Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 1 of 10

1 LYNN S. CARMAN, State Bar 028860 Medicaid Defense Fund

2 28 Newport Landing Dr. Novato, CA 94949-8214

3 Telephone: (415) 927-4023 Facsimile: (415) 499-1687

4 Email:

a7827@comcast.net

5 STANLEY L. FRIEDMAN, State Bar 120551 445 S. Figueora St., 27th Floor
6 Los Angeles, CA 90071-1631 Telephone: (213) 629-1500
7 Facsimile: (213) 489-6899 Email: friedman@friedmanlaw.org
8 Attorneys for
9 Plaintiffs Managed Pharmacy Care; Independent Living Center of Southern California, Inc.; Gerald Shapiro, Pharm.D., dba .
10 Uptown Pharmacy & Gift Shoppe; Sharon Steen, dba Central Pharmacy; and Tran Pharmacy, Inc.,dba Tran Pharmacy
11

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IN THE UNITED STATES DISTRICT COURT

FOR THE CENTRAL DISTRICT OF CALIFORNIA
13

WESTERN DIVISION

14

MANAGED PHARMACY CARE, a

No.

15 California corporation; INDEPENDENT LIVING

CENTER OF SOUTHERN CALIFORNIA, INC., 16 a California corporation; GERALD SHAPIRO,

Pharm.D., doing business as Uptown Pharmacy & 17 Gift Shoppe; SHARON STEEN, doing business as

Central Pharmacy; and TRAN PHARMACY, INC., 18 a California corporation,

19 -vs.-

Plaintiffs,

20 DAVID MAXWELL-JOLLY, Director of
21 Department of Health Care Services of the State of California,
22 Defendant.
23 _____________________________1

Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 2 of 10

1

The Plaintiffs complain of the defendant DAVID MAXWELL-JOLLY,

2 Director of Department of Health Care Services of the State of Califomia, and for
claims for relief allege:
3
INTRODUCTION 4
1. Plaintiffs challenge the validity of the 5% reduction, under Assembly Bill
5
("AB") 1183, in reimbursement rates to providers of Pharmacy services to beneficiaries

6 of the Medi-Cal fee-for-service program, for services furnished on or after March I,

7 2009, which Defendant David Maxwell-Jolly, Director of the California Department of

8 Health Care Services is responsible for implementing under AB 1183, and Welf. & Inst.

9 Code 14105.

10

Jurisdiction and venue

2. The Court has jurisdiction under 28 U.S.C. § 1331. Shaw v. Delta Air
11
Lines, Inc., 463 U.S. 85,96 n.4 (1983). 12
3. The actions of the Defendant complained were and will be done in all
13
parts ofthe state of California, including the County of Los Angeles. The injuries which
14 are inflicted and threatened which are complained of, to Plaintiffs, the members of

15 Managed Care Pharmacy, and their patients in the Medi-Cal fee-for-service program,

16 have occurred and are threatened to occur in all parts of the state of California, including

17 the County of Los Angeles. The Defendant and the California Attorney General has an

18 office in the County of Los Angeles.

19

Parties

4. The plaintiff MANAGED PHARMACY CARE ("MPC") is a California 20
corporation, whose principal place of business is at Lake Arrowhead, California, and 21
does business throughout California, including the County of Los Angeles, California. 22
MPC has 284 pharmacy members throughout California, who are pharmacy providers in

23 -1-

Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 3 of 10

1 the Medi-Cal fee-for-service program.

2

5. (a) The plaintiff INDEPENDENT LIVING CENTER OF SOUTHERN

CALIFORNIA, INC. ("ILCSCal") is a nonprofit California corporation which was duly
3
organized and incorporated in California on July 25, 1977 pursuant to the General
4
Nonprofit Corporation Law of the State of California.
5 (b) ILCSCal has its principal office and place of business in, and does

6 business in the County of Los Angeles, California.

7

6. (a) The plaintiff GERALD SHAPIRO, Pharm.D., is a duly licensed

8 registered pharmacist with License No. 24377, who owns and operates a duly licensed

9 retail pharmacy under the fictitious name of Uptown Pharmacy & Gift Shoppe, under

10 retail pharmacy license No. PRY 41615, in the City of Los Angeles, California.
(b) The plaintiff SHAPIRO's pharmacy participates in the Medi-Cal fee11
for-service program and also in Medi-Cal managed care plans, under Medi-Cal provider 12
identification No. PHA 416150.
13
7. (a) The plaintiff SHARON STEEN is an individual who is a copartner in a 14
copartnership which owns and operates a licensed retail pharmacy, under the fictitious
15 name Central Pharmacy, under retail pharmacy license No. PRY 38051, in the City of
16 Santa Monica, California.

17

(b) The plaintiff STEEN's pharmacy participates in the Medi-Cal fee-for-

18 service program and also in Medi-Cal managed care plans, under Medi-Cal provider
19 identification No. PHA 380510.
8. (a) The PlaintiffTRAN PHARMACY, INC. is California 20
corporation which owns and operates a duly licensed retail pharmacy under the fictitious 21
name of Tran Pharmacy, under retail pharmacy license No. PHY 43647, in Garden 22
Grove, California.
23
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Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 4 of 10

1

(b) The TRAN PHARMACY, INC.' s pharmacy participates in the Medi-

2 Cal fee- for-service program and also in Medi-Cal managed care plans, under Medi-Cal

provider identification No. PHA 436470. 3
9. (a) The Department of Health Care Services ("Department") is a 4
department of the State of California. The Department administers the Medi-Cal
5 program under § 14000 et seq. California Welfare and Institutions ("Welf. & Inst.")

6 Code.

7

(b) The defendant DAVID MAXWELL-JOLLY, ("Director"), is the

8 director of the Department. The Director is exclusively empowered by §§ 14100.1 and

9 14105 Welf. & Inst. Code to set all policies, rules and regulations in the Medi-Cal
10 program, including all rates payable to Medi-Cal providers. The Director has an office in the County of Los Angeles. The Director is sued in his official capacity, only.
11 10. Plaintiffs are citizens and residents ofthe State of California, and sue
12 herein on their own behalf, in their own interest, and in the interest of the members of
13
MPC, and in the interests of the Medi-Cal patients of the Plaintiffs and the members of 14 MPC, as well as also on behalf of the public of the State of California, to procure the 15 performance of public duty by the defendant public official: namely the performance of
16 the mandatory public duty of the Director, under and pursuant to the Supremacy Clause,

17 not to injure Medi-Cal beneficiaries and their providers, including Pharmacy providers,

18 in the Medi-Cal FFS program, by implementing the federally preempted 5% Rate
19 Reduction of AB 1183, -- which aforesaid actions of the Director are preempted, under
the Supremacy Clause, in that the aforesaid actions violate and are hence contrary to 42 20
U.S.C. § 1396a(a)(30)(A), -- "Sec. 30A," -- including the quality and equal access 21
clauses of Sec. 30A. 22
11. Plaintiffs also sue in a prudential jus tertii capacity to assert their 23
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Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 5 of 10

1 interests as well as the interests of the Medi-Cal patients of the Plaintiffs and the
members ofMPC, in the claims for relief, and Supremacy Clause preemption, which are 2
sued upon and sought in this within intervention complaint.
3
12. Plaintiffs, -- as well as the Pharmacy provider members of MPC, -- and 4
their Medi-Cal patients on behalf of whom Plaintiffs sue herein, -- also have standing 5 and a claim for relief against the Director inasmuch as each has suffered, will suffer, and
6 is threatened to suffer, concrete and irreparable injury, unless the Defendant Director is
7 restrained by an appropriate injunction from implementing the 5% Rate Reduction of

8 AB 1183, which actions are preempted under the Supremacy Clause by Sec. 30A.

9

INTRODUCTION

10

13. Medi-Cal is a major component of the "safety net" that ensures the State's

poor have access to health care services.
11

12

FIRST CLAIM FOR RELIEF

13

For injunctive relief to enjoin the Defendant to refrain from

implementing AB 1183 and the 5% Rate Reduction

14 14. Plaintiffs refer to and incorporate each of the allegations in the preceding

15 Paragraphs of this Complaint as if fully set forth herein.

16

LEGISLATIVE HISTORY OF ASSEMBLY BILL 1183

17

15. Assembly Bill ("AB") 1183, -- a health trailer bill to implement the budget

18 cutting decisions of the 2008-2009 Budget Bill, was enacted September 30,2008 and

19 was chaptered as Chapter 758, Statutes 2008-2009.

20

AB 1183

16. AB 1183 was introduced Feb. 2, 2008 as a hazardous material bill and was 21

amended several times as solely a hazardous material bill. However, on September 15,
22 2008, the bill was amended in the Senate so as to be at once turned into a trailer bill, on

23
many different subjects, to enact all provisions necessary to implement the provisions of

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Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 6 of 10

1 the 2008-2009 Budget Bill; aU without any public hearings or any hearing by any
committee of the Legislature; was passed shortly before midnight of the same day of 2
September 15,2008 by the Senate; was sent to the Assembly, and was immediately 3
passed by the Assembly before 2:08 a.m. of September 16, 2008, -- all within the space
4
of a few hours, -- and was signed by the Governor and filed with the Secretary of State
5 on September 30, 2008.

6

17. By such legislative history, there were no committee hearings on AB

7 1183.

8

18. Further, there are hundreds of different health care subjects in AB 1183,

9 each of which required separate consideration by the Legislature if any reasoned

10 decision was to be made by any legislator in the Senate or the Assembly in deciding to
vote for or against particular provisions in the hundreds of different subjects contained
11
in thc bill. AB 1183 was hence the pure product of pure logrolling, where, if any 12
member wished his or her health care provision in the multi-provisioned AB 1183 to be
13
enacted, that legislator had to accept blindly all the other provisions relating to the
14 hundreds of other subj ects in the same bill.

15

19. It is a fact, and it is manifest from all the facts alleged in this First Claim

16 for Relief, that individual legislators who voted on AB 1183, and the Legislature as a

17 whole, could not and did not appropriately consider, and did not consider at all, whether

18 or not the reduced rates ofthe 5% Rate Reduction for pharmacy services, and the

19 reduced rates of the 5% Rate Reduction, were consistent with quality of services, or

consistent with equal access of beneficiaries to quality services, in the Medi-Cal FFS 20

program. 21
20.

By each and all ofthe above facts, the action of the Legislature in

22 enacting, and the action of the Director to implement, the 5% Rate Reduction provisions

23

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Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 7 of 10

1 of AB 1183 were and are arbitrary, capricious, and contrary to law, (namely, contrary to
the quality and equal clauses of Sec. 30A, and contrary to the requirement of Sec. 30A 2
that a Medicaid rate setter consider the factors of quality and equal access of
3
beneficiaries in the course of setting new Medicaid rates for payment of providers); so 4
that the provisions of (new) Welf. & lnst. Code § 14105.191 which enacted the 5% Rate 5 Reduction in respect to Pharmacy services, effective March 1,2009, violated and hence
6 are preempted, under the Supremacy Clause, by Sec. 30A.

7

21. Further, unless restrained by the Court by an appropriate injunction, the

8 defendant Director will implement the aforesaid 5% Rate Reduction in respect to

9 Pharmacy services providers (including members ofMPC); which in turn will thereby
10 result in injury to the Plaintiffs; to the members ofMPC; and to their Medi-Cal patients -- which i~ury will foreseeably result in Pharmacy providers (including members of
11
MPC) not accepting new Medi-Cal patients, or stopping serving Medi-Cal patients at
12
all, or by reducing kinds, amounts, locations, and levels of services to Medi-Cal
13
beneficiaries, or by going out of business, so that thereby Medi-Cal beneficiaries are 14 and will be caused, and threatened to be caused, denial and reduction of access to life-
15 vital Pharmacy services and treatment in the Medi-Cal FFS program, resulting in great

16 physical suffering and injury to beneficiaries, including beneficiaries who are patients

17 of Plaintiffs and of the members ofMPC; all to the irreparable injury, and threat of

18 irreparable injury, to thousands ofMedi-Cal beneficiaries including the beneficiaries
19 served by Plaintiffs and the members ofMPC.
22. Plaintiffs and the members ofMPC,. and their Medi-Cal patients, have no 20
administrative remedy, nor any plain, speedy, or adequate remedy whatsoever or at all,
21
except by this complaint in intervention for injunctive relief. 22
WHEREFORE, Plaintiffs pray for judgment and orders as shall hereinafter be
23

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Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 8 of 10

specified:
1 2 3

SECOND CLAIM FOR RELIEF
For injunctive relief to enjoin the Defendant to refrain from implementing the 5% Rate Reduction of Sec. 45 of AB 1183.

4

23. Plaintiffs refer to and incorporate each of the allegations in the

5 preceding Paragraphs of this Petition as if fully set forth herein.

24. However, the enactment of the 5% Rate Reduction in respect to
6
Pharmacy services and providers in the Medi-Cal FFS program, of new Welf. & lnst. 7
Code § 14105.191, by Sec. 45 of AB 1183, by the Legislature was without any
8
consideration of quality and equal access as required by Sec. 3OA,1 and was without any
9 consideration of what it costs providers to perform the various services and procedures,
10 as requin:d by Sec. 30A;2 such that the State's sole purpose, and the conclusive factor,

11 in enacting the 5% Rate Reduction was to reduce the budget deficit.

12

25. Accordingly, under the standard of Orthopaedic Hosp., 103 F.3d 1491, at

13 1500 (1997), the action of the Legislature to enact the aforesaid provision.s of
14 §14105.191 Welf. & lnst. Code, including the 5% Rate Reduction in respectto Pharmacy providers; and the policy and action of the Director to implement the 5%
15
Rate Reduction, was and is arbitrary and capricious, and contrary to and in violation of
16
the quality and access provisions of Sec. 30A. 17
26. Accordingly, by each and all of the foregoing facts alleged, new 18 § 14105.191 Welf. & lnst. Code, and the 5% Rate Reduction in respect to Pharmacy
19 providers, were and are contrary to and in violation of the quality and access provisions
20

21

I Othopaedic Hospital v. Belshe, 103 F.3d 1491, 1500 (9th Cir.1997).

22

'Jd., 103 FJd at 1500; Arkansas Medical Society, Inc. v. Reynolds, 6 F.3d 519

(8th Cir. 1993).

23

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Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 9 of 10

1 of Sec. 30A, so as to be preempted, under the Supremacy Clause, by the quality and
access provisions of Sec. 30A, such that the Defendant Director is and will be acting in 2
excess of and without jurisdiction to implement § 14105.191 Welf. & lnst. Code,
3
including the 5% Rate Reduction, to Pharmacy providers, commencing March 1, 2009.
4
27. Further, unless restrained by the Court by an appropriate injunction, the 5
Defendant Director will implement the aforesaid § 14105.191 Welf. & lnst. Code, and 6 the 5% Rate Reduction in payments to Pharmacy providers, commencing March 1,
7 2009, and thereby will cause injury to Plaintiffs; the members ofMPC, and their Medi-

8 Cal patients; which injury is irreparable, all, as has been hereinbefore set forth in detail

9 in the within complaint in intervention.

10

28. Plaintiffs, the members ofMPC, and their Medi-Cal patients, have no

administrative remedy, nor any plain, speedy, or adequate remedy whatsoever or at all,
11
except by this complaint in intervention [or injunctive and declaratory relief. 12
WHEREFORE, Plaintiffs prays for judgment and orders as follows: 13
A. That Plaintiffs have judgment against the Defendant DAYID
14 MAXWELL-JOLLY, Director of California Department of Health Services, (herein,

15 "Director"), and that Defendants take nothing.

16

B. That a preliminary and permanent injunction be issued to command the

17 Director DAYID MAXWELL-JOLLY to set aside his preempted policy to implement

18 § 14105.19 Welf. & lnst. Code, of AB 1183, and the 5% Rate Reduction, and, to
19 refrain from implementing the same; including but not limited to refraining from
reducing payments by 5 percent or by any other deduction, to pharmacy providers in the 20
Medi-Cal FFS program, for services furnished on and after March 1, 2009. 21
C. That Plaintiffs have costs of suit incurred, together with such other and 22
II
23

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Case 2:09-cv-00382-CAS-MAN Document 1 Filed 01/16/09 Page 10 of 10

1 further relief as may be just.
2 3 4
5
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
22
23

LYNN S. CARMAN STANLEY L. FRIEDMAN
By: ~../~-~L~--:-,:-;~-=-_-.-...·...,._--=-s for Plaintiffs
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 Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 1 of 18

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2

3

4

5

6

7

8

UNITED STATES DISTRICT COURT

9

CENTRAL DISTRICT OF CALIFORNIA

10

WESTERN DIVISION

11 Managed Pharmacy Care, et al.

)

)

12

)

)

13

)

Plaintiff(s),

)

14

)

vs.

)

15

)

David Maxwell Jolly

)

16

)

)

17

Defendant(s).

)

)

18 ________________________________ )

Case No. CV 09-382 CAS (MANx) ORDER GRANTING PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION

19 I. INTRODUCTION AND BACKGROUND
20 On September 16, 2008, the California Legislature passed Assembly Bill 1183
21 (“AB 1183”), which was subsequently signed by the Governor and filed with the
22 Secretary of State on September 30, 2008. AB 1183 amends Cal. Welf. & Inst. Code. §
23 14105.19 and mandates that, effective March 1, 2009, Medi-Cal reimbursement
24 payments to some fee-for-service providers will be reduced by one percent or five
25 percent, depending on provider type. Particularly relevant to the instant action, AB
26 1183 enacts a modified Cal. Welf. Inst. Code § 14105.191(b)(3) so as to require that
27 Medi-Cal fee-for-service payments to pharmacies be reduced by 5 percent.
28

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 2 of 18

1

These reductions mandated in AB 1183 replace the ten percent rate reduction put

2 into place by Assembly Bill X3 5 (“AB 5”), which is scheduled to terminate on

3 February 28, 2009. See Cal. Welf. & Inst. Code § 14105.19(b)(1). AB 5 was passed by

4 the California Legislature on February 16, 2008. On August 18, 2008, the ten percent

5 rate reduction mandated by AB 5 was partially enjoined by this Court in a related

6 action, Independent Living Center of Southern California, Inc. v. Sandra Shewry, CV-

7 08-3315 CAS (MANx). In issuing the preliminary injunction, this Court found that

8 petitioners had, inter alia, demonstrated a strong likelihood of success in showing that

9 AB 5 was preempted by § 30(A) of the Medicaid Act (referred to herein as “§ 30(A)”).

10 The Court’s August 18, 2008 order is currently being appealed to the Court of Appeals

11 for the Ninth Circuit.1

12

On January 16, 2009, Managed Pharmacy Care, Independent Living Center of

13 Southern California, Inc., Gerald Shapiro, Sharon Steen, and Tran Pharmacy, Inc. filed

14 the instant action against David Maxwell-Jolly, Director of the Department of Health

15 Care Services of the State of California. Plaintiffs’ complaint challenges the five

16 percent Medi-Cal reimbursement rate reduction to providers of pharmacy services under

17 AB 1183. Plaintiffs seek an order directing defendant “to set aside his preempted

18 policy to implement § 14105.19 Welf. & Inst. Code, of AB 1183, and the 5% Rate

19 Reduction, and, to refrain from implementing the same; including but not limited to

20 refraining from reducing payments by five percent or by any other deduction, / / /

21

22

23

1 The Court’s August 18, 2008 order was issued on remand from the Ninth Circuit,

24 after plaintiffs appealed this Court’s original June 25, 2008 ruling on their preliminary

injunction motion. The Court’s June 25, 2008 order found that plaintiffs in Independent 25 Living lacked any federal rights under § 30(A), and therefore had denied petitioners’

26 motion for preliminary injunction. On appeal, the Ninth Circuit held that plaintiffs could

27

bring suit under the Supremacy Clause to enjoin AB 5 as preempted under the Medicaid Act, and remanded to this Court. See Independent Living Center of Southern California

28 et. al. v. Sandra Shewry et al., 543 F.3d 1050 (9th Cir. 2008).

2

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 3 of 18

1 to pharmacy providers in the Medi-Cal FFS program, for services furnished on and after

2 March 1, 2009.”2 Compl. at 8; Mot. at 1.

3

On February 2, 2009, plaintiffs filed the instant motion for a preliminary

4 injunction. Defendant filed an opposition thereto on February 11, 2009. A reply was

5 filed on February 16, 2009. Plaintiffs’ motion for a preliminary injunction is currently

6 before the Court.

7 II. LEGAL STANDARD

8

A preliminary injunction is appropriate when the moving party shows either (1) a

9 combination of probable success on the merits and the possibility of irreparable harm,

10 or (2) the existence of serious questions going to the merits and that the balance of

11 hardships tips sharply in the moving party’s favor. See Rodeo Collection, Ltd. v. West

12 Seventh, 812 F.2d 1215, 1217 (9th Cir. 1987). These are not two distinct tests, but

13 rather “the opposite ends of a single ‘continuum in which the required showing of harm

14 varies inversely with the required showing of meritoriousness.’” Id. A “serious

15 question” is one on which the movant “has a fair chance of success on the merits.”

16 Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th Cir. 1984).

17 III. DISCUSSION

18

A. ELEVENTH AMENDMENT AND PRUDENTIAL STANDING

19

Before addressing the merits of plaintiffs’ argument for preliminary injunction,

20 the Court must first address two arguments raised by defendant: (1) that plaintiffs’ suit

21 is barred by the Eleventh Amendment and (2) that plaintiffs lack standing. The Court

22 finds that neither of these arguments is persuasive.

23

The essence of defendant’s Eleventh Amendment argument is that plaintiffs’ suit

24 effectively amounts to a request for money damages to be paid out of the state treasury,

25 in violation of the Eleventh Amendment. See Opp’n at 20 (“the primary purpose

26

27

2 On January 26, 2009, plaintiff Managed Pharmacy Care was voluntarily dismissed

28 as a plaintiff in this action.

3

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 4 of 18

1 driving this lawsuit is to obtain funds from the State above the 5% payment reduction”),

2 citing Edelman v. Jordan, 415 U.S. 651 (“Thus the rule has evolved that a suit by

3 private parties seeking to impose a liability which must be paid from public funds in the

4 state treasury is barred by the Eleventh Amendment”). However, the Court disagrees

5 with defendant’s characterization of plaintiffs’ claim. Plaintiffs complaint does not

6 seek money damages, but instead seeks only prospective injunctive relief – namely, an

7 injunction preventing defendant from enforcing a state law that, defendants argue, is

8 preempted by the Medicaid Act. Such prospective injunctive relief against a state

9 official is permissible under Ex Parte Young, 209 U.S. 123 (1908), even where such an

10 injunction will have an effect on the state treasury. See, e.g., Miliken v. Bradley, 433

11 U.S. 267 (federal courts permitted “to enjoin state officials to conform their conduct to

12 requirements of federal law, notwithstanding a direct and substantial impact on the state

13 treasury”).

14

Defendant also argues that plaintiffs lack prudential standing, because they are

15 health care providers who have no “rights” under the federal law they seek to enforce.

16 Opp’n at 22. The Court disagrees. In its September 17, 2008 order in the related action

17 Independent Living, 543 F.3d at 1065, the Ninth Circuit determined that petitioners in

18 that action had standing:

19

20

Petitioners include independent pharmacies and health care providers

21

participating in the State's Medi-Cal program that, according to their

22

complaint, will be directly injured, by loss of gross income, when the

23

ten-percent rate reduction takes effect. The Supreme Court repeatedly has

24

recognized that such [direct economic] injuries establish the threshold

25

requirements of Article III standing. Moreover, this injury is directly

26

traceable to the Director's implementation of AB 5, and would certainly be

27

redressed by a favorable decision of this court enjoining the ten-percent

28

rate reduction.

4

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 5 of 18

1 As in Independent Living, plaintiffs in the instant action include independent

2 pharmacies participating in the Medi-Cal program, and an independent living center

3 which serves over 8,000 individuals with disabilities annually, 96 percent of whom are

4 Medi-Cal beneficiaries, who, plaintiffs allege, would be directly injured by the five

5 percent Medi-Cal reimbursement rate reduction. See Vescovo Decl. ¶ 5. Therefore, the

6 Ninth Circuit’s holding in Independent Living, 543 F.3d at 1065, with regard to

7 standing applies in this case as well, and the Court finds defendant’s argument that

8 plaintiffs lack standing to be without merit.

9

B. LIKELIHOOD OF SUCCESS ON THE MERITS

10

Pursuant to the holding of the Ninth Circuit in the related action Independent

11 Living, 543 F.3d at 1065, the Court finds, as an initial matter, that plaintiffs may pursue

12 a claim for relief under the Supremacy Clause based on the allegation that AB 1183 is

13 preempted by § 30(A). Here, plaintiffs’ Supremacy Clause claim is predicated upon

14 federal conflict preemption. Under general principles of federal preemption, state law is

15 preempted only to the extent that it actually conflicts with federal law. Pacific Gas &

16 Elec. Co. v. State Energy Comm’n, 461 U.S. 190, 204 (1983). Such a conflict may

17 arise either where “compliance with both federal and state regulations is a physical

18 impossibility, or where state law stands as an obstacle to the accomplishment and

19 execution of the full purposes and objectives of Congress.” Id. at 203-04 (citations

20 omitted).

21

Thus, to prevail on the merits plaintiffs will have to prove either that it is not

22 possible for the Department to comply with both AB 1183 and the Medicaid Act or that

23 AB 1183 stands as an obstacle to the enforcement of § 30(A). As such, the Court turns

24 to the statutory provisions at issue here.

25

The “quality of care” provision of § (30)(A) provides that

26

[a] State plan for medical assistance must . . . provide such methods and

27

procedures relating to the utilization of, and the payment for, care and

28

services available under the plan . . . as may be necessary to safeguard

5

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 6 of 18

1

against unnecessary utilization of such care and services and to assure that

2

payments are consistent with efficiency, economy, and quality of care.

3 42 U.S.C. § 1396a(30)(A). The “equal access” provision of § 30(A) provides that

4

[a] State plan for medical assistance must . . . provide such methods and

5

procedures relating to the utilization of, and the payment for, care and

6

services available under the plan . . . as may be necessary to safeguard

7

against unnecessary utilization of such care and services and to assure that

8

payments are . . . sufficient to enlist enough providers so that care and

9

services are available under the plan at least to the extent that such care and

10

services are available to the general population in the geographic area.

11 Id.

12

13

In Orthopaedic Hospital v. Kizer, 1992 WL 345652 (C.D. Cal. 1992)

14 (“Orthopaedic I”), plaintiff-hospital providers filed suit pursuant to 42 U.S.C. § 1983

15 (“§ 1983”), claiming that the Director violated § 30(A) by setting reimbursement rates

16 for hospital outpatient services without considering the effect of hospital costs on

17 efficiency, economy, and quality of care.3 Id. at *1. The district court concluded that §

18 30(A) was enforceable in a § 1983 action, and that the Department “had a judicially

19 enforceable obligation” to consider and make findings each time it modified

20 reimbursement rates. Id. at *2. According to the district court, § 30(A) obligated the

21 Department to consider efficiency, economy, and quality of care, which it referred to as

22 the “relevant factors.” Id. at *4. The district court found that the Director had acted

23 arbitrarily and capriciously in establishing six of the seven challenged rates. Id. The

24 court then remanded the matter to the Department for further consideration. Id. at *14.

25

26

27

3 The hospitals did not, however, challenge the rates under the “equal access”

28 provision. Orthopaedic I, 1992 WL 345652 at *14 n.4.

6

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 7 of 18

1 Upon remand, the Department conducted a rate study, and readopted the reimbursement

2 rates without change. Orthopaedic Hospital II/III, 103 F.3d at 1495.

3

The hospitals returned to the district court, filing two lawsuits (Orthopaedic II/III)

4 that the district court consolidated, arguing that the adopted rates did not comply with §

5 30(A). Id. The district court entered judgment in favor of the Department, finding that

6 the Department was not statutorily required to consider hospital costs when setting

7 reimbursement rates. Id. The hospitals appealed, and the Ninth Circuit reversed. The

8 Ninth Circuit’s interpretation held that § 30(A) “provides that payments for services

9 must be consistent with efficiency, economy, and quality of care, and that those

10 payments must be sufficient to enlist enough providers to provide access to Medicaid

11 recipients.” Id. at 1496 (emphasis in original). The Ninth Circuit therefore concluded

12 that under § 30(A)

13

14

the Director must set hospital outpatient reimbursement rates that bear a

15

reasonable relationship to efficient and economical hospitals’ costs of

16

providing quality services, unless the Department shows some justification

17

for rates that substantially deviate from such costs. To do this, the

18

Department must rely on responsible cost studies, its own or others’, that

19

provide reliable data as a basis for its rate setting.

20 Id.4 Further, the Ninth Circuit found that “[i]t is not justifiable for the Department to

21

22 4 See e.g., Alaska Dep’t of Health & Soc. Servs. v. Ctrs. for Medicare & Medicaid
23 Servs., 424 F.3d 931, 940-41 (9th Cir. 2005); see also Arkansas Med. Soc’y v. Reynolds,

24 6 F.3d 519, 530 (8th Cir. 1993) (“We agree with the trial court’s conclusion that the

relevant factors that DHS is obliged to consider in its rate-making decisions are the factors 25 outlined in 42 U.S.C. § 1396a(a)(30)(A).”); cf. Methodist Hosps. v. Sullivan, 91 F.3d 1026,

26 1030 (7th Cir. 1996) (finding that § 30(A) does not require a state to consider any

27

particular factors, but rather, requires that the state arrive at substantive results consistent with the Medicaid Act); Rite Aid, Inc. v. Houstoun, 171 F.3d 842 (3d Cir. 1999) (same).

28

7

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 8 of 18

1 reimburse providers substantially less than their costs for purely budgetary reasons.”

2 Id. at 1499 n.3.5

3

Whatever else its effect may have been, it is clear that Sanchez v. Johnson, 416

4 F.3d 1051 (9th Cir. 2005) left undisturbed the rule announced in Orthopaedic II/III that

5 § 30(A) creates duties on behalf of the Department, i.e., the duty to consider efficiency,

6 economy, and quality of care when establishing reimbursement rates. Indeed, the

7 Sanchez court recognized that “[§ 30(A)] speaks . . . of the State’s obligation to develop

8 ‘methods and procedures’ for providing services generally.”6 Sanchez, 416 F.3d at

9

10

5 Subsequently, in Sanchez v. Johnson, 416 F.3d 1051 (9th Cir. 2005), the Ninth

Circuit held that § 30(A) does not confer individual rights that are enforceable under 42

11 U.S.C. § 1983. Id. at 1060. However, in Independent Living, 543 F.3d 1050 (9th Cir.

12 2008), the Ninth Circuit held that “a plaintiff seeking injunctive relief under the Supremacy Clause on the basis of federal preemption need not assert a federally created ‘right,’ in the
13 sense that term has been recently used in suits brought under § 1983, but need only satisfy

14 traditional standing requirements.” Independent Living, 543 F.3d 1050, 1058 (9th Cir. 2008).
15

16

6 Defendant nevertheless argues herein that under Sanchez v. Johnson, 416 F.3d

1051, plaintiffs are precluded from obtaining a judicial remedy, and that “Plaintiffs are

17 attempting to have this Court undercut decades of federal jurisprudence to say that, merely

18 by claiming to be suing under the Supremacy Clause instead of § 1983, a party can obtain a remedy in federal court against a state agency for non-compliance with a provision of the
19 Medicaid Act . . . ” Opp’n at 18. Defendant argues that the Ninth Circuit’s holding in

20 Independent Living, 543 F.3d 1050, does not contradict this argument, because the issue presented herein is substantially different from the issue presented in that case. Opp’n at
21 16 (“the only issue in front of the Court of Appeals in the Independent Living Center

22 matter was ‘whether ILC may maintain a valid cause of action to enjoin implementation of AB 5 on the basis of federal preemption”). However, the Court finds defendant’s
23 arguments unpersuasive. The Court disagrees that the issue presented herein is

24 substantially different from the issue before the Ninth Circuit in Independent Living, 543 F.3d at 1063, and further notes that the Ninth Circuit in Independent Living specifically
25 distinguished Sanchez:

26

27

[In Sanchez] [w]e held that the quality of care and access provisions of § 30(A) do not give rise to the type of unambiguously conferred rights

28

(continued...)

8

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 9 of 18

1 1059 (emphasis added).

2

Because Orthopaedic II/III is binding authority on this Court, the Court finds that

3 when the State of California seeks to modify reimbursement rates for health care

4

5 6(...continued)

6

required under Gonzaga. But our decision in [Sanchez] had nothing to say

7

about a claim for injunctive relief brought under the Supremacy Clause.

Indeed, even as the Supreme Court has tightened the requirements for

8

seeking damages under § 1983, it has consistently reaffirmed the availability

9

of injunctive relief to prevent state officials from implementing state

legislation allegedly preempted by federal law.

10

11

Defendant also argues herein that Congress has evinced an intent that § (30)(a) not

12

be judicially enforced. Opp’n at 17, n.8. Specifically, defendant notes that the so-called “Boren Amendment,” which required that states provide the Secretary with assurances that

13 Medicaid reimbursements according to rates that were “reasonable and adequate” to meet

14

costs, was repealed by Congress subsequent to a Supreme Court decision finding that providers had rights under the Boren Amendment to challenge the adequacy of a state’s

15 reimbursement rates under the Medicaid statute. Opp’n at 5. However, defendant’s

16

arguments are belied by Orthopaedic II/III, which held that the Department’s obligations under §30(a) were independent of the obligations imposed by the Boren Amendment:

17

18

The Boren Amendment requires the Department to make assurances

to the Secretary of Health and Human Services that rates are

19

reasonable and adequate to meet the hospitals' costs, and requires

20

periodic cost reports from hospitals subject to audit by the

Department. These requirements are not part of § 1396a(a)(30)(A).

21

The requirements of § 1396a(a)(30)(A) are more flexible than the

22

Boren Amendment, but not so flexible as to allow the Department to

ignore the costs of providing services. For payment rates to be

23

consistent with efficiency, economy, quality of care and access, they

24

must bear a reasonable relationship to provider costs, unless there is

some justification for rates that do not substantially reimburse

25

providers their costs.

26

27 Orthopaedic II/III, 103 F.3d at 1499.

28

9

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 10 of 18

1 services provided under the Medi-Cal program, it must consider efficiency, economy,

2 and quality of care, as well as the effect of providers’ costs on those relevant statutory

3 factors.

4

In the instant motion for preliminary injunction, plaintiffs argue that AB 1183's

5 five percent reimbursement rate reduction to pharmacies is preempted by § 30(A),

6 because the Legislature did not consider any of the relevant factors as required by

7 Orthopaedic II/III. To demonstrate that the Legislature did not consider any of the

8 relevant factors, plaintiffs first note that Sec. 76 of AB 1183 indicates that the purpose

9 of the bill was budgetary:

10

11

[t]his act is an urgency statute necessary for the immediate

12

preservation of the public peace, health, or safety within the meaning

13

of Article IV of the Constitution and shall go into immediate effect.

14

The facts constituting the necessity are: In order to make the necessary

15

statutory changes to implement the Budget Act of 2008 at the earliest

16

possible time, it is necessary that this act take effect immediately.

17 Plaintiffs further describe the legislative history of AB 1183, which, they argue,

18 demonstrates that the Legislature did not consider any of the relevant factors:

19

AB 1183 was introduced Feb. 2, 2008 as a hazardous material bill and

20

was amended several times as solely a hazardous material bill.

21

However, on September 15, 2008, the bill was amended in the Senate

22

so as to be at once turned into a trailer bill, on many different subjects

23

. . . All without any public hearings or any hearing by any committee

24

of the Legislature; was passed shortly before midnight of the same day

25

of September 15, 2008 by the Senate; was sent to the Assembly, and

26

was immediately passed by the Assembly before 2:08 a.m. of

27

September 16, 2008, – all within the space of a few hours. . .

28 Mot. at 8.

10

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 11 of 18

1

Defendant does not appear to contest that the Legislature did not in fact consider

2 the relevant factors prior to passing AB 1183. However, defendant appears to argue that

3 the requirements of Orthopaedic II/III are nevertheless satisfied, because the

4 Department itself performed a detailed analysis of the relevant factors. Opp’n at 11.

5 Specifically, defendant submits the Department’s report “Analysis of Pharmacy

6 Reimbursement under AB 1183,” (“Department Analysis”) completed in February

7 2009, well after the enactment of AB 1183 on September 16, 2008. Opp’n at 11. The

8 Department Analysis analyzes the impact of the five percent rate reduction, and

9 ultimately concludes:

10

After a 5% payment reduction is implemented on March 1, 2009,

11

Medi-Cal reimbursement paid to pharmacies will comply with title 42,

12

United States Code, section 1396(a)(30)(A). The available data

13

indicates that Medi-Cal recipients will continue to have sufficient

14

access to pharmacy services as required by federal law.

15

Reimbursement will be below applicable federal upper payment limits.

16

The 5% payment reduction will result in more efficient and economical

17

Medi-Cal coverage. It will not have any negative impact for Medi-Cal

18

recipients. Finally, the Department determined that Medi-Cal

19

reimbursement will in the aggregate compensate pharmacy drug costs

20

at a level that is well above the “range of reasonableness” that was

21

acceptable under the repealed Boren Amendment. Thus,

22

reimbursement will be sufficient under the more flexible requirements

23

of section 1396(a)(30)(A).

24 Def’s Ex. A-A (Analysis of Assembly Bill 1183 Medi-Cal Reimbursement for

25 Pharmacies) at 12-13. The Department Analysis further concludes that the Legislature

26 “had other alternatives for reducing spending in the Medi-Cal program, which would

27 have had a much more negative impact on Medi-Cal recipients. Def’s Ex. A-A

28 (Analysis of Assembly Bill 1183 Medi-Cal Reimbursement for Pharmacies) at 4.

11

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 12 of 18

1

Plaintiffs, however, argue that the Department’s post-hoc analysis does not satisfy

2 the requirements of Orthopaedic II/III. The Court agrees. First, the Court notes that AB

3 1183, as passed by the Legislature, does not provide the Department with any discretion

4 to determine whether the five percent rate reduction should be implemented based on

5 the Department’s consideration of the relevant factors. See Mot. at 5-6; Cal. Welf. &

6 Inst. Code. § 14105.191 (“Notwithstanding any other provision of law, or order to

7 implement changes in the level of funding for health care services, the director shall

8 reduce provider payments, as specified in this section . . .”) (emphasis added). In

9 Orthopaedic II/III, in which rates set by the Department, rather than the Legislature,

10 were at issue, the court stated that the “the Department must rely on responsible cost

11 studies, its own or others’, that provide reliable data as a basis for its rate setting.” 103

12 F.3d at 1496 (emphasis added); see also id. at 1499-1500 (“Since the Department did

13 not adequately consider hospitals’ costs when readopting its rates, the Department’s

14 actions were arbitrary and capricious and contrary to law”) (emphasis added). The

15 Orthopaedic II/III holding therefore indicates that the body responsible for rate setting

16 must consider the relevant factors contemporaneously with the adoption of the rates.

17 Here, the legislative history shows no indication that the Legislature considered any of

18 the relevant factors before implementing AB 1183. Instead, it appears that the

19 Legislature enacted the rate reduction purely for budgetary reasons. Because the

20 Department has no authority to alter the rate reduction imposed by the Legislature, the

21 Department’s post hoc analysis does not satisfy the requirements of Orthopaedic II/III.

22

Therefore, because the Legislature did not consider any of the relevant factors

23 prior to implementing the five percent rate reduction in AB 1183, the Court finds that

24 plaintiffs have a strong likelihood of success on the merits.

25

C. IRREPARABLE HARM

26

The next question before this Court is whether plaintiffs have shown that Medi-

27 Cal beneficiaries will be irreparably harmed if the five percent rate reduction to

28 pharmacies is permitted to go into effect. After reviewing the declarations submitted by

12

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 13 of 18

1 plaintiffs and defendant, the Court finds that plaintiffs have made a sufficient showing

2 of irreparable harm to warrant an injunction.

3

Plaintiffs submit the declaration of Richard Wilson, a Certified Public Accountant

4 who has examined various data regarding Medi-Cal prescription drug reimbursement –

5 including the Survey of Dispensing and Acquisition Costs of Pharmaceuticals in the

6 State of California, a December 2007 study prepared by Myers and Stauffer, CPA’s

7 (“Myers Stauffer study”) – in order to examine the impact of the five percent rate

8 reduction on pharmacies.

9

Wilson notes that there are two primary cost components in the provision of

10 prescription drugs: dispensing cost and drug acquisition cost. Wilson states that the

11 average cost to a pharmacy for dispensing a prescription is currently $11.49 per

12 prescription, and that the five percent reimbursement rate reduction will reduce Medi-

13 Cal coverage for pharmacies’ dispensing fees, from an average of $7.25 per

14 prescription to an average of $6.88 per prescription. Wilson Decl. ¶ 21-22. Wilson

15 states that the five percent reduction will therefore increase the loss incurred by

16 pharmacies on dispensing fees from $3.56 per Medi-Cal prescription to $4.61 per Medi-

17 Cal prescription. Wilson Decl. ¶ 22.

18

Furthermore, Wilson, states that the five percent rate reduction will also cause

19 pharmacies to experience a loss on the acquisition of many brand and generic drugs.

20 For example, Wilson states that the average acquisition costs for brand drugs is 79

21 percent of average wholesale price, while the amount of reimbursement that pharmacies

22 will receive under the five percent rate reduction is only 78.85 percent of average

23 wholesale price. Wilson Decl. ¶ 24. As a result, Wilson states that the five percent rate

24 reduction will cause pharmacies to operate at a loss in the acquisition of 51 percent of

25 the 200 top-selling brand drugs, and that pharmacies will make only a very small gross

26 profit on an additional 12.5 percent of the top-selling brand drugs, a profit which will

27 generally be insufficient to compensate for the loss that the pharmacies incur in

28 dispensing costs. Wilson Decl. ¶ 25. With regard to generic drugs, Wilson states that

13

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 14 of 18

1 the five percent rate reduction will cause pharmacies to operate at a loss or obtain only a

2 very small gross profit on 39 percent of the top-selling generic drugs. Wilson Decl. ¶

3 31.

4

Wilson concludes that because pharmacies, on average, will suffer a financial loss

5 to acquire and dispense brand drugs as a result of the five percent rate reduction, many

6 will be forced to stop dispensing many if not most brand products to Medi-Cal patients.

7 Wilson Decl. ¶ 28. Wilson further concludes that, as a result of the five percent rate

8 reduction, many pharmacies will also be forced to stop dispensing many of the generic

9 drugs to Medi-Cal patients. Wilson Decl. ¶ 32.

10

Petitioners also submit additional declarations providing further evidence to the

11 effect that the five percent rate reduction will cause independent pharmacy owners to

12 limit the scope of the services they provide to Medi-Cal beneficiaries. Specifically,

13 plaintiffs submit the declarations of ten independent pharmacists, many of whom state

14 that the five percent rate reduction will significantly affect their ability to provide

15 services to Medi-Cal patients. See Davis Decl. ¶ 8; Dunckel Decl. ¶ 8; Faast Decl. ¶ 8.

16 For example, the pharmacists’ declarations state that the total reimbursement under AB

17 1183 will cover neither their acquisition costs nor their dispensing costs on many drugs,

18 and that, as a result, they will not be able to fill all Medi-Cal prescriptions, including

19 some prescriptions for AIDS medications and name-brand antipsychotropics, and will

20 not be able to serve all existing Medi-Cal customers. See Davis Decl. ¶ 8, 11; Dunckel

21 Decl. ¶ 8, 11; Faast Decl. ¶ 11; Shapiro Decl. ¶ 26; Tran Decl. ¶ 17; Medina Decl. ¶ 11;

22 Tran Decl. ¶ 20. Some of the pharmacists also state that the five percent rate reduction

23 will prevent them from accepting new Medi-Cal patients. See Dunckel Decl. ¶ 11; Jeha

24 Decl. ¶ 11. In addition, some pharmacists say they will be forced to cut the business

25 hours of the pharmacy and lay off employees in order to remain profitable, while others

26 state that the five percent rate reduction will force them out of business. See, e.g., Jeha

27 Decl. ¶ 11; Leonelli Decl. ¶ 11. Some pharmacists state that the five percent rate

28 reduction will prevent them from providing prescription delivery service to their Medi-

14

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 15 of 18

1 Cal beneficiary patients who are unable to leave their homes. See Medina Decl. ¶ 9;

2 Shapiro Decl. ¶ 26.

3

Defendant counters that plaintiffs’ showing of harm is speculative and that, in

4 fact, under the five percent rate reduction, “an extremely high percentage of pharmacy

5 costs will be compensated and the more efficient pharmacies should be able to obtain a

6 substantial profit from providing services under the Medi-Cal program.” Opp’n at 5.

7 For example, defendant notes that the Department Analysis estimates that under the five

8 percent rate reduction, pharmacies will continue, on average, to be compensated above

9 their costs for Medi-Cal prescriptions. See Def’s Ex. A-A at 8 (stating that the five

10 percent rate reduction will reduce the aggregate Medi-Cal reimbursement for

11 prescription drugs from compensating approximately 108.7 percent of pharmacy costs

12 to approximately 103 percent of pharmacy costs).

13

Defendant also submits the declaration of Kevin Gorospe, who is employed as the

14 Department's Chief of Medi-Cal Pharmacy Policy Branch. Gorospe states that he has

15 examined plaintiffs’ submitted declarations, and has calculated that, with one exception,

16 the total revenue loss after the five percent rate reduction for each pharmacist submitting

17 a declaration in support of plaintiffs’ motion will be less than 2 percent. Gorospe Decl.

18 ¶ 12. Gorospe further argues that some of plaintiffs’ cost estimates are misleading,

19 because much of the average dispensing fee costs are costs of operation that a pharmacy

20 incurs regardless of whether it provides drugs to Medi-Cal recipients, so that “continued

21 participation in Medi-Cal by these pharmacies brings in additional reimbursement that

22 will help to pay for many of the costs of operating a pharmacy that the pharmacy would

23 incur even if [it] didn’t participate in Medi-Cal.” Gorospe Decl. ¶ 13. Gorospe further

24 echoes the Department Analysis, stating that dispensing cost increases will not cause

25 irreparable harm, because “Medi-Cal reimbursement for the drug itself frequently is

26 well above pharmacy acquisition cost, that any loss on the dispensing fee portion of

27 reimbursement is made up for by a significant profit on MediCal reimbursement for the

28 drug itself.” Gorospe Decl. ¶ 21.

15

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 16 of 18

1

The Court concludes that defendant has failed to refute plaintiffs’ showing of

2 irreparable harm. Even if defendant is correct that, on average, pharmacies will be

3 compensated above their acquisition costs even after the five percent rate reduction,

4 defendant has not refuted plaintiffs’ findings that many brand and generic drugs will be

5 reimbursed at a level below cost, thereby preventing pharmacies from providing those

6 drugs and limiting access for Medi-Cal patients. Indeed, the Gorospe declaration

7 confirms that only 98-99 percent, on average, of pharmacy costs for single source drugs

8 will be compensated after the five percent rate reduction. Because many single source

9 drugs are protected from competition by patents, there are no available generic

10 alternatives. See August 18, 2008 Preliminary Injunction Order. There can be little or

11 no doubt that Medi-Cal patients will be harmed if these necessary drugs are placed

12 outside of their reach.

13

Furthermore, if pharmacists are forced to curtail services or go out of business,

14 there is no indication that all existing customers will have access to other pharmacies in

15 which to obtain their medication and, in some cases, home-delivery services for such

16 medication. Indeed, the many declarations submitted by petitioners show that

17 independent pharmacy providers, who constitute approximately thirty-three percent of

18 the licensed community pharmacies in California, will be hard-hit by the five percent

19 rate reduction, and may discontinue, or at least severely reduce, services to Medi-Cal

20 beneficiaries. See August 18, 2008 Preliminary Injunction Order. Therefore, the Court

21 concludes that plaintiffs have demonstrates a significant likelihood of irreparable harm.

22

D. BALANCE OF HARDSHIPS

23

The Court is mindful of the difficulty facing the State of California in light of its

24 fiscal crisis.7 However, the State has accepted federal funds under the Medicaid Act. In

25

26

7 The Court notes that there is evidence to suggest that if the five percent rate

27

reduction is given effect, many Medi-Cal beneficiaries will turn to more costly forms of medical care, such as emergency room care, thereby diminishing the State’s projected

28

(continued...)

16

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 17 of 18

1 so doing, the State agreed to abide by the conditions imposed by Congress. Further,

2 retroactive relief for Medi-Cal beneficiaries will likely be inadequate and, and it will

3 come too late, to remedy their pain, suffering, and harm to their mental and physical

4 well-being. See e.g., Lopez v. Heckler, 713 F.2d 1432, 1437 (9th Cir. 1983). In light of

5 the significant threat to the health of Medi-Cal recipients, reducing payments to health-

6 care service providers will likely cause, and given that nothing in this Court’s order

7 prevents respondent from imposing a rate reduction after she has appropriately

8 considered and applied the relevant factors, the Court finds that the balance of hardships

9 tips in favor of granting the preliminary injunction.

10

E. PUBLIC INTEREST

11

“The district court’s public interest analysis should be whether there exists some

12 critical public interest that would be injured by the grant of preliminary relief.”

13 Hybritech, 849 F.2d at 1458. Clearly, there is a public interest in ensuring that the State

14 has enough money to meet its financial obligations in the face of competing demands.

15 However, there is also a public interest in ensuring access to health care. In light of all

16 the circumstances, including the fact that the State may decide to implement a rate

17 change upon making a properly reasoned and supported analysis, the Court finds that

18 the public interest does not weigh against the issuance of a preliminary injunction.

19 IV. CONCLUSION

20

For the foregoing reasons, the Court GRANTS plaintiffs’ motion for preliminary

21 injunction. The Court hereby orders respondent Director, his agents, servants,

22 employees, attorneys, successors, and all those working in concert with him to refrain

23 from enforcing Cal. Welf. & Inst. Code § 14105.191(b)(3), as modified by AB 1183

24 beginning on March 1, 2009, by refraining from reducing by five percent payments to

25 pharmacies for prescription drugs (including prescription drugs and traditional over-the-

26

27

7(...continued)

28 savings. See e.g., Rodde v. Bonta, 357 F.3d 988, 999 (9th Cir. 2004).

17

Case 2:09-cv-00382-CAS-MAN Document 34 Filed 02/27/09 Page 18 of 18

1 counter drugs provided by prescription) provided under the Medi-Cal fee-for-service 2 program.8

3 4 Dated: February 27, 2009 5

__________________________________ CHRISTINA A. SNYDER UNITED STATES DISTRICT JUDGE

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24 8 Plaintiff’s motion appears to seek an injunction as to the five percent rate reduction
25 for all pharmacy products, not just drugs. However, plaintiffs’ arguments regarding

26 irreparable harm focus on brand and generic drugs dispensed by pharmacies; plaintiffs have

27

not shown irreparable harm as to the effect of the five percent rate reduction on other pharmacy products. Therefore, the Court limits the scope of the injunction to drug

28 products dispensed by pharmacies.

18

 
 Case 2:09-cv-00382-CAS-MAN Document 74 Filed 03/25/10 Page 1 of 7
,<

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

FILED
MAR 25 2010
MOLLY C. DWYER, CLERK
u.s. COURT OF APPEALS

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.; et aI.,
Plaintiffs - Appellees,
v.
DAVID MAXWELL-JOLLY, Director of Department of Health Care SelVices of the State of California,
Defendant - Appellant.

No. 09-55692
D.C. No. 2:09-cv-00382-CAS-MAN U.S. District Court for Central California, Los Angeles
MANDATE

The judgment of this Court, entered March 03, 2010, takes effect this date. This constitutes the formal mandate of this Court issued pursuant to Rule 4l(a) of the Federal Rules of Appellate Procedure.

FOR THE COURT:
Molly C. Dwyer Clerk of Court
Lee-Ann Collins Deputy Clerk

Case 2:09-cv-00382-CAS-MAN Document 74 Filed 03/25/10 Page 2 of 7

FILED

NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS

MAR 03 2010
MOLLY C. DWYER, CLERK u.s. COURT OF APPEALS

FOR THE NINTH CIRCUIT

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.; et aI.,
Plaintiffs - Appellees,
v.
DAVID MAXWELL-JOLLY, Director of Department of Health Care Services of the State of California,
Defendant ~ Appellant.

No. 09-55692 D.C. No. 2:09-cv-00382-CASMAN
MEMORANDUM'

Appeal from the United States District Court for the Central District of California
Christina A. Snyder, District Judge, Presiding
Argued and Submitted January 19,20 I0 Pasadena, California
Before: REINHARDT, W. FLETCHER and M. SMITH, Circuit Judges.
Plaintiffs-Appellees Independent Living Center of Southern California, Inc.,
et al. sought a preliminary injunction in the district court to enjoin AB 1183's five
percent Medi-Cal reimbursement rate reduction as to providers of pharmacy
, This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.

Case 2:09-cv-00382-CAS-MAN Document 74 Filed 03/25/10 Page 3 of 7
serVices. As the facts and procedural history are familiar to the parties, we do not recite them here except as necessary to explain our decision. We affirm the district court's grant of the preliminary injunction.
For the reasons discussed in Cal. Pharms. Ass 'n v. Maxwell-lolly, No. 0955532, slip op. at 3331-3361 (9th Cir. Mar. 3, 2010) (California Pharmacists II), we reject the Director's contention that the State legislature was not required to study the impact of the five percent rate reduction on the statutory factors of efficiency, economy, quality, and access to care, prior to enacting AB 1183.
The primary issue in this appeal is whether the legislature actually conducted the requisite analysis prior to enacting AB 1183. At oral argument, the Director called our attention to a December 2007 Survey of Dispensing and Acquisition Costs of Pharmaceuticals in the State of California, which was prepared for the Department by the accounting firm Myers and Stauffer LC (the Myers and Stauffer Study). The Director referenced the Myers and Stauffer Study in its briefing before the district court, but only to support the argument that the Department had sufficiently considered the § 30(A) factors prior to implementing the five percent rate reduction. However, for the reasons we explained in California Pharmacists II, slip op. at 3349-3355, any analysis performed by the Department was
2

Case 2:09-cv-00382-CAS-MAN Document 74 Filed 03/25/10 Page 4 of 7
inadequate because the Department did not retain the discretion not to implement the rate reductions based on a § 30(A) analysis.
On appeal, the Director argues that the legislature also considered the Myers and Stauffer Study, because it appears in the "Comments" column of the May 30, 2008 agenda released by the Assembly Budget Subcommitee No. I on Health and Human Services. That comment reads: "Dec. 2007 Myers and Stauffer study found that current Medi-Cal drug pricing averages around 5 percent over cost." The Director did not argue in his briefing, either here or in the district court, that the citation to the Myers and Stauffer Study in the May 2008 agenda satisfied § 30(A)'s requirements. However, the Director presented the agenda to the district court as part of AB 1183's legislative history, and the district court held that the legislative history shows no indication that the § 30(A) factors were considered. We have held that the district court's finding on that issue was not clearly erroneous. See California Pharmacists II, slip op. at 3349.
In any event, for two additional reasons, we reject the Director's reliance on the Myers and Stauffer Study to satisfy the requirement that the legislature "stud[ied] the impact of the contemplated rate change(s) on the statutory factors prior to setting rates, or in a manner that allow[ed] those studies to have a meaningful impact on rates before they [were] finalized." California Pharmacists
3

Case 2:09-cv-00382-CAS-MAN Document 74 Filed 03/25/10 Page 5 of 7
II, slip op. at 3360-61 (emphasis omitted). First, the one-sentence citation to the May 30,2008 agenda does not show adequate consideration of the § 30(A) factors. Second, while the Myers and Stauffer Study provides a detailed discussion of costs, it is bereft of any analysis of the remaining § 30(A) factors-efficiency, economy, quality, and access to care. See California Pharmacists II, slip op. at 3360 (holding that the State must consider costs and study the impact of the rate change on the statutory factors). Indeed, the Myers and Stauffer Study notes several times that it is only a cost study, and recommends that the Department conduct additional analysis in light of those costs. See, e.g., Myers and Stauffer Study at 79 ("There are several factors that should be considered in determining an appropriate pharmacy reimbursement formula for Medi-Cal. These factors include dispensing costs ... , drug acquisition costs and market dynamics ... balanced with the need to maintain sufficient access to services for Medi-Cal recipients throughout the state."); id. ("Myers and Stauffer recommends that the Department of Health Services evaluate its pharmacy participation level as well as any additional data sources available for tracking complaints about recipient access to services."); id. at 81 ("The cost survey performed by Myers and Stauffer reports aggregate historical costs of dispensing as observed in the current provider community but does not determine if the costs observed are reflective of providers
4

Case 2:09-cv-00382-CAS-MAN Document 74 Filed 03/25/10 Page 6 of 7
operating in the most efficient manner possible." ); id. ("An evaluation of the dispensing fee should also consider issues of access to services, reimbursement rates prevalent in the marketplace from other third party payers and payment rates that promote incentives for provider efficiency."). Accordingly, we affirm the district court's holding concerning Plaintiffs' likelihood of success on the merits because the State did not study the impact of the five percent rate reduction on the statutory factors prior to enacting AB 1183, or in a manner that allowed those studies to have a meaningful impact on rates before they were finalized . See California Pharmacists II, slip op. at 3360-6J.
Nor did the district court abuse its discretion in finding that Plaintiffs demonstrated irreparable harm. After considering both parties' evidence, the district court concluded that the Director failed to refute Plaintiffs' showing of irreparable harm. The district court concluded that even if, on average, pharmacies would be compensated above their acquisition costs, the Director had not refuted Plaintiffs' showing that many brand and generic drugs would be reimbursed at a level below cost, limiting Medi-Cal patients' access to those drugs. The district court noted that because many single-source drugs are protected from competition by patents, there are no available generic alternatives. The court also concluded that if pharmacies are forced to curtail services or go out of business, existing
5

Case 2:09-cv-00382-CAS-MAN Document 74 Filed 03/25/10 Page 7 of 7
customers would not have access to other pharmacies, especially since homedelivery services would end. It further noted that independent pharmacies represent thirty-three percent of the licensed community pharmacies in California and that they would be severely impacted by the reductions.
Contrary to the Director's argument, the district court did not disregard the Director's evidence, and the Director cannot rely solely on asking this court to reweigh the evidence presented to the district court. Indep. Living Ctr. ofS. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644, 658 (9th Cir. 2009). The district court's conclusion that Plaintiffs would suffer irreparable harm was not clear error.
The district court also did not abuse its discretion in determining that the balance of hardships tipped decidedly in Plaintiffs' favor. See California Pharmacists II, slip op. at 3360.
For these reasons and those we provided in California Pharmacists II, slip op. at 3331-61, we affirm the district court's grant of a preliminary injunction. AFFIRMED.
6

 
 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

FILED
APR 26 2012
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC., a nonprofit corporation; GRAY PANTHERS OF SACRAMENTO, a nonprofit corporation; GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; JERRY SHAPIRO, Pharm. D. doing business as Uptown Pharmacy and Gift Shoppe; SHARON STEEN, doing business as Central Pharmacy; MARK BECKWITH; MARGARET DOWLING; TRAN PHARMACY, INC., doing business as Tran Pharmacy; JASON YOUNG,
Petitioners - Appellees,
SACRAMENTO FAMILY MEDICAL CLINICS, INC.; THEODORE MAZER, M.D.; RONALD B. MEAD; ACACIA ADULT DAY SERVICES,
Intervenors - Appellees,
v.
SANDRA SHEWRY, Director of the Department of Health Care Services, State of California,
Respondent - Appellant.

No. 08-56422
D.C. No. 2:08-cv-03315-CASMAN Central District of California, Los Angeles
ORDER

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC., a nonprofit corporation; GRAY PANTHERS OF SACRAMENTO, a nonprofit corporation; GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; GERALD SHAPIRO, Pharm. D. doing business as Uptown Pharmacy and Gift Shoppe; SHARON STEEN, doing business as Central Pharmacy; MARK BECKWITH; MARGARET DOWLING; TRAN PHARMACY, INC., doing business as Tran Pharmacy; JASON YOUNG,
Petitioners - Appellees,
THEODORE MAZER, M.D.; RONALD B. MEAD; ACACIA ADULT DAY SERVICES; SACRAMENTO FAMILY MEDICAL CLINICS, INC.,
Intervenors - Appellees,
v.
SANDRA SHEWRY, Director of the Department of Health Care Services, State of California; DEPARTMENT OF HEALTH CARE SERVICES, a Department of the State of California,
Respondents - Appellants.

No. 08-57016
D.C. No. 2:08-cv-03315-CASMAN Central District of California, Los Angeles

CALIFORNIA PHARMACISTS ASSOCIATION; CALIFORNIA MEDICAL ASSOCIATION;

No. 09-55532 D.C. No. 2:09-cv-00722-CAS-

CALIFORNIA DENTAL ASSOCIATION; CALIFORNIA HOSPITAL ASSOCIATION; CALIFORNIA ASSOCIATION FOR ADULT DAY SERVICES; MARIN APOTHECARY, INC., DBA Ross Valley Pharmacy; SOUTH SACRAMENTO PHARMACY; FARMACIA REMEDIOS, INC.; ACACIA ADULT DAY SERVICES; SHARP MEMORIAL HOSPITAL; GROSSMONT HOSPITAL CORPORATION; SHARP CHULA VISTA MEDICAL CENTER; SHARP CORONADO HOSPITAL AND HEALTHCARE CENTER; FEY GARCIA; CHARLES GALLAGHER,

MAN Central District of California, Los Angeles

Plaintiffs - Appellees,

v.

DAVID MAXWELL-JOLLY, Director of The California Department of Health Care Services,

Defendant - Appellant.

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.; JERRY SHAPIRO, Pharm. D., DBA Uptown Pharmacy & Gift Shoppe; SHARON STEEN, DBA Central Pharmacy; TRAN PHARMACY, INC., a California corporation,
Plaintiffs - Appellees,

No. 09-55692
D.C. No. 2:09-cv-00382-CASMAN Central District of California, Los Angeles

v. DAVID MAXWELL-JOLLY, Director of Department of Health Care Services of the State of California,
Defendant - Appellant.
Before: REINHARDT, W. FLETCHER, and M. SMITH, Circuit Judges. The parties are directed to file contemporaneous supplemental briefs in their respective cases concerning the effect of Douglas v. Independent Living Center of Southern California, Inc., 132 S. Ct. 1204 (2012). Briefs shall be due 45 days from the filing of this order and shall not exceed 30 pages in length. SO ORDERED.

 
 UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

FILED
MAY 22 2012
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC., a nonprofit corporation; GRAY PANTHERS OF SACRAMENTO, a nonprofit corporation; GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; JERRY SHAPIRO, Pharm. D. doing business as Uptown Pharmacy and Gift Shoppe; SHARON STEEN, doing business as Central Pharmacy; MARK BECKWITH; MARGARET DOWLING; TRAN PHARMACY, INC., doing business as Tran Pharmacy; JASON YOUNG,
Petitioners - Appellees,
SACRAMENTO FAMILY MEDICAL CLINICS, INC.; THEODORE MAZER, M.D.; RONALD B. MEAD; ACACIA ADULT DAY SERVICES,
Intervenors - Appellees,
v.
SANDRA SHEWRY, Director of the Department of Health Care Services, State of California,
Respondent - Appellant.

No. 08-56422
D.C. No. 2:08-cv-03315-CASMAN Central District of California, Los Angeles
ORDER

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC., a nonprofit corporation; GRAY PANTHERS OF SACRAMENTO, a nonprofit corporation; GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; GERALD SHAPIRO, Pharm. D. doing business as Uptown Pharmacy and Gift Shoppe; SHARON STEEN, doing business as Central Pharmacy; MARK BECKWITH; MARGARET DOWLING; TRAN PHARMACY, INC., doing business as Tran Pharmacy; JASON YOUNG,
Petitioners - Appellees,
THEODORE MAZER, M.D.; RONALD B. MEAD; ACACIA ADULT DAY SERVICES; SACRAMENTO FAMILY MEDICAL CLINICS, INC.,
Intervenors - Appellees,
v.
SANDRA SHEWRY, Director of the Department of Health Care Services, State of California; DEPARTMENT OF HEALTH CARE SERVICES, a Department of the State of California,
Respondents - Appellants.

No. 08-57016
D.C. No. 2:08-cv-03315-CASMAN Central District of California, Los Angeles

CALIFORNIA PHARMACISTS ASSOCIATION; CALIFORNIA MEDICAL ASSOCIATION;

No. 09-55532 D.C. No. 2:09-cv-00722-CAS-

CALIFORNIA DENTAL ASSOCIATION; CALIFORNIA HOSPITAL ASSOCIATION; CALIFORNIA ASSOCIATION FOR ADULT DAY SERVICES; MARIN APOTHECARY, INC., DBA Ross Valley Pharmacy; SOUTH SACRAMENTO PHARMACY; FARMACIA REMEDIOS, INC.; ACACIA ADULT DAY SERVICES; SHARP MEMORIAL HOSPITAL; GROSSMONT HOSPITAL CORPORATION; SHARP CHULA VISTA MEDICAL CENTER; SHARP CORONADO HOSPITAL AND HEALTHCARE CENTER; FEY GARCIA; CHARLES GALLAGHER,

MAN Central District of California, Los Angeles

Plaintiffs - Appellees,

v.

DAVID MAXWELL-JOLLY, Director of The California Department of Health Care Services,

Defendant - Appellant.

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.; JERRY SHAPIRO, Pharm. D., DBA Uptown Pharmacy & Gift Shoppe; SHARON STEEN, DBA Central Pharmacy; TRAN PHARMACY, INC., a California corporation,
Plaintiffs - Appellees,

No. 09-55692
D.C. No. 2:09-cv-00382-CASMAN Central District of California, Los Angeles

v. DAVID MAXWELL-JOLLY, Director of Department of Health Care Services of the State of California,
Defendant - Appellant.
Before: REINHARDT, W. FLETCHER, and M. SMITH, Circuit Judges. The parties’ unanimous joint motion to refer Case Nos. 08-56422, 08-57016, 09-55532, and 09-55692 to mediation, and to continue the supplemental briefing schedule during the pendency of mediation [D.E. 49-1], is hereby GRANTED. SO ORDERED.

 
 Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 1 of 12 Page ID #:52

1 LYNN S. CARMAN, State Bar 028860 Medicaid Defense Fund
2 28 Newport Landing Dr. Novato, CA 94949-8214
3 Telephone: (415) 927-4023 Facsimile : (415) 499-1687
4 Email: a7827@comcast.net

5 STANLEY L. FRIEDMAN, State Bar 120551 445 S. Figueora St., 27th Floor
6 Los Angeles, CA 90071-1631 Telephone: (213) 629-1500
7 Facsimile : (213) 489-6899 Email: friedman@friedmanlaw.org
8 Attorneys for Plaintiffs Independent Living Center
9 of Southern California, Inc.; Gerald Shapiro, Pharm.D., dba Uptown Pharmacy & Gift Shoppe; Sharon Steen,
10 dba Central Pharmacy; and Tran Pharmacy, Inc., dba Tran Pharmacy
11

12

IN THE UNITED STATES DISTRICT COURT

13

CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

MANAGED PHARMACY CARE, a 14
California corporation;1 INDEPENDENT LIVING

15 CENTER OF SOUTHERN CALIFORNIA, INC., a California corporation; GERALD SHAPIRO,

16 Pharm.D., doing business as Uptown Pharmacy &

Gift Shoppe; SHARON STEEN, doing business as

17 Central Pharmacy; and Tran Pharmacy, Inc., a

California corporation,

18

Plaintiffs,

-vs.19 DAVID MAXWELL-JOLLY, Director of

Department of Health Care Services of the 20 State of California,

Defendant. 21
_______________________________________/

CV-09-0382 CAS (MANx)

Date: Time: Courtroom: Judge:

Feb. 23, 2009 10 a.m. 5 Honorable Christina A. Snyder

PLAINTIFFS’ NOTICE OF MOTION, AND MOTION, FOR PRELIMINARY INJUNCTION
and PLAINTIFFS’ MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION

22

1
23

This plaintiff, Managed Pharmacy Care “MPC”) was dismissed as a plaintiff on January

24

26, 2009 by virtue of filing a voluntary dismissal of MPC’s causes of action in this case.

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 2 of 12 Page ID #:53

1

NOTICE OF MOTION, AND MOTION

2 TO THE DEFENDANT DAVID MAXWELL-JOLLY, Director of the Department of

3 Health Care Services of the State of California, and your counsel:

4

PLEASE TAKEN NOTICE that on February 23, 2009, in Courtoom 5 of the

above entitled Court, located at 312 N. Spring Street, Los Angeles, California, that each 5
and all of the Plaintiffs (except the plaintiff MANAGED PHARMACY CARE who has 6
been dismissed from this case), will move the Court, -- and the said Plaintiffs do hereby 7
move the Court, -- for a preliminary and permanent injunction to be issued to command
8 the defendant, DAVID MAXWELL-JOLLY, Director of California Department of Health

9 Care Services, to set aside his preempted policy to implement § 14105.19 Welf. & Inst.

10 Code, of AB 1183, and the 5% Rate Reduction, and, to refrain from implementing the

11 same; including but not limited to refraining from reducing payments by 5 percent or by

12 any other deduction, to pharmacy providers in the Medi-Cal fee-for-sevice program, for
13 services furnished on and after March 1, 2009; together with sith such other relief as may
be just. 14
Said motion shall be made upon all grounds set forth in the Plaintiffs’ 15
Memorandum in Support of Preliminary Injunction which is set forth below. 16
The said motion shall be made and based upon this Notice of Motion, the above-
17 stated Motion, and the aforesaid Plaintiffs’ Memorandum in Support of Preliminary
18 Injunction; and upon all Declarations served and filed herewith; and upon Requests for

19 Judicial Notice filed herewith or which may be filed before or at the said hearing; and upon

20 //

21 //
// 22
// 23

24

-1-

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 3 of 12 Page ID #:54

1 oral argument.

2

Dated: February 2, 2009

LYNN S. CARMAN

3

STANLEY L. FRIEDMAN

4

By: /s/ Lynn S. Carman

Attorneys for Plaintiffs

5

Independent Living Center of Southern California, Inc.;

Gerald Shapiro, Pharm.D. dba Uptown Pharmacy & Gift

6

Shoppe; Sharon Steen, dba Central Pharmacy; Tran

Pharmacy, dba Tran Pharmacy; Vietnamese American

7

Pharmacy Association; and California Korean Pharmacists

Association

8

************************

9

PLAINTIFFS’ MEMORANDUM IN SUPPORT OF MOTION FOR

10

PRELIMINARY INJUNCTION

11

This is a Supremacy Clause preemption case.2

Plaintiffs are: 12

-- three pharmacies who are providers in the Medi-Cal fee-for-service program; 13

-- an independent living center whose disabled clients are Medi-Cal fee-for14

15

service;

16 who seek preliminary injunction, to order the Director (“Director”) of the California

Department of Health Care Services (“Department”) to set aside his action and policy to 17
implement, and to refrain from implementing, Section 45 of Assembly Bill (AB) 1183, 18
(enacted Sept. 30, 2008 as Stats. 2008, Chapter 758), which enacts (new) § 14105.191,
19 subds. (a) and (b)(3) Cal. Welf. & Inst. Code, which legislatively command and requires
20

21

2 The Supremacy Clause (article VI, cl. 2 of U.S. Constitution) provides:

22

“This Constitution, and the laws of the United States which shall be made in pursuance

thereof, . . . shall be the supreme law of the land; and the judges of every state shall be

23

bound thereby, anything in the Constitution or laws of any State to the contrary,

notwithstanding.”

24

-2-

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 4 of 12 Page ID #:55

1 the Director, without fail, to cut payments 5% to pharmacies in the Medi-Cal fee-for-

2 service program, for dates of service on and after March 1, 2008.

More particularly, § 14105.191, subds. (a) and (b)(3), provide: 3

“(a) Notwithstanding any other provision of law, in order to implement

4

changes in the level of funding for health care services, the director shall reduce

provider payments, as specified in this section.

5

(b) . . . (3) Except as provided in subdivision (d), for dates of service on and

after March 1, 2009, Medi-Cal fee-for-service payments to pharmacies shall be

6

reduced by 5 percent.

. . . (e) Notwithstanding Chapter 3.5 (commencing with Section 11340) of

7

{Part 1 of Division 3 of Title 2, of the Government Code, the department may

implement this section by means of a provider bulletin, or similar instruction, without

taking regulatory action.” (Boldface emphasis supplied.) 8

Sec. 76 of AB 1183 provided: 9

“This act is an emergency statute necessary for the immediate preservation of the

10

public peace, health, or safety within the meaning of Article IV of the Constitution

and shall go into immediate effect. The facts constituting the necessity are:

11

In order to make the necessary statutory changes to implement the

Budget Act of 2008 at the earliest possible time, it is necessary that this act take

effect immediately.” (Boldfrace emphasis supplied.) 12

However, these provisions of Sec. 45 of AB 1183, and the Legislature’s action to enact 13
these provisions, and the action of the Director to adopt a policy to implement these 14
provisions of Sec. 45 of AB 1183, including reducing payments 5% to pharmacies in the
15 Medi-Cal fee-for-service program for services on and after March 1, 2009, are contrary to

16 and are in direct conflict with the below federal Medicaid statutes, so as to be preempted, --

17 due to the Supremacy Clause, -- by the below preempting federal statutes; namely:

18

- the “quality of care” clause of subd. (a)(30)(A) of 42 U.S.C. § 1396a, -- herein,

19

“Sec. 30(A);3 and,

20

21

3 The “quality of care” clause of Sec. 30(A) provides in relevant part:

22

“(a) A state plan for medical assistance must– (30)(A) provide such methods and

procedures relating to the . . . payment for, care and services available under the

23

plan . . . as may be necessary . . . to assure that payments are consistent with

efficiency, economy, and quality of care . . . ”

24

-3-

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 5 of 12 Page ID #:56

1

2

- the “equal access” clause of Sec. 30(A).4

3 Further, as shown by the voluminous declarations filed in support of preliminary
4 injunction, this aforesaid State action and statute, and the state action and policy of the
5 Director to adopt and implement the 5% pharmacy payment reduction, foreseeably reduces
6 the payments to pharmacies in the Medi-Cal fee-for-service program so low that (1) the
7 reduced Medi-Cal payments to pharmacies for their cost to acquire both brand drugs and
8 many generic drugs will be less than what the pharmacies pay both to acquire these
9 brand drugs and to acquire a large percentage of generic drugs; plus (3) is so low that
10 the new reduced $6.88 dispensing fee to be paid under AB 1183 is at least $4.61 less
11 than the $11.49 it costs pharmacies in overhead, on average, to dispense a prescription.
Accordingly, as the direct inevitable result of the 5% reduced rate, pharmacies 12
throughout the state, including the three Plaintiff pharmacies, will stop dispensing all 13
brand prescriptions and many generic prescriptions, in the Medi-Cal fee-for-service 14
program, causing immediate and widespread injury, and continual threat of injury, to 15
millions of Medi-Cal beneficiaries, including the patients of the three pharmacy
16 Plaintiffs, and the 7,000-plus dusabled Medi-Cal recipients who are the clients of the
17 Plaintiff independent living center; -- all due to their inability or difficulty in obtaining
18 life-necessary brand medicines, and generic medicines, caused by the 5% pharmacy rate

19 4 The “equal access” clause of Sec. 30(A) provides in relevant part:

20

“(a) A state plan for medical assistance must– (30)(A) provide such methods and

21

procedures relating to the . . . payment for, care and services available under the

the plan . . . as may be necessary . . . to assure that payments . . . are sufficient to

22

enlist enough providers so that care and services are available under the plan at

least to the extent that such care and services are available to the general

23

population in the geographic area.”

-4-

24

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 6 of 12 Page ID #:57

1 reduction.

2

Further, the declarations of:

- Plaintiff Sharon Steen, owner of Central Pharmacy in Santa Monica, 3
- Plaintiff Thu-Hang Tran, Pharm.D., owner of Tran Pharmacy and president of 4
the 20-pharmacy-member Vietnamese American Pharmacy Association in Orange 5
County,
6 - Martin Kim, R.Ph., president of the 130-pharmacy-member California Korean

7 Pharmacists Association in Southern California,

8

9 establish that another further direct effect of the 5% rate cut is that hundreds of thousands

10 of mental patients, -- who depend on highpriced psychotropic brand drugs such as

11 Zyoprexa, Seroquel, Abilifyt, Geodon, Lamictal, Wllbrutin, Effexor, Lesapro,to stay out

of Emergency Rooms and institutions, -- will be unable to obtain these brand medications 12
because pharmacies, not being reimbursed their cost to acquire these expensive brands 13
from wholesalers, will simply not dispense them anymore, even to dangerously psychotic 14
Medi-Cal recipients who endanger themselves and others if their psychotropic medicine is
15 withheld.

16

Further there is not a shadow of a question of a doubt that because AB 1183 (1)

17 specifically directs and commands the Director to implement the 5% rate cut of AB

18 1183, that the Director is not free in this case to consider any relevant factors required by

19 Sec. 30A to be considered. before implementing a new Medicaid. -- such that the Director,
20 by the specific legislative command, is not free to contend otherwise in the case at bar,
and must carry out the legislative command of AB 1183 whether the Director wishes to or 21
not. He will not be heard by a court to say, “I am free to consider whether the new rates 22
are consistent with qauality of care” as required by Sec. 30A, when the Legislature has 23
-524

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 7 of 12 Page ID #:58

1 specifically commanded him otherwise.

2

Further, executive officers and agencies are commanded by Article 3.5 of the

California Constitution to carry out every command of the Legislature, -- no matter 3
unlawful the Legislative command is, -- absent an appeals court ruling that the law in 4
question is constitutionally or otherwise void. 5
Thus:
6 Welf. & Inst. Code § 14109.191, enacted by Section 45 of AB 1183, expressly

7 provides:

8

“(a) Notwithstanding any other provision of law, or order to implement changes in

the level of funding for health care services, the director shall reduce provider

9

payments, as specified in this section. . . .

(b) (3) Except as otherwise provided in subdivision (d), for dates of service

10

on and after March 1, 2009,.Medi-Cal fee-for-service payments to pharmacies shall

be reduced by 5 percent..” 5 (Emphasis supplied).

11 Also, Cal. Const. article 3.5 expressly provides:

12

“An administrative agency, including an administrative agency created by the

Constitution or an initiative statute, has no power:

13

. . .

(c) To declare a statute unenforceable, or to refuse to enforce a statute on the basis

14

that federal law or federal regulations prohibit the enforcement of such statute

unless an appellate court has made a determination that the enforcement of such

15

statute is prohibited by federal law or federal regulations.” (Emphasis supplied.)

Conclusion 16
The Ex Parte Young, 209 U.S. 123 (1908) line of cases, culminating in Independent 17
Living Center of Southern California, Inc. v. Shewry, 543 F.3d 1050 (9th Cir. 2008), 18
control this case and compel that injunction be issued to prevent this threat of injury, from
19 this State action which is contrary to, hence preempted under the Supremacy Clause, by
20

21

5 Subd. (d) of Welf. & Inst. Code 14105.191 excuses this 5% reduction in

22

respect to a number of providers who are not licensed pharmacies, such

as for example rural health clinics.

23 -6-
24

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 8 of 12 Page ID #:59

1 Sec. 30A.

2

DISCUSSION

Sec. 45 of AB 1183 was enacted by a legislative history replete with gubernatorial 3
and legislative declarations which identify the bill as a pure budget reducing measure, not, 4
any measure in respect to which the Legislature engaged in any inquiry whatsoever as to 5
whether pharmacies could sustain the reduction without loss of quality or equal access for
6 Medi-Cal recipients. Accordingly, under the rule laid down by Orthopaedic Hospital v.
7 Belshe, 103 F.3d 1491, 1500 (9th Cir. 1997), the reduced 5% rate and AB 1183 which

8 enacted it, and the action of the Director to implement it, are arbitrary and capricious,

9 hence contrary to law, -- due to the fact, as held by Orthopaedic Hosp., 103 F.3d at 1500:

10

“Without an appropriate consideration of the relevant factors, the [rate setter]

cannot possibly comclude that there is a rational relationship of those factors to the

11

rates set. Therefore the [rate setter’s] action in [setting] . . . the rates were

arbitrary and capricious, and contrary to law,”

12 hence (1) contrary to the “quality of services” requirement of Sec. 30A so as to hence,

13 under the Supremacy Clause, be preempted by Sec. 30A.

14

LEGISLATIVE HISTORY OF ASSEMBLY BILL 1183

15

Assembly Bill (“AB”) 1183 was a health trailer bill whose sole purpose and

function was to reduce State expenditures so as to implement the budget cutting 16
decisions of the 2008-2009 Budget Bill. It was enacted September 30, 2008 and was 17
chaptered as Chapter 758, Statutes 2008-2009. 18
Note: AB 1183 was introduced Feb. 2, 2008 as a hazardous material bill and was
19 amended several times as solely a hazardous material bill. However, on September 15,
20 2008, the bill was amended in the Senate so as to be at once turned into a trailer bill, on

21 many different subjects, to enact all provisions necessary to implement the provisions of

22 the 2008-2009 Budget Bill; all without any public hearings or any hearing by any

23 committee of the Legislature; was passed shortly before midnight of the same day of -7-
24

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 9 of 12 Page ID #:60

1 September 15, 2008 by the Senate; was sent to the Assembly, and was immediately passed

2 by the Assembly before 2:08 a.m. of September 16, 2008, -- all within the space of a few
hours, -- and was signed by the Governor and filed with the Secretary of State on 3
September 30, 2008. 4
By such legislative history, there were no committee hearings on AB 5
1183. 6
Further, there are hundreds of different health care subjects in AB 1183,
7 each of which required separate consideration by the Legislature if any reasoned
8 or principled decision was to be made by any legislator in the Senate or the

9 Assembly in deciding to vote for or against particular provisions in the hundreds of

10 different subjects contained in the bill.

11

AB 1183 was hence the pure product of pure logrolling, where, if any

member of the legislature wished his or her health care provision in the multi12
provisioned AB 1183 to be enacted, that legislator had to accept blindly all the 13
other provisions relating to the hundreds of other subjects in the same bill. 14
The manner of the insertion of the 5% rate cut proposal in the 2008-2009
15 Budget Act health trailer bill containing hundreds of different and conflicting

16 provisions, was as reasonable and principled as if the Chief Judge of a federal

17 district court ordered 50 cases, pending before 11 district court judges, be

18 consolidated into one lawsuit, and that the 11 district judges cast a vote, in which

19 the majority vote counted, such that in a majority vote of “yea,” all the plaintiffs in
20 the 100 cases would be automatically awarded judgment in their favor; but if the
majority of the 11 judges voted “no” on the package of cases, then, judgment 21
would be given in favor of all the 100 defendants, instead. 22
Is that justice? Is that reasoned? Is that principled? But this is the 23
-824

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 10 of 12 Page ID #:61

1 unlawful and totally inappropriate and capricious manner by which the Legislature

2 enacted the 5% rate cut of AB 1183, in the multi-sectioned 2008-2009 Budget Act
health trailer bill! And, which arbitrary enactment the Director will carry out and 3
injure Medi-Cal beneficiaries, unless restrained by the Court,. 4
(If this is an appropriate consideration of the relevant factor of “quality of 5
services” which Sec. 30A requires every Medicaid rate setter to perform before 6
enacting or adopting new Medicaid rates for that state, surely the Attorney General
7 will explain in his Answer brief how is “reasoned” and “prinipled,” and indeed a
8 guide to all States as how best to comply with the duty, under Sec. 30A, to

9 consider the factor of quality of services, in setting a new Medicaid provider rate,

10 to best protect beneficiaries’ health, and enable quality services to be furnished.)

11

Conclusion

It is manifest that individual legislators who voted on AB 1183, and the 12
Legislature as a whole, could not and did not appropriately consider, and did not 13
consider at all, whether or not the reduced rates of the 5% Rate Reduction for 14
pharmacy services were consistent with quality of services, or consistent with
15 equal access of beneficiaries to quality services, in the Medi-Cal FFS program.

16

By each and all of the above facts, the action of the Legislature in enacting,

17 and the action of the Director to implement, the 5% Rate Reduction provisions of

18 AB 1183 were and are facially, without more, arbitrary, capricious, and contrary

19 to law, (namely, contrary to the quality and equal access clauses of Sec. 30A, and
20 contrary to the requirement of Sec. 30A that a Medicaid rate setter consider the
factors of quality and equal access of beneficiaries in the course of setting new 21
Medicaid rates for payment of providers); so that the provisions of (new) Welf. & 22
Inst. Code § 14105.191, subds. (a) and (b) which enacted the 5% Rate Reduction 23
-9-
24

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 11 of 12 Page ID #:62

1 in respect to Pharmacy services, effective March 1, 2009, violated and hence are

2 preempted, under the Supremacy Clause, by Sec. 30A.
Irreparable injury, and threat of irreparable injury. 3
Further, unless restrained by the Court by an appropriate injunction, the 4
defendant Director will implement the aforesaid 5% Rate Reduction in respect to 5
pharmacy providers, who, -- because the rates are too low to enable them to even 6
purchase brand drugs, and many generic drugs, from their wholesalers; which in
7 turn inevitably and quickly will result in injury to the Medi-Cal patients and clients
8 of the Plaintiffs. This will quickly occur because pharmacies, unable to purcahse

9 brand drugs and generic drugs from their wholesaler, will necessarily stop

10 accepting new Medi-Cal patients, or stopg serving Medi-Cal patients at all, or will
11 reduce, kinds, amounts, locations, and levels of services to Medi-Cal beneficiaries,
or will necessarily go out of business, -- so that thereby Medi-Cal beneficiaries 12
will manifestly be denied access to life-vital Pharmacy services and treatment in 13
the Medi-Cal fee-for-service program, (either at all or in a timely fashion), so as to 14
manifestly result in great physical suffering and injury to Medi-Cal beneficiaries, 15
including beneficiaries who are patients and clients of Plaintiffs; all to the
16 irreparable injury, and threat of irreparable injury, also to thousands of Medi-Cal
17 beneficiaries including the beneficiaries served by Plaintiffs.

18

Conclusions

19

The State’s sole purpose, and the conclusive factor in enacting the 5% Rate

20 Reduction was to reduce the budget deficit.
Accordingly, by each and all of the foregoing facts shown in this motion, 21
(new) § 14105.191 Welf. & Inst. Code, and the 5% Rate Reduction in respect to 22
Pharmacy providers, were and are contrary to and in violation of the quality and 23
-10-
24

Case 2:09-cv-00382-CAS -MAN Document 10 Filed 02/02/09 Page 12 of 12 Page ID #:63

1 access provisions of Sec. 30A, so as to be preempted, under the Supremacy Clause,

2 by the quality and access provisions of Sec. 30A, such that the Defendant Director

is and will be acting in excess of and without jurisdiction to implement 3

§ 14105.191 Welf. & Inst. Code, including the 5% Rate Reduction, to Pharmacy 4
providers, commencing March 1, 2009, and injure Medi-Cal beneficiaries in so 5
doing; which injury by its nature is irreparable.
6 Accordingly, for the reasons given, the Plaintiffs pray as follows;

7

A. That a preliminary and permanent injunction be issued to command the

8 Director DAVID MAXWELL-JOLLY to set aside his preempted policy to

9 implement § 14105.19 Welf. & Inst. Code, of AB 1183, and the 5% Rate

10 Reduction, and, to refrain from implementing the same; including but not limited

11 to refraining from reducing payments by 5 percent or by any other deduction, to

pharmacy providers in the Medi-Cal FFS program, for services furnished on and 12

after March 1, 2009. 13

Respectfully submitted,

14 LYNN S. CARMAN

15

STANLEY L. FRIEDMAN

16

By: /s/ Lynn S. Carman

Attorneys for Plaintiffs

17

Independent Living Center of Southern California,

Inc.; Gerald Shapiro, Pharm.D. dba Uptown

18

Pharmacy & Gift Shoppe; Sharon Steen, dba

Central Pharmacy; Tran Pharmacy, dba Tran

19

Pharmacy; Vietnamese American Pharmacy

Association; and California Korean Pharmacists

20

Association

21

22

23 -11-
24

 
 Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 1 of 52 Page ID #:2197

1168460.1

1 LYNN S. CARMAN (State Bar No. 28860)

MEDICAID DEFENSE FUND 2 404 San Anselmo Ave.

3

San Anselmo, CA 94960 Telephone: (415) 927-4023

4 Facsimile: (415) 256-9632

5

STANLEY L. FRIEDMAN (State Bar No. 120551) 445 S. Figueroa Street, 27th Floor

6 Los Angeles, CA 90071-1631

Telephone: (213) 629-1500 7 Facsimile: (213) 232-4071

8 E-Mail: friedman@friedmanlaw.org

9 LLOYD A. BOOKMAN (State Bar No. 89251)

CRAIG J. CANNIZZO (State Bar No. 70379)

10 JORDAN B. KEVILLE (State Bar No. 217868)

11

E-Mail: ccannizzo@health-law.com HOOPER, LUNDY & BOOKMAN, P.C.

12 1875 Century Park East, Suite 1600 Los Angeles, CA 90067-2517

13 Telephone: (310) 551-8103

Facsimile: (310) 551-8181 14

15 Attorneys for Plaintiffs and Intervenors

16

UNITED STATES DISTRICT COURT

17

CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

18 INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.,
19 a nonprofit corporation, et al.,

20

Petitioners,

21

SACRAMENTO FAMILY MEDICAL CLINICS, INC.; et al.,

22

Intervenors,

v.

23

TOBY DOUGLAS, Director of the

24 Department of Health Care Services,

State of California

25

Defendants.

26

27

Case No. CV 08-3315 CAS (MANx)
DECLARATION OF CRAIG J. CANNIZZO IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT
[Notice of Motion and Joint Motion, Memorandum of Points and Authorities and Proposed Order filed concurrently herewith]
Date: September 22, 2014 Time: 10:00 a.m. Crtrm.:5, Floor 2 Hon. Christina A. Snyder Action Filed: April 22, 2008

28
CV 08-3315 CAS (MANx) DECLARATION OF CRAIG J. CANNIZZO IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 2 of 52 Page ID #:2198

1168460.1

1 CALIFORNIA PHARMACISTS

ASSOCIATION, et al.,

2

Plaintiffs,

3

v.

TOBY DOUGLAS, Director of the

4 California Department of Health Care

Services

5

Defendant.

6

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.,

7 et al.,

8 v.

Plaintiffs,

9 TOBY DOUGLAS, Director of the

10

Department of Health Care Services, State of California

11

Defendant.

12

CALIFORNIA HOSPITAL ASSOCIATION

13

Plaintiff,

14 v.

15

TOBY DOUGLAS, Director of the Department of Health Care Services,

16

State of California Defendant.

17

Case No. CV 09-722 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: January 29, 2009
Case No. CV 09-382 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: January 16, 2009
Case No. CV 09-8642 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: November 24, 2009

18

19

20

21

22

23

24

25

26

27

28
CV 08-3315 CAS (MANx) DECLARATION OF CRAIG J. CANNIZZO IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 3 of 52 Page ID #:2199

1168460.1

1

DECLARATION OF CRAIG J. CANNIZZO

2

I, CRAIG J. CANNIZZO, declare as follows:

3

1. I am an attorney duly licensed to practice law in the State of California.

4 I am an attorney with the law firm of Hooper, Lundy & Bookman, P.C., counsel of

5 record for certain Plaintiffs and Intervenors herein. The facts stated herein are

6 personally known to me, and if called as a witness I could and would competently

7 testify to them.

8

2. Attached hereto as Exhibit A is a true and correct copy of the

9 Settlement Agreement reached in the above-referenced cases.

10

I declare under penalty of perjury that the foregoing is true and correct.

11

Executed on August 19, 2014, at San Francisco, California.

12

13

/s/

CRAIG J. CANNIZZO

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

CV 08-3315 CAS (MANx)

DECLARATION OF CRAIG J. CANNIZZO IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 4 of 52 Page ID #:2200
EXHIBIT A

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 5 of 52 Page ID #:2201

SETTLEMENT AGREEMENT

This Settlement Agreement is made by and among Toby Douglas, in his official capacity as the Director of the California Department of Health Care Services, and the Department of Health Care Services (collectively, DHCS), on the one hand, and each of the named plaintiffs and intervenors in the Applicable Cases as defined below; Lynn Carman and Stanley L. Friedman with respect to Paragraphs III.C.1.a and III.C.1.c only; and Hooper, Lundy & Bookman, P.C. with respect to Paragraphs III.C.1.b and III.C.1.c only, on the other hand.
I. RECITALS WHEREAS, the State of California implemented various reductions and limitations on Medi-Cal reimbursement effective on and after July 1, 2008; WHEREAS, certain of the Medi-Cal reimbursement reductions and limitations are being challenged in the Applicable Cases; WHEREAS, certain of the plaintiffs in the Applicable Cases and their counsel believe that they have viable legal claims against DHCS for additional Medi-Cal reimbursement arising from the application of the challenged Medi-Cal reimbursement reductions and limitations; WHEREAS, DHCS denies the validity of any such claims; WHEREAS, DHCS believes that it has valid claims for recovery of Medi-Cal reimbursement as to certain providers for various time periods during which various reductions and limitations on Medi-Cal reimbursement were enjoined by a district court, but where the federal government, through its Centers for Medicare and Medicaid Services (CMS), ultimately approved the reductions and limitations; WHEREAS, the Settling Plaintiffs deny the validity of any such claims;

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 6 of 52 Page ID #:2202
WHEREAS, the California Legislature enacted legislation in 2011 (SB 90) that ended effective April 13, 2011 the reductions and limitations challenged in some of the Applicable Cases for non-contract hospital inpatient services, as codified at Welfare and Institutions Code section 14166.245;
WHEREAS, as a result of the enactment of the 2011 legislation (SB 90), certain of the Settling Plaintiffs agreed not to pursue further certain legal claims against DHCS relating to the 2008 AB 5 Reductions, 2009 AB 5 Reductions, and AB 1183 Reductions (as defined below) as to certain hospitals services;
WHEREAS, the settlement provided for herein is not, and shall not in any way be construed as, deemed to be evidence of, or be admissible in any action or proceeding of any kind whatsoever (including, without limitation, litigation, arbitration, and administrative proceedings) as an admission or concession of any fault, liability, or fact by any individual or entity;
WHEREAS, the Parties recognize the inherent uncertainty in litigation, and the time and resources necessary to litigate the issues raised in the Applicable Cases;
WHEREAS, the Parties desire to fully and finally resolve and settle the Applicable Cases; and
WHEREAS, the Parties have engaged in extensive settlement negotiations supervised by a Ninth Circuit mediator; including in-person meetings, conference calls, and electronic communications prior to reaching the terms contained in this Settlement Agreement.
II. DEFINITIONS The following definitions shall apply for purposes of this Settlement Agreement: 1. “2008 AB 5,” means Assembly Bill X3 5, enacted February 16, 2008, and enrolled at Chapter 3, Statutes of 2007-2008, Third Extraordinary Session.

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2. “2008 AB 5 Reductions,” means the 10% reduction to Medi-Cal payments for various health care services enacted pursuant to 2008 AB 5, and previously codified at California Welfare & Institutions Code §§ 14105.19(b) and 14166.245.
3. “2009 AB 5,” means Assembly Bill X4 5, enacted on July 28, 2009, and enrolled at Chapter 5, Statues of 2009-2010, Fourth Extraordinary Session.
4. “2009 AB 5 Reductions,” means the Medi-Cal reductions and limits enacted pursuant to 2009 AB X4 5 and codified at California Welfare & Institutions Code §§ 14105.191(f)(1) and 14166.245(g).
5. “AB 1183,” means Assembly Bill 1183, enacted on September 30, 2008, and enrolled at Chapter 758, Statutes of 2008.
6. “AB 1183 Reductions,” means the Medi-Cal 1% and 5% payment reductions, and “applicable average regional per diem contract rate reduced by 5%” reimbursement limit for some non-contract hospitals, enacted pursuant to AB 1183, and previously codified at California Welfare & Institutions Code § 14105.191(b) and § 14166.245(b)(2)(A) and (c)(3)(B).
7. “Agreement” or “Settlement Agreement” or “Settlement” means this Settlement Agreement.
8. “Applicable Cases” means the following: a. California Association for Health Services at Home v. Shewry, United
States District Court for the Central District of California, Case No. CV08-07045 CAS-MAN; b. California Hospital Association v. Maxwell-Jolly, United States District
Court for the Central District of California, Case No. 2:09-CV-08642 CAS; c. California Hospital Association v. Maxwell-Jolly, Sacramento County
Superior Court, Case No. 34-2010-80000673;

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d. California Hospital Association v. Douglas, San Francisco Superior Court, Case No. CPF-11-511413;
e. California Medical Association v. Shewry, Los Angeles County Superior Court, Case No. BC390126;
f. California Medical Transportation Association, Inc. v. Shewry, United States District Court for the Central District of California, Case No. CV08-07046 CAS-MAN;
g. California Pharmacists Association v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. CV 09-722 CAS(Ex);
h. Independent Living Center of Southern California v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. 2:08-cv-03315 CAS (MANx); and
i. Independent Living Center of Southern California v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. 2:09-CV-00382-CAS (MANx).
9. “CHA” means the California Hospital Association. 10. “CHA Notice” means the notice described in paragraph III.A.4. 11. “DHCS” means and includes each of the California Department of Health Care Services and the Director of the California Department of Health Care Services. 12. “DHCS’s Claimed Excess Payments” means payments that DHCS has made to Medi-Cal providers, or may make to Medi-Cal providers in the future, in excess of the amounts authorized by state law, specifically as to periods in which (1) the 2008 AB 5 Reductions, 2009 AB 5 Reductions, and/or AB 1183 Reductions were enjoined by a court, and (2) DHCS ultimately obtained federal approval from CMS to implement the reductions, and where, in

2064620.1

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addition, (3) such payments were in excess of the Medicaid reimbursement ultimately approved by CMS through amendments to the California State Medicaid Plan.
13. “DHCS’s Released Claims” means any and all rights, claims, and causes of action that DHCS and/or the State had, has, or may have in the future against Medi-Cal providers for recoupment of DHCS’s Claimed Excess Payments, if CMS approves DHCS’s request not to recoup those payments in accordance with Paragraph III.A.2, supra. However, “DHCS’s Released Claims” shall not include any claims for recoupment of DHCS’s Claimed Excess Payments as to any Opt Out Provider.
14. “DP/NF,” means distinct part nursing facility, which is a unit of a hospital that furnishes skilled nursing services.
15. “Federal Released Entities” means any federal agency, federal agency subdivision, or person employed by the federal government, including but not limited to the United States Department of Health and Human Services (HHS); the Secretary of HHS; CMS; any subdivisions of HHS and CMS; and the officers, employees and agents of HHS and CMS, and persons working with them.
16. “Interlocutory Ninth Circuit Appeals and Cross-Appeals” means: a. California Hospital Association v. Maxwell-Jolly, 9th Cir. No. 10-55462; b. California Pharmacists Association v. Maxwell-Jolly, 9th Cir. No. 09-
55365; c. California Pharmacists Association v. Maxwell-Jolly, 9th Cir. No. 09-
55532; d. Independent Living Center of Southern California, Inc. v. Shewry, 9th Cir.
No. 08-56422;

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e. Independent Living Center of Southern California, Inc. v. Shewry, 9th Cir. No. 08-56554;
f. Independent Living Center of Southern California, Inc. v. Shewry, 9th Cir. No. 08-57016; and
g. Independent Living Center of Southern California, Inc. v. Maxwell-Jolly, 9th Cir. No. 09-55692.
17. “Non-Contract Hospital” means a hospital that has not entered into a Selective Provider Contracting Program (SPCP) contract with DHCS, as set forth in Article 2.6 of Chapter 7, Part 3, Division 9 of the California Welfare and Institutions Code.
18. “North Bay HealthGroup Plaintiff” means any plaintiff in NorthBay Healthcare Group v. Douglas, San Francisco Superior Court, Case No. CGC-11-512059.
19. “Opt Out Provider” means any and all of the following: (1) any individual or entity that maintains and fails to dismiss within thirty (30) days of the Settlement Effective Date any lawsuit or administrative action (e.g., administrative audit appeal) against any entity or official of the State or Federal governments with respect to any or all of the 2008 AB 5 Reductions, the 2009 AB 5 Reductions, or the AB 1183 Reductions as applied to any service(s), excluding any such action limited exclusively to the accuracy of the computation of any of the challenged statutory reductions to a specific Medi-Cal provider; (2) any individual or entity that, at any time on or after the Settlement Effective Date, initiates a new lawsuit or administrative action against any entity or official of the State or Federal governments with respect to any one or all of the 2008 AB 5 Reductions, the 2009 AB 5 Reductions, or the AB 1183 Reductions, excluding any such action limited exclusively to the accuracy of the computation of any of the

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challenged statutory reductions to a specific Medi-Cal provider; and (3) any Santa Rosa Plaintiff or North Bay HealthGroup Plaintiff.
Lawsuits or administrative actions that will be the basis for treating a provider as an “Opt Out Provider” under this Paragraph shall include, but shall not be limited, to any lawsuit that a hospital may timely file in accordance with the CHA Notice and the procedures set forth in Paragraph III.A.4, infra, and any following lawsuits that are not dismissed with prejudice within thirty (30) days after the Settlement Effective Date:
a. California Association of Health Facilities v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. CV10-03259;
b. California Hospital Association v. Maxwell-Jolly, United States District Court for the Central District of California, No. 2:09-CV-03694;
c. Care Centers, Inc. v. Maxwell-Jolly, Sacramento County Superior Court, Case No. 34-2010-80000700;
d. Developmental Services Network v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. CV10-03284;
e. Hospital of Barstow, Inc., v. California Department of Health Care Services, Sacramento County Superior Court, Case No. 34-2010-80000522;
f. Hospital of Barstow, Inc. v. Sebelius, United States District Court for the Central District of California, Case No. CV11-10638 CAS (MANx);
g. NorthBay Healthcare Group v. Douglas, San Francisco Superior Court, Case No. CGC-11-512059, subject to the additional terms described in this Paragraph;

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h. Santa Rosa Memorial Hospital v. Maxwell-Jolly, United States District

Court for the Northern District of California, Case No. 08-CV-5173-SC, subject to the additional

terms described in this Paragraph; and

i.

Santa Rosa Memorial Hospital v. Douglas, San Francisco Superior Court,

Case No. CPF-09-509658, subject to the additional terms described in this Paragraph.

20. “Parties” means the named plaintiffs and intervenors in the Applicable Cases and

DHCS.

21. “Plaintiff Released Claims” means:

a. Any and all rights, claims, and causes of action, whether federal, state, or

otherwise, and whether past, present, or future, asserted in the Applicable Cases, and the

Interlocutory Ninth Circuit Appeals and Cross-Appeals, and any and all rights, claims, and

causes of action, whether federal, state, or otherwise, and whether past, present, or future,

concerning or relating to the 2008 AB5 Reductions, 2009 AB5 Reductions, or AB 1183

Reductions, that could have been asserted in respect to those Reductions in those cases based on

the facts alleged therein, including but not limited to any claim for Medicaid reimbursement for

services subject to those Reductions rendered on or after July 1, 2008 but before June 1, 2011

that would exceed reimbursement that complies with California’s federally-approved Medicaid

State Plan as amended, including but not limited to State Plan Amendments (SPAs) approved by

CMS as SPA 08-009A, SPA 08-009B1, and SPA 08-009D on or about October 27, 2011,

excluding any such claim by an Opt Out Provider; and

b. Any and all rights, claims, and causes of action, under the federal

Administrative Procedures Act (APA) or any other federal or state law, whether past, present, or

future, arising from HHS’s approval for various periods of implementation the 2008 AB 5

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Reductions, 2009 AB 5 Reductions, AB 1183 Reductions, excluding any such rights, claims, and causes of action by an Opt Out Provider.
22. “Santa Rosa Plaintiff” means any plaintiff in the following matters: Santa Rosa Memorial Hospital v. Maxwell-Jolly, United States District Court for the Northern District of California, Case No. 08-CV-5173-SC; Santa Rosa Memorial Hospital v. Douglas, San Francisco Superior Court, Case No. CPF-09-509658.
23. “Settlement Execution Date” means the date that this Settlement Agreement is fully executed.
24. “Settlement Effective Date” means either (1) the date on which CMS grants complete and total approval of DHCS’s request to forgo seeking recoupment of DHCS’s Claimed Excess Payments, as provided in Paragraph III.A.2 infra, or (2) if CMS only partially approves DHCS’s request, the date (if any) upon which DHCS notifies plaintiffs’ counsel that it is not exercising its option to terminate the Settlement as set forth in Paragraph III.D.4, infra.
25. “Settling Plaintiffs” means all of the named plaintiffs and intervenors in the Applicable Cases; their successors and assigns, agents, heirs, executors, administrators, and personal representatives (as to plaintiffs who are individual persons); their successors and assigns, parent corporations, affiliates, subsidiaries, divisions, current members, former members who were members during any period of time in which the 2008 AB 5 Reductions, the 2009 AB 5 Reductions, and the AB 1183 Reductions were in effect or would have been in effect if not enjoined by the courts, officers, directors, agents and employees (as to plaintiffs and intervenors who are not individual persons); and any person or entity in privity with the named plaintiffs and intervenors, or who otherwise can claim through or be bound by them. Notwithstanding the foregoing, Settling Plaintiffs shall not include any Opt Out Provider.

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26. “State Released Entities” means the State of California; the Governor of the State

of California; the State Legislature and all of its members; any elected state officer; any state

agency, board, and commission, and their officers, employees, agents, and persons working with

them, including but not limited to DHCS and the Director of DHCS; and any subdivision of the

State.

III. TERMS In view of the foregoing, the Parties agree as follows.

Each of the foregoing recitals and definitions is incorporated by reference herein and

made a part hereof.

A. General Terms

1. Within fifteen (15) days of the Settlement Execution Date, the parties shall jointly

request that the United States Court of Appeals for the Ninth Circuit dismiss the Interlocutory

Ninth Circuit Appeals and Cross Appeals, with each side to bear their own costs including but

not limited to costs previously awarded by any appellate court in these cases. Within fifteen (15)

days of the date that the Ninth Circuit dismisses the appeals in this matter, the parties shall

jointly submit this Settlement to the United States District Court for the Central District of

California and request that the Court approve it.

2. Within thirty (30) days of receiving notice of the district court’s approval of this

Settlement as described in Paragraph III.A.1, DHCS shall send a written request to CMS for

approval to forgo seeking recoupment of DHCS’s Claimed Excess Payments to Medicaid

providers without jeopardizing any federal financial participation (FFP). However, DHCS may

request to retain the right to apply the 2008 AB 5 Reductions, 2009 AB 5 Reductions, and AB

1183 Reductions, to the extent that implementation of such reductions was previously approved

by CMS, with respect to any Opt Out Provider. Within 5 business days of its receipt of CMS’s

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decision to approve or reject, in whole or in part, its request, DHCS shall notify all plaintiffs’ counsel in writing by email to their known email addresses of that occurrence and provide a copy of CMS’s response.
3. Within thirty (30) days of the Settlement Effective Date, all plaintiffs in the Applicable Cases shall file a dismissal of all actions in the Applicable Cases, with prejudice, each party to bear their own costs, including any costs that may have been previously awarded or by any court in these proceedings. The parties stipulate that any order of dismissal shall state that the district court retains jurisdiction to entertain any application for attorneys’ fees as described in Part III.C and for purposes of enforcement of this Agreement and for such period as described in Part III.D.17.
4. Within thirty (30) days of the Settlement Effective Date, CHA shall send a notice to all current hospital members, and any hospital that was a prior member of CHA during any period on or after July 1, 2008, by registered or certified mail, return-receipt requested, to their last known address, that advises them: (a) of the terms of this Settlement; (b) that they may “opt out” of the settlement by filing their own lawsuit(s), in their own name(s), challenging any one or all of the 2008 AB 5 Reductions, 2009 AB 5 Reductions, or AB 1183 Reductions for any or all hospital services, including without limitation Non-Contract hospital inpatient services, DP/NF services, or hospital outpatient services, and/or the federal government’s approval of these reductions, provided that they file any such individual action within forty-five (45) days of when the notice was mailed to them; and (c) that, if a hospital does file such an individual action challenging one or more of these payment reductions, then it will lose the benefits of this Settlement, and DHCS will have the right under this Agreement to seek recoupment of any payment to that provider that constitutes or constituted a DHCS’s Claimed Excess Payment.

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Counsel for CHA shall meet and confer with DHCS’s counsel regarding the wording of the notice; in the event that the parties are unable to reach agreement on such wording, the matter shall be submitted to the United States District Court for the Central District of California for resolution. Within fourteen (14) days of sending the notice provided in this paragraph, CHA shall file a proof of service regarding that notice with the United States District Court for the Central District of California, and attach thereto true and accurate copies of all executed return receipts. If any notices are returned to CHA as nondeliverable, CHA shall also include photocopies of such returned notices as attachments to its proof of service.
5. With respect to any individual lawsuit filed by a hospital as described in Paragraph III.A.4 that complies with the 45-day time period set forth therein: (1) DHCS shall waive, and not assert, any collateral estoppel or res judicata defense, based on the dismissals, the Settlement, or the Settlement Agreement; and (2) any such lawsuit shall be treated as if it was filed on May 5, 2008 with respect to the 2008 AB 5 Reductions, September 30, 2010 with respect to the AB 1183 Reductions, and June 30, 2011 with respect to the 2009 AB 5 Reductions, for statute-of-limitations and laches purposes. Except as provided in this paragraph, DHCS shall retain any and all defenses that may be available to it in such cases and to such claims. Nothing in this Settlement Agreement shall extend the time for the filing of any administrative action by an Opt Out Provider. Nothing in the Settlement, the Settlement Agreement, or any dismissal in this matter, shall have any collateral estoppel or res judicata effect on CHA v. Shewry, No. CPF03-503772 (S.F. Super. Ct.); CHA v. Shewry, No. CPF-08-508578 (S.F. Super. Ct.); CHA v. Douglas, CPF-12-512379 (S.F. Super. Ct.) (collectively, the “CHA Cases”), and no Party shall assert otherwise. The CHA Cases shall not be included in Plaintiff Released Claims.

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 17 of 52 Page ID #:2213
6. Other than hospitals as provided in Paragraphs III.A.4, no Settling Plaintiff shall seek to continue to litigate their claims in the Applicable Cases, institute any new lawsuit or claim challenging the 2008 AB 5 Reductions, 2009 AB 5 Reductions, or AB 1183 reductions in any forum, or otherwise seek to opt out of this Settlement.
7. DHCS shall retain the right to seek recoupment of any payments that constitutes or constituted DHCS’s Claimed Excess Payments from any Opt Out Provider.
8. DHCS hereby confirms that it has never had, and does not currently have, any intention to seek recoupment from providers for services rendered during any period in which 2008 AB 5, 2009 AB5, or AB1183 were enjoined, and for which DHCS chose to withdraw its request for SPA approvals for reductions during those periods, including but not limited to the additional money that DHCS was required to pay to physicians, clinics, optometrists, pharmacies, optometrists, and adult day health care centers for services rendered July 1, 2008August 17, 2008 pursuant to the amended preliminary injunction issued by Judge Snyder, dated January 22, 2010. DHCS hereby confirms, represents, warrants, and agrees that DHCS will not seek recoupment with respect to the reductions described above for time periods in which it withdrew its request for, and did not receive, SPA approval, nor will it otherwise seek to enforce the reductions described above for those periods. No Settling Plaintiff may quote, cite, reference, or otherwise rely upon this Paragraph, or any portion of it, in connection with any motion for attorney’s fees.
B. Releases 1. Effective on the Settlement Effective Date, all Settling Plaintiffs shall release the State Released Entities and the Federal Released Entities from any and all liability, derivative or otherwise, for all of the Plaintiff Released Claims, excluding any claims that any individual

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 18 of 52 Page ID #:2214

Medi-Cal provider may have relating exclusively to the accuracy of the computation by DHCS

of the reimbursement due to that provider under applicable law.

2. Effective on the Settlement Effective Date, DHCS shall release the Settling

Plaintiffs from any and all liability for DHCS’s Released Claims for Payments, and shall not

seek to recoup DHCS’s Claimed Excess Payments, except that DHCS shall not release its claims

to recoup DHCS’s Claimed Excess Payments from any Opt Out Provider.

C. Attorneys’ Fees and Costs 1. The Parties shall each pay their own fees and costs, including but not limited to

any costs incurred and/or awarded in any appellate proceeding, except as expressly set forth

herein.

a. No earlier than the Settlement Effective Date, and no later than thirty (30)

days after the Settlement Effective Date, plaintiffs and their attorneys Lynn Carman and Stanley

Friedman may file (an) application(s), together or separately, for attorneys’ fees for services

performed in litigating Independent Living Center of Southern California v. Maxwell-Jolly,

United States District Court for the Central District of California, Case No. 2:08-cv-03315 CAS

(MANx), and Independent Living Center of Southern California v. Maxwell-Jolly, United States

District Court for the Central District of California, Case No. 2:09-CV-00382-CAS (MANx),

including any proceeding in these cases before the Judicial Council on Multidistrict Litigation,

the Ninth Circuit Court of Appeals, or the Supreme Court. DHCS may oppose any such request

and retains any and all arguments and defenses that it may have to an award of attorneys’ fees

and to the amount of such award that may be claimed.

b. No earlier than the Settlement Effective Date, and no later than thirty (30)

days after the Settlement Effective Date, intervenors and the law firm of Hooper, Lundy &

Bookman, P.C., may file an application for attorneys’ fees for services performed in litigating

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 19 of 52 Page ID #:2215
Independent Living Center of Southern California v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. 2:08-cv-03315 CAS (MANx), including any appellate proceedings in this case. DHCS may oppose any such request and retains any and all arguments and defenses that it may have to an award of attorneys fees and to the amount of such award that may be claimed.
c. No earlier than the Settlement Effective Date, and no later than thirty (30) days after the Settlement Effective Date, any plaintiffs’ attorney who has appeared in one or more of the Applicable Cases may file an application for attorneys fees under the “common benefit” theory (as described in Mills v. Electric Auto-Lite Co., 396 U.S. 375, 392-96 (1970)) or any other theory for services performed in litigating the relevant case(s), provided that such application shall seek payment exclusively and directly from any Medicaid providers that purportedly obtained a benefit from counsel’s work, and not from DHCS or any of the State Released Entities. In connection with any such application, plaintiffs counsel shall not assert any argument that would require DHCS or any other state agency to utilize its resources or modify its internal practices to assist plaintiffs’ counsel in collecting any fee award that the court may grant. Further, any plaintiffs’ counsel who makes such an application shall fully indemnify the State Released Parties and hold them harmless as to any claims asserted by any provider who may be ordered by the court to pay fees to counsel in connection with work done on the Applicable Cases, provided such indemnification obligation shall not exceed the actual attorneys fee recovery of such counsel pursuant to an award of fees as described in this Paragraph.
2. Except as provided in Paragraph III.C.1 supra, the Settling Plaintiffs and their counsel release DHCS for any attorneys’ fees incurred in connection with the Applicable Cases.

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D. Other Terms 1. In the event that this Settlement Agreement is not finally approved by the United

Stated District Court for the Central District of California, as provided in Paragraph III.A.1,

supra, the Parties shall be restored to their respective positions as of the date when this

Settlement Agreement is signed, except that the dismissed Interlocutory Ninth Circuit Appeals

and Cross-Appeals shall remain dismissed. In this event, the terms and provisions of this

Settlement Agreement shall have no further force and effect with respect to the Parties and shall

not be used in any action or in any other proceeding for any purpose, and any judgment or order

entered by the United Stated District Court for the Central District of California in accordance

with the terms of this Settlement Agreement shall be treated as vacated, nunc pro tunc.

2. If CMS does not act upon DHCS’s request to forgo recoupment of DHCS’s

Claimed Excess Payments to Medicaid providers, as provided in Paragraph III.A.2, supra within

180 days from when DHCS submits its request, then any of the Parties, individually or

collectively, may elect to terminate the Settlement by providing written notice to all the other

Parties in the manner set forth in Paragraph III.D.18, infra. If any Party or Parties exercise their

right to terminate the Settlement pursuant to this Paragraph, then the Parties shall be restored to

their respective positions as of the date when this Settlement Agreement is signed, except that the

dismissed Interlocutory Ninth Circuit Appeals and Cross-Appeals shall remain dismissed.

Subject only to this exception (i.e., continued dismissal of the Interlocutory Ninth Circuit

Appeals and Cross-Appeals), the terms and provisions of this Settlement Agreement shall have

no further force and effect with respect to the Parties and shall not be used in any action or in any

other proceeding for any purpose, and any judgment or order entered by the United Stated

District Court for the Central District of California in accordance with the terms of this

Settlement Agreement shall be treated as vacated, nunc pro tunc.

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3. In the event that CMS completely rejects DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments to Medicaid providers, as provided in Paragraph III.A.2, supra, the Parties shall be restored to their respective positions as of the date when this Settlement Agreement is signed, except that the dismissed Interlocutory Ninth Circuit Appeals and Cross-Appeals shall remain dismissed. Subject only to this exception (i.e., continued dismissal of the Interlocutory Ninth Circuit Appeals and Cross-Appeals), the terms and provisions of this Settlement Agreement shall have no further force and effect with respect to the Parties and shall not be used in any action or in any other proceeding for any purpose, and any judgment or order entered by the United Stated District Court for the Central District of California in accordance with the terms of this Settlement Agreement shall be treated as vacated, nunc pro tunc.
4. In the event that CMS partially, but not fully, approves DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments to Medicaid providers, as provided in Paragraph III.A.2, supra, DHCS shall have the option of terminating this Settlement, as follows:
a. Within thirty (30) days of receiving notice of CMS’s decision to only partially approve its request, DHCS shall notify plaintiffs’ counsel, as provided in Paragraph III.D.18, infra, of whether it is continuing with, or terminating, the Settlement.
b. If DHCS exercises its option to terminate the Settlement, the Parties shall be restored to their respective positions as of the date when this Settlement Agreement is signed, except that the dismissed Interlocutory Ninth Circuit Appeals and Cross-Appeals shall remain dismissed. Subject only to this exception (i.e., continued dismissal of the Interlocutory Ninth Circuit Appeals and Cross-Appeals), the terms and provisions of this Settlement Agreement shall have no further force and effect with respect to the Parties and shall not be used in any action or

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 22 of 52 Page ID #:2218
in any other proceeding for any purpose, and any order entered by the United States District Court for the Central District of California in accordance with the terms of this Settlement Agreement shall be treated as vacated, nunc pro tunc.
5. If this Settlement Agreement is approved by the court as provided in Paragraph III.A.1.a, supra, and if CMS fully approves DHCS’s request to forgo recoupment as provided in Paragraph III.A.2, supra, or, if CMS partially, but not fully, approves DHCS’s request but DHCS nevertheless does not exercise its option to terminate this Agreement (as provided in Paragraph III.D.4, supra), then DHCS also shall agree not to implement the 2009 AB 5 Reductions and AB 1183 Reductions as to DP/NF services provided and/or prescription drugs dispensed by Medicaid providers on or after June 1, 2011, in the event that superseding statutory reductions as to such services are or remain under court injunction. See Order Granting Preliminary Injunction, California Hospital Association v. Douglas, No. 11-9078 CAS (MANx) (C.D. Cal. Dec. 28, 2011).
6. No order of a court pertaining to an application for attorneys’ fees as set forth in Paragraph C, supra, or modification or reversal on appeal of any court order concerning any application for attorneys’ fees awarded to any of plaintiff’s counsel, shall constitute grounds for cancellation, modification or termination of this Agreement, and neither the Parties nor plaintiff’s counsel shall request or suggest any such relief.
7. Notwithstanding any failure to obtain final court or federal approval as contemplated by this Agreement, and notwithstanding any other termination of this Agreement, any agreements made and orders entered during the course of the settlement negotiations relating to the confidentiality of information shall survive.

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 23 of 52 Page ID #:2219
8. This Settlement Agreement is executed without reliance upon any representation by any of the named plaintiffs and intervenors in the Applicable Cases, and their agents, on the one hand, and DHCS or its agents on the other hand, concerning the nature or extent of any damages or legal liability, and all Parties have read the contents hereof, have been fully advised by counsel as to the consequences thereof, and have signed the same as a free act.
9. Each Party executing this Agreement received independent legal advice from its counsel regarding the meaning and legal effect of this Settlement Agreement, the advisability of making the agreements provided for herein, and the execution of this Settlement Agreement, and fully understand the same. Each Party executing this Settlement Agreement has the full right and authority to enter into this Agreement on behalf of itself, or any person or entity on behalf of whom it enters into this Agreement in a representative capacity, and to bind fully such person or entity to the terms and obligations of this Settlement Agreement. The Parties executing this Agreement have full power to enter into this Settlement Agreement and have not heretofore assigned, transferred, or encumbered, or purported to assign, transfer, or encumber, voluntarily or involuntarily, to any person or entity, all or any portion of the obligations or rights which are the subject of this Settlement Agreement.
10. None of the Parties shall be considered to be the drafter of this Settlement Agreement or any provision hereof for the purpose of any statute, case law, or rule of interpretation or construction that would or might cause any provision to be construed against the drafter hereof. This Settlement Agreement was drafted with substantial input by all Parties and their counsel, and no reliance was placed on any representations other than those contained herein.

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 24 of 52 Page ID #:2220

11. The terms set forth in this Agreement constitute the entire Agreement and are not

subject to modification except by a writing signed by all of the Parties through their respective

counsel.

12. The Parties agree to execute all documents that may be necessary to effectuate the

purpose of this Agreement.

13. This Agreement shall be used solely for the following purposes, and for no other

purpose: (1) settlement; (2) enforcement of the terms of this Agreement; and (3) in an action for

breach of this Agreement.

14. This Agreement may be executed through the use of two or more counterparts,

each of which will be deemed an original, and together shall constitute one written instrument.

Photographic or facsimile copies of signed counterparts may be used in lieu of the originals for

any purpose and shall have the same force and effect as an original ink signature.

15. The Settling Parties acknowledge that this Agreement (and any order that may

incorporate its terms) is based on a compromise of disputed claims and does not constitute an

admission by any of the Settling Parties as to any of the Settling Parties’ claims or defenses in

any of the Applicable Cases referenced in this Agreement.

16. This entire Settlement Agreement, and all of its obligations, shall fully terminate

upon the first of the following:

a.

Termination of this Settlement Agreement for lack of court approval as

set forth in Paragraph III.D.1, supra;

b. Termination of the Settlement on a Party’s (Parties’) election because

CMS failed to act upon DHCS’s request to forgo recoupment of DHCS’s Claimed Excess

Payments as set forth in Paragraph III.D.2, supra.

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 25 of 52 Page ID #:2221

c. Termination of this Settlement Agreement because CMS disapproves

entirely DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments made to

Medicaid Providers, as set forth in Paragraph III.D.3, supra; and

d. Termination of this Settlement Agreement because CMS only partially

disapproves DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments made to

Medicaid Providers, and DHCS exercises its option to terminate the Settlement, as set forth in

Paragraph III.D.4, supra.

In addition, the district court’s continuing jurisdiction, as set forth in Part III.D.17,

shall terminate on the earlier of the following.

a. Completion of all of the parties’ respective obligations under this

Settlement Agreement; or

b.

The arrival of January 1, 2016.

The Parties further agree that, upon the occurrence of any event set forth above in this

Paragraph, no court will retain any jurisdiction over this Settlement Agreement, and the parties

will not seek to either extend or enforce any court’s jurisdiction over this Settlement Agreement

beyond the time at which any of the events set forth in this Paragraph have occurred.

Notwithstanding the foregoing, following a termination of this Settlement Agreement as

described in this Paragraph, the jurisdiction of United States District Court for the Central

District of California shall remain in full force and effect for any actions, disputes, claims or

controversies regarding the validity, enforcement, interpretation or breach of this Settlement

Agreement to the extent they relate to any period of time in which this Settlement Agreement

was in effect.

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17. The Parties agree to submit to the continuing jurisdiction of the United States
District Court for the Central District of California, (1) with respect to any motion for attorney’s
fees as contemplated by Part III.C., and (2) in any motion or proceeding brought or filed by any
named plaintiff in any of the Applicable Cases to enforce this Settlement Agreement, up to and
including January 1, 2016. The Parties agree to the court’s continuing jurisdiction solely as a
means for expediting the resolution of any disputes that may arise, and do not intend for their
agreement to submit to the court’s jurisdiction as described in this Paragraph to be a factor for
the district court to consider in assessing any application for attorneys’ fees as described in Part
III.C., supra, and no Party shall argue otherwise.
18. All notices to the Parties that this Agreement may require or permit shall be made
in writing and shall be sufficiently served if personally delivered or sent by certified or registered
mail, return receipt requested, postage prepaid, addressed to the parties as set forth below:
a. The Plaintiffs and Intervenors:
Lloyd A. Bookman Hooper, Lundy & Bookman, P.C. 1875 Century Park East Suite 1600 Los Angeles, California 90067 lbookman@health-law.com
Craig Cannizzo Hooper, Lundy & Bookman, P.C. 575 Market Street, Suite 2300 San Francisco, California 94105 ccannizzo@health-law.com
Lynn S. Carman Medicaid Defense Fund 404 San Anselmo Ave. San Anselmo, California 94960 lynnscarman@hotmail.com

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 27 of 52 Page ID #:2223

Stanley L. Friedman 445 S. Figueroa Street, 27th Floor Los Angeles, California 90071 friedman@friedmanlaw.org
b. DHCS:
Susan Carson Greg Brown Office of the Attorney General 455 Golden Gate Ave., Suite 11000 San Francisco, California 94102 Susan.Carson@doj.ca.gov Gregory.Brown@doj.ca.gov
Douglas Press Chief Counsel Department of Health Care Services Office of Legal Services MS 0011 PO Box 997413 Sacramento, California 95899-7413
Notice shall be deemed given on the date of personal delivery or, if served by mail, upon
the date stamped by the postal service on the return receipt. Any Party may change its address
for notice by notifying all of the other parties of the change of address in writing in accordance
with the provisions of this subparagraph.
19. This Settlement Agreement may be signed in counterparts. This Settlement
Agreement shall be signed by each named plaintiff in the Applicable Cases, who agree to be
bound thereby. However, an attorney may sign on behalf of a named plaintiff if authorized to do
so by that named plaintiff, and any attorney who so signs warrants and represents that he/she has
full authority to bind the named plaintiff on whose behalf he/she signs.
20. This Agreement, along with any exhibits, appendices, addendums, schedules, and
amendments hereto, encompasses the entire agreement of the Parties, and supersedes all previous
understandings and agreements between the Parties, whether oral or written. No prior versions

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of this Agreement, or written proposals of any party, are admissible in any court for any purpose, including but not limited to use to interpret the meaning of this Agreement. This Agreement is the product of drafting by all the Settling Parties and, in construing this Agreement, no Party shall have any term or provision hereof construed against it solely by reason of such party having drafted this Agreement or any portion of it.

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 29 of 52 Page ID #:2225

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 30 of 52 Page ID #:2226

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 31 of 52 Page ID #:2227

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 32 of 52 Page ID #:2228

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 33 of 52 Page ID #:2229

For: California Association of Public Hospitals and HeaJ.th Systems

By: (411/
Name: 1?-Cr
Title: ZSbEA%ST
Date:

Cf 0

For: California Dental Association
By: Name: Title: Date:

For: California Hospital Association
By: Name: Title: Date:

For: California Medical Association
By: Name: Title: Date:

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 34 of 52 Page ID #:2230

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 35 of 52 Page ID #:2231

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 36 of 52 Page ID #:2232

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 37 of 52 Page ID #:2233
*
* Farmacia Remedios, Inc. no longer exists, and the corporate form of the original plaintiff is no longer recognized by the State of California or the state of incorporation (Delaware).

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 38 of 52 Page ID #:2234

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 39 of 52 Page ID #:2235
For: California Pharmacists Association By: Name: Title: Date:
For: Farmacia Remedios, Inc. By: Name: Title:_____ Date:
For: Charles Gallagher By: Name: Title: Date:
For: Fe Garcia
Title:
Date: GfJt1 1 aD\4

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 40 of 52 Page ID #:2236

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 41 of 52 Page ID #:2237

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 42 of 52 Page ID #:2238

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 43 of 52 Page ID #:2239

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 44 of 52 Page ID #:2240

For: Sacramento Family Medical Clinics

Name: 6-1t.-4etT ji,ao-,1 AP

Title: Date:

c9jc,ijt 9t&tLt &
) 3110 Ij’

For: South Sacramento Pharmacy
By: Name: Title: Date:

For: Sharp Chula Vista Medical Center
By: Name: Title: Date:

For: Sharp Coronado Hospital and Heaithcare Center
By: Name: TitLe: Date:

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__ __ _ _ _ _ _ _ _ _

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 45 of 52 Page ID

FROM :SOUTH SPCRRMENTO PHFRRMPCY

FOX NO. :#91:284254210214

Mar. 11 2014 12:35PM P2

For: Sacramento Family Medical Clinics

Name:__Title: Date:.

For: South Sacramento Pharmacy

By:

t2t_

0 Nane:Js ;- ...

-

Title: C) ga n -&_.

.

Date:________

For: Sharp Chula Vista Medical Center
fly:_____
Name: Title: . Date: .

For Sharp Coronado Hospital and flcalthcare Center

By:__ Name: Title: Date:

-....

20iS462ft1

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Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 46 of 52 Page ID #:2242

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 47 of 52 Page ID #:2243

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 48 of 52 Page ID #:2244

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 49 of 52 Page ID #:2245

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 50 of 52 Page ID #:2246

Case 2:09-cv-00382-CAS-MAN Document 93-2 Filed 08/19/14 Page 51 of 52 Page ID #:2247
Approved as to form: HOOPER, LUNDY & BOOKMAN, P.C.
OFFICE OF THE ATTORNEY GENERAL
Gregory D. Brown Deputy Attorney General

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 Case 2:09-cv-00382-CAS-MAN Document 96 Filed 09/22/14 Page 1 of 3 Page ID #:2255

1168469.1

1

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UNITED STATES DISTRICT COURT

9

CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

10 INDEPENDENT LIVING CENTER

11

OF SOUTHERN CALIFORNIA, INC., a nonprofit corporation, et al.,

12

Petitioners,

13

SACRAMENTO FAMILY MEDICAL CLINICS, INC.; et al.,

14

Intervenors,

15 v.

TOBY DOUGLAS, Director of the

16 Department of Health Care Services,

State of California

17

Defendants.

18

CALIFORNIA PHARMACISTS ASSOCIATION, et al.,

19

Plaintiffs,

20

v.

TOBY DOUGLAS, Director of the 21 California Department of Health Care

Services 22

Defendant.

23 INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.,
24 et al.,

25

Plaintiffs,

v.

26 TOBY DOUGLAS, Director of the

27

Department of Health Care Services, State of California

28

Defendant.

Case No. CV 08-3315 CAS (MANx)
[PROPOSED] ORDER GRANTING JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT
Date: September 22, 2014 Time: 10:00 a.m. Crtrm.: 5, Floor 2 Hon. Christina A. Snyder Action Filed: April 22, 2008
Case No. CV 09-722 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: January 29, 2009
Case No. CV 09-382 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding
Action Filed: January 16, 2009

CV 08-3315 CAS (MANx) [PROPOSED] ORDER GRANTING JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-00382-CAS-MAN Document 96 Filed 09/22/14 Page 2 of 3 Page ID #:2256

1168469.1

1 CALIFORNIA HOSPITAL

ASSOCIATION

2

Plaintiff,

3 v.

4 TOBY DOUGLAS, Director of the Department of Health Care Services,
5 State of California Defendant.
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7

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Case No. CV 09-8642 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: November 24, 2009

CV 08-3315 CAS (MANx) [PROPOSED] ORDER GRANTING JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-00382-CAS-MAN Document 96 Filed 09/22/14 Page 3 of 3 Page ID #:2257

1168469.1

1

This matter, having come to the attention of the Court by the Joint Motion for

2 Approval of Settlement Agreement (the “Motion”) filed by Plaintiffs and

3 Intervenors, on the one hand, and the Department of Health Care Services

4 (“DHCS”) and the Director of DHCS, on the other, the Court hereby finds that good

5 cause exists to grant the Motion for the reasons set forth in the parties’

6 Memorandum of Points and Authorities.

7

Therefore, IT IS HEREBY ORDERED that the Joint Motion for Approval

8 of Settlement Agreement is GRANTED.

9

10 Date: September 22, 2014 11

_______________________________ The Honorable Christina A. Snyder

12

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CV 08-3315 CAS (MANx)

[PROPOSED] ORDER GRANTING JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

 
 Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 1 of 13
(MANx),CLOSED,DISCOVERY,MANADR,RELATED−G
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA (Western Division − Los Angeles)
CIVIL DOCKET FOR CASE #: 2:09−cv−00382−CAS−MAN

Independent Living Center et al v. David Maxwell−Jolly Assigned to: Judge Christina A. Snyder Referred to: Magistrate Judge Margaret A. Nagle Related Case: 2:08−cv−03315−CAS−MAN
Case in other court: 9th CCA, 09−55692 Cause: 28:2201 Constitutionality of State Statute(s)
Plaintiff

Date Filed: 01/16/2009 Date Terminated: 06/01/2011 Jury Demand: None Nature of Suit: 950 Constitutional − State Statute Jurisdiction: Federal Question

Managed Pharmacy Care a California corporation TERMINATED: 01/26/2009

represented by Lynn S Carman Medicaid Defense Fund 71 Marin Valley Drive Novato, CA 94949 415−312−9707 Fax: None Email: lynnscarman@hotmail.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Stanley L Friedman Law Offices of Stanley L Friedman 445 South Figueroa Street 27th Floor Los Angeles, CA 90071−1631 213−629−1500 Fax: 213−489−6899 Email: friedman@friedmanlaw.org LEAD ATTORNEY ATTORNEY TO BE NOTICED

Plaintiff
Independent Living Center of Southern California, Inc. a California corporation

represented by Lynn S Carman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Stanley L Friedman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Plaintiff
Gerald Shapiro Pharm. D. doing business as Uptown Pharmacy & Gift Shoppe

represented by Lynn S Carman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Stanley L Friedman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Plaintiff
Sharon Steen doing business as Central Pharmacy

represented by Lynn S Carman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 2 of 13

Stanley L Friedman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Plaintiff
Tran Pharmacy, Inc. a California corporation

represented by Lynn S Carman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Stanley L Friedman (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

V.
Defendant
David Maxwell−Jolly Director of Department of Health Care Services of the State of California

represented by Eric D Bates CAAG − Office of Attorney General of California 300 S Spring St, Suite 1700 Los Angeles, CA 90013 213−897−2457 Fax: 213−−897−2805 LEAD ATTORNEY ATTORNEY TO BE NOTICED
Jennifer M Kim CAAG − Office of CA Attorney General California Department of Justice 300 South Spring Street Suite 1702 Los Angeles, CA 90012 213−897−2443 Fax: 213−897−2805 Email: jennifer.kim@doj.ca.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED
Jesse Cardenas CAAG − Office of the California Attorney General California Department of Justice 300 South Spring Street Suite 1702 Los Angeles, CA 90013 213−897−2444 Fax: 213−897−2805 Email: jesse.cardenas@doj.ca.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED
Michele Li Wong CAAG − Office of the Attorney General California Department of Justice 300 South Spring Street Suite 1702 Los Angeles, CA 90013 213−897−2449 Fax: 213−897−2805 Email: michele.wong@doj.ca.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

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Susan Marie Carson CAAG − Office of the Attorney General California Department of Justice 455 Golden Gate Avenue Suite 11000 San Francisco, CA 94102 415−703−5580 Fax: 415−703−5480 Email: Susan.Carson@doj.ca.gov ATTORNEY TO BE NOTICED

Date Filed 01/16/2009
01/16/2009 01/16/2009 01/16/2009 01/16/2009 01/20/2009 01/22/2009
01/26/2009 01/26/2009 01/29/2009
02/02/2009

# Docket Text
1 COMPLAINT against Defendant David Maxwell−Jolly. (Filing fee $ 350: FEE PAID.), filed by plaintiffs Sharon Steen, Tran Pharmacy, Inc., Managed Pharmacy Care, Independent Living Center of Southern California, Inc., Gerald Shapiro.(ghap) (Additional attachment(s) added on 1/21/2009: # 1 Notice of Assignment, # 2 Civil Cover Sheet) (ds). (Additional attachment(s) added on 1/21/2009: # 3 Summons) (ds). (Entered: 01/20/2009)
20 DAY Summons Issued re Complaint − (Discovery) 1 as to Defendant David Maxwell−Jolly. (ghap) (Entered: 01/20/2009)
2 CERTIFICATION AND NOTICE of Interested Parties filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Managed Pharmacy Care, Independent Living Center of Southern California, Inc., Gerald Shapiro, (ghap) (ds). (Entered: 01/20/2009)
3 NOTICE of Related Case(s) filed by plaintiffs Sharon Steen, Tran Pharmacy, Inc., Managed Pharmacy Care, Independent Living Center of Southern California, Inc., Gerald Shapiro. Related Case(s): CV−08−3315−CAS(MANx), CV−08−7045−CAS (MANx) and CV−08−7046−CAS (MANx) (ghap) (ds). (Entered: 01/20/2009)
4 NOTICE TO PARTIES OF ADR PILOT PROGRAM filed.(ghap) (Entered: 01/20/2009)
5 INITIAL STANDING ORDER FOR CASES ASSIGNED TO Judge S. James Otero, (bp) (Entered: 01/20/2009)
6 PROOF OF SERVICE Executed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Managed Pharmacy Care, Independent Living Center of Southern California, Inc., Gerald Shapiro, upon David Maxwell−Jolly served on 1/20/2009, answer due 2/9/2009. The Summons and Complaint were served by Personal service, by Rule 4(2)(C) FRCP statute, upon Jarol Krause, Staff Counsel, DHCS. Due Dilligence declaration No. Original Summons Was Returned. (Carman, Lynn) (Entered: 01/22/2009)
7 NOTICE of Plaintiffs' Objections to Stay filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Managed Pharmacy Care, Independent Living Center of Southern California, Inc., Gerald Shapiro. (Friedman, Stanley) (Entered: 01/26/2009)
8 NOTICE OF DISMISSAL filed by Plaintiff Managed Pharmacy Care pursuant to FRCP 41a(1) as to Managed Pharmacy Care. (Friedman, Stanley) (Entered: 01/26/2009)
9 ORDER RE TRANSFER PURSUANT TO GENERAL ORDER 08−05 −Related Case− filed. Related Case No: CV 08−3315 CAS (MANx). Case transferred from Judge S. James Otero and Magistrate Judge Patrick J. Walsh to Judge Christina A. Snyder and Magistrate Judge Margaret A. Nagle for all further proceedings. The case number will now reflect the initials of the transferee Judge CV 09−0382 CAS (MANx).Signed by Judge Christina A. Snyder (rn) (Entered: 01/29/2009)
10 NOTICE OF MOTION AND MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. Motion set for hearing on 2/23/2009 at 10:00 AM before Judge Christina A. Snyder. (Carman, Lynn) (Entered: 02/02/2009)

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02/02/2009 02/02/2009 02/02/2009 02/02/2009 02/03/2009 02/05/2009
02/06/2009 02/06/2009 02/06/2009

11 DECLARATION of SCHDULE OF DECLARANTS IN SUPPORT MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION 10 filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 Declaration, # 2 Declaration, # 3 Declaration)(Carman, Lynn) (Entered: 02/02/2009)
12 REQUEST FOR JUDICIAL NOTICE re MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION 10 RE LEGISLATIVE HISTORY filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Carman, Lynn) (Entered: 02/02/2009)
13 PROOF OF SERVICE OF SERVICE filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro, re Complaint − (Discovery), Complaint − (Discovery) 1 OF (1) NOTICE OF MOTION; MOTION; AND MEMORANDUM; (2) SCHEDULE OF DECLARATIONS; (3) REQUEST FOR JUDICIAL NOTICE RE LEGISLATIVE HISTORY, SERVED ON DEFENDANT MAXWELL−JOLLY served on FEBRUARY 2, 2009. (Carman, Lynn) (Entered: 02/02/2009)
14 NOTICE OF LODGING filed Proposed Order for Preliminary Injunction re Declaration (Motion related), Declaration (Motion related) 11 , MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION 10 , Request for Judicial Notice, Request for Relief,, 12 , Proof of Service (subsequent documents), Proof of Service (subsequent documents) 13 (Friedman, Stanley) (Entered: 02/02/2009)
15 NOTICE TO COUNSEL: This case has been assigned to Judge Christina A. Snyder. (See Notice for further details). (mmu) (Entered: 02/04/2009)
16 EXPARTE APPLICATION for Extension of Time to File Defendant's Ex Parte Application for Order Continuing Hearing on Plaintiffs' Motion for Preliminary Injunction or, In the Alternative, Extending Time for Defendant to File an Opposition filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Declaration Declaration of Michele L. Wong in Support of Defendant's Ex Parte Application For Order Continuing Hearing on Plaintiffs' Motion for Preliminary Injunction or, In the Alternative, Extending Time For Defendant to File an Opposition, # 2 Proposed Order Proposed Order Granting Defendant's Ex Parte Application For Order Continuing Hearing on Plaintiffs' Motion for Preliminary Injunction or, In the Alternative, Extending time for Defendant to File an Opposition)(Kim, Jennifer) (Entered: 02/05/2009)
17 Plaintiffs' Opposition to Ex Parte Request to Continue Hearing and Plaintiffs' Offer toStipulate to Give Defendant Extra Time to File Opposition Opposition re: EXPARTE APPLICATION for Extension of Time to File Defendant's Ex Parte Application for Order Continuing Hearing on Plaintiffs' Motion for Preliminary Injunction or, In the Alternative, Extending Time for Defendant to File an Opposition 16 filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 Proposed Order)(Friedman, Stanley) (Entered: 02/06/2009)
18 STIPULATION for Extension of Time to File to Extend T ime for Defendant to File Its Answer and/or Responsive Pleading to The Summons and Complaint filed by Plaintiff and response due from filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order Re Stipulation to Extend Time for Defendant to File Its Answer and/or Responsive Pleading to the Summons and Complaint)(Kim, Jennifer) (Entered: 02/06/2009)
19 STIPULATION for Extension of Time to File To Extend Time to Defendant to File Opposition to Plaintiffs' Motion for Preliminary Injunction filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order ExParte to Extend Time to defendant to File Opposition to Plaintiffs' Motion for Preliminary Injunction to File Opposition)(Kim, Jennifer) (Entered: 02/06/2009)

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02/06/2009 02/06/2009 02/10/2009 02/10/2009 02/11/2009
02/13/2009 02/16/2009 02/16/2009

20 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: Notice of Lodging event utilized in docketing this filing. A Notice of Lodging is not attached to this document. This document tendered for the judge's approval should have been submitted as a separate PDF attachment to a Notice of Lodging or to the Motion, document number 14 RE: Proposed Preliminary Injunction filed 2/2/2009 14 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 02/09/2009)
21 ORDER GRANTING DEFENDANT'S EX PARTE APPLICATION FOR ORDER CONTINUING HEARING ON PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION OR, IN THE ALTERNATIVE, EXTENDING TIME FOR DEFENDANT TO FILE AN OPPOSITION by Judge Christina A. Snyder: Defendant's Request 16 is GRANTED. The time period for Defendant to file an opposition to Plaintiff's Motion for Preliminary Injunction 10 is extended to 2/13/2009. (gk) (Entered: 02/10/2009)
22 ORDER by Judge Christina A. Snyder to Extend Time to Defendant to File Opposition to MOTION for Preliminary Injunction 10 . Defendant DAVID MAXWELL−JOLLY shall have to and including midnight of Wednesday, February 11, 2008, to file Opposition to Plaintiffs' MOTION for Preliminary Injunction. Reply shall be filed on or before February 17, 2009. (mg) (Entered: 02/11/2009)
23 ORDER by Judge Christina A. Snyder Re Stipulation to Extend Time for Defendant to File its Answer and/or Responsive Pleading to the Summons and Complaint 19 . Defendant David Maxwell−Jolly's answer and/or responsive pleading currently due on 2/9/09 is now due on 2/19/2009. (mg) (Entered: 02/11/2009)
24 OPPOSITION DEFENDANTS OPPOSITION TO PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION re: MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION 10 filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Declaration PAGES 00024−00073−−DECLARATION OF TOBY DOUGLAS IN SUPPORT OF DEFENDANTS OPPOSITION TO PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION, # 2 Declaration PAGES 00074−000123−−DECLARATION OF TOBY DOUGLAS IN SUPPORT OF DEFENDANTS OPPOSITION TO PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION, # 3 Declaration PAGES 000124−000173−−DECLARATION OF TOBY DOUGLAS IN SUPPORT OF DEFENDANTS OPPOSITION TO PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION, # 4 Declaration PAGES 000174−000233−−DECLARATION OF TOBY DOUGLAS IN SUPPORT OF DEFENDANTS OPPOSITION TO PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION, # 5 Declaration PAGES 000234−00289−−DECLARATIONS OF T. ALLAN HANSEN, KEVIN GOROSPE AND SUSAN FLORES IN SUPPORT OF DEFENDANTS OPPOSITION TO PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION)(Kim, Jennifer) (Entered: 02/11/2009)
25 NOTICE NOTICE OF ERRATA RE: DEFENDANT'S OPPOSITION TO PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION filed by Defendant David Maxwell−Jolly. (Kim, Jennifer) (Entered: 02/13/2009)
26 REPLY IN SUPPORT OF MOTION FOR PRELIMINARY INJUNCTION MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION 10 filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 EXHIBITS A, B, C, D, E)(Carman, Lynn) (Entered: 02/16/2009)
27 REQUEST FOR JUDICIAL NOTICE re MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION 10 filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 EXHIBIT A − ASSEMBLY BILL 1183)(Carman, Lynn) (Entered: 02/16/2009)

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02/19/2009 02/20/2009
02/23/2009 02/23/2009 02/23/2009 02/24/2009 02/24/2009 02/27/2009
02/27/2009
03/02/2009 03/13/2009

28 ANSWER TO COMPLAINT filed by Defendant David Maxwell−Jolly.(Kim, Jennifer) (Entered: 02/19/2009)
29 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: A concise description of the nature of the document should appear immediately below the docket number, Local Rule 11−3.8(e). RE: Reply in Support of Motion for Preliminary Injunction 26 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (pso) (Entered: 02/20/2009)
30 NOTICE OF LODGING filed AND LODGING OF ORDER IN SANTA ROSA MEMORIAL HOSPITAL, ET AL v DAVID MAXWELL−JOLLY re Objection/Opposition (Motion related), Objection/Opposition (Motion related), Objection/Opposition (Motion related), Objection/Opposition (Motion related), Objection/Opposition (Motion related) 24 (Kim, Jennifer) (Entered: 02/23/2009)
31 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: No Certification of Interested Parties, Local Rule 7.1−1 RE: Defendant's Answer to Complaint filed 2/19/2009 28 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 02/24/2009)
36 MINUTES OF PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION (filed 02/02/09) held before Judge Christina A. Snyder: Hearing held and counsel are present. Tentative order provided. The Court confers with counsel and counsel argue. The Court takes plaintiffs' motion under submission. The Court will issue a final ruling. Court Reporter: Laura Elias. (bm) (Entered: 03/02/2009)
32 DEFENDANT'S NOTICE OF INTERESTED PARTIES of Interested Parties filed by Defendant all defendants, (Kim, Jennifer) (Entered: 02/24/2009)
33 MINUTES OF IN CHAMBERS ORDER held before Judge Christina A. Snyder: Proceedings: Order Setting Scheduling Conference. This matter is set for Scheduling Conference on 4/20/2009 at 11:00 AM before Judge Christina A. Snyder. (mg) (Entered: 02/25/2009)
34 ORDER GRANTING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION by Judge Christina A. Snyder: The Court GRANTS Plaintiffs' Motion for Preliminary Injunction 10 . The Court hereby orders respondent Director, his agents, servants, employees, attorneys, successors, and all those working in concert with him to refrain from enforcing Cal. Welf. & Inst. Code Section 14105.191(b)(3), as modified by AB 1183 beginning on March 1, 2009, by refraining from reducing by five percent payments to pharmacies for prescription drugs (including prescription drugs and traditional over−the counter drugs provided by prescription) provided under the Medi−Cal fee−for−service program. (gk) (Entered: 02/27/2009)
35 JOINT STATEMENT of FURTHER OBJECTIONS TO STAY, AND TO DE FACTO STAY BY FAILURE TO ISSUE INJUNCTION, AND TO OBEY 9TH CIRCUIT MANDATE TO ACT MOTION for Preliminary Injunction re: TE ENJOIN 5% PHARMACY RATE CUT AND PLAINTIFFS' MEMORANDUM IN SUPPORT OF PRELIMINARY INJUNCTION 10 IN RE 2/23/09 MOTION filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 EXHIBITS A, B, C, D, E, F)(Carman, Lynn) (Entered: 02/27/2009)
37 NOTICE of Related Case(s) filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. Related Case(s): 2:−0−CV−00722 (Attachments: # 1 EXHIBIT A, # 2 PROOF OF SERVICE)(Carman, Lynn) (Entered: 03/02/2009)
38 NOTICE OF MOTION AND MOTION for Preliminary Injunction re: DEFENDANTS MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION filed by Defendant David Maxwell−Jolly. Motion set for hearing on 4/6/2009 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Declaration DECLARATION OF MICHELE L. WONG PURSUANT TO LOCAL RULE 7−3 IN IN SUPPORT OF

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03/13/2009
03/13/2009 03/18/2009 03/23/2009 03/30/2009 04/03/2009 04/16/2009 04/30/2009 05/01/2009

DEFENDANTS MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION)(Cardenas, Jesse) (Entered: 03/13/2009)
39 DEFENDANTS REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS NOTICE OF MOTION AND MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION re MOTION for Preliminary Injunction re: DEFENDANTS MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION 38 filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Exhibit PAGES 000003−000025− EXHIBIT A IN SUPPORT OF DEFENDANTS REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS NOTICE OF MOTION AND MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION, # 2 Exhibit PAGES 000026−000076−EXHIBIT B IN SUPPORT OF DEFENDANTS REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS NOTICE OF MOTION AND MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION, # 3 Exhibit PAGES 000075−000124−EXHIBIT B IN SUPPORT OF DEFENDANTS REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS NOTICE OF MOTION AND MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION, # 4 Exhibit PAGES 000125−000160−EXHIBIT B IN SUPPORT OF DEFENDANTS REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS NOTICE OF MOTION AND MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION)(Cardenas, Jesse) (Entered: 03/13/2009)
40 NOTICE OF MOTION re MOTION for Preliminary Injunction re: DEFENDANTS MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION 38 filed by Defendant David Maxwell−Jolly. Motion set for hearing on 4/6/2009 at 10:00 AM before Judge Christina A. Snyder. (Cardenas, Jesse) (Entered: 03/13/2009)
41 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error) was found: INCORRECT EVENT SELECTED. CORRECT EVENT TO BE USED IS: REQUESTS − FOR JUDICIAL NOTICE. RE: 39 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (pp) (Entered: 03/18/2009)
42 OPPOSITION TO DEFENDANT'S MOTION TO ALTER OR AMEND, AND CLARIFY FEB. 27, 2009 ORDER filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 EXHIBIT A TO OPPOSITION BRIEF)(Carman, Lynn) (Entered: 03/23/2009)
43 REPLY BRIEF TO PLAINTIFF'S OPPOSITION to MOTION for Preliminary Injunction re: DEFENDANTS MOTION TO ALTER OR AMEND, AND CLARIFY ORDER GRANTING PLAINTIFFS; MOTION FOR PRELIMINARY INJUNCTION 38 filed by Defendant David Maxwell−Jolly. (Cardenas, Jesse) (Entered: 03/30/2009)
44 MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: The Court DENIES Defendant's Motion to Alter, Amend, or Clarify the Court's 2/27/2009 Order 38 . Court Reporter: Not Present. (gk) (Entered: 04/03/2009)
45 MINUTES OF IN CHAMBERS ORDER by Judge Christina A. Snyder: On the Court's own motion, the Court continues the Scheduling Conference from April 20, 2009 to July 13, 2009 at 11:00 A.M. A Joint Report and ADR Questionnaire shall be filed on or before June 30, 2009. (pso) (Entered: 04/16/2009)
46 NOTICE OF PRELIMINARY INJUNCTION APPEAL filed by Defendant David Maxwell−Jolly. (Attachments: # 1 US Court of Appeals for the 9th Circuit C ivi; Apeals D ocketing Statement)(Kim, Jennifer) (Entered: 04/30/2009)
49 APPEAL FEE PAID: re Notice of Appeal to 9th Circuit Court of Appeals, 47 as to Defendant David Maxwell−Jolly; Receipt Number: 118257, Paid in the amount of

Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 8 of 13

05/06/2009 05/08/2009 05/11/2009 05/11/2009
05/18/2009 06/05/2009 06/09/2009 08/19/2009 10/11/2009
10/11/2009

$455. (lr) (Entered: 05/11/2009)
47 NOTICE OF APPEAL to the 9th CCA filed by Defendant David Maxwell−Jolly. (Filing Fee PAID.) (Attachments: # 1 NOTICE OF ERROR IN AND CORRECTION TO DOCKET, # 2 NOTICE OF PRELIMINARY INJUNCTION APPEAL, # 3 US COURT OF APPEALS FOR THE NINTH CIRCUIT CIVIL APPEALS DOCKETING STATEMENT)(Kim, Jennifer) (Entered: 05/06/2009)
48 NOTIFICATION by Circuit Court of Appellate Docket Number 09−55692, 9th CCA regarding Notice of Appeal to 9th Circuit Court of Appeals, 47 as to Defendant David Maxwell−Jolly. (cbr) (Entered: 05/08/2009)
50 NOTICE OF APPEAL NOTIFICATION form issued regarding Notice of Appeal to 9th Circuit Court of Appeals, 47 as to Defendant David Maxwell−Jolly. (lr) (Entered: 05/11/2009)
51 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals, 47 filed by David Maxwell−Jolly, CCA # 09−55692. The appeal filed May 6, 2009 is a preliminary injunction appeal. Accordingly, Ninth Circuirt Rule 3−3 shall apply. If they have not already done so, within 7 calendar days of the filing date of this order, the parties shall make arrangemnts to obtain from the court reporter an offical transcript of proceedings in the district court that will be included in the record on appeal. The briefing schedule is established as follows: the opening brief is due not later than June 2, 2009; the answering brief is due June 30, 2009 or 28 days after service of the opening brief, whichever is earlier; and the optional reply brief is due within 14 days of service of the answering brief. See 9th Cir. R. 3−3(b). If appellant fails to file the timely the opening brief, this appeal will be dismissed automatically by the Clerk for failure to prosecute. See 9th Cir. R. 42−1. Order received in this district on 5/11/09. (lr) (Entered: 05/13/2009)
52 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals, 47 filed by David Maxwell−Jolly, CCA # 09−55692. Appellant's unopposed oral motion for an extension of time to file opening brief is granted. Brief schedule set. (cbr) (Entered: 05/20/2009)
53 STIPULATION for Order [PROPOSED] ORDER TO TAKE SCHEDULING CONFERENCE OFF CALENDAR OR, IN THE ALTERNATIVE, CONTINUE THE SCHEDULING CONFERENCE filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order)(Kim, Jennifer) (Entered: 06/05/2009)
54 ORDER by Judge Christina A. Snyder GRANTING Stipulation for Order 53 45 ; Resetting Scheduling Conference for 1/11/2010 at 11:00 AM. (pp) (Entered: 06/09/2009)
55 ORDER DENYING TRANSFER by the Judicial Panel on Multidistrict Litigation, MDL 2069, that the motion by Plaintiffs in an action in the Northern District of California (3:08−5173), pursuant to 28 U.S.C. Section 1407, for centralization of the six actions listed on Schedule A (attached) is denied. (gk) (Entered: 08/19/2009)
56 NOTICE OF MOTION AND MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. Motion set for hearing on 11/2/2009 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 RICHARD D. WILSON, C.P.A., DECLARATION, # 2 EXHIBITS A, B, C, D, # 3 ;YNN ROLSTON DECLARATION, # 4 EXHIBIT, # 5 EXHIBIT, # 6 THU−HANG TRAN DECLARATION, # 7 EXHIBIT A, # 8 GERALD SHAPIRO DECLARATION, # 9 EXHIBIT, # 10 DECLARATIONS)(Carman, Lynn) (Entered: 10/11/2009)
57 REQUEST FOR JUDICIAL NOTICE re MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION 56 PLAINTIFFS' FURTHER REQUEST FOR JUDICIAL NOTICE filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 EXHIBITS A, B, C, D, E, F, F, H, I, J, K, L, M, N, O, P, Q,, R)(Carman, Lynn) (Entered: 10/11/2009)

Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 9 of 13

10/11/2009 10/11/2009 10/12/2009 10/12/2009 10/12/2009 10/13/2009
10/13/2009 10/15/2009 10/15/2009

58 REQUEST FOR JUDICIAL NOTICE re MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION 56 OF DOCUMENTS IN FIRST DATABANK CASE (Attachments: # 1 EXHIBIT A, # 2 EXHIBIT, # 3 EXHIBIT B, # 4 exhibit, # 5 EXHIBIT C, # 6 EXHIBIT)(Carman, Lynn) (Entered: 10/11/2009)
59 DECLARATION re MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION 56 DECLARATION OF PAUL LOFHOLM, PARM.D. filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Carman, Lynn) (Entered: 10/11/2009)
60 NOTICE NOTICE OF LODGING OF (PROPOSED) ORDER filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. FOR NOV. 2, 2009 HEARING (Carman, Lynn) (Entered: 10/12/2009)
61 NOTICE OF LODGING OF PROPOSED ORDER FOR NOVEMBER 2, 2O09 HEARING filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Carman, Lynn) (Entered: 10/12/2009)
62 REQUEST FOR JUDICIAL NOTICE re MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION 56 filed by PLAINTIFFS Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 EXHIBIT A, # 2 EXHIBIT: PROPOSED SETTLEMENT IN FIRST DATABANK CASE, # 3 EXHIBIT B, # 4 LIST OF 8000 BRAND DRUGS IN FIRST DATABANK CASE, # 5 EXHIBIT C, # 6 ORDER APPROVING FIRST DATABANK SETTLEMENT)(Carman, Lynn) (Entered: 10/12/2009)
63 EXPARTE APPLICATION for Extension of Time to File Order Extending Defendant's Time to Respond to Plaintiffs' Motion to Enforce Preliminary Injunction filed, October 11, 2009 filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Supplement Memorandum of Points and Authorities in Support of Defendant's Ex Parte Application for Order Extending Defendant's Time to Respond to Plaintiffs' Notice of Motion and Motion to Enforce Injunction Dated February 27, 2009 and Public Notice Regulation, # 2 Declaration Declaration of Carmen D. Snuggs in Support of Respondent's Ex Parte Application for Order Extending Respondent's Time to Respond to Petitioners' Notice of Motion and Motion to Enforce Injunction Dated February 27, 2009 and Public Notice Regulation, # 3 Proposed Order [Proposed] Order Granting Defendant's Ex Parte Application for Order Extending Defendant's Time to Respond to Plaintiffs' Motion to Enforce Preliminary Injunction Filed October 11, 2009)(Kim, Jennifer) (Entered: 10/13/2009)
64 OPPOSITION Opposition to re: EXPARTE APPLICATION for Extension of Time to File Order Extending Defendant's Time to Respond to Plaintiffs' Motion to Enforce Preliminary Injunction filed, October 11, 2009 63 , MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION 56 filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Managed Pharmacy Care, Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 Exhibit A, # 2 Proposed Order)(Friedman, Stanley) (Entered: 10/13/2009)
65 MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: The Court grants in part and denies in part Defendant's Ex Parte Application for Order Extending Defendant's Time to Respond to Plaintiffs' Motion to Enforce Preliminary 63 as follows: Defendant's shall file an opposition with courtesy copies to chambers on or before 3:00 PM on 10/26/2009; Plaintiffs' shall file a reply with courtesy copies to chambers on or before 3:00 PM on 10/29/2009; and the hearing on plaintiffs' motion 56 shall remain on calendar on 11/2/2009 at 10:00 AM. Court Reporter: Not Present. (gk) (Entered: 10/15/2009)
66 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: Document submitted in the wrong case. Document cites Case No. CV 09−03315 CAS (MANx). At least two lines of the text of any order or judgment shall appear on the page that has the line provided for the signature of the

Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 10 of 13

10/15/2009
10/26/2009 10/29/2009 10/30/2009 11/03/2009 12/29/2009 01/04/2010 03/25/2010 06/22/2010 06/24/2010

judge, Local Rule 58−10 RE: Notice of Lodging of Proposed Order filed 10/12/2009 60 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 10/15/2009)
67 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: At least two lines of the text of any order or judgment shall appear on the page that has the line provided for the signature of the judge, Local Rule 58−10 RE: Notice of Proposed Order filed 10/12/2009 61 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 10/15/2009)
68 DEFENDANT'S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PLAINTIFFS' MOTION TO ENFORCE PRELIMINARY INJUNCTION AND REQUEST FOR SANCTIONS YES re: MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION 56 filed by Defendant David Maxwell−Jolly. (Kim, Jennifer) (Entered: 10/26/2009)
69 REPLY IN SUPPORT MOTION to Enforce INJUNCTION DATED FEBRUARY 27, 2009 AND PUBLIC MOTICE REGULATION 56 filed by Plaintiffs Sharon Steen, Tran Pharmacy, Inc., Independent Living Center of Southern California, Inc., Gerald Shapiro. (Attachments: # 1 EXHIBITS A, B, C, D)(Carman, Lynn) (Entered: 10/29/2009)
70 MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: On the Court's own motion, Plaintiffs' Motion to Enforce Preliminary Injunction 56 is taken under submission. The Court hereby dispenses with oral argument on the above motion and will decide the motion on the basis of the papers submitted. Therefore, the parties are not to appear before this Court on 11/2/2009 at 10:00 A.M. Court Reporter: Not Present. (gk) (Entered: 10/30/2009)
71 MINUTE ORDER (IN CHAMBERS) by Judge Christina A. Snyder Re Plaintiff's Motion to Enforce Preliminary Injunction and, also, to Stay and Preliminarily Enjoin Implementation of Payment Cuts for Lack of Public Notice (filed 10/11/09) 56 : The Court DENIES petitioners' motion to enforce the preliminary injunction, with leave to amend, and DENIES petitioners motion to stay and preliminarily enjoin the challenged practices, with leave to amend. (jre) (Entered: 11/03/2009)
72 STIPULATION to Continue Scheduling Conference from January 11, 2010 to Off Calendar, or in the alternrative, continue to July 12, 2010 filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order To Take Scheduling Conference Off Calendar Or, in the Alternative, Continue the Scheduling Conference)(Kim, Jennifer) (Entered: 12/29/2009)
73 ORDER TO TAKE SCHEDULING CONFERENCE OFF CALENDAR OR, IN THE ALTERNATIVE, CONTINUE THE SCHEDULING CONFERENCE by Judge Christina A. Snyder: Upon Stipulation 72 , the Scheduling Conference is continued to 7/12/2010 11:00 AM before Judge Christina A. Snyder. (gk) (Entered: 01/06/2010)
74 MANDATE of 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals, 47 , CCA # 09−55692. The Decision of the District Court is AFFIRMED. Mandate received in this district on 3/25/2010. (lr) (Entered: 03/26/2010)
75 STIPULATION to Reschedule To Take Scheduling Conference Off Calendar or, in the Alternative, Continue the Scheduling Conference filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order to Take Scheduling Conference Off Calendar or, in the Alternative, Continue the Scheduling Conference)(Wong, Michele) (Entered: 06/22/2010)
76 ORDER TO TAKE SCHEDULING CONFERENCE OFF CALENDAR OR, IN THE ALTERNATIVE, CONTINUE THE SCHEDULING CONFERENCE by Judge Christina A. Snyder: Upon Stipulation 75 , the Scheduling Conference is continued to 10/4/2010 11:00 AM before Judge Christina A. Snyder. (gk) (Entered: 06/24/2010)

Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 11 of 13

09/17/2010 09/20/2010 09/21/2010
12/21/2010 12/29/2010 03/11/2011 03/15/2011 06/01/2011
07/07/2011 10/06/2011 04/26/2012
05/22/2012

77 STIPULATION for Hearing re Order, Set/Reset Hearing,, 76 filed by Plaintiffs Independent Living Center of Southern California, Inc., Managed Pharmacy Care, Gerald Shapiro, Sharon Steen, Tran Pharmacy, Inc.. (Attachments: # 1 Proposed Order)(Friedman, Stanley) (Entered: 09/17/2010)
78 ORDER TO TAKE SCHEDULING CONFERENCE OFF CALENDAR OR, IN THE ALTERNATIVE, CONTINUE THE SCHEDULING CONFERENCE by Judge Christina A. Snyder: Upon Stipulation 77 , the Scheduling Conference is continued to 1/10/2011 11:00 AM before Judge Christina A. Snyder. (gk) (Entered: 09/20/2010)
79 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents RE: Stipulation to Take Scheduling Conference Off Calendar or, in the Alternative, Continue the Scheduling Conference filed 9/17/2010 77 . The following error(s) was found: The PDF for the proposed order is attached as the Main Document, and the Stipulation is attached as Attachment 1. In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. You need not take any action in response to this notice unless and until the court directs you to do so. (gk) (Entered: 09/21/2010)
80 STIPULATION to Continue Scheduling Conference from January 10, 2011 to March 28, 2011 filed by defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order To take scheduling conference off calendar or, in the alternative, continue the scheduling conference, # 2 Declaration of Service)(Cardenas, Jesse) (Entered: 12/21/2010)
81 ORDER by Judge Christina A. Snyder, re Stipulation 80 . Upon the stipulation of the parties and good cause appearing, the scheduling conference set for 1/10/2011 is continued to 3/28/2011 at 11:00 AM. (vdr) (Entered: 12/29/2010)
82 STIPULATION to Vacate /to take Scheduling Conferene off Calendar or, in the Alternative, Continue the Scheduling Conference filed by defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order)(Cardenas, Jesse) (Entered: 03/11/2011)
83 ORDER by Judge Christina A. Snyder, re Stipulation 82 to Take Scheduling Conference Off Calendar. The 3/28/2011 scheduling conference is taken off calendar. (vdr) (Entered: 03/15/2011)
84 MINUTE ORDER IN CHAMBERS by Judge Christina A. Snyder: This action is hereby removed from this Courts active caseload until further application by the parties or order of this Court. Counsel shall file a joint report detailing the status of the case within 30 days and every quarter thereafter until the action has been reactivated on this Courts active caseload or a stipulation for dismissal is filed. (Made JS−6. Case Terminated.) (im) (Entered: 06/03/2011)
85 STATUS REPORT Joint Status Report Pursuant to the Court's Minute Order Dated June 3,2011 filed by Defendant David Maxwell−Jolly. (Cardenas, Jesse) (Entered: 07/07/2011)
86 STATUS REPORT Joint Status Report Pursuant to the Court's Minute Order Dated June 3, 2011 filed by Defendant David Maxwell−Jolly. (Cardenas, Jesse) (Entered: 10/06/2011)
87 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals, 47 filed by David Maxwell−Jolly, CCA # 09−55692. The parties are directed to file contemporaneous supplemental briefs in their respective cases concerning the effect of Douglas v. Independent Living Center of Southern California, Inc., 132 S.Ct.1204(2012). Briefs shall be due 45 days from the filing of this order and shall not exceed 30 pages in length. Order received in this district on 4/26/12. (car) (Entered: 04/30/2012)
88 ORDER from 9th CCA filed, CCA # 08−56422, 08−57016, 09−55532, 09−55692. The parties' unanimous joint motion to refer Case Nos. 08−56422, 08−57016, 09−55532, and 09−55692 to mediation, and to continue the supplemental briefing schedule during the pendency of mediation [D.E. 49−1], is hereby GRANTED. Order received in this district on 5/22/12 (car) (Entered: 05/24/2012)

Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 12 of 13

07/12/2012 07/12/2012 11/05/2013
05/28/2014 08/19/2014 08/28/2014 09/22/2014 09/22/2014 03/31/2015 04/21/2015

89 Change of Address filed by Plaintiffs Independent Living Center of Southern California, Inc., Managed Pharmacy Care, Gerald Shapiro, Sharon Steen, Tran Pharmacy, Inc. (Carman, Lynn) (Entered: 07/12/2012)
90 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents RE: Miscellaneous Document 89 . The following error(s) was found: Incorrect event selected. The correct event is: Notice of change of attorney information. In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. You need not take any action in response to this notice unless and until the court directs you to do so. (ak) (Entered: 07/25/2012)
91 MINUTES (IN CHAMBERS) STAY OF PROCEEDINGS by Judge Christina A. Snyder: By order dated 7/8/2013, the Court directed the parties in these matters to submit a joint status report. Dkt. #242, in case no. 2:11−CV−09688−CAS(MANx). The joint status report was filed on 7/23/2013. Dkt. #243, in case no. 2:11−CV−09688−CAS(MANx). The Court has reviewed the parties' positions set forth therein, as well as the issues presented by the petition for writ of certiorari now pending in the United States Supreme Court, see Supreme Court Docket No. 13−253. Based on the foregoing, the Court finds that there is good cause to stay the proceedings or, if applicable, to continue the existing stay of the proceedings in the above−entitled cases, pending notification from this Court. The parties are directed to file a joint status report with this Court within 14 days after the Supreme Court has taken any action with respect to the above−referenced petition for writ of certiorari. Court Reporter: Not Present. (gk) (Entered: 11/06/2013)
92 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals, 47 filed by David Maxwell−Jolly, CCA # 09−55692. Pursuant to the parties joint request for dismissal, these appeals are voluntarily dismissed. Fed. R. App. P. 42(b). The parties shall bear their own costs and fees on appeal. A copy of this order shall serve as and for the mandate of this court. Order received in this district on 5/28/14. (mat) (Entered: 05/30/2014)
93 NOTICE OF MOTION AND MOTION for Settlement Approval of Settlement Agreement of the Parties filed by Plaintiffs Independent Living Center of Southern California, Inc., Managed Pharmacy Care, Gerald Shapiro, Sharon Steen, Tran Pharmacy, Inc.. Motion set for hearing on 9/22/2014 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Memorandum, # 2 Declaration, # 3 Proposed Order)(Friedman, Stanley) (Entered: 08/19/2014)
94 Notice of Appearance or Withdrawal of Counsel: for attorney Susan Marie Carson counsel for Defendant David Maxwell−Jolly. Adding Susan M. Carson as attorney as counsel of record for David Maxwell−Jolly Director of California Department of Health Care Services for the reason indicated in the G−123 Notice. Filed by Defendant DAVID MAXWELL−JOLLY, Director of Department of Health Care Services of the State of California. (Attorney Susan Marie Carson added to party David Maxwell−Jolly(pty:dft))(Carson, Susan) (Entered: 08/28/2014)
95 MINUTES OF MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT 93 hearing held before Judge Christina A. Snyder. The Court confers with counsel. The Court grants the above−referenced motion. The Court will issue the Proposed Order Granting Joint Motion for Approval of Settlement Agreement forthwith. Court Reporter: Laura Elias. (lom) (Entered: 09/25/2014)
96 ORDER GRANTING JOINT MOTION FOR APPROVALOF SETTLEMENT AGREEMENT 93 by Judge Christina A. Snyder. (lom) (Entered: 09/25/2014)
97 NOTICE BY PLAINTIFFS OF SETTLEMENT EFFECTIVE DATE filed by Plaintiffs Independent Living Center of Southern California, Inc., Managed Pharmacy Care, Gerald Shapiro, Sharon Steen, Tran Pharmacy, Inc.. (Friedman, Stanley) (Entered: 03/31/2015)
98 Joint EX PARTE APPLICATION to Dismiss Case filed by Plaintiffs Independent Living Center of Southern California, Inc., Managed Pharmacy Care, Gerald Shapiro, Sharon Steen, Tran Pharmacy, Inc.. (Attachments: # 1 Memorandum, # 2 Declaration, # 3 Declaration)(Friedman, Stanley) (Entered: 04/21/2015)

Case: 2:09-cv-382 As of: 11/14/2017 12:27 PM PST 13 of 13

04/22/2015 04/23/2015
04/29/2015

99 STIPULATION for Extension of Time to File Opposition Memoranda and Reply Memoranda in Regard to Motions for Attorneys' Fees filed by Plaintiffs Independent Living Center of Southern California, Inc., Managed Pharmacy Care, Gerald Shapiro, Sharon Steen, Tran Pharmacy, Inc.. (Attachments: # 1 Proposed Order)(Friedman, Stanley) (Entered: 04/22/2015)
100 ORDER ON PLAINTIFFS' EX PARTE APPLICATION FOR DISMISSAL OF ACTION by Judge Christina A. Snyder: Upon Plaintiff's Ex Parte Application 98 , IT IS HEREBY ORDERED that, pursuant to Federal Rule of Civil Procedure 41(a)(2), Case No. CV 09−382 is hereby dismissed with prejudice, each party to bear its own costs in accordance with Part III.A.3 of the Settlement Agreement of the parties on file herein, with the Court retaining jurisdiction, pursuant to Parts III.A.3 and III.D.17 of the Settlement Agreement, to entertain any application for attorneys' fees as described in Part III.C. of the Settlement Agreement, and for purposes of enforcement of the Settlement Agreement by any parties in the within action, up to and including 1/1/2016. (gk) (Entered: 04/24/2015)
101 ORDER REGARDING BRIEFING SCHEDULE FOR MOTIONS FOR ATTORNEYS FEES by Judge Christina A. Snyder: Upon Stipulation 99 , the Court hereby orders the following briefing schedule: Filing date for Plaintiffs' Attorneys' Fee motions 4/23/2015. Due Date for Defendant's Oppositions to Attorneys' Fee motions 5/13/2015. Due Date for Plaintiffs' Reply Briefs 5/26/2015. Hearing date 6/8/2015 at 11:00 AM. (gk) (Entered: 05/01/2015)

 
 No. 09-1158
IN THE
SUPREME COURT OF THE UNITED STATES
______
DAVID MAXWELL-JOLLY, DIRECTOR, CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, PETITIONER,
v.
CALIFORNIA PHARMACISTS ASSOCIATION, ET AL., RESPONDENTS.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT ______

BRIEF OF RESPONDENTS INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA,
INC.; GERALD SHAPIRO, PHARM.D, D/B/A UPTOWN PHARMACY AND GIFT SHOPPE; SHARON STEENE, D/B/A CENTRAL PHARMACY; AND TRAN PHARMACY, INC., D/B/A TRAN
PHARMACY IN OPPOSITION

ROCHELLE BOBROFF NATIONAL SENIOR CITIZENS LAW CENTER 1444 EYE STREET, NW WASHINGTON, DC 20005 RBOBROFF@NSCLC.ORG (202) 289-6976

LYNN S. CARMAN* MEDICAID DEFENSE FUND 8 WATERBURY LANE NOVATO, CA 94949 LYNNSCARMAN@HOTMAIL.COM (415) 927-4023
STANLEY L. FRIEDMAN 445 S. FIGUEROA STREET, 27TH FL LOS ANGELES, CA 90071 FRIEDMAN@FRIEDMANLAW.ORG (213) 629-1500

MAY 24, 2010

*Counsel of Record

i
PARTIES TO THE PROCEEDING Petitioner is David Maxwell-Jolly, Director of the Department of Health Care Services, State of California (DHCS). Respondents in this Opposition brief are Independent Living Center of Southern California, Inc.; Gerald Shapiro, Pharm.D., d/b/a Uptown Pharmacy and Gift Shoppe; Sharon Steen, d/b/a Central Pharmacy; and Tran Pharmacy, Inc., d/b/a Tran Pharmacy, who are the plaintiffs-appellees in Case No. 09-55692, Independent Living Center of Southern California v. Maxwell.-Jolly.
CORPORATE DISCLOSURE STATEMENT (RULE 29.6)
None of the corporations who were plaintiffsappellees below in Case No. 09-55692 have a parent corporation and no public corporation owns any stock in these corporations.

ii
TABLE OF CONTENTS
PARTIES TO THE PROCEEDING............................ i
CORPORATE DISCLOSURE STATEMENT ............ i
TABLE OF CONTENTS ............................................ ii
TABLE OF AUTHORITIES ..................................... iv
BRIEF IN OPPOSITION ............................................1
STATEMENT ..............................................................1
A. Statutory Framework........................................1
B. Factual Background ..........................................3
REASONS THE PETITION SHOULD BE DENIED ....................................................................10
I. CERTIORARI SHOULD BE DENIED ON THE FIRST QUESTION BECAUSE THERE IS NO DIVISION IN THE LOWER COURTS AND THE DECISION BELOW IS A CORRECT APPLICATION OF THIS COURT’S SETTLED SUPREMACY CLAUSE JURISPRUDENCE .........10
A. The Courts Of Appeals Have Uniformly Reached The Same Conclusion As The Panel Below .....................................................10
B. The Decision Below, Like The Decisions Of All The Other Courts Of Appeals, Followed Numerous Precedents Of This Court Permitting Preemption Claims To Enjoin State Law, Including In Cases Involving Spending Clause Statutes ...............................13
C. There Is No Basis For Petitioner’s Assertion That A Preemption Claim Must Satisfy The Standards Of an Implied Private Right of Action and 42 U.S.C. § 1983 ...........................20

iii
II. CERTIORARI SHOULD BE DENIED ON THE SECOND QUESTION BECAUSE THE DECISION BELOW IS A CORRECT APPLICATION OF THE MEDICAID ACT AND THERE IS NO RELEVANT DIVISION IN THE LOWER COURTS ..........................................................24 CONCLUSION ..........................................................28

iv
TABLE OF AUTHORITIES
Cases Antrican v. Odom,
290 F.3d 178 (4th Cir. 2002) __________________ 17 Arkansas Dept. of Health & Human Services v.
Ahlborn, 547 U.S. 268 (2006) ___________________ 16, 17, 26 BellSouth Telecommunications, Inc. v. MCImetro Access Transmission Services, Inc., 317 F.3d 1270 (11th Cir. 2003) ________________ 13 Bernhardt v. Los Angeles County, 339 F.3d 920 (9th Cir. 2003) __________________ 20 Blessing v. Freestone, 520 U.S. 329 (1997) __________________________ 18 Blum v. Bacon, 457 U.S. 132 (1982) ______________________ 17, 26 Bud Antle, Inc. v. Barbosa, 45 F.3d 1261 (9th Cir. 1994) __________________ 20 Burgio & Campofelice, Inc. v. New York State Dept. of Labor, 107 F.3d 1000 (2d Cir. 1997) ______________ 12, 16 California Pharmacists Ass'n v. Maxwell-Jolly, 596 F.3d 1098 (9th Cir. 2010) ________________ 6, 7 City of Burbank v. Lockheed Air Terminal Inc., 411 U.S. 624 (1973) ___________________________ 4 City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981) __________________________ 22 Cort v. Ash, 422 U.S. 66 (1975) ___________________________ 21 Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363 (2000) __________________________ 21 CSX Transp., Inc. v. Easterwood, 507 U.S. 658 (1993) __________________________ 17

v
Dalton v. Little Rock Family Planning Services, 516 U.S. 474 (1996) __________________________ 17
Edelman v. Jordan, 415 U.S. 651 (1974) __________________________ 18
Equal Access for El Paso, Inc. v. Hawkins, 562 F.3d 724 (5th Cir. 2009) __________________ 20
Evergreen Presbyterian Ministries Inc. v. Hood, 235 F.3d 908 (5th Cir. 2000) __________________ 27
Frazar v. Gilbert, 300 F.3d 530(5th Cir. 2002) rev'd sub nom. Frew ex rel. Frew v. Hawkins, 540 U.S. 431 (2004) __________________________ 17
Frew ex rel. Frew v. Hawkins, 540 U.S. 431 (2004) __________________________ 18
Golden State Transit Corp. v. City of Los Angeles, 493 U.S. 103 (1989) ______________________ 23, 24
Gonzaga Univ. v. Doe, 536 U.S. 273 (2002) __________________________ 12
Gray Panthers of San Francisco v. Schwarzenegger, C 09-2307 PJH, 2009 WL 2880555 (N.D. Cal. Sept. 1, 2009) _____________________________________ 20
Green v. Mansour, 474 U.S. 64 (1985) ___________________________ 22
GTE N., Inc. v. Strand, 209 F.3d 909(6th Cir. 2000), cert. denied, 531 U.S. 957 (2000) __________________________________ 13
Guar. Nat. Ins. Co. v. Gates, 916 F.2d 508 (9th Cir. 1990) __________________ 20
Hagans v. Lavine, 415 U.S. 528 (1974) __________________________ 23
Hines v. Davidowitz, 312 U.S. 52 (1941) ___________________________ 26

vi
Illinois Ass'n of Mortg. Brokers v. Office of Banks & Real Estate, 308 F.3d 762 (7th Cir. 2002) __________________ 12
Indep. Living Ctr. of S. California, Inc. v. MaxwellJolly, 572 F.3d 644 (9th Cir. 2009) ___________________ 7
Indep. Living Ctr. of S. California, Inc. v. Shewry, 543 F.3d 1050 (9th Cir. 2008) cert. denied, 129 S. Ct. 2828 (U.S. 2009) __________________________ 4
Lawrence County v. Lead-Deadwood Sch. Dist. No. 40-1, 469 U.S. 256 (1985) __________________________ 17
Long Term Care Pharmacy Alliance v. Ferguson, 362 F.3d 50 (1st Cir. 2004) ___________________ 27
Methodist Hospitals, Inc. v. Sullivan, 91 F.3d 1026 (7th Cir. 1996) __________________ 27
Minnesota HomeCare Ass'n, Inc. v. Gomez, 108 F.3d 917 (8th Cir. 1997) __________________ 27
Missouri Child Care Ass'n v. Cross, 294 F.3d 1034 (8th Cir. 2002) _________________ 17
Pennsylvania Prot. & Advocacy, Inc. v. Houstoun, 228 F.3d 423 (3d Cir. 2000) ___________________ 17
Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644 (2003) ______________________ 16, 17
Qwest Corp. v. City of Santa Fe, New Mexico, 380 F.3d 1258 (10th Cir. 2004) ________________ 12
Ray v. Atl. Richfield Co., 435 U.S. 151 (1978) ___________________________ 4
Rite Aid of Pennsylvania, Inc. v. Houstoun, 171 F.3d 842 (3d Cir. 1999) ___________________ 27
Rosado v. Wyman, 397 U.S. 397 (1970) __________________________ 18
Rowe v. New Hampshire Motor Transp. Ass'n, 552 U.S. 364 (2008) __________________________ 26

vii
Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) __________________ 4, 13, 14, 15
St. Thomas--St. John Hotel & Tourism Ass'n, Inc. v. Gov't of U.S. Virgin Islands, 218 F.3d 232 (3d Cir. 2000) ___________________ 12
Planned Parenthood of Houston & Se. Tex. v. Sanchez, 403 F.3d 324 (5th Cir. 2005) __________________ 16
United States v. Lopez, 514 U.S. 549 (1995) __________________________ 11
Verizon Maryland, Inc. v. Global NAPS, Inc., 377 F.3d 355 (4th Cir. 2004) ______________ 12, 21
Verizon Maryland, Inc. v. Pub. Serv. Comm'n of Maryland, 535 U.S. 635 (2002) ______________________passim
Westside Mothers v. Haveman, 289 F.3d 852(6th Cir. 2002), cert. denied, 537 U.S. 1045 (2002) _________________________________ 17
Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498 (1990) __________________________ 18
Winkelman ex rel. Winkelman v. Parma City Sch. Dist., 550 U.S. 516 (2007) __________________________ 19
Statutes 28 U.S.C. § 1331 ___________________________ 14, 23 42 U.S.C. § 1396a(a)(1)-(71) _____________________ 1 42 U.S.C. § 1983 ___________________________passim 42 U.S.C. § 1988 _______________________________ 22 Cal. Welf. & Inst. Code § 14105.19(b)(1) (2008) ____ 2
Other Authorities David Sloss, Constitutional Remedies for Statutory
Violations, 89 Iowa L. Rev. 355 (2004) _______________ 11, 22

viii
Samuel R. Bagenstos, Spending Clause Litigation in the Roberts Court, 58 Duke L.J. 345 (2008) ______________________ 11

1
BRIEF IN OPPOSITION
STATEMENT
A. Statutory Framework
1. Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (hereinafter “Medicaid Act”), is a cooperative federal-state program that provides federal financial assistance to participating States to enable them to provide medical treatment for the poor, elderly, and disabled.
A State’s participation in Medicaid is voluntary. However, if a State chooses to participate, then it must comply with the Medicaid Act and its implementing regulations. To receive federal funds, States are required to establish and administer their Medicaid programs through individual “state plans for medical assistance” approved by the federal Secretary of Health and Human Services (HHS). 42 U.S.C. § 1396.
The Medicaid Act provides specific requirements for state plans and reimbursement rates, see 42 U.S.C. § 1396a(a)(1)-(71), including those set out in § 1396a(a)(30)(A) (hereinafter “Section 30A”), the specific provision at issue in this case. Section 30A requires that a state plan must provide such methods and procedures relating to payments for care and services to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers to ensure that care and services are as available to recipients as is available to the public in the same geographical area.
2. On February 16, 2008, the California Legislature enacted Assembly Bill X3 5 (hereinafter

2
“AB 5”). AB 5 added § 14105.19 to the Welfare and Institutions Code, which instructed petitioner Director of the Department of Health Care Services, as the state agency which administers California’s state Medicaid plan, to cut by ten percent reimbursement rates under the Medi-Cal fee-forservice program to physicians, dentists, pharmacies, adult day health care centers, optometrists, clinics, and other providers. AB 5 provided that the ten percent rate cuts were to go into effect on July 1, 2008. See Cal. Welf. & Inst. Code § 14105.19(b)(1) (2008).1
The California Legislature subsequently enacted Assembly Bill 1183 (hereinafter “AB 1183”), on September 30, 2008. Section 44 of AB 1183 amended § 14105.19 to make the rate reductions of AB 5, excluding non-contract hospitals, expire on February 28, 2009. Cal. Welf. & Inst. Code § 14105.19(b). Section 45 of AB 1183 added a new § 14105.191 (2009) that, effective March 1, 2009, required a five percent rate cut for pharmacies under Medi-Cal’s fee-for-service program. Section 57 of AB 1183 makes the legislative finding that the “state faces a fiscal crisis that requires unprecedented measures to be taken to reduce General Fund expenditures.” Pet. App. 210. The Legislature provided that the act would “take effect immediately.” Pet. App. 216-17 (§ 76).
1 The ten percent cuts of AB 5 were challenged in another case with the same caption. The instant suit does not address the cuts in AB 5.

3
B. Factual Background
1. The Respondents are an independent living center with more than 5,000 clients or members who are Medi-Cal beneficiaries in the Medi-Cal fee-forservice program, and three Medi-Cal pharmacies with more than 8,000 Medi-Cal beneficiaries. On January 16, 2009, they sued David Maxwell-Jolly, Director of the California Department of Health Care Services, in the United States District Court of the Central District of California to prevent the implementation of AB 1183. Pet. App. 128-29.
The complaint alleged that the action of the State to enact and implement the five percent payment reduction of AB 1183 was void, contrary to and preempted under the Supremacy Clause by the federal quality of services and equal access clauses of Section 30A, due to the fact that the Legislature had enacted AB 1183 without considering—as required by Section 30A—the relevant factors of whether providers could sustain the payment reduction without loss of quality of services and equal access of beneficiaries to quality services; and that irreparable injury in the form of reduction and denial of access to services to Medi-Cal beneficiaries would result. Pet. App. 130.
The relief sought by Respondents was an injunction to prohibit the Director of the Department of Health Care Services from implementing AB 1183. Pet App. 130.
2. On February 27, 2009, the district court granted respondents’ motion for injunctive relief. Pet. App. 151.

4
In holding that respondents could bring their claim under the Supremacy Clause, the district court relied on the Ninth Circuit’s decision in Indep. Living Ctr. of S. California, Inc. v. Shewry, 543 F.3d 1050 (9th Cir. 2008) cert. denied, 129 S. Ct. 2828 (U.S. 2009) (hereinafter “ILC I”). In that opinion, the Ninth Circuit stated that “[t]he Supreme Court has repeatedly entertained claims for injunctive relief based on federal preemption, without requiring that the standards for bringing suit under § 1983 be met.” The court cited in detail the numerous cases holding that claims for injunctive relief based on federal preemption may be brought absent any express right or cause of action. Id. at 1055-1056 (citing, inter alia, City of Burbank v. Lockheed Air Terminal Inc., 411 U.S. 624 (1973); Ray v. Atl. Richfield Co., 435 U.S. 151 (1978); and Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983). Id. at 10551056.
In ILC I, the Ninth Circuit also rejected petitioner’s argument that a claim of preemption under a federal statute enacted pursuant to Congress’ spending power, like the Medicaid Act, should be treated differently. Id. at 1059-1062. The Ninth Circuit noted that this Court and other circuits that have addressed the argument flatly rejected it. Id. Petitioner’s petitions for rehearing, rehearing en banc and certiorari for this decision were denied.
The first question of this present petition for certiorari (No. 09-1158) is essentially, therefore, another bite of the same apple, without any change in circumstances or new law cited by petitioner to

5
justify or explain why the Court should now re-visit and re-review its prior decision to deny certiorari on the facts and legal claims in respect to which certiorari was previously denied, in 2009.
3. In the instant case, the district court concluded that respondents had met their burden of demonstrating that a preliminary injunction should issue to enjoin implementation of AB 1183.
The district court found that respondents demonstrated a likelihood of success on the merits because the Legislature enacted the rate reduction without any consideration of the relevant factors required by Section 30A to be considered—efficiency, economy, quality of care, and equality of access, as well as the effect of providers’ costs on those relevant factors—and failed to show any justification other than purely budgetary concerns for rates that substantially deviate from the providers’ costs. Pet. App. 139, 143.
Also, it found that respondents demonstrated a substantial likelihood of irreparable harm resulting from implementation of AB 1183, because the cuts would limit Medi-Cal beneficiaries’ access to many brand and generic drugs. Pet. App. 144-49. In addition, the evidence established that independent pharmacies represent thirty-three percent of the licensed community pharmacies in California and many of these pharmacies with higher than average costs would be “hard-hit” by the cut, causing a discontinuation or severe reduction in services to Medi-Cal beneficiaries. Pet. App. 148-49.
Weighing the balance of the hardships and the public interest, the district court concluded that the

6
“significant threat to the health of Medi-Cal recipients” that “reducing payments to health-care service providers will likely cause” outweighed any expected fiscal savings, which the district court noted were unlikely to materialize because “many Medi-Cal beneficiaries will turn to more costly forms of medical care, such as emergency room care.” Pet. App. 147 n.7.
On April 3, 2009, the district court denied petitioner’s motion to amend, alter, or clarify the preliminary injunction of February 27, 2009. Pet. App. 152.
4. On March 3, 2010, the Ninth Circuit affirmed the district court’s issuance of a preliminary injunction. Pet. App. 53. In an unreported decision, the court referenced the reasoning supplied in another case decided that day, California Pharmacists Ass'n v. Maxwell-Jolly, 596 F.3d 1098 (9th Cir. 2010) (hereinafter “California Pharmacists”), which rejected petitioner’s arguments on the likelihood of success on the merits. Pet. App. 54.
Petitioner argued in both California Pharmacists and the instant case that while the state Legislature enacted the rate cuts, nevertheless, the Legislature did not need to comply with the mandate of Section 30A. Instead, petitioner contended, only the Department was required to consider the factors set forth in Section 30A. Pet. App. 11.
The Ninth Circuit held in California Pharmacists that whichever state body sets the rates must comply with the federal requirements for setting them. The court explained: “[S]uch an approach is

7
consistent with that of our sister circuits, where in the context of legislative, as opposed to agency, ratesetting, they too have focused on ensuring that the legislative body had information before it so that it could properly consider efficiency, economy, quality of care, and access to services before enacting rates.” Pet. App. 15-16 (emphasis in original) (citing cases from the Eighth Circuit).
Next, petitioner argued in California Pharmacists that the state Legislature did actually consider the factors of Section 30A. The Ninth Circuit upheld the district court’s conclusion that the legislative history showed that the Legislature did not in fact consider the Section 30A factors but rather was “concerned solely with budgetary matters.” Pet. App. 20.
The Ninth Circuit then reiterated its holding from Indep. Living Ctr. of S. California, Inc. v. MaxwellJolly, 572 F.3d 644 (9th Cir. 2009)(hereinafter “ILC II”), which is consistent with all the courts of appeals to consider the issue, that Section 30A mandates that state Medicaid rate reductions “may not be based solely on state budgetary concerns.” 572 F.3d at 659 (citing cases from the Third, Eighth, Ninth, and Tenth Circuits).
Petitioner further argued in California Pharmacists that the Department had retained the discretion not to implement the rate cut and that the Department’s post-enactment study complied with the requirements of Section 30A. The Ninth Circuit noted that this argument had been waived because it was not raised in petitioner’s opening brief, but further rejected the argument on the merits. Pet. App. 22-24.

8
The court concluded that the Department’s contention that it had discretion not to implement the cuts was rebutted by the clear text of the state law as well as the state’s published notice announcing that the Department “is mandated” to implement the rate reductions. Pet. App. 26-28.
5. In the instant ILC Plaintiffs case, petitioner did not contest, at the preliminary injunction hearing, nor in his appeal briefs, that the Legislature did not in fact consider the relevant quality and equal access factors of Section 30A, in enacting AB 1183. Pet. App. 141, 54-55. At oral argument at the Ninth Circuit, petitioner did assert, for the first time, that the legislature had considered the Section 30A factors with regard to pharmacies. Yet, the only evidence proffered by petitioner was a comment on the May 30, 2008 agenda of Assembly Budget Subcommittee stating: “Dec. 2007 Myers and Stauffer study found that current Medi-Cal drug pricing averages around 5 percent over cost,” (Pet. App. 54-55), the veracity of which comment was challenged by the ILC Plaintiffs at the oral argument. The Ninth Circuit, without ruling on the veracity issue, noted that petitioner did not even argue in his briefing, in either the district court or on appeal, that the citation to a study is sufficient to comply with Section 30A. Id. The Ninth Circuit concluded that a one-sentence citation to the May 30, 2008 agenda “does not show adequate consideration of the § 30(A) factors.” Id. at 55-56.
In addition, the Ninth Circuit found that the cited study did not demonstrate that the rate cut complied with Section 30A. The court noted that while the study addressed costs, “it is bereft of any

9

analysis of the remaining § 30(A) factors – efficiency,

economy, quality, and access to care.” Pet. App. 56.

The study indicated that in setting an appropriate

reimbursement formula, costs and market dynamics

should be “balanced with the need to maintain

sufficient access to services for Medi-Cal recipients

throughout the state.” Id.

Further, the study

instructed that the rate setter should “consider

issues of access to services.” Id. The study also

did not address whether “the costs observed are

reflective of providers operating in the most efficient

manner possible.” Id.

The Ninth Circuit

therefore affirmed the district court’s holding that

respondents were likely to succeed on their claim

that the rates were not set in compliance with

Section 30A.

The Ninth Circuit similarly found that the district court did not abuse its discretion in holding that respondents had demonstrated irreparable harm. The appeals court explained: “The district court concluded that even if, on average pharmacies would be compensated above their acquisition costs, the Director had not refuted Plaintiffs’ showing that many brand and generic drugs would be reimbursed at a level below cost, limiting Medi-Cal patients’ access to those drugs.” Id.

10
REASONS THE PETITION SHOULD BE DENIED
I. CERTIORARI SHOULD BE DENIED ON THE FIRST QUESTION BECAUSE THERE IS NO DIVISION IN THE LOWER COURTS AND THE DECISION BELOW IS A CORRECT APPLICATION OF THIS COURT’S SETTLED SUPREMACY CLAUSE JURISPRUDENCE
A. The Courts Of Appeals Have Uniformly Reached The Same Conclusion As The Panel Below
While petitioner’s previous petitions have alleged conflict in the courts of appeals, the present petition contains no such claim. To the contrary, the present petition seeks review based on the harmonious interpretation of law among the Ninth, D.C., Fifth and Eighth Circuits. Pet. 27. Indeed, every court of appeals is in accord with the Ninth Circuit’s holding that a federal court may resolve, on the merits, a claim that a plaintiff will be injured unless injunctive or declaratory relief is issued to enjoin a preempted state law.
The unanimity among courts of appeals follows naturally from the clarity of the Court’s preemption decisions, such as Verizon Maryland, Inc. v. Pub. Serv. Comm'n of Maryland, 535 U.S. 635 (2002). Petitioner’s assertion that the Court has failed to address pertinent questions of law is rebutted by the widespread agreement among courts of appeals regarding the appropriate standards for permitting a preemption claim.

11
Verizon established that a statutory cause of action is not needed for a preemption claim. Any change in this holding would impact a wide range of preemption claims, including those frequently brought by businesses. Indeed, “most federal statutes that are at issue in … preemption cases do not create an express private cause of action for injunctive relief against state officers.” David Sloss, Constitutional Remedies for Statutory Violations, 89 Iowa L. Rev. 355, 406-7 (2004).
Petitioner suggests that preemption claims under Spending Clause statutes should be treated differently, but petitioner does not cite a single case that so holds. And there is no basis in the text of the Constitution for differentiating the Spending Clause from any other constitutional provision under which Congress legislates. Samuel R. Bagenstos, Spending Clause Litigation in the Roberts Court, 58 Duke L.J. 345, 392-93 (2008).
A change in the standards for preemption would have widespread implications, reducing the primacy of federal law in our system of government. As Justice Kennedy has observed, “the whole jurisprudence of preemption” is of vital importance to “maintaining the federal balance.” United States v. Lopez, 514 U.S. 549, 577 (1995) (Kennedy, J., concurring).
Petitioner provides citations for the decisions of the D.C., First, Fifth, and Eighth Circuits that have permitted preemption claims to be considered on the merits in the context of Spending Clause statutes. Pet. 27. Petitioner has previously conceded in its earlier petition that in cases brought under non-

12
Spending Clause statutes, several other Circuits have permitted preemption claims “regardless of whether the federal statutes create privately enforceable rights,” giving as examples cases from the Second, Third, and Tenth Circuits. Petition in ILC II at 22, n.6.
Indeed, the Tenth Circuit held that a “party may bring a claim under the Supremacy Clause that a local enactment is preempted even if the federal law at issue does not create a private right of action.” Qwest Corp. v. City of Santa Fe, New Mexico, 380 F.3d 1258, 1266 (10th Cir. 2004). Accord Burgio & Campofelice, Inc. v. New York State Dept. of Labor, 107 F.3d 1000, 1006 (2d Cir. 1997). The Third Circuit similarly concluded that “a state or territorial law can be unenforceable as preempted by federal law even when the federal law secures no individual substantive rights for the party arguing preemption.” St. Thomas--St. John Hotel & Tourism Ass'n, Inc. v. Gov't of U.S. Virgin Islands, 218 F.3d 232, 241 (3d Cir. 2000).
Moreover, the Fourth, Sixth, Seventh and Eleventh Circuits have also held that preemption claims do not depend upon a cause of action in the preempting federal statute. The Fourth Circuit stated: “we need not inquire into whether [the federal statute] provides a cause of action” for a preemption claim. Verizon Maryland, Inc. v. Global NAPS, Inc., 377 F.3d 355, 368-369 (4th Cir. 2004). The Seventh Circuit rejected the argument advanced by petitioner in this case that Gonzaga Univ. v. Doe, 536 U.S. 273 (2002), is applicable to a preemption claim. Illinois Ass'n of Mortg. Brokers v. Office of

13

Banks & Real Estate, 308 F.3d 762, 765 (7th Cir.

2002). The Sixth Circuit held that there is “a cause

of action for prospective injunctive relief” for federal

preemption claims. GTE N., Inc. v. Strand, 209 F.3d

909, 916 (6th Cir. 2000), cert. denied, 531 U.S. 957

(2000). Finally, the Eleventh Circuit held en banc

that, apart from any express cause of action

available under the statute, “[f]ederal courts must

resolve the question of whether a public service

commission’s order violates federal law and any

other

federal

question.”

BellSouth

Telecommunications, Inc. v. MCImetro Access

Transmission Services, Inc., 317 F.3d 1270, 1278

(11th Cir. 2003) (citing Verizon Maryland, Inc., 535

U.S. 635); see also id. at 1296 (Tjoflat, J., dissenting

on other grounds) (“litigants may assert a private

right of action for preemption under the Supremacy

Clause”).

B. The Decision Below, Like The Decisions Of All The Other Courts Of Appeals, Followed Numerous Precedents Of This Court Permitting Preemption Claims To Enjoin State Law, Including In Cases Involving Spending Clause Statutes
1. This Court has long permitted private parties to obtain declaratory and injunctive relief to prevent injury from state laws that are preempted by federal law. In Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), employers sought a declaration that a New York law was preempted by a federal statute providing no cause of action. The Court unanimously reached the merits of the employers’ preemption claim. It explained:

14
A plaintiff who seeks injunctive relief from state regulation, on the ground that such regulation is pre-empted by a federal statute which, by virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal question which the federal courts have jurisdiction under 28 U.S.C. § 1331 to resolve.
463 U.S. at 96 n.14.
Subsequently, this Court unanimously reaffirmed the availability of injunctive relief on the basis of federal preemption. In Verizon Maryland, Inc. v. Pub. Serv. Comm'n of Maryland, 535 U.S. 635 (2002), the Court again sustained the jurisdiction of the federal courts to hear claims that state conduct (there, an order of the public service commission) was preempted by federal law. In Verizon, the state commission argued that Verizon’s preemption claim could not proceed, because the federal Telecommunications Act “does not create a private cause of action to challenge the Commission’s order.” 535 U.S. at 642. The Court dismissed this argument, stating:
We need express no opinion on the premise of this argument. “It is firmly established in our cases that the absence of a valid (as opposed to arguable) cause of action does not implicate subject-matter jurisdiction, i.e., the courts’ statutory or constitutional power to adjudicate the case.” As we have said, “the district court has jurisdiction if the right of the petitioners to recover under their complaint will be sustained if the Constitution and laws of the United States are given one construction and will be defeated if they

15
are given another, unless the claim clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous.”
Id. at 642-643 (citations and some quotation marks omitted).
As in Shaw and Verizon, respondents seek declaratory and injunctive relief against an allegedly preempted state law. Respondents’ entitlement to relief will unquestionably depend on the construction of a federal statute. Petitioner does not argue that the claim is immaterial or wholly insubstantial and frivolous. The Ninth Circuit dutifully followed Shaw and Verizon in reaching the merits of the preemption claim.
It is true that these cases speak in terms of jurisdiction, rather than in terms of a cause of action. But petitioner does not dispute the existence of a federal cause of action to enforce the Supremacy Clause. Indeed, petitioner himself conceded below that there were “circumstances under which a party may properly seek relief under the Supremacy Clause.” C.A. ILC I Pet. Opening Br. 6. This sensible concession is in accord with the repeated and consistent actions of this Court in adjudicating preemption claims on the merits even in the absence of an express or implied statutory cause of action. It is also consistent with the understandings of leading federal courts treatises. See Richard H. Fallon, Jr., Daniel J. Meltzer, & David L. Shapiro, Hart & Wechsler’s The Federal Courts & The Federal System 903 (5th ed. 2003); 13D Charles A. Wright, Arthur R.

16
Miller & Edward H. Cooper, Federal Practice and Procedure § 3566 (3d ed. 2008).2
2. Petitioner nonetheless argues that respondents’ claim should be dismissed, because the federal statute at issue in this case, Medicaid, is a Spending Clause statute. Pet. 26-27. That assertion is contrary to this Court’s recent practice.
This Court has repeatedly adjudicated claims by private parties asserting preemption by virtue of the Medicaid statute and other federal spending statutes. In Arkansas Dept. of Health & Human Services v. Ahlborn, 547 U.S. 268 (2006), a Medicaid recipient sought a declaratory judgment that a state law was preempted by the Medicaid Act, and this Court unanimously agreed. In Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644 (2003), drug makers also brought an action asserting preemption of a state law under the Act. A plurality of four Justices concluded on the merits that the state law was not preempted, while three Justices argued in dissent that the state law was indeed preempted.3
2 The Second and Fifth Circuits have identified the Supremacy Clause itself as the basis of a cause of action for preemption claims. See Burgio & Campofelice, Inc. v. New York State Dept. of Labor, 107 F.3d 1000, 1006 (2d Cir. 1997); Planned Parenthood of Houston & Se. Tex. v. Sanchez, 403 F.3d 324, 333 (5th Cir. 2005). 3 Justice Thomas’s concurrence suggested that the Court might want to consider “whether Spending Clause legislation can be enforced by third parties in the absence of a private right of action.” Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 683 (2003) (Thomas, J., concurring in judgment). Justice (Footnote continued on following page)

17
Furthermore, petitioner’s argument appears to rely on the assumption that federal Spending Clause statutes cannot preempt state statutes under the Supremacy Clause. But that is contrary to a host of this Court’s holdings. See, e.g., Dalton v. Little Rock Family Planning Services, 516 U.S. 474, 476 (1996) (per curiam) (preemption under Medicaid); Blum v. Bacon, 457 U.S. 132, 138 (1982); CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 663 (1993); Lawrence County v. Lead-Deadwood Sch. Dist. No. 40-1, 469 U.S. 256, 269-270 (1985); see also Pennsylvania Prot. & Advocacy, Inc. v. Houstoun, 228 F.3d 423, 428 (3d Cir. 2000) (Alito, J.).4 In essence, petitioner makes a policy argument against enforcement of the Medicaid statute, but this policy argument has no basis in law.
Scalia concurred separately, proposing initial enforcement by the federal government. Id. at 675 (Scalia, J., concurring in judgment). Nevertheless, both Justices joined without reservation the Court’s subsequent decision in Arkansas Dept. of Health & Human Services v. Ahlborn, 547 U.S. 268 (2006), resolving a private action asserting preemption under Medicaid. 4 Every court of appeals to consider the argument that Medicaid as a whole is unenforceable (arising largely in the context of suits under § 1983) because of its nature as Spending Clause legislation, has rejected that argument as contrary to extensive Supreme Court precedent. Missouri Child Care Ass'n v. Cross, 294 F.3d 1034, 1041 (8th Cir. 2002); Antrican v. Odom, 290 F.3d 178, 188 (4th Cir. 2002); Westside Mothers v. Haveman, 289 F.3d 852, 860 (6th Cir. 2002), cert. denied, 537 U.S. 1045 (2002); Frazar v. Gilbert, 300 F.3d 530, 550 (5th Cir. 2002) rev'd sub nom. Frew ex rel. Frew v. Hawkins, 540 U.S. 431 (2004).

18
Indeed, this Court has consistently held that the Eleventh Amendment is not a bar to private parties seeking prospective injunctive relief against state officials to enforce Medicaid and other Spending Clause statutes because such suits are necessary in order to vindicate the Supremacy Clause. See Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 437 (2004) (Medicaid); Edelman v. Jordan, 415 U.S. 651 (1974) (Aid to the Aged, Blind, and Disabled).
3. Petitioner also suggests (Pet. 37) that because of the oversight role of the federal government in the Medicaid program, a preemption claim should not be permitted. As this Court explained in Verizon, a preemption claim may proceed as long as the statute “does not divest the district courts of their authority” under federal question jurisdiction to review the state’s “compliance with federal law.” Verizon Maryland, Inc., 535 U.S. at 642 (emphasis in original). There is nothing in the text or structure of the Medicaid Act that divests the courts of their authority to resolve a preemption claim. The federal government’s ability to withhold federal funds does not preclude other federal remedies. Rosado v. Wyman, 397 U.S. 397 (1970). See also Blessing v. Freestone, 520 U.S. 329, 346-348 (1997); Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 521 (1990).
4. Preemption claims such as respondents’ are consistent with the voluntary nature of states’ participation in federal spending programs.
Petitioner’s assertion of a “sovereign right to choose not to comply,” with such statutes, Pet. in ILC I at 32 (April 1, 2009), is erroneous. States have a sovereign right to choose not to participate in

19

federal programs and to choose not to take federal monies. But once they have made those choices, the State “must comply with [the federal statute’s] mandates.” Winkelman ex rel. Winkelman v. Parma City Sch. Dist., 550 U.S. 516, 520 (2007).

Although petitioner complains of the cost to

comply with federal law, (see, Pet. Br. 28), the

federal government matches or exceeds state dollars

for Medi-Cal. The federal government paid half of

Medi-Cal expenditures prior to October 2008, and

will pay more than half for the period of October

2008 to December 2010 pursuant to the American

Recovery and Reinvestment Act of 2009 (hereinafter

“ARRA”), Pub. L. No. 111-5, 123 Stat. 115. Under

ARRA, the federal government is expected to spend

over $11 billion on Medi-Cal for that period. Kaiser

Commission on Medicaid and the Uninsured,

American Recovery and Reinvestment Act (AARA):

Medicaid and Health Care Provisions (Mar. 2009), at

http://www.kff.org/medicaid/upload/7872.pdf.

In

return for this infusion of billions of federal dollars

to provide health insurance for California residents,

it is fitting that the state be required to comply with

federal law.

Moreover, this is not the first time the Ninth Circuit has recognized this cause of action. To the contrary, the court of appeals and many other courts of appeals expressly reached the same conclusion long ago. As petitioner himself acknowledged below, the Ninth Circuit “has recognized that ‘the Supremacy Clause creates an implied right of action for injunctive relief against state officers who are threatening to violate the federal Constitution or laws.’ ” C.A. ILC I Pet. Opening Br. 5-6 (quoting

20
Guar. Nat. Ins. Co. v. Gates, 916 F.2d 508, 512 (9th Cir. 1990)); see also Bernhardt v. Los Angeles County, 339 F.3d 920, 929 (9th Cir. 2003); Bud Antle, Inc. v. Barbosa, 45 F.3d 1261, 1269 (9th Cir. 1994).
5. Petitioner argues that under the Ninth Circuit’s ruling in ILC I, any alleged conflict between federal and state law is sufficient to “enjoin state conduct,” thereby opening “the door to a flood of lawsuits.” Pet. 27. Yet, petitioner refutes his own argument by citing a recent California case applying ILC I in which the district court dismissed the Supremacy Clause claim, finding no preemption of state law. Pet. 28 (citing Gray Panthers of San Francisco v. Schwarzenegger, C 09-2307 PJH, 2009 WL 2880555 (N.D. Cal. Sept. 1, 2009)). Similarly, in other Supremacy Clause cases involving Spending Clause statutes in which the court found no conflict between federal and state law, claims have been dismissed in accordance with this Court’s clear directions for preemption cases. See, e.g., Equal Access for El Paso, Inc. v. Hawkins, 562 F.3d 724 (5th Cir. 2009).
C. There Is No Basis For Petitioner’s Assertion That A Preemption Claim Must Satisfy The Standards Of an Implied Private Right of Action and 42 U.S.C. § 1983
Petitioner suggests that respondents’ preemption claim should be dismissed because it does not meet the standards for a cause of action under an implied private right of action and under 42 U.S.C. § 1983 (“Section 1983”). Pet. 27. This Court has never

21
utilized either standard for a preemption claim, and indeed, petitioner cites no case which has so ruled.
1. Petitioner suggests that Congress did not intend to create a private remedy under an implied private right of action. Pet. 27. The remedy in this case is a declaration that federal law preempts state law and an injunction preventing enforcement of a preempted state law. This remedy is supplied by the Supremacy Clause, not an implied private right of action, and does not depend upon an express declaration by Congress. As this Court has explained, “the existence of conflict cognizable under the Supremacy Clause does not depend on express congressional recognition that federal and state law may conflict.” Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 388 (2000). Thus, the cases cited by petitioner requiring express statements by Congress to create an implied private right of action are simply inapposite to respondents’ preemption claim.
Indeed, Verizon rejected the assertion that a district court could not reach the merits of a preemption claim unless the plaintiff had demonstrated a statutory cause of action. Verizon Maryland, Inc. v. Pub. Serv. Comm'n of Maryland, 535 U.S. 635, 642 (2002). Dutifully following Verizon, the Fourth Circuit rejected the argument advanced by petitioner in the instant case (Pet. 17) that Cort v. Ash, 422 U.S. 66 (1975), applies to a preemption claim. Verizon Maryland, Inc., 377 F.3d at 368-369. As noted supra, a claim under the Supremacy Clause is not dependent upon a statutory cause of action, either express or implied.

22
2. Section 1983 is an express cause of action to enforce statutory and constitutional rights that provides various remedies against individuals acting under color of state law and municipal corporations. It does not supplant or repeal remedies available under the Constitution and the laws of the United States for injunctive or declaratory relief.
Preemption and § 1983 are completely distinct and separate avenues of enforcing federal law. The remedies available under § 1983 are far more extensive than under preemption, including compensatory and punitive damages against state actors in their individual capacities, compensatory damages against municipalities, and attorneys’ fees. See City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (1981); 42 U.S.C. § 1988. Preemption claims, in contrast, seek only to enforce the structural relationship between federal and state law by obtaining prospective equitable relief against state and local officials in their official capacities.
“Remedies designed to end a continuing violation of federal law are necessary to vindicate the federal interest in assuring the supremacy of that law.” Green v. Mansour, 474 U.S. 64, 68 (1985). For a nonfrivolous preemption claim, “denial of a judicial remedy would undermine federal supremacy and subvert the rule of law by enabling state officers to proceed with enforcement of an invalid state law, to the detriment of private parties.” David Sloss, Constitutional Remedies for Statutory Violations, 89 Iowa L. Rev. 355, 409 (2004).
Several members of this Court have stressed that preemption claims and § 1983 serve different

23
purposes and have different requirements. In Golden State Transit Corp. v. City of Los Angeles, 493 U.S. 103 (1989), for example, Justice Kennedy explained that even though he would have held that the plaintiff could not bring its action under § 1983, nevertheless:
we would not leave the [plaintiff] without a remedy. Despite what one might think from the increase of litigation under the statute in recent years, § 1983 does not provide the exclusive relief that the federal courts have to offer. * * * [P]laintiffs may vindicate [statutory] preemption claims by seeking declaratory and equitable relief in the federal district courts through their powers under federal jurisdictional statutes. See 28 U.S.C. § 1331 (1982 ed.); 28 U.S.C. § 2201; 28 U.S.C. § 2202 (1982 ed.). These statutes do not limit jurisdiction to those who can show the deprivation of a right, privilege, or immunity secured by federal law within the meaning of § 1983.
Id. at 119 (Kennedy, J., dissenting) (some citations omitted, emphasis added).
Petitioner asserted in its reply brief in ILC II that Justice Kennedy’s Golden State dissent indicates that an “immunity” is needed for a preemption claim. Pet. Reply in ILC II at 6. In fact, Justice Kennedy said precisely the opposite: “Preemption concerns the federal structure of the Nation rather than the securing of rights, privileges, and immunities to individuals.” 493 U.S. at 117. See also Hagans v. Lavine, 415 U.S. 528, 553 (1974) (Rehnquist, J., dissenting) (a claim that state

24
regulations conflict with federal regulations would properly invoke federal question jurisdiction to determine whether the state regulations are “invalid under the Supremacy Clause of the United States Constitution”).
Indeed, petitioner, in contending on the basis of no supporting precedent, the novel view that the rules applicable to whether a person injured by preempted state action may obtain injunctive relief are those rules applicable to § 1983, ignores statements in Golden State in which the Court has specifically highlighted the differences between § 1983 and preemption:
Given the variety of situations in which preemption claims may be asserted, in state court and in federal court, it would be obviously incorrect to assume that a federal right of action pursuant to § 1983 exists every time a federal rule of law pre-empts a state regulatory authority.
Golden State Transit Corp., 493 U.S. at 107-108 (emphasis added).
II.CERTIORARI SHOULD BE DENIED ON THE SECOND QUESTION BECAUSE THE DECISION BELOW IS A CORRECT APPLICATION OF THE MEDICAID ACT AND THERE IS NO RELEVANT DIVISION IN THE LOWER COURTS
1. Petitioner asserts that the Ninth Circuit’s opinion does not comport with the text of the Medicaid statute. Pet. 3-7, 30-33. This claim is without basis. The opinion in this matter is mindful of the textual provisions of Section 30A, concluding

25
the evidence showed that the state statute conflicted with federal statutory requirements.
The Medicaid statute, in Section 30A, requires states to utilize “methods and procedures…to assure that payments are consistent with efficiency, economy, quality of care, and are sufficient to enlist enough providers" so that beneficiaries have the same access to services as the general population.
The evidence demonstrated that the state Legislature which enacted the rate cut never considered the impact of the rate cut on the Section 30A factors of efficiency, economy, quality, and access to care. Because the Legislature did nothing to assure that payments were sufficient to provide access to services comparable to the general population, the state statute conflicted with federal law.
Petitioner mischaracterizes the Ninth Circuit’s evidentiary holding as setting numerous “specific requirements” for a study to comply with Section 30A. Pet. 31-33. In fact, the Ninth Circuit’s opinion does not set forth any specifications for procedures or studies that would comply with Section 30A. On the contrary, the Ninth Circuit merely evaluated the evidence proffered by the parties and concluded the setting of the pharmaceutical rates lacked any consideration of numerous Section 30A factors. Instead, the evidence demonstrated that the rates were set for purely budgetary reasons. Pet. App. 20.
Further, the Dec. 2007 Myers and Stauffer cost study filed by petitioner as proof of the Legislature’s compliance with Section 30A explicitly stated that the study did not contain any information about

26
access to services and that the “evaluation” of fees should include consideration of access to services. Pet. App. 55-56. The study similarly noted that it did not address efficiency and that this should be considered in setting rates. Id. Thus, the Ninth Circuit properly held that the study does not show that the rate cut was enacted in accordance with Section 30A.
Petitioner suggests that the Ninth Circuit erred in holding that the Legislature, as distinguished from the Department, was required to comply with Section 30A. Pet. App. 31-32. This Court held in Ahlborn that when a state Legislature enacts a statute that conflicts with the federal Medicaid law, the state statute is “unenforceable.” Arkansas Dept. of Health & Human Services v. Ahlborn, 547 U.S. 268, 292 (2006). It is well established that the enactments of state Legislatures may be preempted by federal law. See, e.g., Rowe v. New Hampshire Motor Transp. Ass'n, 552 U.S. 364 (2008); Blum v. Bacon, 457 U.S. 132, 138 (1982); Hines v. Davidowitz, 312 U.S. 52 (1941). The Ninth Circuit properly analyzed the text and legislative history of the state law and found it conflicted with the textual requirements of Section 30A.
2. All Circuits which have ruled on the subject have unanimously concluded that although budgetary considerations, - which are not listed in the text of Section 30A as a relevant factor at all may be considered by the rate setter along with the relevant factors of efficiency, economy, quality of care, and equal access, nevertheless, rates based purely on budgetary considerations, or in which budgetary considerations are the conclusive factor,

27
violate Section 30A. See, e.g., Rite Aid of Pennsylvania, Inc. v. Houstoun, 171 F.3d 842 (3d Cir. 1999); Minnesota HomeCare Ass'n, Inc. v. Gomez, 108 F.3d 917, 917 (8th Cir. 1997).
This being so, the claim of the petitioner that the Ninth Circuit is out of step with other Circuits on the basic issue of whether a State may reduce Medicaid provider payments purely for budgetary reasons, is without merit. Cases from the Fifth and Seventh Circuit addressed only the “equal access” provision of Section 30A. Those courts described the plaintiffs’ appeal as not raising a failure of the state to consider the factors of efficiency, economy and quality of care. See Evergreen Presbyterian Ministries Inc. v. Hood, 235 F.3d 908, 932 (5th Cir. 2000); Methodist Hospitals, Inc. v. Sullivan, 91 F.3d 1026, 1029 (7th Cir. 1996). Similarly, the First Circuit did not address these requirements in rejecting the enforceability of Section 30A under 42 U.S.C. § 1983. See Long Term Care Pharmacy Alliance v. Ferguson, 362 F.3d 50, 59-60 (1st Cir. 2004). There is no split among the Circuits on whether the requirements of Section 30A can be disregarded; therefore, no review is warranted in respect to the Second Question asserted by petitioner.

28

CONCLUSION
For the reasons set forth above, the petition for a writ of certiorari should be denied.

Respectfully submitted,

ROCHELLE BOBROFF NATIONAL SENIOR CITIZENS LAW CENTER 1444 EYE STREET, NW, STE 1100 WASHINGTON, DC 20005 RBOBROFF@NSCLC.ORG (202) 289-6976

LYNN S. CARMAN* MEDICAID DEFENSE FUND 8 WATERBURY LANE NOVATO, CA 94949 LYNNSCARMAN@HOTMAIL.C
OM
(415) 927-4023
STANLEY L. FRIEDMAN 445 S. FIGUEROA STREET, 27TH FL LOS ANGELES, CA 90071 FRIEDMAN@FRIEDMANLAW.
ORG
(213) 629-1500

*Counsel of Record

MAY 24, 2010

Counsel for Respondents Independent Living Center of Southern California, Inc.; Gerald Shapiro, Pharm.D., d/b/a Uptown Pharmacy and Gift Shoppe; Sharon Steen, d/b/a Central Pharmacy; and Tran Pharmacy, Inc., d/b/a Tran Pharmacy

 
 (Slip Opinion)

OCTOBER TERM, 2011

1

Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES

Syllabus
DOUGLAS, DIRECTOR, CALIFORNIA DEPARTMENT 
 OF HEALTH CARE SERVICES v. INDEPENDENT 
 LIVING CENTER OF SOUTHERN CALIFORNIA, 
 INC., ET AL. 

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
No. 09–958. Argued October 3, 2011—Decided February 22, 2012*
Medicaid is a cooperative federal-state program that provides medical care to needy individuals. To qualify for federal funds, a State must submit its Medicaid plan and any amendments to the federal agency that administers the program, the Centers for Medicare & Medicaid Services (CMS). Before approving a plan or amendments, CMS conducts a review to determine whether they comply with federal requirements. Federal law requires state plans or amendments to “assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers” to make Medicaid “care and services” available. 42 U. S. C. §1396a(a)(30)(A). After California enacted three statutes reducing the State’s payments to various Medicaid providers, the State submitted plan
—————— * Together with No. 09–1158, Douglas, Director, California Depart-
ment of Health Care Services v. California Pharmacists Association et al., Douglas, Director, California Department of Health Care Services v. California Hospital Association et al. (see this Court’s Rule 12.4), Douglas, Director, California Department of Health Care Services v. Independent Living Center of Southern California, Inc., et al. (see this Court’s Rule 12.4), Douglas, Director, California Department of Health Care Services v. Dominguez, By and Through her Mother and Next Friend Brown, et al. (see this Court’s Rule 12.4); and No. 10–283, Douglas, Director, California Department of Health Care Services v. Santa Rosa Memorial Hospital et al., also on certiorari to the same court.

2

DOUGLAS v. INDEPENDENT LIVING CENTER OF

SOUTHERN CAL., INC.




Syllabus


amendments to CMS. Before the agency finished its review, Medicaid providers and beneficiaries sought, in a series of cases, to enjoin the rate reductions on the ground that they were pre-empted by federal Medicaid law. In seven decisions, the Ninth Circuit ultimately affirmed or ordered preliminary injunctions preventing the State from implementing its statutes. The court (1) held that the providers and beneficiaries could bring a Supremacy Clause action; (2) essentially accepted their claim that the State did not show that its amended plan would provide sufficient services; (3) held that the amendments thus conflicted with §1396a(a)(30)(A); and (4) held that the federal statute pre-empted the new state laws. In the meantime, agency officials disapproved the amendments, and California sought further administrative review. The cases were in this posture when the Court granted certiorari to decide whether respondents could mount a Supremacy Clause challenge. After oral argument, CMS approved several of the State’s amendments, and the State withdrew its requests for approval of the remainder.
Held: The judgments are vacated and the cases are remanded, thereby permitting the parties to argue before the Ninth Circuit in the first instance the question whether respondents may maintain Supremacy Clause actions now that CMS has approved the state statutes. Pp. 5–8. (a) CMS’ approval does not make these cases moot, but it does put them in a different posture, since the federal agency charged with administering Medicaid has now found that the rate reductions comply with federal law. That decision does not change the substantive question whether California’s statutes are consistent with federal law, but it may change the answer. It may also require respondents to seek review of CMS’ determination under the Administrative Procedure Act (APA) rather than in a Supremacy Clause action against California. The APA would likely permit respondents to obtain an authoritative judicial determination of the merits of their legal claim. And their basic challenge now presents the kind of legal question ordinarily calling for APA review. The Medicaid Act commits to a federal agency the power to administer a federal program, and the agency has exercised that authority. As CMS is comparatively expert in the statute’s subject matter, its decision carries weight. And §1396a(a)(30)(A)’s broad and general language suggests that CMS’ expertise is relevant in determining the provision’s application. Finally, to allow a Supremacy Clause action to proceed once CMS has reached a decision threatens potential inconsistency or confusion. The Ninth Circuit declined to give weight to the Federal Government’s interpretation of the federal law, but courts are ordinarily required to apply deference standards to agency decisionmaking. The

Cite as: 565 U. S. ____ (2012)

3

Syllabus
parties suggest no reasons why such standards should not be applied here or why, now that CMS has acted, a court should reach a different result in an APA action than in a Supremacy Clause action. That would make the Supremacy Clause challenge at best redundant. Permitting it to continue would seem inefficient, for the federal agency is not a participant in the action, which will decide whether agency-approved state rates violate federal law. Pp. 5–8.
(b) Given the present posture of the cases, the Court does not address whether the Ninth Circuit properly recognized a Supremacy Clause action to enforce the federal law before the agency took final action. To decide whether these cases may proceed under the Supremacy Clause now that the agency has acted, it will be necessary on remand to consider at least the matters addressed by this Court. P. 8. No. 09–958, 572 F. 3d 644 (first judgment), 342 Fed. Appx. 306 (second judgment), No. 09–1158, 596 F. 3d 1098, 563 F. 3d 847, 374 Fed. Appx. 690, 596 F. 3d 1087, and No. 10–283, 380 Fed. Appx. 656, vacated and remanded.
BREYER, J., delivered the opinion of the Court, in which KENNEDY, GINSBURG, SOTOMAYOR, and KAGAN, JJ., joined. ROBERTS, C. J., filed a dissenting opinion, in which SCALIA, THOMAS, and ALITO, JJ., joined.

Cite as: 565 U. S. ____ (2012)

1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES
_________________

Nos. 09–958, 09–1158, and 10–283
_________________

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DE-


PARTMENT OF HEALTH CARE SERVICES, 


PETITIONER 


09–958

v.

INDEPENDENT LIVING CENTER OF SOUTHERN

CALIFORNIA, INC., ET AL.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DE-


PARTMENT OF HEALTH CARE SERVICES, 


PETITIONER 


09–1158

v.

CALIFORNIA PHARMACISTS ASSOCIATION ET AL.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DE-


PARTMENT OF HEALTH CARE SERVICES, 


PETITIONER 


10–283

v.

SANTA ROSA MEMORIAL HOSPITAL ET AL.

ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
[February 22, 2012]

JUSTICE BREYER delivered the opinion of the Court.
We granted certiorari in these cases to decide whether Medicaid providers and recipients may maintain a cause of action under the Supremacy Clause to enforce a federal Medicaid law—a federal law that, in their view, conflicts

2

DOUGLAS v. INDEPENDENT LIVING CENTER OF

SOUTHERN CAL., INC.




Opinion of the Court 


with (and pre-empts) state Medicaid statutes that reduce
payments to providers. Since we granted certiorari, however, the relevant circumstances have changed. The federal agency in charge of administering Medicaid, the Cen-
ters for Medicare & Medicaid Services (CMS), has now approved the state statutes as consistent with the federal
law. In light of the changed circumstances, we believe that the question before us now is whether, once the agency has approved the state statutes, groups of Medicaid
providers and beneficiaries may still maintain a Supremacy Clause action asserting that the state statutes are inconsistent with the federal Medicaid law. For the rea-
sons set forth below, we vacate the Ninth Circuit’s judgments and remand these cases for proceedings consistent
with this opinion.

I 
 A 

Medicaid is a cooperative federal-state program that provides medical care to needy individuals. To qualify for federal funds, States must submit to a federal agency (CMS, a division of the Department of Health and Human Services) a state Medicaid plan that details the nature and scope of the State’s Medicaid program. It must also submit any amendments to the plan that it may make from time to time. And it must receive the agency’s approval of the plan and any amendments. Before granting approval, the agency reviews the State’s plan and amendments to determine whether they comply with the statutory and regulatory requirements governing the Medicaid program. See 42 U. S. C. §§1316(a)(1), (b), 1396a(a), (b); 42 CFR §430.10 et seq. (2010); Wilder v. Virginia Hospital Assn., 496 U. S. 498, 502 (1990). And the agency’s director has specified that the agency will not provide federal funds for any state plan amendment until the agency approves the amendment. See Letter from Timothy M. Westmoreland,

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3

Opinion of the Court
Director, Center for Medicaid & State Operations, Health Care Financing Admin., U. S. Dept. of Health and Human Servs., to State Medicaid Director (Jan. 2, 2001), online at http://www.cms.gov/SMDL/downloads/SMD010201.pdf (as visited Feb. 17, 2012, and available in Clerk of Court’s case file).
The federal statutory provision relevant here says that a State’s Medicaid plan and amendments must:
“provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan . . . as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.” 42 U. S. C. §1396a(a)(30)(A) (emphasis added).
B
In 2008 and 2009, the California Legislature passed three statutes changing that State’s Medicaid plan. The first statute, enacted in February 2008, reduced by 10% payments that the State makes to various Medicaid providers, such as physicians, pharmacies, and clinics. See 2007–2008 Cal. Sess. Laws, 3d Extraordinary Sess. ch. 3, §§14, 15. The second statute, enacted in September 2008, replaced the 10% rate reductions with a more modest set of cuts. See 2008 Cal. Sess. Laws ch. 758, §§45, 57. And the last statute, enacted in February 2009, placed a cap on the State’s maximum contribution to wages and benefits paid by counties to providers of in-home supportive services. See 2009–2010 Cal. Sess. Laws, 3d Extraordinary Sess. ch. 13, §9.
In September and December 2008, the State submitted

4

DOUGLAS v. INDEPENDENT LIVING CENTER OF

SOUTHERN CAL., INC.




Opinion of the Court 


to the federal agency a series of plan amendments de-
signed to implement most of the reductions contained in these bills. Before the agency finished reviewing the amendments, however, groups of Medicaid providers and
beneficiaries filed a series of lawsuits seeking to enjoin the rate reductions on the ground that they conflicted with,
and therefore were pre-empted by, federal Medicaid law, in particular the statutory provision that we have just set forth. They argued that California’s Medicaid plan
amendments were inconsistent with the federal provision because the State had failed to study whether the rate reductions would be consistent with the statutory factors
of efficiency, economy, quality, and access to care. In effect, they argued that California had not shown that its
Medicaid plan, as amended, would “enlist enough providers” to make Medicaid “care and services” sufficiently available. 42 U. S. C. §1396a(a)(30)(A).
The consolidated cases before us encompass five lawsuits brought by Medicaid providers and beneficiaries
against state officials. Those cases produced seven decisions of the Court of Appeals for the Ninth Circuit. See 572 F. 3d 644 (2009); 342 Fed. Appx. 306 (2009); 596 F. 3d
1098 (2010); 563 F. 3d 847 (2009); 374 Fed. Appx. 690 (2010); 596 F. 3d 1087 (2010); and 380 Fed. Appx. 656
(2010). The decisions ultimately affirmed or ordered preliminary injunctions that prevented the State from implementing its statutes. They (1) held that the Medi-
caid providers and beneficiaries could directly bring an action based on the Supremacy Clause; (2) essentially
accepted the claim that the State had not demonstrated that its Medicaid plan, as amended, would provide sufficient services; (3) held that the amendments consequently
conflicted with the statutory provision we have quoted; and (4) held that, given the Constitution’s Supremacy
Clause, the federal statute must prevail. That is to say, the federal statute pre-empted the State’s new laws.

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5

Opinion of the Court
In the meantime, the federal agency was also reviewing the same state statutes to determine whether they satisfied the same federal statutory conditions. In November 2010, agency officials concluded that they did not satisfy those conditions, and the officials disapproved the amendments. California then exercised its right to further administrative review within the agency. The cases were in this posture when we granted certiorari to decide whether respondents could mount a Supremacy Clause challenge to the state statutes and obtain a court injunction preventing California from implementing its statutes.
About a month after we heard oral argument, the federal agency reversed course and approved several of California’s statutory amendments to its plan. See Letter from Donald M. Berwick, Administrator, CMS, to Toby Douglas, Director, Cal. Dept. of Health Care Servs. (Oct. 27, 2011); Letter from Larry Reed, Director, Division of Pharmacy, Disabled and Elderly Health Programs Group, CMS, to Toby Douglas, Director, Cal. Dept. of Health Care Servs. (Oct. 27, 2011). In doing so, the agency also approved a limited retroactive implementation of some of the amendments’ rate reductions. The State, in turn, withdrew its requests for approval of the remaining amendments, in effect agreeing (with one exception) that it would not seek to implement any unapproved reduction. See Letter from Michael E. Kilpatrick, Assistant Chief Counsel, Cal. Dept. of Health Care Servs., to Benjamin R. Cohen, Director, Office of Hearings, CMS (Oct. 27, 2011). (The exception consists of one statute for which California has submitted no amendment and which, by its own terms, cannot take effect unless and until this litigation is complete, see 2010 Cal. Sess. Laws ch. 725, §25.)
II
All parties agree that the agency’s approval of the enjoined rate reductions does not make these cases moot.

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DOUGLAS v. INDEPENDENT LIVING CENTER OF

SOUTHERN CAL., INC.




Opinion of the Court 


For one thing, the providers and beneficiaries continue to
believe that the reductions violate the federal provision, the agency’s view to the contrary notwithstanding. For another, federal-court injunctions remain in place, forbid-
ding California to implement the agency-approved rate reductions. And, in light of the agency’s action, California
may well ask the lower courts to set those injunctions aside.
While the cases are not moot, they are now in a different
posture. The federal agency charged with administering the Medicaid program has determined that the challenged rate reductions comply with federal law. That agency
decision does not change the underlying substantive question, namely whether California’s statutes are consistent
with a specific federal statutory provision (requiring that reimbursement rates be “sufficient to enlist enough providers”). But it may change the answer. And it may
require respondents now to proceed by seeking review of the agency determination under the Administrative Pro-
cedure Act (APA), 5 U. S. C. §701 et seq., rather than in an action against California under the Supremacy Clause.
For one thing, the APA would likely permit respondents to obtain an authoritative judicial determination of the merits of their legal claim. The Act provides for judicial
review of final agency action. §704. It permits any person adversely affected or aggrieved by agency action to obtain judicial review of the lawfulness of that action. §702. And
it requires a reviewing court to set aside agency action found to be “arbitrary, capricious, an abuse of discretion,
or otherwise not in accordance with law.” §706(2)(A). For another thing, respondents’ basic challenge now
presents the kind of legal question that ordinarily calls for
APA review. The Medicaid Act commits to the federal agency the power to administer a federal program. And
here the agency has acted under this grant of authority. That decision carries weight. After all, the agency is

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7

Opinion of the Court
comparatively expert in the statute’s subject matter. And the language of the particular provision at issue here is broad and general, suggesting that the agency’s expertise is relevant in determining its application.
Finally, to allow a Supremacy Clause action to proceed once the agency has reached a decision threatens potential inconsistency or confusion. In these cases, for example, the Ninth Circuit, in sustaining respondents’ challenges, declined to give weight to the Federal Government’s interpretation of the federal statutory language. (That view was expressed in an amicus curiae brief that the United States submitted in prior litigation.) See Independent Living Center of Southern Cal., Inc. v. Maxwell-Jolly, 572 F. 3d 644, 654 (CA9 2009) (referring to the United States’ certiorari-stage invitation brief in Belshe v. Orthopaedic Hospital, 522 U. S. 1044 (1998) (denying writ of certiorari)). And the District Court decisions that underlie injunctions that now forbid California to implement its laws may rest upon similar analysis.
But ordinarily review of agency action requires courts to apply certain standards of deference to agency decisionmaking. See National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967 (2005) (describing deference reviewing courts must show); Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984) (same). And the parties have not suggested reasons why courts should not now (in the changed posture of these cases) apply those ordinary standards of deference.
Nor have the parties suggested reasons why, once the agency has taken final action, a court should reach a different result in a case like this one, depending upon whether the case proceeds in a Supremacy Clause action rather than under the APA for review of an agency decision. Indeed, to permit a difference in result here would subject the States to conflicting interpretations of federal

8

DOUGLAS v. INDEPENDENT LIVING CENTER OF


SOUTHERN CAL., INC.




Opinion of the Court 


law by several different courts (and the agency), thereby
threatening to defeat the uniformity that Congress intended by centralizing administration of the federal program in the agency and to make superfluous or to under-
mine traditional APA review. Cf. Astra USA, Inc. v. Santa Clara County, 563 U. S. ___, ___ (2011) (slip op., at 2)
(noting that the treatment of lawsuits that are “in substance one and the same” “must be the same, ‘[n]o matter the clothing in which [plaintiffs] dress their claims’ ” (quot-
ing Tenet v. Doe, 544 U. S. 1, 8 (2005)). If the two kinds of actions should reach the same result, the Supremacy
Clause challenge is at best redundant. And to permit the continuation of the action in that form would seem to be
inefficient, for the agency is not a participant in the pending litigation below, litigation that will decide whether the agency-approved state rates violate the federal statute.

III
In the present posture of these cases, we do not address whether the Ninth Circuit properly recognized a Supremacy Clause action to enforce this federal statute before the agency took final action. To decide whether these cases may proceed directly under the Supremacy Clause now that the agency has acted, it will be necessary to take account, in light of the proceedings that have already taken place, of at least the matters we have set forth above. It must be recognized, furthermore, that the parties have not fully argued this question. Thus, it may be that not all of the considerations that may bear upon the proper resolution of the issue have been presented in the briefs to this Court or in the arguments addressed to and considered by the Court of Appeals. Given the complexity of these cases, rather than ordering reargument, we vacate the Ninth Circuit’s judgments and remand the cases, thereby permitting the parties to argue the matter before that Circuit in the first instance.
It is so ordered.

Cite as: 565 U. S. ____ (2012)

1

ROBERTS, C. J., dissenting

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES
_________________

Nos. 09–958, 09–1158, and 10–283
_________________

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DE-


PARTMENT OF HEALTH CARE SERVICES, 


PETITIONER 


09–958

v.

INDEPENDENT LIVING CENTER OF SOUTHERN

CALIFORNIA, INC., ET AL.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DE-


PARTMENT OF HEALTH CARE SERVICES, 


PETITIONER 


09–1158

v.

CALIFORNIA PHARMACISTS ASSOCIATION ET AL.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DE-


PARTMENT OF HEALTH CARE SERVICES, 


PETITIONER 


10–283

v.

SANTA ROSA MEMORIAL HOSPITAL ET AL.

ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
[February 22, 2012]

CHIEF JUSTICE ROBERTS, with whom JUSTICE SCALIA, JUSTICE THOMAS, and JUSTICE ALITO join, dissenting.
The Medicaid Act established a collaborative federalstate program to assist the poor, elderly, and disabled in obtaining medical care. The Act is Spending Clause legis-

2

DOUGLAS v. INDEPENDENT LIVING CENTER OF

SOUTHERN CAL., INC.

ROBERTS, C. J., dissenting

lation; in exchange for federal funds a State agrees to
abide by specified rules in implementing the program. One of those rules is set forth in §30(A) of the Act, which requires States to meet particular criteria in establishing
Medicaid reimbursement rates for those providing services under the Act. 42 U. S. C. §1396a(a)(30)(A). In 2008 and
2009, California enacted legislation reducing the rates at which it would compensate some providers. Certain providers and individuals receiving Medicaid benefits thought
the new reimbursement rates did not comply with the criteria set forth in §30(A). They sued the State to prevent the new rates from going into effect.
But those plaintiffs faced a significant problem: Nothing in the Medicaid Act allows providers or beneficiaries
(or anyone else, for that matter) to sue to enforce §30(A). The Act instead vests responsibility for enforcement with a federal agency, the Centers for Medicare & Medicaid
Services (CMS). See, e.g., 42 U. S. C. §1316(a)(1). That is settled law in the Ninth Circuit. See Sanchez v. Johnson,
416 F. 3d 1051, 1058–1062 (2005) (“[T]he flexible, administrative standards embodied in [§30(A)] do not reflect a
Congressional intent to provide a private remedy for their violation”). And it is the law in virtually every other circuit as well. See, e.g., Long Term Care Pharmacy Alli-
ance v. Ferguson, 362 F. 3d 50, 57–59 (CA1 2004) (holding that it would be inconsistent with this Court’s precedent to
find that §30(A) creates rights enforceable by private parties). The respondents have never argued the contrary.
Thus, as this case comes to us, the federal rule is that Medicaid reimbursement rates must meet certain criteria, but private parties have no statutory right to sue to en-
force those requirements in court. The providers and beneficiaries sought to overcome that
difficulty by arguing that they could proceed against the State directly under the Supremacy Clause of the Constitution, even if they could not do so under the Act. They

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3

ROBERTS, C. J., dissenting
contended that the new state reimbursement rates were inconsistent with the requirements of §30(A). The Supremacy Clause provides that a federal statute such as §30(A) preempts contrary state law. Therefore, the providers and beneficiaries claimed, they could sue to enforce the Supremacy Clause, which requires striking down the state law and giving effect to §30(A). The Ninth Circuit agreed with this argument and blocked the new state reimbursement rates.
During briefing and argument in this case, the parties have debated broad questions, such as whether and when constitutional provisions as a general matter are directly enforceable. It is not necessary to consider these larger issues. It is not even necessary to decide whether the Supremacy Clause can ever provide a private cause of action. The question presented in the certiorari petitions is narrow: “Whether Medicaid recipients and providers may maintain a cause of action under the Supremacy Clause to enforce [§30(A)] by asserting that the provision preempts a state law reducing reimbursement rates.” To decide this case, it is enough to conclude that the Supremacy Clause does not provide a cause of action to enforce the requirements of §30(A) when Congress, in establishing those requirements, elected not to provide such a cause of action in the statute itself.
The Supremacy Clause operates differently than other constitutional provisions. For example, if Congress says in a law that certain provisions do not give rise to a taking without just compensation, that obviously does not resolve a claim under the Takings Clause that they do. The Supremacy Clause, on the other hand, is “not a source of any federal rights.” Chapman v. Houston Welfare Rights Organization, 441 U. S. 600, 613 (1979); accord, Dennis v. Higgins, 498 U. S. 439, 450 (1991) (contrasting, in this regard, the Supremacy Clause and the Commerce Clause). The purpose of the Supremacy Clause is instead to ensure

4

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SOUTHERN CAL., INC.




ROBERTS, C. J., dissenting


that, in a conflict with state law, whatever Congress says
goes. See The Federalist, No. 33, p. 205 (C. Rossiter ed. 1961) (A. Hamilton) (the Supremacy Clause “only declares a truth which flows immediately and necessarily from the
institution of a federal government”). Thus, if Congress does not intend for a statute to supply
a cause of action for its enforcement, it makes no sense to claim that the Supremacy Clause itself must provide one. Saying that there is a private right of action under the
Supremacy Clause would substantively change the federal rule established by Congress in the Medicaid Act. That is not a proper role for the Supremacy Clause, which simply
ensures that the rule established by Congress controls. Indeed, to say that there is a federal statutory right
enforceable under the Supremacy Clause, when there is no such right under the pertinent statute itself, would effect a complete end-run around this Court’s implied right of
action and 42 U. S. C. §1983 jurisprudence. We have emphasized that “where the text and structure of a statute
provide no indication that Congress intends to create new individual rights, there is no basis for a private suit, whether under §1983 or under an implied right of action.”
Gonzaga Univ. v. Doe, 536 U. S. 273, 286 (2002). This body of law would serve no purpose if a plaintiff could
overcome the absence of a statutory right of action simply by invoking a right of action under the Supremacy Clause
to the exact same effect. Cf. Astra USA, Inc. v. Santa Clara County, 563 U. S. ___, ___ (2011) (slip op., at 7)
(rejecting contention that contract incorporating statutory terms could be enforced in private action when statute itself could not be; “[t]he absence of a private right to
enforce the statutory ceiling price obligations would be rendered meaningless if [contracting] entities could over-
come that obstacle by suing to enforce the contract’s ceiling price obligations instead”).
The providers and beneficiaries argue, however, that the

Cite as: 565 U. S. ____ (2012)

5

ROBERTS, C. J., dissenting
traditional exercise of equity jurisdiction supports finding a direct cause of action in the Supremacy Clause. This contention fails for the same reason. It is a longstanding maxim that “[e]quity follows the law.” 1 J. Pomeroy, Treatise on Equity Jurisprudence §425 (3d ed. 1905). A court of equity may not “create a remedy in violation of law, or even without the authority of law.” Rees v. Watertown, 19 Wall. 107, 122 (1874). Here the law established by Congress is that there is no remedy available to private parties to enforce the federal rules against the State. For a court to reach a contrary conclusion under its general equitable powers would raise the most serious concerns regarding both the separation of powers (Congress, not the Judiciary, decides whether there is a private right of action to enforce a federal statute) and federalism (the States under the Spending Clause agree only to conditions clearly specified by Congress, not any implied on an ad hoc basis by the courts).
This is not to say that federal courts lack equitable powers to enforce the supremacy of federal law when such action gives effect to the federal rule, rather than contravening it. The providers and beneficiaries rely heavily on cases of this kind, most prominently Ex parte Young, 209 U. S. 123 (1908). Those cases, however, present quite different questions involving “the pre-emptive assertion in equity of a defense that would otherwise have been available in the State’s enforcement proceedings at law.” Virginia Office for Protection and Advocacy v. Stewart, 563 U. S. ___, ___ (2011) (KENNEDY, J., concurring) (slip op., at 1). Nothing of that sort is at issue here; the respondents are not subject to or threatened with any enforcement proceeding like the one in Ex parte Young. They simply seek a private cause of action Congress chose not to provide.

6

DOUGLAS v. INDEPENDENT LIVING CENTER OF

SOUTHERN CAL., INC.




ROBERTS, C. J., dissenting


* * *
The Court decides not to decide the question on which we granted certiorari but instead to send the cases back to the Court of Appeals, because of the recent action by CMS approving California’s new reimbursement rates. But the CMS approvals have no impact on the question before this Court. If, as I believe, there is no private right of action under the Supremacy Clause to enforce §30(A), that is the end of the matter. If, on the other hand, the Court believes that there is such a cause of action, but that CMS’s recent rate approvals may have an effect on that action going forward, then the Court should say just that and then remand to the Ninth Circuit for consideration of the effect of the agency approvals.
I am not sure what a remand without answering the preliminary question is meant to accomplish. The majority claims that the agency’s recent action “may change the [lower courts’] answer” to the question whether the particular state rates violate §30(A). Ante, at 6. But that factspecific question is not the one before us; we chose not to grant certiorari on the question whether California’s rates complied with §30(A), limiting our grant to the cause of action question. 562 U. S. ___ (2011).
The majority also asserts that the lower courts must “decide whether these cases may proceed directly under the Supremacy Clause now that the agency has acted.” Ante, at 8. The majority contends that the parties have not “fully argued this question.” Ibid. But the agency proceedings that ultimately led to the CMS approvals were well underway when this Court granted certiorari. The parties debated the import of the parallel administrative proceedings in their initial briefs and at oral argument. See, e.g., Brief for Petitioner 28–29 (“Private lawsuits . . . interfere with . . . CMS’s own enforcement procedures,” as is “vividly demonstrated in the present cases”); Brief for Respondents Santa Rosa Memorial Hos-

Cite as: 565 U. S. ____ (2012)

7

ROBERTS, C. J., dissenting
pital et al. in No.10–283, p. 46 (“This case vividly illustrates why the [administrative] enforcement scheme . . . cannot substitute for a constitutional preemption claim”). No party—nor the United States as amicus curiae— argued that any action by CMS would affect the answer to the question we granted certiorari to review. See, e.g., Tr. of Oral Arg. 53–54 (counsel for respondents) (arguing that, “to be sure,” there would be a cause of action under the Supremacy Clause even after the agency took action on the challenged rates).
Once the CMS approvals were issued, this Court directed the parties to file supplemental briefs to address “the effect, if any, of the [CMS approvals] on the proper disposition of this case.” 565 U. S. ___ (2011). Again, no one argued on supplemental briefing that the CMS approvals affected the answer to the question before this Court. See, e.g., Supp. Letter Brief for Certain Respondents 6 (“The CMS findings do not directly resolve whether the Constitution supports a right of action”); Supp. Letter Brief for Petitioner 6 (agreeing that “if a preemption cause of action may be stated here against the State, [CMS] approval may affect its merits but not its existence”). It seems odd, then, to claim that the parties have not had the opportunity to fully address the impact of the agency action on the question that we granted certiorari to review: whether the Ninth Circuit correctly recognized a private cause of action under the Supremacy Clause to enforce §30(A).
So what is the Court of Appeals to do on remand? It could change its view and decide that there is no cause of action directly under the Supremacy Clause to enforce §30(A). The majority itself provides a compelling list of reasons for such a result: “The Medicaid Act commits to the federal agency the power to administer a federal program”; “the agency is comparatively expert in the statute’s subject matter”; “the language of the particular provision

8

DOUGLAS v. INDEPENDENT LIVING CENTER OF

SOUTHERN CAL., INC.




ROBERTS, C. J., dissenting


at issue here is broad and general, suggesting that the
agency’s expertise is relevant”; and APA review would provide “an authoritative judicial determination.” Ante, at 6–7. Allowing for both Supremacy Clause actions and
agency enforcement “threatens potential inconsistency or confusion,” and imperils “the uniformity that Congress
intended by centralizing administration of the federal program in the agency.” Ante, at 7–8; see Gonzaga, 536 U. S., at 291–293 (BREYER, J., concurring in judgment)
(explaining that Congress often means to preclude a private right of action in statutes where it employs an ad-
ministrative enforcement scheme that achieves “expertise, uniformity, widespread consultation, and resulting administrative guidance,” while “avoid[ing] the comparative risk
of inconsistent interpretations and misincentives that can arise out of an occasional inappropriate application of the
statute in a private action for damages”). The majority acknowledges, in light of all this, that the
Supremacy Clause challenge appears “at best redundant,”
and that “continuation of the action in that form would seem to be inefficient.” Ante, at 8. Still, according to the
majority, the Court of Appeals on remand could determine that the Supremacy Clause action may be brought but then must abate “now that the agency has acted,” ibid.—
as everyone knew the agency would. A Court concerned with “inefficien[cy]” should not find that result very pal-
atable, and the majority cites no precedent for a cause of action that fades away once a federal agency has acted.
Such a scenario would also create a bizarre rush to the courthouse, as litigants seek to file and have their Supremacy Clause causes of action decided before the agency
has time to arrive at final agency action reviewable in court.
Or perhaps the suits should continue in a different “form,” by which I understand the Court to suggest that they should morph into APA actions. The APA judicial

Cite as: 565 U. S. ____ (2012)

9

ROBERTS, C. J., dissenting
review provisions, however, seem to stand in the way of such a transformation. To convert the litigation into an APA suit, the current defendant (the State) would need to be dismissed and the agency (which is not currently a party at all) would have to be sued in its stead. 5 U. S. C. §§701–706. Given that APA actions also feature—among other things—different standards of review, different records, and different potential remedies, it is difficult to see what would be left of the original Supremacy Clause suit. Or, again, why one should have been permitted in the first place, when agency review was provided by statute, and the parties were able to and did participate fully in that process.
I would dispel all these difficulties by simply holding what the logic of the majority’s own opinion suggests: When Congress did not intend to provide a private right of action to enforce a statute enacted under the Spending Clause, the Supremacy Clause does not supply one of its own force. The Ninth Circuit’s decisions to the contrary should be reversed.

 
 No. 09-958 Title:

Toby Douglas, Director, California Department of Health Care Services, Petitioner

v.

Independent Living Center of Southern California, Inc., et al.

Docketed:

February 17, 2010

Linked with 09A508

Lower Ct:

United States Court of Appeals for the Ninth Circuit

Case Nos.:

(08-56422, 08-56554)

Decision Date: July 9, 2009

Rehearing Denied:

October 29, 2009

Rule 12.4

Questions

Presented

~~~Date~~~ ~~~~~~~Proceedings and Orders~~~~~~~~~~~~~~~~~~~~~
Nov 23 2009 Application (09A508) to extend the time to file a petition for a writ of certiorari from December 22, 2009 to February 20, 2010, submitted to Justice Kennedy.
Dec 2 2009 Application (09A508) granted by Justice Kennedy extending the time to file until January 22, 2010.
Jan 8 2010 Application (09A508) to extend further the time from January 22, 2010 to February 20, 2010, submitted to Justice Kennedy.
Jan 8 2010 Application (09A658) to extend the time to file a petition for a writ of certiorari from January 27, 2010 to February 22, 2010, submitted to Justice Kennedy.
Jan 15 2010 Application (09A658) granted by Justice Kennedy extending the time to file until February 22, 2010.
Jan 15 2010 Application (09A508) granted by Justice Kennedy extending the time to file until February 19, 2010.
Feb 16 2010 Petition for a writ of certiorari filed. (Response due March 19, 2010)
Mar 3 2010 Order extending time to file response to petition to and including April 19, 2010, for all respondents.
Mar 19 2010 Brief amici curiae of Michigan, et al. filed.
Apr 19 2010 Brief of respondents Sacramento Family Medical Clinics, Inc., et al. in opposition filed.

Apr 19 2010 Brief of respondents Independent Living Center of Southern California, Inc., et al. in opposition filed.
Apr 30 2010 Reply of petitioner David Maxwell-Jolly, Director, California Department of Health Care Services filed.
May 4 2010 DISTRIBUTED for Conference of May 20, 2010.
May 24 2010 The Solicitor General is invited to file a brief in this case expressing the views of the United States.
Dec 3 2010 Brief amicus curiae of United States filed.
Dec 14 2010 Supplemental brief of petitioner David Maxwell-Jolly, Director, California Department of Health Care Services filed.
Dec 15 2010 DISTRIBUTED for Conference of January 7, 2011.
Jan 10 2011 DISTRIBUTED for Conference of January 14, 2011.
Jan 13 2011 Letter of January 13, 2011, from Acting Solicitor General received. (Distributed)
Jan 18 2011 Petition GRANTED limited to Question 1 presented by the petitions. The petitions for certiorari in No. 09-1158 and No. 10-283 are granted limited to Question 1 presented by the petitions. The cases are consolidated and a total of one hour is allotted for oral argument. VIDED.
Feb 17 2011 The time to file the joint appendix and petitioners' briefs on the merits is extended to and including April 14, 2011. VIDED.
Feb 17 2011 The time to file respondents' briefs on the merits is extended to and including June 24, 2011. VIDED.
Apr 7 2011 The time to file the joint appendix and petitioners' briefs on the merits is further extended to and including May 19, 2011. VIDED.
Apr 7 2011 The time to file respondents' briefs on the merits is further extended to and including July 29, 2011. VIDED.
May 19 2011 Joint appendix filed. VIDED. (Statement of costs filed)
May 19 2011 Brief of petitioner Toby Douglas, Director, California Department of Health Care Services filed. VIDED.
May 25 2011 Brief amici curiae of National Governors Association, et al. filed. VIDED.
May 26 2011 Brief amicus curiae of the United States filed. VIDED.
May 26 2011 Brief amicus curiae of APA Watch filed. VIDED.
May 26 2011 Brief amici curiae of Michigan and 30 Other States filed. VIDED.
Jul 15 2011 CIRCULATED.
Jul 19 2011 SET FOR ARGUMENT ON Monday, October 3, 2011.
Jul 29 2011 Brief of respondents California Pharmacists, et al. filed. VIDED. (Distributed)
Jul 29 2011 Brief of respondents Santa Rosa Memorial Hospital, et al. filed. VIDED. (Distributed)
Jul 29 2011 Brief of respondents Dominguez, et al. filed. VIDED. (Distributed)
Jul 29 2011 Brief of respondents Independent Living Center of Southern California, Inc., et al. filed. VIDED. (Distributed)
Aug 4 2011 Brief amici curiae of National Association of Chain Drug Stores, et al. filed.

VIDED. (Distributed)
Aug 5 2011 Brief amicus curiae of Chamber of Commerce of the United States of America filed. VIDED. (Distributed)
Aug 5 2011 Motion of the Solicitor General for leave to participate in oral argument as amicus curiae and for divided argument filed. VIDED.
Aug 5 2011 Brief amici curiae of Members of Congress filed. VIDED. (Distributed)
Aug 5 2011 Brief amici curiae of American Medical Association, et al. filed. VIDED. (Distributed)
Aug 5 2011 Brief amici curiae of American Civil Liberties Union, et al. filed. VIDED. (Distributed)
Aug 5 2011 Brief amici curiae of American Health Care Association, et al. filed. VIDED. (Distributed)
Aug 5 2011 Brief amicus curiae of AARP, et al. filed. (Distributed)
Aug 5 2011 Brief amici curiae of Former HHS Officials filed. VIDED. (Distributed)
Aug 8 2011 Application (11A171) of petitioners for an extension of time to file a reply brief on the merits and to exceed the word limit, submitted to Justice Kennedy. VIDED
Aug 10 2011 Application (11A171) granted by Justice Kennedy of petitioners for an extension of time to file a reply brief on the merits and to exceed the word limit. The reply brief of no more than 9,000 words is to be filed on or before September 6, 2011.
Aug 11 2011 Record received fro U.S.C.A. for 9th Circuit. (1 envelope)
Aug 11 2011 Record from U.S.D.C. for Central District of California is electronic.
Sep 1 2011 Reply of petitioners Toby Douglas, Director, California Department of Health Care Services filed. VIDED. (Distributed)
Sep 27 2011 Motion of the Solicitor General for leave to participate in oral argument as amicus curiae and for divided argument GRANTED. VIDED.

Oct 3 2011

Argued. For petitioner: Karin S. Schwartz, Supervising Deputy Attorney General, San Francisco, Cal.; and Edwin S. Kneedler, Deputy Solicitor General, Department of Justice, Washington, D. C. (for United States, as amicus curiae.) For respondents: Carter G. Phillips, Washington, D. C.)

Oct 28 2011 Letter with attachments received from the Solicitor General. VIDED. (Distributed)

Nov 4 2011

The parties and the Solicitor General are directed to file supplemental briefs addressing the following question: "What should be the effect, if any, of the developments discussed in the letter submitted by the Solicitor General on October 28, 2011, on the proper disposition of this case?" The briefs, in letter format, limited to 10 pages, are to be filed simultaneously with the Clerk and served upon opposing counsel on or before 2 p.m., Friday, November 18, 2011. VIDED.

Nov 18 2011 Supplemental brief of petitioner Toby Douglas, Director, California Department of Health Care Services filed. VIDED. (Distributed)

Nov 18 2011 Supplemental brief of respondents Independent Living Center of Southern

California, Inc., et al. filed. VIDED. (Distributed)
Nov 18 2011 Supplemental brief of United States filed. VIDED. (Distributed)
Nov 18 2011 Supplemental brief of respondents' counsel Carter Phillips, Deanne E. Maynard, and Stephen P. Berzon (Distributed). filed. VIDED.
Jan 17 2012 Letter, dated January 17, 2012, received from the Attorney General of California informing the Court of recent preliminary injunctions. (Distributed). VIDED.
Jan 20 2012 Letter, dated January 20,2012, received from counsel for respondents in response to State of California's letter of January 17, 2012 (Distributed). VIDED.
Feb 22 2012 Judgment VACATED and case REMANDED. Breyer, J., delivered the opinion of the Court, in which Kennedy, Ginsburg, Sotomayor, and Kagan, JJ., joined. Roberts, C. J., filed a dissenting opinion, in which Scalia, Thomas, and Alito, JJ., joined.
Mar 26 2012 JUDGMENT ISSUED.

~~Name~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~Address~~~~~~~~~~~~~~~~~~ ~~Phone~~~

Attorneys for Petitioner:

Karin S. Schwartz

Supervising Deputy Attorney General

(415) 7031382

455 Golden Gate Avenue, Suite 11000

San Francisco, CA 94102-7004

Karin.Schwartz@doj.ca.gov

Party name: Toby Douglas, Director, California Department of Health Care Services

Attorneys for Respondents:

Stephen P. Berzon

Altshuler Berzon LLP

(415) 4217151

Counsel of Record

177 Post Street, Suite 300

San Francisco, CA 94108

sberzon@altshulerberzon.com

Party name: Dominguez, et al.

Lynn S Carman

Medicaid Defense Fund

Counsel of Record

8 Waterbury Lane

Novato, CA 94949

lynnscarman@hotmail.com

Party name: Independent Living Center of Southern California, Inc., et al.

(415) 9274023

Deanne E. Maynard

Morrison & Foerster LLP

(202) 8878740

Counsel of Record

2000 Pennsylvania Avenue, N.W.

Washington, DC 20006

DMaynard@mofo.com

Party name: California Pharmacists, et al.

Carter G. Phillips

Sidley Austin LLP

Counsel of Record

1501 K Street, N.W.

Washington, DC 20005

cphillips@sidley.com

Party name: Santa Rosa Memorial Hospital, et al.

(202) 7368000

Craig J. Cannizzo

Hooper, Lundy & Bookman, Inc.

575 Market Street Suite 2300 San Francisco, CA 94105 ccannizzo@health-law.com Party name: Sacramento Family Medical Clinics, Inc., et al. Other:

Frederick R. Ball

Duane Morris LLP

190 South LaSalle Street, Suite 3700 Chicago, IL 60603 FRBall@duanemorris.com Party name: National Association of Chain Drug Stores, et al.

(415) 8758511
(312)-4996720

Louis W. Bullock

Bullock Bullock & Blakemore

110 W. Seventh Street, Suite 707 Tulsa, OK 74119 lbullock@bullock-blakemore.com Party name: American Medical Association, et al.

(918) 5842001

John J. Bursch

Michigan Solicitor General
Michigan Department of Attorney General P.O. Box 30212 Lansing, MI 48909 BurschJ@michigan.gov

(517) 3731124

Party name: Michigan and 30 Other States

Douglas Hallward-Driemeier

Ropes & Gray LLP

(202) 5084600

One Metro Center

700 12th Street, NW, Suite 900

Washington, DC 20005

Douglas.Hallward-Driemeier@ropesgray.com

Party name: American Health Care Association, et al.

Lawrence J. Joseph Party name: APA Watch

1250 Connecticut Ave., NW
Suite 200 Washington, DC 20036 ljoseph@larryjoseph.com

(202) 6695135

Edwin S. Kneedler

Deputy Solicitor General

(202) 5142217

United States Department of Justice

950 Pennsylvania Avenue, N.W.

Washington, DC 20530-0001

Party name: Toby Douglas, Director, California Department of Health Care Services v. Independent Living Center of Southern California, Inc., et al.

Michael W. McConnell

Kirkland & Ellis LLP

655 Fifteenth Street, N.W. Washington, DC 20005 michael.mcconnell@kirkland.com Party name: National Governors Association, et al.

(202) 8795000

Martha Jane Perkins Party name: AARP, et al.

National Health Law Program
101 E. Weaver Street, #G7 Carrboro, NC 27510 perkins@healthlaw.org

(919)-9686308

B. Eric Restuccia

Deputy Solicitor General

(517) 3731124

Party name: Michigan, et al.

Michigan Attorney General's Office
P.O. Box 30212 Lansing, MI 48909 restucciae@michigan.gov

Paul M. Smith Party name: Members of Congress

Jenner & Block LLP
1099 New York Avenue, N.W., Suite 900 Washington, DC 20001 psmith@jenner.com

(202) 6396000

Alan E. Untereiner

Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP

1801 K Street, N.W., Suite 411

Washington, DC 20006

auntereiner@robbinsrussell.com

Party name: Chamber of Commerce of the United States of America

(202) 7754500

Donald B. Verrilli Jr. Party name: United States

Solicitor General
United States Department of Justice 950 Pennsylvania Avenue, N.W. Washington, DC 20530-0001 SupremeCtBriefs@USDOJ.gov

(202) 5142217

Stephen I. Vladeck Party name: Former HHS Officials

4801 Massachusetts Ave., N.W.
Washington, DC 20016 svladeck@wcl.american.edu

(202)-2744241

Paul R.Q. Wolfson

Wilmer Cutler Pickering Hale and Dorr LLP

1875 Pennsylvania Avenue, N.W. Washington, DC 20006 paul.wolfson@wilmerhale.com Party name: American Civil Liberties Union, et al.

(202) 6636390