Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_10-cv-04605/USCOURTS-cand-4_10-cv-04605-13/pdf.json

Nature of Suit Code: 950
Nature of Suit: Constitutionality of State Statutes
Cause of Action: 42:1396 - Tort Negligence

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United States District Court 

For the Northern District of California 

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IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

LA CLINICA DE LA RAZA, INC., 

 

 Plaintiff, 

 

 v. 

CAL. DEP'T OF HEALTH CARE 

SERVICES, et al., 

 

 Defendants. 

________________________________/ 

No. C 10-4605 CW 

ORDER DENYING 

MOTION FOR 

INJUNCTION PENDING 

APPEAL 

(Docket No. 94) 

On May 13, 2014, this Court entered an order granting in part 

and denying in part Defendants' motion for summary judgment and 

denying Plaintiff's cross-motion for summary judgment. Docket No. 

78.1 Plaintiff appealed to the Ninth Circuit Court of Appeals, 

which appeal remains pending. Docket No. 90. On July 30, 2015, 

Plaintiff filed a motion for an injunction pending appeal. Docket 

No. 94. For the reasons explained below, the Court now denies 

Plaintiff's motion. 

BACKGROUND 

The following facts are taken from the Court's May 13, 2014 

summary judgment order with minor modifications and additions. 

Plaintiff is a nonprofit healthcare organization which provides 

 1 The above-captioned case is related to three other cases. 

The May 13, 2014 order resolved motions that were filed by several 

additional parties not currently before the Court. This order 

omits mention of the additional parties, except where relevant to 

the current dispute, for clarity. 

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medical services to low-income communities in the San Francisco 

bay area. Plaintiff receives funding from the United States and 

the State of California (the Governments) under the Medicaid and 

Medicare programs for operating as a "federally-qualified health 

center" (FQHC). As a condition of this funding, Plaintiff is 

required to report certain information about its operations and 

finances to the Governments. This action arises out of a dispute 

concerning the State's method of reimbursing Plaintiff for certain 

services Plaintiff provides under the Medicare Part D program. 

 Medicare is a federal health insurance program that provides 

benefits to people with disabilities and people over age sixtyfive. See 42 U.S.C. §§ 1395 et seq. The Medicare Act is divided 

into several parts, each of which deals with a different set of 

benefits. Part D, which pertains to prescription drug benefits, 

is the only part relevant here. 

 In 2006, Congress passed legislation expanding Part D 

coverage to individuals who qualify for benefits under both 

Medicaid and Medicare, a group known as "dual-eligibles." This 

legislation effectively shifted responsibility for paying dualeligibles' prescription drug costs from state Medicaid programs to 

Medicare. See 42 U.S.C. § 1396u–5(d)(1). Because of this shift, 

FQHCs in California must now seek reimbursement under Medicare 

Part D, rather than Medi-Cal, for the prescription drug services 

they provide to dual-eligibles. Previously, FQHCs were reimbursed 

for these services in the same way that they were reimbursed for 

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all other of the other services they provided to Medi-Cal 

beneficiaries: that is, a combination of wraparound payments (the 

name given to a system for estimating how much a FQHC is owed) and 

reconciliation payments (the annual process under which a more 

precise calculation of compensation is determined). 

 After the 2006 legislation, the California Department of 

Health Care Services (DHCS) offered FQHCs two options for seeking 

reimbursement for prescription drug services under Medicare Part 

D. Under the first option (Option 1), the FQHC would adjust its 

per-visit reimbursement rate by subtracting the costs of all 

prescription drug services, for both dual-eligibles and other 

Medi-Cal beneficiaries, and seek reimbursements directly from the 

Department of Health and Human Services (HHS) for its services to 

dual-eligibles; DHCS would then reimburse the FQHC at a separate 

per-visit rate for the prescription drug services it provided to 

non dual-eligibles. Under the second option (Option 2), the FQHC 

would continue to receive reimbursements from DHCS at the same 

per-visit reimbursement rate but, during the annual reconciliation 

process, would pay back to DHCS any funding that the FQHC received 

under Medicare Part D during that fiscal year for its prescription 

drug services to dual-eligibles. Following the Part D expansion, 

Plaintiff chose to proceed under Option 2. 

In June 2010, another FQHC, North East Medical Services 

(NEMS), not a party to this action, filed a declaratory judgment 

action against DHCS and its director challenging the agency's 

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efforts to implement the Medicare Part D expansion in California. 

Specifically, NEMS alleged that both reimbursement options offered 

by DHCS violated federal law. Plaintiff, represented by the same 

counsel as NEMS, filed this nearly identical action against DHCS 

and its director in October 2010. The two cases were consolidated 

in November 2010, with Judge Richard Seeborg presiding. 

In June 2011, Judge Seeborg dismissed Plaintiff's and NEMS's 

claims. He found that, because they were seeking to recover Part 

D funds that they had previously paid to DHCS under Option 2, they 

were essentially asserting claims against the State for 

retrospective monetary relief, which is precluded by the Eleventh 

Amendment to the United States Constitution. Plaintiff and NEMS 

appealed the order of dismissal in July 2011. 

In April 2013, the Ninth Circuit affirmed the order of 

dismissal in part and reversed it in part. North East Med. Servs. 

v. Cal. Dep’t Health Care Servs., 712 F.3d 461, 470-71 (9th Cir. 

2013) (NEMS). It held that the district court properly found that 

the Eleventh Amendment barred Plaintiff and NEMS from pursuing 

monetary relief but erred in dismissing the claims in their 

entirety. It reasoned that some of the claims against the 

director of DHCS could potentially be construed as injunctive 

relief claims and "under Ex parte Young, the Eleventh Amendment 

generally does not bar suits for prospective, non-monetary relief 

against state officers." Id. at 466. The court highlighted two 

claims, in particular, that might fall under the Ex Parte Young 

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exception to the Eleventh Amendment. First, it found that one of 

NEMS's claims could be construed as claim for prospective relief 

insofar as NEMS was seeking to avoid future liability for its past 

failures to comply with Option 2, such as when it refused to pay 

DHCS the Medicare Part D money that it received in 2008. Id. at 

470 ("While California has not demanded payment, it has maintained 

that it is entitled to it. This leaves open the possibility that 

California will prospectively apply Option 2 to NEMS for fiscal 

year 2008 when California tries to extract payment from NEMS in 

the future."). Second, the court found that one of Plaintiff's 

claims might also be construed as a claim for prospective relief 

insofar as it was seeking to avoid complying with its obligations 

under Option 2 in the future.2

 Id. ("La Clinica continues to pay 

Medicare Part D payments over to California under Option 2. As 

such, it argues that it is entitled to declaratory and injunctive 

relief barring any future attempt by California to collect La 

Clinica’s Part D payments."). Because the Ninth Circuit found 

that both of these claims "arguably seek genuine prospective 

relief," id. at 466, it remanded "to allow the district court to 

assess Ex Parte Young's application to: (1) NEMS's claim to 

injunctive relief for fiscal year 2008, and (2) Plaintiff's claims 

arising from prospective application of Option 2." Id. at 471. 

 2 The Ninth Circuit did not find that NEMS's claims for declaratory 

relief regarding DHCS's future enforcement of Option 1 contained a 

prospective component. This is likely because "NEMS conceded in both 

its briefing and at oral argument that it suffers no ongoing harm since 

proceeding under Option 1." NEMS, 712 F.3d at 465. 

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Following remand, the cases were related to two other pending 

cases and reassigned to this Court. Docket No. 28. Defendants, 

along with the United States of America (as a defendant in the 

related cases) filed a motion for summary judgment. Docket No. 

50. Plaintiff and NEMS filed a cross-motion for summary judgment. 

Docket No. 65. 

In the portion of the order relevant here, the Court held 

that Ex Parte Young did not apply to NEMS's claim because NEMS was 

seeking retrospective monetary relief; that is, in the context of 

Medicaid payments, NEMS was seeking reimbursement for services 

already rendered. Accordingly, the Eleventh Amendment barred 

NEMS's claims. The Court held that the Eleventh Amendment did not 

bar Plaintiff's claim because Plaintiff was not seeking 

compensation for services it had already rendered. However, the 

Court determined that Plaintiff's claim was moot because Plaintiff 

could still elect to proceed under Option 1. The Court also 

rejected Plaintiff's and NEMS's argument that Option 2 violates 

federal law for an additional and independently adequate reason: 

that neither Plaintiff nor NEMS presented sufficient evidence to 

support an inference that Option 2 violates federal law. 

Plaintiff moved for leave to file a motion for reconsideration; 

the Court denied the motion and entered judgment. Docket Nos. 85 

and 89. Plaintiff then filed its notice of appeal to the Ninth 

Circuit Court of Appeals. 

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There appears to have been no subsequent relevant interaction 

between the parties until May 15, 2015, when DHCS contacted 

Plaintiff to request a reporting of Plaintiff's Part D revenues 

for dual-eligible patients from fiscal year 2011. Docket No. 96-

2, Ex. A. Then, on June 23, 2015, DHCS sent a written notice that 

it would begin the reconciliation process to determine whether 

Plaintiff had been under- or overpaid for fiscal year 2011. 

Plaintiff requested that DHCS delay the reconciliations because 

the payments were the subject of litigation on appeal before the 

Ninth Circuit, but DHCS indicated it would move forward with the 

reconciliation process unless Plaintiff could provide an 

injunctive order prohibiting DHCS from proceeding. On July 29, 

2015, DHCS issued final settlements for the reconciliation 

requests. The final settlements show that Plaintiff owes 

$100,111.00 for one clinic and $28,374.00 for a second clinic; the 

total amount due is thus $128,485.00. Docket No. 96-2, Exs. B and 

C. The following day, July 30, 2015, Plaintiff filed this motion 

seeking an injunction against "all actions by [Defendants] with 

respect to [Plaintiff's] pending reconciliation requests" until 

resolution of its appeal. Docket No. 94. 

LEGAL STANDARD 

 The Court may employ either of two different frameworks to 

determine whether to grant an injunction pending appeal. 

Southeast Alaska Conservation Counsel v. U.S. Army Corps of 

Engineers, 472 F.3d 1097, 1100 (9th Cir. 2006). Under the 

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"traditional test" the moving party must show "(1) a strong 

likelihood of success on the merits, (2) the possibility of 

irreparable injury to the plaintiff if preliminary relief is not 

granted, (3) a balance of hardships favoring the plaintiff, and 

(4) advancement of the public interest (in certain cases)." Id. 

(internal quotations omitted). Under the "alternative test" the 

moving party must show "either a combination of probable success 

on the merits and the possibility of irreparable injury or that 

serious questions are raised and the balance of hardships tips 

sharply in his favor." Id. (internal quotations omitted). "These 

two formulations represent two points on a sliding scale in which 

the required degree of irreparable harm increases as the 

probability of success decreases. They are not separate tests but 

rather outer reaches of a single continuum." Id. (internal 

quotations omitted, capitalization modified). 

ANALYSIS 

A. Plaintiff's Waiver of Relief 

In its opposition, Defendants first argue that there is no 

basis for granting a stay because Plaintiff waived any claim to 

relief involving the services included in the pending 

reconciliation requests when it did not appeal this Court's 

conclusion that relief sought for services provided in the past 

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are retroactive claims barred by the Eleventh Amendment.3 

Defendants argue that, because Plaintiff did not appeal on this 

ground, the Ninth Circuit's eventual ruling cannot possibly undo 

this Court's holding that claims for past services are barred, and 

accordingly granting a stay is inappropriate. In reply, Plaintiff 

argues that its case has often been commingled with facts and 

arguments presented by NEMS; thus, according to Plaintiff, it does 

not matter that Plaintiff did not raise the question on appeal 

because, presumably, NEMS did.4

 

While the Court agrees that it appears that the Ninth 

Circuit's decision could not result in Plaintiff being able to 

keep the money due, as explained below, the Court concludes that 

analysis under the two established tests for preliminary 

injunctions clearly results in denial of Plaintiff's motion. The 

Court, accordingly, proceeds to the analysis under the established 

framework. 

 3 Plaintiff's opening brief articulates two issues presented 

for review: (1) whether this Court erred in denying its claim for 

prospective injunctive relief as moot and (2) whether this Court 

erred in finding that Plaintiff did not present sufficient 

evidence that Option 2 violates federal law. Docket No. 96-1. 

4 Plaintiff provides no proof that NEMS is actually pursuing 

this claim on appeal. Instead, Plaintiff implies that NEMS has 

appealed on this ground, arguing that Defendants' argument creates 

"artificial distinctions between NEMS and [Plaintiff]" and alleges 

"that an argument raised by NEMS cannot also be raised by 

[Plaintiff]." Reply Brief (Docket No. 97) at 3. 

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B. The Traditional Test 

The first showing Plaintiff must make under the "traditional 

test" is that it is likely to succeed on the merits of its claim. 

Southeast Alaska Conservation Counsel, 472 F.3d at 1100. 

Plaintiff has not made a strong showing in this regard. In the 

order on the motions for summary judgment, the Court found that 

Plaintiff's claim was moot because Plaintiff could still elect to 

proceed under Option 1. Plaintiff first argues that it is likely 

to succeed on its appeal because Option 1 is not lawful. 

Plaintiff asserts that it is unlawful because the only way that 

Option 1 can be lawful is if Plaintiff agrees to accept Option 1 

and it has not done so. But the Court did not deny Plaintiff's 

claims on the basis that Plaintiff had accepted Option 1; the 

Court denied Plaintiff's claims because Plaintiff did not present 

any evidence to suggest that it could not proceed under Option 1. 

Plaintiff's argument that the only threat to Option 1's legality 

is that Plaintiff has chosen not to elect it only underscores the 

viability of Option 1. Plaintiff next argues that the Court 

misunderstood its claim regarding Option 2. This is the exact 

argument Plaintiff made, and the Court rejected, in its motion for 

leave to file a motion for reconsideration. Accordingly, as 

explained above and in the order denying Plaintiff's motion for 

leave to file a motion for reconsideration, the Court concludes 

that Plaintiff has not shown that it is likely to succeed on the 

merits of its claim. 

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The second prong of the traditional test requires Plaintiff 

to show that it will suffer irreparable harm absent an injunction. 

Plaintiff has not made such a showing. Plaintiff argues that if 

it is required to pay the settlement amount for the reconciliation 

request, it will have no adequate legal remedy in federal court 

because its claims would then be characterized as seeking 

retrospective monetary damages and would be, therefore, barred by 

the Eleventh Amendment. However, as Defendants show, if Plaintiff 

is required to pay the settlement amount, it will merely lose the 

federal forum for that claim, but it will still have the option to 

file an administrative appeal and to seek a writ of administrative 

mandate in state court if it loses its administrative appeal. 

Plaintiff does not dispute the adequacy or availability of a state 

forum for relief in its reply brief. Accordingly, the Court 

concludes that Plaintiff has not shown that it will be irreparably 

harmed absent an injunction. 

The third prong requires a showing that the balance of harms 

weighs in favor of granting the injunction. Plaintiff argues that 

issuing the stay will preserve the status quo and permit Plaintiff 

to use the income to "further the objectives of its Section 330 

grant, including serving additional patients and providing 

additional services to the residents of its service area." Motion 

Brief (Docket No. 94) at 10. That Plaintiff could effect greater 

community service with the funds at issue is not relevant to the 

inquiry. The Court has determined that Plaintiff's arguments 

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regarding Option 2 do not warrant relief, and the result of the 

reconciliation process is that Plaintiff was overpaid and must now 

pay Defendants the amount of that overpayment. While Plaintiff 

must relinquish its overpayments, this does not constitute harm in 

a legal sense because it was not entitled to the funds in the 

first place. On the other hand, Defendants are harmed if they are 

delayed in recouping the funds to which they are entitled. The 

harm in denying Defendants the funds these funds may be modest, 

but it outweighs any harm Plaintiff claims. Thus, the balance of 

harms tips in Defendants' favor. 

The final prong of the traditional test requires Plaintiff to 

show that the public interest is served by granting the 

injunction. Plaintiff again argues that the funds would allow it 

to serve the community; that argument is no more persuasive under 

this prong than it was on prong three of the test. And finally 

Plaintiff argues that the public interest is served by granting 

the stay so that the federal court retains jurisdiction. The 

Court is not persuaded, considering the above-discussed 

availability of an alternative forum for Plaintiff's claims. 

In sum, Plaintiff has not shown entitlement to a preliminary 

injunction pending appeal under the traditional test. 

C. The Alternative Test 

Under the "alternative test" the moving party must show 

"either a combination of probable success on the merits and the 

possibility of irreparable injury or that serious questions are 

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raised and the balance of hardships tips sharply in his favor." 

Southeast Alaska Conservation Counsel, 472 F.3d at 1100 (internal 

quotations omitted). For the reasons articulated under the 

traditional test, Plaintiff has shown neither a probability of 

success on the merits nor irreparable injury. Further, Plaintiff 

has not shown that any serious questions are raised and, as 

discussed above, the balance of hardships does not weigh in favor 

of granting a stay. Accordingly, Plaintiff is not entitled to an 

injunction under the alternative test. 

For the reasons stated above, Plaintiff's motion for an 

injunction pending appeal is denied. 

IT IS SO ORDERED. 

 

Dated: September 11, 2015 CLAUDIA WILKEN 

United States District Judge

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