. In addition, the Court
found that the State had waived its immunity under Section 504 by
accepting federal funds:

> Finally, I shall note that even if Congress did not properly abrogate
> the defendants' immunity under the Rehabilitation Act, it is likely
> that the State has waived any such immunity defense\...In
> [Clark]{.underline} \[[v. State of California]{.underline}, 123 F.3d
> 1267, 1271 (9^th^ Cir. 1997), [cert. denied]{.underline}, 118 S.Ct.
> 2340 (1998)\], the court found that:
>
> the Rehabilitation Act manifests a clear intent to condition a
> \[S\]tate's participation on its consent to waive its Eleventh
> Amendment immunity. The amended Rehabilitation Act provides:
>
> "(1) A State shall not be immune under the Eleventh Amendment\...from
> any suit in Federal court for a violation of section 504 of the
> Rehabilitation Act of 1973\...or the provisions of any other Federal
> Statute prohibiting discrimination by recipients of Federal financial
> assistance." 42 U.S.C. §2000d-7.
>
> The Supreme Court has characterized this section as "an unambiguous
> waiver of the States' Eleventh Amendment immunity." [Lane v.
> Pena]{.underline}, 518 U.S. 187, \[200\], 116 S.Ct. 2092, 2100, 135
> L.Ed.2d 486 (1996). Because California accepts federal funds under the
> Rehabilitation Act, California has waived any immunity under the
> Eleventh Amendment.
>
> [Clark]{.underline}, 123 F.3d at 1271.
>
> I agree with the [Clark]{.underline} court that a State waives its
> sovereign immunity if it receives federal funds under the
> Rehabilitation Act. Section 2000d-7 contains a clear expression of
> Congress' intent to condition the receipt of federal funds under the
> Rehabilitation Act on the States' waiver of Eleventh Amendment
> immunity\...The defendants have conceded that they have received
> federal funds under the Rehabilitation Act. Thus, it appears that even
> if Congress did not lawfully abrogate the defendants' immunity as to
> the Rehabilitation Act, the defendants have waived their immunity by
> accepting federal funds under the Act.

Memorandum and Order on Defendants' Motion for Summary Judgment,
November 25, 1998, Filing \# 268, p. 7 (citations omitted).

On December 22, 1998, the State appealed this Court's denial of its
Motion for Summary Judgment to the Court of Appeals for the Eighth
Circuit, again asserting that it was immune from suit under the Eleventh
Amendment. The United States intervened pursuant to 28 U.S.C. 2403(a) in
order to defend the constitutionality of the abrogation provisions under
both the Fourteenth Amendment and the Spending Clause. During the two
and a half years that this case was pending on appeal, the Eighth
Circuit handed down three major decisions that would affect its outcome:
[Alsbrook v. City of Maumelle]{.underline}, 184 F.3d 999 (8^th^ Cir.
1999), [cert. granted]{.underline}, 528 U.S. 1146, [cert.
dismissed]{.underline}, 529 U.S. 1001 (2000); [Bradley v. Arkansas Dept.
of Education]{.underline}, 189 F.3d 745 (8^th^ Cir. 1999),
[rev'd]{.underline} in part [sub nom]{.underline}; and [Jim C. v.
Arkansas Department of Education]{.underline}, 235 F.3d 1079 (8^th^ Cir.
2000), [cert. denied]{.underline}, 121 S.Ct. 2591 (2001).

In [Alsbrook]{.underline}, the Eighth Circuit held that Title II of the
ADA did not properly abrogate states' Eleventh Amendment immunity to
suit in federal court pursuant to Section 5 of the Fourteenth Amendment.
[Alsbrook]{.underline}, 184 F.3d at 1008-1009. Subsequently, in
[Bradley]{.underline}, a panel of the Eighth Circuit reached the same
conclusion with respect to Section 504, and then further held that
Section 504 was also not a proper enactment under the Spending Clause.
[Id]{.underline}., 189 F.3d at 756, 758. The United States filed a
petition for rehearing en banc, arguing that the Court's latter holding
was wrong and literally unprecedented. The Court granted rehearing en
banc "limited to the spending clause issue raised by the petition" and
vacated that part of the [Bradley]{.underline} opinion. [Jim
C.]{.underline}, 197 F.3d 958 (8^th^ Cir. 1999). Finally, in [Jim
C.]{.underline}, the en banc Court held that Section 504
[was]{.underline} a proper enactment under the Spending Clause, and that
its clear provision removing states' Eleventh Amendment immunity was
therefore valid. [Id]{.underline}., 235 F.3d 1079, at 1080.

On March 2, 2001, following the U.S. Supreme Court's landmark ruling in
[Board of Trustees of the Univ. of Alabama v. Garrett]{.underline}, 531
U.S. 356 (2001), the appeal panel requested the parties' views on the
proper disposition of the appeal. The United States recommended summary
reversal with respect to Title II on the basis of [Alsbrook]{.underline}
and summary affirmance with respect to Section 504 on the basis of [Jim
C.]{.underline} However, both Plaintiffs and Defendants sought further
briefing, on Title II and Section 504 respectively. On March 23, 2001,
one day after the State of Arkansas filed a petition for certiorari in
[Jim C.]{.underline}, the State of Nebraska filed another motion urging
the Court either to stay the case pending the final disposition of [Jim
C.]{.underline} or to put the case back on its regular docket for
briefing and argument.

Instead, the Eighth Circuit issued its ruling on April 17, 2001,
reversing the Title II claim on the basis of [Alsbrook]{.underline} and
vacating and remanding the Section 504 claim to this Court "for
reconsideration in light of [Jim C.]{.underline}" On June 29, 2001, the
U.S. Supreme Court denied the State of Arkansas' petition for
certiorari. [Arkansas Dept. of Education v. Jim C.]{.underline}, 121
S.Ct. 2591 (2001). On October 29, 2001, the State of Nebraska filed a
Renewed Motion for Summary Judgment. In that Motion, defendants argue,
*inter alia*, that the State's waiver of Eleventh Amendment immunity
under Section 504 is unenforceable because the State was "coerced" into
accepting federal financial assistance. [See]{.underline} Defendant's
Brief in Support of its Renewed Motion for Summary Judgment
(hereinafter, "Defendant's Brief") at p. 23-28.[^1]

**STATUTORY BACKGROUND**

Section 504 of the Rehabilitation Act of 1973 (hereinafter, "Section
504") was enacted pursuant to Congress' power under the Spending Clause,
Art. I, § 8, Cl. 1 of the U.S. Constitution. It provides that "\[n\]o
otherwise qualified individual with a disability in the United
States\...shall, solely by reason of her or his disability, be excluded
from the participation in, be denied the benefits of, or be subjected to
discrimination under any program or activity receiving Federal financial
assistance." 29 U.S.C. 794(a). A "program or activity" is defined to
include "all of the operations" of a state agency or other
instrumentality of a state, "any part of which is extended Federal
financial assistance." 29 U.S.C. 794(b). Thus, the non-discrimination
obligations of Section 504 only apply to those state agencies that
choose to apply for and accept federal financial assistance.

Section 504 may be enforced through private suits against recipients of
federal financial assistance. [See]{.underline} [Olmstead v.
L.C.]{.underline}, 527 U.S. 581, 590 n. 4 (1999); [Meiner v.
Missouri]{.underline}, 673 F.2d 969, 973-974 (8^th^ Cir. 1982), [cert.
denied]{.underline}, 459 U.S. 909 (1982). In 1986, Congress amended the
statute specifically to clarify its intent that States would not be
entitled to invoke their Eleventh Amendment immunity to private suits in
federal court. [See]{.underline} 42 U.S.C. 2000d-7, which provides in
relevant part:

> \[A\] State shall not be immune under the Eleventh Amendment of the
> Constitution of the United States from suit in Federal court for a
> violation of section 504 of the Rehabilitation Act of 1973 \[29 U.S.C.
> 794\], title IX of the Education Amendments of 1972\..., title VI of
> the Civil Rights Act of 1964, or the provisions of any other Federal
> statute prohibiting discrimination by recipients of Federal financial
> assistance.

42 U.S.C. 2000d-7(a)(1).[^2] The effective date for Section 2000d-7 was
October 21, 1986. [See]{.underline} 42 U.S.C. 2000d-7(b). Thus, state
entities that chose to receive federal financial assistance after that
date were put on clear notice by the statute that they could not invoke
their immunity as a defense to private suits seeking to enforce their
obligations under Section 504.

**ARGUMENT**

**Section 504 and 42 U.S.C. 2000d-7 Are Valid Exercises of the Spending
Clause**

**A. Congress May Condition a Grant of Federal Funds Upon States'
Agreement to Comply With Section 504\'s Non-Discrimination Mandate**

Under the Spending Clause, Art. I, §8, Cl. 1 of the U.S. Constitution,
Congress is empowered to spend federal money in order to "provide for
the\...general Welfare of the United States." When Congress elects to
disburse federal funds, "Congress may, in the exercise of its spending
power, condition its grant of funds to the States upon their taking
certain actions\...and that acceptance of the funds entails an agreement
to the actions." [College Savings Bank]{.underline} v. [Florida Prepaid
Postsecondary Educ. Expense Bd.]{.underline}, 119 S. Ct. 2219, 2231
(1999); [see also]{.underline} [South Dakota v. Dole]{.underline}, 483
U.S. 203, 206 (1987) ("Congress may attach conditions on the receipt of
federal funds, and has repeatedly employed the power 'to further broad
policy objectives by conditioning receipt of federal moneys upon
compliance by the recipient with federal statutory and administrative
directives.'"); [New York v. United States]{.underline}, 505 U.S. 144,
158, 167 (1992); [Pennhurst State Sch. & Hosp. v.
Halderman]{.underline}*,* 451 U.S. 1, 17 ("Unlike legislation enacted
under §§ 5 \[of the Fourteenth Amendment\]\...legislation enacted
pursuant to the spending power is much in the nature of a contract: in
return for federal funds, the States agree to comply with federally
imposed conditions. The legitimacy of Congress' power to legislate under
the spending power thus rests on whether the State voluntarily and
knowingly accepts the terms of the 'contract.'" (citations omitted));
[Gorrie v. Bowen]{.underline}, 809 F.2d. 508, 519-520 (8^th^ Cir. 1987);
[Nebraska]{.underline} v. [Tiemann]{.underline}, 510 F.2d 446, 448 (8th
Cir. 1975).

Section 504\'s nondiscrimination mandate is patterned on Title VI of the
Civil Rights Act of 1964, 42 U.S.C. 2000d [et]{.underline}
[seq]{.underline}., and Title IX of the Education Amendments of 1972, 20
U.S.C. 1681 [et]{.underline} [seq]{.underline}., which prohibit race and
sex discrimination, respectively, by programs that receive federal
funds. [See]{.underline} [School Bd. of Nassau County]{.underline} v.
[Arline]{.underline}, 480 U.S. 273, 278 n.2 (1987). Like these and other
Spending Clause statutes, the choice whether to be subject to conditions
imposed by Section 504 belongs to the recipient, which is always free to
decline federal funds and the attendant "strings." [See]{.underline}
[United States Dep't of Transp. v. Paralyzed Veterans of
Am.]{.underline}, 477 U.S. 597, 605 (1986) ("Under\...Title VI, Title
IX, and Section 504, Congress enters into an arrangement in the nature
of a contract with the recipients of the funds: the recipient's
acceptance of the funds triggers coverage under the nondiscrimination
provision.")

The condition that recipients of federal funds not use them to
discriminate has long been upheld as valid Spending Clause legislation.
[See]{.underline} [Lau]{.underline} v. [Nichols]{.underline}, 414 U.S.
563, 569 (1974) (upholding Title VI) ("The Federal Government has power
to fix the terms on which its money allotments to the States shall be
disbursed."); [Grove City College]{.underline} v. [Bell]{.underline},
465 U.S. 555, 575 (1984) (upholding Title IX) ("Congress is free to
attach reasonable and unambiguous conditions to federal financial
assistance that educational institutions are not obligated to accept.")
In [Jim C.]{.underline}, the Eighth Circuit relied on this consistent
line of Supreme Court cases to conclude that like Title VI and Title IX,
Section 504 was a valid enactment under the Spending Clause.
[Id]{.underline}., 235 F.3d at 1080-1082 (citing [Lau]{.underline} as
upholding Congress's power to condition federal education funds on
non-discrimination in federally funded programs and "hold\[ing\] that
Section 504 is a valid exercise of Congress's spending power\...Th\[e\]
requirement \[that the state comply with Section 504\] is comparable to
the ordinary *quid pro quo* that the Supreme Court has repeatedly
approved; the State is offered federal funds for some activities, but,
in return, it is required to meet certain federal requirements in
carrying out those activities.")

These cases stand for the proposition that Congress has an interest in
ensuring that none of its funds are used to support, directly or
indirectly, programs that discriminate against protected groups of
persons. Thus, when a condition is designed to assure that federal money
is not used to support or subsidize programs that discriminate on the
basis of disability, it is a valid condition on the receipt of all
federal financial assistance. [See]{.underline}, [e.g.]{.underline},
[City of Cleburne]{.underline} v. [Cleburne Living Ctr.,
Inc.]{.underline}, 473 U.S. 432, 443-444 (1985) (discussing Section 504
with approval). Because this interest extends to all federal funds,
Congress drafted Title VI, Title IX, and Section 504 to apply across the
board to all federal financial assistance, rather than adding a separate
nondiscrimination provision into each grant statute.[^3]

In [South Dakota v. Dole]{.underline}, the Supreme Court identified four
limitations on Congress's Spending Power. [Id]{.underline}., 483 U.S. at
206; [see also]{.underline} [Jim C.]{.underline} at 1081. First, the
Spending Clause by its

terms requires that Congress legislate in pursuit of "the general
welfare," with respect to which the courts must "defer substantially to
the judgment of Congress." [Dole]{.underline} at 207. Second, if
Congress places conditions upon the states' receipt of federal funds, it
"must do so unambiguously\..., enabling the States to exercise their
choice knowingly, cognizant of the consequences of their participation."
[Ibid.]{.underline} (quoting [Pennhurst]{.underline}, 451 U.S. at 17).
Third, the Supreme Court's cases "have suggested (without significant
elaboration) that conditions on federal grants might be illegitimate if
they are unrelated 'to the federal interest in particular national
projects or programs.'" [Ibid.]{.underline} And fourth, the obligations
imposed by Congress may not induce a governmental recipient to violate
any independent constitutional provisions. [Id.]{.underline} at 209-211.
These four conditions were repeated in dicta in [New York]{.underline},
505 U.S. at 172-173.

The State does not suggest that Section 504 fails to meet any of these
requirements. Prohibiting discrimination on the basis of disability is
clearly in the general welfare, especially given Congress' broad
discretion in making that determination, and as with other civil rights
protections, it is the appropriate subject of federal legislation.
[See]{.underline} [Dole]{.underline}, 483 U.S. at 207 n. 2;
[Cleburne]{.underline}, 473 U.S. at 443-444. Nor is there any doubt that
Section 504 makes its conditions on federal funds sufficiently clear.
[See]{.underline} [Arline]{.underline}, 480 U.S. at 286 n.15 (describing
Section 504 as an "antidiscrimination mandate"); [Jim C.]{.underline} at
1082 (citing [Lane]{.underline}, 518 U.S. at 200, for its conclusion
that 42 U.S.C. 2000d-7 is a "clear expression of Congress's 'intent to
condition participation in the program\[\]\...on a State's consent to
waive its constitutional immunity.'").

The State also does not argue that Section 504\'s non-discrimination
mandate is "unrelated" to the federal funding it receives, even though
the obligation, once invoked, applies to the entire state agency
regardless of the specific purpose of each federal grant. [See also Jim
C.]{.underline} at 1082, 1084 (finding irrelevant "that the
waiver\...cover\[s\] all activities of the Department of Education, and
not merely those activities specifically supported by Section 504
funds," and thus rejecting the dissent's argument that the waiver
condition was not sufficiently "related" to the purpose of the federal
education funds.) First, the federal government's interest in preventing
federal funds from being used to subsidize discrimination by the states
will always be sufficiently "related" to the purpose of any federal
spending program, as such spending is ultimately intended to benefit
[all]{.underline} citizens.[^4] Secondly, to a much greater extent than
the educational funds at issue in [Jim C.]{.underline}, Section 504\'s
non-discrimination mandate is particularly "related" to the kinds of
federal grants received by the State of Nebraska's Department of Health
and Human Services (DHHS), the large majority of which, either directly
or indirectly, serve populations that typically have large proportions
of individuals with disabilities, including the elderly.[^5] Finally,
the State does not argue that Section 504 requires it to engage in
unconstitutional conduct. There is nothing unconstitutional about a
State opening their programs up to people with disabilities,
[see]{.underline} [Cleburne]{.underline}, 473 U.S. at 443-444, or
waiving their Eleventh Amendment immunity, [see]{.underline} [College
Savings Bank]{.underline}, 119 S.Ct. at 2227 n. 2, 2231.

**B. Congress May Condition a Grant of Federal Funds Upon States' Waiver
of Eleventh Amendment Immunity**

The Supreme Court has long recognized that Congress may condition a
grant of federal funds on states' waiver of their Eleventh Amendment
immunity. [See]{.underline} [College Savings Bank]{.underline}, 527 U.S.
666, 678-679 n.2 (1999) (accepting that "a waiver \[of Eleventh
Amendment immunity\] may be found in a State's acceptance of a federal
grant"); [Atascadero]{.underline}, 473 U.S. at 247 (as long as a statute
"manifests a clear intent to condition participation in the programs
funded under the Act on a State's consent to waive its constitutional
immunity," the federal courts have jurisdiction over states that accept
federal funds); [see also]{.underline} [Alden v. Maine]{.underline}, 527
U.S. 706, 755 (1999) (citing [Dole]{.underline} for the proposition that
"the Federal Government \[does not\] lack the authority or means to seek
the States' voluntary consent to private suits.") All of the courts of
appeals to address the issue have similarly held that, so long as
Congress has made its intentions clear, it has the power to condition
the receipt of federal funds on a state recipient's waiver of Eleventh
Amendment immunity with respect to the program or activity that receives
the federal assistance.[^6]

In [Jim C.]{.underline}, the Eighth Circuit ruled that Congress'
requirement that states waive their immunity to suit under Section 504
was a valid enactment under the Spending Clause. [Id]{.underline}. at
1081-1082 ("Congress may require a waiver of state sovereign immunity as
a condition for receiving federal funds\...We hold, therefore, that
Arkansas waived sovereign immunity \[under Section 504\]\...when it
chose to participate in the federal spending program\... .");
[see]{.underline} [also]{.underline} [Bradley]{.underline} at 753
("\[T\]he Supreme Court continues to recognize that Congress, if acting
within its spending power, may condition a state's participation in a
federal spending program on the state's waiving its Eleventh Amendment
immunity to claims arising from that program"). Since its ruling in [Jim
C.]{.underline}, the Eighth Circuit has repeatedly affirmed that holding
without undertaking any further analysis. [See]{.underline},
[e.g.]{.underline}, [Grandson v. Univ. of Minnesota]{.underline}, 272
F.3d 568, 568 n. 2 (8^th^ Cir. 2001) (citing its holding in [Jim
C.]{.underline} as "preclud\[ing\] the \[state's\] Eleventh Amendment
defense" in Title IX case); [Grey v. Wilburn]{.underline}, 270 F.3d 607,
609-610 (reversing a dismissal of a claim under Section 504 "\[b\]ased
on [Jim C.]{.underline}")

C.  **Congress Has Not "Coerced" the States Into Waiving Their Eleventh
    Amendment Immunity Under Section 504**

The State does not claim that Section 504 is not valid Spending Clause
legislation, nor does it question Congress's power to attach conditions
to a grant of federal funds, including the condition that states waive
their Eleventh Amendment immunity to suit under Section 504. Instead,
the State argues that its acceptance of federal funds in this particular
case does not represent a valid waiver of its Eleventh Amendment
immunity under Section 504, because the amount of federal funding its
Department of Health and Human Services applies for and accepts is so
great that its decision to accept those funds and thereby waive its
immunity to suits under Section 504 is not voluntary, but "coerced."
Defendants' Brief, p. 26-27.[^7] In support of this claim, the State
asserts that "the [Jim C.]{.underline} case examine\[d\] the level of
federal funding accepted by a particular department of a state to
determine whether Eleventh Amendment immunity ha\[d\] been voluntarily
waived," and argues that although the court in that case found no
coercion, it was only because the federal funding represented only 12%
of the department's budget. The State claims that federal funds have
traditionally amounted to 60% of the budget for its Department of Health
and Human Services, and therefore, unlike the state agency at issue in
[Jim C.]{.underline}, its waiver of Eleventh Amendment immunity was not
voluntary, but "coerced." [Ibid.]{.underline}

> **1. The Supreme Court Has Never Found Any Spending Condition to be
> Unconstitutionally "Coercive"**

The "coercion" theory is based on language in [Steward Machine
Co.]{.underline} v. [Davis]{.underline}, 301 U.S. 548, 590 (1937),
reiterated in [Dole]{.underline}, 483 U.S. at 211, and [College Savings
Bank]{.underline}, 119 S. Ct. at 2231, that there may be some instance
in which "the financial inducement offered by Congress
[might]{.underline} be so coercive as to pass the point at which
'pressure turns into compulsion'" (emphasis added). But in none of those
cases was the theory actually applied to find a Spending Clause
condition coercive.[^8] Moreover, while this language has been in
existence for over 60 years, no court -- until the vacated panel opinion
in [Bradley]{.underline} -- had [ever]{.underline} found a Spending
Clause condition to be coercive. Indeed, in [New York]{.underline}, a
case relied on by both the panel in [Bradley]{.underline} and the en
banc court in [Jim C.]{.underline}, the Supreme Court did not even
mention the concept of "coercion" in explicating the limits of the
Spending Clause.

Instead, the U.S. Supreme Court has repeatedly rejected claims of
"coercion" under the Spending Clause, even where large amounts of
federal funds were at stake. In [Board of Education]{.underline} v.
[Mergens]{.underline}, 496 U.S. 226 (1990), the Court interpreted the
scope of the Equal Access Act, 20 U.S.C. 4071 [et]{.underline}
[seq]{.underline}., which conditions federal financial assistance to
public secondary schools that maintain a "limited open forum" on the
provision of "equal access" to students based on the content of their
speech. In rejecting the school's argument that the Act as interpreted
unduly hindered local control, the Court noted that "because the Act
applies only to public secondary schools that receive federal financial
assistance, a school district seeking to escape the statute's
obligations could simply forgo federal funding. Although we do not doubt
that in some cases this [may be an unrealistic option]{.underline},
\[complying with the Act\] is the price a federally funded school must
pay if it opens its facilities to noncurriculum-related student groups."
496 U.S. at 241 (emphasis added, citation omitted).

Similarly, in [North Carolina ex rel. Morrow]{.underline} v.
[Califano]{.underline}, 445 F. Supp. 532 (E.D.N.C. 1977) (three-judge
court), [aff'd mem.]{.underline}, 435 U.S. 962 (1978), the Supreme Court
summarily affirmed a three--judge district court's rejection of the
"coercion" argument where the state's right to receive funding under
"some forty-odd federal financial assistance health programs" was at
stake. [Id]{.underline}. at 533. In order to continue to be eligible for
the federal funding, new federal legislation required the State to
create a "State Health Planning and Development Agency" to regulate
health services within the State. [Id]{.underline}. The State argued
that the Act was a coercive exercise of the Spending Clause because it
conditioned money for multiple pre-existing programs on compliance with
a new condition. The three-judge court rejected that claim, holding that
the condition "does not impose a mandatory requirement\...on the State;
it gives to the states an [option]{.underline} to enact such legislation
and, in order to induce that enactment, offers financial assistance.
Such legislation conforms to the pattern generally of federal grants to
the states and is not 'coercive' in the constitutional sense."
[Id]{.underline}. at 535-536 (footnote omitted).

These cases demonstrate that the federal government can place conditions
on federal funding that require States to make the difficult choice of
losing federal funds from many different longstanding funding programs
([North Carolina]{.underline}) or even losing all federal funds
([Mergens]{.underline}) without crossing the line to coercion. The
Eighth Circuit's ruling in [Jim C.]{.underline} that the choice imposed
by Section 504\'s waiver condition is not coercive is entirely in line
with these decisions. Like the substantive provisions upheld in
[Lau]{.underline} and [Grove City]{.underline}, Section 504\'s waiver
condition is a reasonable condition intended to enforce Section 504\'s
mandate that federal money not be used to support or subsidize programs
that unnecessarily exclude people with disabilities.

**2. The Eighth Circuit Ruled in [Jim C.]{.underline} That Section
504\'s Waiver Condition Is Not "Coercive" Despite The Fact That It
Applies to 100% of an Agency's Federal Funds**

In [Jim C.]{.underline}, the en banc Court ruled that Section 504\'s
waiver condition was valid. [Id]{.underline}. at 1080. In doing so, the
Court overruled the panel decision in [Bradley]{.underline}, which had
concluded that "Section 504\...\[was\] not a valid exercise of
Congress's spending power" because "Section 504 and its \[waiver\]
provision impose overly broad conditions on state agencies."
[Bradley]{.underline} at 757. The panel in [Bradley]{.underline}
explained that the Supreme Court's decisions:

> recognize\[\] that Congress may require states to comply with
> conditions to receive federal funds, including waiving their Eleventh
> Amendment immunity. \[The Court has\] warn\[ed\], however, that "the
> financial inducements offered by Congress might be so coercive as to
> pass the point at which pressure turns into compulsion." There are
> also limitations on the conditions that Congress may impose on a
> state's receipt of federal funds. One of these limitations is that
> "conditions must\...bear some relationship to the purpose of the
> federal spending; otherwise, of course, the spending power could
> render academic the Constitution's other grants and limits of federal
> authority."

[Id]{.underline}. (Citations omitted.)

Under this reasoning, the panel concluded that Section 504 and its
waiver condition imposed the "overly broad condition" of requiring the
state to "waive its Eleventh Amendment immunity to all claims arising
under §504 if it receives any federal funding, even funding unrelated to
the state's obligations to comply with §504 or the rest of the
\[Rehabilitation Act\]." [Id]{.underline}. The panel concluded that

> Congress's imposition of such conditions on a state violates the
> Constitution because it amounts to impermissible coercion: Arkansas is
> forced to renounce all federal funding, including funding wholly
> unrelated to the \[Rehabilitation Act\], if it does not want to comply
> with §504. Congressional imposition of such a condition does not give
> Arkansas, or any other state, a meaningful choice regarding whether to
> receive federal funding and waive its Eleventh Amendment immunity to
> suits arising under §504 or reject funding and retain its Eleventh
> Amendment immunity to such suits. The condition §504 imposes on
> recipients of federal funds exceeds the ordinary *quid pro quo*
> involved in a proper exercise of Congress's spending power.

[Id]{.underline}. at 757-758.

Nowhere in the [Bradley]{.underline} panel opinion is there any
reference to the actual amount of federal funds received by the agency
at issue in that case, nor to the proportion of the agency's budget that
was made up of federal funds. In fact, there is no implication that the
panel's conclusion was premised in any way upon the particular facts of
that case. Instead, the panel concluded that Section 504 was "coercive"
on its face because, as the panel understood the statutory language, it
applied to the activities of the entire State if any part of the State
accepted federal financial assistance. The panel thus found "coercion"
not by virtue of the monetary amount at stake, but from the fact that
Section 504 and its waiver condition applied across the board to all
federal funding received by an agency, "including funding wholly
unrelated to the \[Rehabilitation Act\]." [Id]{.underline}.

In [Jim C.]{.underline}, the en banc Court reversed. The Court framed
the issue as the defendant State of Arkansas had: whether "Section
504\'s waiver requirement exceeds Congress's spending power by placing
overly broad and therefore coercive conditions on federal funds." [Jim
C.]{.underline} at 1081. The court noted that, contrary to the panel's
understanding, "the State itself as a whole" is not covered by Section
504 merely because some part of the State receives federal financial
assistance. [Id]{.underline}. Instead, Section 504 and its waiver
condition apply only to those individual agencies that choose to accept
funds, and "acceptance of funds by one state agency therefore leaves
unaffected both other state agencies and the State as a whole."
[Id.]{.underline} Thus, "\[a\] State and its instrumentalities can avoid
Section 504\'s waiver requirement on a piecemeal basis, by simply
accepting federal funds for some departments and declining them for
others. The State is accordingly not required to renounce all federal
funding to shield chosen state agencies from compliance with Section
504." [Id]{.underline}.

Based on this proper reading of the statute, the Court concluded that
Section 504 was [not]{.underline} unconstitutionally coercive.
[Id]{.underline}. "While it appears, as the defendant urges, that the
'financial inducements' employed by Congress can become so 'coercive as
to cross the point where 'pressure turns into compulsion,'' that limit
has not been crossed here. To avoid the effect of Section 504 on the
Arkansas Department of Education, the State would be required to
sacrifice federal funds only for that department. This requirement is
comparable to the ordinary quid pro quo that the Supreme Court has
repeatedly approved; the State is offered federal funds for some
activities, but, in return, it is required to meet certain federal
requirements in carrying out those activities." [Id]{.underline}. at
1081-1082 (citations omitted). The Court specifically
"\[acknowledge\[d\] that the waiver does cover all activities of the
Department of Education, and not merely those activities specifically
supported by Section 504 funds," and stated that it did "not consider
such a choice unconstitutionally 'coercive.'" [Id]{.underline}. at 1082.
The Court concluded that "\[t\]he choice is up to the State: either give
up federal aid to education, or agree that the Department of Education
can be sued under Section 504. We think the Spending Clause allows
Congress to present States with this sort of choice." [Id]{.underline}.

Thus, the [Jim C.]{.underline} decision reversed the
[Bradley]{.underline} panel ruling in mirror fashion -- rejecting the
panel's finding of "coercion" from the fact that Section 504 and its
waiver condition applied across the board, the [Jim C.]{.underline}
Court held that, in fact, its agency-specific applicability did
[not]{.underline} render the scheme coercive. The State thus
misconstrues the [Jim C.]{.underline} opinion when it claims that the
Court "examine\[d\] the level of federal funding" to determine whether
there had been a valid waiver of immunity. [See]{.underline} Defendants'
Brief, p. 26-27. The Court had already concluded that Section 504\'s
waiver condition was not coercive based upon its agency-specific
application when it observed that although Arkansas' "sacrifice of all
federal education funds, approximately \$250 million or 12 percent of
the annual state education budget\..., would be politically painful," it
nonetheless did not "compel\[\] Arkansas's choice\...." for purposes of
finding unconstitutional coercion. [Id]{.underline}. at 1082. Just as in
the [Bradley]{.underline} panel opinion, there is no indication in [Jim
C.]{.underline} that the Court's holding was premised upon the
particular level of federal funding at issue in that case. Indeed, by
making this statement, the Court seemed to be indicating the irrelevance
of that consideration to its holding that Section 504 -- despite the
fact that it applies to 100% of an agency's federal funding -- is not
"unconstitutionally 'coercive' because "\[t\]he State may take the money
or leave it." [Id]{.underline}.[^9]

> **3. Section 504\'s Non-Coercive Waiver Condition Is Not Rendered
> Unconstitutionally Coercive By the Amount of Federal Funds an Agency
> Chooses to Receive**

In contrast to Spending Clause legislation that is tied to a particular
spending program, Section 504, like Title VI and Title IX before it,
applies to any recipient of federal financial assistance. Whether the
recipient accepts one dollar or one billion dollars of federal money,
its obligation to comply with Section 504 and to waive its immunity to
suit thereunder is exactly the same. For this reason, the State cannot
point to anything in particular about Section 504\'s waiver condition
that overbears a particular state agency's ability to say "no" to the
offer of federal funds if it does not want to be subjected to suits
under Section 504 -- instead, it argues that the

amount of federal money it receives is what makes the statutory scheme
unduly coercive. In other words, the alleged "coercion" results not from
the fact that Section 504\'s waiver condition applies on an
agency-specific basis, but rather from the fact that the State of
Nebraska, and its Department of Health and Human Services in particular,
has chosen to apply for and accept a great deal of federal money.

However, because Section 504\'s waiver condition applies not via any
specific federal spending program but whenever federal money is spent,
the amount of federal money at stake is completely within the State's
control. Congress does not force the states to accept any federal money
at all, much less does it dictate what amount they must accept. In most
states, as in the State of Nebraska, the politically appointed head of
each state agency, the Governor and the state legislature all
participate in the decision whether to apply for and accept federal
funds.[^10] If a state prefers to maintain its independence from federal
money, it is entirely within its power to do so.[^11] Moreover, just
because an agency has elected to apply for and accept numerous federal
grants, it does not follow that the federal government's authority to
impose conditions on each grant it offers is somehow diminished. If the
federal government is justified in placing conditions on the receipt of
modest amounts of federal resources, it is no less justified in placing
those conditions on the receipt of larger amounts of federal assistance.
As the First Circuit has explained, "\[w\]e do not agree that the carrot
has become a club because rewards for conforming have increased. It is
not the size of the stakes that controls, but the rules of the game."
[New Hampshire Dep\'t of Employment Sec. v. Marshall]{.underline}, 616
F.2d 240, 246 (1st Cir.), appeal dismissed and [cert.
denied]{.underline}, 449 U.S. 806 (1980); [United States ex rel.
Zissler]{.underline} v. [Regents of the Univ. of Minn.]{.underline}, 154
F.3d 870, 873 (8th Cir. 1998) ("There is no coercion in subjecting
States to the same conditions for federal funding as other grantees:
States may avoid these requirements simply by declining to apply for and
to accept these funds. But if they take the King's shilling, they take
it [cum]{.underline} [onere]{.underline}."); accord
[Massachusetts]{.underline} v. [Mellon]{.underline}, 262 U.S. 447, 480
(1923).[^12]

By finding that Section 504 was not coercive despite the fact that it
applied across the board to the entire agency, including activities not
"specifically supported by" Section 504 funds, [see]{.underline}
[id]{.underline}. at 1082, the [Jim C]{.underline}. decision stands for
the proposition that states are not "coerced" into waiving their
immunity under Section 504 despite the fact that in order to avoid that
condition, state agencies would have to decline 100% of their federal
funds. By contrast, under the State's theory of coercion, the courts
would be required to evaluate in each individual case the percentage
that those federal funds would have constituted of the agency's budget
for that year in order to determine whether, as applied to that
particular agency during that year and on those facts, Section 504\'s
waiver condition was coercive in that particular case. [See]{.underline}
Defendants' Brief, p. 27-28.

The Eighth Circuit's ruling in [Jim C.]{.underline} did not countenance
such an "as applied" interpretation of unconstitutional coercion.
Neither did the Supreme Court's ruling in [Dole]{.underline}, which saw
no reason generally to undertake the "coercion" analysis in the first
place, much less to analyze in each individual application of Spending
Clause legislation whether the particular state agency at issue was
coerced. [Id]{.underline}., 483 U.S. at 211. Noting that every
congressional spending statute "is in some measure a temptation," in
[Dole]{.underline} the Court recognized that "to hold that motive or
temptation is equivalent to coercion is to plunge the law in endless
difficulties." [Id]{.underline}., \[cite\] (quoting [Steward
Machine]{.underline}, 301 U.S. at 589-90.) Nowhere in the [Jim
C.]{.underline} decision is there any support for the idea that Section
504\'s constitutional and non-coercive waiver condition may be rendered
unconstitutionally coercive in any given case based solely upon a
particular state agency's unique (and annually changing) quantum of
dependence upon federal money -- something which, unlike most federal
spending measures, is entirely under the states' control.

Indeed, it directly serves one of the critical purposes of the Eleventh
Amendment -- the protection of the "financial integrity of the States,"
[Alden v. Maine]{.underline}, 527 U.S. 706, 750 (1999) -- to permit each
State to make its own cost-benefit analysis for each state agency it has
established and determine whether to accept the federal money with the
condition that that agency waive its immunity to suit in federal court,
or to forgo the federal funds. [See New York]{.underline}, 505 U.S. at
168. The State's theory of coercion presumes that States are incapable
of making these cost-benefit assessments for themselves. At the same
time, its theory would give states unilateral power to void their
waivers of immunity under Section 504 simply by choosing to apply for
and accept vast amounts of federal money -- or an incentive to spend as
little of their own money as possible -- for any agency they wished to
remain immune. Moreover, such a standard for unconstitutional coercion
would be completely unworkable. Given the changing structure of state
agencies and the inevitable variations in both the annual availability
of federal funds and state agency budgets -- both among different
agencies and over time in a single agency -- the validity of each
agency's waiver would necessarily vary from agency to agency and from
year to year. Neither the agencies nor their constituencies would ever
know for certain whether their waivers of immunity under Section 504
were valid, and the courts would be forced to resolve the waiver issue
in every single case. None of the Supreme Court's rulings in the
Spending Clause context sanction the creation of such uncertainty in the
relationship between the federal government and the states.

4\. Section 504\'s Waiver Condition Allows States to Retain Complete
Control Over the Scope of Their Waiver of Immunity

In addition to being completely free to determine how much federal money
a given state agency will accept, States are also able to completely
control the extent of Section 504\'s coverage, and thus the extent of
its waiver of immunity. By imposing the nondiscrimination and waiver
conditions on all of the operations of any state agency that receives
any federal funds, Congress elected to rely on the State's own
governmental framework in determining the proper breadth of coverage.
Thus, the State may unilaterally determine the precise scope of its
waiver of immunity by structuring the boundaries and functions of its
state agencies in such a way as to minimize the coverage of Section 504.
State law establishes the allocation of operations and functions among
departments of the state government. [See]{.underline} Nebraska
Partnership for Health and Human Services, 1996 Neb. Laws. L.B. 1044.
Congress reasonably could have presumed that States normally place
related operations with overlapping goals, constituencies, and resources
in the same department.[^13] That level of coverage -- broader than
simply the discrete program that nominally receives the funds, but
narrower than the entire state government -- is an appropriate means of
both protecting state sovereignty and assuring, through the avenue of
federal judicial enforcement, that no federal money supports or
facilitates programs that are not accessible to people with
disabilities. [Compare]{.underline} [Rust v. Sullivan]{.underline}, 500
U.S. 173, 197-199 (1991) (Congress may constitutionally require that a
private entity that receives federal funds not engage in conduct
Congress does not wish to subsidize so long as recipient may restructure
its operations to separate its federally-supported activities from other
activities); [Regan]{.underline} v. [Taxation with
Representation]{.underline}, 461 U.S. 540, 544-545 (1983).

In this case, the agency formerly known as the Department of Social
Services was "sunsetted" in 1996, and reborn as the Department of Health
and Human Services (DHHS), which is itself only one part of a much
larger, three-agency system called the Department of Health and Human
Services System (hereinafter, "DHHS System").[^14] Following this
reorganization, the federal matching funds for Medicaid were assigned to
one of the other two agencies -- the DHHS Finance and Support agency --
rather than the DHHS. [See]{.underline} Executive Summary of "Nebraska
Health and Human Services: Common Sense Solutions for a Healthy
Nebraska," Exhibit F of attached Index of Evidence, at page ix.

Historically, 55% of all of the federal funds received by the entire
DHHS System (which totalled nearly \$1 billion in 2001) are expended as
the federal portion of matching programs such as Medicaid, AFDC and
other public assistance programs.[^15] When Medicaid was placed within
the DHHS Finance and Support agency, the DHHS agency's budget
immediately went from being 60% comprised of federal funds (when it was
the DSS) to only 40% comprised of federal funds (the total amount of
those funds amounting to only approximately \$86 million in 1997 and
\$90 million by 2001.) [See]{.underline} Excerpts from State of Nebraska
Biennial Budget as Enacted During 1997 and 1999 Legislative Sessions,
Exhibit G and H in attached Index of Evidence, p. 70 and 56
respectively. That percentage has continued to fall in each subsequent
year: from 40% in fiscal year 1998, to 39% in fiscal year 1999, to 37%
in fiscal year 2000, to 36% in fiscal year 2001. [Id]{.underline}.

Moreover, based on the summary of federal grant programs, nearly all of
that federal money goes towards programs [other than]{.underline} the
foster care and adoption programs.[^16] Based on the descriptions of the
purposes of each federal grant program on the federal CFDA website, less
than \$30 million of the approximately \$90 million in federal grants
received by the DHHS in 2001 relate to foster care or adoption. Other
than the State's choice to locate similar programs within the same
agency, there is no reason -- certainly no reason imposed by federal law
-- why the foster care and adoption programs must be located in the
DHHS, or indeed why such programs could not constitute their own
separate agency of the State of Nebraska. [See]{.underline},
[e.g.]{.underline}, Deposition Response of Ron Ross at p. 5 (citing as
the only reason why the foster care and adoptive programs are part of
the DHHS "the opportunity for integration leading to the program being
more effective and efficient.") Therefore, for example, the fact that
\$90 million in federal funding, as opposed to \$30 million, was
conditioned upon the State's waiver of immunity in FY2001 is solely the
result of the State's choices. Properly undertaking its own cost-benefit
analysis, the State may well have decided that the costs of accepting
federal funds (complying with Section 504 and being subject to suit in
federal court) were de minimus, while the benefits (receiving \$90
million in federal money to have a bigger and better social services
program) were substantial.

Thus, the choice imposed by Section 504 is not impermissibly "coercive"
in the constitutional sense. State officials are constantly forced to
make difficult decisions regarding competing needs for limited funds.
While it may not always be easy to decline federal funding, each
department or agency of the State, under the control of state officials,
is free to decide whether it will accept the federal funds with the
Section 504 and waiver "string" attached, or simply decline the funds.
[See]{.underline} [Grove City]{.underline}, 465 U.S. at 575; [Kansas v.
United States]{.underline}, 214 F.3d 1196, 1203-1204 (10th Cir.) ("In
this context, a difficult choice remains a choice, and a tempting offer
is still but an offer. If Kansas finds the\...requirements so
disagreeable, it is ultimately free to reject both the conditions and
the funding, no matter how hard that choice may be. Put more simply,
Kansas' options have been increased, not constrained, by the offer of
more federal dollars." (citation omitted)), [cert. denied]{.underline},
121 S. Ct. 623 (2000). Once one of those options has been selected,
however, "\[r\]equiring States to honor the obligations voluntarily
assumed as a condition of federal funding\...simply does not intrude on
their sovereignty." [Bell v. New Jersey]{.underline}, 461 U.S. 773, 790
(1983).

**D. The Two Additional Cases Cited by the State In Support of its
"Coercion" Theory Are Inapposite**

Defendants cite two recent panel decisions as "persuasive authority" for
their argument that their waiver of Eleventh Amendment immunity under
Section 504 was unconstitutionally "coerced." Defendants' Brief, p.
27-28. However, neither of these cases actually addressed the "coercion"
theory.

In fact, in [Garrett v. Board of Trustees at the University of
Alabama]{.underline}, 261 F.3d 1242 (11^th^ Cir. 2001), a panel of the
Eleventh Circuit didn't even address the waiver issue, and has since
been vacated for that very reason. [See]{.underline} [Garrett v. Board
of Trustees at the University of Alabama]{.underline}, 2001 WL 1636201
(11^th^ Cir. 2001). On rehearing, the panel realized that "neither the
district court, this Court, nor the Supreme Court had addressed the
\[Section 504 waiver\] issue," and, as the state defendants themselves
conceded, "'the possibility that the plaintiffs' Rehabilitation Act
claims might, or might not, be the source of jurisdiction via a waiver
of state immunity\...simply was not analyzed or discussed; frankly, none
of the parties presented much in the way of argument on the issue of
waiver.'" [Id]{.underline}. at \*1. Consequently, the panel vacated its
ruling and remanded the case to the district court with the instruction
that it "consider the argument that defendants have voluntarily waived
their Eleventh Amendment immunity under §504 of the Rehabilitation Act
by their receipt of federal financial assistance conditioned upon such a
waiver\... ." [Id]{.underline}.

The State also cites the recent panel opinion in [Garcia v.
S.U.N.Y.]{.underline}, 2001 WL 1159970 (2^nd^ Cir. 2001), petition for
[reh'g en banc]{.underline} pending. Defendants' Brief, p. 27-28. In
[Garcia]{.underline}, the Second Circuit found that the State of New
York "had not knowingly waived its sovereign immunity from suit" under
Section 504 because "\[a\]t the time that New York accepted the
conditioned funds, Title II of the ADA was reasonably understood to
abrogate New York's sovereign immunity\... ." [Id]{.underline}. at
\*10-11. The panel reasoned that "a state accepting conditioned federal
funds could not have understood that in doing so it was actually
abandoning its sovereign immunity from private damages suits, since by
all reasonable appearances state sovereign immunity had already been
lost." [Id]{.underline}.[^17]

[Garcia]{.underline} was wrongly decided and the United States' petition
for rehearing and rehearing en banc is currently pending before the
Second Circuit. Should this Court wish for further briefing on that
case, the United States will provide it. But no such briefing is
required. [Garcia]{.underline} did not address coercion, which is the
sole ground the State is pressing at this stage in support of dismissal
on Eleventh Amendment grounds. Indeed, as the State apparently realizes,
the issue whether it knowingly waived its immunity to suits under
Section 504 by accepting federal funds was resolved by the Eighth
Circuit in [Jim C.]{.underline} [See]{.underline} 235 F.3d at 1082
("With regard to the requirements of [Atascadero]{.underline}, the
Rehabilitation Act's waiver provision, 42 U.S.C. 2000d-7(a)(1), provides
a clear expression of Congress's 'intent to condition participation in
the program\[\]\...on a State's consent to waive its constitutional
immunity'") (Citations omitted). Nor did the State raise this argument
in the prior rounds of briefing on this issue before this Court and the
court of appeals. The State's opportunity to dispute this point has thus
long since passed. Both as a matter of the law of this circuit and the
law of this case, the State's waiver of Eleventh Amendment immunity
under Section 504 was knowing. [Id]{.underline}.; [see also]{.underline}
[Little Rock School District v. Mauney]{.underline}, 183 F.3d 816
(1999); [Douglas]{.underline} at 820-821; [Nihiser]{.underline} at 627;
and [Stanley]{.underline} at 344.

In the end, by arguing that it was "coerced" into waiving its immunity
under Section 504, the State is asking this Court to deny the United
States one of the primary benefits of its bargain. As Section 504 makes
clear, two of the conditions that Congress places upon states' receipt
of federal funds is that they (1) comply with Section 504\'s
non-discrimination mandate and (2) waive their immunity to suits seeking
to enforce that obligation. It is simply not fair for a state agency to
apply for and accept federal funds knowing of these conditions, but then
later claim

that it should not be bound by its agreement to the latter condition
because at the time it accepted the funds its financial situation would
not have permitted it to reject them. Indeed, if the state agency's
waiver of immunity were to be deemed ineffective for any part of the
relevant period of time, it would seem that the DHHS would have no
entitlement to retain the federal funds that were conditioned, in part,
on the State's agreement to comply with Section 504 or to waive its
immunity. [See]{.underline} [Oubre v. Entergy Operations,
Inc.]{.underline}, 522 U.S. 422, 425 (1998) (noting general rule that in
order to avoid a contract that is voidable on the grounds of mistake, a
party must "tender back any benefits received under the contract.")

**CONCLUSION**

For the foregoing reasons, the United States respectfully submits that
the State of Nebraska has validly waived its Eleventh Amendment to suit
under Section 504 and therefore this Court should deny the State's
Renewed Motion for Summary Judgment.

DATED: January 24, 2002

> Respectfully submitted,
>
> Ralph F. Boyd, Jr.
>
> Assistant Attorney General
>
> Civil Rights Division
>
> Michael G. Hevican
>
> United States Attorney
>
> John L. Wodatch, Chief
>
> Renee M. Wohlenhaus, Deputy Chief
>
> Philip L. Breen, Special Legal Counsel
>
> Disability Rights Section
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> M. Christine Fotopulos
>
> Trial Attorney
>
> Disability Rights Section
>
> Civil Rights Division
>
> U.S. Department of Justice
>
> 950 Pennsylvania Avenue, N.W.
>
> Washington, D.C. 20530
>
> \(202\) 305-7475
>
> \(202\) 305-9775 (fax)
>
> Counsel for Plaintiff-Intervenor
>
> United States of America

[CERTIFICATE OF SERVICE]{.underline}

I hereby certify that on this 24th day of January, 2002, a true and
correct copy of **United States' Brief in Opposition to Defendants'
Renewed Motion for Summary Judgment** was served by first-class mail on
the following parties:

D. Milo Mumgaard

626 Washington Street

Lincoln, NE 68502

Counsel for Plaintiffs

Paul R. Elofson

Alan E. Pedersen

McGill, Gotsdiner, Workman & Lepp, P.C., L.L.O.

11404 West Dodge Road, Suite 500

Omaha, NE 68154-2584

Counsel for Defendants

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

M. Christine Fotopulos

[^1]: ^[?]{.underline}/^ The United States is participating in this case
    to defend the constitutionality of Section 504 and its waiver
    condition as valid enactments under the Spending Clause, and its
    discussion in this brief is therefore limited to that issue. More
    than half of the Defendants' brief (pp. 9-23) is devoted to a
    separate constitutional issue that is controlled by the Eighth
    Circuit's decision in [Bradley]{.underline}: whether Section 504
    validly abrogates states' Eleventh Amendment immunity pursuant to
    Section 5 of the Fourteenth Amendment. As Defendants recognize,
    [Bradley]{.underline} held that it does not, and that holding
    remains good law. [See]{.underline} Defendants' Brief at p. 6
    ("Although the Eighth Circuit in [Jim C.]{.underline} reversed the
    decision in [Bradley]{.underline} in part by holding that Congress'
    actions predicating federal funding for various programs on each
    state's agreement to waive its sovereign immunity resulted in an
    effective waiver subjecting states to the Rehabilitation Act, the
    [Jim C.]{.underline} decision reversed [Bradley]{.underline} only as
    to the spending clause issue."); [Jim C.]{.underline}, 197 F.3d at
    958 (vacating and granting rehearing en banc only on the Spending
    Clause issue); [Id]{.underline}., 235 F.3d at 1080 (same). Because
    [Bradley]{.underline}'s holding that Section 504 does not validly
    abrogate states' Eleventh Amendment immunity pursuant to Section 5
    of the Fourteenth Amendment is binding on this Court, we limit our
    discussion to the Spending Clause issue.

[^2]: ^[?]{.underline}/^ Congress enacted 42 U.S.C. 2000d-7 as part of
    the Rehabilitation Act Amendments of 1986, Pub. L. No. 99-506, Tit.
    X, §1003, 100 Stat. 1845, in response to the Supreme Court's ruling
    in [Atascadero State Hospital v. Scanlon]{.underline}, 473 U.S. 234
    (1985). In [Atascadero]{.underline}, the Court held that Congress
    had not made sufficiently clear its intent that state agencies
    receiving federal funds would be amenable to suit for violations of
    Section 504. In [Lane v. Pena]{.underline}, 518 U.S. 187, 200
    (1996), the Court held that 42 U.S.C. 2000d-7 was the "clear
    expression of Congress's 'intent to condition participation in the
    program\[\]\...on a State's consent to waive its constitutional
    immunity'" that its ruling in [Atascadero]{.underline} had required.
    [See also]{.underline} [Jim C.]{.underline} at 1082 (same).

[^3]: ^[?]{.underline}/^ The purposes articulated by Congress in
    selecting this means of establishing the condition in Title VI,
    purposes equally attributable to Title IX and Section 504, were to
    avoid the need to attach nondiscrimination provisions each time a
    federal assistance program was before Congress, and to avoid
    "piecemeal" application of the nondiscrimination requirement if
    Congress failed to place the provision in each grant statute. See
    110 Cong. Rec. 6544 (1964) (Sen. Humphrey); [id]{.underline}. at
    7061-7062 (Sen. Pastore); [id]{.underline}. at 2468 (Rep. Celler);
    [id]{.underline}. at 2465 (Rep. Powell). Certainly, there is no
    distinction of constitutional magnitude between a nondiscrimination
    provision attached to each appropriation and a single provision
    applying to all federal spending.

[^4]: ^[?]{.underline}/^ [See]{.underline}, [e.g.]{.underline}, [Gebser
    v. Lago Vista Independent School District]{.underline}, 524 U.S.
    274, 286 (1998) (holding that Title IX has two primary purposes:
    preventing federal money from being used for discriminatory purposes
    and protecting individuals from gender discrimination); [United
    States v. Louisiana]{.underline}, 692 F. Supp. 642, 652 (E.D. La.
    1988) (three-judge court) ("\[T\]he condition imposed by Congress on
    defendants \[by Title VI\], that they may not discriminate on the
    basis of race in any part of the State's system of public higher
    education, is directly related to one of the main purposes for which
    public education funds are expended: equal education opportunities
    to all citizens." (footnote omitted)); [see also]{.underline} James
    Leonard, "The Shadows of Unconstitutionality: How the New Federalism
    May Affect the Anti-Discrimination Mandate of the Americans with
    Disabilities Act," 52 Ala. L. Rev. 91, 180 (2000) ("One of the
    obvious statutory purposes behind Section 504 is to avoid the use of
    federal money for discriminatory practices. Another obvious and
    related purpose of the Rehabilitation Act is to ensure that federal
    recipients make their entire operations available to all otherwise
    qualifying persons, regardless of disability and regardless of the
    specific uses of the federal money.") Moreover, the Constitution
    does not require that Congress provide funds specifically to combat
    discrimination if it wishes to attach a nondiscrimination
    requirement to receipt of those funds. [See]{.underline},
    [e.g.]{.underline}, [Grove City]{.underline}, 465 U.S. at 559, 565
    n.13 (enforcing Title IX where the purpose of the federal funds was
    to provide general financial aid, not to combat sex discrimination.)

[^5]: ^[?]{.underline}/^ [See]{.underline} "Fund 4000 -- Federal Grants
    Utilized by DHHS in State FY1998 to FY 2001 by CFDA Number," Exhibit
    A in the attached Index of Evidence. The majority of federal grant
    programs funding the entire DHHS System are intended to serve people
    with disabilities, either directly or indirectly (such as those that
    serve the elderly). [See]{.underline}, [e.g.]{.underline} (by CFDA
    number): 93.104 (Special Mental Health Services for Children),
    93.150 (Mental Health Homeless "PATH" Grant), 93.630 (Developmental
    Disabilities Basic Support Grant), 93.778 (Medical Assistance
    Program -- Title XIX Medicaid), 93.917 (HIV Formula "Ryan White"
    Grant), 93.944 (HIV/AIDS Surveillance), 93.945 (Arthritis Special
    Grant), 93.958 (Community Mental Health Services Block Grant),
    93.959 (Substance Abuse Prevention and Treatment Block Grant), and
    93.988 (Diabetes Control and Surveillance Grant); 93.041 (Title VII
    -- Prevention of Elder Abuse), 93.042 (Ombudsman Services for the
    Elderly), 93.043 (Health Promotion for the Elderly), 93.044 (Senior
    Centers Grant Program), 93.045 (Nutrition Services for the Elderly),
    93.048 (Discretionary Elderly Grant), and 93.052 (Family Caregiver
    Demo. Grant). For more information about the specific purposes of
    each federal grant program, see
    [[www.cfda.gov.]{.underline}](http://www.cfda.gov/)

[^6]: ^[?]{.underline}/^ [See]{.underline} [Douglas v. California Youth
    Auth.]{.underline}, 271 F.3d 812, 820-821 (9th Cir. 2001) (Section
    504); [Nihiser v. Ohio E.P.A.]{.underline}, 269 F.3d 626, 627 (6th
    Cir. 2001) (Section 504); [Cherry v. University of Wis. Sys. Bd. of
    Regents]{.underline}, 265 F.3d 541, 553-555 (7th Cir. 2001) (Title
    IX); [Stanley v. Litscher]{.underline}, 213 F.3d 340, 344 (7th Cir.
    2000) (Section 504); [Pederson v. Louisiana State
    Univ.]{.underline}, 213 F.3d 858, 875-876 (5th Cir. 2000) (Title
    IX); [Sandoval v. Hagan]{.underline}, 197 F.3d 484, 493-494 (11th
    Cir. 1999) (Title VI), [rev'd]{.underline} on other grounds, 121 S.
    Ct. 1511 (2001); [Litman v. George Mason Univ.]{.underline}, 186
    F.3d 544, 554 (1999) (Title IX), [cert. denied]{.underline}, 528
    U.S. 1181 (2000); [see also]{.underline} [Board of Educ. v. Kelly
    E.]{.underline}, 207 F.3d 931, 935 (7th Cir.) (IDEA), [cert.
    denied]{.underline}, 531 U.S. 824 (2000); [Little Rock Sch. Dist. v.
    Mauney]{.underline}, 183 F.3d 816, 831-832 (8th Cir. 1999) (same);
    [Clark v. California]{.underline}, 123 F.3d 1267, 1271 (9th Cir.
    1997) (Section 504), [cert. denied]{.underline}, 524 U.S. 937
    (1998); [Department of Educ. v. Katherine D.]{.underline}, 727 F.2d
    809, 818-819 (9th Cir. 1983) (Education for All Handicapped Children
    Act of 1975), [cert. denied]{.underline}, 471 U.S. 1117 (1985);
    [Scanlon v. Atascadero State Hosp.]{.underline}, 735 F.2d 359,
    361-362 (9th Cir. 1984) (Section 504), [rev\'d]{.underline} due to
    the absence of a clear statement, 473 U.S. 234 (1985); [Florida
    Nursing Home Ass\'n v. Page]{.underline}, 616 F.2d 1355, 1363 (5th
    Cir. 1980) (Medicaid), [rev\'d]{.underline} due to the absence of a
    clear statement [sub nom]{.underline}. [Florida Dep\'t of Health &
    Rehabilitative Servs. v. Florida Nursing Home Ass'n]{.underline},
    450 U.S. 147 (1981); [see also]{.underline} [Premo v.
    Martin]{.underline}, 119 F.3d 764, 770-771 (9th Cir. 1997) (State
    participation in Randolph- Sheppard Vending Stand Act constitutes a
    waiver of Eleventh Amendment immunity), [cert. denied]{.underline},
    522 U.S. 1147 (1998); [Delaware Dep\'t of Health & Social Servs. v.
    United States Dep\'t of Educ.]{.underline}, 772 F.2d 1123, 1138 (3d
    Cir. 1985) (same).

[^7]: ^[?]{.underline}/^ Nowhere in the State's brief does it suggest
    that it has been coerced into complying with the primary condition
    of Section 504, which is the non-discrimination mandate itself.
    However, there is no principled basis for distinguishing the State's
    agreement to comply with Section 504\'s non-discrimination condition
    from its agreement to comply with its waiver condition, since its
    agreement to both conditions is derived from the same act: its
    acceptance of federal funds. If one condition may be rendered
    unconstitutionally coercive solely by virtue of the alleged
    involuntariness of that acceptance, so must the other. Moreover,
    Section 504 gains a significant measure of its value from the fact
    that it can be enforced by private individuals in court -- the
    invalidation of the waiver condition would seriously undercut the
    value of the legislation. [See]{.underline} Erwin Chemerinsky,
    "Protecting the Spending Power," 4 Chap. L. Rev. 89, 104
    ("\[E\]nsuring accountability requires that Congress be able to
    condition federal funds on a state's waiver of its sovereign
    immunity\...Preventing suits against states would allow them to take
    federal money and disregard the conditions that Congress
    constitutionally has the right to impose."); [see also]{.underline}
    [Cannon v. University of Chicago]{.underline}, 441 U.S. 677, 703
    (1979) (noting that if "\[a private\] remedy is necessary or at
    least helpful to the accomplishment of the statutory purpose, the
    Court is decidedly receptive to its implication under the statute.")

[^8]: ^[?]{.underline}/^ Similarly, in [College Savings
    Bank]{.underline}, while the Court used the word "coercion" in
    holding that Congress could not condition States' participation in
    fields of interstate commerce on waiver of their Eleventh Amendment
    immunity, the Court recognized that its holding would not carry over
    to Spending Clause statutes. Reaffirming that no one is entitled to
    federal money -- rather, it is simply a "gift" that Congress is free
    to disburse if it so chooses -- the Court thus distinguished
    Congress' power to place conditions on "gifts" from conditions on
    engaging in "otherwise lawful activity." [Id]{.underline}., 119 S.
    Ct. at 2231.

[^9]: ^[?]{.underline}/^ This is borne out by subsequent cases decided
    by the Eighth Circuit since its ruling in [Jim C.]{.underline}, in
    which the Court has repeatedly cited its holding in [Jim
    C.]{.underline} to preclude an Eleventh Amendment defense without
    requiring any further analysis. [See]{.underline},
    [e.g.]{.underline}, [Grandson]{.underline} at 568 n. 2;
    [Grey]{.underline} at 609-610. The [Jim C.]{.underline} decision is
    also in accordance with the holdings of other circuits on this
    issue. [See]{.underline}, [e.g.]{.underline}, [California v. United
    States]{.underline}, 104 F.3d 1086, 1092 (9^th^ Cir. 1997) (finding
    no coercion when state would lose all federal Medicaid funds if it
    did not comply with condition of providing EMS service to illegal
    aliens); [Oklahoma v. Schweiker]{.underline}, 655 F.2d 401 (D.C.
    Cir. 1981) (finding no coercion when state would lose all federal
    Medicaid funds if it did not comply with certain requirements in
    Social Security Act.)

[^10]: ^[?]{.underline}/^ For example, the DHHS Director has to approve
    applications for federal funding and submit an annual budget to the
    Governor incorporating those requests. The Governor then submits a
    statewide budget to the legislature, which also incorporates the
    requests for federal funding. Finally, the state legislature has to
    approve the state budget, which includes the appropriation of
    federal funds received by the state and state agencies, and must
    appropriate federal funds before they can be expended by the agency.
    [See]{.underline}, [e.g.]{.underline}, Deposition Responses of James
    Jensen, Exhibit B in attached Index of Evidence, p. 3; Neb. Op.
    Atty. Gen. No. 95034, 1995 WL 250350 (Apr. 26, 1995); Neb. Op. Atty.
    Gen. No. 87114, 1987 WL 248506 (Dec. 9, 1987).

[^11]: ^[?]{.underline}/^ The State has produced no evidence that the
    State of Nebraska is opposed to receiving federal money, or that it
    has taken any measures to lessen its dependence on federal funding
    with the intent of preserving its immunity to suit under Section
    504. To the contrary, the people of the State of Nebraska, through
    their elected representatives in the state legislature, have
    specifically authorized -- and in many cases instructed -- the DHHS
    and other state agencies to "apply for, receive and administer" as
    much federal money as possible to run their programs.
    [See]{.underline}, [e.g.]{.underline}, Neb. Rev. St. §81-3102(7)
    (providing that "\[t\]he powers and duties" of the DHHS "shall
    include\... seek\[ing\] grants and other funds from
    federal\...sources to carry out\...the missions and purposes of the
    \[DHHS\] and\...accept\[ing\] and administer\[ing\]\...resources
    delegated, designated, assigned, or awarded\..."); Neb. Rev. St.
    §68.703-01 (authorizing DHHS to use federal funds for the board and
    care of foster children); Neb. Rev. St. §71-501.02 (AIDS Program);
    Neb. Rev. St. §71-523 (Metabolic Diseases Program); and Neb. Rev.
    St. §71-706 (Women's Health Initiative Fund).

    Other statutory enactments actually mandate that DHHS apply for
    federal funds. [See]{.underline}, [e.g.]{.underline}, Neb. Rev. St.
    §71-4738 (providing that the DHHS "shall apply for all available
    federal funding to implement the Infant Hearing Act"); and Neb. Rev.
    St. §71-5043 (mandating that "\[a\]ll available
    federal\...resources\...should be effectively utilized" for services
    for people with "severe, persistent, and disabling psychiatric
    disorders"). Several others go even further, and not only authorize
    or mandate that agencies apply for federal funds, but that they
    comply with Section 504 and all of its requirements in order to
    ensure that the agency will continue to receive as much federal
    funding as possible. [See]{.underline}, [e.g.]{.underline}, Neb.
    Rev. St. §83-210.02 (emphasis added) (providing that the DHHS "[is
    hereby authorized to accept the provisions of \[the Rehabilitation
    Act of 1973\] and all amendments thereto, and to cooperate with the
    United States Government in any way necessary to enable the
    department to receive federal funds for the vocational
    rehabilitation of the blind as provided in such public
    law]{.underline}\..."); Neb. Rev. St. §79-11,126 (authorizing the
    Division of Rehabilitation Services "to comply with such
    requirements as may be necessary to obtain the maximum amount of
    federal funds and the most advantageous proportion possible\...");
    Neb. Rev. St. §71-8607 and §71-8610 (mandating that the Commission
    for the Blind and Visually Impaired "\[a\]pply for, receive and
    administer money from any\...federal agency to be used for purposes
    relating to blindness, including federal funds relating to
    vocational rehabilitation of blind persons\..." and authorizing it
    to "accept the provisions of the federal Rehabilitation Act of 1973,
    as amended, 29 U.S.C. 701 et seq., and to cooperate with the United
    States Government in any way necessary to enable the commission to
    receive federal funds for the vocational rehabilitation of blind
    persons as provided in such act\..."); and Neb. Rev. St. §79-11,124
    (mandating that the State Board of Education "comply with such
    conditions as may be necessary to secure the full benefits
    of\...federal acts and appropriations \[relating to vocational
    rehabilitation\]\... .")

    In many of these statutory enactments, the legislature makes clear
    that federal funds shall expended before state funds.
    [See]{.underline}, [e.g.]{.underline}, Neb. Rev. St. §71-5205
    (providing that "\[t\]he family practice residency program may be
    funded in part by grants provided by\...agencies of the federal
    government," and that "\[i\]f such grants are provided, the
    Legislature shall not provide funding for such program"); Neb. Rev.
    St. §79-1132 (providing that "grants \[to school districts for
    children with disabilities\]\...shall continue to be one hundred
    percent \[of the costs of such programs\] as long as the funding for
    such grants comes from federal funds"); Neb. Rev. St. §81-2213 and
    2227 (mandating that the DHHS "accept\...federal funds" for its
    Aging Services and submit budget requests that "include all federal
    funds available to the department\..."); and Neb. Rev. St. §83-169
    (providing that "\[i\]n the event federal funds are available to the
    State of Nebraska for alcoholism, drug abuse\...or other addiction
    programs, the division is authorized to comply with such
    requirements as may be necessary to obtain the maximum amount of
    federal funds and the most advantageous proportion possible\... .")
    [See also]{.underline} Contract between the DHHS and MAXIMUS,
    effective August 1, 1994 through October 31, 1997, Exhibit E in
    attached Index of Evidence (noting as its purpose that "the
    Department is desirous of contracting for the generation of
    additional Federal revenues on behalf of the State's health human
    services programs.")

[^12]: ^[?]{.underline}/^ Spending Clause statutes are often analogized
    to contracts. When a plaintiff is seeking to void a contract on the
    grounds of "economic duress," it must show "acts on the part of the
    defendant \[that\] produced" the financial circumstances that made
    it impossible to decline the offer, and it is not enough to show
    that the plaintiff wants, or even needs, the money being offered.
    [Undersea Engineering & Construction Co. v. International Tel. &
    Tel. Corp.]{.underline}, 429 F.2d 543, 550 (9^th^ Cir. 1970);
    [accord]{.underline} [United States v. Vanhorn]{.underline}, 20 F.3d
    104, 113 n. 19 (4^th^ Cir. 1994).

[^13]: ^[?]{.underline}/^ Indeed, this is the case here. Effective
    January 1, 1997, the State of Nebraska elected to combine several
    separate but related state agencies -- the Department of Aging,
    Department of Health, Department of Social Services, Office of
    Juvenile Services (of the Department of Correctional Services) and
    Department of Public Institutions -- into one big, three-agency
    system, of which the DHHS is only one part. [See]{.underline}
    Nebraska Partnership for Health and Human Services Act, 1996 Neb.
    Laws. L.B. 1044.

[^14]: ^[?]{.underline}/^ In addition to the DHHS, the System includes
    two other agencies, the Department of Health and Human Services
    Regulation and Licensure and the Department of Health and Human
    Services Finance and Support. The System also includes a Policy
    Cabinet and a Partnership Council. [See]{.underline} Executive
    Summary of "Nebraska Health and Human Services: Common Sense
    Solutions for a Healthy Nebraska," Exhibit F of attached Index of
    Evidence, at page v.

[^15]: ^[?]{.underline}/^ [See]{.underline} Excerpts from State of
    Nebraska Biennial Budget as Enacted During 1997 Legislative Session,
    Exhibit G in attached Index of Evidence, p. 61; and Exhibit A.

[^16]: ^[?]{.underline}/^ [See]{.underline} Exhibit A in attached Index
    of Evidence (by CFDA number): 93.556 (Safe and Stable Families
    Grant); 93.645 (Child Welfare Services "IV-B"); 93.658 (Foster Care
    -- Title IV-E); 93.659 (Adoption Assistance).

[^17]: ^[?]{.underline}/^ The State's citation of [Garcia]{.underline}
    demonstrates the conceit of its "coercion" theory. The State could
    not have been "coerced" into waiving its immunity if at the same
    time it did not believe that it was waiving anything at all. In
    fact, there is no evidence in this case that anyone in a position to
    authorize the agency's annual requests for federal funds even knew
    about, much less relied one way or the other upon, Title II's
    abrogation of immunity. [See]{.underline}, [e.g.]{.underline},
    Deposition of Senator James Jensen, Exhibit B in attached Index of
    Evidence, p. 6 (answering "no" to the question whether he knew about
    the Title II abrogation at any time before or during his
    participation in any decision approving DHHS's acceptance of federal
    funding.)