he good afternoon everyone we are ready to start with the first case all those first is alexander short discussion the supremacy clause and blessing and if you have any time left over i'll go to just the stability and injury in fact song reverse the order of the parade on the merits the question really fundamentally is whether or not the special needs trust visions of the medica stature a mandate to the states or merely permission if their mandate than a preemption analysis may be appropriate to ensure there's no conflict with their mandate if it's merely permissive statute if merely gives permits that it's what i mean is that begins with the words and i probably knocked over the head with it like five times in my brief this subsection shall not apply to any of the following trust that's how the whole to so all that section does and i believe the plaintiffs acknowledge it in their in their brief is lift the mandate of the prior sub paragraphs which say t punitively why go through all the difficulty however and refuse statute and crafting complicated rules to exempt these trusts and then say if you do it should be able to count well first of all clearly the first of all that the rules aren't that complicated the rules are fair  as an elector the parties and said asked about you know given the congress did not write a national law of trust why should the state be of regulated and if this is all that that there is with respect to these trusts they can run while they can run while  i don't get it i thought i'm sorry i thought you would into the system i mean with eyes wide open into the medicaid system and that you agreed that you would be bound by the medicaid provisions that is a state of pennsylvania we seek or miss it do you mean you can pick and choose what you will regulate no absolutely not absolutely not but what i say is that i mean let me let me lay it out the statute says that when you have states regardless of your state policy on subset or several grants or trusts and states have diversity on you'd like us to follow what the second circuit in the tenth circuit said that i have if the second circuit has ruled it must have been very recently because i haven't seen it but the tenth circuit demands have to yet and that is why would you leave aside the modifier complicated why would congress bother providing for the special needs trust provision if it was just going to say to the states you know what you guys can just forget it if you want because the whole structure the medicaid statutes is about state options i mean this is not a i mean cases come here to this court about the d one through three override state law and say regardless of what your policy is on self settled spendthrift trusts you must count them as a resource you suggested the state we now exercise options and selectively of state policy on self settled spendthrift trust in this diversity on state policy with respect to subsidies spencer trusts congress mandates that generally you treat self settled spendthrift trust  settled spendthrift trusts under state law that's how you would treat them now a state like pennsylvania which is hostile to self settled spendthrift trusts and wants to take advantage of this provision in order to make these trust available to the disabled a good thing and that's a law which which sets them aside that's what we did we did it in the full trust act which i wanted to mention because it's not cited in this court opinion and we did it in section fourteen fourteen which authorizes these trust to exist and remember that these are trusts are pennsylvania general i'm not sure how we are now because we've now adopted the uniform trust act and there are much more ambivalent about trusts is really aimed only at abuse i mean i said in the break well everyone seems to be in agreement on what the statue what is permitted and what isn't permitted what we do is we have the right to exclude individuals from using a special needs trust if we conclude the abuse is that the use of the trust is not any way related to their individual special needs remember that special needs and they're really trying to have your cake and eat it too i mean it's hard you're on the one hand you seem to be saying that states can opt in or opt out of this and then you seem to be saying and if we opt into it we can opt into it on our own terms than matter what congress  mean if you say we're going to go ahead and we're going to have these special needs trusts and we're going to accept that as a way for people to provide for folks without  having it count against their eligibility for medicaid what is it in the statutory scheme or in the precedents that causes you to say once we opt in we are free to start crafting our own exceptions to how the no what's the what's the proper word for the no more restrictive means rule against the no more restrictive means rule defaults the state law that's state law so the no more restrictive provision doesn't require you to look at the thirteen ninety six provisions you say before to back into state defaults about all thirty nine feet six p d says is that it's an exemption from the mandatory trust it's now let me let me flip it since since i've since since the court seems to be saying or buying into the argument that that asking questions i know i know i know i know but let me get to get the  up on the exemption issue that i don't get to the let's say you assume it's a mandate issue ok what is so terribly wrong with saying that you can't use a special needs trust purely for inner generational wealth transfers i mean that's what we've set that and what is so terribly wrong about saying that the tax payers are not going to pay for your medical expenses is not really useless and of course of what so terribly wrong at this point you're arguing a policy judgment who's right and if we accept the district's determination this is a mandatory provision and we recognize that you know there's plenty of dispute out there about that but if we accept that then are we are we forced to accept the notion that the the no more restrictive means past the plys in other words whether you think it's a good idea or not in the state that's not the way congress set it up well i mean the assumption behind that question is these are the only rules that can apply to special needs drug isn't oh no this sumption is if you can't make it more restrictive you could do a lot of things with this but you couldn't make it more restrictive that's the assumption because that seems to be the ruling of the district court but the question to you is can you adequately answer that ruling by the district court by saying well that's bad policy now i can i what i can say is that under s s i rules states regulate trusts states determine the validity of trust states the term in the entry and exit rules for all trusts for all trusts i get the feeling that we're circling back well it is sort of circular because what we're saying is that is that it's an exemption it defaults to just state state thirteen ninety six are people who are disabled population i mean isn't that isn't that one of the conditions for buying into that system that you would and that no provision that is more restricted than those in maine in thirteen ninety six look to state law to determine whether the trust is valid you look to state law to determine whether or not the trust as a resource s s i defaults to state law well if it's true then then why bother arguing about mandatory or not i mean if there's this if there's this hole in the bottom the bucket we're all drains out anyway why are we why are we talking about well i mean we're talking about it and it all we're talking about it because member of the congress put these mandatory rules in a plaque that these very punitive rules states were not permitted to treat any trusts you have but you know you answer when i'm trying to ask when i'm trying to ask is it sounds like a heads you win or a heads they win tails you lose argument if it's if it's not mandatory then the state wins if it is mandatory the state still wins because it all the fault of the state law anyway is there there's no there's no way under any reading of this provision that the the the special excuse me that the the plaintiffs can win i disagree with your characterization i mean if you if the heads i win in other words if you fought the state law of course the state once it becomes permissive the states can do whatever you want if the tails argument comes down to are these restrictions assuming it's a mandate are these restrictions interfere with anything that congress intended to do and what we say is the district court construed the statute so that it would be essentially that the approach to the statute well i think that this record just assumed you would do you would exercise the limits of your power right i mean the district court is the court really supposed to take a position particularly in light of fact that you folks haven't put regulations together in years are they supposed to say well let's assume the state is not going to exercise the limits of the power of the clear sit house person what would be the basis for doing that wolf or first of all we haven't put regulations out of there because of those losses right second of all we never actually have however promulgated were created some kind of intrade depart mental manual or set of instructions under which we have never disapproved of a of a special where somebody took a mean spirited approach to the statute and tried to restrict it and they had to be over rule can i trust this if example when you have because we are talking about preemption and we are reviewing the district court's decision and one of those decisions and analyses is that section three hundred ninety six requires only that a person be disabled in disability the find of the section one nine hundred eighty two however the state provision adds to the federal requirement and requires that the beneficiary have special needs that will not be met by the why isn't that a provision that is more restrictive than federal and more severe and the if we should be because it doesn't regulate eligibility it regulates who can enter a trust it is no different than any other person provision of state law that says who can enter or leave a trust except because we have an active member because pennsylvania was generally property is i mean there are lots of state law rules of property that determine who can do enter into transactions capacity aids all automatically would have but the under age sixty five isn't that clearly more restrictive well it's all more restrict if you construed as a mandate if you construe it as a permissive then we have authority to do it i mean we had a problem i mean the problem is laid out in the c m s transmittal where if you transfer money even clearly congress in vision that individuals over sixty five at least they wrote could use full trust and then they also impose a transfer asset penalty on so if you're an elderly individual you stablish full trust you need to answer a nursing home guess what you don't get medicaid that's a horrible situation it's a horrible situation we took an approach of saying look we don't want that situation occur where not going to let you enter into these pool trust that was that the best solution maybe a better solution would have been to get people really clear notice is i don't know  exempt from the mandatory trust rules the statute does not say state you must enact a law that allows everybody to enter the child yet they are back to the mandatory p s i know but except the the promise of the question that it's mandatory on that one give rise lose that one judge if it's mandatory i lose the i lose eight sixty five on the on the on the special needs requirement and the recently related to requirement those can be construed liberally we do construe the rib liberally i think if you look at the way we can say we can string that stack you can give us the benefit of good faith you'll find that there is no even if you construe the statue to be mandatory you will find that there is no conflict with the objectives and purposes the congress bullets talk about that but under has no basis for provision for the state to make judgments about what's a special need and why and and to be inserting itself in the decision making that the to be going through what do you rely on other than the mandatory vs permissive issue to say well we get to do that anyway i guess i guess it comes down to that these rules established by congress were not intended to be the exclusive rules regarding these trusts that they were not intended to exempt these trusts from every other rule that applies to trusts and because these are special trusts in the sense that they would normally be permitted under state law so we're back to mandatory no no we're not back to mandatory we're back to take a look at the restrictions and they're so minimal and they're so commonsense i mean well hold on a second i'm not trying to be wooden i'm just trying to understand the logic of your argument if for the sake scotian it's mandatory and if the federal statute doesn't contain the kind of restriction that fourteen fourteen can then just as a matter of language isn't fourteen fourteen more restrictive and therefore in violation of the only more restrict that we can do it but let me let again let me go back to what is the test for preemption it has to be we have to be interfering with the objective of congress and i ask you if we're preventing individuals from using special needs trust to buy porsches and rolex watches and we're saying that you can't use a special needs trust if you have to have twenty million dollars and you're using it solely to do intergenerational wealth transfer of how does that obstruct the intent of congress it doesn't i mean the this report had to come up with very direct conan and meanspirited interpretations interpretations that we've never adopted in order to find a conflict with the intent of the statute member going to back in a preemption analysis we don't just look at the words of the senate yeah you know we know have to go may on a completely different thing you know in the in the recently issued douglas and by the supreme court the the court says he were in a different ball game here because there was an administrative interpretation  regardless of why you don't have a mute don't have them and i'm wondering if you have an idea about how this works out as a practical matter if we make if we issue a ruling based on the on a plan a recent interview not the differential standard that would exist had there been an administrative ruling and then you folks to come out with some regulations things proceed of pace i mean procedurally it just seems like we're in a sort of a messy spot and i'm curious what your thoughts while you started out with with douglas and and what i was going to say on decide whether or not douglas changes anything the only thing douglas changes is making clear that what i think everybody thought was settled law regarding the supremacy clause is not that it's an open question and the second question you have to ask is whether or not the panel can address that issue whether it has to go to the court on bunk and my feeling is given the language in the same thomas and john opinion which is only one sentence i mean none of the supremacy clause is really engage with the blessing line of cases in you have the i think you have the d c circuit the first circuit of the ninth circuit have engaged with this this court has never engaged with blessing and court the ash versus supremacy clause is just two lines of cases and they don't talk to each they please the court i would like to reframe the question a little differently this case presents the question of whether certain provisions of section fourteen fourteen violate the rights of the pele's under and are preempted by certain provisions of the medical assistance act such that clara torreon injunctive relief is available against the enforcement of section fourteen fourteen pursuant to forty two u s c nine hundred eighty three and the supremacy clause of the united states constitution what is at stake in this case is the rights of disabled individuals to realize an improved quality of life through participation in the special needs trust as congress intended isn't what's also at stake here the right of the state of pennsylvania to try to make some sensible use of the public fisc to me after that people are not abusing the system that we've tried to do that with fourteen fourteen right no i don't believe that's what they tried to do with fourteen fourteen and even if the state has a legitimate purpose its means to accomplish that purpose has to be constitutionally sound which to start with the minute reverses promise or email which your opponent has leaned so well the best example of how this is mandatory is that under the medical assistance act all s s i recipients automatically eligible for medical assistance therefore social security administration makes a determination that an individual is eligible for s s i under its rules then that individual is automatically eligible for medical assistance and no state regulation can be applied to that individual to deprive him have his rights to medical assistance and that's the holding in her with the first is ready answer if you would the language argument that your colleague has put forth he said the  specific language of the statute at the outset that that introductory language indicates that subsection b is not meant to be speak of the language that he's if you would well i'm not sure exactly sure how he's construing the language but it's clear that thirteen ninety six eighteen has been construed by the supreme court in the albert case to be mandatory that it requires the states to apply thirteen ninety six p diddy and thirteen ninety six p d d says for purposes of an individual's eligibility for the amount of benefits under state plan subject to paragraph four the rosen paragraph three shall apply to such individual and paragraph four says this this subsection shall not apply their language cannot be any mandatory and that it shall not apply and so the question if you're going to analyze that too under the one nine hundred eighty three framework the issue is whether this confers privately enforceable rights under nine hundred eighty three and it's clear if you applied a blessing test that the language focuses on the plaintiffs class disabled individuals what do you make of the fence or its decision  mandatory and only simply acknowledge that they were bound by the if the earlier panel decision and keith versus reserved oh and it's important to note that a subsequent district court in the tenth circuit in the  analyzed this language and relying on the language and hobbs found that the one confers privately enforceable rights and his subsequent district court decision in the eighth circuit  no more restrictive requirements to apply to forty forty well i think that's clearly erroneous there's absolutely no authority under the medical assistance act to say that thirteen ninety six  c i three is not mandatory or that thirteen ninety six are too is not mandatory there's absolutely no authority for that position or if we were to conclude that there are no more restrictive requirements do not  automatically eligible for medical assistance so and because the compatibility requirements apply to the medically needy which states that the methodology applied to the medical no more restrictive than the methodology applied to the s s i recipients i just don't see how the state's regulation in any way can be applied constitutionally without the priming the individual's rights to medical assistance in this case guidelines about how money can be spent that it certainly can't be viewed as contrary to the will of congress for the state to be watching out for rich people you know use this as to buy land  expensive luxury goods or something like that absolutely but that there's absolutely no no evidence in the record to suggest anything to support that position and i would point out that that when when when i'm not talking about this is just purely a question of statutory interpretation of i understood mr meehan's argument look even if this is mandatory there's there is room for the state to have in place mechanisms to screen for abuses of the system those the language of the statute doesn't allow us to just lay down and let people roll over with whatever they want that mechanism is already in place without section fourteen fourteen the general law of trust in pennsylvania gives anybody with an interest and i would say that the state's interest is one of the statutory creditor to ensure that aid trustee does not breach their fi duties aren't you kind of given the store away go there if you say if you acknowledge that that in fact that is something the state can do what's the basis for your complain about the state saying in fourteen fourteen you know we can we can screen for special needs here we can take a look at that well because the statute expressly prohibits that statute requires the individual to be only disabled within the meaning of th i provisions the states in order to accomplish what the state wants to do in in screening out for for individual special needs they would have to they would have to make a determination of the nature and severity of an individual's disability and and how the disability is expected to progress the life expectancy of an individual according to his  disability whether there are special needs specific services available to assist an individual that disability the regime suggested by the state in order to screen out these individuals is completely unworkable even if we simply talking about line drawing as to just what the state through the attorney general can do in that rule traditionally and what it can yes it's the line drawn by the constitution which requires the exercise of state authority to not it deprive individuals of their rights privileges and immunities under the constitution or the federal laws and they cannot stand is an obstacle to the full to the accomplishment and execution of for purposes of congress of course it would be part of the attorney general rule in representing the state in its parents career capacity to enforce and apply those various constitutional yes but you know i can point out i mean you talk about the age requirement what legitimate state interest does the state have to prohibit an individual over the age of sixty five from establishing a trust what is the legitimate state interest what about the have a whole variety of tools that are already in place and to treat it traditional trust lawful is a good way to account is no body of federal trust in a state's law but it's totally unnecessary in order to protect the state's interests in this case and i have an example of a comprehensive regulatory stature in pennsylvania which specifically governs pool trusts and i brought copies to hand up to you so that you can take it with you when you go after argument and that it's clear that the state's interests in regulating trusts in this fashion are perfectly constitutional and it takes into effect all of their legitimate state interest in contrast fourteen fourteen were specifically intended it was drafted in conceived by d p w to speak specifically to limit the kinds of individuals that can benefit from these poll trusts in complete conflict with the federal statute itself  m the fifty percent pay back provision pretty interesting because what this what the state of the state receives significant from from the federal government but the state taxpayers pay quite a bit of the funding for the disabled about that well only that did it i think it raises the substantial obstacles to the four purposes and an object as of congress what congress recognize that not for profit associations in these pool trust function and serve the public interest they specifically just as they do under the tax laws specifically conferred a privilege on these not for profits to retain whatever monies they want to retain and there's no requirement that they retain one hundred percent and in fact there are six pool trusts in pennsylvania that do not retain one hundred percent they retain nothing but but congress recognized that these individuals these associations do serve the public interest and to allow them to retain up to four hundred percent of the money i believe serves the intent and objectives of congress to allow those non profits to help other disabled individuals which in fact also serves to defray cost to the taxpayer for these disabled question the congress he anticipates that some of the remainder would be paid over to the state only to the extent that it wasn't retained by the not for profit who makes that decision congress made that decision who makes a decision what would be paid to the state would be kept in the pool well if the not for profit structures its trust to retain fifty percent as as their policy then they would retain fifty percent and the it's clear in this circuit the laws on a case st john's st thomas st john's clearly states that the preemptive federal statute does not have to create rights in order to give rise to a cause of action directly under the supremacy clause and in this case i would respectfully submit that this to preempt a federal statute certainly do confer rights it's not just thirteen ninety six p d that were relying on this the  case to create rights that are in forcible under nine hundred eighty three it's not just thirteen ninety six p diddy which confers these and forcible rights and i would also like to say in answer to the court's question that the state has retained its a historical starting to regulate trusts but only up to the line drawn by the constitution is there a  is there any legitimacy to the state's expressed concern that the interpretation that you're you're processing office opened the door fraud and abuse the power of the bill gates example absolutely not it just defies logic and human behavior why why because if an individual has a substantial amount of money why would they turn over the money to a special needs trust which at the end of the day has to be fully repaid to th there's a four pay back requirement under the pay back provisions and the examples that the state has used to raise the specter here are not pooled trusts which are small amounts of money they're paid back trusts and the state has only described two which should not lead this court to believe that they're anything other than anomal s and i would like to further say that there are up there are a any number of constitutional means to address the concerns that the state has such as requiring the trustees to be bonded and imposing and in fact under the poor trust act it provides that distributions have to be in the best interest of the individual which is a traditional trust law fiduciary duty you're honest would you like copies and we haven't that we think that's why she got it you know the concession that that mr sullivan said the general trust law can regulate these trusts i'm not sure and you know the just report made that observation it's opinion that the statutes not the general trust law i'm not sure where it where we have a line would be i would point out that the statute that mr feldman wanted to hand up to the court contains the fifty percent limitation and the reasonable relationship limitation that are in fourteen fourteen so i'm not sure what the point of handing that such it up to the court is other than the legislature wrote the restrictions once it's a general trust law another into fourteen fourteen i do want to make make one one one point and you can take this as you will you know this is lady  d michigan who who won the lottery and has remained on food stamps got a lot of publicity and for some reason people get really mad at that they get madder at that than they do and at the wall street stop and as a result states are going around and putting on acid tests for food stamps makes no economic sense really it's one hundred percent federally funded doing push people i met and i'm telling you as i gave in the record and i approve these trusts i prove four or five of them a week i get million dollar trust several times a month i've given you a nine million dollar trust i've given you a fifteen million dollar trust the record shows that that individual in this is in the records he says it isn't but it is it is in the record that people have come to these these these pool trusts th have one but the end is it when you write an opinion that says that we that we can't force them to say no they're going to have to say yes what's the what's the response that you yourself say which is