Case4:09-cv-02307-PJH Document1 Filed05/26/09 Page1 of 11

1 LYNN S. CARMAN, State Bar 028860 Medicaid Defense Fund
2 28 Newport Landing Dr. Novato, CA 94949-82 14
3 Telephone: (4 15) 927-4023 Facsimile: (4 15) 499-1687
4 Email: lynnscarman@hotmail.com

5 Attorney for Plaintiffs Gray Panthers of San Francisco
6 and Mark Beckwith
7

E-filing

8

IN THE UNITED STATES DISTRICT COURT

9

NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION

10

~v

11 THE GRAY PANTHERS OF SAN

FRANCISCO, a nonprofit corporation,

12 and MARK BECKWITH,

13 -vs.-

Plaintiffs,

14 ARNOLD SCHWARZENEGGER, Governor
15 of State of California; KIM BELSHE, Secretary of Health and Human Services Agency of the
16 State of California; DAVID MAXWELL-
17 JOLLY, Director of Department of Health Care Services ofthe State of California; JOHN
18 CHIANG, Controller of State of California; BILL LOCKYER, Treasurer of State of
19 California; and MICHAEL E. GENEST, Director of Finance of the State of
20 California, _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _~D~e£~e~nd~a~n~ts~._________1
21

09 230' Civil Case No.
COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

22

23

COMPLAINT FOR INJUNCTIVE AND DECLARATIVE RELIEF

24

Case4:09-cv-02307-PJH Document1 Filed05/26/09 Page2 of 11

California. Under § 12320 Govt. Code all moneys of the State are received and kept

2 by the Treasurer, and under § 12324 Govt. Code, the Treasurer may only payout State

3 monies upon warrants drawn by the Controller. The Treasurer is sued in his official

4 capacity, only.

5

10. The defendant MICHAEL E. GENEST is the Director of Finance of the

6 State of California. The Director of Finance is authorized by § 13300 Govt. Code to

7 supervise the accounts of each department of the State, and may, by certain

8 statutes made and provided therefore, veto certain expenditures of the State.

9

Standinl

10

11. The SF Gray Panthers have a membership of approximately 150, and

11 work in coalition with other groups on senior health, housing, social justice, and

12 war/peace issues. The membership of the SF Gray Panthers is predominantly over the

13 age of65.

14

12. A primary function and purpose of the SF Gray Panthers is to advocate

15 and advance the health care and the health care rights and civil rights of its members,

16 - most of whom are on Medicare, with approximately 10%, or at least 15, who are

17 beneficiaries of the state-federal funded Medicaid program (called "Medi-Cal" in

18 California), either in the Medi-Cal fee-for-service program or the Medi-Cal managed

19 care program, as the case may be.

20

Prudentialjus tertii suit by the plaintiff SF Gray Panthers

21

12. In each of the Claims for Reliefin this Complaint, the plaintiff SF Gray

22 Panthers sue on its own behalf and in a prudential jus tertii capacity to assert,

23 respectively, the interests of its respective members who are beneficiaries of the Medi-

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1 Cal fee-for-service program as well as those of its respective members who are

2 beneficiaries in the Medi-Cal managed care program, to obtain injunctive and

3 declaratory relief from and in respect to injury threatened injury by the State action

4 complained of.

5

FIRST CLAIM FOR RELIEF

6

For injunction a&ainst State action. preempted under the Supremacy

7

Clause, which threatens injury.

8

13. Plaintiffs refer to the allegations in each of the preceding Paragraphs

9 and incorporate each ofthe said allegations as if fully set forth herein.

10

14. As of July 1,2008 and presently, California's state Medicaid plan which

11 is required by the Medicaid Act, (42 U.S.C. 1396a) to be filed with and approved by

12 the Secretary of the U.S. Department of Health and Human Services, (the "State

13 Medicaid plan") included and includes the following benefits and services which are

14 optional and are not mandatory under the Medicaid Act to be provided by a State, in

15 its State Medicaid plan, as a minimum condition for the State to participate in the

16 Medicaid program, and thereby to receive federal funds specified by the Medicaid

17 Act, (called the "federal medical assistance percentage," or "FMAP"), for such

18 participation by the State in the Medicaid program of the Medicaid Act:

19

1. Adult dental services, (except medical and surgical services which, if

provided by a physician, would be considered physician services),

20

2. Acupuncture services,

21

3. Audiology services, 4. Speech therapy services,

22

5. Chiropractic services,

6. Optometric and optician services,

23

7. Podiatric services,

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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8. Psychology services, and, 9. Incontinence creams and washes,
2
3 (herein, "the 9 optional services").

4

15. However, California Welfare & Institutions ("WI") Code § 14131.10

5 (which statute was enacted and became in effect on March 3,2009 by California

6 Assembly Bill ("AB") X3 5, chaptered as Chapter 20, California Statutes 2009-2010),

7 eliminated the 9 optional benefits, effective July 1,2009.

16. However, on February 17, 2009, Congress enacted the American
8
9 Revoery and Reinvestmant Act of 2009, (public Law 111-5), (herein, the "Stimulus

Act"), in which: 10

11

- (1) § 5000, subd. (a), provides as follows:

12

"(a) PURPOSES.~The purposes of this title are as follows:

13

(1) To provide fiscal relief to States in a period of economic downturn.

14

(2) To protect and maintain State Medicaid programs during a period of

15

economic downturn, including by helping to avert cuts to provider payment

16

rates and benefits or services ... "

17

18 - (2) § 5001, subds. (a), (b), (c) provide that the Federal medical
19
assistance percentage ("FMAP"), as defined in § 1905(b) Social Security Act (42
20
U.S.C. 1396(b), shall be temporarily increased to 67% for the duration of the period
21 beginning on October 1, 2008 and ending on December 31, 2010, (the "recession
22 adjustment period"); such that thereby the federal government now contributes $2 to
23

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1 every $1 a State expends for health care services (called "medical assistance") to

2 qualified Medicaid beneficiaries, under the State's Medicaid plan filed with the

3 Secretary of U.S. Department of Health and Human Services, during the recession

4 adjustment period, compared to the FMAP of only $1 to every $1 similarly expended

5 by a State before the Stimulus Act was enacted.

6

- (3) § 5001, subd. (t)(l)(A) provides:

7

"STATE INELIGIBILITY; LIMITATION; SPECIAL RULES.-

8

"(t) STATE INELIGIBLITY; LIMITATION; SPECIAL RULES.---

9

(l) MAINTENANCE OF ELIGIBILITY REQUIREMENTS.---

10

(a) IN GENERAL.- [A] State is not eligible for an increase in

its FMAP under subsection (a), (b), or (c), ... if eligibility standards,

11

methodologies, or procedures under its State plan under title XIX of the Social

12

Security Act (including any waiver under such title or under section 1115 of such Act (42 U.S.C. 1315) are more restrictive than the elegibility standards,

13

methodologies, or procedures, respectively under such plan (or waiver) as in

effect on July 1, 2008." (Boldface emphasis supplied.)

14

and, 15

- (4) § 5001, subd. (t)(3) provides:

16

"STATE'S APPLICATION TOWARD RAINY DAY FUND.-A State is not

17

eligible for an increase in its FMAP under subsection (b) or (c) ... if any

18

amounts attributable (directly or indirectly) to such increase are deposited or credited into any reserve or rainy day fund of the State."

19 17. The extra federal FMAP amounts paid to states, including California,
20 under the foregoing §§ 5000-5001 of the Stimulus Act are know as "Stimulus funds."
21
18. The State of California has elected to receive Stimulus Funds under the 22
Stimulus Act in respect to its expenditures of State funds pursuant to and under the 23
State Medicaid plan of the State of California in and by which the State of California 24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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participates in the state-federal Medicaid program, under the Medicaid Act.

2

19. However, despite each and all of the provisions of Stimulus Act which

3 are set forth in the prior Paragraph 16 of this Complaint, (namely, § 5000, and subds.

4 (a),(b),(c), and (f)(1)(A), and (f)(3) of the Stimulus Act), each of the defendant State

5 officials has adopted a policy, intends, and will unless restrained by the Court,

6 implement the elimination of the 9 optional Medicaid services (as enacted by the state

7 statute, WI Code § 14131.10, by AB X3 5), by refusing to pay for any of the 9

8 optional Medicaid services which are furnished on or after July 1,2009, even though

9 the refusal of the defendants to use any savings to the State from the extra FMAP

10 payments to pay for the continuation of the 9 optional Medicaid services:

11

- (1) violates the express and implied duty, imposed by the State accepting

12

extra FMAP payments for the express purpose under § 5000 of the Stimulus

13

Act of:

14

- enabling the State to protect and maintain its Medicaid program at the

15

same level and inclusions of services as existed on July 1, 2008, and,

16

17

- enabling the State to avert cuts to Medicaid benefits or services;

18

19

- (2) violates the express prohibition ofsubd. (f)(1)(A) of the Stimulus Act,

20

against restricting "procedures," (Le., against restricting services), in the State's

21

Medicaid program to less than were in effect on July 1, 2008; and,

22

23

- (3) violates the express prohibition of subd. (f)(3) of the Stimulus Act not to

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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indirectly deposit or credit into any reserve or rainy day fund any amount

2

attributable to the extra FMAP payments, (here, the savings from the extra

3

FMAP funds which sink unidentified into the General Fund of the State of

4

California, for use by the Legislature as a real but unidentified source of funds

5

for non-Medicaid purposes);

6 such that therein and thereby, the policies and actions of each of the defendant State

7 officials which are alleged in this Paragraph 19, constitute and comprise State action

8 which is in violation of, hence preempted, under the Supremacy Clause, by § 5000 and

9 subds. (a),(b) and (c), and subd. (t)(l)(A), and (t)(3) of § 5001 of the Stimulus Act,

10 and defeat and prevent wholly and in substantial part the full accomplishment of the

11 purposes of Congress in enacting these provisions of the Stimulus Act.

12

20. Further, hundreds of thousands of Medi-Cal beneficiaries, including the

13 plaintiff MARK BECKWITH, and the 15 members of the plaintiff SF Gray Panthers

14 who are beneficiaries in the Medi-Cal fee-for-service and managed care programs,

15 will suffer injury and be threatened with injury by reason and cause of the preempted

16 acts of the defendant State officials which are alleged in Paragraph 19, by being

17 denied by defendants and being unable to obtain any of the 9 optional services for:

18

- (l) treatment and cure of, and relief of pain and suffering from, injury,

19

diseases and conditions of their teeth, mouth, jaws, ability to eat, and facial

20

appearance (dentistry); bodily functions and health (acupuncture and

21

chiropractic services); hearing (audiology); speech (speech therapy); sight

22

(optometric and optician services); feet (podiatry); mental health (psychology);

23

and,

24

COMPLAJNT FOR INJUNCTIVE AND DECLARATORY RELIEF

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- (2) treatment and relief of pain and suffering from incontinence,

2

(incontinence creams and washes);

3 which injuries are irreparable and inexcusably insufferable in their nature and

4 character.

5

21. Also, the plaintiff SF Gray Panthers will also be irreparable injured by

6 the aforesaid preempted State action of the defendant State officials, from interference

7 with the ability of the SF Gray Panthers to obtain, on behalf of its members, adequate

8 health care, due to the elimination of the aforesaid 9 optional Medicaid services by the

9 defendants.

10

22. Plaintiffs have no plain, speedy, adequate or any relief from the

11 preempted action of the defendant State officials except by the injunctive and

12 declarative relief which is prayed for hereinbelow.

13

23. Plaintiffs have no administrative relief, and any administrative relief

14 which may be available to them is futile.

15

WHEREFORE, each of the plaintiffs respectfully pray for judgment as shall be

16 hereinafter specified:

17

SECOND CLAIM FOR RELIEF

18

For declaratory relief in respect to State action. preempted under the

19

Supremacy Clause, which threatens injury

20

24. Plaintiffs refer to the allegations in each of the preceding Paragraphs

21 and incorporate each of the said allegations as if fully set forth herein.

22

25. Pursuant to each and all of the facts alleged in the preceding Paragraphs

23 of this Complaint, there exists an actual controversy between the plaintiffs and each

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1 of the defendants, in respect to which the plaintiffs request a declaration of the

2 respective rights and duties of defendants to the plaintiffs, as set forth in the Prayer to

3 this Second Claim for Relief.

4

26. Plaintiffs have no plain, speedy, adequate or any relief from the

5 preempted action of the defendant State officials except by the declarative relief

6 which is prayed for hereinbelow.

7

27. Plaintiffs have no administrative relief, and any administrative relief

8 which may be available to them is futile.

9

WHEREFORE, the plaintiffs respectfully pray for judgment as follows:

l O O n All Claims for Relief:

11

1. That plaintiffs have judgment against each and all of the defendants, and

12 that the defendants take nothing.

13

On the First Claim For Relief:

14

2. That the Court find that MARK BECKWITH, the plaintiff Medi-Cal

15 beneficiary, and the 15 members of the plaintiffGRAY PANTHERS OF SAN

16 FRANCISCO ("SF Gray Panthers") who are Medicaid beneficiaries, will be injured

17 and are threatened with injury, which is irreparable, from State action by each and all

18 of the defendant State officials which is contrary to, hence preempted under the

19 Supremacy Clause, by a contrary federal statute, (to wit, Section 5000, and subds.

20 (a),(b),(c) and (f)(l)(A) and (f)(3) of Section 5001 of the American Recovery and

21 Reinvestment Act of 2009, (the "Stimulus Act"); and that the plaintiff SF Gray

22 Panthers will also be irreparable injured by the aforesaid preempted State action of the

23 defendant State officials, from interference with the ability of the SF Gray Panthers to

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1 obtain, on behalf of its members, adequate health care;

2

3. That the defendants and each of them be ordered by a temporary

3 restraining order, preliminary injunction, and permanent injunction, to refrain from

4 implementing California Welfare & Institutions Code § 141131.10, or any provision

5 of Assembly Bill X3 5, (chaptered as Chapter 20, California Statutes 2009-2010),

6 enacted and eff. March 3, 2009, including but not limited to refraining from

7 implementing their policy and policies to eliminate the 9 optional Medicaid services,

8 either on July 1, 2009 or at any other time or times whatsoever or at all; which 9

9 optional Medicaid services are, without limitation thereby:

10

1. Adult dental services, (except medical and surgical services which, if

provided by a physician, would be considered physician services),

11

2. Acupuncture services,

12

3. Audiology services, 4. Speech therapy services,

13

5. Chiropractic services,

6. Optometric and optician services,

14

7. Podiatric services,

8. Psychology services, and,

15

9. Incontinence creams and washes;

16 t}r that, in lieu of compliance with the said order, that the defendant State officials ' 17
notifY the Secretary of the U.S. Department of Health and Human Services that the 18 State of California (1) will no longer accept any extra FMAP payments under the 19 Stimulus Act, and (2) will return to the federal government all the extra FMAP
20
payments which the State of California has received from the federal government, at a 21 ratio of $2 federal money for every $1 of state money expended to furnish services to 22
Medi-Cal beneficiaries in the State of California's State Medicaid plan. 23

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1

On the Second Claim for Relief:

2

4. That if and only if the Court denies injunctive relief, and to the extent

3 that the Court does not grant injunctive relief, that the Court nevertheless issue its

4 declaratory judgment in which it finds and adjudicates the rights and duties of the

5 parties to be as set forth in Paragraph 2 ofthis Prayer for Relief.

6

On all Claims for Relief:

7

4. That plaintiffs have their costs of suit herein incurred, together with

8 such attorneys' fees as may be according to law, together with such other and further

9 relief as may be just.

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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 Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page1 of 19

1 LYNN S. CARMAN, State Bar 028860 Medicaid Defense Fund
2 28 Newport Landing Dr. Novato, CA 94949-8214
3 Telephone: (415) 927-4023 Facsimile : (415) 499-1687
4 Email: lynnscarman@hotmail.com

5 JESSIE M. SANDOVAL, State Bar 256757 601 Van Ness Ave., Suite E3-140
6 San Francisco, CA 94102 Telephone: (415) 595-0763
7 Facsimile: (510) 528-3381 Email: sandovaljm@aol.com
8 Attorney for Plaintiffs
9 Gray Panthers of San Francisco; Mark Beckwith;
California Foundation for Independent Living
10 Centers; Independent Living Centers of
Southern California, Inc.; LifeLong Medical
11 Care; and Margaret Dowling

12

IN THE UNITED STATES DISTRICT COURT

13

NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION

14 THE GRAY PANTHERS OF SAN

FRANCISCO, a nonprofit corporation; MARK 15
BECKWITH; CALIFORNIA FOUNDATION

16 FOR INDEPENDENT LIVING CENTERS,

INC., a nonprofit corporation; INDEPENDENT 17 LIVING CENTER OF SOUTHERN

18 CALIFORNIA, INC., a nonprofit corporation; LIFELONG MEDICAL CARE, a nonprofit

19 corporation; and MARGARET DOWLING,

20 -vs.-

Plaintiffs,

21 ARNOLD SCHWARZENEGGER, Governor of State of California; KIM BELSHE, Secretary of
22 Health and Human Services Agency of the State of

California; DAVID MAXWELL-JOLLY, Director 23
of Department of Health Care Services of the

24 State of California; JOHN CHIANG, Controller of

State of California; BILL LOCKYER, Treasurer 25 State of California; and MICHAEL E. GENEST,

26 Director of Finance of the State of California,

Defendants.

/

No. C-09-02307 EMC
.
FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page2 of 19

1

The plaintiffs, THE GRAY PANTHERS OF SAN FRANCISCO; MARK

2 BECKWITH, CALIFORNIA FOUNDATION FOR INDEPENDENT LIVING

3 CENTERS; INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.;

4 LIFELONG MEDICAL CARE, and MARGARET DOWLING, complain of defendants

5 and each of them and for claims for relief alleges as follows:

6

PRELIMINARY

7

Jurisdiction

8

1. The above-entitled Court has jurisdiction under 28 U.S.C. § 1331.

9 Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 (1983).

10

Intradistrict Assignment and Venue

11

2. The actions and failures to act of the defendants which are complained

12 of, and the injuries to the members of the plaintiff The Gray Panthers of San Francisco

13 have and will continuously occur in the City and County of San Francisco, State of

14 California. Also, the defendant Governor and the Attorney General of the State of

15 California each have offices in San Francisco, California. .

16 Parties
17 3. (a) At all times the plaintiff, The Gray Panthers of San Francisco ("SF Gray
18 Panthers”) was and is a California nonprofit corporation which was and is duly organized
19 and incorporated in California on August 28, 1978, pursuant to General Nonprofit
20 Corporation Law of the State of California.
21 (b) Plaintiff has its principal office and place of business in, and does
22 business, in the City and County of San Francisco, California.
23 4. The plaintiff Mark Beckwith is a Medicaid beneficiary who resides in
24 Berkeley, California.
25

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1

5. The plaintiff California Foundation for Independent Living Centers

2 (“CFILC”), was and is a California nonprofit public benefit corporation, whose principal

3 place of business is in the County of Sacramento, California.

4

6. The plaintiff, Independent Living Center of Southern California, Inc.,

5 (“ILC”), was and is a nonprofit corporation duly organized and incorporated in California,

6 whose offices are located in Van Nuys, Santa Clarita, and Lancaster, California.

7

7. (a) The plaintiff LifeLong Medical Care, (“LifeLong Care”), was and is a

8 California nonprofit corporation whose offices are located in Berkeley, Oakland, and

9 Novato, California.

10

(b) LifeLong Care is a community health center organization with nine

11 clinics in Berkeley, Oakland, and Novato, California.

12 `

8. The plaintiff Margaret Dowling is a Medicaid beneficiary who resides in

13 Pittsburg, California.

14

9. The defendant Arnold Schwarzenegger is the Governor of the State of

15 California. His duties under California Government (“Govt.”) Code §§ 12010, 12011 are

16 to supervise all executive and administrative officers of the State of California and see that
17 their official duties are performed. The Governor has an office in San Francesco,
18 California. This defendant is sued in his official capacity, only.
19 10. The defendant Kim Belshe (“Secretary”) is Secretary of the Health and
20 Human Services Agency (“Agency”) of the State of California. The Agency, by § 12801
21 Govt. Code, is under the supervision of the Secretary, and the Department of Health Care
22 Services is within and subordinate to the Agency. This defendant is sued in her official
23 capacity only.
24 11. (a) The defendant David Maxwell-Jolly ("Director") is the director of the
25

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1 Department of Health Care Services (“Department”) of the State of California. The

2 Director is exclusively empowered by §§ 14000.1 and 14105 Welf. & Inst. Code to

3 exclusively set all policies, rules, regulations, and provider payment rates in the state-

4 federal Medicaid program in California, which operates under the Medicaid Act, Social

5 Security Act § 1901 et seq., (42 U.S.C. 1396 et seq.).

6

(b) This defendant is sued in his official capacity, only

7

(c) Plaintiffs are informed and believe and based on such belief allege that

8 the Director has an office in the City and County of San Francisco.

9

12. The defendant John Chiang is the Controller of the State of California. The

10 Controller, by § 12410 Govt. Code, superintends the fiscal concerns of the State of

11 California. Under California Constitution, article XVI, section 7, money may be drawn

12 from the Treasury of the State only upon the Controller's duly drawn warrant. The

13 Controller is sued in his official capacity, only.

14

13. The defendant Bill Lockyer is the Treasurer of the State of California.

15 Under § 12320 and 12324 Govt. Code, the Treasurer receives and keeps all moneys of the

16 State of California, and may only pay out State monies upon warrants drawn by the

17 Controller. The Treasurer is sued in his official capacity, only.
18 14. The defendant Michael E. Genest is the Director of Finance of the State of
19 California. The Director of Finance is authorized by § 13300 Govt. Code to supervise the
20 accounts of each department of the State, and may, by certain
21 statutes made and provided therefore, veto certain expenditures of the State.
22 Standing
23 Medicaid beneficiaries
24 15. The plaintiffs Beckwith and Dowling are Medicaid beneficiaries.
25

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1

SF Gray Panthers

2

16. The plaintiff SF Gray Panthers have a membership of approximately 150,

3 and work in coalition with other groups on senior health, housing, social justice, and

4 war/peace issues. The membership of the SF Gray Panthers is predominantly over the age

5 of 65.

6

17. A primary function and purpose of the SF Gray Panthers is to advocate and

7 advance the health care and the health care rights and civil rights of its members, – most of

8 whom are on Medicare, with approximately 10%, or at least 15, who are beneficiaries of

9 the state-federal funded Medicaid program (called “Medi-Cal” in California), either in the

10 Medi-Cal fee-for-service program or the Medi-Cal managed care program, as the case may

11 be.

12

LifeLong Care

13

18. The plaintiff LifeLong Care is a community health center organization with

14 nine service sites in Berkeley, Oakland, and Novato. LifeLong provides a comprehensive

15 array of health care services including primary medical care, geriatric care, dentistry,

16 podiatry, optometry, and mental health services.
17 19. LifeLong Care provides approximately 12,000 dental visits per year of
18 which approximately 3,500 are provided to 1,300 adults covered by Medicaid. LifeLong
19 Care operates a 10 operatory dental clinic for low income patient and also provides dental
20 services to homeless persons in cooperation with the Alameda County Health Care for the
21 Homeless program. LifeLong Care also provides approximately 4,000 podiatry visits to
22 adults covered by Medicaid, and 700 optometry visits per year to 1,600 adults covered by
23 Medicaid, and 700 optometry visits to adults who are covered by Medicaid, annually.
24

25

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1

The ILC

2

20. (a) The ILC is a designated center for independent living (“CIL”). CILs are

3 community-based organizations established under the California Rehabilitation Act, (§

4 19800 California Welfare & Institutions (“Welf. & Inst.”) Code to advocate and provide

5 services to enable people with disabilities to achieve independence, including equal access

6 to society and all activities of society; which includes assisting them to find and maintain

7 providers for their health care.

8

(b) The ILC serves over 7,500 clients with disabilities who are categorically

9 linked to Medicaid for their health care coverage, because they are poor SSI beneficiaries

10 under the Social Security Act. Many of these 7,500 Medicaid beneficiaries require and

11 use the 9 Medicaid services which Welf. & Inst. Code § 14131.10 will eliminate from

12 Medicaid coverage on and after July 1, 2009.

13

The CFILC

14

21. (a) The CFILC is a nonprofit corporation in Sacramento, California, which

15 is made up of 25 members throughout California, each of which is a designated center for

16 independent living established under the California Rehabilitation Act, to advocate and
17 provide services to enable people with disabilities to achieve independence, including
18 equal access to society and all activities of society; which includes assisting them to find
19 and maintain providers for their health care.
20 (b) The members of CFILC serve over 330,000 clients with disabilities
21 annually, most of whom are Medicaid beneficiaries. Many of these Medicaid
22 beneficiaries served by the members of the CFILC require and use the 9 Medicaid services
23 which Welf. & Inst. Code § 14131.10 will eliminate from Medicaid coverage on and after
24 July 1, 2009.
25

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1

Prudential jus tertii suit by the plaintiff SF Gray Panthers

2

22. In each of the Claims for Relief in this Complaint, the plaintiffs SF Gray

3 Panthers, LifeLong Care, ILC, and CFILC sue, respectively, on its own behalf and in a

4 prudential jus tertii capacity to assert, respectively, the interests of its members, clients, or

5 patients, as the case may be (and in the case of the CFILC, also on behalf of the Medi-Cal

6 beneficiaries who are clients of the members of the CFILC), to obtain injunctive and

7 declaratory relief from and in respect to injury threatened to them by the State action

8 complained of.

9

23. As of July 1, 2008 and presently and continuing, California's state Medicaid

10 plan includes the following benefits and services which are optional, and are not

11 mandatory to be provided by a State, in its state Medicaid plan, as a minimum condition

12 for the State to participate in the Medicaid program of 42 U.S.C. § 1396 and to, thereby,

13 receive federal funds as medical assistance specified by the Medicaid Act, (called the

14 “federal medical assistance percentage,” or “FMAP”), for such participation by the State

15 in the Medicaid program of the Medicaid Act:

16 1. Adult dental services, (except medical and surgical services which, if

17 provided by a physician, would be considered physician services),

2. Acupuncture services,

18

3. Audiology services,

19

4. Speech therapy services,

5. Chiropractic services,

20

6. Optometric and optician services,

7. Podiatric services, 21
8. Psychology services, and,

22

9. Incontinence creams and washes,

23 (herein, “the 9 Medicaid services”).

24

24. However, on February 17, 2009, Congress enacted the American Recovery and

25 Reinvestment Act of 2009, (Public Law 111-5; Page 123, Stat. 115), (the “Stimulus Act”), in

26 ___________________________________________________________________________

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1 which the following provisions of Title V, Division B of the Stimulus Act provide:

2

- (1) “SEC. 5000. PURPOSES; . . .

(a) Purposes,–The purposes of this title are as follows:

3

(1) To provide fiscal relief to States in a period of economic downturn.

4

(2) To protect and maintain State Medicaid programs during a period of

economic downturn, including by helping to avert cuts to provider payment

5

rates and benefits or services . . . ”

6

- (2) § 5001, subs. (a), (b), (c) provide that the FMAP, – as defined in § 1905(b)

7 Social Security Act, 42 U.S.C. § 1396d(b), – in a State shall be temporarily increased

8 during the recession adjustment period of October 1, 2008 through December 31, 2010, by

9 at least 6.2%, – with an additional increase for a State of up to 17.7% depending upon the

10 increase in unemployment in a State during this period.

11 - (3) § 5001, subd. (f)(1)(A) provides:

12 “(f) State Ineligibility; Limitation; Special Rules.--

13 (1) Maintenance of eligibility requirements.--

14

(A) In general.– . . . [A] State is not eligible for an increase in its FMAP

15

under subsection (a), (b), or (c), . . . if eligibility standards, methodologies, or

procedures under its State plan under title XIX of the Social Security Act 16
(including any waiver under such title or under section 1115 of such Act (42

17 18 19 and,

U.S.C. 1315)) are more restrictive than the eligibility standards, methodologies, or procedures, respectively, under such plan (or waiver) as in effect on July 1, 2008.” (Boldface emphasis supplied.)

20

- (4) § 5001, subd. (f)(3) provides:

21

“State's application toward rainy day fund.–A State is not eligible for an

increase in its FMAP under subsection (b) or (c) . . . if any amounts attributable

22

(directly or indirectly) to such increase are deposited or credited into any reserve

23

or rainy day fund of the State.”

24

25. The extra federal FMAP amounts paid to states, including California, under

25 the foregoing §§ 5000-5001 of the Stimulus Act, shall be referred to as “enhanced FMAP

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page9 of 19

1 funds.”

2

26. §§ 5000 - 5008 of Title V, Division B of the Stimulus Act shall sometimes be

3 referred to in this First Amended Complaint as the “Enhanced FMAP Measure.”

4

27. The State of California has elected to receive enhanced FMAP funds under

5 the Enhanced FMAP Measure of the Stimulus Act in respect to its expenditures of State

6 funds under the State Medicaid plan in and by which the State participates in the Medicaid

7 program, under the Medicaid Act.

8

28. Under and by virtue of Enhanced FMAP Measure, the increased FMAP for

9 the State of California for the 18-month recession adjustment period October 1, 2008

10 through December 31, 2010, is 61.59%; and both the defendant Director of Finance and the

11 defendant Director of DHCS have publicly so announced.

12

29. Further, in view of the fact that annual cost is only $124.6 million in State

13 funds to furnish the 9 Medicaid services, the annual savings to the State from the enhanced

14 FMAP funds under the Enhanced FMAP Measure of the Stimulus Act, – which annual

15 savings to the State is estimated by the defendant Director of Finance to be $6.6 billion

16 during the fiscal years 2008-09 and 2009-10, – vastly exceed the annual costs to the State

17 of California to continue the 9 Medicaid services for the unexpired 18-months remainder of

18 the recession adjustment period which ends December 31, 2010.

19

30. By the express provisions of Congress in the purposes clause of § 5000 of the

20 Enhanced FMAP Measure, which provide that the purposes of the Enhanced FMAP

21 Measure is:

22

“(2) To protect and maintain State Medicaid programs during a period of economic

23

downturn, including by helping to avert cuts to provider payment rates and benefits

24

and services,”

25 the acceptance by the State of the enhanced FMAP funds of the Enhanced FMAP Measure

26 ___________________________________________________________________________

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page10 of 19

1 was and is and subject to an express and implied requirement imposed by Congress, in the

2 purposes clause of §5000 of the Enhanced FMAP Measure: namely, that the State shall

3 protect and maintain the State's Medicaid program including averting cutting any services,

4 (at least, so long as the State enjoys savings from receipt of the enhanced FMAP funds

5 which exceed the cost of the Medicaid services it proposes to cut).

6

FIRST CLAIM FOR RELIEF

For injunction against each defendant, to enjoin State action preempted 7
under the Supremacy Clause, which threatens injury, (e.g., violation

8

of the purposes clause of § 5000(a), Title V, Division B, of the Stimulus

Act). 9

31. Each of the plaintiffs refer to the allegations in each of the preceding 10

Paragraphs, and incorporates each of the allegations in the preceding Paragraphs as if fully 11

set forth herein. 12

32. All statutory references are to Title V, Division B, of the Stimulus Act 13

(Public Law 111-5; Page 123, Stat. 115), unless otherwise stated. 14

33. As prior alleged, § 5000(a) provides: 15

“(a) Purposes,–The purposes of this title are as follows: 16
(1) To provide fiscal relief to States in a period of economic downturn.

17

(2) To protect and maintain State Medicaid programs during a period of

economic downturn, including by helping to avert cuts to provider payment

18

rates and benefits or services . . . ”

19 34. However, despite the aforesaid purposes of Congress expressed in § 5000(a),

20 (1) the State has enacted and has not rescinded Welf. & Inst. Code § 14131.10, and

21 (2) each of the defendant State officials has adopted a policy and will, unless restrained by

22 the Court, implement Welf. & Inst. Code § 14131.10 by eliminating and refusing to pay for

23 any of the 9 Medicaid services, for services rendered on or after July 1, 2009; – which state

24 statute and the policies and actions of the defendant State officers constitute State action

25 which is in violation of, hence preempted, under the Supremacy Clause, by the purposes

26 ___________________________________________________________________________

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page11 of 19

1 clause of § 5000(a), (which imposes upon the State and its officers the obligation to protect

2 and maintain the State's Medicaid program by averting cuts to services of the program;

3 especially when in case at bar, the State is enjoying billions of dollars in savings (of at least

4 $3 billion per year) from the enhanced FMAP funds which vastly exceed the State's costs

5 (which are only $129.4 million per year) to continue the 9 Medicaid services in question).

6

35. As a direct result of the aforesaid enactment of the preempted Welf. & Inst.

7 Code § 14131.10, and of the preempted actions of the defendant State officials to

8 implement this preempted State law, the two plaintiffs who are Medicaid beneficiaries, and

9 the Medicaid beneficiaries who are patients, clients, and members of the other plaintiffs,

10 will suffer and are threatened with irreparable injury; all of which is set forth in Paragraphs

11 50-53 of this First Amended Complaint.

12

36. Each of the plaintiffs hereby refer to and incorporate each of the allegations

13 of Paragraphs 50 through 53 of this First Amended Complaint as if fully set forth herein.

14

WHEREFORE, each of the plaintiffs prays for relief as shall hereinafter be

specified: 15

SECOND CLAIM FOR RELIEF

16

For injunction against each defendant, to enjoin State action preempted

under the Supremacy Clause, which threatens injury, (e.g., violation

17

of §§ 5001(f)(3) and 5000(a) of Title V, Division B, of the Stimulus Act).

18

37. Each of the plaintiffs refer to the allegations in each of the preceding Paragraphs,

19 and incorporates each of the allegations in the preceding Paragraphs as if fully set forth herein.

20

38. All statutory references are to Title V, Division B, of the Stimulus Act (Public Law

21 111-5; Page 123, Stat. 115), unless otherwise stated.

22

39. As prior alleged, subd. (f)(3) of § 5001 provides:

23 “A State is not eligible for an increase in its FMAP under subsection (b) or (c),

24

. . . if any amounts attributable (directly or indirectly) to such FMAP increase are

deposited or credited into any reserve or rainy day fund of the State.”

25

26 ___________________________________________________________________________

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page12 of 19

1

40. However, despite the above provisions of subd. (f)(3) of § 5001, (1) the State

2 has enacted and has not rescinded Welf. & Inst. Code § 14131.10, and (2) each of the

3 defendant State officials has adopted a policy and will, unless restrained by the Court,

4 implement Welf. & Inst. Code § 14131.10 by eliminating and refusing to pay for any of the

5 9 Medicaid services which are furnished on or after July 1, 2009; – which state statute and

6 the policies and actions of the defendant State officers constitute State action which is in

7 violation of, hence preempted, under the Supremacy Clause, by subd. (f)(3) of § 5001 and

8 the purposes for which the aforesaid subd. (f)(3) of § 5001was enacted to accomplish,

9 (namely to protect and maintain the State's Medicaid program by averting cuts to Medicaid

10 services, as specified by § 5000(a); especially when in case at bar, the State is enjoying

11 billions of dollars of savings (of at least $3 billion per year) from the enhanced FMAP

12 funds which vastly exceed the State's costs (which are only $129.4 million per year) to

13 continue the 9 Medicaid services in question).

14

41. The violation of subd. (f)(3) of § 5001 consists of this: that the State and the

15 defendant officers have allowed savings resulting to the State from use of enhanced FMAP

16 funds in the Medicaid program, to sink into the fungible funds of the State of California, to

17 be reserved, used as a rainy day fund, and spent for other purposes; – without using these

18 savings to protect and maintain the State's Medicaid program including averting cuts in

19 Medicaid services, (which is the express purposes under § 5000(a) for which subd. (f)(3) of

20 § 5001 was enacted by Congress to accomplish).

21

42. As a direct result of the aforesaid enactment of the preempted Welf. & Inst.

22 Code § 14131.10, and of the preempted actions of the defendant State officials to

23 implement this preempted State law, the two plaintiffs who are Medicaid beneficiaries, and

24 the Medicaid beneficiaries who are patients, clients, and members of the other plaintiffs,

25 will suffer and are threatened with irreparable injury; all of which is set forth in Paragraphs

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page13 of 19

1 50-53 of this First Amended Complaint.

2

43. Each of the plaintiffs hereby refer to and incorporate each of the allegations

3 of Paragraphs 50 through 53 of this First Amended Complaint as if fully set forth herein.

4

WHEREFORE, each of the plaintiffs prays for relief as shall hereinafter be

5 specified:

6

THIRD CLAIM FOR RELIEF

For injunction against each defendant, to enjoin State action preempted 7
under the Supremacy Clause, which threatens injury, (e.g., violation

8

of §§ 5001(f)(1)(A) and 5000(a) of Title V, Division B, of the Stimulus

Act). 9

44. Each of the plaintiffs refer to the allegations in each of the preceding Paragraphs, 10

and incorporates each of the allegations in the preceding Paragraphs as if fully set forth herein. 11

45. All statutory references are to Title V, Division B, of the Stimulus Act (Public Law 12

111-5; Page 123, Stat. 115), unless otherwise stated. 13

46. As prior alleged, subd. (f)(1)(A) of § 5001 provides: 14

“A State is not eligible for an increase in its FMAP under subsection (a), (b), 15
or (c), . . . if eligibility standards, methodologies, or procedures under its

16

State plan under title XIX of the Social Security Act (including any waiver

under such title or under section 1115 of such Act (42 U.S.C. 1315) are more

17

restrictive than the eligibility standards, methodologies, or procedures,

18 `

respectively, under such plan (or waiver) as in effect July 1, 2008.”

19

47. However, despite the above provisions of subd. (f)(1)(A) of § 5001,

20 (1) the State has enacted and has not rescinded Welf. & Inst. Code § 14131.10, and

21 (2) each of the defendant State officials has adopted a policy and will, unless restrained by 22 the Court, implement Welf. & Inst. Code § 14131.10 by eliminating and refusing to pay for 23 any of the 9 Medicaid services, which are furnished on or after July 1, 2009; – which state

24 statute and the policies and actions of the defendant State officers constitute State action

25 which is in violation of, hence preempted, under the Supremacy Clause, by subd. (f)(1)(A)

26 ___________________________________________________________________________

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page14 of 19

1 of § 5001 and the purposes for which the aforesaid subd. (f)(1)(A) of § 5001 was enacted

2 to accomplish, (namely, to protect and maintain the State's Medicaid program by averting

3 cuts to Medicaid services as specified in § 5000(a); especially when in case at bar, the

4 State is enjoying billions of dollars of savings (of at least $3 billion per year) from the

5 enhanced FMAP funds which vastly exceed the State's costs (which are only $129.4

6 million per year) to continue the 9 Medicaid services in question).

7

48. The violation of subd. (f)(1)(A) of § 5001 consists of this:

8

First, that receipt of enhanced FMAP funds under the Enhanced FMAP Measure of

9 the Stimulus Act on the one hand, but elimination of the 9 Medicaid services which were

10 part of California's state Medicaid plan as of July 1, 2008, on the other hand, violates the

11 express prohibition of subd. (f)(1)(A) of § 5001 against restricting “procedures,” (i.e.,

12 against restricting services), in the State's Medicaid program to less than were in effect on

13 July 1, 2008; and,

14

Second, to construe the clause of subd. (f)(1)(A) of § 5000 which prohibits

15 restricting “procedures” to less than those which existed on July 1, 2008, so as not to apply

16 to or refer to restricting the 9 Medicaid “services” which existed on July 1, 2008, would be

17 contrary to and would render the express purposes clause of § 5000(a) meaningless and

18 without any force or effect; so that the rules of statutory construction require, in case at bar,

19 that “procedures” as used in subd. (f)(1)(A) be construed so as to mean and include the 9

20 Medicaid “services” which are the subject of this lawsuit.

21

49. As a direct result of the aforesaid enactment of the preempted Welf. & Inst.

22 Code § 14131.10, and of the preempted actions of the defendant State officials to

23 implement this preempted State law, the two plaintiffs who are Medicaid beneficiaries, and

24 the Medicaid beneficiaries who are patients, clients, and members of the other plaintiffs,

25 will suffer and are threatened with irreparable injury; all of which is set forth in Paragraphs

26 ___________________________________________________________________________

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page15 of 19

1 50-53 below.

2

FURTHER FACTS COMMON TO ALL CLAIMS

3

50. Further, as the direct and proximate result of each of the violations of:

4

- § 5000a as alleged in the First Claim for Relief,

5

- §§ 5001(f)(3) and 5000(a) as alleged in the Second Claim for Relief,

6

- §§ 5001(f)(1)(3) and 5000(a) as alleged in the Third Claim for Relief,

7 by each of the defendants, millions of Medicaid beneficiaries in California, including

8

- the plaintiffs Mark Beckwith and Margaret Dowling,

9

- the Medicaid beneficiaries who are patients, clients, or members of the plaintiffs

10 LifeLong Care, the ILC, the CFILC, and SF Gray Panthers, as the case may be, will suffer

11 injury and be threatened with injury by reason and cause of the preempted acts of the

12 defendant State officials which are alleged in each of the preceding First, Second, and

13 Third Claims for Relief, by being unable to obtain, after June 30, 2009, any of the 9

14 Medicaid services consisting of treatment, cure, and relief of pain and suffering from or in

15 respect to:

16

- (1) treatment and cure of, and relief of pain and suffering from, injury, diseases

17

and conditions of their teeth, mouth, jaws, ability to eat, and facial appearance

18

(dentistry); bodily functions and health (acupuncture and chiropractic services);

19

hearing (audiology); speech (speech therapy); sight (optometric and optician

20

services); feet (podiatry); mental health (psychology); and,

21 - (2) treatment and relief of pain and suffering from incontinence, (incontinence
22 creams and washes);
23 which injuries and harm are irreparable and inexcusably insufferable in their nature and
24 character.
25 51. Also, the organizational plaintiffs SF Gray Panthers, ILC, the CFILC, and
26
___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page16 of 19

1 LifeLong Care, will also be irreparably injured by the aforesaid preempted State action of

2 the defendant State officials, which is alleged in each of the First, Second, and Third

3 Claims for Relief, respectively, from interference with their ability to obtain or provide

4 the 9 Medicaid services to or for their members, clients, and patients, as the case may be,

5 after June 30, 2009, due to the elimination of the aforesaid 9 Medicaid services by the

6 defendants.

7

52. Plaintiffs have no administrative relief, and any administrative relief

8 which may be available to them is futile.

9

53. Plaintiffs have no plain, speedy, adequate or any relief from the preempted

10 action of the defendant State officials except by the injunctive and declarative relief which

11 is prayed for hereinbelow.

12

WHEREFORE, each of the plaintiffs respectfully pray for judgment as shall be

13 hereinafter specified:

14

FOURTH CLAIM FOR RELIEF

For declaratory relief in respect to State action, preempted under the 15
Supremacy Clause, which threatens injury

16
54. Plaintiffs refer to the allegations in each of the preceding Paragraphs and

17 incorporate each of the said allegations as if fully set forth herein.

18 55. Pursuant to each and all of the facts alleged in the preceding Paragraphs of

19 this Complaint, there exists an actual controversy between the plaintiffs and the

20 defendants, in respect to which a declaratory judgment should be issued.

21 56. Plaintiffs have no plain, speedy, adequate or any relief from the preempted

22 action of the defendant State officials except by the injunctive and declarative relief which

23 is prayed for hereinbelow.

24 WHEREFORE, each of the plaintiffs respectfully pray for judgment as follows:

25 //

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page17 of 19

1

On All Claims for Relief:

2

1. That plaintiffs have judgment against each and all of the defendants, and that

3 the defendants take nothing.

4

On each of the First, Second, Third, and Furth Claims for Relief:

5

2. That the Court find that (1) the plaintiffs Mark Beckwith and Margaret

6 Dowling, who are Medicaid beneficiaries, and (2) the Medicaid beneficiaries who the

7 patients, clients, and members of the other four plaintiffs, as the case may be, will be

8 injured and harmed and are threatened with injury and harm, which is irreparable, from

9 State action by each and all of the defendant State officials in each of the First, Second, and

10 Third Claims for Relief, which is contrary to, hence preempted under the Supremacy

11 Clause, by a contrary federal statute, to wit:

12

- § 5000(a), Title V, Division B of the American Recovery and Reinvestment Act of

13 2009, (Public Law 111-5; Page 123, Stat. 115) (“ARRA”), in respect to the First Claim for

14 Relief;

15

- §§ 50001(f)(3) and 5000(a), Title V, Division B, ARRA, in respect to the Second

16 Claim for Relief;

17

- §§ 5001(f)(1)(A) and 5000(a), Title V, Division B, ARRA, in respect to the Third

18 Claim for Relief;

19

- §§ 5000(a), 5001(f)(1)(A), and 5001(f)(3), Title V, Division B. ARRA, in respect

20 to the Fourth Claim for Relief;

21

3. That the defendants and each of them be ordered by a temporary restraining

22 order, preliminary injunction, and permanent injunction:

23

A. To refrain from implementing California Welf. & Inst. Code § 14131.10,

24 including without limitation thereby to refrain from eliminating:

25 //

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page18 of 19

1

1. Adult dental services, (except medical and surgical services which, if

provided by a physician, would be considered physician services), 2
2. Acupuncture services,

3

3. Audiology services,

4. Speech therapy services,

4

5. Chiropractic services,

5

6. Optometric and optician services,

7. Podiatric services,

6

8. Psychology services, and,

9. Incontinence creams and washes; 7

(herein the “9 Medicaid services”), rendered on or after July 1, 2009 in California's 8

Medicaid program; 9

B. To refrain from refusing to pay established Medicaid rates to providers of these 9 10

Medicaid services which are furnished on and after July 1, 2009; and, 11

C. To do all acts necessary to affirmatively use and deploy the savings to the State of 12

California from the temporary increase of Federal Medical Assistance Percentage (FMAP) 13

payments to the State of California under §§ 5000 - 5004, Title V, Division B, of the ARRA, to 14

protect and maintain California's Medicaid program including averting cuts to Medicaid provider 15

payment rates, benefits, and services under the Medicaid Act, (42 U.S.C. § 1396 et seq.); including 16

but not limited to paying Medicaid providers the established rates for furnishing the 9 Medicaid 17

services to Medicaid beneficiaries in California on or after July 1, 2009; and, 18

D. To do all things necessary to reinstate and continue the 9 Medicaid services in the 19

State's Medicaid program, for the duration of the remainder of the recession adjustment period of 20

July 1, 2009 to December 31, 2010; including, without limitation thereby, making timely requests 21

to the Secretary of the U.S. Department of Health and Human Services to obtain all approvals, if 22

necessary, to continue the 9 Medicaid services in the state Medicaid plan and program. 23

4. That the defendants and each of them be ordered to comply with the terms of the 24

temporary retraining order, preliminary injunction, permanent injunction, or declaratory judgment 25

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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Case4:09-cv-02307-PJH Document4 Filed06/30/09 Page19 of 19

1 as the case may be, within a reasonable date set by the Court, or cease receiving or accepting, on

2 and after that date, any more enhanced FMAP funds from the federal government pursuant to or

3 under Title V, commencing with § 5000, of Division B, of the ARRA; and, notify the Secretary of

4 the U.S. Department of Health and Human Services that the State of California (1) will no longer

5 accept any extra FMAP payments under the ARRA, and (2) will return to the federal

6 government all the extra FMAP payments which the State of California has received from

7 the federal government, since the date that the State of California first began to receive

8 such extra FMAP payments, under the ARRA.

9

On the Fourth Claim for Relief:

10

5. That if and only if the Court denies injunctive relief, and to the extent that the

11 Court does not grant injunctive relief, that the Court nevertheless issue its declaratory

12 judgment in which it finds and adjudicates the rights and duties of the parties to be as set

13 forth in Paragraphs 3 and 4 of this Prayer for Relief.

14

On all Claims for Relief:

15

6. That plaintiffs have their costs of suit herein incurred, together with such

16 attorneys' fees as may be according to law, together with such other and further relief as

17 may be just.

18

Dated: June 29, 2009

19

LYNN S. CARMAN

20

JESSIE M. SANDOVAL

21

By

/s/ Lynn S. Carman

22

Attorneys for Plaintiffs

23

24

25

26 ___________________________________________________________________________

FIRST AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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 Case4:09-cv-02307-PJH Document5 Filed07/01/09 Page1 of 35

1 LYNN S. CARMAN, State Bar 028860 Medicaid Defense Fund
2 28 Newport Landing Dr.
3 Novato, CA 94949-8214 Telephone: (415) 927-4023
4 Facsimile : (415) 499-1687 Email: lynnscarman@hotmail.com
5

6 JESSIE M. SANDOVAL, State Bar 256757 601 Van Ness Ave., Suite E3-140
7 San Francisco, CA 94102
8 Telephone: (415) 595-0763 Facsimile: (510) 528-3381
9 Email: sandovaljm@aol.com

10 Attorney for Plaintiffs
Gray Panthers of San Francisco; Mark Beckwith;
11 California Foundation for Independent Living
Centers; Independent Living Centers of Southern
12 California; LifeLong Medical Care; and
Margaret Dowling
13 IN THE UNITED STATES DISTRICT COURT
14 NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION
15

THE GRAY PANTHERS OF SAN 16 FRANCISCO, a nonprofit corporation; MARK

No. C-09-02307 EMC

17 BECKWITH; CALIFORNIA FOUNDATION FOR INDEPENDENT LIVING CENTERS,

Date: Time:

August 5, 2009 10:30 a.m.

18 INC., a nonprofit corporation; INDEPENDENT

Courtroom: C

LIVING CENTER OF SOUTHERN 19
CALIFORNIA, INC., a nonprofit corporation;

Judge;

Hon. Edward M. Chen

20 LIFELONG MEDICAL CARE, a nonprofit

corporation; and MARGARET DOWLING,

21

Plaintiffs,

22 -vs.ARNOLD SCHWARZENEGGER, Governor of

23 State of California; KIM BELSHE, Secretary of

Health and Human Services Agency of the State of 24
California; DAVID MAXWELL-JOLLY, Director

PLAINTIFFS' NOTICE OF MOTION, AND MOTION FOR

25 of Department of Health Care Services of the

PRELIMINARY INJUNCTION;

State of California; JOHN CHIANG, Controller of 26 State of California; BILL LOCKYER, Treasurer

AND MEMORANDUM IN SUPPORT OF PRELIMINARY

of State of California; and MICHAEL E. GENEST,

INJUNCTION

Director of Finance of the State of California,

Defendants.

/

Case4:09-cv-02307-PJH Document5 Filed07/01/09 Page2 of 35

1

NOTICE OF MOTION and MOTION FOR PRELIMINARY INJUNCTION

2

PLEASE TAKE NOTICE that at 10:30 a.m. of August 5, 2009, in Courtroom C, 15th

3 Floor, San Francisco Federal Courthouse, 450 Golden Gate Ave., San Francisco, California 94102,

4 before the Honorable Edward M. Chen, each of the Plaintiffs:

5

- Gray Panthers of San Francisco,

6

- Mark Beckwith,

- California Foundation for Independent Living Centers,

7

- Independent Living Center of Southern California, Inc.,

- LifeLong Medical Care,

8

- Margaret Dowling,

9 will move, – and each of the Plaintiffs do hereby move, – for a preliminary injunction, pending a

10 final determination on the merits, that prohibits each of the Defendants:

11

- Arnold Schwarzenegger, Governor of State of California

12

- Kim Belshe, Secretary of Health and Human Services Agency of State of California,

13

- John Chiang, Controller of State of California

- Bill Lockyer, Treasurer of State of California

14

- Michael E. Genest, Director of Finance of State of California

- David Maxwell-Jolly, Director of Department of Health Care Services of State 15
of California

16 from (1) implementing California Welfare and Institutions (“Welf. & Inst.”) § 14131.10, including

17 (2) refraining from eliminating:

18 1. Adult dental services, 21 years or older, (except medical and surgical services

19

which, if provided by a physician, would be considered physician services),

2. Acupuncture services,

20

3. Audiology services,

21

4. Speech therapy services,

5. Chiropractic services,

22

6. Optometric and optician services,

7. Podiatric services,

23

8. Psychology services, and,

24

25

26

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1

9. Incontinence creams and washes,1

2 (herein, “the 9 Medicaid services”), furnished on or after July 1, 2009 in California's Medicaid
3 program; (3) refraining from refusing to pay established Medicaid rates to providers of these 9
4 Medicaid services which are furnished on and after July 1, 2009; and which affirmatively
5 commands each of them (4) to do all things necessary to use the savings to the State of California
6 from the temporary increase of Federal Medical Assistance Percentage (FMAP) payments to the
7 State of California under §§ 5000 - 5008, Title V, Division B, of the American Recovery and
8 Reinvestment Act of 2009, (Public Law 111-5, Page 123, Stat. 115) to protect and maintain the
9 State's Medicaid program under the Medicaid Act, 42 U.S.C. § 1396 et seq., including but not
10 limited to paying providers the established rates for furnishing the 9 Medicaid services to
11 Medicaid beneficiaries in California on or after July 1, 2009, and (5) to do all things necessary to
12 continue and to reinstate, as the case may be, the 9 Medicaid services in California's state
13 Medicaid plan and program, and to furnish and pay for the 9 Medicaid services to Medicaid
14
beneficiaries in California, for the duration of the remainder of the recession adjustment period of 15
July 1, 2009 to December 31, 2010; or else, in the event the defendants do not reinstate the 16
9 Medicaid services within and by a date specified by the Court, that (5) each of the defendant 17
state officials, and all State employees, attorneys, and those working in concert with the defendant 18
19 officials or any of them, be commanded by the Court (A) to not accept any further enhanced

20

1 An exception is that Welf. & Inst. Code § 14131.10(b)(3) and (c) provide that the 9 21 Medicaid services will continue to be furnished to Medicaid recipients who are:

22

- in the Early and Periodic Screening Diagnosis and Treatment Program,

- receive long-term care in a skilled nursing facility or intermediate care facility, or,

23

- are pregnant.

24

25

26

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1 FMAP payments from the federal government in respect to the State's Medicaid program, (namely,

2 no federal FMAP payments in excess of 50% of all California expenditures for services in the

3 State's Medicaid program); and (B) do all acts necessary to cause the State (1) to cease accepting

4 any more enhanced FMAP funds from the federal government in respect to the State's Medicaid

5 program, and (2) to refund to the federal government all FMAP payments in excess of 50% of the

6 State's expenditures on the Medicaid program in California, received since the enactment of the

7 Stimulus Act, (namely, the ARRA).

8

See, Rosado v. Wyman, 397 U.S. 397 (1970).

9

This motion is made pursuant to FRCP 65 on the ground that Plaintiffs meet the

10 requirements for a preliminary injunction because they have documented a likelihood of success

11 on the merits, a likelihood of irreparable harm in the absence of preliminary relief, that the balance

12 of equities tips in their favor, and that an injunction is in the public interest. See American
13 Trucking Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009).
14 This motion is made and based upon on this Notice of Motion and Motion, the
15 accompanying Memorandum in Support of Preliminary Injunction, the Declarations in Support of
16 Preliminary Injunction, the First Amended Complaint for Injunctive and Declaratory Relief, the
17 Plaintiffs' Request for Judicial Notice, the [Proposed] Order Granting Plaintiffs' Motion for a
18 Preliminary Injunction, the complete files and records in this action, and such other and further
19 matters as the Court may properly consider.
20 Dated: June 30, 2009
21
Respectfully submitted, 22

23

LYNN S. CARMAN

JESSIE M. SANDOVAL

24

25

By:

/s/ Lynn S. Carman

Attorneys for Plaintiffs

26

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1

TABLE OF CONTENTS

2 MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION.. . . . . . . . . . . . . . . . . . . . . . 1

3

Preliminary . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

4 Jurisdiction and venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 1

5 Parties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

6 Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

7

Statement of facts and claims of plaintiffs in the first claim for relief . . . . . . . . . . . . 4

8 The defendant Director of DHCS, and DHCS, have adopted a policy and have issued a bulletin and notice to implement Welf. & Inst. Code §14131.10.. . . . . . . . . . . . . . . . . . . . 6
9
History of § 5000, Title V, Division B of the Stimulus Act.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10
The basic rules of statutory construction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11
ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12

1. 13 14 15 16

The above context and express purposes clause of the Enhanced FMAP Measure compel the conclusion that a State in accepting enhanced FMAP amounts under the Act may not allow the savings therefrom to sink into the State's fungible assets and, at the same time, eliminate services in its Medicaid program; but must, rather, employ the savings resulting from the enhanced FMAP funds to avert cuts in its Medicaid services, during this period of economic downturn... . . . . . . . . . . . . . . . . . . . . . . 12

17 2. 18 19 20 21 22 3. 23 24 25 26

Also, the express purposes clause, § 5000(a), and the “no-reserve--or-rainy-day-fund” clause of § 5001(f)(3) of the Enhanced FMAP Measure , – when read together , -compel the conclusion that defendants have a mandatory ministerial duty, arising from §§ 5000 and 5001(f)(3), not to accept enhanced FMAP funds on the one hand, cut 9 Medicaid services on the other hand, and let the savings therefrom sink into the fungible assets of the State so as to become a de facto sinking fund, reserve, or rainy day fund, for non-Medicaid expenditures by the State.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Also, the express purposes clause, § 5000(a), and the provisions of subs. (f)(1)(A) of § 5001 of the Enhanced FMAP Measure which prohibit restricting “procedures,” (i.e., services), in the State's Medicaid program to less than were in effect on July 1, 2008, – when read together, – compel the conclusion that defendants have a mandatory ministerial duty, arising from §§ 5000 and 5001(f)(1)(A) not to accept enhanced FMAP funds on the one hand and, on the other hand, cut 9 Medicaid services which were in effect on July 1, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

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1

TABLE OF CONTENTS (Cont.)

2 Plaintiff’s have met the factors for preliminary injunction... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

3

A. Likelihood of success on the merits... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4

B. Likelihood of irreparable injury.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

5

(1) Marty Lynch. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

6

(2) Plaintiff Margaret Dowling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

7 (3) Plaintiff Mark Beckwith.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

8 (4) The executive directors of the three plaintiffs:

9

- Independent Living Center of Southern California, Inc. . . . . . . . . . . . . . . 19

- California Foundation for Independent Living Centers.. . . . . . . . . . . . . . . 19

10

- SF Gray Panthers .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

11
12 4.
13
14
15
16

Summary and conclusion of this sub-point, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
The plaintiffs LifeLong Care, ILC, CFILC, and SF Gray Panthers also suffer irreparable injury on their own account, in that (1) LifeLong Care suffers permanent loss of income and is forced to cut its services to its needy clientele and (2) the member/service organizations (ILC, CFILC, and SF Gray Panthers) are impeded and injured in their ability to carry out the functions for which they are organized to provide, namely, to enable the blind, elderly, and disabled of our population to obtain, among other things, adequate medical care.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

17 18
2. 19 20

Conclusion on this sub-point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
There is no defense that no appropriations have been enacted by the Legislature, or that the courts may not, under Separation of Powers, compel the Legislature to enact any appropriations in this case... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

21 3. 22 23

There is also, to boot, a continuing State appropriation of $2 billion to pay Medicaid providers, when there are no other state appropriations to pay Medicaid providers, out of which the defendants can easily comply with the court order which is requested in the case at bar.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

24

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. 22

25

26

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1
2 3 4.
4
5
6 5.
7
8

TABLE OF CONTENTS (Cont.)
Also, DHCS has not yet obtained approval by HHS of any amendment to the state Medicaid plan to eliminate the 9 optional Medicaid services. Hence there is no defense available to the defendants, to claim that the state Medicaid plan has already been amended to delete the 9 optional Medicaid services in question, from the state Medicaid plan.... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
There is no valid defense that HHS is exclusively empowered by Congress to take such action which may be required to enforce the Stimulus Act. . . . . . . . . . . . . . . . . . . . . 23

9 6.
10
11
12
13
14

Also, Rosado v. Wyman, 397 U.S. 397 (1970), established that in cooperative state-federal programs to which the federal government contributes under the Social Security Act, that participation by a State is purely voluntary; so that it is appropriate to order that the State officials perform the court's order to comply with the Social Security Act provision in question or, within a date specified by the court, or cease accepting enhanced FMAP funds under the Enhanced FMAP Measure. . . . . . . . . . . . . . . . 23
C. The balance of hardships tips strongly in Plaintiffs' favor.... . . . . . . . . . . . . 24

15

D. The public interest strongly favors grating relief... . . . . . . . . . . . . . . . . . . . . 25

16 Summary and relief requested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 17

18

19

20

21

22

23

24

25

26

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1 2 Cases

TABLE OF AUTHORITIES

3 California Pharmacists Assn. v. Maxwell-Jolly;

563 F.3d 847 (9th Cir. 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, passim

4

Clayworth v. Bonta,

5

295 F.Supp.2d 1110, 1128 (E.D.Cal. 2003).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 9

6 Clayworth v. Bonta, 140 Fed.Appx. 677 (9th Cir. 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7

Holloway v. U.S.,

8

526 U.S. 1 (1999).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

9 Independent Living Center of Southern California, Inc. v. Shewry,

10

543 F.3d. 1047 (9th Circ. 2008) cert. den... . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, passim

11 Independent Living Center of Southern California, Inc. v. Shewry 2008 WL3891211 (C.D.Cal. Aug. 18, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

12

Kelly v. Robinson,

13

479 U.S. 36, 43 (1986).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

14 Lange v. United States 443 F.2d 720, 723 (D.C. 1971). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
15

Liberation News Service v. Eastland,

16

426 F.2d 1379, 1383 (2d Cir. 1970).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

17 Lopez v. Heckler

18

713 F.2d 1432, 1437 (9th Cir. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25

19 Mastro Plastics Corp. v. NLRB, 350 U.S. 270, 285 (1956).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

20

Offshore Logistics, Inc. v. Tallentire,

21

477 U.S. 207, 221. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

22 Philbrook v. Glodtgett, 421 U.S. 707, 713 (1975).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
23

Powers v. Ohio

24

499 U.S. 400 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

25 Shaw v. Delta Air Lines, Inc.,

26

463 U.S. 85, 96 (1983).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

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1 TABLE OF AUTHORITIES (Cont.)

2 Cases (Cont.)

3

Shapiro v. U.S.,

4

335 U.S. 1 (1948).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 14

5 Shulte v. Louisiana Trailer Sales, Inc.
428 F.2d 61, 65 (1970).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6

Schweiker v. Gray Panthers

7

453 U.S. 34, fn.8 (1981) . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

8 Singleton v. Wulff

9

428 U.S. 106 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

10 United States v. Heirs of Boisdore, 8 How. 113, 122, 12 L.Ed. 1009 (1894). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

11

Weinberger v. Hynson, Westcott and Dunning, Inc.,

12

412 U.S. 609, 631-632 (1973). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 11, 14

13

Statutes 14

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009

15

§ 5000-§ 5008, Title V, Division B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, passim

§ 5000.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, passim

16

§ 5000(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, passim

17

§ 5000(a)(1)(2).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 17

§ 5000(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5, 8

18

§ 5000(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5, 8

§ 5000(f)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,7, passim

19

§ 5001(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, passim

§ 5001(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

20

§ 5001(c)... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

§ 5001(f)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, passim

21

§ 5001(f)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, passim

22 CAL GOVERNMENT CODE

§ 12010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

23

§ 12011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

§ 12801 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

24

§12320. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

25

§12324. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

§12410. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

26

§13300. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

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1 TABLE OF AUTHORITIES (Cont.)

2 Statutes (Cont.)

3

CAL. WELFARE & INST. CODE

4

§14000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

§14105 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

5

§14131.1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, passim

§19800. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6

28 U.S.C.

7

§ 1331. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

8 Social Security Act, Title XIX, 42 U.S.C. 1396 et seq.. . . . . . . . . . . . . . . . . . . . . . . . . 4, passim

9 42 U.S.C.

10

§ 1315.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

§ 1396a.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

11

§ 1396a(a)(10)(A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

§ 1396a(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

12

§ 1396a(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 4, 6

§ 1396d(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 22

13

14 Constitutions

15 U.S. Constitution

Supremacy Clause, article VI, cl. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 8, 16

16

Eleventh Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .20

17 California Constitution

18

article XVI § 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

19 Regulations

20 22 California Code of Regulations

§ 51503.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

21

§ 51505.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

§ 51506,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

22

51507.2, .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

§ 51514, .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

23

§ 51514.5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

§ 51505.3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 24

25

26

Plaintiffs' Notice of Motion, and Motion, for a Preliminary Injunction, Case No. C09-02307 EMC -vi-

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1

MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION

2

The plaintiffs Gray Panthers of San Francisco (“SF Gray Panthers”); Mark Beckwith;

3 California Foundation for Independent Living Centers, Inc. (“CFILC”); Independent Living Center

4 of Southern California, Inc. (“ILC”); LifeLong Medical Care (“LifeLong Care”), and Margaret

5 Dowling file the below memorandum in support of motion for preliminary injunction.

6

PRELIMINARY

7

Jurisdiction and venue

8

This is a Supremacy Clause case.2 The Court has jurisdiction under 28 U.S.C. § 1331. Shaw

9 v. Delta Air Lines, Inc., 463 U.S. 85, 96 (1983). The first named plaintiff in the complaint is the SF

10 Gray Panthers, whose principal office is in San Francisco, California.

11

Parties

12

The plaintiffs are:

13 - a member organization which advocates for and assists its members to obtain

14

healthcare rights including Medicaid benefits whose headquarters is in San Francisco,3

15

- a designated center for independent living under California Rehabilitation Act,

16

§ 19800 California Welfare and Institutions (Welf. & Inst.) Code) in the Los Angeles area,4

17

- the state association for independent living centers, whose members are independent

living centers;5 18

19

- a community health center organization with clinics in Berkeley, Oakland, and

20

21

2 U.S. Constitution, Article VI, cl. 2.

22

3 The SF Gray Panthers, a nonprofit corporation.

23

4 Independent Living Center of Southern California, Inc., (“ILC”), a nonprofit corporation

which serves more than 7,500 disabled Medicaid beneficiaries annually in Van Nuys, Santa 24 Clarita, and Lancaster.

25 5 California Foundation for Independent Living Centers (“CFILC”), a nonprofit
26 corporation, whose members are 25 independent living centers in California who serve 330,000 blind, elderly or disabled persons, most of whom are Medicaid beneficiaries.

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1

Novato;6

2

- two individual beneficiaries of California's Medicaid program (which is often called

“Medi-Cal”).7 3

4

The defendants are all the relevant executive officers of the State of California: the

5 Governor, Controller, Treasurer, Finance Director, Secretary of the California Health and Human

6 Agency, and the Director of the California Department of Health Care Services, – the latter

7 department being the single California agency which is authorized, under the Medicaid Act, 42

8 U.S.C. § 1396a(a)(5) and Section 1 of the State's Medicaid plan (herein, “state Medicaid plan”), to

9 exclusively administer the state Medicaid plan (which plan must be approved by the Secretary of 10 the U.S. Department of Health and Human Services (“HHS”).8

11

Also, the Director of the California Department of Health Care Services (“DHCS”) is

12 authorized by California Welfare and Institutions (“Welf. & Inst.”) Code, §§ 14000.1 and 14105,

13 to exclusively set all policies, rules, and regulations for DHCS and the state Medicaid program.9

14

15

6 LifeLong Care, a nonprofit corporation whose 9 community services sites in the Bay

16 Area receive 5,300 adult dental visits, 4,000 podiatry visits, 700 optometry visits from Medicaid recipients, and also many mental health visits, annually. (¶ 5 Lynch Decl.)

17 7 Mark Beckwith, a quadriplegic who resides in Berkeley, California; and Margaret
18 Dowling, a paraplegic who resides in Pittsburg, California.

19

8 A copy of Section 1 of the state Medicaid plan is set forth in Exhibit D of Plaintiffs'

20 Request for Judicial Notice (“RJN”).

21

9 The Governor's duties are to supervise all executive and administrative officers of the

State and see that their official duties are performed. (Cal. Government (“Govt.) Code §§ 12010,

22 12011).

23

The California Department of Health Care Services (“DHCS”) is within and subordinate

to the California Health and Human Services Agency; and the Agency in turn is, by § 12801

24 Govt. Code, under the supervision of Secretary Kim Belshe.

The Controller, by § 12410 Govt. Code, superintends the fiscal concerns of the State of 25 California. Under California Constitution, article XVI, section 7, money may be drawn from the

26 Treasury of the State only upon the Controller's duly drawn warrant. The Treasurer, under §§ 12320 and 12324 Govt. Code, receives and keeps all moneys of

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1

Standing

2

The plaintiffs have standing to sue to obtain injunctive and declaratory relief because they:

3

- are Medicaid beneficiaries, or,

4

- have patients, clients, or members who are Medi-Cal beneficiaries,

5 who are threatened with injury from enactment of Welf. & Inst. Code 14130.10 and its

6 implementation by the defendant State officials, which State actions are contrary to, – hence

7 preempted under the Supremacy Clause by – Title V, (§§ 5000-5008), of Division B of the

8 American Recovery and Reinvestment Act of 2009.10 See:

9

- Independent Living Center of Southern California, Inc. (“ILC”) v. Shewry, 543 F.3d 1050

10

(9th Cir. 2008), cert. den. June 22, 2009,

- ILC v. Shewry, 2008 WL3891211 (C.D.Cal. Aug. 18, 2008),

11

- California Pharmacists Assn. (“CPhA”) v. Maxwell-Jolly, 563 F.3d 847 (9th Cir.

2009), pet reh'g en banc filed,11 12

13 in which injunctive relief was granted to prevent injury from State action preempted, under the

14 Supremacy Clause, by federal law (there, the Medicaid Act).

15

Also, CPhA, 563 F.3d at 851-852, held that Medicaid providers, – such as the plaintiff

16

17 the State, and may only pay out State monies upon warrants drawn by the Controller.

18

The Director of Finance is authorized by § 13300 Govt. Code to supervise the accounts of

each department of the State, and may, by certain statutes made and provided therefore, veto 19
certain expenditures of the State.

20 10 Public Law 111-5; Page 123, Stat. 115.
21 11 Generally, a person or organization who seeks third party standing to assert or represent
22 the interests of another: (1) must have suffered an injury-in-fact, (2) must have a close

23 relationship with the third party, and (3) there must be "some hindrance" or a "genuine obstacle" to the third party's ability to assert its own interests. Powers v. Ohio, 499 U.S. 400, 410-411
24 (1991); Singleton v. Wulff, 428 U.S. 106, 112-116 (1976). All of these criteria are satisfied in this

case.

25

See, Schweiker v. Gray Panthers, 453 U.S. 34, fn. 8 at 40 (1981): Gray Panthers have

26 prudential standing; Clayworth v. Bonta, 295 F.Supp.2d 1110 (E.D.Cal. 2003), vacated on other grounds, 140 Fed.Appx. 677 (9th Cir. 2005): Medicaid providers have prudential standing.

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Case4:09-cv-02307-PJH Document5 Filed07/01/09 Page14 of 35

1 LifeLong Care in case at bar, – are entitled to preliminary injunctive relief because the Eleventh

2 Amendment bars them from recovery of damages even if they are successful on the merits of their

3 case.

4

STATEMENT OF FACTS AND CLAIMS OF PLAINTIFFS

For injunction against State action, preempted under the Supremacy Clause

5

by the Stimulus Act, which threatens injury.

6

As of July 1, 2008 California's Medicaid program under Social Security Act Title XIX, (42

7 U.S.C. § 1396 et seq.), furnished the following services which are optional, and are not mandatory

8 to be provided in a state Medicaid program, 12 as a minimum condition for the State to receive

9 federal funds under the Medicaid Act, (called the “federal medical assistance percentage,” or

10 “FMAP”)13 for participating in the Medicaid program:

11

1. Adult dental services, 21 years or older (except medical and surgical services which,

12 if provided by a physician, would be considered physician services), 2. Acupuncture services,

13

3. Audiology services,

4. Speech therapy services, 14
5. Chiropractic services,

15

6. Optometric and optician services,

7. Podiatric services,

16

8. Psychology services, and,

17

9. Incontinence creams and washes,

18 (herein, “the 9 Medicaid services”).

19

On February 17, 2009, Congress enacted the American Recovery and Reinvestment Act of

20 2009, (the “Stimulus Act”),14 in which the following provisions of Title V, Division B, provide:

21

22

12 42 U.S.C. §§ 1396a(a)(10)(A) and 1396d.

23

13 Social Security Act § 1903(a)(1), (42 U.S.C. § 1396b(a)(1) , and Social Security Act

§ 1905(b), (42 U.S.C. § 1396d(b), – defining the FMAP which is to paid to States). 24

25

14 NOTE: All statutory references shall be to Title V, of Division B of the Stimulus Act,

unless otherwise specified.

26

A copy of Title V, (§§ 5000-5008), of Division B, of the Stimulus Act, (Public Law

111-5; Page 123, Stat. 115), is set forth in Exhibit F of Plaintiffs' RJN.

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1

“ SEC. 5000. PURPOSES; . . . 2
(a) Purposes.--The purposes of this title are as follows:

3

(1) To provide fiscal relief to States in a period of economic downturn.

(2) To protect and maintain State Medicaid programs during a period of

4

economic downturn, including by helping to avert cuts to provider payment rates and

5

benefits or services . . . ”

6 Note: § 5001, subs. (a), (b), (c) provide that the FMAP for a State shall be temporarily increased

7 during the recession adjustment period of October 1, 2008 through December 31, 2010, by at least

8 6.2%, – with an additional increase for a State of up to 17.7% depending upon the increase in

9 unemployment in a State during this period.

10

-§ 5001, subs. (f)(3) provides:

11 “State's application toward rainy day fund.--A State is not eligible for an increase in its

12

FMAP under subsection (b) or (c) . . . if any amounts attributable (directly or indirectly) to

such increase are deposited or credited into any reserve or rainy day fund of the State.” 13

14

§ 5001, subs. (f)(1)(A) provides:

“[A] State is not eligible for an increase in its FMAP under subsection (a), (b), or (c), . . . if 15
eligibility standards, methodologies, or procedures under its State plan under title XIX of

16

the Social Security Act (including any waiver under such title or under section 1115 of such

Act (42 U.S.C. 1315) are more restrictive than the eligibility standards, methodologies, or

17

procedures, respectively under such plan (or waiver) as in effect on July 1, 2008.”

18

(Boldface emphasis supplied.

19

NOTE: §§ 5000 - 5008 of Title V, Division B, of the Stimulus Act shall hereinafter

20 sometimes be referred to in this Memorandum as the “Enhanced FMAP Measure.”15

21

The extra federal FMAP amounts paid to states, including California, under the foregoing

22 §§ 5000-5001 are referred to in this Memorandum as “enhanced FMAP funds.”

23

However, notwithstanding the Enhanced FMAP Measure , California Welfare & Institutions

24 (“WI”) Code § 14131.10, which was enacted on March 3, 2009, as Stats. 2009, ch . 20, eliminated

25

26 15 A copy of §§ 5000 - 5008 is set forth in Exhibit F of Plaintiffs' RJN.

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Case4:09-cv-02307-PJH Document5 Filed07/01/09 Page16 of 35

1 the 9 Medicaid benefits, effective for services furnished on and after July 1, 2009.16

2

(A copy of Welf. & Inst. Code § 14131.10 is set forth as Exhibit A of Plaintiffs' Request for

3 Judicial Notice (“RJN”).

4

The defendant Director of DHCS, and DHCS, have adopted a policy and have

5

issued a bulletin and notice to implement Welf. & Inst. Code §14131.10.

6

The defendant David Maxwell-Jolly, Director of DHCS, and the DHCS, have adopted a

7 policy to implement Welf. & Inst. Code § 14131.10, as evidenced by the June 2008 Bulletin on

8 DHCS's official website which is entitled:

9

“Notice of Reduction of Medi-Cal Benefits,”

10 which the DHCS website states has been sent to all Medicaid beneficiaries in California.17

11

A copy of this June 2008 bulletin and notice is set forth as Exhibit B of Plaintiffs' RJN).

12

The Director of DHCS has admitted in a Bulletin on the DHCS website that under the

13 Enhanced FMAP Measure of the Stimulus Act that the enhanced FMAP funds for the State for the

14

15

16

16 An exception is that Welf. & Inst. Code § 14131.10(b)(3) and (c) provide that the 9 17
Medicaid services will continue to be furnished to Medi-Cal recipients who are:

18

- in the Early and Periodic Screening Diagnosis and Treatment Program

- receive long-term care in a skilled nursing facility or intermediate care facility, or,

19

- are pregnant.

20

17 An exception stated in the DHCS notice is that the 9 Medicaid services will continue to

21 be furnished to Medi-Cal recipients who are:

- in the Early and Periodic Screening Diagnosis and Treatment Program

22

- living in a skilled nursing facility (Level A or B), including subacute facilities, or,

23

- are pregnant.

The notice also specifies that those in the state-funded part of the Medi-Cal program (i.e., not, the

24 federal-state Medicaid program) will continue to receive these services if the Medi-Cal

beneficiary receives benefits from the California Children's Services program, a Program of All25 Inclusive Care for the Elderly, the Genetically Handicapped Persons Program, a county mental

26 health program, Medicare Part B, or from a physician. These, however, are not Medicaid programs.

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Case4:09-cv-02307-PJH Document5 Filed07/01/09 Page17 of 35

1 recession adjustment period October 1, 2008 through December 31, 2010, is 61.59%.18 This is an

2 11.59% increase over the former 50% FMAP which the State formerly received under the Medicaid

3 Act.19

4

The defendant Director of Finance has estimated that the State will receive $6.6 billion in

5 enhanced FMAP funds during the two fiscal years 2008-09 and 2009-2010, combined,20 which – by

6 simple arithmetic, – is an average of $0.94 billion per calendar quarter (for the seven quarters from

7 October 1, 2008 through December 31, 2009 for which enhanced FMAP funds are estimated by the

8 Director of Finance), or an average of $3.76 billion per year being received by the State.

9

This saves the State $3.76 billion annually in State funds which the State would otherwise

10 have to expend for services in the Medicaid program in California, were it not for this $3.76 billion

11 in enhanced FMAP funds from the Enhanced FMAP Measure of the Stimulus Act.

12

In comparison, it only costs the State $129.4 million in State funds per year to continue the

13 9 Medicaid services in question.21

14

However, despite the above purposes of Congress expressed in § 5000(a), the State

15 (1) has enacted and has not rescinded Welf. & Inst. Code § 14131.10, and (2) each of the

16 defendant State officials has adopted a policy and will, unless restrained by the Court,

17

18

18 See, DHCS Bulletin, (copy set forth in Exhibit C of Plaintiffs RJN), which states:

19

“ The FMAP is the share of Medicaid expenditures paid by the federal government.

ARRA increased California's FMAP from 50 percent to 61.59 percent meaning that the

20

federal government now pays about 62 cents for every dollar of Medi-Cal services used.

21

The FMAP increase is effective from October 12, 2008 through December 31, 2010.”

22 This Bulletin is available at http://www.dhcs.ca.gov/ARRA. (last visited June 28, 2009).

23

19 42 U.S.C. § 1396d(b) provides that the standard FMAP shall be not less than 50%. See,

24 also, prior Footnote 18.

25

20 Exhibit G, Page 22 of Plaintiffs' RJN.

26

21 Assembly Bill Analysis, page 3, of Assembly Bill X3 5, which enacted Welf. & Inst.

Code § 14131.10. (Exhibit J of Plaintiffs' RJN).

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Case4:09-cv-02307-PJH Document5 Filed07/01/09 Page18 of 35

1 implement Welf. & Inst. Code § 14131.10 by eliminating and refusing to pay for any of the

2 9 Medicaid services, for services rendered on or after July 1, 2009; – which state statute and

3 the policies and actions of the defendant State officers constitute State action which is in

4 violation of, hence preempted, under the Supremacy Clause, by the purposes clause of

5 § 5000(a), – which purposes clause expressly imposes upon the State and its officers the

6 obligation to protect and maintain the State's Medicaid program by averting cuts to services

7 of the program; especially when in case at bar, the State is enjoying billions of dollars in

8 savings (of at least $3 billion per year) from the enhanced FMAP funds, (which vastly

9 exceed the State's costs, of only $129.4 million per year, to continue the 9 Medicaid

10 services in question).

11

Also, the implementation of Welf. & Inst. Code § 14131.10 by elimination of the 9

12 Medicaid services, plus, the refusal of the State and the defendant officials to use any of the $3.76

13 billion annual savings to the State, from the increased FMAP payments, to pay for the

14 continuation of the 9 Medicaid services during the remainder of the recession adjustment period,

15 violates the Stimulus Act in two additional ways; because this:

16

- (1) violates the express prohibition of subs. (f)(3) of § 5001 of the Enhanced FMAP

17 Measure not to indirectly deposit or credit into any reserve or rainy day fund any amount

18 attributable to the extra FMAP payments, (here, the savings from the enhanced FMAP funds which

19 sink unidentified into the fungible assets of the State of California, for use by the Legislature as a

20 real but unidentified source of funds for non-Medicaid purposes); and,

21

- (2) violates the express prohibition of subs. (f)(1)(A) of § 5001 of the Enhanced FMAP

22 Measure against restricting “procedures,” (i.e., Medicaid services ) in the State's Medicaid program

23 to less than were in effect on July 1, 2008.

24

Thereby, Welf. & Inst. Code § 14131.10 and the above policies and actions of each of the

25 defendant State officials to implement Welf. & Inst. Code § 14131.10 manifestly comprise state 26 action which is in violation of , – and defeats the purposes of Congress in enacting, – § 5000(a) and

______________________________________________________________________________

Plaintiffs' Motion for a Preliminary Injunction, Memorandum in Support, Case No. C09-02307 EMC

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Case4:09-cv-02307-PJH Document5 Filed07/01/09 Page19 of 35

1 subds. (a),(b) and (c), and subs (f)(3) of § 5001 of the Enhanced FMAP Measure, – so as to be

2 hence preempted, under the Supremacy Clause.

3

Further, millions of poor Medicaid beneficiaries, including the:

4

- plaintiffs Mark Beckwith and Margaret Dowling,

5

- thousands of Medicaid adult dental, podiatry, optometric, and mental health patients of

the plaintiff LifeLong Care, 6

7

- 7,500 blind, elderly, and disabled clients of the plaintiff Independent Living Center of

Southern California, Inc., (“ILC”) who are Medicaid beneficiaries,

8

- several hundred thousand blind, elderly, and disabled Medicaid beneficiaries who are the

9

clients of the 25 independent living centers who are members of the plaintiff California

10

Foundation for Independent Living Centers (“CFILC”), and,

11

- the 15 members of the plaintiff SF Gray Panthers who are Medicaid beneficiaries,

12 will manifestly suffer irreparable injury as shall be set forth on pages 16 - 20 of this Memorandum.
13 Also, the plaintiffs LifeLong Care, ILC, CFILC, and SF Gray Panthers will also be
14 irreparably injured by this preempted State action, as shall be set forth on pages __ of this
15 Memorandum.
16 Accordingly, under the case law in the Ninth Circuit relating to the Supremacy Clause and
17 irreparable injury, (ILC v. Shewry, 453 F.3d 1047, cert . den.; ILC v. Shewry, 2008 WL3891211
18 (C.D.Cal. 2008); CPhA v. Maxwell-Jolly; 563 F.3d at 851-852; and Clayworth v. Bonta, 295
19 F.Supp.2d at 1128 (E.D.Cal. 2003), vacated on other grounds, 140 Fed.Appx. 677 (9th Cir. 2005),
20 the plaintiffs are clearly entitled to a permanent injunction or in the alternative, a preliminary
21 injunction, which enjoins the defendant officials from (1) implementing Welf. & Inst. Code
22 § 14131.10, (2) eliminating the 9 Medicaid services, and (3) refusing to pay established rates for
23 these 9 Medicaid services which are furnished on or after July 1, 2009; and, affirmatively (4)
24 commands them to use the savings to the State from the temporary increase of FMAP federal
25

26

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Plaintiffs' Motion for a Preliminary Injunction, Memorandum in Support, Case No. C09-02307 EMC

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1 payments to California, under the Enhanced FMAP Measure,22 to preserve, continue, and pay 2 providers for furnishing the 9 Medicaid services to Medi-Cal beneficiaries on and after July 1,

3 2009, using savings to the State from the enhanced FMAP payments to do so.

4

History of §§ 5000 - 5001, Title V, Division B of the Stimulus Act

5

This emergency remedial statute was enacted in the greatest economic crisis this country has

6 faced since the Great Depression, to solve, – insofar as this part of the Stimulus Act is concerned, –

7 the collapse of funding sources for states to carry out the Medicaid program of 42 U.S.C. § 1396, et

8 seq., by flooding States with billions of dollars of additional federal funding to enable States to

9 preserve and maintain their existing Medicaid programs, by averting cuts to provider rates, benefits,

10 and services.23 The purpose was not to give extra funds to States to save their Medicaid programs,

11 only to have the States pocket the $$$$ billions and cut their Medicaid services, anyway, in

12 unlawful defiance of the express purpose for which they accepted the additional federal funding to

13 accomplish.

14

The basic rules of statutory construction.

15

The basic rules of statutory construction which apply to this case are as follows:

16

First. A court must first ascertain the purpose of Congress in enacting a statute, and then

17 construe all parts of the statute consistent with, and to effect and not defeat, the purposes for which

18 the statute was enacted. (Philbrook v. Glodtgett, 421 U.S. 707, 713 (1975) (our objective “is to

19 ascertain the congressional intent and give effect to the legislative will”); Weinberger v. Hynson,

20 Westcott and Dunning, Inc., 412 U.S. 609, 631-632 (1973), (we “give the Act the most harmonious,

21 comprehensive meaning possible in light of the legislative policy and purpose”); Kelly v.

22 Robinson, 479 U.S. 36, 43 (1986) (in expounding a statute we “look to the provisions of the whole

23 law, and to its object and policy,” quoting Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 221,

24

25 22 Title V, Division B of the Stimulus Act.
26 23 See, express purposes clause of § 5000(a). (Copy , in Exhibit FL of Plaintiffs' RJN.)

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1 quoting Mastro Plastics Corp. v. NLRB, 350 U.S. 270, 285 (1956), quoting United States v. Heirs of 2 Boisdore, 8 How. 113, 122, 12 L.Ed. 1009 (1894).

3

Second. The starting point for determining legislative purpose is “plainly an appreciation of

4 the “mischief” that Congress was seeking to alleviate.” Liberation News Service v. Eastland, 426

5 F.2d 1379, 1383 (2d Cir. 1970).

6

Third. The provisions of an act must not be construed so as render any part of the act

7 superfluous, without meaning or effect. Weinberger, supra, 421 U.S. at 634.

8

Fourth. A provision of an act may not be construed so as to defeat or frustrate Congress'

9 purpose in enacting the act. Lange v. United States, 443 F.2d 720, 723 (D.C. 1971); Holloway v.

10 U.S., 526 U.S. 1 (1999); Shulte v. Louisiana Trailer Sales, Inc. 428 F.2d 61, 65 (1970).

11

Fifth. Where a provision of an act is susceptible to two opposed interpretations, the

12 provision must be construed in the manner “which effects rather than frustrates the major purpose”

13 of the act. Shapiro v. U.S., 335 U.S. 1, 31 (1948).

14

ARGUMENT

15

The emergency context and terms of the enactment of the Enhanced FMAP Measure,24

16 including the express purposes clause of this measure, which is set forth in § 5000(a) of the

17 Enhanced FMAP Measure , – to wit:

18

“SEC. 5000. PURPOSES; . . .

19

(a) Purposes.--The purposes of this title are as follows: . . . (2) To protect and

maintain State Medicaid programs during a period of economic downtown, including by

20

helping to avert cuts to provider payment rates and benefits or services . . . ”

21 compel the conclusions that are set forth below in this Memorandum.

22 //

23 //

24 //

25

26

24 § 5000 - 5008 of Title V, Division B of the Stimulus Act. (Copy set forth in Exhibit F

of Plaintiffs' RJN.)

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1 1. 2 3 4

The above context and express purposes clause of the Enhanced FMAP Measure compel the conclusion that a State in accepting enhanced FMAP amounts under the Act may not allow the savings therefrom to sink into the State's fungible assets and, at the same time, eliminate services in its Medicaid program; but must, rather, employ the savings resulting from the enhanced FMAP funds to avert cuts in its Medicaid services, during this period of economic downturn.

5

I.e., what purpose is achieved for Congress to have awarded the enhanced FMAP funds to a

6 State, only to have the State let the savings accruing to the State from the enhanced FMAP funds

7 sink into its fungible assets, without using the savings to preserve to the extent possible the State's

8 Medicaid program which Congress is manifestly attempting to save and preserve by awarding, in

9 the first instance, the enhanced FMAP funds to the State, expressly, in § 5000(a), to “protect and

10 maintain State Medicaid programs during a period of economic downtown, including by helping to

11 avert cuts to . . . services and benefits”?

12 To the contrary, such action of the State, in the case at bar, clearly violates the Enhanced

13 FMAP Measure as well as destroys the Congressional purposes – (which are expressly stated in

14 § 5000(a) of the Enhanced FMAP Measure) – for which Congress enacted the Enhanced FMAP

15 Measure in the first instance; so as to be therein preempted, under the Supremacy Clause, the

16 express purposes clause of the Enhanced FMAP Measure.

17 2.
18
19
20
21

Also, the express purposes clause, § 5000(a), and the “no-reserve--or-rainy-dayfund” clause of § 5001(f)(3) of the Enhanced FMAP Measure , – when read together, – compel the conclusion that defendants have a mandatory ministerial duty, arising from §§ 5000(a) and 5001(f)(3), not to accept enhanced FMAP funds on the one hand, cut 9 Medicaid services on the other hand, and let the savings therefrom sink into the fungible assets of the State so as to become a de facto sinking fund, reserve, or rainy day fund, for non-Medicaid expenditures by the State.

22

The no-reserve-no-rainy-day-fund provision of § 5001(f)(3) of the Enhanced FMAP

23 Measure prohibits eligibility of a State to receive increased FMAP payments:

24 //

25 //

26

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1

“ . . . if any amounts attributable (directly or indirectly) to such increase are

deposited or credited into any reserve or rainy day fund of the State.”25 2

3 Note: The failure of the State to formally call the savings accruing to the State from the receipt of

4 these enhanced FMAP funds a “reserve for non-Medicaid purposes” does not prevent such de facto

5 reserve from arising in fact in the fungible assets of the State, all, in violation of the purposes and

6 no-reserve clauses of §§ 5000(a) and 5001(f)(3) of the Enhanced FMAP Measure.

7

Indeed, the fact that the State is reserving the $3.76 billion in savings to the State to its

8 General Fund to be used for purposes other than preserving the state Medicaid program, is brazenly

9 openly stated in a white paper of the California Legislative Analyst to the Legislature:

10

“Federal Medicaid Funds Free Up State General Fund. . . . [T]he additional FMAP funds

that the state would receive for Medi-Cal could be used to reduce state General Fund

11

support for the program. In effect, this would permit a temporary shift of General Fund

12

resources currently used by Medi-Cal to support other state programs and achieve at least a

short-term state budget solution for a couple of years.”26

13

Accordingly, Welf. & Inst. Code § 14131.10 and the actions of the State officials which are 14

complained of to implement § 14131.10 are (1) contrary to both the provisions of the express 15
purposes clause of § 5000(a) of the Enhanced FMAP Measure;27 and the no-reserve-no-rainy-day16

fund provision of § 5001(3)(f) of the Enhanced FMAP Measure; and (2 will destroy and prevent 17

these purposes for which Congress enacted the enhanced FMAP provision of the Stimulus Act, – so 18

as to be hence preempted under the Supremacy Clause, by §§ 5000(a) and 5001(3)(f) of the 19

Enhanced FMAP Measure. 20

21

25 § 5001(f)(3) of Title V, Division D, of the Stimulus Act provides:

22 “(f)(3) State's application toward rainy day fund.–A State is not eligible for an increase in

23

its FMAP under subsection (b)) or (c), . . . if any amounts attributable (directly or

indirectly) to such increase are deposited or credited into any reserve or rainy day fund of

24

the State.”

25

26 A copy of this shocking LAO document is set forth as Exhibit E of Plaintiffs' RJN.

26 27 Title V, Division B, of the Stimulus Act.

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1 3. 2 3 4 5

Also, the express purposes clause, § 5000(a), and subs. (f)(1)(A) of § 5001 of the Enhanced FMAP Measure which prohibits restricting “procedures,”(i.e., services), in the Medicaid program to less than were in effect on July 1, 2008; – when read together, – compel the conclusion that defendants have a mandatory ministerial duty, arising from §§ 5000(a) and 5001(f)(1)(A) not to accept enhanced FMAP funds on the one hand and, on the other hand, cut 9 Medicaid services which were in effect on July 1, 2008.

6

A cardinal rule of statutory construction is that all words in part of an act must be read

7 together to give effect to every word and part, if at all possible. Weinberger, supra, 412 U.S. at 634.

8

However, in respect to the provisions of §§ 5000(a) and 5001(f)(1)(A), construing the word

9 “procedures” as used in § 5001(f)(1)(A) to mean one of its several meanings, namely, “an

10 established or official way of doing something,” (Oxford University Press), would result in

11 the purposes clause of § 5000(a), – (“to protect and maintain State Medicaid programs” by “helping

12 to avert cuts to “provider rates and benefits or services”), – being without any force or effect, –

13 due to the fact that restricting eligibility standards, methodologies, or way of doing something, as

14 such, in a state Medicaid program has no effect and does not avert cuts to provider payments

15 rates, benefits or services, (which is the express purpose of § 5000(a) of the Enhanced FMAP

16 Measure for increased FMAP funds to States), -- hence, rendering the express purposes clause of

17 § 5000(a) meaningless and without any purpose or effect whatsoever.

18

On the other hand, if the word “procedures” in § 5001(f)(1))(A) is construed by the

19 customary professional usage of the word “procedures” as referring to and meaning “services,”

20 then, the no-restriction-of-procedures provision of § 5001(f)(1)(A) and the avert-cuts-to-services

21 provision of § 5000(a) are both given effect and are consistent with each other; but, not otherwise.

22

This is in accordance with the established rule of statutory construction: that a provision

23 which is susceptible to two opposed interpretations, must be construed in the manner “which effects

24 rather than frustrates the major purpose” of the act. Shapiro v. U.S., 335 U.S. 1, 31 (1948).

25

26

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1

Discussion

2

Such construction of “procedures” as referring to professional “services” for which a

3 professional bills and is paid, is the customary professional usage of the word, “procedures.”

4

This is evidenced by the fact that the services of doctors, dentists, etc., are frequently and

5 customarily spoken of or described as being “procedures;” with billings for services by

6 professionals customarily being listed and paid for as “procedures,” under a “procedure code.”

7

For example, payment for physician services is authorized for “each procedure performed by

8 a physician.” 22 California Code of Regulations (“CCR”) § 51503.28 And payment for each of the

9 9 Medicaid services in question are respectively authorized for “procedures” performed by licensed

10 professionals, which services are listed by “procedure code” or “procedure number.” 22 CCR

11 §§ 51506, 51505.1, 51507.2, 51514, 51514.5, and 51505.3.29

12

And it should be noted that in one's discussion with another of what services a professional

13 performed, the question normally asked is not, “What services did your (doctor) (dentist) perform?”

14 but, instead, is “What procedures did your (doctor) (dentist) (podiatrist) perform?”

15

Conclusion in respect to violation of §§5000(a) and 5001(f)(1)(A).

16

As prior shown, the express purposes clause, (§ 5000(a) and the provisions of subs. (f)(1)(A)

17 of § 5001 of the Enhanced FMAP Measure which prohibits restricting “procedures,” (properly

18 construed to mean “services”), in the State's Medicaid program to less than were in effect on July 1,

19 2008; – when read together as comprising one single provision, – compel the conclusion that

20 “procedures” as used in § 5001(f)(1)(A) of the Enhanced FMAP Measure means and includes,

21 “services,” so that defendant officials have a mandatory ministerial duty, arising from §§ 5000(a)

22 and 5001(f)(1)(A) not to receive enhanced FMAP funds on the one hand and, on the other hand, cut

23 the 9 Medicaid services which were in effect on July 1, 2008.

24

25

28 Copy set forth in Exhibit H of Plaintiffs' RJN.

26 29 Copies of these regulations are set forth in Exhibit H of Plaintiffs' RJN.

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1

Accordingly, Welf. & Inst. Code § 14131.10 and the actions of the State officials which are

2 complained of which implement § 14131.10 , are (1) clearly contrary to the express provisions of

3 the express purposes clause of § 5000(a) and the no-restrictions-in-procedures clause of

4 § 5001(f)(1)(A), and (2) will destroy and prevent the purposes for which Congress enacted these

5 statutes to achieve, (namely, to protect and maintain California's Medicaid program during a period

6 of economic downturn, including averting cuts in Medicaid services), – so as to be hence preempted

7 under the Supremacy Clause, by §§ 5000(a) and § 5001(f)(1)(A) of the Enhanced FMAP Measure.30

8

PLAINTIFFS HAVE MET THE FACTORS FOR PRELIMINARY INJUNCTION

9

To obtain a preliminary injunction, a plaintiff must establish “he is likely to succeed on the

10 merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the

11 balance of equities tips in his favor, and that an injunction is in the public interest.” American

12 Trucking Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009). Plaintiffs satisfy

13 each of these requirements.

14

A. Likelihood of success on the merits.

15

Plaintiffs have demonstrated prior in this Memorandum, that they have a high likelihood of

16 success on the merits.

17

B. Likelihood of irreparable injury.

18

In this case there is a certainty, not a mere likelihood, that the (1) two individual Medicaid

19 beneficiary plaintiffs, (2) the thousands of Medicaid beneficiaries who are dental, podiatry,

20 optometric, and psychology patients of the plaintiff LifeLong Care, (3) the 7,500 Medicaid

21 beneficiaries who are annually served by the ILC plaintiff, (4) the 330,000 disabled persons, many

22 of whom are Medicaid beneficiaries, who are served by the 25 independent living centers who are

23 members of the plaintiff CFILC, and (5) the 15 Medicaid beneficiaries of the plaintiff SF Gray

24 Panthers, will be denied and be unable to obtain these needed services. 25

26 30 Title V, Division B, of the Stimulus Act.

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1

In this respect:

2

(1) Marty Lynch, Ph.D., MPA, – the Executive Director of the plaintiff LifeLong

3 Care, – states that this will cause great harm especially to the elderly and disabled patients of

4 LifeLong Care, – including the:

5

- 1,300 adult Medi-Cal beneficiaries who are dental patients,

- 1,600 Medi-Cal beneficiaries who are podiatry patients,

6

- 700 Medi-Cal beneficiaries who are optometry patients,

- Med-Cal beneficiaries who are mental health patients, 7

of the nine health clinics of LifeLong Care in Berkeley, Oakland, and Novato, for the following 8

reasons: 9

- In view of the fact that poor oral health is linked with heart disease, stroke, 10

respiratory disease, diabetes, and low birth weight, the elderly and disabled Medi-Cal beneficiaries 11

who LifeLong Care serves will be unable to manage or care for their diabetes, cardio vascular 12
problems, and other chronic problems without adequate dental care.31 13

- In view of the fact that medically necessary podiatry services are critical in 14

managing chronic diseases like diabetes patients, elimination of this service will adversely implicate 15

16 diabetes patients who have circulatory problems;32 and,

17

- LifeLong Care patients will no longer be able to receive optometry care.33

18

(2) Plaintiff Margaret Dowling, age 69, a paraplegic Medicaid beneficiary who receives

19 536 hours monthly of personal care from 5 attendants under Medicaid, has low vision from head 20 injury, deaf left ear, and is incontinent from recovering from bowel cancer in 2009;34 from skin

21 infection in 2007-2008 which caused open boils (each opening, discharging, then drying and

22

23

31 ¶ 8 Lynch Decl.

24

32 ¶ 9 Lynch Decl.

25

33 ¶ 9 Lynch Decl.

26 34 ¶ 3 Dowling Decl.

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1 healing), and from hospitalization in 2008 for urinary tract infection with consequent constant need 2 for incontinence wipes and washes.35 She has tooth decay and teeth misalignment,36 and may need 3 acupuncture, chiropractic, and podiatry services due to her conditions.37

4

Accordingly, she will be denied dental services, incontinence creams and washes,

5 optometry for her low-vision, audiology for her deafness, and acupuncture, chiropractic, and

6 podiatry services, which is medically necessary for her permanent conditions if the 9 Medicaid

7 services cease; -- which will inevitably cause great suffering (as for just one example out of many, a

8 mass of raw, bleeding, bloody and painful skin for which there is little or no relief if not prevented 9 by incontinence creams and washes).38

10

- (3) Plaintiff Mark Beckwith, age 52, a Medicaid beneficiary, who is a quadriplegic due

11 to spinal muscular atrophy, type 2 (SMA11), with wasted muscles with very little ability to move,39

12 (who receives 655 hours monthly of personal care from 8 attendants under Medicaid),40 and

13 requires oxygen 24 hours a day to survive41 – the result of which he is permanently bedridden most

14 of the hours of each day,42 – states that for this and other afflictions he is permanently incontinent

15 with constant need for incontinent creams and washes.43 He is very near sighted so as to require

16 two pairs of glasses because he cannot move his head enough to use bifocals, and without glasses

17 35 ¶¶ 8, 12, 20 Dowling Decl.
18
36 ¶ 14 Dowling Decl. 19

20

37 ¶ 11 Dowling Decl.

21

38 ¶ 13, Dowling Decl.

22

39 ¶ 3 Beckwith Decl.

23

40 ¶ 7 Beckwith Decl.

24

41 ¶ 4 Beckwith Decl.

25

42 ¶ 15 Beckwith Decl.

26 43 ¶ 15 Beckwith Decl.

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1 his eyesight is inadequate for his daily activities.44

2

Further, because of his age and these conditions, plaintiff Beckwith may need at any time

3 acupuncture, chiropractic, podiatric, and psychology services.45

4

From the above, plaintiff Beckwith will manifestly be subjected to immediate insufferable

5 pain and suffering, if the 9 optional services cease to be furnished on July 1, 2009; – which will be 6 magnified due to his quadriplegia and inability to breathe without the oxygen he needs to survive).46

7

(5) The executive directors of the three plaintiffs:

8

- Independent Living Center of Southern California, Inc., which assists 7,500 disabled

9

Medi-Cal beneficiaries to obtain medical services to enable them to live independently in

10

the community,

11

- California Foundation for Independent Living Centers, whose 25 independent living

12

center members assist 350,000 disabled Medi-Cal beneficiaries to obtain medical services to

13

enable them to live independently in the community, and,

14 - SF Gray Panthers, which assists its 15 members who are Medi-Cal beneficiaries, and
15 the elderly to obtain needed medical care,
16 each state essentially the same, namely, that in their experience it is already difficult for Medi-Cal
17 beneficiaries to obtain the 9 Medicaid services from providers, so that when these 9 Medicaid
18 services are eliminated, that their Medi-Cal clients will be denied these services, which will
19 cause them attendant pain and suffering from untreated conditions.47
20 Also, the elimination of the 9 Medicaid services will manifestly impede and injure the
21 ability of these organizations to carry out their function of enabling and assisting individuals,
22

23

44 ¶ 16 Beckwith Decl.

24

45 ¶ 18, Beckwith Decl.

25

46 ¶ 19 Beckwith Decl.

26 47 ¶ 10 Vescovo Decl.; ¶ 6 Favuzzi Decl.; ¶ 8 Lyon Decl.

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1 including Medi-Cal beneficiaries, to live independently in the community (in the case of the 2 plaintiffs ILC and the CFILC) and to aid the elderly needy (in the case of SF Gray Panthers).48

3

Summary and conclusion of this sub-point

4

The plaintiffs have established overwhelming evidence that millions of Medicaid

5 beneficiaries, including:

6

- the two individual Medicaid beneficiaries who are plaintiffs,

- the Medi-Cal beneficiaries who are patients of the LifeLong Care clinics;

7

- the thousands of Medi-Cal beneficiaries who are served by the plaintiffs ILC, CFILC, and

8

SF Gray Panthers,

9 will be denied the 9 Medicaid services in question, causing them pain and suffering: which facially

10 constitutes irreparable injury.

11 4. 12 13 14 15

The plaintiffs LifeLong Care, ILC, CFILC, and SF Gray Panthers also suffer irreparable injury on their own account, in that (1) LifeLong Care suffers permanent loss of income and is forced to cut its services to its needy clientele and (2) the member/service organizations (ILC, CFILC, and SF Gray Panthers) are impeded and injured in their ability to carry out the functions for which they are organized to provide, namely, to enable the blind, elderly, and disabled of our population to obtain, among other things, adequate medical care.

16

First: The CPhA decision, 563 F.3d at 851-852, supra, establishes that, by virtue of the

17 Eleventh Amendment, that providers of Medicaid services are irreparably injured when their

18 reimbursement for Medicaid services is unlawfully reduced.

19

Second: In addition to the immediate health impacts on LifeLong Care patients, the loss of

20 Medi-Cal revenue for adult dental care, podiatry, optometry, and psychology services will lessen

21 LifeLong Care's ability to provide care to uninsured members of its community as well.49 LifeLong

22

23

24

25

48 See, ¶ 11 Favuzzi Decl.

26 49 ¶ 11 Lynch Decl.

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1 Care already does not have adequate care to serve all needy patients and must place many patients 2 on waiting lists.50

3

Third: Similarly, the elimination of the 9 Medicaid services will impede and impair the

4 ability of the plaintiffs ILC and the statewide CFILC to carry out their purposes of enabling the

5 thousands of persons with disabilities who are the clients of the ILC or the clients of members of

6 the statewide CFILC to be able to achieve and continue independence, including equal access to

7 society and to all activities of society, outside of institutions; and, similarly, will also impede and

8 impair the ability of the plaintiff SF Gray Panthers to carry out its purposes of aiding the elderly 9 needy to obtain adequate medical care.51

10

Conclusion on this sub-point

11

It is facially manifest, and the evidence is overwhelming, that the elimination of the 9

12 Medicaid services will cause irreparable injury to millions of Medi-Cal recipients, – including the

13 two individual plaintiffs Beckwith and Dowling and the Medi-Cal beneficiaries who are served by

14 the four plaintiff organizations, (LifeLong Care, ILC, CFILC, and SF Gray Panthers).

15 5. There is no defense that no appropriations have been enacted by the Legislature,

16

or that the courts may not, under Separation of Powers, compel the Legislature to

enact any appropriations in this case.

17

These defense objections have been fully resolved against the defendants by Dowling v. 18

Davis, 19 F.3d 445 (9th Cir. 1994); White v. Davis, 108 Cal.App.4th 197, 212-216 (2002)52 and 19

White v. Davis, 30 Cal.4th 528 (2003), which held that payments to Medicaid providers are required 20

by federal law, even in the absence of any appropriations therefore by the Legislature. 21

22

23 50, and ¶11 Lynch Decl.
24

51 See, ¶ 11 Favuzzi Decl. 25

26

52 Ordered published by the Supreme Court in White v. Davis 30 Cal.4th 528, fn. 14,

(2003).

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1 6. 2 3

There is also, to boot, a continuing State appropriation of $2 billion to pay Medicaid providers, when there are no existing other state appropriations to pay Medicaid providers, out of which the defendants can easily comply with the court order which is requested in the case at bar.

4

I.e., White, 108 Cal.App.4th at 212-216, holds that enacted continuing appropriations are

5 valid even in the absence of any State budget.

6

In this respect there is in the case at bar, in any event, an existing continuing annual

7 appropriation under Calif. Government Code § 15331.1 of a $2 billion annual fund,53 called the

8 Medical Providers Interim Payment (MPIP) Fund, for each of the fiscal years 2009-2010 and 2010-

9 2011, out of which to pay providers of the 9 Medicaid services in question in this lawsuit.

10

(The actual amount of the annually renewed continuing appropriation of Govt. Code

11 § 15331.1 is $1 billion; but to this is added the $1 billion matching federal funds under the regular

12 FMAP provision under 42 U.S.C. §§ 1396b(a)(1) and 1396d(b).)

13

Conclusion: Accordingly, by the above, there is no valid defense claim that there are no

14 appropriations out of which to fund payment to providers of the 9 Medicaid services in question.

15 7. 16 17 18

Also, DHCS has not yet obtained approval by HHS of any amendment to the state Medicaid plan to eliminate the 9 optional Medicaid services. Hence there is no defense available to the defendants, to claim that the state Medicaid plan has already been amended to delete the 9 optional Medicaid services in question, from the state Medicaid plan.

19

The fact that none of the 9 Medicaid services in question have been deleted from the state

20 Medicaid plan filed with HHS is due to DHCS's practice of never filing any request to HHS for

21 approval of any amendment to the state Medicaid plan, except by an ex post facto filing, after the

22 cut or reduction of Medicaid services has already been commenced by DHCS.

23

In this latter respect, see the defendant Director's judicial admission of this practice at 73a

24 53 The $2 billion continuing appropriation consists of $1 billion of State funds from the
25 State's General Fund, ( subd. (a)(1) of Govt. Code § 16531.1), and $1 billion of federal funds
26 from the Federal Trust Fund maintained by the Controller, (subd. (a)(2) of Govt. Code 16531.1) under the Medicaid Act.

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1 of Appendix of Petition for Writ of Certiorari filed by the Director in Case No. 08-12234, 2 Maxwell-Jolly v. Independent Living Center of Southern California, Inc., (cert. den.), in the 3 U.S. Supreme Court.54

4 8. 5

There is no valid defense that HHS is exclusively empowered by Congress to take such action which may be required to enforce the Stimulus Act.

Such a claim was long ago disposed of by Rosado v. Wyman, 397 U.S. 397 (1970) 6

and by the prior-cited Supremacy Clause cases of ILC v. Shewry, 543 F.3d 1050, cert den; 7

8 ILC v. Shewry, 2008 WL3891211, (C.D.Cal.); and CPhA v. Maxwell-Jolly, 563 F.3d at 851-852;

9 -- which decisions reiterate that persons threatened with injury from State action which is

10 preempted, under the Supremacy Clause, by contrary federal law, are entitled to injunctive and

11 declaratory relief.

12 9.
13

Also, Rosado v. Wyman, 397 U.S. 397 (1970), established that in cooperative state-federal programs to which the federal government contributes under the

the Social Security Act, that participation by a State is purely voluntary; so 14
that it is appropriate to order that the State officials perform the court's order to

15

comply with the Social Security Act provision in question or, within a date specified

by the court, cease accepting enhanced FMAP funds under the Enhanced FMAP

16

Measure.

17

Part One: Rosado ruled that AFDC beneficiaries were entitled, in a Supremacy Clause

18 case, to declaratory and injunctive relief against New York for reducing benefits to AFDC

19 beneficiaries contrary to benefit-setting standards of the Social Security Act § 402(a)(23). Rosado

20 then specifically ordered the District Court, – should New York choose not to comply by the date

21

22

54 A copy of Pages 73a of this Appendix of the Director's Petition for Writ of Certiorari is

set forth as Exhibit I of Plaintiffs' RJN.

23

Also, please note that in any event that, as part of the interlocutory and final relief

24 requested to be ordered in the case at bar, that the Court may always order the Director of DHCS to take all steps necessary to amend the state Medicaid plan back again, so as to once again
25 include the 9 Medicaid services in question; – (were it to become the case that HHS, eventually,

26 approves any application of DHCS to amend the state Medicaid plan to delete the 9 Medicaid services in question, from the state Medicaid plan).

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1 set by the District Court, – to “issue its order restraining the further use of federal monies pursuant

2 to the present statute.”

3`

Part Two: Rosado, in so ruling, incidentally ruled that:

4

“We have considered and rejected the argument that a federal court is without power to

. . . prohibit the use of federal funds by the States in view of the fact that Congress has

5

lodged in the Department of HEW the power to cut off federal funds for noncompliance

6

with statutory requirements. We are most reluctant to assume Congress has closed the

avenue of effective judicial review to those individuals most directly affected by the

7

administration of its program. [citations omitted].” 397 U.S. at 420.

8 Also, Justice Douglas, concurring, pointed out, first, that the fact that a State may choose to
9 refuse to comply with the federal requirements at the cost of losing federal funds is, of course, a
10 risk that any welfare plaintiff takes; and second, that where a suit involves an alleged conflict
11 between a state regulation and federal law, neither the United States nor HEW is a necessary
12 party to such an action, (in that the wrong alleged is the State's failure to comply with federal
13 requirements in the use of federal funds, not, HEW's).
14 Also, the above ILC and CPhA decisions implicitly rejected any State claim that HHS and
15 the United States are necessary parties to this type of Social Security Act litigation.
16 C. The balance of hardships tips strongly in Plaintiffs' favor.
17 The State suffers no financial loss because it is receiving $3.76 billion extra federal funds
18 per year under the Enhanced FMAP Measure out of which to pay the small amount of $129.4
19 million to continue the 9 Medicaid services, which is a function for which the State accepted the
20
extra $3.76 billion annual federal subsidy to accomplish. On the other hand, millions of Medicaid 21
beneficiaries suffer. The balance of hardships is therefore all on the side of the plaintiffs. 22

23 D. The public interest strongly favors grating relief.
24 Finally, the public interest weighs heavily in favor of granting relief to plaintiffs. First, the
25 26 injunctive relief carries out Congress' express purposes to protect and maintain and not cut

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1 Medicaid services in a state. And secondly, “Our society as a whole suffers when we neglect the

2 poor, the hungry, the disabled.” Lopez v. Heckler, 713 F.2d 1432, 1437 (9th Cir. 1983).

3

SUMMARY AND RELIEF REQUESTED

4

For the foregoing reasons, plaintiffs' motion for preliminary injunction should be granted.

5 Dated: June 30, 2009

6

Respectfully submitted,

7

LYNN S. CARMAN

8

JESSIE M. SANDOVAL

9

By

/s/ Lynn S. Carman

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Attorneys for Plaintiffs

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______________________________________________________________________________ Plaintiffs' Motion for a Preliminary Injunction, Memorandum in Support, Case No. C09-02307 EMC -25-

 
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1 EDMUND G. BROWN JR. Attorney General of California
2 KARIN S. SCHWARTZ Supervising Deputy Attorney General
3 State Bar No. 209455 455 Golden Gate Avenue, Suite 11000
4 San Francisco, CA 94102-7004 Telephone: (415) 703-1382
5 Fax: (415) 703-5480 E-mail: karin.schwartz@doj.ca.gov
6 Attorneys for Defendant David Maxwell-Jolly, Director, California Department of Health Care
7 Services

8

IN THE UNITED STATES DISTRICT COURT

9

FOR THE NORTHERN DISTRICT OF CALIFORNIA

10

11

12

THE GRAY PANTHERS OF SAN

C 09-02307-PJH

13 FRANCISCO, a nonprofit corporation;

MARK BECKWITH; CALIFORNIA

14 FOUNDATION FOR INDEPENDENT

LIVING CENTERS, INC., a nonprofit

DEFENDANT MAXWELL-JOLLY’S

15 corporation; INDEPENDENT LIVING

NOTICE OF MOTION AND MOTION

CENTER OF SOUTHERN CALIFORNIA, TO DISMISS (Fed. R. Civ. P. 12(B)(1) &

16 INC., a nonprofit corporation; LIFELONG (6)), AND SUPPORTING

MEDICAL CARE, a nonprofit corporation; MEMORANDUM

17 and MARGARET DOWLING,

Date:

August 19, 2009

18

Plaintiffs, Time:

9:00 a.m.

Judge

The Honorable Phyllis J.

19

v.

Hamilton

Trial Date N/A

20

Action Filed: May 26, 2009

ARNOLD SCHWARZENEGGER,

21 Governor of State of California; KIM

BELSHE, Secretary of Health and Human

22 Services Agency of the State of California;

DAVID MAXWELL-JOLLY, Director of

23 Department of Health Care Services of the

State of California; JOHN CHIANG,

24 Controller of State of California; BILL

LOCKYER, Treasurer of State of

25 California; and MICHAEL E. GENEST,

Director of Finance of the State of

26 California,

27

Defendants.

28

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1

TABLE OF CONTENTS

2

Page

3 Notice of Motion and Motion to Dismiss ....................................................................................... 1

4 Memorandum of Law...................................................................................................................... 1 Statement of Issues to be Decided .................................................................................................. 1
5 Introduction ..................................................................................................................................... 1

6 Statement of Relevant Facts............................................................................................................ 3

7

A. The lawsuit .................................................................................................. 3

B. The Medicaid Act........................................................................................ 3

8

C. Enactment of ABX3 5 ................................................................................. 4

9

D. The American Recovery and Reinvestment Act ......................................... 5

10

E. CMS guidance to states regarding implementation of ARRA .................... 6

Argument ........................................................................................................................................ 7

11

I. Plaintiffs’ claims fail as a matter of law because § 14131.10 does not

12

conflict with ARRA ................................................................................................ 7

A. Plaintiff’s first cause of action fails as a matter of law because §

13

14131.10(b)(1) does not conflict with ARRA’s “purpose” clause ............. 7

14

B. Plaintiffs’ second cause of action fails as a matter of law because § 14131.10(b)(1) does not conflict with ARRA § 5001(f)(3) ........................ 8

15

C. Plaintiffs’ third cause of action fails as a matter of law because §

14131.10(b)(1) does not conflict with ARRA § 5001(f)(1)(a) ................... 9

16

D. Plaintiffs’ fourth cause of action fails as a matter of law because it

17

is entirely derivative of their first three causes of action .......................... 11

II. Plaintiffs’ claims fail as a matter of law because the ARRA provisions at

18

issue are not privately enforceable ........................................................................ 11

19 Conclusion .................................................................................................................................... 12

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1

TABLE OF AUTHORITIES

2

Page

3

CASES 4

Alaska Dept. of Health & Soc. Servs. v. CMS

5

424 F.3d 931 (9th Cir. 2005)..................................................................................................... 9

6 Alexander v. Sandoval

7

532 U.S. 275 (2001) .......................................................................................................... 11, 12

8 Ashcroft v. Iqbal

129 S. Ct. 1937 (2009) .............................................................................................................. 8

9

Bell Atlantic Corp. v. Twombly

10

550 U.S. 544 (2007) .............................................................................................................. 8, 9

11 Chapman v. Houston Welfare Rights Org.

12

441 U.S. 600 (1979) ................................................................................................................ 12

13 Chevron U.S.A. v. Natural Res. Defense Council 467 U.S. 837 (1984) .................................................................................................................. 9

14

Dennis v. Higgins

15

498 U.S. 439 (1991) ................................................................................................................ 12

16 Golden State Transit Corp. v. City of Los Angeles

17

493 U.S. 103 (1989) ................................................................................................................ 12

18 Gonzaga University v. Doe 536 U.S. 273 (2002) ...................................................................................................... 2, 11, 12

19

Hibbs v. Winn

20

542 U.S. 88 (2004) .................................................................................................................. 10

21 Independent Living Center of Southern California, Inc. v. Shewry

22

543 F.3d 1050 (9th Cir. 2008)................................................................................................. 12

23 Orkin v. Taylor 487 F.3d 734 (9th Cir. 2007)..................................................................................................... 8

24 Pennhurst State Sch. & Hosp. v. Halderman

25

451 U.S. 1 (1981) ...................................................................................................................... 7

26 Pharmaceutical Research & Mfrs. of America v. Walsh 538 U.S. 644 (2003) .................................................................................................................. 3
27

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1

TABLE OF AUTHORITIES

(continued)

2

Page

3 Satterfield v. Simon & Schuster, Inc. --- F.3d ----, 2009 WL 1708081 (9th Cir. June 19, 2009)....................................................... 10
4

5

Sprietsma v. Mercury Marine 537 U.S. 51 (2002) .................................................................................................................... 7

6 Wyeth v. Levine

7

129 S. Ct. 1187 (2009) .............................................................................................................. 7

8 STATUTES

9 42 U.S.C. § 1396 ............................................................................................................................. 3

10 42 U.S.C. § 1396a ........................................................................................................................... 3
11 42 U.S.C. §1396a(a)(10) ................................................................................................................. 3
12 42 U.S.C. § 1396a(a)(10)(A)........................................................................................................... 4 13
42 U.S.C. § 1396c ........................................................................................................................... 3 14
42 U.S.C. § 1396d(a) ...................................................................................................................... 3 15
Cal. Govt. Code § 99030................................................................................................................. 5 16
Cal. Welf. & Inst. Code 14131.10(c) .............................................................................................. 5 17
Cal. Welf. & Inst. Code § 14131.10(b)(1) ............................................................................. passim 18 19 Cal. Welf. & Inst. Code § 14131.10(b)(2) ...................................................................................... 4
20 Cal. Welf. & Inst. Code, § 14131.10(f)........................................................................................... 5
21 COURT RULES

22 Fed. R. Civ. P. 8(a)(2) ................................................................................................................. 8, 9

23 Fed. R. Civ. Pro. 12(b)(1) ............................................................................................................... 1

24 Fed. R. Civ. Proc. 12(b)(6).............................................................................................................. 1
25 OTHER AUTHORITIES 26 42 C.F.R. § 430.35 .......................................................................................................................... 3 27
American Recovery and Reinvestment Act, § 5000 .............................................................. passim 28
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1

TABLE OF AUTHORITIES

(continued)

2

Page

3 American Recovery and Reinvestment Act, § 5001(f)(1) ..................................................... passim

4 American Recovery and Reinvestment Act, § 5001(f)(3) ..................................................... passim 5

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1

NOTICE OF MOTION AND MOTION TO DISMISS

2

PLEASE TAKE NOTICE that on August 19, 2009, at 9 a.m., or as soon thereafter as the

3 matter may be heard in the United States District Court for the Northern District of California,

4 450 Golden Gate Ave., San Francisco, California, defendant David Maxwell-Jolly, Director,

5 California Department of Health Care Services, will move the court to dismiss the action pursuant

6 to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure.

7

The complaint, and its four causes of action, fail to state a cause of action upon which relief

8 may be granted because (1) as a matter of law, the challenged statute (Cal. Welf. & Inst. Code §

9 14131.10(b)(1)) does not conflict with §§ 5000(a), 5001(f)(1), or 5001(f)(3) of the American

10 Recovery and Reinvestment Act (ARRA); and (2) the ARRA provisions at issue are not privately

11 enforceable.

12

The motion will be and is based on this Notice of Motion and Motion, the accompanying

13 Memorandum of Points and Authorities, the accompanying Request for Judicial Notice, the 14 pleadings and papers filed herein, and the argument of counsel.

15

MEMORANDUM OF LAW

16

STATEMENT OF ISSUES TO BE DECIDED

17

1. Have plaintiffs stated a claim upon which relief may be granted based on a purported

18 conflict between California Welfare and Institutions Code § 14131.10(b)(1) and §§ 5000(a),

19 5001(f)(1), or 5001(f)(3) of the American Recovery and Reinvestment Act (ARRA)?

20

2. May §§ 5000(a), 5001(f)(1), or 5001(f)(3) of ARRA be enforced by private parties?

21

INTRODUCTION

22

The court should dismiss the complaint because it fails to state a cause of action upon

23 which relief may be granted. Plaintiffs contend that a state statute, California Welfare and

24 Institutions Code § 14131.10(b)(1), is preempted by §§ 5000(a), 5001(f)(1), and 5001(f)(3) of the 25 American Recovery and Reinvestment Act (ARRA). There is, however, no conflict between 26 ARRA and § 14131.10(b)(1), which eliminated certain Medicaid benefits (or services) in some 27 circumstances, the provision of which are, and remain, optional under the Medicaid Act.

28 1
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1

Plaintiffs’ claims fail as a matter of law because, although ARRA prohibits states from

2 restricting eligibility for the Medicaid program as a condition for receiving funds, it does not

3 prohibit states from restricting the benefits and services that are available to those who are

4 eligible for Medicaid. Congress made clear that, as a condition for receiving ARRA funds, states

5 may not impose more restrictive “eligibility” criteria on potential Medicaid beneficiaries, and to

6 that end included a “Maintenance of Eligibility” requirement in ARRA. §§ 5000(a), 5001(f)(1).

7 However, Congress did not impose any “Maintenance of Benefits” or “Maintenance of Service”

8 conditions on receipt of funds. Indeed, ARRA’s “purpose” clause makes an important distinction

9 between “cuts to . . . benefits or services,” which ARRA seeks to “help[] avert,” and

10 “constrictions of income eligibility requirements,” which ARRA seeks to “prevent.” § 5000(a)(2).

11 Although § 14131.10(b)(1) eliminated some optional benefits in certain circumstances, it did not

12 affect eligibility in any way (and plaintiffs do not allege otherwise), and it therefore is not

13 preempted by ARRA. This understanding is confirmed by a recent guidance memorandum issued

14 by the Centers for Medicare & Medicaid Services (CMS), the federal agency charged with

15 implementing ARRA’s Medicaid provisions, that explains that states may restrict benefits and

16 services without violating ARRA. In light of the plain text of ARRA, its purpose clause, and

17 CMS’s guidance, and its legislative history, this court should hold that plaintiffs’ allegations of a

18 conflict between § 14131.10(b)(1) and ARRA fail as a matter of law, and dismiss the complaint

19 without leave to amend.

20

Plaintiff also contends that § 14131.10(b)(1) conflicts with ARRA’s prohibition against

21 depositing ARRA funds into a rainy day or reserve fund. This challenge fails because nothing in

22 § 14131.10(b)(1) addresses the disposition of ARRA funds, let alone directs that they be

23 deposited in a reserve fund. Beyond that, as the court may confirm based on judicially noticeable

24 documents and facts, this claim is frivolous: far from operating with a reserve, the State currently

25 has a negative cash balance (-$11 billion) and has been forced to issue I.O.U.s.

26

Finally, plaintiffs’ claims fail as a matter of law for a separate and independent reason: the

27 ARRA provisions at issue are not enforceable by private parties. See Gonzaga University v. Doe,

28 536 U.S. 273 (2002). 2
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1

STATEMENT OF RELEVANT FACTS

2

A. The Lawsuit

3

Plaintiffs are a membership organization that advocates on behalf of the elderly; several

4 nonprofit organizations that provide services to Medicaid beneficiaries; and two individual

5 Medicaid beneficiaries. They challenge the California legislature’s decision, in February 2008, to

6 eliminate nine “optional” Medicaid services effective July 1, 2009. See Cal. Welf. & Inst. Code §

7 14131.10(b)(1). Their first three causes of action allege that § 14131.10(b)(1) is preempted by,

8 respectively, (1) section 5000(a) of ARRA, a “purposes” clause; (2) section 5001(f)(3), which

9 prohibits the State from using ARRA funds to create a “rainy day” fund; and (3) section

10 5001(f)(1)(A), which prohibits a State from adopting “eligibility standards, methodologies, or

11 procedures under its State Plan” that are “more restrictive” than those that were in effect on July

12 1, 2008. Defendant Maxwell-Jolly’s Request for Judicial Notice (RJN), Ex. A. Plaintiffs’ fourth

13 cause of action seeks “declaratory relief” that § 14131.10(b)(1) is preempted by ARRA. 14 Plaintiffs also seek various forms of injunctive relief. (First Amended Complaint (FAC) at 1615 18.)

16

B. The Medicaid Act

17

Medicaid is a cooperative federal-state program that provides federal financial assistance to

18 participating states to reimburse certain costs of medical treatment for the poor, elderly, and

19 disabled. 42 U.S.C. § 1396. To qualify for federal matching funds, known as the Federal

20 Medical Assistance Percentage (FMAP), a state must establish and administer its Medicaid

21 program through a state plan approved by the Secretary of Health and Human Services (HHS).

22 42 U.S.C. § 1396a. The receipt of federal funding is expressly conditioned on compliance with

23 the Medicaid Act, and HHS is authorized to withhold funds for noncompliance. 42 U.S.C. §

24 1396c; see also 42 C.F.R. § 430.35. The Centers for Medicare & Medicaid Services (CMS) is the

25 federal agency that administers the Medicaid program on behalf of the Secretary of HHS. See

26 Pharmaceutical Research & Mfrs. of America v. Walsh, 538 U.S. 644, 650 n.3 (2003).

27

A state that participates in Medicaid must determine which services it will provide. See 42

28 U.S.C. § 1396d(a). To receive federal approval, the Medicaid Act mandates that a state plan 3

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1 include only seven enumerated medical services. See id. §§ 1396a(a)(10), 1396d(a)(1)-(5), (17),

2 (21) (including as mandatory: inpatient hospital, outpatient hospital, laboratory and x-ray, nursing

3 facility, physician, nurse-midwife, and nurse-practitioner services). A state may also elect to

4 provide optional medical services, such as dental services, prosthetics, and prescription drugs. See

5 id. §§ 1396a(a)(10)(A), 1396d(a). At issue here is the California legislature’s decision in

6 February 2009, as part of its response to the State’s fiscal emergency, to eliminate some (but not

7 all) of the optional services previously offered under Medi-Cal in certain circumstances, effective

8 July 1, 2009.

9

C. Enactment of ABX3 5

10

On December 19, 2008, the Governor of California declared a fiscal emergency and

11 directed the California legislature into a special session. RJN, Ex. B. The Governor noted that

12 there was an approximately $15 billion General Fund deficit for the 2008-2009 fiscal year that, if

13 unaddressed, would grow to $42 billion with the next 18 months. (Id.) Therefore, the Governor

14 stated that “immediate and comprehensive action to reduce current spending must be taken to

15 ensure, to the maximum extent possible, that the essential services of the State are not jeopardized

16 and the public health and safety is preserved.” (Id.)

17

The Legislature enacted a series of budget measures in response, including, in February

18 2009, ABX3 5 as urgency legislation to take effect immediately. RJN, Ex. C, at 3, 13. ABX3 5

19 made a variety of reductions to various state programs; at issue here is its enactment of Welfare

20 and Institutions Code § 14131.10(b)(1), which “excluded from [Medi-Cal] coverage” the

21 following services: adult dental services, acupuncture services, audiology services and speech

22 therapy services, chiropractic services, optometric and optician services, podiatric services,

23 psychological services, and incontinence creams and washes. However, such services remain

24 covered if they constitute “[m]edical and surgical services provided by a doctor of dental

25 medicine or dental surgery, which, if provided by a physician, would be considered physician

26 services, and which services may be provided by either a physician or a dentist in this state.” Id.,

27 § 14131.10(b)(2). In addition, these services are covered if they are pregnancy-related; provided

28 to beneficiaries under the Early and Periodic Screening Diagnosis and Treatment Program; or 4
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1 provided to beneficiaries receiving long term care in certain nursing facilities licensed by the

2 State. Id., § 14131.10(b)(3) & (c). It was anticipated that § 14131.10(b)(1) would result in

3 $129.4 million in savings to General Fund expenditures in the 2009-2010 fiscal year. RJN, Ex. D

4 at 2 (p. 4 of the original document).

5

Section 14131.10 was to take effect 90 days after ABX3 5 became operative. Welf. & Inst.

6 Code, § 14131.10(f). However, the Legislature provided that § 14131.10 (and certain other

7 program changes) would not to take effect if the Treasurer and Director of Finance notified the

8 Joint Legislative Budget Committee by April 1, 2009 that the State would receive at least $10

9 billion in federal stimulus funds under ARRA that would offset General Fund expenditures, and

10 that the funds would “be available” to the State by June 30, 2010. Cal. Govt. Code § 99030; RJN,

11 Ex. C , at 13 (AB 5, § 12). On or about March 27, 2009, however, the Treasurer and Director of

12 Finance issued findings that insufficient funds would be available under ARRA to avoid

13 implementation of § 14131.10. See RJN, Ex. E, Attachment at 1 (“Determination).

14

D. The American Recovery and Reinvestment Act

15

Congress enacted ARRA on February 17, 2009. RJN, Ex. A (H.R. 1, 111th Cong., Pub. L.

16 No. 111-5 (1st Sess. 2009)). At issue here is Title V of the Act, which provides “state fiscal

17 relief,” including a temporary increase in FMAP payments, for all states through the first quarter

18 of the 2011 fiscal year. See id., § 5000, et seq. In enacting these provisions, Congress expressly

19 intended: (1) to “provide fiscal relief to the States in a period of economic downturn”; and (2) “to

20 protect and maintain State Medicaid programs during a period of economic downturn, including

21 by helping to avert cuts to provider payment rates and benefits or services, and to prevent

22 constrictions of income eligibility requirements for such programs, but not to promote increases

23 in such requirements.” Id., § 5000(a)(1)-(2). Under ARRA, qualifying states receives a general

24 6.2 percent increase in their FMAP, and states with relatively high growth in unemployment rates

25 receive additional increases based on quarterly unemployment statistics. Id., § 5001(b), (c).

26

In order to receive enhanced FMAP, a state must comply with “MAINTENANCE OF

27 ELIGIBILITY REQUIREMENTS” set forth in § 5001(f)(1) of the act, which provides in relevant part:

28

(1) MAINTENANCE OF ELIGIBILITY REQUIREMENTS –

5

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1

(A) IN GENERAL. – Subject to subparagraphs (B) and (C), a State is not eligible for

an increase in its FMAP . . . if eligibility standards, methodologies, or procedures

2

under its [Medicaid] State plan . . . are more restrictive than the eligibility standards,

methodologies, or procedures, respectively, under such plan (or waiver) as in effect

3

on July 1, 2008.

4 H.R. 1, § 5001(f)(1). A state is also ineligible for enhanced FMAP if it merely deposits those

5 funds in a reserve rather than spending them on state programs:

6

(3) STATE’S APPLICATION TOWARD RAINY DAY FUND. – A State is not eligible for an

increase in its FMAP. . . if any amounts attributable (directly or indirectly) to such

7

increase are deposited or credited into any reserve or rainy day fund of the State.

8 Id., § 5001(f)(3).

9

E. CMS Guidance to States Regarding Implementation of ARRA

10

Since February 2009, CMS has issued several letters and fact sheets to assist the States in

11 complying with ARRA’s requirements. It has provided guidance concerning both substantive

12 provisions at issue here: §§ 5001(f)(1) and (f)(3).

13

With respect to § 5001(f)(1), CMS has made clear that ARRA prohibits States from

14 restricting eligibility for Medicaid, as distinct from the medical services provided under the Act.

15 Thus, in a recent communication with the states, CMS explained that a state could eliminate

16 Medicaid services without jeopardizing enhanced FMAP:

17

Question 19: Can States modify or eliminate services, as opposed to eligibility

criteria, and still qualify for the increased FMAP?

18

Answer: If the change in the service has no potential impact on an individual’s

19

ability to maintain Medicaid eligibility, such a change would not disqualify a State

from the increased FMAP.

20 RJN, Ex. F at 8; see also id. (response to Question 20: reduction in optional services provided

21 would not disqualify a State from receiving FMAP because no beneficiaries would lose

22 eligibility). Consistent with this understanding, CMS explained that “procedures,” as utilized in §

23 5001(f)(1), “refers to those actions taken by the State in administration of their Medicaid

24 eligibility or redetermination process,” as distinct from medical services. Id. at 6.

25 With respect to § 5001(f)(3), CMS has explained that the availability of enhanced FMAP

26 may free up funds that may be spent either on Medicaid or non-Medicaid purposes: “[t]he

27 availability of increased FMAP funding will free-up State funds, which may be spent on activities

28

6

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1 that may or may not be related to the Medicaid program.” RJN, Ex. F at 12 (“Answer” to

2 Question 31); see also id. (“States may use this freed up State money to fund other programs

3 within the State, such as education, or to maintain aspects of their Medicaid program that may

4 have been previously cut due to budgetary constraints.”).

5

ARGUMENT

6

Plaintiffs’ complaint, and all the causes of action within it, fail as a matter of law as to all

7 defendants because (1) § 14131.10(b)(1) does not conflict with ARRA or stand as an obstacle to

8 its purposes; and (2) plaintiffs cannot privately enforce the ARRA provisions at issue.

9 I. 10 11

PLAINTIFFS’ CLAIMS FAIL AS A MATTER OF LAW BECAUSE § 14131.10 DOES NOT CONFLICT WITH ARRA
Plaintiffs bear a heavy burden in pursuing their preemption claim that they cannot meet

here. The Supreme Court has identified two “cornerstones” of a preemption case. See Wyeth v. 12
Levine, 129 S. Ct. 1187, 1194 (2009). “First, ‘the purpose of Congress is the ultimate touchstone

13

in every pre-emption case.”’ Id. (citation omitted). “Second, ‘[i]n all pre-emption cases, and 14

particularly in those in which Congress has “legislated . . . in a field which the States have 15
traditionally occupied,” . . . we “start with the assumption that the historic police powers of the

16

States were not to be superseded by the Federal Act unless that was the clear and manifest 17

purpose of Congress.”’” Id. at 1194-95. Plaintiffs here are pursuing an “implied” or “conflict”

18 preemption claim, as ARRA does not contain an “express” preemption clause. Accordingly,
19

plaintiffs must demonstrate either that it is “‘impossible for a private party to comply with both 20

state and federal requirements,’” or that state law “‘stands as an obstacle to the accomplishment

21 and execution of the full purposes and objectives of Congress.’” Sprietsma v. Mercury Marine,
22

537 U.S. 51, 64 (2002). Because § 14131.10 is entirely consistent with ARRA and does not 23
conflict with it in any way, plaintiffs’ preemption claim fails as a matter of law.

24

A. Plaintiff’s first cause of action fails as a matter of law because §

25

14131.10(b)(1) does not conflict with ARRA’s “purpose” clause

26

Plaintiffs contend that § 14131.10 conflicts with the “purpose” clause of ARRA. As an

27 initial point, because the purpose clause is advisory or hortatory rather than mandatory, it cannot

28 support a cause of action. See Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 24 (1981) 7
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1 (declining to infer a private cause of action because statute spoke in terms “intended to be

2 hortatory, not mandatory”); Orkin v. Taylor, 487 F.3d 734, 739 (9th Cir. 2007) (holding that

3 “precatory” provision did not create “any enforceable law”).

4

Beyond that, there is no conflict. The ARRA purpose clause makes an important

5 distinction between “cuts to . . . benefits or services,” which ARRA merely seeks to “help[]

6 avert,” and “constrictions of income eligibility requirements,” which ARRA seeks to “prevent.”

7 § 5000(a)(2). Beyond cavil, the State’s receipt of enhanced FMAP will “help[] to avert cuts”

8 under Medicaid. However, the State has not received sufficient ARRA funds to avert all cuts

9 entirely. See RJN, Ex. C , at 13 (AB No. 5, § 12); id., Ex. E, Attachment at 1 (“Determination).

10 Nothing in ARRA precludes the States from cutting “benefits or services,” see § 5000(a)(2),

11 which is what the State has done here, as distinct from constricting eligibility requirements, which

12 it has not.

13

B. Plaintiffs’ second cause of action fails as a matter of law because §

14131.10(b)(1) does not conflict with ARRA § 5001(f)(3) 14

15

Plaintiffs contend that § 14131.10(b)(1) conflicts with ARRA’s prohibition against deposit

16 of enhanced FMAP into a reserve or “rainy day” fund, § 5001(f)(3). Plaintiffs’ facial challenge to

17 § 14131.10(b)(1) fails as a matter of law: nothing in § 14131.10 requires or authorizes deposit of

18 enhanced FMAP into a rainy day fund, or, for that matter, addresses in any matter the disposition

19 of the funds.

20

Plaintiffs contend, nonetheless, that “defendant officers have allowed savings resulting to

21 the State from use of enhanced FMAP . . . to sink into the fungible funds of the State of

22 California” rather than to be used directly for Medicaid. (FAC, ¶ 41.) This pleading is entirely

23 conclusory and therefore insufficient to state a claim. Bell Atlantic Corp. v. Twombly, 550 U.S.

24 544, 555 (2007) (explaining that a “plaintiff's obligation to provide the ‘grounds’ of his

25 ‘entitle[ment] to relief’ requires more than labels and conclusions”); see also Ashcroft v. Iqbal,

26 129 S. Ct. 1937, 1949 (2009) (citing Twombly); Fed. R. Civ. P. 8(a)(2). But even were this

27 allegation adequately pled, plaintiffs’ claim would fail as a matter of law because nothing in the

28 text of § 5001(f)(3) prohibits the State from applying savings due to enhanced FMAP to offset 8
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1 non-Medicaid expenditures. CMS has confirmed as much in its guidance materials to the States.

2 RJN, Ex. F at 12-13 (“States may use this freed up State money to fund other programs within the

3 State, such as education, or to maintain aspects of their Medicaid program that may have been

4 previously cut due to budgetary constraints.”). The federal agency’s interpretation, which is

5 entirely consistent with the language of ARRA, is entitled to substantial deference. Chevron

6 U.S.A. v. Natural Res. Defense Council, 467 U.S. 837, 844 (1984) (“We have long recognized

7 that considerable weight should be accorded to an executive department’s construction of a

8 statutory scheme it is entrusted to administer.”); Alaska Dept. of Health & Soc. Servs. v. CMS,

9 424 F.3d 931, 939-40 (9th Cir. 2005) (CMS entitled to deference with respect to Medicaid Act).

10

Plaintiff also alleges, in similarly conclusory fashion, that the State has “s[u]nk” the

11 enhanced FMAP “to be reserved, used as a rainy day fund.” Again, this allegation is too

12 conclusory to satisfy federal pleading requirements. See Twombly, 550 U.S. at 555 (“[A]

13 formulaic recitation of the elements of a cause of action will not do.”); Fed. R. Civ. P. 8(a)(2).

14 Beyond that, it is entirely counterfactual, as this court may confirm by judicially noticing facts

15 that are beyond dispute: far from enjoying any reserves, the State is running out of cash and has

16 issued I.O.Us. because of that fact. RJN, Ex. G; see also id., Ex. H at 4 (reflecting that, as of June

17 30, 2009, the state had a negative cash balance of - $11 billion).

18

C. Plaintiffs’ third cause of action fails as a matter of law because §

14131.10(b)(1) does not conflict with ARRA § 5001(f)(1)(A) 19

Finally, plaintiffs suggest that elimination of the optional benefits violates ARRA’s

20

“maintenance of eligibility requirements” prohibition, in particular the prohibition against

21

adopting “eligibility standards, methodologies, or procedures under its State Plan” that are “more

22

restrictive” than those in effect on July 1, 2008. ARRA, § 5001(f)(1)(A). Specifically, plaintiffs

23

contend that the word “procedures,” as used in ARRA, encompasses “services” such as the

24

optional services described in § 14131.10(b)(1).

25

Plaintiffs’ argument fails as a matter of law under the plain text of the statute and classic

26

canons of statutory construction. It is a “cardinal rule that statutory language must be read in

27

context [since] a phrase gathers meaning from the words around it.” Hibbs v. Winn, 542 U.S. 88,

28

9

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1 101 (2004). The ultimate purpose, of course, is to effectuate congressional intent, of which the

2 plain text is the best evidence. Here, the specific provision on which plaintiffs rely occurs in a

3 section entitled “Maintenance of Eligibility Requirements,” not “Maintenance of Benefits or

4 Services.” According to its plain meaning, and within context, § 5001(f)(1)(A) restricts states

5 from constricting “eligibility” standards, methodologies, or procedures. Because § 14131.10 does

6 not restrict the “procedures” by which a Medi-Cal beneficiaries “eligibility” is determined, there

7 is no conflict between § 14131.10 and § 5001(f)(1)(A), and plaintiffs’ claims fail as a matter of

8 law. This is consistent with Congress’s express purpose in enacting these provisions, and the

9 distinction it made between “cuts to . . . benefits or services,” which ARRA was only intended to

10 “help[] to avert,” and “constrictions” to “income eligibility requirements,” which ARRA was

11 intended to “prevent.” § 5000(a)(2).

12

Given the unambiguous statement of Congressional purpose and the statutory text, there is

13 no need to resort to extrinsic aids. However, defendant notes that this understanding of §

14 5001(f)(1)(A) is supported by CMS’s guidance regarding the statute. See Satterfield v. Simon &

15 Schuster, Inc., --- F.3d ----, 2009 WL 1708081, at *4 (9th Cir. June 19, 2009). As described

16 supra in the Statement of Facts, CMS explained that “procedures,” as utilized in § 5001(f)(1),

17 “refers to those actions taken by the State in administration of their Medicaid eligibility or

18 redetermination process,” as distinct from medical services. RJN, Ex. F at 6. In addition, this

19 understanding is consistent with the legislative history relating to ARRA’s enactment. See, e.g.,

20 155 Cong. Rec. S1474, S1513 (Feb. 4, 2009) (statement of Sen. Grassley) (“The bill only

21 prevents States from cutting Medicaid income eligibility. But if Congress is giving States $87

22 billion and telling them not to cut Medicaid eligibility, I think it is very important we in Congress

23 also tell the States that they can't cut benefits. But this bill doesn't do that.”), attached as RJN, Ex. 24 I.1

25

1 See also 155 Cong. Rec. S1992, S2009 (Feb. 9, 2009) (statement of Sen. Grassley) (“

Does the bill prevent States from getting Medicaid Programs? It does not. The bill only prevents

26 States from cutting Medicaid on one of three propositions, this one being income eligibility. So

that is a good thing. But if Congress is giving States $87 billion and telling them not to cut

27 Medicaid eligibility, shouldn't Congress also tell States they can't cut benefits?”), attached as

RJN, Ex. J; see also id at 2013 (“The bill only prevents States from cutting Medicaid income

28

(continued…)

10

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1

In sum, because § 14131.10(b)(1) does not implicate the State’s “eligibility” process, it

2 does not conflict with, and therefore is not preempted by, § 5001(f)(1)(A).

3

D. Plaintiffs’ fourth cause of action fails as a matter of law because it is

entirely derivative of their first three causes of action 4
In their fourth cause of action, plaintiffs seek declaratory relief based on the allegations in

5

their first three causes of action. This claim must be dismissed because it is dependent on the 6

substantive claims that precede it, all of which fail as a matter of law. 7

II. PLAINTIFFS’ CLAIMS FAIL AS A MATTER OF LAW BECAUSE THE ARRA

8

PROVISIONS AT ISSUE ARE NOT PRIVATELY ENFORCEABLE

9

Plaintiffs’ claims fail as a matter of law for a separate and independent reason: the ARRA

10 provisions at issue are not enforceable by private parties. In Gonzaga University v. Doe, 536 U.S.

11 273 (2002), the Supreme Court explained that, regardless of whether plaintiffs seek to enforce a

12 federal statute under an “implied” rights theory or under § 1983, the court “must first determine

13 whether Congress intended to create a federal right” with its enactment. Id. at 283. This is

14 because, “[l]ike substantive federal law itself, private rights of action to enforce federal law must

15 be created by Congress.” Alexander v. Sandoval, 532 U.S. 275, 286 (2001).

16

A statute only may be found to create a private right of action where its text is “phrased in

17 terms of the persons benefited,” thus reflecting an intention to “confer[s] rights on a particular

18 class of persons.” Gonzaga, 536 U.S. at 284-85 (internal quotations omitted). “[W]here the text

19 and structure of a statute provide no indication that Congress intends to create new individual

20 rights, there is no basis for a private suit, whether under § 1983 or under an implied right of

21 action.” Id. at 286. And “even where a statute is phrased in such explicit rights-creating terms, a

22 plaintiff suing under an implied right of action still must show that the statute manifests an intent

23 ‘to create not just a private right but also a private remedy.’” Id. at 284 (quoting Sandoval).

24

25 (…continued)
26 eligibility.”). Senator Grassley filed an amendment to prohibit States “from generally cutting eligibility and benefits and providers,” but it was not voted on and therefore not incorporated. Id.
27 at S2009-2010; see also id. at 2013 (“I had several other amendments that were never allowed to be made pending.”)
28
11
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1

The ARRA provisions at issue are not privately enforceable because they do not evince any

2 Congressional intent to create either privately enforceable rights or a private remedy. Rather than

3 confer “rights” on private parties, the text of ARRA imposes obligations on the parties to be

4 regulated (i.e., the States). See Sandoval, 532 U.S. at 289 (“Statutes that focus on the person

5 regulated rather than the individuals protected create ‘no implication of an intent to confer rights

6 on a particular class of persons.’”). Further, there is no indication in the text of an intent to create

7 a private remedy; to the contrary, it appears that Congress intended that the obligation to enforce

8 ARRA, and to impose remedies for noncompliance (i.e., forfeiture of FMAP), would lie with

9 CMS. See § 5001(g) (providing for reporting by states to Secretary of HHS).

10

Plaintiffs may contend that, under Independent Living Center of Southern California, Inc. v.

11 Shewry, 543 F.3d 1050 (9th Cir. 2008), private parties may state a claim for injunctive relief

12 under the Supremacy Clause any time there is a purported conflict between a federal and state

13 statute. However, Independent Living was wrongly decided because it conflicts with numerous

14 Supreme Court precedents, including Gonzaga, and because the Supremacy Clause does not itself

15 create any substantive rights. See Dennis v. Higgins, 498 U.S. 439, 450 (1991); Golden State

16 Transit Corp. v. City of Los Angeles, 493 U.S. 103, 107 (1989); Chapman v. Houston Welfare

17 Rights Org., 441 U.S. 600, 615 (1979). Defendant recognizes, however, that Independent Living

18 is arguably controlling here, and therefore raises this argument to preserve it for later appellate

19 proceedings.

20

CONCLUSION

21

The court should grant the motion to dismiss without leave to amend. Section

22 14131.10(b)(1) does not conflict with ARRA in any way. Although ARRA prohibits states, as a

23 condition for receiving funds, from constricting eligibility for the Medicaid program, it does not

24 prohibit states from restricting the benefits and services that are available to those who are

25 eligible for Medicaid. And while ARRA prohibits states from depositing ARRA funds in a

26 reserve fund, there is nothing in § 14131.10(b)(1) that addresses disposition of ARRA funds, let

27 alone that directs their deposit into a reserve fund. Further, the court may confirm, based on

28 12
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1 judicially noticeable documents, that far from creating reserve funds, the State has expended all

2 the cash available to it and has a negative cash position.

3

4 Dated: July 15, 2009 5 6

Respectfully Submitted,
EDMUND G. BROWN JR. Attorney General of California

7

8 9 10 11 SF2009404122
20209289.doc
12

/s/ Karin S. Schwartz KARIN S. SCHWARTZ Supervising Deputy Attorney General Attorneys for Defendant David MaxwellJolly, Director, California Department of Health Care Services

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 13
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 Case4:09-cv-02307-PJH Document32 Filed07/27/09 Page1 of 11

1 EDMUND G. BROWN JR. Attorney General of California
2 KARIN S. SCHWARTZ Supervising Deputy Attorney General
3 JOSHUA N. SONDHEIMER Deputy Attorney General
4 State Bar No. 152000 455 Golden Gate Avenue, Suite 11000
5 San Francisco, CA 94102-7004 Telephone: (415) 703-5615
6 Fax: (415) 703-5480 E-mail: Joshua.Sondheimer@doj.ca.gov
7 Attorneys for Defendants Arnold Schwarzenegger, Kim Belshé, Bill Lockyer, and Michael E. Genest, in
8 their official capacities

9

10

IN THE UNITED STATES DISTRICT COURT

11

FOR THE NORTHERN DISTRICT OF CALIFORNIA

12

13 THE GRAY PANTHERS OF SAN

C 09-02307-PJH

FRANCISCO, a nonprofit corporation; et

14 al.,

CERTAIN DEFENDANTS’ MOTION TO

DISMISS (Fed. R. Civ. P. 12(B)(1) & (6)),

15

Plaintiffs, AND SUPPORTING MEMORANDUM

16

v.

17
ARNOLD SCHWARZENEGGER, 18 Governor of State of California; KIM
BELSHE, Secretary of Health and Human 19 Services Agency of the State of California;
DAVID MAXWELL-JOLLY, Director of 20 Department of Health Care Services of the
State of California; JOHN CHIANG, 21 Controller of State of California; BILL
LOCKYER, Treasurer of State of 22 California; and MICHAEL E. GENEST,
Director of Finance of the State of 23 California,

Date:

September 2, 2009

Time:

9:00 a.m.

Courtroom: 17th floor, Courtroom 5

Judge

Hon. Phyllis J. Hamilton

Trial Date N/A

Action Filed: May 26, 2009

24

Defendants.

25

26

27

28
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1

NOTICE OF MOTION AND MOTION TO DISMISS

2

PLEASE TAKE NOTICE that on September 2, 2009, at 9:00 a.m., or as soon thereafter as

3 the matter may be heard in the United States District Court for the Northern District of California,

4 450 Golden Gate Ave., San Francisco, California, defendants Arnold Schwarzenegger, Governor

5 of the State of California; Kim Belshé, Secretary of the Health and Human Services Agency of

6 the State of California; Bill Lockyer, Treasurer of the State of California; and Michael Genest,

7 Director of Finance of the State of California (collectively, moving defendants) will and hereby

8 do move the court to dismiss the action pursuant to Rules 12(b)(1) and (6) of the Federal Rules of

9 Civil Procedure.

10

This motion is made on the grounds that the court lacks jurisdiction over the subject matter

11 of the actions against moving defendants and the complaint fails to state a cause of action against

12 moving defendants upon which relief may be granted because moving defendants lack any direct

13 connection with enforcement of California Welfare and Institutions Code section 14131.10 or the

14 disposition of state funds.

15

The motion will be and is based on this Notice of Motion and Motion, the accompanying

16 Memorandum, the pleadings and papers filed herein, and the argument of counsel.

17

MEMORANDUM OF LAW

18

STATEMENT OF ISSUES TO BE DECIDED

19

1. Have plaintiffs alleged facts to demonstrate a sufficient connection between moving

20 defendants and the challenged acts or statute to overcome moving defendants’ immunity under

21 the Eleventh Amendment or to support the “case or controversy” requirement of Article III of the

22 United States Constitution?

23

2. Is there any possibility that plaintiffs could allege a sufficient connection between

24 moving defendants and the challenged acts or statute to overcome moving defendants’ immunity 25 under the Eleventh Amendment or to support the “case or controversy” requirement of Article III 26 of the United States Constitution?

27

28
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1

INTRODUCTION

2

Plaintiffs’ complaint, which seeks to enjoin certain cuts to California’s Medi-Cal program

3 and the alleged misuse of certain federal Medicaid funds, aims in scattershot fashion at not only

4 the director of the state agency responsible for the Medi-Cal program, but also at the California

5 Governor, the state Secretary of Health and Human Services, the state Treasurer, and the director

6 of the state Department of Finance. Even as alleged by plaintiffs, these officials have at best

7 general supervisory power over persons responsible for the challenged acts or with enforcing the

8 statute at issue, and at worst, no pertinent authority at all.

9

Plaintiffs seeking prospective injunctive or declaratory relief in federal court against state

10 officials must demonstrate that the officials have a “fairly direct” connection to the allegedly

11 wrongful acts or enforcement of the statute in question in order to meet the jurisdictional

12 limitations of the Eleventh Amendment and Article III. Plaintiffs cannot allege facts sufficient to

13 demonstrate that moving defendants have the requisite connection to avoid the Eleventh 14 Amendment’s bar to action against the State, or that the alleged injury is traceable to and capable 15 of redress by them so as to support the “case or controversy” requirement of Article III. 16 Accordingly, the actions against moving defendants should be dismissed.

17

STATEMENT OF RELEVANT FACTS

18

A. Medicaid and Medi-Cal

19

Medicaid is a cooperative federal-state program that provides federal financial assistance to

20 participating states to reimburse certain costs of medical treatment for the poor, elderly, and

21 disabled. 42 U.S.C. § 1396. To qualify for federal matching funds, known as the Federal

22 Medical Assistance Percentage (FMAP), a state must establish and administer its Medicaid

23 program through a state plan approved by the Secretary of the United States Department of

24 Health and Human Services. 42 U.S.C. § 1396a. The state must designate a “single state 25 agency” to be responsible for administration and supervision of the state plan. 42 U.S.C. 26 § 1396a(a)(5). Once designated as the single state agency for Medicaid, this agency may not 27 delegate the administration of the program or any activities related to rule-making and policy 28 development to any entity other than its own officials. 42 C.F.R. § 431.10(e).
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1

California participates in Medicaid through the Medi-Cal program, and has designated the

2 Department of Health Care Services (DHCS) as the single state agency responsible for its

3 administration. Cal. Welf. & Inst. Code §§ 10740, 14000 et seq.

4

A state that participates in Medicaid must determine which services it will provide. See 42

5 U.S.C. § 1396d(a). To receive federal approval, the Medicaid Act mandates that a state plan

6 include only seven enumerated medical services. See id. §§ 1396a(a)(10), 1396d(a)(1)-(5), (17),

7 (21) (including as mandatory: inpatient hospital, outpatient hospital, laboratory and x-ray, nursing

8 facility, physician, nurse-midwife, and nurse-practitioner services). A state may also elect to

9 provide optional medical services, such as dental services, prosthetics, and prescription drugs.

10 See id. §§ 1396a(a)(10)(A), 1396d(a).

11

B. Enactment of ABX3 5

12

Acting in response to a fiscal emergency declared by the Governor of California in

13 December 2008, the state Legislature enacted a series of spending reductions, including, in

14 February 2009, Assembly Bill (AB) X3 5. Stats. 2009-2010, 3rd Exec. Sess., c. 20 (AB 5).

15 ABX3 5 made a variety of reductions to various state programs, including the enactment of

16 Welfare and Institutions Code section 14131.10 (“section 14131.10”), which provides that,

17 beginning July 1, 2009, certain optional MediCal services are “excluded from coverage under the

18 Medi-Cal program” unless certain exceptions apply. Cal. Welf. & Inst. Code § 14131.10(a)-(f).

19

C.

The American Recovery and Reinvestment Act

20

Congress enacted the American Recovery and Reinvestment Act (ARRA) also in February

21 2009. H.R. 1, 111th Cong., Pub. L. No. 111-5 (1st Sess. 2009). Title V of the Act provides “state

22 fiscal relief,” including a temporary increase in Medicaid payments, for all states through the first

23 quarter of the 2011 fiscal year provided certain requirements are met. See id., § 5000, et seq.

24 Specifically, qualifying states receive a general 6.2 percent increase in their FMAP, and states

25 with relatively high growth in unemployment rates receive additional increases based on quarterly

26 unemployment statistics. Id., § 5001(b), (c). In order to receive enhanced FMAP, a state may not

27 restrict eligibility “standards, methodologies, or procedures,” beyond those in effect on July 1,

28
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1 2008. A state is also ineligible for enhanced FMAP if it deposits or credits amounts attributable

2 to those funds into a reserve or “rainy day” fund. Id., § 5001(f)(3).

3

C. Plaintiffs’ Allegations Against the Governor and Other State Officials

4

Plaintiffs challenge the California legislature’s decision in ABX3 5 to eliminate certain

5 optional Medicaid services. Their first and third causes of action seek to enjoin implementation

6 of the cuts mandated by section 14131.10 on the grounds that the cuts violate the “purposes”

7 clause of ARRA and its limitations on restricting “eligibility standards, methodologies, or

8 procedures.” (First Amended Complaint (FAC) ¶¶ 31-36, 44-49 and Prayer for Relief ¶ 3.) In

9 their second cause of action, plaintiffs also seek to enjoin alleged violations of ARRA’s

10 prohibition on deposit or credit of amounts attributable to enhanced FMAP into any state reserve

11 or “rainy day” fund. (FAC ¶¶ 37-43 and Prayer for Relief ¶ 3.) Plaintiffs’ fourth cause of action

12 seeks, in the event injunctive relief is denied, a declaration that section 14131.10 is contrary to

13 and preempted by ARRA. (FAC ¶¶ 54-56 and Prayer for Relief ¶ 5.)

14

Plaintiffs have named and seek relief on each of their causes of action against not only the

15 director of DHCS and the state Controller, but also against the following state officials:

16

• Governor Arnold Schwarzenegger;

17

• The Secretary of the state Health and Human Resources Agency, Kim Belshé;

18

• The state Treasurer, Bill Lockyer; and

19

• The state Director of Finance, Michael E. Genest.

20 (FAC ¶¶ 9-14, Prayer for Relief ¶¶ 2-5.) The complaint’s only specific allegations as to moving

21 defendants’ relation to the action are set out under the heading “parties,” and state:

22

1) That Governor Schwarzenegger has duties under California Government Code

23 sections 12010 and 12011 to “supervise all executive and administrative officers of the State of

24 California and see that their official duties are performed.” (FAC ¶ 9);

25

2) That the state Health and Human Resources Agency (HHR), directed by HHR

26 Secretary Belshé, “is under the supervision of the Secretary, and the Department of Health Care

27 Services is within and subordinate to the Agency.” (FAC ¶ 10);

28
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1

3) That Treasurer Lockyer, pursuant to California Government Code sections 12320 and

2 12324, “receives and keeps all moneys of the State of California, and may only pay out State

3 monies upon warrants drawn by the Controller” (FAC ¶13); and that

4

4) Finance Director Genest is authorized under California Government Code section

5 13300 to “supervise the accounts of each department of the State, and may, by certain statutes 6 made and provided therefore, veto certain expenditures of the State.” (FAC ¶ 14).1

7

The complaint also generally asserts the responsibility of each of the six named defendants

8 for the allegedly wrongful acts of eliminating the discontinued optional services pursuant to

9 section 14131.10 (FAC ¶¶ 34, 47) and allowing “savings resulting to the State from use of

10 enhanced FMAP funds” to be used as a rainy day fund. (FAC ¶ 41).

11 I.
12
13

PLAINTIFFS’ CLAIMS AGAINST MOVING DEFENDANTS ARE BARRED BY THE ELEVENTH AMENDMENT
A suit against a state official for prospective injunctive or declaratory relief is barred by the

14 Eleventh Amendment’s guarantee of state immunity from suit in federal court unless the official

15 has “some connection with the enforcement of the act.” Ex parte Young, 209 U.S. 123 (1908);

16 see National Audubon Soc’y, Inc. v. Davis, 307 F.3d 835, 847 (9th Cir. 2002) (finding action for

17 injunctive and declaratory relief against California Governor and Secretary of Resources barred

18 by Eleventh Amendment “as there is no showing that they have the requisite enforcement 19 connection” to challenged ballot proposition). 2 Absent the officials’ connection with the

20 allegedly wrongful act, the suit “is merely making him a party as a representative of the State, and

21 thereby attempting to make the State a party.” Id. at 157. Thus, “when a state officer is sued to

22

1 California Government Code section 13300 does not support plaintiffs’ allegations

regarding the authority of the Director of Finance. That section merely calls for the Department

23 of Finance to establish and maintain a “modern and complete” accounting system and policies

applicable to all state agencies, and to work with certain other state offices and agencies to

24 design, develop, and implement a financial information system.

25

2 Like the case or controversy requirement, the Eleventh Amendment operates as a limit to

the court’s subject matter jurisdiction. Seminole Tribe of Florida v. Florida, 517 U.S. 44, 64

26 (1996) (“[T]he Eleventh Amendment [stands] for the constitutional principle that state sovereign

immunity limit[s] the federal courts' jurisdiction under Article III. The text of the Amendment

27 itself is clear enough on this point: ‘The Judicial power of the United States shall not be construed

to extend to any suit . . . .’”) 28

5

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1 enjoin enforcement of state law, he must have ‘some connection’ with enforcement or suit against

2 him would be equivalent to suit against the state and would violate the Eleventh Amendment.” S.

3 Pacific Transp. Co. v. Brown, 651 F.2d 613, 615 (9th Cir. 1980).

4

The official’s connection required to overcome Eleventh Amendment immunity “must be

5 fairly direct; a generalized duty to enforce state law or general supervisory power over the

6 persons responsible for enforcing the challenged provision will not subject an official to suit.”

7 Snoeck v. Brussa, 153 F.3d 984, 986 (9th Cir. 1998) (quoting Los Angeles County Bar Ass’n v.

8 Eu, 979 F.2d 697, 704 (9th Cir. 1992).)

9

A. Plaintiffs’ Complaint Fails to Allege that Moving Defendants Have a

Sufficient Connection with Enforcement to Overcome Their

10

Eleventh Amendment Immunity

11

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted

12 as true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550

13 U.S. 544, 570, 127 (2007). A claim has facial plausibility “when the plaintiff pleads factual

14 content that allows the court to draw the reasonable inference” that the defendant may be liable.

15 Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556). Plaintiffs’

16 complaint fails to allege facts demonstrating any direct connection between moving defendants

17 and enforcement of section 14131.10 or the disposition of funds attributable to ARRA’s enhanced

18 FMAP.

19

The complaint’s allegations against Governor Schwarzenegger, that he has duties “to

20 supervise all executive and administrative officers of the State of California and see that their

21 official duties are performed,” assert merely general supervisory power over the persons

22 responsible for enforcing provisions of the Medi-Cal program. The complaint’s allegations of

23 HHS Secretary Belshé’s supervision of the Agency within which DHCS operates likewise merely

24 alleges general supervisory power over DHCS. These allegations are insufficient to support

25 federal jurisdiction over these defendants. Snoeck, 153 F.3d at 984.

26

As to the remaining moving defendants, Treasurer Lockyer and Finance Director Genest,

27 the complaint merely recites each of these officials’ general areas of responsibility with respect to

28 state finances and payments. These allegations state no facts that would establish those officials’
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1 connection with enforcement of section 14131.10, nor do they support any “reasonable inference”

2 that defendants have any form of direct responsibility regarding the disposition of amounts

3 attributable to the enhanced FMAP reimbursements made available through ARRA.

4

Plaintiffs’ conclusory and indiscriminate allegations that each and every defendant is

5 responsible for each of the wrongful acts alleged need not be accepted as true, and are insufficient

6 to meet plaintiffs’ burden to plead “factual content” that would allow the court to draw a

7 reasonable inference of defendants’ connection to the alleged acts. See Iqbal, 129 S.Ct. at

8 1949-50 (respondents’ bare allegations of officials’ knowledge of, condoning, and agreement to

9 alleged wrongful conduct were “conclusory and not entitled to be assumed true”).

10

Plaintiffs’ complaint thus fails to state a plausible claim that any of moving defendants have

11 the requisite “fairly direct” connection with enforcement of section 14131.10 or disposition of

12 amounts attributable to enhanced FMAP. Snoeck, 153 F.3d at 986; see, e.g., Doe v.Wal-Mart

13 Stores, --- F.3d ---, 2009 WL 1978730 (9th Cir. 2009) (plaintiffs’ allegations failed to establish

14 defendant’s “day-to-day” authority over foreign supplier’s employment decisions).

15

B. Plaintiffs Cannot Establish that Moving Defendants Have a

Sufficient Connection with Enforcement to Overcome Their

16

Eleventh Amendment Immunity

17

The Ninth Circuit has recognized that the Eleventh Amendment bars suit against governors

18 and other state agencies and officials for prospective relief where plaintiffs could not demonstrate

19 a sufficient connection to enforcement of the challenged law. National Audubon, 307 F.3d at 847

20 (governor and agency secretary lacked connection to challenged ballot proposition); Snoeck, 153

21 F.3d at 987 (Nevada state judicial discipline commission “has no enforcement power, and

22 therefore, it has no connection to the enforcement of the challenged law as required under Ex

23 parte Young); S. Pacific, 651 F.2d at 615 (attorney general’s power to direct and advise local

24 prosecutors did not “establish sufficient connection with enforcement to satisfy Ex parte Young”).

25 Plaintiffs cannot establish the requisite connection between moving defendants and the

26 challenged statute or conduct here.

27

Governor Schwarzenegger’s general responsibility over state agencies and general duty to

28 enforce state law is insufficient to establish any direct connection to enforcement of section
7 Motion to Dismiss Certain Defendants (C 09-02307-PJH)

Case4:09-cv-02307-PJH Document32 Filed07/27/09 Page9 of 11

1 14131.10 or the alleged misallocation of amounts attributable to enhanced FMAP. If such

2 general responsibilities were sufficient, state governors would be subject to suit in every case in

3 which a plaintiff seeks prospective declaratory or injunctive relief against the state. The Ninth

4 Circuit has recognized that absent any showing of specific responsibilities, the Eleventh

5 Amendment bars suit against California’s Governor for such relief. National Audubon, 307 F.3d

6 at 847; Los Angeles Branch NAACP v. Los Angeles Unified Sch. Dist., 714 F.2d 946, 953 (9th

7 Cir. 1983).

8

Other circuit courts have held likewise. See, e.g., Waste Mgmt. Holdings v. Gilmore, 252

9 F.3d 316, 331 (4th Cir. 2001) (Virginia governor, although under a general duty to enforce state

10 laws, dismissed from action where he lacked a specific duty to enforce the challenged statutes);

11 Okpalobi v. Foster, 244 F.3d 405, 426-27, 430 (5th Cir. 2001) (en banc) (reversing panel’s

12 holding that Louisiana governor’s general duties established sufficient connection with

13 enforcement of statute to overcome Eleventh Amendment immunity); Shell Oil Co., Inc. v. Noel,

14 608 F.2d 208, 211 (1st Cir.1979) (“The mere fact that a governor is under a general duty to

15 enforce state laws does not make him a proper defendant in every action attacking the

16 constitutionality of a state statute.”).

17

The remaining moving defendants, each head of a state office or agency, are barred by the

18 “single state agency” requirements from having any discretionary authority over enforcement of

19 section 14131.10 or the disposition of funds attributable to enhanced FMAP under ARRA.

20 DHCS, as California’s “single state agency” under the Medicaid program, possesses exclusive

21 administrative discretion over the enforcement of section 14131.10 and the disposition of federal

22 Medicaid reimbursement. 42 C.F.R. § 431.10(e); see San Lazaro Ass'n, Inc. v. Connell, 286 F.3d

23 1088, 1092-93 & 1100 (9th Cir. 2002) (noting that single state agency under Medicaid is barred

24 from delegating administrative discretion in administration or supervision of state Medicaid plan).

25 Moving defendants, therefore, necessarily lack the connection required under Ex parte Young.

26

Although HHS Secretary Belshé’s has general supervisory authority over DHCS, like the

27 governor’s authority over all state agencies, such general supervisory power is insufficient to

28 establish the “fairly direct” connection to enforcement required by Ex parte Young. See National
8 Motion to Dismiss Certain Defendants (C 09-02307-PJH)

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1 Audubon, 307 F.3d at 847 (Eleventh Amendment immunity barred suit against state Secretary of

2 Resources, but not over director of subordinate Department of Fish & Game which had “direct

3 authority and principal responsibility for enforcing” challenged ballot proposition).

4

Irrespective of the single state agency requirement, moving defendants have no statutory

5 authority relevant to enforcing section 14131.10 or determining the disposition of funds

6 attributable to enhanced FMAP. Treasurer Lockyer’s responsibilities to “receive and keep” State

7 funds and to pay out funds on warrants issued by the Controller have nothing to do with enforcing

8 reductions to optional Medi-Cal benefits or determining whether to place state funds into a

9 reserve. Cal. Gov’t Code §§ 12320, 12324. Finance Director Genest’s “general powers of

10 supervision” over state financial and business policies likewise have no direct connection with the

11 actions challenged by plaintiffs. Id., § 13070. The Governor and Secretary Belshé, as already

12 noted, hold merely general supervisory authority, respectively, over state agencies and DHCS.

13

As none of the moving defendants have any direct connection to the challenged acts or

14 enforcement of section 14131.10, the court lacks jurisdiction pursuant to the Eleventh

15 Amendment over the actions against moving defendants, and the actions against each of them

16 must be dismissed with prejudice.

17 II.
18

PLAINTIFFS FAIL TO ALLEGE JUSTICIABLE CLAIMS AGAINST MOVING DEFENDANTS

19

The “case or contoversy” requirement of Article III of the federal Constitution precludes

20 the exercise of jurisdiction by a federal court unless plaintiffs’ alleged injury is “fairly traceable to

21 the action challenged and is likely to be redressed by a favorable decision.” Culinary Workers

22 Union, Local 226 v. Del Papa, 200 F.3d 614, 617 (9th Cir. 1999) (citing Valley Forge Christian

23 College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 472 (1982)).

24 Whether plaintiffs’ injury in a claim for injunctive or declaratory relief against a state official may

25 properly be traced to actual or threatened action by that official depends upon whether the official

26 has any connection with enforcement of the statute or allegedly wrongful acts at issue. Culinary

27 Workers, 200 F.3d at 617-19; S. Pacific, 651 F.2d at 615. Thus, the inquiry is substantially

28 similar to the court’s inquiry regarding the applicability of Eleventh Amendment to the claim
9 Motion to Dismiss Certain Defendants (C 09-02307-PJH)

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1 against the official, discussed above. See Culinary Workers, 200 F.3d at 619 (finding requisite

2 connection under Eleventh Amendment in suit against Nevada attorney general “for the same

3 reasons” that a case and controversy exists); S. Pacific, 651 F.2d at 615 (finding no justiciable

4 controversy where Oregon attorney general’s power to direct and advise local prosecutors “does

5 not make the alleged injury fairly traceable to his action, nor does it establish sufficient

6 connection with enforcement to satisfy Ex parte Young”); Okpalobi, 244 F.3d at 429 (finding no

7 case or controversy due to governor and attorney general’s lack of relevant enforcement

8 authority, and in the alternative, that suit barred by Eleventh Amendment).

9

For the same reasons discussed in the preceding section, plaintiffs have failed to and cannot

10 allege facts demonstrating that moving defendants have any sufficiently direct connection to the

11 challenged acts or statute. Accordingly, no case or controversy exists as to each moving

12 defendant, and the actions against each must be dismissed.

13

CONCLUSION

14

For the foregoing reasons, moving defendants respectfully request that the action be

15 dismissed, with prejudice, for lack of subject matter jurisdiction and for failure to state a claim on

16 which relief may be granted.

17

18 Dated: July 27, 2009 19 20 21

Respectfully submitted,
EDMUND G. BROWN JR. Attorney General of California KARIN S. SCHWARTZ Supervising Deputy Attorney General

22 23 24 25
SF2009404122
26 40357747.docx 27

/s/ Joshua Sondheimer JOSHUA N. SONDHEIMER Deputy Attorney General Attorneys for Defendants

28
10 Motion to Dismiss Certain Defendants (C 09-02307-PJH)

 
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United States District Court For the Northern District of California

1

2

3

4

5

6

UNITED STATES DISTRICT COURT

7

NORTHERN DISTRICT OF CALIFORNIA

8

9

10

11 THE GRAY PANTHERS OF SAN FRANCISCO, et al.,
12 Plaintiffs,
13 v.
14 ARNOLD SCHWARZENEGGER, et al.,
15 Defendants.
16 _______________________________/

No. C 09-2307 PJH
ORDER GRANTING MOTION TO DISMISS

17

Before the court is the motion of defendants Arnold Schwarzenegger, Governor of

18 California (“Schwarzenegger”), and Bill Lockyer, Treasurer of the State of California

19 (“Lockyer”), for an order dismissing them from the above-entitled action.1 Having read the

20 parties’ papers and carefully considered their arguments and the relevant legal authority,

21 and good cause appearing, the court hereby GRANTS the motion. The dismissal is without

22 leave to amend, as the court finds that amendment would be futile.

23

The background of the case is as set forth in the court’s order denying plaintiffs’

24 motion for preliminary injunction, filed concurrently with the present order. Briefly, plaintiffs

25 bring a challenge California Welfare & Institutions Code § 14131.10(b)(1), which eliminates

26

27

1 The present motion to dismiss was filed by four of the original six defendants – Arnold

28

Schwarzenegger, Kim Belshé, Bill Lockyer, and Michael Genest. Plaintiffs subsequently dismissed Belshé and Genest from the case.

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United States District Court For the Northern District of California

1 certain optional Medicaid services in the State of California, and which was enacted by the

2 California Legislature in 2009 as part of ABX3 5.

3

The first and second causes of action in the first amended complaint (“FAC”) seek to

4 enjoin implementation of the cuts mandated by § 14131.10 on the ground that the cuts are

5 preempted by the “purposes” clause of the federal American Recovery and Reinvestment

6 Act of 2009 (“ARRA”), ARRA § 5000(a), and that the proposed cuts are also preempted by

7 ARRA § 5001(f)(1), which prohibits the deposit of any amounts attributable to ARRA’s

8 enhanced Federal Medical Assistance Percentage (“FMAP”) into a state reserve or “rainy

9 day” fund. The third cause of action has been dismissed, and the fourth cause of action

10 seeks, in the event that injunctive relief is denied, a declaration that § 14131.10 is contrary

11 to and is preempted by ARRA.

12

Plaintiffs seek relief in this action not only against David Maxwell-Jolly, the Director

13 of the California Department of Health Care Services (“DHCS”), the State agency that is

14 solely responsible for the administration of the Medi-Cal program, and against John

15 Chiang, the Controller of the State of California, but also against Schwarzenegger and

16 Lockyer.

17

In the FAC, plaintiffs allege that as Governor, Schwarzenegger has duties under the

18 California Government Code to “supervise all executive and administrative officers of the

19 State of California and see that their official duties are performed.” FAC ¶ 9. They assert

20 further that under provisions of the Government Code, Lockyer “receives and keeps all

21 moneys of the State of California, and may only pay out State moneys upon warrants

22 drawn by the Controller.” FAC ¶ 13. Plaintiffs also allege generally that both defendants

23 bear responsibility for the allegedly wrongful acts of eliminating the discontinued optional

24 services pursuant to the challenged § 14131.10, and allowing “savings resulting to the

25 State from the use of enhanced FMAP funds” to be used as a rainy day fund. FAC ¶ 41.

26

Schwarzenegger and Lockyer seek an order dismissing the claims asserted against

27 them, pursuant to Rule 12(b)(6) and Rule 12(b)(1). They argue that they are immune from

28 suit under the Eleventh Amendment because they have no direct role in the implementation

2

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United States District Court For the Northern District of California

1 of § 14131.10, and that plaintiffs therefore cannot state a claim for injunctive or declaratory

2 relief. They also assert that because plaintiffs cannot allege a sufficient connection with the

3 implementation of § 14131.10, there is therefore no “case or controversy” as required to

4 meet the jurisdictional limitations of Article III of the United States Constitution.

5

A suit against a state official for prospective injunctive or declaratory relief is barred

6 by the Eleventh Amendment’s guarantee of state immunity from suit in federal court unless

7 the official has “some connection with the enforcement of the act.” Ex Parte Young, 209

8 U.S. 123 (1908); see National Audubon Soc’y v. Davis, 307 F.3d 835, 847 (9th Cir. 2002)

9 (finding action for injunctive and declaratory relief against California Governor and

10 Secretary of Resources barred by Eleventh Amendment in absence of showing that they

11 had requisite enforcement connection to challenged ballot proposition).

12

Where a plaintiff fails to establish an official’s connection with the allegedly wrongful

13 act, the suit merely makes the official a party as a representative of the state, constituting in

14 effect an attempt to make the state a party. Ex Parte Young, 209 U.S. at 157. The

15 official’s connection required to overcome Eleventh Amendment immunity “must be fairly

16 direct; a generalized duty to enforce state law or general supervisory power over the

17 persons responsible for enforcing the challenged provision will not subject an official to

18 suit.” Snoeck v. Brussa, 153 F.3d 984, 986 (9th Cir. 1998) (citation and quotation omitted).

19

Here, the FAC does not allege facts showing that either Schwarzenegger or Lockyer

20 has any direct connection with the enforcement of § 14131.10. The allegation that

21 Schwarzenegger has the duty to “supervise all executive and administrative officers of the

22 State of California and see that their official duties are performed” simply asserts that

23 Schwarzenegger has general supervisory power over the persons responsible for enforcing

24 provisions of the Medi-Cal program. Such general responsibilities are insufficient under the

25 Eleventh Amendment. Were it otherwise, a state governor would be subject to suit in every

26 case in which a plaintiff in his or her state seeks prospective injunctive or declaratory relief

27 against an official in that state.

28

Similarly, the allegation that Lockyer has certain responsibilities with respect to State

3

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United States District Court For the Northern District of California

1 finances and payments does not state any facts that would establish that Lockyer has a

2 direct connection with the enforcement of § 14131.10, or any responsibility regarding the

3 disposition of amounts attributable to the enhanced FMAP reimbursements attributable to

4 ARRA. Lockyer’s responsibilities, as State Treasurer, to “receive and keep” State funds

5 and to pay out funds on warrants issued by the Controller have nothing to do with enforcing

6 reductions to optional Medi-Cal benefits or determining whether to place State funds into a

7 reserve. Cal. Gov’t Code §§ 12320, 12324. Thus, Lockyer has no direct connection to the

8 implementation or enforcement of § 14131.10.

9

Moreover, DHCS is the “single state agency” designated as the agency responsible

10 for administering the Medicaid program in California. See Cal. Welf. & Inst. Code

11 §§ 10740, 14000, et seq. Other agencies are barred by the “single state agency”

12 requirements from having any discretionary authority over enforcement of § 14131.10 and

13 the disposition of federal Medicaid enforcement. See 42 C.F.R. § 431.10(e); San Lazaro

14 Ass’n, Inc. v. Connell, 286 F.3d 1088, 1092-93 (9th Cir. 2002) (single state agency under

15 Medicaid is barred from delegating administrative discretion in administration or supervision

16 of state Medicaid plan).

17

In their opposition to the motion, plaintiffs contend that Schwarzenegger has the

18 requisite direct connection with the alleged injury because, as Governor, he approved (or

19 did not veto) ABX3 5. Thus, plaintiffs assert, Schwarzenegger “created” or “enacted”

20 § 14131.10, and thereby caused the injury alleged. They also assert that he is the very

21 officer of the State over whom the court must have personal jurisdiction in order to effect

22 the requested injunctive relief.

23

However, the signing of the bill does not show a connection with the enforcement of

24 § 14131.10, which is the act that is at issue. See, e.g., Sweat v. Hull, 200 F.Supp. 2d 1162

25 (D. Ariz. 2001) (Arizona governor’s general authority to execute laws and her action of

26 signing a particular piece of legislation that repealed an emissions testing program were

27 insufficient to establish a connection with the enforcement of the state implementation plan

28 that included the testing program).

4

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United States District Court For the Northern District of California

1

Plaintiffs assert further that per California Government Code § 12012, the Governor

2 of California is the sole, official organ of communication between the State government and

3 the government of the United States. Again, however, this general provision in the

4 California Government Code fails to establish that Schwarzenegger has sufficient direct

5 connection with the enforcement of § 14131.10.

6

Plaintiffs also contend that under ARRA, the Governor of a state that receives the

7 enhanced FMAP funds is required, no later than 45 days after the date of enactment of

8 ARRA, to certify that the state will request and use funds provided by ARRA (citing Sec.

9 1607 of Title XVI of Division A of ARRA). However, this section of ARRA is not at issue in

10 this case. Moreover, the certification, which was provided by California months ago (in

11 March 2009) has no connection with enforcing § 14131.10, nor does it establish that an

12 injunction against the Governor would provide any part of the relief sought by plaintiffs in

13 this action.

14

As to Lockyer, plaintiffs assert only that “the Treasurer is also an indispensable party

15 due to the fact that he has the power to deliver funds from the Treasury of the State, if the

16 defendants are ordered to restore the 9 Medicaid programs in question, to the State’s

17 Medicaid program” and that Lockyer “therefore cannot be dismissed from the case.”

18

Plaintiffs fail to demonstrate that Lockyer has any connection with enforcement of

19 § 14131.10. While plaintiffs appear to be suggesting that the Treasurer may refuse to

20 release funds if the court issues the requested injunction, but the Controller issues a

21 warrant for payment of state funds that contravenes the court’s order, the court notes that

22 under the California Constitution, a warrant from the Controller is required before state

23 funds may be released. “[M]oney may be drawn from the Treasury only through an

24 appropriation made by law and upon a Controller’s duly drawn warrant.” Cal. Const. art.

25 XVI, § 7. However, the Treasurer is required by law to release funds upon a warrant issued

26 by the Controller. Cal. Gov’t Code § 12324 (“The Treasurer shall pay warrants drawn by

27 the Controller except warrants canceled pursuant to law.”).

28

Because the court finds that Schwarzenegger and Lockyer must be dismissed

5

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United States District Court For the Northern District of California

1 because they are immune from suit under the Eleventh Amendment, the court finds it

2 unnecessary to also address the second ground for the motion to dismiss – that there is no

3 “case or controversy” as required under Article III for the exercise of jurisdiction.

4

The date for the hearing on the motion, previously set for Wednesday, September 2,

5 2009, is VACATED.

6

7 IT IS SO ORDERED.

8 Dated: September 1, 2009 9 10

______________________________ PHYLLIS J. HAMILTON United States District Judge

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United States District Court For the Northern District of California

1

2

3 UNITED STATES DISTRICT COURT
4 NORTHERN DISTRICT OF CALIFORNIA
5

6

7

8 THE GRAY PANTHERS OF SAN FRANCISCO, et al.,
9 Plaintiffs,
10 v.
11 ARNOLD SCHWARZENEGGER, et al.,
12 Defendants.
13 _______________________________/

No. C 09-2307 PJH
ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION; ORDER GRANTING MOTION TO DISMISS

14

Plaintiffs’ motion for a preliminary injunction and the motion of defendants Arnold

15 Schwarzenegger and David Maxwell-Jolly to dismiss the complaint came on for hearing

16 before this court on August 19, 2009. Plaintiffs appeared by their counsel Lynn S. Carman,

17 Jessie M. Sandoval, and Stanley L. Friedman; and defendants appeared by their counsel

18 Deputy Attorneys General Karin S. Schwarz and Joshua N. Sondheimer. Defendant John

19 Chiang also appeared, by his counsel Daniel J. Powell.

20

Having read the parties’ papers and carefully considered their arguments and the

21 relevant legal authority, and good cause appearing, the court hereby DENIES the motion

22 for preliminary injunction and GRANTS the motion to dismiss.

23

BACKGROUND

24

This is a case challenging the implementation of certain provisions of California

25 Assembly Bill (AB) X3 5, Stats. 2009-2010., 3rd Exec. Sess., c.20 (AB 5). The challenged

26 provisions, codified at California Welfare and Institutions Code § 14131.10(b)(1), eliminate

27 payment under Medicaid, as of July 1, 2009, for certain “optional” Medicaid services.

28

Plaintiffs bring this action under the Supremacy Clause, Art. 6, cl. 2 of the United

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United States District Court For the Northern District of California

1 States Constitution, seeking injunctive and declaratory relief. Plaintiffs allege that the

2 implementation of § 14131.10(b)(1) conflicts with the federal American Recovery and

3 Reinvestment Act or 2009 (“ARRA”), and that § 14131.10(b)(1) is therefore preempted.

4 Plaintiffs now move for a preliminary injunction, and defendants move to dismiss the

5 complaint.

6 A. The Medicaid Act

7

Medicaid is a cooperative federal-state program that provides federal financial

8 assistance to participating states to reimburse certain costs of medical treatment for the

9 poor, elderly, and disabled. 42 U.S.C. § 1396. To qualify for federal matching funds,

10 known as the Federal Medical Assistance Percentage (FMAP),1 a state must establish and

11 administer its Medicaid program through a state plan approved by the Secretary of Health

12 and Human Services (HHS). Id. § 1396a.

13

A state that participates in Medicaid must determine which services it will provide.

14 See id. § 1396d(a). To receive federal approval, a state plan is required to include seven

15 enumerated medical services. Id. §§ 1396a(a)(10), 1396d(a)(1)-(5), (17), (21) (including as

16 mandatory: inpatient hospital, outpatient hospital, laboratory and x-ray, nursing facility,

17 physician, nurse-midwife, and nurse-practitioner services). A state may also elect to

18 provide optional services, such as dental services, prosthetics, and prescription drugs. See

19 id. §§ 1396a(a)(10)(A), 1396d(a).

20

The state must designate a “single state agency” to be responsible for administration

21 and supervision of the state plan. Id. § 1396a(a)(5). Once designated as the single state

22 agency for Medicaid, this agency may not delegate the administration of the program or

23 any activities related to rule-making and policy development to any entity other than its own

24 officials. 42 C.F.R. § 431.10(e). California participates in Medicaid through the Medi-Cal

25

26

1 FMAP is defined in the Medicaid Act as, “for any State[,] . . . 100 per centum less the

27

State percentage. . . . “ The “State percentage” is “the percentage which bears the same ratio to 45 per centum as the square of the per capita income of such State bears to the square of

28

the per capita income of the continental United States (including Alaska) and Hawaii” with some modifications. Id. § 1396d(b).

2

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United States District Court For the Northern District of California

1 program, and has designated the Department of Health Care Services (DHCS) as the

2 single state agency responsible for administration of the Medi-Cal program. Cal. Welf. &

3 Inst. Code § 10740, 14000, et seq.

4

The receipt of federal funding is expressly conditioned on compliance with the

5 Medicaid Act, and HHS is authorized to withhold funds for noncompliance. 42 U.S.C.

6 § 1396c; see also 42 C.F.R. § 430.35. The Centers for Medicare & Medicaid Services

7 (CMS) is the federal agency that administers the Medicaid program on behalf of the

8 Secretary of HHS. See Pharmaceutical Research & Mfrs. of America v. Walsh, 538 U.S.

9 644, 650 n.3 (2003).

10 B. Enactment of ABX3 5

11

At issue in the present action is the California Legislature’s decision in February

12 2009, as part of its response to the State’s fiscal emergency, to eliminate some (but not all)

13 of the optional benefits previously offered under Medi-Cal.

14

On December 19, 2008, the Governor of California declared a fiscal emergency and

15 directed the California legislature into a special session. The Governor noted that

16 there was an approximately $15 billion General Fund deficit for the 2008-2009 fiscal year

17 that, if unaddressed, would grow to $42 billion with the next 18 months. Therefore, the

18 Governor stated that “immediate and comprehensive action to reduce current spending

19 must be taken to ensure, to the maximum extent possible, that the essential services of the

20 State are not jeopardized and the public health and safety is preserved.”

21

The Legislature enacted a series of budget measures in response, including, in

22 February 2009, ABX3 5 as urgency legislation to take effect immediately. ABX3 5, which

23 became effective on March 3, 2009, made a number of reductions to various state

24 programs. In the present action, plaintiffs challenge the provision codified as Welfare and

25 Institutions Code § 14131.10(b)(1), which “exclude[s] from coverage under the Medi-Cal

26 program,” effective July 1, 2009, the following optional benefits: adult dental services,

27 acupuncture services, audiology services and speech therapy services, chiropractic

28 services, optometric and optician services, podiatric services, psychological services, and

3

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United States District Court For the Northern District of California

1 incontinence creams and washes (“the nine Medicaid services”).

2

Dental services remain covered if they constitute “[m]edical and surgical services

3 provided by a doctor of dental medicine or dental surgery, which, if provided by a physician,

4 would be considered physician services, and which services may be provided by either a

5 physician or a dentist in this state.” Cal. Welf. & Inst. Code § 14131.10(b)(2).

6

In addition, the nine optional Medicaid services are covered if they are pregnancy-

7 related; or if they are provided to beneficiaries under the Early and Periodic Screening

8 Diagnosis and Treatment Program, or provided to beneficiaries receiving long term care in

9 certain nursing facilities licensed by the State. Id. § 14131.10(b)(3) & (c). The State

10 anticipates that the implementation of § 14131.10(b)(1) will result in $129.4 million in

11 savings to General Fund expenditures in the 2009-2010 fiscal year.

12 C. The American Recovery and Reinvestment Act

13

Congress enacted ARRA on February 17, 2009. H.R. 1, 111th Cong., Pub. L. No.

14 111-5 (1st Sess. 2009). At issue here is a provision of Title V of ARRA. Title V provides

15 “state fiscal relief,” during a limited period of economic downturn (October 1, 2008 through

16 December 31, 2010). This “state fiscal relief” comes in seven forms – a temporary increase

17 in Medicaid FMAP payments, ARRA § 5001; a temporary increase in DSH

18 (disproportionate share hospitals) allotments during the recession, id. § 5002; an extension

19 of moratoria on certain Medicaid final regulations, id. § 5003; an extension of transitional

20 medical assistance, id. § 5004; an extension of the qualifying individual program, id.

21 § 5005; protections for Indians under Medicaid and CHIP, id. § 5006; and funding for

22 oversight and implementation, id. § 5007.

23

Congress expressly stated that the purposes of Title V are (1) “[t]o provide fiscal

24 relief to the States in a period of economic downturn[;]” and (2) “[t]o protect and maintain

25 State Medicaid programs during a period of economic downturn, including by helping to

26 avert cuts to provider payment rates and benefits or services, and to prevent constrictions

27 of income eligibility requirements for such programs, but not to promote increases in such

28 requirements.” Id. § 5000(a).

4

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United States District Court For the Northern District of California

1

Under ARRA, qualifying states receive a general 6.2 percent increase in their FMAP,

2 and states with relatively high growth in unemployment rates receive additional increases

3 based on quarterly unemployment statistics. Id. § 5001(b), (c).

4

In order to receive enhanced FMAP, a state may not restrict eligibility “standards,

5 methodologies, or procedures” beyond those in effect on July 1, 2008. Id. § 5001(f)(1). In

6 addition, a state is also ineligible for enhanced FMAP “if any amounts attributable (directly

7 or indirectly) to such increase are deposited or credited into any reserve or rainy day fund

8 of the State.” Id., § 5001(f)(3).

9 D. CMS Guidance to States Regarding Implementation of ARRA

10

Since February 2009, CMS has issued several letters and fact sheets to assist the

11 states in complying with ARRA’s requirements. CMS has made clear that ARRA prohibits

12 states from restricting eligibility for Medicaid, as distinct from the medical services provided

13 under the Act. Thus, in a recent communication, CMS explained that a state could

14 eliminate Medicaid services without jeopardizing enhanced FMAP:

15

Question 19: Can States modify or eliminate services, as opposed to eligibility

16

criteria, and still qualify for the increased FMAP?

17

Answer: If the change in the service has no potential impact on an individual’s

ability to maintain Medicaid eligibility, such a change would not disqualify a

18

State from the increased FMAP.

19 CMS, “American Recovery and Reinvestment Act of 2009 - Frequently Asked Questions

20 from States, July 7, 2009,” attached as Exhibit A to Declaration of Toby Douglas, filed

21 herein on July 26, 2009, at 8; see also id. (response to Question 20: reduction in optional

22 services provided would not disqualify a State from receiving FMAP because no

23 beneficiaries would lose eligibility).

24

CMS has also explained that “[t]he availability of increased FMAP funding will

25 free-up State funds, which may be spent on activities that may or may not be related to the

26 Medicaid program.” Id. at 12 (“Answer” to Question 31); see also id. at 12-13 (“States may

27 use this freed up State money to fund other programs within the State, such as education,

28 or to maintain aspects of their Medicaid program that may have been previously cut due to

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1 budgetary constraints.”).

2 E. Procedural Background

3

The present action was filed by six plaintiffs. Two are seriously disabled California

4 Medi-Cal beneficiaries – Mark Beckwith and Margaret Dowling. The third is an organization

5 that advocates on behalf of the elderly – The Gray Panthers of San Francisco. The

6 remaining three plaintiffs are nonprofit organizations that advocate for and provide health-

7 care services to (among others) Medicaid beneficiaries – California Foundation for

8 Independent Living Centers, Inc., Independent Living Center of Southern California, Inc.,

9 and Lifelong Medical Care.

10

Originally named as defendants were Arnold Schwarzenegger (“Schwarzenegger”),

11 Governor of California; Kim Belshé (“Belshé”), Secretary of California’s Health and Human

12 Services Agency; David Maxwell-Jolly (“Maxwell-Jolly”), Director of California’s Department

13 of Health Care Services (“DHCS”) and the State official responsible for the administration of

14 the MediCal program; John Chiang (“Chiang”), Controller of the State of California; Bill

15 Lockyer (“Lockyer”), Treasurer of the State of California; and Michael E. Genest (“Genest”),

16 Director of the California Department of Finance.

17

Plaintiffs filed the first amended complaint (“FAC”) on June 30, 2009, alleging four

18 causes of action. Plaintiffs subsequently dismissed the third cause of action, and also

19 dismissed defendants Belshé and Genest from the case.

20

In the first and second causes of action, plaintiffs seek to enjoin implementation of

21 Welfare & Institutions Code §14131.10(b)(1), on the grounds that the mandated cuts

22 conflict with two provisions of ARRA – the “purpose clause” (§ 5000(a)), and the provision

23 in § 5001(f)(3) that a state will be ineligible for increased FMAP if it deposits the enhanced

24 FMAP funds in a reserve or rainy day fund (§ 5001(f)(3)). In the fourth cause of action,

25 plaintiffs seek, in the event that injunctive relief is denied, a judicial declaration that

26 § 14131.10(b)(1) is contrary to and is preempted by ARRA.

27

Plaintiffs allege that the increased FMAP for the State of California for the 18-month

28 recession adjustment period will amount to an annual savings to the State of $6.6 billion

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1 during the fiscal years 2008-2009 and 2009-2010. They contend that the annual cost to the

2 State to furnish the nine Medicaid services is $124.6 million – a small percentage of the

3 total the State will be receiving in enhanced FMAP funds.

4

Plaintiffs now seek a preliminary injunction, and Schwarzenegger and Maxwell-Jolly

5 seek an order dismissing the complaint for failure to state a claim and for lack of subject

6 matter jurisdiction.

7

DISCUSSION

8 A. Motion for Preliminary Injunction

9

In their motion for preliminary injunction, plaintiffs seek an order enjoining

10 enforcement of the reductions mandated by § 14131.10(b)(1), and requiring defendants to

11 “use and deploy the savings” resulting from the enhanced FMAP reimbursements under

12 ARRA to avert such cuts. In the event that defendants do not restore the nine Medicaid

13 services, plaintiffs seek an order requiring them to refrain from accepting any additional

14 enhanced FMAP funds, and to return all such funds already received.

15

1. Legal Standard

16

Plaintiffs seeking a preliminary injunction in a case in which the public interest is

17 involved must establish that they are likely to succeed on the merits, that they are likely to

18 suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips

19 in their favor, and that an injunction is in the public interest. California Pharmacists Ass'n v.

20 Maxwell-Jolly, 563 F.3d 847, 849 (9th Cir. 2009) (citing Winter v. Natural Resources

21 Defense Council, Inc., 129 S.Ct. 365, 376 (2008)); see also Munaf v. Geren, 128 S.Ct.

22 2207, 2218-19 (2008).

23

2. Plaintiffs’ Motion

24

Plaintiffs argue that they meet all the requirements for preliminary injunctive relief.

25 First, they assert that they have established a likelihood of success on the merits of the first

26 and second causes of action. With regard to the first cause of action, they contend that the

27 language of § 5000(a) compels the conclusion that a state that accepts enhanced FMAP

28 amounts under ARRA may not allow the savings it achieves to “sink into the State’s

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1 fungible assets” and, at the same time, eliminate services to its Medicaid beneficiaries; but

2 must, rather, employ the savings resulting from the enhanced FMAP funds to avoid having

3 to cut its own Medicaid services during the period of economic downturn.

4

With regard to the second cause of action, plaintiffs argue that § 5001(f)(3), when

5 read together with § 5000(a), establishes that defendants have a mandatory ministerial

6 duty not to accept enhanced FMAP funds with one hand, and cut services with the other

7 while contributing funds to a reserve or rainy-day fund. They claim that because the State

8 of California is accepting the FMAP enhancements, which will save the State approximately

9 $3 billion, it cannot then turn around and cancel services worth only $129 million a year on

10 the ground that it can not afford them.

11

Second, with regard to irreparable injury, plaintiffs cite to declarations detailing the

12 ways in which the elimination of the nine Medicaid services will affect Medicaid

13 beneficiaries, and will lead to increased pain and suffering, as well as the possibility of

14 developing other medical conditions. Plaintiffs also contend that the organizational plaintiffs

15 will suffer irreparable injury on their own account, as they will be impeded in their ability to

16 carry out functions for which they are organized to provide – to enable the blind, elderly,

17 and disabled of our population to obtain adequate medical care and to achieve and

18 continue independence.

19

Third, plaintiffs argue that the balance of hardships tips strongly in their favor. They

20 argue that the State will suffer no financial loss because it is receiving $3.76 billion extra

21 funds from the enhanced FMAP payments, out of which to pay the relatively small amount

22 of $129.4 million that will be cut as a result of eliminating the nine Medicaid services.

23

Finally, plaintiffs assert that the public interest strongly favors granting relief, as the

24 requested injunctive relief carries out Congress’ express purpose to protect and maintain

25 and not cut Medicaid services, and because our society as a whole suffers when we

26 neglect the poor, the hungry, and the disabled.

27

In opposition, defendants argue that the motion must be denied because plaintiffs

28 cannot establish the elements necessary for preliminary injunctive relief. Defendants focus

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1 primarily on the question whether plaintiffs have demonstrated a likelihood of success on

2 the merits. Defendants contend that plaintiffs cannot show a likelihood of success on the

3 merits because § 14131.10(b)(1) does not conflict with § 5000(a) or with § 5001(f)(3). In

4 addition, defendants assert, plaintiffs’ claims fail as a matter of law because the ARRA

5 provisions at issue are not privately enforceable.

6

Defendants assert that § 14131.10(b)(1) does not conflict with § 5000(a) because

7 the “purpose clause” is advisory or hortatory, not mandatory, and therefore cannot support

8 a cause of action. In addition, they note that the stated purpose of ARRA Title V is to “help[

9 ] to avert cuts to provider payment rates and benefits or services,” § 5000(a)(2) (emphasis

10 added), and contend that nothing in ARRA precludes the states from cutting benefits or

11 services, which is what the State of California has done here, as distinct from tightening

12 eligibility requirements, which it has not.

13

Defendants point to comments by Senator Chuck Grassley, who spoke out against

14 H.R. 1 when it was being debated in the Senate. Senator Grassley opposed the bill

15 because while it told states not to restrict Medicaid eligibility, it did not tell them that they

16 could not cut payments and services. See 155 Cong. Rec. S1474, S1513 (Feb. 4, 2009)

17 (statement of Sen. Grassley). Defendants also point to statements by Senator Grassley

18 regarding a proposed amendment that would have prevented states from cutting benefits

19 and provider payment rates as a condition of receiving enhanced FMAP payments, see 155

20 Cong. Rec. S2009-2010, 2013-2014 (Feb. 9, 2009) (statements of Sen. Grassley), and

21 note that the amendment was not passed by the Senate.

22

Defendants contend that § 14131.10(b)(1) also does not conflict with § 5000(f)(3), as

23 nothing in the State statute requires or authorizes the deposit of enhanced FMAP into a

24 rainy-day fund, or even mentions the disposition of the enhanced FMAP funds. In addition,

25 defendants argue that the allegations that defendants have “allowed savings resulting to

26 the State from enhanced FMAP . . . to sink into the fungible funds of the State of California”

27 rather than to be used directly for Medicaid, and that they have “s[u]nk” the enhanced

28 FMAP “to be reserved, used as a rainy day fund,” FAC ¶ 41, are entirely conclusory and

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1 therefore insufficient to state a claim under the standard recently articulated by the U.S.

2 Supreme Court in Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009).

3

Defendants submit that even were these allegations adequately pled, the claim

4 would fail as a matter of law because nothing in the test of § 5001(f)(3) prohibits the State

5 from applying savings resulting from enhanced FMAP to offset non-Medicaid expenditures.

6 Defendants contend that CMS confirmed as much in its guidance to the States, when it

7 said that States “may use this freed up State money to fund other programs within the

8 State, such as education, or to maintain some aspects of their Medicaid programs that may

9 have been previously cut due to budgetary constraints.” Defendants argue that the federal

10 agency’s interpretation, which is consistent with the language of ARRA, is entitled to

11 substantial deference.

12

Defendants make two additional arguments in support of their assertion that plaintiffs

13 cannot show a likelihood of success. First, to the extent that plaintiffs allege that

14 implementation of § 14131.10(b)(1) will violate ARRA – as opposed to asserting that

15 § 14131.10(b)(1) is preempted by ARRA – defendants argue that plaintiffs’ claims fail as a

16 matter of law because the ARRA provisions at issue are not privately enforceable, as they

17 do not evince any Congressional intent to create either private enforceable rights or a

18 private remedy. Rather, defendants assert, it appears that Congress intended that the

19 obligation to enforce ARRA, and to impose remedies for noncompliance would lie with

20 CMS, as § 5001(g) provides for reporting by the states to CMS.

21

Second, defendants argue that the relief sought violates separation of powers. They

22 contend that the request that the court order the State to “cancel and withdraw all requests”

23 to amend the State plan to implement § 14131.10(b)(1), or the alternate request that if HHS

24 approves the proposed amendment, the State be ordered to re-amend its Medicaid plan to

25 restore the services, constitutes an effort by plaintiffs to disrupt and preempt the precise

26 means adopted by Congress for review of the State’s compliance with the Medicaid Act.

27

With regard to the remaining factors in the injunctive relief analysis, defendants

28 argue that plaintiffs have not met their burden of demonstrating irreparable injury, as the

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1 individual declarants offer no competent evidence with regard to acupuncture, audiology,

2 speech therapy, chiropractic, and psychological services, and the organizational declarants

3 simply offer speculation unsupported by facts. Defendants also assert that plaintiffs have

4 not carried their burden with regard to adult dental services, optometric and optician

5 services, and incontinence creams and washes, as the evidence provided is speculative

6 and anecdotal.

7

Defendants contend that the factors of balance of hardships and the public interest

8 favor defendants, noting that the State of California is facing an unprecedented budget

9 crisis, and asserting that the State reduced Medicaid coverage of certain optional services

10 as a last resort (while retaining many optional coverages including coverage of prescription

11 drugs).

12

The court finds that the motion must be DENIED, as plaintiffs have not met their

13 burden of showing a likelihood of success on the merits. Specifically, they have not

14 established that § 14131.10(b)(1) is preempted by either § 5000(a) or § 5001(f)(3).

15

Federal preemption is premised upon the Supremacy Clause of the United States

16 Constitution. The Supremacy Clause invalidates all state laws that “interfere with, or are

17 contrary to,” federal law. Hillsborough County v. Automated Med. Labs., 471 U.S. 707, 712

18 (1985) (quoting Gibbons v. Ogden, 9 Wheat. 1, 22 U.S. 1, 82 (1824)). A plaintiff may bring

19 suit under the Supremacy Clause to enjoin implementation of a state law allegedly

20 preempted by federal statute, regardless of whether the federal statute at issue confers an

21 express “right” or cause of action on the plaintiff. Independent Living Ctr. of So. Calif. v.

22 Shewry, 543 F.3d 1047, 1048-49 (9th Cir. 2009).

23

Federal preemption analysis always starts with a question of congressional intent,

24 and then proceeds to a discussion of the state law's interaction with the federal law or

25 regulation. See Wyeth v. Levine, 129 S.Ct. 1187, 1195 (2009); English v. General Elec.

26 Co., 496 U.S. 72, 78-79 (1990); see also Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996)

27 (“‘[t]he purpose of Congress is the ultimate touchstone’ in every preemption case”)

28 (quotation and citation omitted).

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1

State action may be preempted by federal law in three ways – where Congress

2 expressly preempts state law; where Congress indicates by implication that federal law

3 shall exclusively occupy a field of regulation; and where state law conflicts with federal law.

4 Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 541 (2001).

5

Here, ARRA Title V contains no express statement of intent to preempt state law. In

6 addition, the court is unaware of any federal regulations that contain any such statement of

7 express preemption. Nor has Congress indicated by implication that federal law shall

8 exclusively occupy the field of regulation, as Medicaid is a cooperative federal-state

9 program, in which federal law imposes certain requirements, but in which the states also

10 play a role in deciding how the program will operate.

11

A conflict between state and federal law “arises when compliance with both federal

12 and state regulations is a physical impossibility or when state law stands as an obstacle to

13 the accomplishment and execution of the full purposes and objectives of Congress.”

14 Hillsborough, 471 U.S. at 713; see also Independent Living Ctr of So. Calif. v. Maxwell-

15 Jolly, 572 F.3d 644, 653 (9th Cir. 2009).

16

Plaintiffs allege in the FAC that the acceptance by the State of California of

17 enhanced FMAP funds (under ARRA)

18

was and is and subject to an express and implied requirement imposed by

19

Congress, in the purposes clause of § 5000 of the Enhanced FMAP Measure:

namely, that the State shall protect and maintain the State's Medicaid

20

program including averting cutting any services, (at least, so long as the State

enjoys savings from receipt of the enhanced FMAP funds which exceed the

21

cost of the Medicaid services it proposes to cut).

22 FAC ¶ 30. Although it is not entirely clear from the papers, plaintiffs’ position, based on

23 statements of counsel at the hearing, appears to be that § 14131.10(b)(1) conflicts with

24 ARRA because compliance with both federal and state law is impossible, and because

25 state law prevents the full accomplishment of Congressional purposes.

26

The U.S. Supreme Court recently commented that “physical impossibility” may not

27 be the most appropriate standard for determining whether the text of state and federal laws

28 directly conflict. See Wyeth, 129 S.Ct. at 1208-09. In any event, the court finds nothing in

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1 the text of the laws at issue here that suggests that it is impossible to comply with both

2 state and federal law, as § 14131.10 does not mention the use of the enhanced FMAP

3 funds, and nothing in Title V prohibits states receiving the enhanced FMAP funds from

4 cutting optional Medicaid services.

5

Thus, the court must consider whether state law stands as an obstacle to the full

6 purpose and objectives of Congress. With regard to § 5000(a), plaintiffs contend that

7 Congress provided the enhanced FMAP to the states so that they would not cut Medicaid

8 services, and that California’s enactment of a law requiring the elimination of certain

9 “optional” Medicaid services stands as an obstacle to the accomplishment and execution of

10 that Congressional purpose.

11

With regard to § 5001(f)(3), plaintiffs appear to be arguing that because the cost of

12 the eliminated optional Medicaid services is less than the total amount the State of

13 California is to receive under the enhanced FMAP, the fact that the State is not using the

14 enhanced FMAP funds to pay for the optional services means that it is “indirectly”

15 depositing some of the FMAP funds into a reserve fund – which also stands as an obstacle

16 to the accomplishment and execution of Congressional purpose.

17

ARRA Title V is entitled “State Fiscal Relief,” and, as described above, has a two-

18 fold purpose. Section 5000(a), subpart (2), is the clause at issue here. It sets forth a

19 general purpose, which is “to protect and maintain” state Medicaid programs during a

20 period of economic downturn. It then provides two ways in Title V is intended to protect

21 and maintain those Medicaid programs. The first way is “by helping to avert cuts to

22 provider payment rates and benefits or services.” The second way is “by helping . . . to

23 prevent constrictions of income eligibility requirements for such programs, but not to

24 promote increases in such requirements.”

25

The court agrees with defendants that subpart (2) is advisory or precatory, not

26 mandatory. See Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 24 (1981) (no

27 private cause of action because statute spoke in terms intended to be hortatory not

28 mandatory); Orkin v. Taylor, 487 F.3d 734, 739 (9th Cir. 2007) (under Cort v. Ash analysis,

13

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1 reference to “the sense of Congress” was merely a precatory provision, not amounting to

2 positive, enforceable law); see also Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 511

3 (1990) (elaborating on Pennhurst).

4

Plaintiffs contend that the first example – “by helping to avert cuts to . . . benefits or

5 services” – should be read as a statement of intent that states receiving the enhanced

6 FMAP payments are not permitted to cut any benefits or services that their Medicaid

7 beneficiaries had previously been receiving, even if those benefits or services are optional

8 under the Medicaid Act.

9

However, § 5000(a) it does not impose any “obligation” on the states, and also does

10 not mandate that the states categorically “avert cuts” to Medicaid programs. Section

11 5000(a) states that the enhanced FMAP payments are intended to “help avert” cuts to

12 benefits or services, not that the enhanced payments are meant to “prevent” such cuts. If

13 Congress had wanted to say that states receiving the enhanced FMAP payments were

14 required not to cut any benefits or services – in other words, that any state that cut benefits

15 or services would be ineligible for the enhanced FMAP payments – it could easily have

16 done so.

17

The second way in which the enhanced FMAP payments are intended to “protect

18 and maintain” Medicaid programs is by “helping . . . to prevent constrictions of income

19 eligibility requirements” for Medicaid. In § 5001(f)(1), Congress specifically provided that a

20 state would not be eligible for the enhanced FMAP payments “if eligibility standards,

21 methodologies, or procedures under its State plan . . . are more restrictive” than under the

22 plan that was in effect on July 1, 2008.

23

That is, under § 5001(f)(1), if a state makes it more difficult to qualify to be a

24 Medicaid beneficiary than it was as of July 1, 2008, that state will not be eligible for the

25 enhanced FMAP payments. However, there is no corresponding provision in § 5001 that

26 applies to the cutting of benefits or services. The fact that Congress did include the

27 limitation in § 5001(f)(1) indicates that it could also easily have included a prohibition

28 against cutting benefits or services if it wanted to, but chose not to.

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1

In sum, the court finds that cuts in optional services mandated by Welfare and

2 Institutions Code § 14131.10(b)(1) do not stand as an obstacle to the accomplishment and

3 execution of the congressional purpose stated in ARRA § 5000(a) subpart (2). Accordingly,

4 plaintiffs have not established a likelihood of success as to the first cause of action.

5

Similarly, with regard to the second cause of action, the court finds that

6 § 14131.10(b)(1) does not stand as an obstacle to the accomplishment and execution of

7 Congressional purpose. As discussed above, nothing in § 14131.10(b)(1) requires or

8 authorizes the deposit of enhanced FMAP funds into a reserve or rainy day fund, or in any

9 way addresses the disposition of the funds. Accordingly, plaintiffs have not established a

10 likelihood of success as to the second cause of action.

11

Finally, plaintiffs cannot establish a likelihood of success on the fourth cause of

12 action if they do so as to the first and second causes of action, as the fourth cause of action

13 is entirely derivative of the first two causes of action.

14

Because the court finds that plaintiffs have not established a likelihood of success on

15 the merits, the court finds it unnecessary to address the remaining factors governing

16 motions for preliminary injunction.

17 B. Motion to Dismiss

18

Maxwell-Jolly and Schwarzenegger seek an order dismissing the complaint for

19 failure to state a claim and for lack of subject matter jurisdiction, arguing that § 14131.10

20 does not conflict with ARRA, and also asserting that there is no private right of action to

21 enforce §§ 5000 and 5001 of ARRA.

22

1. Legal Standards

23

a. Motions to Dismiss for Failure to State a Claim

24

A motion to dismiss under Rule 12(b)(6) tests for the legal sufficiency of the claims

25 alleged in the complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003).

26 Review is limited to the contents of the complaint. Allarcom Pay Television, Ltd. v. Gen.

27 Instrument Corp., 69 F.3d 381, 385 (9th Cir. 1995). To survive a motion to dismiss for

28 failure to state a claim, a complaint generally must satisfy only the minimal notice pleading

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1 requirements of Federal Rule of Civil Procedure 8. Rule 8(a)(2) requires only that the

2 complaint include a “short and plain statement of the claim showing that the pleader is

3 entitled to relief.” Fed. R. Civ. P. 8(a)(2).

4

A motion to dismiss should be granted if the complaint does not proffer enough facts

5 to state a claim for relief that is plausible on its face. See id. at 558-59. “[W]here the well-

6 pleaded facts do not permit the court to infer more than the mere possibility of misconduct,

7 the complaint has alleged – but it has not ‘show[n]’ – ‘that the pleader is entitled to relief.’”

8 Iqbal, 129 S.Ct. at 1950.

9

b. Motions to Dismiss for Lack of Subject Matter Jurisdiction

10

Federal courts are courts of limited jurisdiction, possessing only that power

11 authorized by Article III of the United States Constitution and statutes enacted by Congress

12 pursuant thereto. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377

13 (1994). Thus, federal courts have no power to consider claims for which they lack subject-

14 matter jurisdiction. See Chen-Cheng Wang ex rel. United States v. FMC Corp., 975 F.2d

15 1412, 1415 (9th Cir. 1992).

16

The court is under a continuing duty to dismiss an action whenever it appears that

17 the court lacks jurisdiction. Billingsly v. C.I.R., 868 F.2d 1081, 1085 (9th Cir. 1989). The

18 burden of establishing that a cause lies within this limited jurisdiction rests upon the party

19 asserting jurisdiction. Kokkonen, 511 U.S. at 377; Tosco Corp. v. Communities for a Better

20 Env't, 236 F.3d 495, 499 (9th Cir. 2001).

21

2. Defendants’ Motion

22

Defendants argue that the first two causes of action fail as a matter of law, for the

23 reasons argued in opposition to plaintiffs’ motion for preliminary injunction, and assert that

24 the fourth cause of action fails because it is derivative of the first two causes of action.

25

With regard to the first cause of action, defendants assert that § 14131.10 does not

26 conflict with § 5000(a), because Title V’s “purpose clause” is advisory or hortatory rather

27 than mandatory, and because nothing in ARRA precludes states from cutting “benefits or

28 services,” which is what the State of California has done here, as distinct from constricting

16

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1 eligibility requirements, which it has not.

2

With regard to the second cause of action, defendants argue that § 14131.10 does

3 not conflict with § 5001(f)(3) because nothing in § 14131.10 requires or authorizes deposit

4 of enhanced FMAP into a rainy day fund, or addresses in any matter the disposition of the

5 funds.

6

Plaintiffs make the same arguments in opposition to the motion to dismiss as they

7 made in support of their motion for preliminary injunction. First, they contend that the

8 enhanced FMAP estimated to be received by the State will amount to approximately $3.76

9 billion per year – a sum that the State would otherwise have had to expend for services in

10 the Medi-Cal program in California – and that the amount the State will save by cutting the

11 nine optional Medicaid services will be approximately $129.4 million.

12

Plaintiffs argue that the refusal of the State to use any of the $3.76 billion it is saving

13 to cover the cost of the $129.4 million it is cutting violates the express “purpose clause” of

14 § 5000(a), which, plaintiffs assert, “expressly imposes upon the State and its officers the

15 obligation to protect and maintain the State’s Medicaid program by averting cuts to services

16 of the program;” and also violates the provision in § 5001(f)(3) that prohibits States from

17 directly or indirectly depositing the enhanced FMAP funds into a rainy-day fund. Plaintiffs

18 then argue that they are entitled to injunctive relief, for the same reasons as argued in their

19 motion for preliminary injunction.

20

The court finds that the motion must be GRANTED. To the extent that the FAC

21 alleges that § 14131.10(b)(1) is preempted by ARRA because it conflicts with federal law,

22 the motion to dismiss is granted without leave to amend. For the reasons stated above in

23 the discussion of plaintiffs’ motion for preliminary injunction, the court finds no express or

24 implied preemption, and no conflict between § 5000(a) and § 14131.10(b)(1), or between

25 § 5001(f)(1) and §14131.10(b)(1).

26

The basis of plaintiffs’ suit is not entirely clear, however. While they allege in the

27 FAC that this is a case brought under the Supremacy Clause – that is, that both the first

28 and second causes of action are claims “[f]or injunction against each defendant, to enjoin

17

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1 State action preempted under the Supremacy Clause” – they also allege, for example, that

2 § 14131.10 and “the policies and actions” of the defendants

3

constitute State action which is in violation of, hence preempted, under the

Supremacy Clause, by subd. (f)(3) of § 5001 and the purposes for which the

4

aforesaid subd. (f)(3) of § 5001was enacted to accomplish, (namely to protect

and maintain the State's Medicaid program by averting cuts to Medicaid

5

services, as specified by § 5000(a).

6 FAC ¶ 40.

7

In other words, they appear to be alleging both that § 14131.10.(b)(1) is preempted

8 by ARRA, and that in implementing the cuts mandated by § 14131.10(b)(1), defendants

9 have violated, or will violate, ARRA. In addition, plaintiffs argue in their opposition to the

10 motion to dismiss (as in their motion for preliminary injunction) that the cutting of the nine

11 Medicaid services “violates” ARRA – not just that § 14131.10(b)(1) is preempted by ARRA.

12

Accordingly, to the extent that plaintiffs intend to allege that in implementing

13 § 14131.10, defendants have violated (or will violate) ARRA, the court also finds that the

14 motion should be granted, without leave to amend as to the first cause of action, but with

15 leave to amend as to the second cause of action.

16

As to the first cause of action, amendment would be futile, because § 5000(a) is

17 advisory or hortatory rather than mandatory, and therefore cannot support a cause of

18 action. See Pennhurst, 451 U.S. at 24. It is true, as plaintiffs assert, that under Shewry, a

19 private party may seek declaratory and injunctive relief against the enforcement of a state

20 statutory scheme on the ground of federal preemption, even in the absence of an explicit

21 statutory provision establishing a cause of action, and regardless of whether the federal

22 statute at issue confers a “federal right” on the plaintiff. Id., 543 F.3d at 1058. Here,

23 however, plaintiffs have conflated the right to seek injunctive relief against the enforcement

24 of a state statute on the ground of federal preemption, with the right to bring a claim

25 alleging violation of a federal statute by state officials.

26

That is, while plaintiffs are permitted, under the rule stated in Shewry, to seek an

27 order enjoining the implementation of a state statute on the grounds that it is preempted by

28 federal law, the same analysis does not apply to a claim that a state official has violated

18

Case4:09-cv-02307-PJH Document59 Filed09/01/09 Page19 of 20

United States District Court For the Northern District of California

1 federal law by implementing the provisions of a state statute.

2

Under that second option, the issue is whether Congress intended that there be a

3 private right of action under the particular federal law at issue. Thus, the court must

4 determine whether Congress intended to create a federal right with its enactment. See

5 Gonzaga Univ. v. Doe, 536 U.S. 273, 283 (2002). This is because, like substantive federal

6 law itself, private rights of action to enforce federal law must be created by Congress. See

7 Alexander v. Sandoval, 532 U.S. 275, 286 (2001).

8

Here, because plaintiffs have confused the two issues (claim of federal preemption

9 vs. claim of violation of federal law), and the question is not adequately briefed, and the

10 court therefore does not decide whether or not Congress intended a private right of action,

11 but assumes – for purposes of this motion only – that it did so. In such a case, the ultimate

12 question with regard to the second cause of action – the claim that § 14131.10 violates the

13 provision in § 5001(f)(3) that the State is not eligible for enhanced FMAP payments if any

14 amounts attributable to increased FMAP are deposited into a rainy-day fund – is whether

15 the State is actually depositing any of the funds received under the FMAP enhancement

16 provision into a reserve or rainy-day fund.

17

Plaintiffs do not allege in the FAC any facts showing that such a fund exists or that

18 the State is depositing some of the money it is receiving under the FMAP enhancement

19 provision into said rainy-day fund. What plaintiffs do allege is that defendants “have

20 allowed savings resulting to the State from use of enhanced FMAP funds in the Medicaid

21 program[ ] to sink into the fungible funds of the State of California, to be reserved, used as

22 a rainy day fund, and spent for other purposes; – without using these savings to protect and

23 maintain the State’s Medicaid program including averting cuts in Medicaid services.” FAC

24 ¶ 41.

25

Defendants claim that there is no rainy-day fund. They submit a declaration by

26 Michael Genest (the Finance Director), stating that the State of California does not currently

27 have a reserve or rainy-day fund with money in it; and also stating that the funds being

28 provided under ARRA are being used for Medicaid purposes. For their part, plaintiffs do

19

Case4:09-cv-02307-PJH Document59 Filed09/01/09 Page20 of 20

United States District Court For the Northern District of California

1 not provide any evidence that the State is in fact depositing the funds into a rainy-day fund.

2 Nevertheless, in a Rule 12(b)(6) motion, defendants’ evidence may not be considered by

3 the court.

4

The court agrees with defendants that under Iqbal, the second cause of action does

5 not allege sufficient facts to state a claim. Accordingly, the motion is granted with leave to

6 amend the second cause of action, to allege facts showing that the State has in fact

7 violated ARRA by depositing the enhanced FMAP funds into a rainy-day fund. Any

8 amended complaint must be filed no later than October 1, 2009.

9

Should plaintiffs choose to file an amended complaint, defendants may file a motion

10 to dismiss for failure to state a claim, and may also file a motion to dismiss on the ground

11 that there is no private right of action to assert a claim under ARRA.

12

CONCLUSION

13

In accordance with the foregoing, the court DENIES the motion for preliminary

14 injunction, and GRANTS the motion to dismiss, with leave to amend the second cause of

15 action only.

16

17 IT IS SO ORDERED.

18 Dated: September 1, 2009 19 20

______________________________ PHYLLIS J. HAMILTON United States District Judge

21

22

23

24

25

26

27

28

20

 
 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

FILED
OCT 16 2009
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; et al.,
Plaintiffs - Appellants,
v.
ARNOLD SCHWARZENEGGER, Governor of the State of California; et al.,
Defendants - Appellees.

No. 09-16967 D.C. No. 4:09-cv-02307-PJH Northern District of California, Oakland
ORDER

Before: REINHARDT, W. FLETCHER and M. SMITH, Circuit Judges. The court is of the unanimous opinion that the proposed amicus curiae brief
on behalf of Service Employees International Union (SEIU) California State Council et al., does not provide additional factual and legal analysis relevant to the disposition of Plaintiffs-Appellants Gray Panthers of San Francisco’s emergency motion filed in this case. See Fed. R. App. P. 29(b). Accordingly, SEIU’s motion for leave to file an amicus curiae brief in support of Plaintiffs-Appellants Gray Panthers of San Francisco’s emergency motion is DENIED, without prejudice to SEIU’s right to seek to file one or more amicus briefs in connection with other pleadings hereafter filed in this case by one or more of the parties.

 
 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

FILED
OCT 22 2009
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; et al.,
Plaintiffs - Appellants,
v.
ARNOLD SCHWARZENEGGER, Governor of the State of California; et al.,
Defendants - Appellees.

No. 09-16967 D.C. No. 4:09-cv-02307-PJH Northern District of California, Oakland
ORDER

Before: REINHARDT, W. FLETCHER and M. SMITH, Circuit Judges. Plaintiffs-Appellants’ Emergency Motion Pursuant to Circuit Rule 27-3 for a
Stay Pending Appeal is DENIED.

 
 Case4:09-cv-02307-PJH Document81 Filed10/29/09 Page1 of 4

1 EDMUND G. BROWN JR. Attorney General of California
2 KARIN S. SCHWARTZ Supervising Deputy Attorney General
3 State Bar No. 209455 455 Golden Gate Avenue, Suite 11000
4 San Francisco, CA 94102-7004 Telephone: (415) 703-1382
5 Fax: (415) 703-5480 E-mail: karin.schwartz@doj.ca.gov
6 Attorneys for ARNOLD SCHWARZENEGGER, Governor of State of California; DAVID MAXWELL-
7 JOLLY, Director of Department of Health Care Services of the State of California; BILL LOCKYER,
8 Treasurer of State of California

9 IN THE UNITED STATES DISTRICT COURT
10 FOR THE NORTHERN DISTRICT OF CALIFORNIA
11

12

THE GRAY PANTHERS OF SAN 13 FRANCISCO, a nonprofit corporation;

C 09-02307-PJH

MARK BECKWITH; CALIFORNIA 14 FOUNDATION FOR INDEPENDENT

STIPULATION AND ORDER DISMISSING LAWSUIT WITH

LIVING CENTERS, INC., a nonprofit 15 corporation; INDEPENDENT LIVING

PREJUDICE

CENTER OF SOUTHERN CALIFORNIA, Date:

N/A

16 INC., a nonprofit corporation; LIFELONG Time:

N/A

MEDICAL CARE, a nonprofit corporation; Judge 17 and MARGARET DOWLING,

The Honorable Phyllis J. Hamilton

Trial Date N/A

18

Plaintiffs, Action Filed: May 26, 2009

19

v.

20
ARNOLD SCHWARZENEGGER, 21 Governor of State of California; KIM
BELSHE, Secretary of Health and Human 22 Services Agency of the State of California;
DAVID MAXWELL-JOLLY, Director of 23 Department of Health Care Services of the
State of California; JOHN CHIANG, 24 Controller of State of California; BILL
LOCKYER, Treasurer of State of 25 California; and MICHAEL E. GENEST,
Director of Finance of the State of 26 California,

27

Defendants.

28
1

Stipulation and Order Dismissing Lawsuit With Prejudice (Case No. C-09-02307-PJH)

Case4:09-cv-02307-PJH Document81 Filed10/29/09 Page2 of 4

1

The parties, through their counsel, hereby stipulate and agree as follows:

2

1. The parties enter into this stipulation to finally resolve this matter while preserving

3 any rights plaintiffs may have to appeal.

4

2. On September 1, 2009, this Court entered an order granting the motion of defendant

5 David Maxwell-Jolly, Director, California Department of Health Care Services (DHCS), to

6 dismiss the first and second causes of action for failure to state a cause of action upon which

7 relief may be granted, and providing plaintiffs with leave to amend the second cause of action by

8 October 1, 2009. Plaintiffs have declined to amend the second cause of action.

9

3. Also on September 1, 2009, this Court entered an order granting the motion of

10 defendant Governor Arnold Schwarzenegger and Treasurer Bill Lockyer to dismiss pursuant to

11 Federal Rule of Civil Procedure 12(b)(1).

12

4. The third cause of action previously has been dismissed in its entirety by (1)

13 stipulation as to Controller Chiang, and (2) a voluntary dismissal as to all other defendants.

14

5. The fourth cause of action for declaratory relief is entirely derivative of the first and

15 second causes of action dismissed by the Court in its order on September 1, 2009 granting

16 DHCS’s motion to dismiss.

17

6. The parties request that, based on its prior rulings, the Court enter an order dismissing

18 the complaint with prejudice, each party to bear its own costs and attorneys fees.

19

So stipulated.

20 Dated: October 27, 2009
21 22 23 24 25 26 27

EDMUND G. BROWN JR. Attorney General of California
/s/ Karin S. Schwartz KARIN S. SCHWARTZ Supervising Deputy Attorney General Attorneys for ARNOLD SCHWARZENEGGER, Governor of State of California; DAVID MAXWELL-JOLLY, Director of Department of Health Care Services of the State of California; BILL LOCKYER, Treasurer of State of California

28
1 Stipulation and Order Dismissing Lawsuit With Prejudice (Case No. C-09-02307-PJH)

Case4:09-cv-02307-PJH Document81 Filed10/29/09 Page3 of 4

1 Dated: October 27, 2009 2

EDMUND G. BROWN JR. Attorney General of California

3
4
5
6 Dated: October 27, 2009
7
8

/s/ Daniel Powell DANIEL POWELL Deputy Attorney General Attorneys for JOHN CHIANG, Controller of State of California
LYNN S. CARMAN STANLEY L. FRIEDMAN JESSIE M. SANDOVAL

9

/s/ Stanley L. Friedman

10

Attorneys for Plaintiffs

11 I hereby attest that I have on file all holograph signatures for any signatures indicated by a
12 “conformed” signature (/s/) within this efiled document.
13

14 Dated: October 27, 2009

15

/s/ Karin S. Schwartz

16

KARIN S. SCHWARTZ

Supervising Deputy Attorney General

17

Attorneys for ARNOLD

SCHWARZENEGGER, Governor of State of

18

California; DAVID MAXWELL-JOLLY,

Director of Department of Health Care

19

Services of the State of California; BILL

LOCKYER, Treasurer of State of California

20

21

22

//

23

//

24

//

25

//

26

//

27

//

28

//

2 Stipulation and Order Dismissing Lawsuit With Prejudice (Case No. C-09-02307-PJH)

Case4:09-cv-02307-PJH Document81 Filed10/29/09 Page4 of 4

1

ORDER

2

Pursuant to the stipulation of the parties, and consistent with the court’s prior orders in the

3 case, the Court hereby dismisses the complaint with prejudice.

UNITED S ALIFORNIA

OURT NORTH

4

IT IS SO ORDERED

5 6 Dated: October _2_9, 2009 7

8

TATES DISTRICT C
____________________________
JNPuHodYrgtLheLeIoIrTSfnJtIDh.SHeisSAUtrMOniciIttLOeoTdfORSCNDtaalEtiefRsorDEnDiisatrict Court,

9 SF2009404122
30804557.doc
10
11
12

Judge Phyllis J. Hamilton
ERN DISTRICT OF C

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28
3 Stipulation and Order Dismissing Lawsuit With Prejudice (Case No. C-09-02307-PJH)

 
 Case: 4:09-cv-02307-PJH As of: 03/29/2010 06:36 PM PDT 1 of 10
ADRMOP, CLOSED, E−Filing
U.S. District Court California Northern District (Oakland) CIVIL DOCKET FOR CASE #: 4:09−cv−02307−PJH

Gray Panthers of San Francisco et al v. Schwarzenegger et al Assigned to: Hon. Phyllis J. Hamilton Case in other court: Ninth Circuit Court of Appeals, 09−16967 Cause: 28:1331 Fed. Question
Plaintiff

Date Filed: 05/26/2009 Date Terminated: 10/29/2009 Jury Demand: None Nature of Suit: 950 Constitutional − State Statute Jurisdiction: Federal Question

Gray Panthers of San Francisco a nonprofit corporation

represented by Lynn Stuart Carman Lynn S. Carman 1035 Cresta Way, #3 San Rafael, CA 94903−4866 415−927−4023 Fax: 415−499−1687 Email: a7827@attbi.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Stanley Lester Friedman Attorney at Law 445 S Figueroa St 27FL Los Angeles, CA 90071−1631 (213) 629−1500 Fax: (213) 489−6899 Email: Friedman@Friedmanlaw.org ATTORNEY TO BE NOTICED

Plaintiff Mark Beckwith

represented by Lynn Stuart Carman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Stanley Lester Friedman (See above for address) ATTORNEY TO BE NOTICED

Plaintiff LifeLong Medical Center

represented by Stanley Lester Friedman (See above for address) ATTORNEY TO BE NOTICED

Lynn Stuart Carman (See above for address) ATTORNEY TO BE NOTICED

Plaintiff Margaret Dowling

represented by Stanley Lester Friedman (See above for address) ATTORNEY TO BE NOTICED

Lynn Stuart Carman (See above for address) ATTORNEY TO BE NOTICED

Plaintiff

Case: 4:09-cv-02307-PJH As of: 03/29/2010 06:36 PM PDT 2 of 10

Independent Living Center of Southern Caifornia, Inc.

represented by Stanley Lester Friedman (See above for address) ATTORNEY TO BE NOTICED

Lynn Stuart Carman (See above for address) ATTORNEY TO BE NOTICED

Plaintiff
California Foundation for Independent Living Centers

represented by Stanley Lester Friedman (See above for address) ATTORNEY TO BE NOTICED

Lynn Stuart Carman (See above for address) ATTORNEY TO BE NOTICED

V. Defendant Arnold Schwarzenegger Governor of the State of California
Defendant Kim Belshe Secretary of Health and Human Services Agency of the State of California Defendant David Maxwell−Jolly Director of Department of Health Care Services of the State of California Defendant John Chiang Controller of the State of California

represented by Joshua Nathan Sondheimer California Department of Justice Office of the Attorney General 455 Golden Gate St., Suite 11000 San Francisco, CA 94102 415−703−5615 Fax: (415)703−5480 Email: joshua.sondheimer@doj.ca.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED
Karin S. Schwartz Office of the Attorney General 455 Golden Gate Avenue, Suite 11000 San Francisco, CA 94102−7004 415−703−1382 Email: Karin.Schwartz@doj.ca.gov ATTORNEY TO BE NOTICED
represented by Joshua Nathan Sondheimer (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
represented by Karin S. Schwartz (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
represented by Daniel J. Powell Department of Justice, Attorney General's Office 455 Golden Gate Avenue, Suite 11000 San Francisco, CA 94102 (415)703−5830 Fax: 415−703−1234 Email: Daniel.Powell@doj.ca.gov LEAD ATTORNEY

Case: 4:09-cv-02307-PJH As of: 03/29/2010 06:36 PM PDT 3 of 10

ATTORNEY TO BE NOTICED

Defendant
Bill Lockyer Treasurer of the State of California

represented by Joshua Nathan Sondheimer (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Karin S. Schwartz (See above for address) ATTORNEY TO BE NOTICED

Defendant
Michael E. Genest Director of Finance of the State of California

represented by Joshua Nathan Sondheimer (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Date Filed 05/26/2009 05/26/2009 05/26/2009 05/26/2009 06/30/2009
07/01/2009
07/02/2009
07/02/2009

# Docket Text
1 COMPLAINT; summons issued against Michael E. Genest, Arnold Schwarzenegger, Kim Belshe, David Maxwell−Jolly, John Chiang, Bill Lockyer (Filing fee $ 350, receipt number 34611032474). Filed by Gray Panthers of San Francisco, Mark Beckwith. (Attachments: # 1 Civil Cover Sheet, # 2 Summons)(slh, COURT STAFF) (Filed on 5/26/2009) (Entered: 06/01/2009)
2 Disclosure of Non−Party Interested Entities or Persons by Gray Panthers of San Francisco, Mark Beckwith (slh, COURT STAFF) (Filed on 5/26/2009) (Entered: 06/01/2009)
3 ADR SCHEDULING ORDER: Case Management Statement due by 8/26/2009. Case Management Conference set for 9/2/2009 01:30 PM. (Attachments: # 1 EMC Standing Order) (slh, COURT STAFF). (Entered: 06/01/2009)
CASE DESIGNATED for Electronic Filing. (slh, COURT STAFF) (Filed on 5/26/2009) (Entered: 06/01/2009)
4 AMENDED COMPLAINT against Kim Belshe, John Chiang, Michael E. Genest, Bill Lockyer, David Maxwell−Jolly, Arnold Schwarzenegger. Filed byMark Beckwith, Gray Panthers of San Francisco, LifeLong Medical Center, Margaret Dowling, Independent Living Center of Southern Caifornia, Inc., California Foundation for Independent Living Centers. (Carman, Lynn) (Filed on 6/30/2009) (Entered: 06/30/2009)
5 MOTION for Preliminary Injunction TO ENJOIN ELIMINATION OF 9 MEDICAID SERVICES IN VIOLATION OF STIMULUS ACT filed by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. Motion Hearing set for 8/5/2009 10:30 AM in Courtroom C, 15th Floor, San Francisco. (Attachments: # 1 Supplement, # 2 Supplement, # 3 Supplement, # 4 Supplement, # 5 Supplement, # 6 Supplement, # 7 Supplement)(Carman, Lynn) (Filed on 7/1/2009) (Entered: 07/01/2009)
6 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center re 5 MOTION for Preliminary Injunction TO ENJOIN ELIMINATION OF 9 MEDICAID SERVICES IN VIOLATION OF STIMULUS ACT NOTICE OF PROPSED ORDER (Carman, Lynn) (Filed on 7/2/2009) (Entered: 07/02/2009)
7 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center RULE 3−16 DISCLOSURE (Carman, Lynn) (Filed on 7/2/2009) (Entered: 07/02/2009)

Case: 4:09-cv-02307-PJH As of: 03/29/2010 06:36 PM PDT 4 of 10

07/06/2009
07/06/2009 07/07/2009 07/07/2009 07/07/2009
07/07/2009
07/07/2009
07/08/2009
07/08/2009 07/09/2009
07/09/2009 07/09/2009 07/10/2009 07/14/2009

8 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center re 5 MOTION for Preliminary Injunction TO ENJOIN ELIMINATION OF 9 MEDICAID SERVICES IN VIOLATION OF STIMULUS ACT NOTICE OF CONTINUANCE OF MOTION TO AUGUST 12, 2009 (Carman, Lynn) (Filed on 7/6/2009) (Entered: 07/06/2009)
9 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center CONSENT TO MAGISTRATE JUDGE (Carman, Lynn) (Filed on 7/6/2009) (Entered: 07/06/2009)
10 First Declination to Proceed Before a U.S. Magistrate Judge by David Maxwell−Jolly. (Schwartz, Karin) (Filed on 7/7/2009) (Entered: 07/07/2009)
11 NOTICE by David Maxwell−Jolly of Unavailability of Counsel (Schwartz, Karin) (Filed on 7/7/2009) (Entered: 07/07/2009)
12 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center re 5 MOTION for Preliminary Injunction TO ENJOIN ELIMINATION OF 9 MEDICAID SERVICES IN VIOLATION OF STIMULUS ACT NOTICE TO CONTINUE HEARING TO AUG. 12, 2009 (Carman, Lynn) (Filed on 7/7/2009) (Entered: 07/07/2009)
13 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center AMENDED CONSENT TO MAGISTRATE JUDGE (Carman, Lynn) (Filed on 7/7/2009) (Entered: 07/07/2009)
14 AFFIDAVIT of Service for SUMMONS AND ALL MOVING PAPERS served on ALL DEFENDANTS on 7/6/09, filed by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. (Carman, Lynn) (Filed on 7/7/2009) (Entered: 07/07/2009)
15 Ex Parte Application WITH REQUEST FOR JUDICIAL NOTICE filed by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. (Attachments: # 1 Exhibit, # 2 Supplement, # 3 Exhibit, # 4 Proposed Order)(Carman, Lynn) (Filed on 7/8/2009) (Entered: 07/08/2009)
16 CLERK'S NOTICE of Impending Reassignment to U.S. District Judge (bpfS, COURT STAFF) (Filed on 7/8/2009) (Entered: 07/08/2009)
17 ERRATA TO SET FORTH CORRECT EXHIBIT 1 TO EX PARTE REQUESTS OF PLAINTIFFS by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. (Carman, Lynn) (Filed on 7/9/2009) (Entered: 07/09/2009)
18 ORDER REASSIGNING CASE. Case reassigned to Judge Hon. Phyllis J. Hamilton for all further proceedings. Judge Magistrate Judge Edward M. Chen no longer assigned to the case. Signed by Executive Committee on 7/9/09. (mab, COURT STAFF) (Filed on 7/9/2009) (Entered: 07/09/2009)
19 Reply Memorandum re 15 Ex Parte Application WITH REQUEST FOR JUDICIAL NOTICE filed byDavid Maxwell−Jolly. (Schwartz, Karin) (Filed on 7/9/2009) (Entered: 07/09/2009)
20 ORDER by Judge Hamilton denying 15 Ex Parte Application (pjhlc1, COURT STAFF) (Filed on 7/10/2009) (Entered: 07/10/2009)
21 ORDER SETTING CASE MANAGEMENT CONFERENCE. Signed by Judge Phyllis J. Hamilton on 7/14/09. (nah, COURT STAFF) (Filed on 7/14/2009) (Entered: 07/14/2009)

Case: 4:09-cv-02307-PJH As of: 03/29/2010 06:36 PM PDT 5 of 10

07/14/2009 07/15/2009 07/15/2009 07/15/2009 07/26/2009
07/26/2009 07/26/2009 07/26/2009
07/26/2009
07/27/2009 07/27/2009 07/27/2009
07/27/2009
07/27/2009 07/30/2009 08/01/2009

Set Deadlines/Hearings: Joint Case Management Statement due by 9/10/2009. Initial Case Management Conference set for 9/17/2009 02:30 PM. (nah, COURT STAFF) (Filed on 7/14/2009) (Entered: 07/14/2009)
22 MOTION to Dismiss the Complaint filed by David Maxwell−Jolly. Motion Hearing set for 8/19/2009 09:00 PM in Courtroom 5, 17th Floor, San Francisco. (Schwartz, Karin) (Filed on 7/15/2009) (Entered: 07/15/2009)
23 Request for Judicial Notice re 22 MOTION to Dismiss the Complaint filed byDavid Maxwell−Jolly. (Related document(s) 22 ) (Schwartz, Karin) (Filed on 7/15/2009) (Entered: 07/15/2009)
24 Proposed Order re 22 MOTION to Dismiss the Complaint by David Maxwell−Jolly. (Schwartz, Karin) (Filed on 7/15/2009) (Entered: 07/15/2009)
25 Memorandum in Opposition re 5 MOTION for Preliminary Injunction TO ENJOIN ELIMINATION OF 9 MEDICAID SERVICES IN VIOLATION OF STIMULUS ACT filed byDavid Maxwell−Jolly. (Schwartz, Karin) (Filed on 7/26/2009) (Entered: 07/26/2009)
26 Declaration of Barbara Bailey in Support of 25 Memorandum in Opposition to Motion for Preliminary Injunction filed byDavid Maxwell−Jolly. (Related document(s) 25 ) (Schwartz, Karin) (Filed on 7/26/2009) (Entered: 07/26/2009)
27 Declaration of Michael C. Genest in Support of 25 Memorandum in Opposition to Motion for Preliminary Injunction filed byDavid Maxwell−Jolly. (Related document(s) 25 ) (Schwartz, Karin) (Filed on 7/26/2009) (Entered: 07/26/2009)
28 Request for Judicial Notice re 25 Memorandum in Opposition to Motion for Preliminary Injunction filed byDavid Maxwell−Jolly. (Attachments: # 1 Exhibit, # 2 Exhibit)(Related document(s) 25 ) (Schwartz, Karin) (Filed on 7/26/2009) (Entered: 07/26/2009)
29 Declaration of Toby Douglas in Support of 25 Memorandum in Opposition to Motion for Preliminary Injunction filed byDavid Maxwell−Jolly. (Attachments: # 1 Errata, # 2 Exhibit, # 3 Exhibit)(Related document(s) 25 ) (Schwartz, Karin) (Filed on 7/26/2009) (Entered: 07/26/2009)
30 Letter from Karin Schwartz re E−Filing of Defendant Maxwell−Jolly's Opposition to Motion for Preliminary Injunction. (Schwartz, Karin) (Filed on 7/27/2009) (Entered: 07/27/2009)
31 Answer to Amended Complaint For Injunctive and Declaratory Relief byJohn Chiang. (Powell, Daniel) (Filed on 7/27/2009) (Entered: 07/27/2009)
32 MOTION to Dismiss (Fed. R. Civ. P. 12(b)(1) &(6) filed by Kim Belshe, Michael E. Genest, Bill Lockyer, Arnold Schwarzenegger. Motion Hearing set for 9/2/2009 09:00 AM in Courtroom 5, 17th Floor, San Francisco. (Sondheimer, Joshua) (Filed on 7/27/2009) (Entered: 07/27/2009)
33 Joinder −−CONDITIONAL−−TO DEFENDANT MAXWELL−JOLLYS MOTION TO DISMISS AND DEFENDANTS OPPOSITION TO MOTION FOR PRELIMINARY INJUNCTION by Arnold Schwarzenegger. (Sondheimer, Joshua) (Filed on 7/27/2009) (Entered: 07/27/2009)
34 Proposed Order Granting Motion to Dismiss by Kim Belshe, Michael E. Genest, Bill Lockyer, Arnold Schwarzenegger. (Sondheimer, Joshua) (Filed on 7/27/2009) (Entered: 07/27/2009)
35 NOTICE by Kim Belshe, Michael E. Genest, Bill Lockyer, Arnold Schwarzenegger Of Unavailability of Counsel (Sondheimer, Joshua) (Filed on 7/30/2009) (Entered: 07/30/2009)
36 Memorandum in Opposition TO MOTION TO DISMISS filed byMark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. (Carman, Lynn) (Filed on 8/1/2009) (Entered: 08/02/2009)

Case: 4:09-cv-02307-PJH As of: 03/29/2010 06:36 PM PDT 6 of 10

08/02/2009 08/05/2009 08/05/2009 08/05/2009 08/06/2009 08/06/2009 08/07/2009 08/08/2009
08/10/2009 08/10/2009 08/10/2009

37 NOTICE of Voluntary Dismissal OF THIRD CLAIM FOR RELIEF, ONLY, AGAINST ALL DEFENDANTS EXCEPT JOHN CHIANG, CONTROLLER by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center (Carman, Lynn) (Filed on 8/2/2009) (Entered: 08/02/2009)
38 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center OF WITHDRAWAL OF PRELIMINARY INJUNCTION MOTION IN RESPECT TO THIRD CLAIM FOR RELIEF, ONLY (Attachments: # 1 Exhibit EXHIBITS A, B)(Carman, Lynn) (Filed on 8/5/2009) (Entered: 08/05/2009)
39 Reply Memorandum re 22 MOTION to Dismiss the Complaint filed byDavid Maxwell−Jolly. (Schwartz, Karin) (Filed on 8/5/2009) (Entered: 08/05/2009)
40 Reply Memorandum WITH SUPPLENTAL REQUEST FOR JUDICIAL NOTICE filed byMark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. (Attachments: # 1 SUPPLEMENTAL REQUEST FOR JUDICIAL NOTICE, # 2 EXHIBITS A, B)(Carman, Lynn) (Filed on 8/5/2009) (Entered: 08/05/2009)
41 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center CORRECTION OF ERRATA IN SUPPLEMENTAL REQUEST FOR JUDICIAL NOTICE (Attachments: # 1 CORRECTION OF ERRATA)(Carman, Lynn) (Filed on 8/6/2009) (Entered: 08/06/2009)
42 OBJECTIONS to re 40 Reply Memorandum, filed by Plaintiffs on August 5, 2009 by David Maxwell−Jolly. (Schwartz, Karin) (Filed on 8/6/2009) (Entered: 08/06/2009)
43 Consent MOTION for Leave to File Supplementary Material in Opposition to Motion for Preliminary Injunction filed by David Maxwell−Jolly. Motion Hearing set for 8/19/2009 09:00 AM in Courtroom 5, 17th Floor, San Francisco. (Attachments: # 1 Exhibit, # 2 Proposed Order)(Schwartz, Karin) (Filed on 8/7/2009) (Entered: 08/07/2009)
44 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center NOTICE OF NON−OBJECTION TO A FURTHER MEMORANDUM BY DEFENDANTS IN RESPECT TO DEFENDANTS' NEW MATTER OBJECTION FILED AUGUST 6, 2009 (Attachments: # 1 Exhibit EXHIBIT A)(Carman, Lynn) (Filed on 8/8/2009) (Entered: 08/08/2009)
45 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center NOITICE OF ASSOCIATION OF CO−COUNSEL (Carman, Lynn) (Filed on 8/10/2009) (Entered: 08/10/2009)
46 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center APPEARANCE OF STANLEY L. FRIEDMAN AS A CO−COUNSEL (Carman, Lynn) (Filed on 8/10/2009) (Entered: 08/10/2009)
47 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center JESSIE M. SANDOVAL APPEARANCE AS A CO−COUNSELE (Carman, Lynn) (Filed on 8/10/2009) (Entered: 08/10/2009)

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08/12/2009 08/13/2009
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48 Memorandum in Opposition TO DISMISSAL MOTION OF THE GOVERNOR AND THE TREASURER filed byMark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. (Carman, Lynn) (Filed on 8/12/2009) (Entered: 08/12/2009)
49 EX PARTE REQUEST FOR LYNN S. CARMAN TO USE EAR PHONES AT AUGUST 19, 2009 HEARING by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center (Carman, Lynn) (Filed on 8/13/2009) Modified on 8/17/2009 (far, COURT STAFF). (Entered: 08/13/2009)
50 ORDER by Judge Phyllis J. Hamilton granting 43 Motion for Leave to File (nah, COURT STAFF) (Filed on 8/14/2009) (Entered: 08/14/2009)
51 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center STIPULATION TO DISMISS DEFENDANTS KIM BELSHE AND MICHAEL E. GENEST (Carman, Lynn) (Filed on 8/17/2009) (Entered: 08/17/2009)
52 NOTICE by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center STIPULATION TO DISMISS 3D CLAIM FOR RELIEF, ONLY, AGAINST DEFENDANT JOHN CHIANG, ONLY (Carman, Lynn) (Filed on 8/17/2009) (Entered: 08/17/2009)
53 NOTICE of Voluntary Dismissal OF DEFENDANTS KIM BELSHE AND MICHAEL E. GENEST, ONLY by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center (Carman, Lynn) (Filed on 8/17/2009) (Entered: 08/17/2009)
54 Reply to Opposition REPLY IN SUPPORT OF GOVERNOR SCWHARZENEGGER AND TREASURER LOCKYER'S MOTION TO DISMISS filed byBill Lockyer, Arnold Schwarzenegger. (Sondheimer, Joshua) (Filed on 8/18/2009) (Entered: 08/18/2009)
55 Minute Entry: Motion Hearing held on 8/19/2009 before Phyllis J. Hamilton (Date Filed: 8/19/2009) re 5 MOTION for Preliminary Injunction TO ENJOIN ELIMINATION OF 9 MEDICAID SERVICES IN VIOLATION OF STIMULUS ACT filed by Mark Beckwith, LifeLong Medical Center, Independent Living Center of Southern Caifornia, Inc., Gray Panthers of San Francisco, California Foundation for Independent Living Centers, Margaret Dowling, 22 MOTION to Dismiss the Complaint filed by David Maxwell−Jolly. (Court Reporter Katherine Sullivan.) (nah, COURT STAFF) (Date Filed: 8/19/2009) (Entered: 08/19/2009)
56 NOTICE of Appearance by Stanley Lester Friedman (Friedman, Stanley) (Filed on 8/21/2009) (Entered: 08/21/2009)
57 Transcript of Proceedings held on 8/19/09, before Judge Phyllis J. Hamilton. Court Reporter/Transcriber Katherine Powell Sullivan, Telephone number 415−794−6659. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerks Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction.After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. Release of Transcript Restriction set for 11/23/2009. (Sullivan, Katherine) (Filed on 8/26/2009) (Entered: 08/26/2009)
58 ORDER by Judge Hamilton granting 32 Motion to Dismiss (pjhlc1, COURT STAFF) (Filed on 9/1/2009) (Entered: 09/01/2009)
59 ORDER by Judge Hamilton denying 5 Motion for Preliminary Injunction; granting 22 Motion to Dismiss (pjhlc1, COURT STAFF) (Filed on 9/1/2009) (Entered: 09/01/2009)

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09/04/2009

60 CLERKS NOTICE

Effective September 14, 2009, Judge Phyllis Hamilton's courtroom and chambers will be located in the Oakland Courthouse, Courtroom #3, 3rd floor, 1301 Clay Street, Oakland, California 94612.

On or after September 14, 2009, all filings for matters pending on Judge Hamiltons docket, all court appearances, and all deliveries of chambers' copies of documents must be made at the Oakland Courthouse.

The days and times for law and motion calendars and all currently scheduled proceedings remain unchanged.

Please note that all of Judge Hamilton's case files will be moved to the Oakland Courthouse, therefore all cases numbers assigned to her will be changed slightly to reflect the correct venue. Previously, all case numbers started with "3:" to indicate the San Francisco office (Example: 3:09−cv−12345−PJH). As of September 14th, 2009, all of Judge Hamilton's case files will begin with "4:" to indicate the Oakland office, but everything else will stay the same (Example: 4:09−cv−12345−PJH). When e−filing, using the short case number format will always avoid problems when searching for the correct case: 09−12345 (YY−NNNNN).

For information on the Oakland Courthouse's accessibility, parking, driving directions, public transit, hotels and other helpful links, please visit our website: http://www.cand.uscourts.gov, click on "Court Information" on the right hand side of our main page, then select the Oakland link under "Address and Jurisdiction". The main telephone number for the Oakland Division is 510 637−3530.

09/04/2009
09/08/2009 09/09/2009 09/10/2009
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(cp, COURT STAFF) (Filed on 9/4/2009) (Entered: 09/04/2009)
61 NOTICE OF APPEAL re 55 , 59 by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center (Attachments: # 1 Exhibit)(Carman, Lynn) FEE STATUS: PAID (Filed on 9/4/2009) Modified on 9/11/2009 (far, COURT STAFF). Modified on 9/14/2009 (vlk, COURT STAFF). (Entered: 09/04/2009)
USCA Appeal Fees received $ 455 receipt number 34611036328 (far, COURT STAFF) (Filed on 9/8/2009) (Entered: 09/10/2009)
62 STIPULATION AND ORDER RE SEPT. 17, 2009 by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. (Friedman, Stanley) (Filed on 9/9/2009) (Entered: 09/09/2009)
63 STIPULATION AND ORDER RE SEPTEMBER 17, 2009 CASE MANAGEMENT CONFERENCE re 62 Stipulation, filed by Mark Beckwith, LifeLong Medical Center, Independent Living Center of Southern Caifornia, Inc., Gray Panthers of San Francisco, California Foundation for Independent Living Centers, Margaret Dowling. Signed by Judge Phyllis J. Hamilton on 9/10/09. (nah, COURT STAFF) (Filed on 9/10/2009) (Entered: 09/10/2009)
64 Copy of Notice of Appeal and Docket sheet mailed to all counsel (Attachments: # 1 docket)(vlk, COURT STAFF) (Filed on 9/14/2009) (Entered: 09/14/2009)
65 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals (Attachments: # 1 Appeal Notification Form, # 2 Notice of Appeal, # 3 docket)(vlk, COURT STAFF) (Filed on 9/14/2009) (Entered: 09/14/2009)
66 Certificate of Record forwarded to USCA (vlk, COURT STAFF) (Filed on 9/14/2009) (Entered: 09/14/2009)
67 USCA Case Number 09−16967 Ninth Circuit Court of Appeals (kk, COURT STAFF) (Filed on 9/17/2009) (Entered: 09/17/2009)
68 Document incorrectly e−filed. See document 71 . NOTICE of Appeal by Mark Beckwith, California Foundation for Independent Living Centers, Margaret

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09/24/2009
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Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center NOTICE OF APPEAL FROM re 58 DISMISSAL OF GOVERNOR AND TREASURER (Attachments: # 1 Exhibit A and B)(Carman, Lynn) (Filed on 9/24/2009) Modified on 9/24/2009 (vlk, COURT STAFF). Modified on 9/24/2009 (vlk, COURT STAFF). (Entered: 09/24/2009)
69 RECEIVED: Civil Appeals Docketing Statement forwarded to 9th Circuit US Court of Appeals by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center (Attachments: # 1 Supplement ATTACHMENT TO DOCKETING STATEMENT, # 2 Exhibit EXHIBITS A AND B)(Carman, Lynn) (Filed on 9/24/2009) (Entered: 09/24/2009)
70 USCA Case Number 09−17098 Ninth Circuit Court of Appeals re: #68(Attachments: # 1 USCA Time Scheduling Order)(kk, COURT STAFF) (Filed on 9/24/2009) Modified on 9/24/2009 (kk, COURT STAFF). (Entered: 09/24/2009)
72 Copy of re 71 Notice of Appeal and Docket sheet mailed to all counsel (Attachments: # 1 docket)(vlk, COURT STAFF) (Filed on 9/24/2009) Modified on 9/24/2009 (vlk, COURT STAFF). Modified on 9/24/2009 (vlk, COURT STAFF). (Entered: 09/24/2009)
71 NOTICE OF APPEAL as to 58 Order on Motion to Dismiss by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center. Filing fee $ 455. Receipt No. 44611004169 Appeal Record due by 10/26/2009. (vlk, COURT STAFF) (Filed on 9/24/2009) Modified on 9/24/2009 (vlk, COURT STAFF). (Entered: 09/24/2009)
73 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals re 71 Notice of Appeal, (Attachments: # 1 Appeal Notification Form, # 2 Notice of Appeal, # 3 Docket)(vlk, COURT STAFF) (Filed on 9/24/2009) (Entered: 09/24/2009)
74 **ISSUED IN ERROR. PLEASE DISREGARDCertificate of Record forwarded to USCA re appeal 71 Notice of Appeal (vlk, COURT STAFF) (Filed on 9/24/2009) Modified on 9/25/2009 (vlk, COURT STAFF). (Entered: 09/24/2009)
75 ORDER of USCA as to 71 Notice of Appeal re: emergency motion for an injunction pending appeal (vlk, COURT STAFF) (Filed on 10/7/2009) (Entered: 10/07/2009)
76 NOTICE of Voluntary Dismissal OF ACTION AGAINST DEFENDANTS ARNOLD SCHWARZENEGGER, DAVID MAXWELL−JOLLY, AND BILL LOCKYER, ONLY by Mark Beckwith, California Foundation for Independent Living Centers, Margaret Dowling, Gray Panthers of San Francisco, Independent Living Center of Southern Caifornia, Inc., LifeLong Medical Center (Carman, Lynn) (Filed on 10/24/2009) (Entered: 10/24/2009)
77 MOTION TO ENTER ORDER OF DISMISSAL AS TO ALL PARTIES AND ALL CAUSES OF ACTION PURSUANT TO COURTS PRIOR SUBSTANTIVE ORDERS IN THE CASE filed by David Maxwell−Jolly. (Attachments: # 1 Exhibit, # 2 Proposed Order)(Schwartz, Karin) (Filed on 10/26/2009) (Entered: 10/26/2009)
78 STIPULATION AND [Proposed] ORDER DISMISSING LAWSUIT WITH PREJUDICE by Bill Lockyer, David Maxwell−Jolly, Arnold Schwarzenegger. (Schwartz, Karin) (Filed on 10/27/2009) (Entered: 10/27/2009)
79 ORDER of USCA as to 71 Notice of Appeal denying emergency motion (kk, COURT STAFF) (Filed on 10/28/2009) (Entered: 10/28/2009)
80 ORDER of USCA denying plaintiff's emergency motion for a stay pending appeal(kk, COURT STAFF) (Filed on 10/28/2009) (Entered: 10/28/2009)
81 STIPULATION AND ORDER DISMISSING CASE, ***Civil Case Terminated. Signed by Judge Phyllis J. Hamilton on 10/29/09. (nah, COURT STAFF) (Filed on

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11/12/2009
11/12/2009 01/12/2010
01/12/2010

10/29/2009) (Entered: 10/29/2009)
82 MANDATE of USCA as to 71 Notice of Appeal, filed by Mark Beckwith, LifeLong Medical Center, Independent Living Center of Southern Caifornia, Inc., Gray Panthers of San Francisco, California Foundation for Independent Living Centers, Margaret Dowling (vlk, COURT STAFF) (Filed on 11/12/2009) (Entered: 11/12/2009)
83 CLERKS Letter Spreading Mandate to Counsel (vlk, COURT STAFF) (Filed on 11/12/2009) (Entered: 11/12/2009)
84 MANDATE of USCA as to 71 Notice of Appeal, filed by Mark Beckwith, LifeLong Medical Center, Independent Living Center of Southern Caifornia, Inc., Gray Panthers of San Francisco, California Foundation for Independent Living Centers, Margaret Dowling (vlk, COURT STAFF) (Filed on 1/12/2010) (Entered: 01/12/2010)
85 CLERKS Letter Spreading Mandate to Counsel (vlk, COURT STAFF) (Filed on 1/12/2010) (Entered: 01/12/2010)