• Case3:09-cv-04398-MHP Document1-1

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1 Bingham McCutchen LLP

WILLIAM F. ABRAMS (SBN 88805)

2 william.abrams@bingham.com

1900 University Avenue

3 East Palo Alto, CA 94303-2223

Telephone: 650.849.4400

4 Facsimile: 650.849.4800

5 Bingham McCutchen LLP JENNIFER A. LOPEZ (SBN 232320)
6 jennifer.lopez@bingham.com CRAIG A. TAGGART (SBN 239168)
7 craig.taggart@bingham.com MICHAEL D. MORTENSON (SBN 247758)
8 michael.mortenson@bingham.com
600 Anton Boulevard, 18th Floor 9 Costa Mesa, CA 92626-1924
Telephone: 714.830.0600 10 Facsimile: 714.830.0700

~~filin9

11 Attorneys for Plaintiff CALIFORNIA ALLIANCE OF CHILD AND FAMILY
12 SERVICES

13

UNITED STATES DISTRICT COURT

14

NORTHERN DISTRICT OF CALIFORNIA

15

SAN FRANCISCO D~SION

16

L,V u9 4398

17 CALIFORNIA ALLIANCE OF CHILD AND

FAMILY SERVICES,

18

Plaintiff,

19

v.

Case No.
COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF (42 U.S.c. § 1983)

20 JOHN WAGNER, Interim Director of the California Department of Social Services, in his
21 official capacity; GREGORY ROSE, Deputy Director of the Children and Family Services
22 Division of the California Department of Social Services, in his official capacity,
23 Defendants.
24

DEMAND FOR JURY TRIAL

25

26

Plaintiff California Alliance of Child and Family Services ("the Alliance") files

27 this Complaint against John Wagner ("Wagner"), in his official capacity as Director of the

28 California Department of Social Services ("DSS"), and Gregory Rose ("Rose"), in his official

COMPLAINT

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1 capacity as Deputy Director of the Children and Family Services Division of DSS ("CFS"), for

2 Declaratory Judgment and Injunctive Relief.

3

SUMMARY

4

1. This case is brought on behalf of non-profit charitable organizations that care for

5 children who have been removed from their homes and for whom the State of California has

6 failed to provide adequate funding required by the Child Welfare Act, 42 U.S.C. §§ 670-679b.

7 This action seeks to prevent the State of California from violating federal law by reducing sums

8 paid to group homes for the care of foster children under the Child Welfare Act, and to obtain

9 payment amounts required by the Child Welfare Act sufficient to provide these children the

10 appropriate care and shelter to which they are entitled. California's past, present and future

11 violation of federal law has caused and will continue to cause these non-profit agencies to cease

12 operating or to dramatically reduce vital programs and staff, irreparably harming California's

13 foster children.

14

2. The Alliance previously filed an action against the State in the Northern District

15 of California for violations of the Child Welfare Act. See California Alliance ofChild and

16 Family Services v. Allenby, No. C 06-04095 MHP (N.D. Cal. June 30, 2006) ("California

17 Alliance F'). The district court held that the State's payment of80% of foster care group homes'

18 costs "substantially complied" with the Child Welfare Act and that the State was permitted to

19 take into account budgetary considerations in setting its foster care maintenance payment rates,

20 although this could not be the only factor. California Alliance I, 2008 WL 686860 (N.D. Cal.

21 Mar. 12, 2008). The court also stated that: "The court is aware that over time, given a multitude

22 of years with budgetary constraints, the standard rate schedule could become greatly out of synch

23 with the costs of items enumerated in the CWA. In that case, the rate may well fall to a level that

24 does not satisfy the State's obligation to 'have a process for determining rates that takes into

25 account the statutory criteria mandated by the CWA'." Id. California Alliance 1 is currently on

26 appeal and is set for hearing before the Ninth Circuit Court of Appeal on October 7,2009.
27 California Alliance ofChild and Family Services v. Allenby, c.A. NO. 08-16267.

28 -2 -

COMPLATNT

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1

3. This current action is necessitated by the State's recent enactment of a new budget

2 for fiscal year 2009-10 that cuts payments to foster care group homes by ten-percent (10%),

3 effective October 1, 2009 -- a decision based solely on budgetary considerations. The State,

4 therefore, is not in compliance or even substantial compliance with the mandates of the Child

5 Welfare Act. This 10% rate cut will irreparably harm the Alliance's members and the children

6 for whom they care and must be enjoined. Furthermore, because the State's most recent budget

7 impermissibly conflicts with the mandates of the Child Welfare Act, it is preempted by the

8 . Supremacy Clause and, accordingly, its implementation must be enjoined.

9

In support thereof, the Alliance alleges as follows:

10

PARTIES

11

4. The Alliance is a California corporation with its principal place of business at

12 2201 K Street, Sacramento, California 95816. The Alliance is a private non-profit membership

13 organization that, among other things, represents the interests of group homes and the foster

14 children for whom they provide care and supervision as described below.

15

a. The Alliance represents California non-profit agencies offering an array of

16 services to vulnerable children and their families, including group home programs. Group

17 homes provide care and supervision for foster children who are placed with them by county child

18 welfare and/or probation departments and who have significant emotional or behavioral

19 problems and who cannot live safely in their own homes or in another family setting, and who

20 require more restrictive out-of-home placement environments. DSS licenses, audits, and

21 establishes monthly payment rates for group homes serving foster children. DSS provides

22 federal and State reimbursement to counties for the costs of making payments, using the DSS-

23 established rates, to group homes on behalf of foster children who are eligible under the Aid to

24 Families with Dependent Children-Foster Care ("AFDC-FC") program.

25

b. The Alliance's membership includes approximately 115 private, non-

26 profit member agencies that provide adoption, foster care, group home, mental health treatment,

27 family preservation and support, wrap-around, educational, and other services. Based on the

28 -3-

COMPLAINT

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June 4,2009 review of the DSS' Group Home Rates Listing, the Alliance's member agencies

2 operate 87 group home programs, with a licensed capacity 0[3,720 beds.

3

c. The Alliance advocates on behalf of foster children and the non-profit

4 agencies that provide care and services for them. This advocacy includes promoting and

5 encouraging the continual improvement of services and outcomes for children and families.

6

d. The Alliance represents the interests of its members relating to the State of

7 California and DSS' administration of the AFDC-FC program.

8

e. The Alliance is authorized to file this action on behalf of its members, who

9 are and will continue to be irreparably harmed by the unlawful actions of Defendants, and each

10 of them, alleged herein. Through this Complaint, the Alliance seeks to protect interests that are

11 germane to its purpose and affiliation with member group homes. The Alliance and each group

12 home that is a member of the Alliance has independent standing to bring this action. California

13 Alliance ofChild and Family Services v. Allenby, 459 F.Supp.2d 919, 925 (N.D. CaL 2006).

14 Nevertheless, the Alliance asserts the claims alleged in this Complaint without the participation

15 of an individual member of the Alliance. Should it be deemed necessary for a group home to

16 participate in this action, the Alliance will seek leave to amend this Complaint to name specific

17 group homes as parties-in-interest.

18

5. DSS is the State agency responsible for the administration in California of foster

19 care, independent living, and adoption assistance under Title IV-E of the federal Social Security

20 Act. As the Director of DDS, Wagner is responsible in his official capacity for the

21 administration of the Child Welfare Act, 42 U.S.C. §§ 670-679b, and the programs related to that

22 Act in California. Further, Wagner is responsible for implementing the policies contained in the

23 approved state plans and assuring DSS' compliance with state and federal law. Wagner is sued

24 only in his official capacity.

25

6. Rose is responsible in his official capacity for implementing the policies

26 contained in the approved state plans. Rose is sued only in his official capacity.

27

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COMPLAINT

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JURISDICTION AND VENUE

2

7. The Alliance brings this civil action under 42 U.s.C. § 1983 and Article VI

3 Paragraph 2 of the United States Constitution (hereafter, "Supremacy Clause") and seeks a

4 declaratory judgment, pursuant to 28 U.S.C. § 2201, that the Rate Classification Level ("RCL")

5 system implemented and applied by Defendants, and each of the them, which establishes the

6 rates of payment to group homes on behalf of foster children, and the 10% rate cut to foster care

7 group homes in the State's 2009/2010 budget, as described in Assembly Bill 4 of the Fourth

8 Extraordinary Session (ABX4 4) (Evans, Chapter 4, Statutes of 2009), violate Title IV-E of the

9 Social Security Act, 42 U.S.C. §§ 670-679b ("Child Welfare Act") and its implementing

10 regulations. Further, the Alliance seeks provisional and permanent injunctive relief prohibiting

11 and enjoining Defendants from (1) implementing the 10% rate cut to foster care group homes in

12 the 200912010 budget, and (2) from using the RCL to establish payment rates. This Court has

13 subject matter jurisdiction pursuant to 28 U.S.C. § 1343(a)(3).

14

8. The Alliance is informed and believes and on that basis alleges that Wagner in his

15 official capacity is a resident of California and works in California.

16

9. The Alliance is informed and believes and on that basis alleges that Rose in his

17 official capacity is a resident of California and works in California.

18

10. The Alliance is informed and believes and on that basis alleges that venue is

19 proper in this district pursuant to 28 U.S.C. § 1391 (b)(2) because a substantial part of the events

20 or omissions giving rise to the claims in this Complaint occurred in this district.

21

INTRADISTRICT ASSIGNMENT

22

11. This Complaint arises in the County of San Francisco, among other places.

23 Consequently, this action is assigned to either the San Francisco Division or the Oakland

24 Division. Civil Local Rule 3-2 (c)-(d).

25

GENERAL ALLEGATIONS

26

The Child Welfare Act

27

12. In 1980, Congress enacted the Child Welfare Act to address the need for

28 providing an appropriate setting for children who are dependents or wards of the state. -5-

COMPLAINT

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1

13. The Child Welfare Act establishes a cooperative federal-state program that assists

2 states in meeting the costs of providing foster care to children who are dependents and/or wards

3 of the state. Pursuant to this cooperative program, the federal government and the state

4 government share the cost of providing funds for licensed third parties (e.g., group homes) that

5 care for these children. Under California law, the State government is responsible for paying for

6 40% of the non-federal share of AFDC-FC payments and the counties are responsible for paying

7 the other 60% of the non-federal share of AFDC-FC payments..

8

14. The Child Welfare Act and related federal regulations require states receiving

9 federal aid to provide foster care and transitional independent living programs for a child when a

10 court has determined that it is necessary under applicable law that the child be removed from his

11 or her home and placed in out-of-home care.

12

15. To become eligible for federal funding, a state must submit a plan for financial

13 assistance to the Secretary of the U.S. Department of Health and Human Services C'DHHS") for

14 approval. As a prerequisite for DHHS approval, the SUbmitting state must agree, among other

15 conditions, to administer its foster care program pursuant to the Child Welfare Act, related

16 regulations, and policies promulgated by the Secretary ofDHHS. 42 U.S.C. § 671(a), (b); 45

17 C.F.R. §§233.l10, 1355.21, 1356.20, 1356.21. A state must amend its approved plan by

18 appropriate submission to the Secretary of DHHS whenever, among other instances, necessary to

19 comply with alterations to the Child Welfare Act and/or federal regulations or policies. 45

20 C.F.R. § 1356.20(e)(I).

21

16. Pursuant to the Child Welfare Act, a state must designate a state agency to

22 administer and/or supervise the administration of the approved state plan. 42 U.S.C. § 671 (a)(2).

23

17. The Child Welfare Act requires that states participating in the cooperative

24 program provide "foster care maintenance payments" on behalf of eligible children to child-care

25 institutions, including group homes. 42 U.S.c. §§ 671(a)(2), 672(b)(2); 675(4); 45 C.F.R. §

26 1356.21(a).

27

18. "Foster care maintenance payments" must "cover the cost of (and the cost of

28 providing) food, clothing, shelter, daily supervision, school supplies, a child's personal -6-

COMPLAINT

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incidentals, liability insurance with respect to a child, reasonable travel to the child's home for

2 visitation and reasonable travel for the child to remain in the school in which the child is enrolled at

3 the time of placement. In the case of institutional care, [foster care maintenance payments] shall

4 include the reasonable costs of administration and operation of such institution as are necessarily

5 required to provide the items described in the proceeding sentence." 42 U.S.C. § 675(4)(A)

6 (emphasis added).

7

19. Further, federal law requires participating states to conduct "periodic reviews" of

8 "amounts paid as foster care maintenance payments and adoption assistance to ensure their

9 continuing appropriateness." 42 U.S.C. §§ 671(a)(11). On information and belief, the 10% RCL

10 payment rate reduction is being enacted solely on the basis that California is experiencing

11 budgetary shortfalls and the 10% RCL rate reduction is one of many measures the State has

12 undertaken to reduce future State General Fund expenditures. The rate reduction action is being

13 taken without any reference whatsoever to (1) the costs being reported by individual group

14 home providers to DSS Foster Care rates on an annual basis as part of its rate-setting and

15 auditing protocols; (2) the estimated costs of group homes as a whole as measured by increases

16 in the CNI; or (3) an analysis of the costs of providing the various items which compose the

17 federal definition of foster care maintenance payments. The State's failure to conduct a

18 "periodic review" to determine whether or not a 10% rate reduction would ensure that the

19 "amounts paid as foster care maintenance payments" would continue to be "appropriate" violates

20 the Child Welfare Act. See 42 U.S.C. §§ 671(a)(ll).

21

CalifOrnia's Approved Child-Care Institution Program

22

20. For all periods relevant to this Complaint, DSS has been the state agency

23 responsible for SUbmitting the California state plan to the Secretary of DHHS for approval.

24 Subsequent to receiving DHHS approval, DSS received federal funds specifically intended to

25 cover a portion of the foster care maintenance payment made to group homes on behalf of

26 eligible children. CaL WeI. & Inst. Code §§ 11229, 11460(a), I 1462(a).

27

21. DSS uses the RCL system to establish payment rates for foster care group homes.

28 See Cal. WeI. & Inst. Code § 11462. A group home is assigned to one of fourteen Rate -7 -
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COMPLAINT

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Classification Levels (RCLs) based on the group home's number of "points." The number of

2 points assigned to a group home is based largely on (1) the number of "paid/awake" hours

3 worked per child, per month, and (2) the qualifications of the staff. All of the group homes in the

4 same RCL receive the same AFDC-FC payment rate based on the standardized schedule of rates

5 in state law. See Cal. WeI. & Inst. Code § 11462(1). When California implemented the RCL on

6 July 1, 1990, the DSS contended that the initial standardized schedule of rates was "adequate for

7 a typical group home program to cover the legitimate and reasonable costs of providing the level

8 of care and services associated with its RCL."

9

22. For all periods of time relevant to this Complaint, DSS, through CFS, has

10 established payment rate levels for foster care providers, including group homes. The RCL

11 system payments are made by the county that placed the child with the group home or other

12 foster care provider. Each group home that participates in California's foster care program

13 executes an agreement with the county placement agency for each child to provide and be

14 compensated for care and supervision.

15

Calitornia's RCL System Violates the Child Welfare Act

16

23. California's RCL system was implemented by state statute during the 1990-1991

17 state fiscal year. (1989 Cal. Stat. Ch. 1294.) Since that time, the RCL standardized schedule of

18 rates has increased only 33%. By contrast, increases in actual costs that group homes incur to

19 care for and supervise children greatly exceed 33%. Indeed, the California Necessity Index I

20 ("CNI"), a proxy for the cost of living, has increased by approximately 76% from fiscal year 21 1990-91 to fiscal year 2008-2009.2

22

23

California law establishes the CNI as the index to be used for determining the size of annual cost-of-living adjustments. (Cal. WeI. & Inst. Code § 11462.) The CNI is a weighted

24

average of increases in various necessary costs of living for low-income consumers, including food, clothing, fuel, utilities, rent, and transportation. (Cal. WeI. & Inst. Code § 11453.)

25 2

The CNI underestimates actual increases in costs. For example, the CNI does not reflect

substantial increases over the last few years in the cost of workers' compensation insurance,

26 liability insurance, medical insurance, and utilities. Further, the CNI does not reflect new costs that group homes must incur to satisfy state and county requirements concerning staff training,

27 administrator certification, licensing fees, independent financial audits, record-keeping, and other new requirements.

28

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COMPLAINT

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24. The disparity between the costs of, and costs of providing, foster care to

2 California's children and the payments that DSS makes to "cover" such costs is due primarily to

3 (1) increases in the actual costs associated with the compensable items under the Child Welfare

4 Act, and (2) "new" costs that group homes must incur to satisfy added state and county

5 requirements.

6

25. As a result of California's unlawful RCL system, foster care maintenance

7 payments made to group home foster care providers during the 2008-2009 fiscal year covered

8 only 77% ofthe costs of, and costs of providing, foster care to children.

9

26. California's failure to make payments that cover the costs, and costs of providing,

10 the basic necessities enumerated in the Child Welfare Act has caused numerous Alliance

11 members to cease operating their group home programs. Indeed, the Alliance is informed and

12 believes that since fiscal year 2004, approximately 12 Alliance members have ceased operating

13 primarily due to inadequate funding. Many other Alliance members have been forced to

14 significantly reduce their group home programs, including reducing capacity and cutting staff,

15 due, in substantial part, to the increasing costs that were not covered by payments established by

16 the RCL system.

17

27. On or about July 28, 2009, California revised its budget for fiscal year 2009-10

18 ("2009 Budget"). The 2009 Budget will reduce group home rates by ten-percent (10%),

19 effective October 1. 2009, as set forth in Assembly Bill 4 of the Fourth Extraordinary Session

20 (ABX4 4), Section 21 (adding paragraphs (5) and (6) to subdivision (g) of California Welfare &

21 Institutions Code, Section 11462). (Evans, Chapter 4, Statutes of2009). The Alliance is

22 informed and believes and on that basis alleges that the ten-percent group home rate reduction

23 was based solely on budgetary considerations, in violation of the Child Welfare Act.

24

28. Furthermore, California's 2009 Budget does not provide a 1.53% CNI-based Cost

25 of Living Adjustment ("COLA") for 2009-10, forcing group homes to absorb, once again, the

26 operating cost increases without additional AFDC-FC funding. The 10% RCL payment rate cut,

27 combined with the absence of a CNI-based COLA for 2009-10, means that the purchasing power

28 -9 -

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of the RCL standardized schedule of rates will fall to only 68% of the level it had in 1990, when

2 the RCL system was implemented.

3

29. The Alliance is informed and believes and on that basis alleges that the 10% rate

4 reduction, when applied to the current already inadequate RCL standardized schedule of rates,

5 will cause additional group home members to shutter their operations. The group homes that are

6 able to survive, will be forced to significantly cut essential programs and additional staff.

7

30. Group home closures, program cuts and lay-offs of essential group home

8 employees, precipitated by California's failure to comply with the Child Welfare Act's mandate

9 to make foster care maintenance payments sufficient to cover the costs, and cost of providing,

10 basic necessities to foster care children, will irreparably harm California's most vulnerable

11 children.

12

31. There is no administrative process or remedy available for the Alliance or its

13 members to challenge the propriety of the RCL system, including the current 10% rate reduction

14 set forth in the 2009 Budget.

15

COUNT I

16

Declaratory Relief

17

32. The Alliance incorporates Paragraphs 1-31 as though fully set forth herein.

18

33. There is currently an actual controversy between the Alliance and Defendants,

19 and each of them, which is ripe for adjudication as to whether the RCL system, which sets foster

20 care maintenance payment rates, and the State's 2009 Budget that cuts RCL payment rates by

21 10%, violates federal law.

22

34. The RCL system implemented and applied by Defendants, and each of the them,

23 that establishes payment rates to group homes for the care and supervision of foster children,

24 violates Title IV-E ofthe Social Security Act, 42 U.S.C. §§ 670-679b and its implementing

25 regulations.

26

35. The failure of Defendants, and each of them, to substantially comply with the

27 Child Welfare Act's mandated factors in setting rates for foster care maintenance payments

28 - 10-

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1 deprives the Alliance's member group homes of their federal rights, privileges and immunities

2 under color of state law in violation of 42 U.S.C. § 1983.

3

36. The 10% cuts in RCL system payment rates for group homes, mandated by the

4 2009 Budget, violates the Child Welfare Act's requirement that participating states make "foster

5 care maintenance payments" that "cover" the costs ofproviding the essential items set forth in

6 Section 675(4)(A) and is, consequently, preempted by the requirements ofthe Child Welfare Act

7 under the Supremacy Clause.

8

37. The Alliance is entitled to recover the full costs of this action and reasonable

9 attorneys' fees pursuant to 42 U.S.C. § 1988.

10

COUNT II

11

Permanent lrljunctive Relief

12

38. The Alliance incorporates Paragraphs 1-37 as though fully set forth herein.

13

39. The Alliance is informed and believes and on that basis alleges that Defendants,

14 and each of them, will continue to establish, and counties will continue to use, foster care

15 maintenance payment rates that fail to comply, or even substantially comply, with the Child

16 Welfare Act.

17

40. The Alliance and its member group homes have suffered injury that is irreparable

18 in nature as the proximate result of the failure of Defendants, and each of them, to make foster

19 care maintenance payments in a manner that required by the Child Welfare Act. The Alliance

20 and its member group homes are without adequate remedy at law.

21

41. The Alliance and its member group homes will suffer injury that is irreparable in

22 nature as the proximate result of the ten-percent (10%) reduction in RCL payment rates required

23 by the State's 2009-10 Budget.

24

42. The Alliance is entitled to recover the full costs of this action and reasonable

25 attorneys' fees pursuant to 42 U.S.C. § 1988.

26

PRAYER FOR RELIEF

27

Wherefore, the Alliance requests relief as follows:

28

1. That Defendants, and each of them, be permanently enjoined from enacting the

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COMPLAINT

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1

ten-percent (10%) payment rate reduction for group homes mandated by the

2

State's 2009 Budget, which violates the Child Welfare Act's requirement that

3

participating states make "foster care maintenance payments" that "cover" the

4

costs of providing the essential items set forth in Section 675(4)(A);

5

2. That the Court declare that Defendants, and each of them, violated, continue to

6

violate, and/or will violate the Child Welfare Act by failing to establish a payment

7

system adequate to cover the costs incurred by group homes that provide care and

8

supervision in accordance with federal and state laws; and

9

3. That the Court declare that Defendants' current and continued use of the RCL

10

system violated, continues to violate, and/or will violate the group homes' federal

11

rights, privileges and immunities under color of state law;

12

4. That the Court declare that Defendants' current and continued use of the RCL

13

system is preempted by the Supremacy Clause of the United States Constitution

14

because it violates the Child Welfare Act's requirement that participating states

15

make "foster care maintenance payments" that "cover" the costs ofproviding the

16

essential items set forth in Section 675(4)(A);

17

5. That Defendants, and each ofthem, be permanently enjoined from currently and

18

continually using the RCL system to establish foster care maintenance payment

19

rates to group homes;

20

6. That Defendants, and each of them, prepare and implement a payment system that

21

complies with the Child Welfare Act;

22

7. That Defendants be required to increase RCL payment rates in an amount

23

sufficient to correspond to the cumulative increase in the CNI since 1990 made

24

between the time that (1) the Court grants provisional relief in favor of the

25

Alliance, and (2) Defendants, and each of them, prepare and implement a

26

payment system that complies with the Child Welfare Act;

27

8. That the Alliance be awarded its reasonable costs of suit and attorney's fees

28

included herein; and

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1

9. That this Court award the Alliance such other relief as is warranted by the facts

2

and the law as is just under the circumstances.

3

4

5

6

DEMAND FOR JURY TRIAL

7

Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure and Local Rule 3"

8 6(a), the Alliance hereby demands a trial by jury for all issues that are so triable.

9

10 DATED: September 18, 2009 11 12 13 14 15

Bingham McCutchen LLP
By: \jj,\~r~ William F. Abrams Attorneys for Plaintiff CALIFORNIA ALLIANCE OF CHILD AND FAMILY SERVICES

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" 13 "
COMPLAINT

 
 Case3:09-cv-04398-MHP Document57 Filed11/18/09 Page1 of 16

United States District Court For the Northern District of California

1

2

3

4

5

6

7

UNITED STATES DISTRICT COURT

8
NORTHERN DISTRICT OF CALIFORNIA

9

10 CALIFORNIA ALLIANCE OF CHILD AND FAMILY SERVICES,
11 Plaintiff,
12 v.
13 JOHN WAGNER, Director of the California
14 Department of Social Services, in his official capacity; GREGORY ROSE, Deputy Director
15 of the Children and Family Services Division of the California Department of Social
16 Services, in his official capacity,

No. C 09-4398 MHP
MEMORANDUM & ORDER Re: Plaintiff’s Motion for a Preliminary Injunction

17

Defendants.

/

18

19

Plaintiff represents the interests of certain agencies that operate group homes in California.

20 These group homes provide care and supervision for foster children with emotional or behavioral

21 problems who cannot live safely in their own homes or another family setting. Defendants

22 administer the State of California’s contributions to the funding to such group homes. Plaintiff has

23 brought this action seeking to enjoin defendants from implementing a ten percent reduction to the

24 funding of group homes adopted by the California legislature as part of the Budget Act of 2009.

25 Plaintiff alleges, pursuant to 42 U.S.C. section 1983 (“section 1983”), that the reduction causes the

26 State’s funding scheme to fall out of substantial compliance with the federal Child Welfare Act,

27 42 U.S.C. §§ 670-79b. Now before the court is plaintiff’s motion for a preliminary injunction.

28

Case3:09-cv-04398-MHP Document57 Filed11/18/09 Page2 of 16

United States District Court For the Northern District of California

1 Having considered the parties’ submissions and arguments, the court enters the following

2 memorandum and order.

3

4 BACKGROUND

5 I. Parties

6

The California Alliance of Child and Family Services (“the Alliance” or “plaintiff”) is a non-

7 profit organization whose member agencies operate eighty-seven group home programs with a

8 collective licensed capacity of 3,720 beds. Docket No. 11 (Johnson Dec.) ¶ 2. The California

9 Department of Social Services (“CDSS”) licenses, audits and provides funding to these group homes

10 through the “Aid to Families with Dependent Children–Foster Care” (“AFDC-FC”) program. Cal.

11 Health & Safety Code §§ 1500; Cal. Welf. & Inst. Code §§ 11450(d) & 15200(c)(1). Plaintiff’s

12 members receive “foster care maintenance payments” pursuant to the Child Welfare Act.

13 Defendants John Wagner and Gregory Rose are senior officials of the CDSS, sued in their official

14 capacity. They are referred to collectively herein as “the State” or “defendant.”

15 II. The Child Welfare Act

16

The federal Child Welfare Act (“CWA” or “the Act”) establishes a cooperative federal-state

17 program that assists states in meeting the costs of providing foster care to children. Pursuant to this

18 federal spending clause legislation, the federal government and the state governments share the cost

19 of providing funds for licensed third parties (e.g., group homes) that care for these children. The

20 CWA and related federal regulations require states receiving federal aid to provide foster care for a

21 child when a court has determined that it is necessary under applicable law that the child be removed

22 from his or her home and placed in out-of-home care. See, e.g., 42 U.S.C. §§ 670-79b.

23

The CWA requires that states participating in the cooperative program provide “foster care

24 maintenance payments” on behalf of eligible children to child-care institutions, including group

25 homes. 42 U.S.C. §§ 671(a)(1), 672(b)(2); 45 C.F.R. § 1356.21(a). “The term ‘foster care

26 maintenance payments’ means payments to cover the cost of (and the cost of providing) food,

27 clothing, shelter, daily supervision, school supplies, a child’s personal incidentals, liability insurance

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1 with respect to a child, reasonable travel to the child’s home for visitation, and reasonable travel for

2 the child to remain in the school in which the child is enrolled at the time of placement.” 42 U.S.C.

3 § 675(4)(a). “In the case of institutional care, such term shall include the reasonable costs of

4 administration and operation of such institution as are necessarily required to provide the items

5 described in the preceding sentence.” Id.

6

To become eligible for federal funding, a state must submit a plan for financial assistance to

7 the U.S. Secretary of Health and Human Services (“the Secretary”) for approval. As a prerequisite

8 for approval, the submitting state must agree, among other conditions, to administer its foster care

9 program pursuant to the CWA, related regulations and policies promulgated by the Secretary. Id.

10 § 671(a), (b); 45 C.F.R. §§ 233.110, 1355.21, 1356.20, 1356.21. Pursuant to the CWA, a state must

11 designate a state agency to administer or supervise the administration of the approved state plan.

12 42 U.S.C. § 671(a)(2). The state must also amend its approved plan by appropriate submission to

13 the Secretary whenever necessary to comply with alterations to the CWA or federal regulations or

14 policies. 45 C.F.R. § 1356.20(e)(1).

15 III. California Law and the Rate Classification Level (RCL) System

16

For all relevant periods, the CDSS has been the state agency responsible for submitting the

17 California state plan to the Secretary for approval. See Cal. Welf. & Inst. Code § 11460(a).

18 Subsequent to approval, the CDSS receives federal funding intended to cover a portion of the foster

19 care maintenance payments made to group homes on behalf of eligible children.1 See generally id.

20 § 11462. California law provides: “Foster care providers shall be paid a per child per month rate in

21 return for the care and supervision of the AFDC-FC child placed with them.” Id. § 11460(a). “Care

22 and supervision” is defined as “food, clothing, shelter, daily supervision, school supplies, a child’s

23 personal incidentals, liability insurance with respect to a child, and reasonable travel to the child’s

24 home for visitation.” Id. § 11460(b). This language largely mirrors the language of the CWA,

25 showing that CDSS took the statutory criteria mandated by the CWA into account in developing its

26 system to provide foster care maintenance payments. See Mar. 2008 Order at 6.

27

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1

CDSS uses a Rate Classification Level (“RCL”) system to establish payment rates for foster

2 care group home programs. See generally Cal. Welf. & Inst. Code § 11462. The RCL system was

3 implemented during the 1990-91 fiscal year, and it has never been rejected by the Secretary. The

4 CDSS, through the Children and Family Services Division, assigns group home programs to one of

5 fourteen levels (i.e., RCLs). All group home programs with the same RCL receive the same

6 payment rate per child based on the standardized schedule of rates set forth in state law. See Docket

7 No. 41 (Williams Dec.), Exh. A. For instance, in 2008-09 a group home in RCL 6 received foster

8 care maintenance payments of $3,489 per child per month, whereas a group home in RCL 12

9 received payments of $6,694 per child per month. Id. ¶ 7.

10

The assignment of an RCL to a particular group home is based upon the measure of “points”

11 earned by the home, such measure indicating the intensity of care and services the home provides.

12 Points are assigned by determining the total number of hours worked by staff, with certain

13 adjustments, and dividing those hours by a measure of the number of children in the home.2 The

14 staff hours are adjusted by taking into account the experience, education and ongoing training of

15 each staff member. For instance, the value of an hour of child care and supervision provided by an

16 individual with no college degree, no prior experience and no program-provided training would be

17 1.0, whereas the value of an hour of child care and supervision provided by an individual with 48

18 months of experience, a bachelor’s degree in behavioral science, and participation in program-

19 provided training would be 1.6. See id., Exh A. at 1. The number of points earned by a group home

20 determines the applicable RCL level, which in turn determines the amount of money paid per child

21 under the state’s program; the “points” are therefore a function of the services provided to the

22 children on a per child basis.

23

The initial standardized schedule of foster care rates for the 1990-91 fiscal year was

24 developed using 1985 calendar year costs. This schedule was to be increased each fiscal year in

25 tandem with the California Necessities Index (“CNI”). Cal. Welf. & Inst. Code §§11453. The CNI

26 is a weighted average of increases in various necessary costs of living for low-income consumers,

27 including food, clothing, fuel, utilities, rent, and transportation. Id. State law allows the CNI

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1 increase to be circumvented in certain situations: “Beginning with the 2000-01 fiscal year, the

2 standardized schedule of rates shall be adjusted annually by an amount equal to the CNI computed

3 pursuant to section 11453, subject to the availability of funds.” Id. § 11462(g)(2) (emphasis added).

4 IV. California Alliance I

5

On June 30, 2006, the Alliance filed a section 1983 action in this court alleging that the

6 funding level for foster care maintenance payments paid to group homes pursuant to the RCL system

7 had deviated from actual costs to such an extent that the State’s scheme no longer complied with the

8 CWA. See Case No. C 06-4095 (N.D. Cal.) (Patel, J.) (California Alliance I). Since the 1990-91

9 fiscal year, the State had increased rates established under the RCL system by approximately 27%,

10 whereas the CNI had increased by approximately 59%. See California Alliance I, Docket No. 41

11 (Joint Statement of Undisputed Facts). The court ruled that the CWA confers an individual right on

12 plaintiff’s members to enforce foster care maintenance payments pursuant to 42 U.S.C.

13 section 675(4)(a). California Alliance I, Docket No. 24 (Oct. 2006 Order). Thereafter, the court

14 ruled on cross-motions for summary judgment. The court found that, as of the 2006-07 fiscal year,

15 the RCL system provided for “at least 80% of the costs associated with the items enumerated in the

16 CWA.” California Alliance I, Docket No. 57 (Mar. 2008 Order) at 7. The court ruled that the State

17 was obligated only to substantially—rather than fully—comply with the CWA, and that the level of

18 funding at that time was enough to enable a finding of “substantial compliance.” The court

19 summarized its rulings as follows:

20

In sum, with respect to institutional providers, the State’s methodology in

determining foster care payments must consider the costs of the items enumerated in

21

the federal statute. See 42 U.S.C. § 675(4)(a). The methodology must also consider

the reasonable costs of the administration and operation of such institutions. Id. In

22

addition, the State may account for budgetary considerations as long as payment

levels remain in substantial compliance with the costs to be incurred. Since the

23

California scheme takes the appropriate statutory considerations into account and is

in substantial compliance with the CWA, federal law has not been violated.

24

Id. at 8. The court warned “Nevertheless, it is worth repeating that without further increases over

25

time, the California system may well be in violation of federal law.” Id.

26

27

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1 V. Subsequent Developments

2

Effective January 1, 2008, the California legislature increased the amount included in the

3 standard rate for each RCL by five percent. See Cal. Welf. & Inst. Code § 11462(g)(4). According

4 to the State, at that point the rates represented 83.81% of the costs of the program. Williams Dec.

5 ¶ 7. In July 2009, the California legislature, sitting in its fourth extraordinary session of the year,

6 approved Assembly Bill ABX4 4, which among other things reduced the standard rate for each RCL

7 by ten percent, effective October 1, 2009. This legislation was signed by the Governor

8 Schwarzenegger on July 28, 2009, and codified at California Welfare and Institutions Code section

9 11462(g)(5). See ABX4 4 § 21, available at http://www.leginfo.ca.gov/bilinfo.html (last visited

10 Nov. 13, 2009). In the meantime, cost of living increases for the years following those addressed in

11 the Alliance I decision, as measured by the CNI, have been: 3.7% (2007-08), 5.26% (2008-09), and

12 1.53% (2009-10). Williams Dec. ¶ 8. The State has made no adjustments to offset the increased

13 cost of living aside from the five percent increase that had been enacted effective January 1, 2008.

14 In light of the ten percent reduction provided in the Budget Act of 2009 and unmet increases in the

15 CNI, the State concedes that the RCL rates for 2009-10 represent only 69.63% of the costs of the

16 group home programs. Id.

17

On October 11, 2009, the governor signed Senate Bill 597 (“SB 597”) into law. This

18 legislation adopted a set of adjusted point ranges to be used to calculate RCLs during the 2009-10

19 fiscal year. See SB 597 § 5, available at http://www.leginfo.ca.gov/bilinfo.html (last visited Nov.

20 13, 2009). The range of points serving to qualify a group home to receive payments at a particular

21 RCL was decreased for each RCL. For instance, a group home was required in 2008-09 to provide

22 services within the point range of 282-310 to be eligible for payments at RCL 10. Under SB 597, a

23 home is eligible for payments at RCL 10 if it provides services in the 245-270 point range. See id.

24 VI. Federal Eligibility

25

According to the State, approximately 41% of children in group homes—3,924 out of 9,585

26 children—are not “federally eligible,” and the State receives no federal payments for these children.

27 See Docket No. 52 (Habek Dec.) ¶ 3. Conversely, approximately 5,683 children are federally

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1 eligible and subject to the CWA.3 Id. The Alliance agreed at oral argument that some children in

2 group homes are federally eligible and subject to the CWA while some are not.

3 VII. Procedural History

4

Plaintiff filed this action on September 18, 2009. The complaint was accompanied by an

5 ex parte application for a Temporary Restraining Order (TRO). The parties appeared on October 9

6 and 29 to argue the merits of granting a TRO. Following additional submissions requested by the

7 court and filed by the State on November 2, the court entered, on November 4, a TRO and order to

8 show cause why a preliminary injunction should not issue. Plaintiff filed and served its motion for a

9 preliminary injunction that same day. The court invited the parties to call witnesses at oral

10 argument, held November 13, 2009, and both parties declined to do so.

11

12 LEGAL STANDARD

13

A preliminary injunction is a provisional remedy, the purpose of which is to preserve status

14 quo and to prevent irreparable loss of rights prior to final disposition of the litigation. Sierra

15 On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1422 (9th Cir. 1984). In light of these

16 considerations, a plaintiff seeking preliminary injunctive relief must demonstrate either: “(1) a

17 likelihood of success on the merits and the possibility of irreparable injury; or (2) that serious

18 questions going to the merits [have been] raised and the balance of hardships tips sharply in [the

19 plaintiff’s] favor.” Southwest Voter Registration Educ. Project v. Shelley, 344 F.3d 914, 917 (9th

20 Cir. 2003) (en banc) (per curiam). The district court must also consider whether the public interest

21 favors issuance of a preliminary injunction. Id. The components of these two tests operate on a

22 sliding scale or “continuum.” Id. at 918. Consequently, “the less certain the district court is of the

23 likelihood of success on the merits, the more plaintiffs must convince the district court that the

24 public interest and balance of hardships tip in their favor.” Id.; see also Miller v. California Pac.

25 Med. Ctr., 19 F.3d 449, 456 (9th Cir. 1994) (en banc).

26

27

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1 DISCUSSION

2 I. Likelihood of Success on the Merits

3

A. Substantial Compliance

4

In California Alliance I, this court cautioned that the RCL system may no longer

5 substantially comply with the provisions of the CWA should the level of funding drop yet further.

6 At that time, the RCL system provided for at least 80% of the costs of the items set out in the CWA.

7 In light of the ten percent reduction for 2009-10 and the absence of increases reflecting the CNI, the

8 State concedes that the RCL rates for 2009-10 represent only 69.63% of costs. Williams Dec. ¶ 8.

9 The Alliance argues that it is likely to succeed on the merits of its claim that 69.63 cents on the

10 dollar does not represent substantial compliance with the requirements of the CWA, which requires

11 that the State “cover the costs” of the items enumerated in 42 U.S.C. section 675(4)(a). Where full

12 compliance with the CWA’s mandate to “cover the costs” for foster children would entail the

13 payment of one dollar in foster care maintenance payments for every dollar of actual cost, the court

14 views it as likely that plaintiff will succeed in showing that payment of less than 70 cents on the

15 dollar does not constitute substantial compliance. A foster child who scores a 69.63% on an English

16 exam would typically receive a grade of “F.” The State has advanced no argument explaining why it

17 should be held to a lower standard in its compliance with federal law.

18

B. Federal Preemption and Judicial Review

19

The State advances several arguments why this court should not issue a preliminary

20 injunction. First, the State challenges the premise that the CWA can preempt the challenged budget

21 provision under the Supremacy Clause of the United States Constitution.4 In determining whether a

22 federal law preempts a state law, it is necessary to look to the purpose of Congress as a touchstone

23 and to “start with the assumption that the historic police powers of the States were not to be

24 superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Wyeth

25 v. Levine, ___ U.S. ___, ___, 129 S.Ct. 1187, 1194-95 (2009). A state statute may be preempted

26 expressly or impliedly; implied preemption may be found where it is “impossible for a private party

27 to comply with both state and federal requirements” or where state law “stands as an obstacle to the

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1 accomplishment and execution of the full purposes and objectives of Congress.” Sprietsma v.

2 Mercury Marine, 537 U.S. 51, 64-65 (2002) (quoting Freightliner Corp. v. Myrick, 514 U.S. 280,

3 287 (1995)). The State asserts, offering little rationale, that the ten percent reduction is entirely

4 consistent with the CWA’s provisions addressing foster care maintenance payments and therefore

5 does not conflict with the Act. Notably, the State’s argument does not address the actual language

6 of the CWA, which requires the State to “cover the costs” of providing the items enumerated in the

7 Act. A purpose of the CWA is to cover the costs of those items for foster children. See 42 U.S.C. §

8 670. Insofar as it is likely the ten percent reduction results in payments that fail to “cover the costs,”

9 the budget provision frustrates Congress’s unambiguous purpose. The court finds that the Alliance

10 is likely to prevail on the preemption issue.

11

The State also argues that the court cannot determine whether the State is in substantial

12 conformity with the CWA, because the Secretary is authorized to determine substantial conformity.5

13 The federal statute 42 U.S.C. section 1320a-2a (a) provides that the Secretary “shall promulgate

14 regulations for the review of [foster care] programs to determine whether such program are in

15 substantial conformity with [federal requirements and regulations, and the approved State plan].”

16 That provision sets out specific elements for review of substantial compliance. See id. § 1320a-2a

17 (b) & (c). It is undisputed that the Secretary can find a State’s program not to substantially comply

18 with the mandates of the CWA. Yet the State does not point to any statute, and the court is aware of

19 none, limiting judicial review over the question of substantial compliance. This court held the

20 existence of agency approval not to be dispositive in California Alliance I. See California Alliance

21 I, Mar. 2008 Order at 5. The other cases addressing foster care maintenance payments have likewise

22 held judicial review not to be foreclosed. See Missouri Child Care Ass’n v. Martin, 241 F. Supp. 2d

23 1032 (W.D. Mo. 2003); California Foster Parent Ass’n v. Wagner, 2008 WL 4679857 (N.D. Cal.

24 Oct. 21, 2008) (Alsup, J.).

25

C. Effect of SB 597

26

The only substantive argument advanced by the State is the contention that SB 597 somehow

27 offsets the effects of funding foster care maintenance payments at 69.63% of actual costs. The court

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1 noted in its TRO that this argument appeared to have little merit, and the State has submitted no

2 evidence suggesting a contrary conclusion. As noted, the “points” a group home receives directly

3 correlate to the hours and expertise of staff care provided for each child. The adjustment of the point

4 scale provided in SB 597 appears to help a group home’s financial posture by allowing the group

5 home to cut “costs,” i.e., the services provided to each child, without losing additional funding. By

6 cutting the points necessary to achieve a certain RCL level, SB 597 increases the nominal percentage

7 of costs covered by foster care maintenance payments by allowing homes to provide less care and

8 supervision services. See, e.g., Williams Dec. ¶ 9 (“Under this system . . . [a]n RCL 11 [group

9 home] can operate at the adjusted (lower) point schedule, equivalent to an RCL 9, while still being

10 paid at an RCL 11. Thus, the group home is operating at an RLC 9 and being paid 81.70 percent of

11 its costs.”). The concern of the Act is the actual provision of foster care to children, not simply the

12 balance sheets of the service provider. While SB 597's adjustment of point ranges may reduce the

13 group home’s overhead, it does not appear to blunt the impact of the budget reduction upon the

14 foster children in group homes.

15

If anything, the readjustment of points raises troubling questions about the State’s

16 commitment to care for the most troubled foster children. The State calculates points on an absolute

17 basis: the level of care and supervision per child meriting 300 points this year is the same, or

18 approximately the same, as the level meriting 300 points last year. See Williams Dec. It is the point

19 requirements for each RCL that have shifted. Last year, 300 points would place a home in RCL 10;

20 under the current budget, it would compensate the home at an RCL 12 level. See SB 597 § 5. The

21 highest RCL level is RCL 14. Last year, a home could achieve RCL 14 by providing services worth

22 396 points; under the current budget, a home need only provide services worth 348 points to achieve

23 the highest level of funding. This begs the question: what happens to the children with the greatest

24 learning disabilities and behavior problems, who need care at the 396-point intensity? Either the

25 group homes providing such care will scale back, in order to reap the savings of SB 597, or they will

26 continue to provide 396-point service, nullifying any benefit to be derived from the point

27 adjustment.

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1

In summary, the State’s argument that SB 597 somehow offsets the effects of the ten percent

2 budget reduction appears flawed.

3 II. Balance of Hardships and the Public Interest

4

The State argues that the Alliance has not shown a possibility of irreparable injury or that the

5 balance of hardships tips in its favor. According to the State, “plaintiff has yet to offer any evidence

6 that any foster child has gone without services.” Docket No. 51 (Def.’s Opp.) at 9. Plaintiff has

7 provided declarations of agency representatives who testify that the failure of foster care

8 maintenance payments to track increases in the cost of living has caused some homes to close. See,

9 e.g., Docket No. 9 (Di Stefano Dec.); Docket No. 10 (Diamond Dec.); Docket No. 14 (Martone

10 Dec.). This evidence, standing alone, is unpersuasive. There may be any number of factors, such as

11 an increased policy preference for placing children in private homes, that may account for the

12 closing of group homes. See Docket No. 27 (Treadwell Dec.) (describing decline of numbers of

13 children in group homes occurring in tandem with an increase in children participating in

14 California’s “Wraparound” program). Moreover, the purposes of the CWA include providing for

15 foster children, not ensuring that any particular program or given home remains open.

16

Yet plaintiff has also provided declarations of agency representatives testifying to the

17 consequences to the children in their homes of the State’s failure to meet its obligations under the

18 CWA. See, e.g., Docket No. 12 (Lemieux Dec.) ¶ 8 (“Because of the past failure to make cost-of-

19 living adjustments to reimbursement rates and the recently instituted ten-percent reduction in

20 reimbursement rates, we cannot afford to hire the additional staff we need. Specifically, we need,

21 but cannot afford to hire, one therapist, three full-time child care workers and one full-time

22 administration/office position. We are also unable to afford additional hours by our psychiatrist.”);

23 Docket No. 13 (Martin Dec.) (“[T]he reimbursement rates from DSS no longer cover the costs of

24 providing the required basic necessities to the foster care children at our facilities. Unfortunately,

25 this has led us to lay-off some of our staff.”); Docket No. 15 (Rich Dec.) (“The majority of our

26 residents have some form of learning disability and there are currently at least twenty-five girls at

27 our facility who would benefit from participation in the [special program for children with learning

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1 disabilities]. Unfortunately, because of inadequate funding, only three girls are currently

2 participating and no new residents will be accepted into the program. We now only accept private

3 clients who can afford to pay for their cost of participation in the program.”). The declarants are

4 advocates for their programs, rather than unbiased commentators, and they undoubtedly have a

5 vested interest in the institutions they represent. Regardless, it is incorrect to assert that the Alliance

6 has provided no evidence that the State’s failure to meet its funding obligation is likely to harm

7 children.

8

Indeed, the ten percent reduction contemplated by the Budget Act of 2009 could not but have

9 an effect upon the services provided to foster children. The RCL payments are calculated on a per

10 child per month basis, not a per home basis. See Cal. Welf. & Inst. Code § 11460(a). Accordingly,

11 the cut does not reflect, for instance, a determination that each group home has seen a recent ten

12 percent decrease in the number of children it services, in which case the resources per child would

13 remain constant despite a ten percent cut. There is no evidence that the reduction has any relation

14 whatsoever to the number of children in any group home: the group homes were presumably caring

15 for approximately as many children on October 1 as on September 30—but with ten percent less

16 money from foster care maintenance payments. There is no evidence that the legislature enacted the

17 ten percent reduction based on a finding that the earlier funding level provided luxuries or non-

18 essential items to foster children.6 The RCL levels initially established for the baseline year of 1990-

19 91 were based upon data reporting actual costs and staffing levels. California Alliance I, Mar. 2008

20 Order at 6; see also Cal. Welf. & Inst. Code § 11462(c). The premise of the State’s RCL scheme is

21 that these actual costs increase according to annual increases in the CNI. Accordingly, it is very

22 likely that the actual costs that are supposed to be paid under the RCL system, as adjusted according

23 to the CNI, actually represent the costs of maintaining a foster child. By the logic of the State’s

24 funding structure, there can be little doubt that the ten percent cut directly affects the services

25 provided to foster children. The State suggests that a preliminary injunction should not issue until

26 actual instances of child neglect or deprivation of food, shelter or other enumerated items to specific

27 children have been documented. Such an approach would not reflect the appropriate standard for a

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1 preliminary injunction, which is to prevent irreparable harm before a trial can be held on the merits,

2 and it would undermine the very purposes of the CWA.

3

It is true that the State is in the midst of a severe budgetary crisis. As of October, the State of

4 California had a negative cash balance of $16.2 billion, which was being covered by $7.4 billion in

5 internal borrowing and $8.8 billion in external borrowing. Docket No. 36 (Def.’s RJN) ¶ 3. The

6 state legislature has been forced to enact cuts to numerous state programs to narrow California’s

7 budget shortfall.7 Yet the State has consistently underfunded the RCL system, in good times as well

8 as bad. There was no global financial crisis two years ago, when the State funded only 80 cents on

9 the dollar, or in the several years previous, when payments under the RCL system slipped further

10 and further below the actual costs of the items enumerated in the CWA. Had the State complied

11 more fully in better times, a sudden ten percent reduction might not have imperiled its substantial

12 compliance with the statute. California has opted into the CWA’s statutory scheme and cannot

13 simply ignore the requirements of federal law.

14

On the other side of the balance stand the basic needs of thousands of foster children. The

15 implementation of the ten percent funding reduction may be expected to result in reductions in care,

16 housing, services, staffing numbers and staff qualifications. The resources provided to cover food,

17 clothing, shelter, daily supervision and the other items enumerated under the CWA would decline

18 substantially from a level that was already underfunded according to the State’s own funding

19 scheme. Additionally, group homes that begin to restructure their respective staffing complements

20 in response to the reduction may find it difficult to reestablish the status quo ante should plaintiff

21 succeed on the merits. Plaintiff has demonstrated that the balance of hardships tips sharply in its

22 favor. See Golden Gate Restaurant Ass’n v. City & County of San Francisco, 512 F.3d 1112, 1126

23 (9th Cir. 2008) (“While the City’s and Association’s injuries are entirely economic, the Intervenors’

24 injuries include preventable human suffering. Therefore, the balance of hardships tips sharply in

25 favor of the parties seeking relief.”). Moreover, the public interest weighs in favor of ensuring that

26 decisions directly affecting this particularly vulnerable segment of society scrupulously adhere to the

27 law’s requirements. See Lopez v. Heckler, 713 F.2d 1432, 1437 (9th Cir. 1983) (holding public

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1 interest more harmed by possibility of wrongful deprivation of benefits to vulnerable persons than

2 by possibility that government might not recoup funds it need not have paid).

3

4 CONCLUSION

5

For the foregoing reasons, plaintiff’s motion for a preliminary injunction is GRANTED.

6 Pending final adjudication of the merits of the instant action, named defendants John Wagner and

7 Gregory Rose, and their successors, agents, officers, servants, employees, attorneys and

8 representatives, and all persons acting in concert or participating with defendants in their respective

9 official capacities as Director of the California Department of Social Services and Deputy Director

10 of the Children and Family Services Division of the California Department of Social Services, are

11 HEREBY ENJOINED AND PROHIBITED from implementing the ten percent reduction in the

12 standardized schedule of rates for each RCL provided at California Welfare and Institutions Code

13 § 11462(g)(5), such reduction having been approved in Assembly Bill ABX 4 4, filed with the

14 Secretary of State on July 28, 2009, and Senate Bill 597, filed with the Secretary of State on October

15 11, 2009, as part of the Budget Act of 2009.

16

This injunction prohibits implementation of the reduction only with respect to payments

17 made in connection with children subject to the CWA. Execution of the injunction SHALL NOT be

18 carried out in a manner that will reduce in any amount the full entitlement to such federally eligible

19 children under this order.

20

Counsel for the parties agreed at oral argument that the RCL system and group homes do not

21 distinguish between federally eligible and non-federally eligible children in the rates set or the

22 services provided. This raises the question whether any funding scheme for foster care maintenance

23 payments that discriminates among federally eligible and non-federally eligible children can be

24 carried out under California’s system. To ensure compliance with this injunction, the State SHALL

25 file within twenty-one (21) days of entry of this order the State’s plan for determining the amount of

26 foster care maintenance payments for each group home that will satisfy this order.

27

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1

The parties SHALL address the issue of retroactivity and the limited question of substantial

2 compliance in accordance with the briefing schedule set out at oral argument.

3

4

IT IS SO ORDERED.

5

6 Dated: November 17, 2009
7
8

MARILYN HALL PATEL United States District Court Judge Northern District of California

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24

25

26

27

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Case3:09-cv-04398-MHP Document57 Filed11/18/09 Page16 of 16

United States District Court For the Northern District of California

1

ENDNOTES

2 1. By way of example, the standard rate for a single child in an RCL 12 group home was $5,891

during the 2008-09 fiscal year. The “federally allowable” portion of the cost—i.e., the portion that 3 covers costs included in the CWA’s definition of “foster care maintenance payments”—was $5,377.

The federal government pays 50% of this $5,377, while the particular county pays 30% and the State 4 pays 20%. Docket No. 31 (Johnson Supp. Dec.) ¶ 6. When the State reduces its contribution by 10%,

the federal government and county also reduce their contributions by approximately the same amount; 5 therefore, a 10% percent reduction in the State’s contribution results in an approximately 10% reduction

in the overall rate paid. See id. ¶¶ 7-9. 6

2. Specifically, the adjusted hours are divided by the greater of 90% of the program’s licensed 7 capacity or 5.4 minimum occupancy for group homes that have six children. Williams Dec., Exh. A
at 1. 8

3. 9

The State’s numbers do not add up: 5,683 plus 3,924 equals 9,607, not 9,585.

4. This court held in California Alliance I that the Alliance has a private right of action under 10 section 1983 to enforce the provisions of the CWA at issue. California Alliance I, Oct. 2006 Order.
Two other federal district court cases have held that a private plaintiff can maintain a right of action 11 under section 1983 to enforce CWA provisions pertaining to reimbursement of foster care maintenance
costs. See Missouri Child Care Ass’n v. Martin, 241 F. Supp. 2d 1032 (W.D. Mo. 2003) (holding CWA 12 created right enforceable by foster care institutional providers pursuant to section 1983); California
Foster Parent Ass’n v. Wagner, 2008 WL 4679857 (N.D. Cal. Oct. 21, 2008) (Alsup, J.) (holding same 13 as to foster parents receiving foster care maintenance funding for the support of children living in private
homes). 14

5. The State also argues in its opposition papers that the Alliance has failed to provide evidence 15 that its members serve children who are federally eligible. Yet the Alliance has provided several

declarations attesting to the fact that Alliance members receive foster care maintenance payments 16 pursuant to the CWA. See, e.g., Docket No. 11 (Johnson Dec.) ¶ 5; Docket No. 12 (Lemieux Dec.) ¶¶

4-5; Docket No. 15 (Rich Dec.) ¶¶ 4-5. Counsel for the Alliance also stated in open court that the 17 Alliance’s breakdown of federally eligible versus non-federally eligible children is roughly equivalent

to that in the State’s total population of foster children living in group homes. 18

6. Counsel for the State speculated at oral argument that some children may be admitted to group 19 homes providing a higher level of care than they need. Counsel conceded, however, that the State has
provided no evidence in connection with this question. 20

7. 21

The court takes judicial notice of this fact. See Fed. R. Evid. 201.

22

23

24

25

26

27

28 16

 
 Case3:09-cv-04398-MHP Document18 Filed09/25/09 Page1 of 1
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
RELATED CASE ORDER
A Motion for Administrative Relief to Consider Whether Cases Should be Related or a Sua Sponte Judicial Referral for Purpose of Determining Relationship (Civil L.R. 3-12) has been filed. The time for filing an opposition or statement of support has passed. As the judge assigned to the earliest filed case below that bears my initials, I find that the more recently filed case(s) that I have initialed below are related to the case assigned to me, and such case(s) shall be reassigned to me. Any cases listed below that are not related to the case assigned to me are referred to the judge assigned to the next-earliest filed case for a related case determination.
C 06-04095 MHP California Alliance of Child and Family Services v. Allenby et aI C 09-04398 VRW California Alliance of Child and Famil Services v.
I find that the above case is related to the case assigned to me. -fi,;.<q-¥,-
ORDER
Counsel are instructed that all future filings in any reassigned case are to bear the initials of the newly assigned judge immediately after the case number. Any case management conference in any reassigned case will be rescheduled by the Court. The parties shall adjust the dates for the conference, disclosures and report required by FRCivP 16 and 26 accordingly. Unless otherwise ordered, any dates for hearing noticed motions are vacated and must be renoticed by the moving party before the newly assigned judge; any deadlines set by the ADR Local Rules remain in effect; and any deadlines established in a case management order continue to govern, except dates for appearance in court, which will be rescheduled by the newly assigned judge.
Dated:
-1-

 
 Case3:09-cv-04398-MHP Document45 Filed11/04/09 Page1 of 4

United States District Court For the Northern District of California

1

2

3

4

5

6

7

UNITED STATES DISTRICT COURT

8

NORTHERN DISTRICT OF CALIFORNIA

9 CALIFORNIA ALLIANCE OF CHILD AND
10 FAMILY SERVICES,

No. C 09-04398 MHP

11

Plaintiff,

12 v.

13 JOHN WAGNER, Director of the California Department of Social Services, in his official
14 capacity; GREGORY ROSE, Deputy Director of the Children and Family Services Division
15 of the California Department of Social Services, in his official capacity,

16 Defendants.

17

/

TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE REGARDING PRELIMINARY INJUNCTION

18

19

This matter having come on for hearing before this court on October 9 and 29, 2009, and the

20 court having considered the memoranda and arguments of counsel, and all other matters submitted

21 with respect to plaintiffs’ application for a Temporary Restraining Order, and good cause appearing,

22 the court makes the following findings and enters this order.

23

1. The court finds that plaintiff has raised serious questions going to the merits of this

24 action. The federal Child Welfare Act (“the Act”) provides that “Each State with a plan approved

25 under this part shall make foster care maintenance payments on behalf of each child who has been

26 removed from the home of a relative . . . .” 42 U.S.C. § 672(a)(1) (emphasis added). The Act

27 defines “foster care maintenance payments” as “payments to cover the cost of (and the cost of

28 providing)” certain items enumerated in the Act, including food, clothing, shelter and supervision.

Case3:09-cv-04398-MHP Document45 Filed11/04/09 Page2 of 4

United States District Court For the Northern District of California

1 42 U.S.C. § 675(4)(A). Plaintiff represents California non-profit agencies offering services to

2 vulnerable children and their families, including group home programs. Group homes provide care

3 and supervision for foster children who are placed with them by county child welfare and probation

4 departments and who often have significant emotional or behavioral problems. See Docket No. 1

5 (Complaint) ¶ 4. Approximately two years ago, plaintiff brought a challenge to the level of funding

6 provided by the State of California to support foster care maintenance payments to group homes. At

7 that time, this court found that California’s Rate Classification Level (RCL) system provided for at

8 least 80% of the costs of the items enumerated by the Act. California Alliance of Child & Family

9 Servs. v. Allenby, 2008 WL 686860, at *4 (N.D. Cal. Mar. 12, 2008) (Patel, J.). While finding said

10 funding level to be substantially compliant with the Act, the court warned that the California system

11 may well be in violation of federal law without further funding increases over time. Id. at *6. The

12 implementation of the ten percent reduction provided in California’s Budget Act of 2009, coupled

13 with the cumulative effect of uncompensated cost of living increases, would reduce foster care

14 maintenance payments to a level covering only 68-70% of the costs of the items enumerated by the

15 Act. See Docket No. 41 (Def.’s Supp. Dec.) ¶ 8. Defendants’ contention that the effects of the

16 budget cut are offset by the provision of Senate Bill 597 that adjusted the respective RCL point

17 ranges appears to have little merit: this adjustment appears to help a group home’s financial posture

18 by allowing the group home to cut “costs,” i.e., the services provided to each child, without losing

19 additional funding. The concern of the Act is the actual provision of foster care to children, not

20 simply the balance sheets of the service provider. There are serious questions whether California’s

21 funding scheme for 2009-10 substantially complies with the Act.

22

2. Plaintiff has demonstrated that the balance of hardships tips sharply in its favor and

23 that the entry of a Temporary Restraining Order is in the public interest. The implementation of

24 California’s ten percent budget cut may be expected to result in decreases in care, housing, services,

25 staffing numbers and staff qualifications. Group homes that begin to restructure their respective

26 staffing complements in response to the reduction may find it difficult to reestablish the status quo

27 ante should plaintiff succeed on the merits, unless a Temporary Restraining Order issues forthwith.

28 2

Case3:09-cv-04398-MHP Document45 Filed11/04/09 Page3 of 4

United States District Court For the Northern District of California

1 The entry of a Temporary Restraining Order imposes a fiscal impact on the State, which is

2 navigating a severe budgetary crisis, see Docket No. 36 (Def.’s RJN); however, this temporary

3 hardship does not outweigh the irreparable injury likely to be sustained by the foster children living

4 in group homes that may have already begun terminating staff and cutting services. See Golden

5 Gate Restaurant Ass’n v. City & County of San Francisco, 512 F.3d 1112, 1126 (9th Cir. 2008)

6 (“While the City’s and Association’s injuries are entirely economic, the Intervenors’ injuries include

7 preventable human suffering. Therefore, the balance of hardships tips sharply in favor of the parties

8 seeking relief.”). Moreover, the public interest weighs in favor of ensuring that decisions directly

9 affecting this particularly vulnerable segment of society scrupulously adhere to the law’s

10 requirements. See Lopez v. Heckler, 713 F.2d 1432, 1437 (9th Cir. 1983).

11

3. Accordingly, plaintiff’s application for a Temporary Restraining Order is

12 GRANTED.

13

4. Defendants John Wagner and Gregory Rose, and their successors, agents, officers,

14 servants, employees, attorneys and representatives, and all persons acting in concert or participating

15 with defendants in their respective official capacities as Director of the California Department of

16 Social Services and Deputy Director of the Children and Family Services Division of the California

17 Department of Social Services, are HEREBY ENJOINED AND PROHIBITED from

18 implementing the ten percent reduction in the standardized schedule of rates for each RCL provided

19 at California Welfare and Institutions Code § 11462(g)(5), such reduction having been approved in

20 Assembly Bill ABX 4 4, filed with the Secretary of State on July 28, 2009, and Senate Bill 597, filed

21 with the Secretary of State on October 11, 2009, as part of the Budget Act of 2009.

22

5. This Temporary Restraining Order will expire ten (10) days after entry, see Fed. R.

23 Civ. P. 65(b)(2), unless the parties agree to extend the order for a reasonable amount of time in order

24 to prepare for the adjudication of plaintiff’s motion for a preliminary injunction.

25

6. This court HEREBY ISSUES an Order to Show Cause fixing the time for hearing

26 plaintiff’s motion for a preliminary injunction. Said motion shall be heard on Friday, November

27

28 3

Case3:09-cv-04398-MHP Document45 Filed11/04/09 Page4 of 4

United States District Court For the Northern District of California

1 13, 2009, at 10:00 a.m., in Courtroom 15, 450 Golden Gate Ave., 18th Floor, San Francisco,

2 California.

3

7. Plaintiff’s motion for a preliminary injunction, with all supporting pleadings, papers

4 and evidence, shall be served upon defendants no later than Wednesday, November 4, 2009.

5 Defendants’ opposition pleadings, papers and evidence in response to plaintiff’s motion for a

6 preliminary injunction shall be filed and served on plaintiff no later than Monday, November 9,

7 2009. Defendants shall also file their proposals concerning the taking of testimony by that date.

8 Plaintiff’s papers and evidence in reply to defendants’ opposition to plaintiff’s motion for a

9 preliminary injunction shall be filed and served upon counsel for defendants no later than

10 Wednesday, November 11, 2009. Plaintiffs shall also file their proposals concerning the taking of

11 testimony by that date.

12

13

IT IS SO ORDERED.

14

15 Dated: November 4, 2009
16
17

MARILYN HALL PATEL United States District Court Judge Northern District of California

18

19

20

21

22

23

24

25

26

27

28 4

 
 Case: 3:09-cv-04398-MHP As of: 03/15/2010 09:32 PM PDT 1 of 7
ADRMOP, APPEAL, E−Filing, RELATE
U.S. District Court California Northern District (San Francisco) CIVIL DOCKET FOR CASE #: 3:09−cv−04398−MHP

California Alliance of Child and Family Services v. Wagner et al Date Filed: 09/18/2009

Assigned to: Hon. Marilyn H. Patel

Jury Demand: Plaintiff

Relate Case Case: 3:06−cv−04095−MHP

Nature of Suit: 890 Other Statutory

Case in other court: 09−17649 Cause: 42:1983 Civil Rights Act

Actions Jurisdiction: Federal Question

Plaintiff

California Alliance of Child and Family Services

represented by Craig Allen Taggart Bingham McCutchen LLP 600 Anton Blvd. 18th Floor Costa Mesa, CA 92626 714−830−0600 x20628 Fax: 714−830−0700 Email: craig.taggart@bingham.com ATTORNEY TO BE NOTICED

Jennifer Allison Lopez Bingham McCutchen 600 Anton Blvd. 18th Floor Costa Mesa, CA 92626 714−830−0614 Fax: 714−830−0738 Email: jennifer.lopez@bingham.com ATTORNEY TO BE NOTICED

Michael Donn Mortenson Bingham McCutchen LLP 600 Anton Blvd 18th Floor Costa Mesa, CA 92626 714−830−0656 Fax: 714−830−0756 Email: michael.mortenson@bingham.com ATTORNEY TO BE NOTICED

William Frederick Abrams Bingham McCutchen LLP 1900 University Avenue East Palo Alto, CA 94303 650−849−4400 Fax: 650−849−4800 Email: william.abrams@bingham.com ATTORNEY TO BE NOTICED

V.
Defendant
John Wagner Interim Director of the California Department of Social Services, in his official capacity

represented by George Dey Prince California Dept. of Justice Attorney Generals Office 455 Golden Gate Avenue, Suite 11000 San Francisco, CA 94102−7004 (415) 703−5749 Fax: (415) 703−5480 Email: george.prince@doj.ca.gov

Case: 3:09-cv-04398-MHP As of: 03/15/2010 09:32 PM PDT 2 of 7

ATTORNEY TO BE NOTICED

Susan M. Carson Deputy Attorney General 455 Golden Gate Avenue Suite 11000 San Francisco, CA 94102−7004 415−703−5580 Fax: 415−703−5480 Email: susan.carson@doj.ca.gov ATTORNEY TO BE NOTICED

Defendant
Gregory Rose Deputy Director of the California Department of Social Services, in his official capacity

represented by George Dey Prince (See above for address) ATTORNEY TO BE NOTICED
Susan M. Carson (See above for address) ATTORNEY TO BE NOTICED

Date Filed 09/18/2009
09/18/2009 09/18/2009
09/18/2009 09/18/2009 09/18/2009
09/18/2009 09/18/2009
09/18/2009
09/18/2009

# Docket Text
1 COMPLAINT for Declaratory and Injunctive Relief against Gregory Rose, John Wagner ( Filing fee $ 350, receipt number 34611036803). Demand for Jury Trial. Filed byCalifornia Alliance of Child and Family Services. (far, COURT STAFF) (Filed on 9/18/2009) (Additional attachment(s) added on 9/22/2009: # 1 Complaint) (far, COURT STAFF). (Entered: 09/18/2009)
CASE DESIGNATED for Electronic Filing. (far, COURT STAFF) (Filed on 9/18/2009) (Entered: 09/18/2009)
2 ADR SCHEDULING ORDER: Case Management Statement due by 12/31/2009. Case Management Conference set for 1/7/2010 03:30 PM in Courtroom 6, 17th Floor, San Francisco. (far, COURT STAFF) (Filed on 9/18/2009) (Entered: 09/18/2009)
3 Summons Issued as to Gregory Rose, John Wagner. (far, COURT STAFF) (Filed on 9/18/2009) (Entered: 09/18/2009)
4 Certificate of Interested Entities by California Alliance of Child and Family Services (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
5 EX PARTE APPLICATION for a Temporary Restraining Order and an Order to Show Cause regarding preliminary injunction filed by California Alliance of Child and Family Services. (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
6 Received Order re 5 Ex Parte Application by California Alliance of Child and Family Services. (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
7 MEMORANDUM of Points and Authorities in Support re 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
8 Declaration of William F. Abrams in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
9 Declaration of Robert Di Stefano in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered:

Case: 3:09-cv-04398-MHP As of: 03/15/2010 09:32 PM PDT 3 of 7

09/18/2009 09/18/2009 09/18/2009 09/18/2009 09/18/2009 09/18/2009 09/18/2009 09/18/2009
09/25/2009 09/25/2009
09/25/2009
09/27/2009

09/18/2009)
10 Declaration of Andrew Diamond in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
11 Declaration of Doug Johnson in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
12 Declaration of Susan Lemieux in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
13 Declaration of Jim Martin in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
14 Declaration of William Martone in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
15 Declaration of Charles C. Rich in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
16 Declaration of Chris Stoner−Mertz in Support of 5 Ex Parte Application filed byCalifornia Alliance of Child and Family Services. (Related document(s) 5 ) (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
17 CERTIFICATE OF SERVICE by California Alliance of Child and Family Services re 7 Memorandum in Support, 6 Received Order, 1 Complaint, 5 Ex Parte Application, 8 Declaration in Support, 16 Declaration in Support, 12 Declaration in Support, 15 Declaration in Support, 10 Declaration in Support, 3 Summons Issued, 11 Declaration in Support, 9 Declaration in Support, 13 Declaration in Support, 4 Certificate of Interested Entities, 14 Declaration in Support (far, COURT STAFF) (Filed on 9/18/2009) (far, COURT STAFF). (Entered: 09/18/2009)
18 ORDER RELATING CASE to C 06−4095 MHP; Signed by Judge Marilyn Hall Patel on 9/24/2009. (awb, COURT STAFF) (Filed on 9/25/2009) (Entered: 09/25/2009)
19 CERTIFICATE OF SERVICE by California Alliance of Child and Family Services re 7 Memorandum in Support, 6 Received Order, 1 Complaint, 5 Ex Parte Application, 8 Declaration in Support, 16 Declaration in Support, 12 Declaration in Support, 15 Declaration in Support, 10 Declaration in Support, 2 ADR Scheduling Order, 3 Summons Issued, 11 Declaration in Support, 9 Declaration in Support, 17 Certificate of Service,, 13 Declaration in Support, 4 Certificate of Interested Entities, 14 Declaration in Support, Case Referred to ECF Service on Defendant John Wagner (Lopez, Jennifer) (Filed on 9/25/2009) (Entered: 09/25/2009)
20 CERTIFICATE OF SERVICE by California Alliance of Child and Family Services re 7 Memorandum in Support, 6 Received Order, 1 Complaint, 5 Ex Parte Application, 8 Declaration in Support, 16 Declaration in Support, 12 Declaration in Support, 15 Declaration in Support, 10 Declaration in Support, 2 ADR Scheduling Order, 3 Summons Issued, 11 Declaration in Support, 9 Declaration in Support, 17 Certificate of Service,, 13 Declaration in Support, 4 Certificate of Interested Entities, 14 Declaration in Support, Case Referred to ECF Service on Defendant Gregory Rose (Lopez, Jennifer) (Filed on 9/25/2009) (Entered: 09/25/2009)
21 Ex Parte Application FOR ORDER SETTING THE HEARING DATE FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE

Case: 3:09-cv-04398-MHP As of: 03/15/2010 09:32 PM PDT 4 of 7

09/28/2009 09/28/2009 09/29/2009 09/29/2009 10/05/2009 10/05/2009 10/05/2009 10/05/2009 10/05/2009 10/09/2009 10/09/2009
10/09/2009 10/09/2009
10/13/2009 10/16/2009

REGARDING PRELIMINARY INJUNCTION filed by California Alliance of Child and Family Services. (Attachments: # 1 Declaration of Craig A. Taggart in Support of Ex Parte Application, # 2 Certificate of Service)(Lopez, Jennifer) (Filed on 9/27/2009) (Entered: 09/27/2009)
22 Memorandum in Opposition to Plaintiff's Ex Parte Application for Order Setting the Hearing Date for TRO, etc. filed byGregory Rose, John Wagner. (Prince, George) (Filed on 9/28/2009) (Entered: 09/28/2009)
Case reassigned to Hon. Marilyn H. Patel. Hon. Vaughn R. Walker no longer assigned to the case. (ha, COURT STAFF) (Filed on 9/28/2009) (Entered: 09/28/2009)
23 NOTICE by Gregory Rose, John Wagner NOTICE OF REPRESENTATION (Attachments: # 1 Proof of Service)(Carson, Susan) (Filed on 9/29/2009) (Entered: 09/29/2009)
24 CLERKS NOTICE: Motion Hearing re TRO/Preliminary Injunction set for 10/9/2009 02:30 PM in Courtroom 15, 18th Floor, San Francisco before the Hon. Marilyn Hall Patel (awb, COURT STAFF) (Filed on 9/29/2009) (Entered: 09/29/2009)
25 Memorandum in Opposition to Motion for TRO, etc, plus 1st of four declarations in support filed byGregory Rose, John Wagner. (Attachments: # 1 Affidavit)(Prince, George) (Filed on 10/5/2009) (Entered: 10/05/2009)
26 DECLARATION of Peter Cervinka iso opposition to mtn for TRO, etc. filed byGregory Rose, John Wagner. (Prince, George) (Filed on 10/5/2009) (Entered: 10/05/2009)
27 DECLARATION of Cheryl Treadwell (part one of two−part dec) in Opposition to Mtn for TRO, etc. filed byGregory Rose, John Wagner. (Prince, George) (Filed on 10/5/2009) (Entered: 10/05/2009)
28 Declaration of Cheryl Treadwell (part two of two−part dec) iso Opposition to Mtn for TRO filed byGregory Rose, John Wagner. (Prince, George) (Filed on 10/5/2009) (Entered: 10/05/2009)
29 Declaration of Cora L. Dixon iso Opposition to Mtn for TRO, etc. filed byGregory Rose, John Wagner. (Prince, George) (Filed on 10/5/2009) (Entered: 10/05/2009)
30 NOTICE by California Alliance of Child and Family Services of filing of Supplemental Declaration of Doug Johnson in Support of Ex Parte Application for Temporary Restraining Order and Order to Show Cause Regarding Preliminary Injunction (Lopez, Jennifer) (Filed on 10/9/2009) (Entered: 10/09/2009)
31 Declaration of Doug Johnson SUPPLEMENTAL in Support of Ex Parte Application for Temporary Restraining Order and Order to Show Cause Regarding Preliminary Injunction filed byCalifornia Alliance of Child and Family Services. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E)(Lopez, Jennifer) (Filed on 10/9/2009) (Entered: 10/09/2009)
32 ERRATA re 31 Declaration in Support, of Ex Parte Application for Temporary Restraining Order and Order to Show Cause Regarding Preliminary Injunction by California Alliance of Child and Family Services. (Taggart, Craig) (Filed on 10/9/2009) (Entered: 10/09/2009)
33 Minute Entry: Temporary Restraining Order Hearing held on 10/9/2009 before Hon. Marilyn Hall Patel (Date Filed: 10/9/2009); Further Motion Hearing set for 10/29/2009 02:30 PM in Courtroom 15, 18th Floor, San Francisco. (Court Reporter Margo Garule.) (awb, COURT STAFF) (Date Filed: 10/9/2009) (Entered: 10/09/2009)
34 ANSWER to Complaint for Injunctive and Declaratory Relief byGregory Rose, John Wagner. (Prince, George) (Filed on 10/13/2009) (Entered: 10/13/2009)
35 Brief Response of CDSS to Supplemental Decl. of Doug Johnson filed byGregory Rose, John Wagner. (Attachments: # 1 Affidavit)(Prince, George) (Filed on 10/16/2009) (Entered: 10/16/2009)

Case: 3:09-cv-04398-MHP As of: 03/15/2010 09:32 PM PDT 5 of 7

10/16/2009 10/21/2009 10/23/2009
10/29/2009 11/02/2009 11/02/2009 11/02/2009 11/03/2009
11/03/2009 11/04/2009 11/04/2009 11/04/2009 11/04/2009

36 Request for Judicial Notice re 35 Brief Response of CDSS to decl of Doug Johnson filed byGregory Rose, John Wagner. (Related document(s) 35 ) (Prince, George) (Filed on 10/16/2009) (Entered: 10/16/2009)
37 STATEMENT OF RECENT DECISION pursuant to Civil Local Rule 7−3.d in Support of EX PARTE APPLICATION for a Temporary Restraining Order and an Order to Show Cause Regarding Preliminary Injunction filed byCalifornia Alliance of Child and Family Services. (Related document(s) 7 , 6 , 5 ) (Taggart, Craig) (Filed on 10/21/2009) (Entered: 10/21/2009)
38 Transcript of Proceedings held on 10/09/09, before Judge MARILYN H. PATEL. Court Reporter/Transcriber Margaret "Margo" Gurule, Telephone number 415−504−4204 or margolargo@gmail.com. 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 1/19/2010. (mng, COURT STAFF) (Filed on 10/23/2009) (Entered: 10/23/2009)
39 Minute Entry: Motion Hearing re TRO held on 10/29/2009 before Marilyn Hall Patel (Date Filed: 10/29/2009). (Court Reporter Sahar McVickar) (ls, COURT STAFF) (Date Filed: 10/29/2009) (Entered: 10/30/2009)
40 Proposed Order re 5 Ex Parte Application for a Temporary Restraining Order and Order to Show Cause re Preliminary Injunction by California Alliance of Child and Family Services. (Lopez, Jennifer) (Filed on 11/2/2009) (Entered: 11/02/2009)
41 DECLARATION of Debra Williams in Response to Court's Request of October 29, 2009, etc. filed byGregory Rose, John Wagner. (Attachments: # 1 Exhibit, # 2 Exhibit)(Prince, George) (Filed on 11/2/2009) (Entered: 11/02/2009)
42 Proposed Order Denying Application for TRO, etc. by Gregory Rose, John Wagner. (Prince, George) (Filed on 11/2/2009) (Entered: 11/02/2009)
43 Transcript of Proceedings held on 10/29/09, before Judge Marilyn Hall Patel. Court Reporter/Transcriber Sahar McVickar, CSR, RPR, Telephone number (415) 626−6060/sahar_mcvickar@cand.uscourts.gov. 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 1/29/2010. (McVickar, Sahar) (Filed on 11/3/2009) (Entered: 11/03/2009)
44 ERRATA re 41 Declaration in Opposition Letter to Judge Patel correcting incorrect number in declaration by Gregory Rose, John Wagner. (Prince, George) (Filed on 11/3/2009) (Entered: 11/03/2009)
45 TEMPORARY RESTRAINING ORDER and ORDER TO SHOW CAUSE: Order to Show Cause Hearing set for 11/13/2009 10:00 AM before the Hon. Marilyn Hall Patel; Signed by Judge Marilyn Hall Patel on 11/4/2009. (awb, COURT STAFF) (Filed on 11/4/2009) (Entered: 11/04/2009)
46 NOTICE by California Alliance of Child and Family Services of Motion for Preliminary Injunction (Lopez, Jennifer) (Filed on 11/4/2009) (Entered: 11/04/2009)
47 MOTION for Preliminary Injunction and Memorandum of Points and Authorities in Support Thereof filed by California Alliance of Child and Family Services. Motion Hearing set for 11/13/2009 10:00 AM in Courtroom 15, 18th Floor, San Francisco. (Lopez, Jennifer) (Filed on 11/4/2009) (Entered: 11/04/2009)
48 Proposed Order re 47 MOTION for Preliminary Injunction and Memorandum of Points and Authorities in Support Thereof by California Alliance of Child and Family Services. (Lopez, Jennifer) (Filed on 11/4/2009) (Entered: 11/04/2009)

Case: 3:09-cv-04398-MHP As of: 03/15/2010 09:32 PM PDT 6 of 7

11/05/2009 11/06/2009 11/09/2009 11/10/2009 11/10/2009 11/11/2009 11/11/2009 11/13/2009
11/18/2009 11/19/2009 11/23/2009
11/24/2009 11/25/2009

49 STIPULATION re 34 Answer to Complaint by California Alliance of Child and Family Services. (Attachments: # 1 Proposed Order)(Taggart, Craig) (Filed on 11/5/2009) (Entered: 11/05/2009)
50 STIPULATION AND ORDER extending time to 12/7/2009 for plaintiffs to file motion to strike; Signed by Judge Marilyn Hall Patel on 11/6/2009. (awb, COURT STAFF) (Filed on 11/6/2009) (Entered: 11/06/2009)
51 Memorandum in Opposition to Plaintiff's Motion for Preliminary Injunction filed byGregory Rose, John Wagner. (Prince, George) (Filed on 11/9/2009) (Entered: 11/09/2009)
52 AFFIDAVIT in Opposition to Plaintiff's Motion for Preliminary Injunction filed byGregory Rose, John Wagner. (Prince, George) (Filed on 11/10/2009) (Entered: 11/10/2009)
53 ERRATA letter to Judge Patel by Gregory Rose, John Wagner. (Prince, George) (Filed on 11/10/2009) (Entered: 11/10/2009)
54 Reply Memorandum re 47 MOTION for Preliminary Injunction and Memorandum of Points and Authorities in Support Thereof filed byCalifornia Alliance of Child and Family Services. (Lopez, Jennifer) (Filed on 11/11/2009) (Entered: 11/11/2009)
55 Proposed Order re 47 MOTION for Preliminary Injunction and Memorandum of Points and Authorities in Support Thereof (REVISED PROPOSED ORDER) by California Alliance of Child and Family Services. (Lopez, Jennifer) (Filed on 11/11/2009) (Entered: 11/11/2009)
56 Minute Entry: Preliminary Injunction Hearing held on 11/13/2009 before Hon. Marilyn Hall Patel (Date Filed: 11/13/2009); Courts orders that TRO to remain in place as a preliminary injunction; Further briefing due 12/2/09; Responses due 12/9/09; Further Case Management Conference set for 1/11/2010 03:00 PM in Courtroom 15, 18th Floor, San Francisco, with a joint CMC statement to be filed by 1/4/2010(Court Reporter Lydia Zinn.) (awb, COURT STAFF) (Date Filed: 11/13/2009) (Entered: 11/13/2009)
57 MEMORANDUM AND ORDER by Judge Marilyn Hall Patel granting 47 plaintiff's Motion for Preliminary Injunction (awb, COURT STAFF) (Filed on 11/18/2009) (Entered: 11/18/2009)
59 NOTICE OF APPEAL as to 57 Order on Motion for Preliminary Injunction by Gregory Rose, John Wagner. Filing fee $ 455.00. Receipt Number 34611039167. (Attachments: # 1 Civil Appeals Docketing Statement) (gba, COURT STAFF) (Filed on 11/19/2009) (Additional attachment(s) added on 11/24/2009: # 2 Memorandum and Order) (gba, COURT STAFF). (Entered: 11/24/2009)
58 Transcript of Proceedings held on 11/13/2009, before Judge William Alsup. Court Reporter/Transcriber Lydia Zinn, Telephone number (415) 531−6587. 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 2/18/2010. (Zinn, Lydia) (Filed on 11/23/2009) (Entered: 11/23/2009)
60 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals re 59 Notice of Appeal (gba, COURT STAFF) (Filed on 11/24/2009) (Additional attachment(s) added on 11/24/2009: # 1 Notice of Appeal Notification Form) (gba, COURT STAFF). (Additional attachment(s) added on 11/24/2009: # 2 Docket Sheet) (gba, COURT STAFF). (Entered: 11/24/2009)
61 RESPONSE to Directive re: Retroactivity and Substantial Conformity by Gregory Rose, John Wagner. (Attachments: # 1 Affidavit)(Prince, George) (Filed on 11/25/2009) (Entered: 11/25/2009)

Case: 3:09-cv-04398-MHP As of: 03/15/2010 09:32 PM PDT 7 of 7

12/07/2009 12/09/2009
12/09/2009 12/09/2009 12/15/2009 12/18/2009 12/29/2009
01/04/2010 01/05/2010 01/06/2010 01/11/2010
01/13/2010 01/15/2010 02/22/2010 02/24/2010 03/01/2010

62 Amended ANSWER to Complaint byGregory Rose, John Wagner. (Prince, George) (Filed on 12/7/2009) (Entered: 12/07/2009)
63 Response re 57 Order on Motion for Preliminary Injunction Submission Re: State's Plan for Determining Amount of Foster Care Maintenance Payments for Group Homes byGregory Rose, John Wagner. (Prince, George) (Filed on 12/9/2009) (Entered: 12/09/2009)
64 RESPONSE to re 61 Response ( Non Motion ) to Defendants' Submission Regarding Retroactivity by California Alliance of Child and Family Services. (Lopez, Jennifer) (Filed on 12/9/2009) (Entered: 12/09/2009)
65 Declaration of Craig Taggart in Support of 64 Response ( Non Motion ) filed byCalifornia Alliance of Child and Family Services. (Related document(s) 64 ) (Lopez, Jennifer) (Filed on 12/9/2009) (Entered: 12/09/2009)
66 RESPONSE to re 63 Response and Objection to Defendants' Plan Filed on December 9, 2009 by California Alliance of Child and Family Services. (Lopez, Jennifer) (Filed on 12/15/2009) (Entered: 12/15/2009)
67 ORDER RE SCOPE OF PRELIMINARY INJUNCTION; Signed by Judge Marilyn Hall Patel on 12/18/2009. (awb, COURT STAFF) (Filed on 12/18/2009) (Entered: 12/18/2009)
68 AMENDED NOTICE OF APPEAL by Gregory Rose, John Wagner Defendants' Appeal of December 18, 2009 Order Re: Scope of Preliminary Injunction. Filing fee $ 455. Appeal Record due by 1/28/2010. (Prince, George) (Filed on 12/29/2009) (Entered: 12/29/2009)
69 CASE MANAGEMENT STATEMENT Joint Case Management Conference Statement filed by Gregory Rose, John Wagner. (Prince, George) (Filed on 1/4/2010) (Entered: 01/04/2010)
70 USCA Case Number 09−17649 for 59 Notice of Appeal, filed by John Wagner, Gregory Rose. (gba, COURT STAFF) (Filed on 1/5/2010) (Entered: 01/05/2010)
71 ORDER of USCA as to 59 Notice of Appeal, filed by John Wagner, Gregory Rose, 68 Amended Notice of Appeal filed by John Wagner, Gregory Rose (gba, COURT STAFF) (Filed on 1/6/2010) (Entered: 01/06/2010)
72 Minute Entry: Further Case Management Conference held on 1/11/2010 before Hon. Marilyn Hall Patel (Date Filed: 1/11/2010); Proposed compliance schedule to be submitted by 1/15/2010; Responses due by 1/29/2010; Replies due by 2/5/2010; Further hearing set for 2/22/2010 02:00 PM in Courtroom 15, 18th Floor, San Francisco. (Court Reporter Connie Kuhl.) (awb, COURT STAFF) (Date Filed: 1/11/2010) (Entered: 01/12/2010)
***Deadlines terminated. (gba, COURT STAFF) (Filed on 1/13/2010) (Entered: 01/13/2010)
73 Proposed Order Proposed Judgment for Plaintiff in Alliance v. Allenby, Case No. CV06−4095 by California Alliance of Child and Family Services. (Mortenson, Michael) (Filed on 1/15/2010) (Entered: 01/15/2010)
74 Minute Entry: Status Conference re USCA Compliance held on 2/22/2010 before the Hon. Marilyn Hall Patel (Date Filed: 2/22/2010). (Court Reporter Connie Kuhl.) (awb, COURT STAFF) (Date Filed: 2/22/2010) (Entered: 02/23/2010)
***Deadlines terminated. (gba, COURT STAFF) (Filed on 2/24/2010) (Entered: 02/24/2010)
***Deadlines terminated. (gba, COURT STAFF) (Filed on 3/1/2010) (Entered: 03/01/2010)

 
 ALIFORNIA ALLIANCE OF CHILD AND FAMILY SERVICES, Plaintiff–Appellee, v. John A. WAGNER, Director of the California Department of Social Services, in his official capacity; Gregory Rose, Deputy Director of the Children and Family Services Division of the California Department of Social Services, in his official capacity, Defendants–Appellants. California Alliance of Child and Family Services, Plaintiff–Appellee, v. John Wagner, Director of the California Department of Social Services, in his official capacity; Gregory Rose, Deputy Director of the Children and Family Services Division of the California Department of Social Services, in his official capacity, Defendants– Appellants.
Nos. 09–17649, 10–15593.
Argued and Submitted Jan. 12, 2011.Filed April 5, 2011.
Attorneys and Law Firms
*661 William F. Abrams, Esquire, Bingham McCutchen LLP, East Palo Alto, CA, Andrew B. Ellsworth, Esquire, Bingham McCutchen, LLP, San Francisco, CA, Michael Donn Mortenson, Esquire, Craig A. Taggart, Bingham McCutchen LLP, Costa Mesa, CA, for Plaintiff–Appellee.
Susan Marie Carson, Deputy Assistant Attorney General, George Prince, Esquire, Deputy Attorney General, Attorney General Office, San Francisco, CA, for Defendants– Appellants.
Appeals from the United States District Court for the Northern District of California, Marilyn H. Patel, Senior District Judge, Presiding. D.C. Nos. 3:09–cv–04398–MHP, 3:06–cv–04095–MHP.
Before: HUG, SCHROEDER, and RAWLINSON, Circuit Judges.
Opinion
MEMORANDUM* These appeals concern the same parties and legal issues and have been consolidated for the purpose of disposition.
In Appeal No. 10–15593, Defendant–Appellants John Wagner, Director of the California Department of Social Services, and Gregory Rose, Deputy Director of the Children and Family Services Division of the California Department of Social Services, state officials named in their official capacities (State), appeal the scope of the district court's judgment in favor of Plaintiff–Appellee California Alliance of Child and Family Services

(Alliance), entered on remand from this court in Cal. Alliance of Child and Family Services v. Allenby, 589 F.3d 1017 (9th Cir.2009) (Allenby ).
In Appeal No. 09–17649, the State appeals the scope of the district court's preliminary injunction order in favor of Alliance that enjoins the implementation of a ten percent reduction in foster care maintenance payment rates mandated by recently-enacted state legislation. See Cal. Welf. & Inst.Code § 11462(g)(5), (f)(2)(A).
We review the scope of injunctive relief for abuse of discretion. See Internet Specialties West, Inc. v. Milon–DiGiorgio Enterprises, Inc., 559 F.3d 985, 993 (9th Cir.2009). In both appeals, the State contends that the district court abused its discretion by granting injunctive relief that requires California to increase funding for the approximately fortyone percent of resident foster children who do not meet the eligibility criteria of the Child Welfare Act, 42 U.S.C. § 670 et seq. See 42 U.S.C. § 672(a)(1)–(3) (defining eligibility criteria). This argument fails.
*662 2 The State did not waive its objection to the district court's inclusion of nonfederally eligible children within the terms of the injunction. The State's Eleventh Amendment challenge may be raised at any time. See Oregon v. Legal Services Corp., 552 F.3d 965, 969 (9th Cir.2009); see also Edelman v. Jordan, 415 U.S. 651, 678, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974) (“[T]he Eleventh Amendment defense sufficiently partakes of the nature of a jurisdictional bar so that it need not be raised in the trial court[.]”). “We review de novo whether Eleventh Amendment immunity applies.” Nat'l Audubon Soc'y Inc. v. Davis, 307 F.3d 835, 846 (9th Cir.2002).
The district court's judgment and preliminary injunction order did not exceed its jurisdiction, the scope of the pleadings, or our remand in Allenby, 589 F.3d at 1023. “In determining the scope of an injunction, a district court has broad latitude, and it must balance the equities between the parties and give due regard to the public interest.” California ex rel. Lockyer v. U.S. Dept. of Agriculture, 575 F.3d 999, 1020 (9th Cir.2009), as amended (citation omitted). The district court extended injunctive relief to all California foster children based on our interpretation of the Child Welfare Act in Allenby, 589 F.3d at 1023. The district court's undisputed finding was that because the State does not distinguish between federally-eligible and non-federally eligible children when making group home program placements or setting payment rate levels, reimbursing foster care providers at lower rates for non-federally eligible children inevitably dilutes funds for federally-eligible children.
There was no violation of the Eleventh Amendment because the district court's preliminary injunction order and judgment fall squarely within the doctrinal exception of Ex Parte Young, 209 U.S. 123, 159–60, 28 S.Ct. 441, 52 L.Ed. 714 (1908). See, e.g., Cardenas v. Anzai, 311 F.3d 929, 934–35 (9th Cir.2002). A district court may enjoin state officials from future violations of a federal statute, “even if it might require substantial outlay of funds from the state treasury, provided that it does not award retroactive relief for past conduct.” Natural Resources Def. Council v. Cal. Dept. of Transp., 96 F.3d 420, 422 (9th Cir.1996) (citation omitted).

The district court's permanent injunction in Appeal No. 10–15593 is AFFIRMED. The district court's preliminary injunction order in Appeal No. 09–17649 is AFFIRMED.