FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ALOHACARE, 

Plaintiff-Appellant, No. 08-16589

v. D.C. No.

STATE OF HAWAII, DEPARTMENT OF  1:08-cv-00212-

HUMAN SERVICES; LILLIAN B. SOM-BMK

KOLLER, Director, State of Hawaii, OPINION Department of Human Services,

Defendants-Appellees. 

Appeal from the United States District Court

for the District of Hawaii

Susan Oki Mollway, District Judge, Presiding

Argued and Submitted

May 15, 2009—Honolulu, Hawaii

Filed July 14, 2009

Before: Alex Kozinski, Chief Judge, Jay S. Bybee and

Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Bybee

8805
COUNSEL

James L. Feldesman (argued), Feldesman Tucker Leifer Fidell

LLP, Washington, D.C.; Edward C. Kemper, Kemper &

Watts, Honolulu, Hawaii, for the plaintiff-appellant.

John F. Molay, Deputy Attorney General, Department of the

Attorney General, Honolulu, Hawaii; Charles A. Miller

(argued), Covington & Burling, LLP, Washington, D.C., for

the defendants-appellees.

OPINION

BYBEE, Circuit Judge:

AlohaCare submitted a proposal to provide managed health

care to Medicaid-eligible aged, blind, and disabled individuals. When the Hawaii Department of Human Services

awarded the contract to two other health plans, AlohaCare

brought suit under 42 U.S.C. § 1983, alleging that the state

had violated the Medicaid Act. We must decide whether 42

U.S.C. § 1396b(m) confers a federal right to contract eligibility on AlohaCare that can be remedied under § 1983. For the

reasons discussed below, we conclude that it does not and

thus affirm the judgment of the district court.

I

A

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et

seq., (the “Act” or “Medicaid Act”), provides federal funding

to “enabl[e] each State, as far as practicable . . . to furnish . . .

medical assistance on behalf of families with dependent children and of aged, blind, or disabled individuals, whose

income and resources are insufficient to meet the costs of nec8808 ALOHACARE v. STATE OF HAWAII
essary medical services.” 42 U.S.C. § 1396-1. Medicaid is a

jointly financed federal-state program that is administered by

the States in accordance with federal guidelines. See Children’s Hosp. & Health Ctr. v. Belshe, 188 F.3d 1090, 1093

(9th Cir. 1999). Medicaid is overseen at the federal level by

the Department of Health and Human Services (“HHS”)

through HHS’s Centers for Medicare and Medicaid Services

(“CMS”). See Robert F. Kennedy Med. Ctr. v. Leavitt, 526

F.3d 557, 558 (9th Cir. 2008). 

The Act, among other things, outlines detailed requirements for plan eligibility, id. § 1396a, erects a complex

scheme for allocating and receiving federal funds, id.

§ 1396b, and imposes detailed requirements on States that

wish to delegate the provision of health care services through

contracts with managed care organizations (“MCOs”), id.

§ 1396u-2. Hawaii’s compliance with these federal laws is the

subject of the current dispute.

B

Hawaii has established the Department of Human Services

(“DHS”) as the “single State agency” responsible for administering and supervising Hawaii’s Medicaid program. See HAW.

REV. STAT. § 26-14; 42 U.S.C. § 1396a(a)(5). Medicaid generally requires a State to conform with federal guidelines prior

to receiving federal funds; however, under 42 U.S.C. § 1315,

CMS may waive compliance for certain “experimental, pilot,

or demonstration project[s].” Id. § 1315(a). Pursuant to

§ 1315, in 1993 Hawaii obtained approval from CMS to operate a managed care model known as QUEST. QUEST is a

statewide demonstration project that allows Hawaii to contract with health-maintenance organizations (“HMOs”) and

provide health care coverage to populations outside the normal reach of Medicaid.

In 1993, a group of Hawaii’s federally qualified health care

organizations (“FQHCs”) formed AlohaCare, a non-profit

ALOHACARE v. STATE OF HAWAII 8809
organization whose central purpose is to provide and arrange

for health care services for Medicaid-eligible individuals in

Hawaii. AlohaCare obtained approval to participate as an

HMO under the QUEST program. At the time of this suit,

AlohaCare was the second largest QUEST health plan in

Hawaii and the third largest health plan in the state overall.

FQHCs are organizations, funded by the federal government under 42 U.S.C. § 254b, that provide medical health services to “medically underserved” populations. 42 U.S.C.

§ 254b(a)(1); see also id. § 1396d(l)(2)(A)-(B); id.

§ 1395x(aa)(3)(B). The Medicaid Act has a number of provisions that place FQHCs on more favorable footing than other

health care organizations. For example, because a number of

requirements usually applicable to MCOs do not apply to

FQHCs, FQHCs can often become eligible for managed care

contracts more easily than other health care organizations. See

id. § 1396b(m)(1)(C)(ii)(IV), (2)(B)(i)(I), (2)(G).

C

In January 2005, DHS sought to implement a revised version of QUEST, called QUEST Expanded Access (“QEXA”).

The purpose of this program was to build on the existing

QUEST program and offer managed care services to

Medicaid-eligible aged, blind, and disabled individuals. As

with the original QUEST program, DHS had to obtain a

waiver for QEXA from CMS under 42 U.S.C. § 1315 as an

experimental demonstration project. DHS submitted its application in January 2005, and CMS approved the waiver in February 2008.

In 2007, DHS issued a request for proposals (“RFP”) for

qualified health care plans to provide managed care under

QEXA, and AlohaCare submitted a proposal in response.

After conducting an internal review, DHS concluded that AlohaCare did not meet the RFP’s technical requirements and

thus did not consider AlohaCare as a viable candidate for the

8810 ALOHACARE v. STATE OF HAWAII
QEXA program. Ultimately, DHS awarded contracts to two

other health plans: Ohana Health Plan and Evercare. AlohaCare filed a protest, arguing that its proposal was not properly

evaluated. This protest was denied by Lillian Koller, the

Director of DHS, and AlohaCare filed a request for reconsideration with the State Procurement Office. 

In 2008, before Hawaii had responded to the request for

reconsideration, AlohaCare filed a complaint in federal district court against DHS and Koller (collectively “the Defendants”) pursuant to 42 U.S.C. § 1983. AlohaCare alleged that

the Defendants violated at least five provisions of the Medicaid Act: (1) 42 U.S.C. § 1396b(m) (by awarding contracts in

violation of the statute’s requirements for MCOs and by finding AlohaCare ineligible for the contract); (2) § 1396u-2(b)(5)

(by awarding a contract to an MCO without obtaining adequate assurances that the MCO’s network of providers has

sufficient capacity to serve the relevant population); (3)

§ 1396b(i)(17) (by providing rebates to the winning bidders);

(4) § 1396u-2(a)(2)(A) (by imposing managed care on the

population under the age of nineteen); and (5) § 1396u2(a)(1)(A) (by restricting the number of entities eligible for

managed care contracts).1 The complaint sought a declaration

that the awards made to the selected contractors were null and

void, an injunction prohibiting the Defendants from proceeding with the awarded contracts, an order to force DHS to conform its contract requirements to federal law, and an order to

force DHS to consider AlohaCare as an eligible applicant in

any future procurements.

Shortly after AlohaCare filed suit, Aaron Fujioka, the

1AlohaCare’s complaint also included claims for violations of due process, breach of the implied duty of good faith and fair dealing, and retaliation for the exercise of First Amendment rights. The district court

dismissed the first two of these claims, and AlohaCare does not challenge

those rulings on appeal. AlohaCare withdrew its retaliation claim at a

hearing before the district court. 

ALOHACARE v. STATE OF HAWAII 8811
state’s Chief Procurement Officer, denied AlohaCare’s

request for reconsideration, concluding that there was no evidence that AlohaCare’s proposal was improperly evaluated.

Defendants filed a motion to dismiss AlohaCare’s suit for

failure to state a claim, which the district court granted. Based

on the three-pronged analysis in Blessing v. Freestone, 520

U.S. 329 (1997), the district court found that AlohaCare could

not bring claims for violations of the Medicaid Act under

§ 1983. The court also found that AlohaCare did not have

third-party standing to bring these claims on behalf of the

aged, disabled, and blind population in Hawaii or AlohaCare’s member FQHCs. AlohaCare filed a timely appeal. We

have jurisdiction pursuant to 28 U.S.C. § 1291.2

II

On appeal, AlohaCare argues that the district court erred by

(1) failing to analyze its claims under the Supremacy Clause,

(2) concluding that AlohaCare could not bring claims pursuant to § 1983 for violations of the Medicaid Act, and (3) failing to conclude that AlohaCare has associational standing to

bring claims on behalf of its member FQHCs. We address

each of these claims in turn.

A

“Absent exceptional circumstances, we generally will not

consider arguments raised for the first time on appeal,

although we have discretion to do so.” El Paso City of Tex.

v. Am. W. Airlines, Inc. (In re Am. W. Airlines, Inc.), 217 F.3d

1161, 1165 (9th Cir. 2000). We may exercise this discretion

“(1) to prevent a miscarriage of justice; (2) when a change in

law raises a new issue while an appeal is pending; and (3)

2We review de novo a dismissal under rules 12(b)(1) and 12(b)(6) of the

Federal Rules of Civil Procedure. Kingman Reef Atoll Invs., L.L.C. v.

United States, 541 F.3d 1189, 1195 (9th Cir. 2008); Williams v. Gerber

Prods. Co., 552 F.3d 934, 937 (9th Cir. 2008). 

8812 ALOHACARE v. STATE OF HAWAII
when the issue is purely one of law.” Kimes v. Stone, 84 F.3d

1121, 1126 (9th Cir. 1996) (internal quotation marks omitted).

However, we will not “reframe [an] appeal to review what

would be (in effect) a different case than the one the district

court decided below.” Robb v. Bethel Sch. Dist. No. 403, 308

F.3d 1047, 1052 n.4 (9th Cir. 2002). 

[1] AlohaCare’s claims under the Supremacy Clause have

not been preserved for appeal because they were never raised

below. There is an important distinction between a claim

brought under the Supremacy Clause and a claim brought

under § 1983: the latter “require[s] a plaintiff to show the

deprivation of ‘an unambiguously conferred right’ in order to

support a cause of action,” while the former “is presumptively

available to remedy a state’s ongoing violation of federal

law.” Ind. Living Ctr. of S. Cal. v. Shewry, 543 F.3d 1050,

1062, 1064 (9th Cir. 2008).

[2] AlohaCare’s complaint specifically states that its claims

were brought “pursuant to 42 U.S.C. § 1983.” AlohaCare

never raised an argument under the Supremacy Clause before

the district court, and consistently pressed its arguments under

the framework of § 1983 cases. We refuse to reverse the district court for failing to foresee what AlohaCare would argue

on appeal.

B

AlohaCare also argues that the district court erroneously

dismissed its § 1983 claims. Specifically, AlohaCare asserts

that the provisions of 42 U.S.C. § 1396b(m) confer an unambiguous federal right to contract eligibility on FQHCs and

FQHC-controlled entities.3 We disagree.

3

In the district court AlohaCare argued that DHS violated a number provisions of the Medicaid Act, including 42 U.S.C. §§ 1396b(m)(1),

(m)(2)(B), (m)(2)(G), (i)(17), 1396u-2(a)(1)(A)(ii), (a)(2)(A), (b)(5).

However, on appeal AlohaCare has only argued that the provisions of

§ 1396b(m) give rise to a federal right. We only address the provisions

that AlohaCare has presented on appeal. 

ALOHACARE v. STATE OF HAWAII 8813
1

[3] In Maine v. Thiboutot, 448 U.S. 1, 4-5 (1980), the

Supreme Court held that § 1983 actions may be brought

against States to enforce rights created by federal statute as

well as the Constitution. However, “the remedy announced in

Thiboutot [is] to be applied sparingly and only to statutes in

which Congress speaks with a clear voice and unambiguously

creates a right secured by the laws of the United States.” Sanchez v. Johnson, 416 F.3d 1051, 1056 (9th Cir. 2005) (internal

quotation marks and alterations omitted). 

In Blessing, the Supreme Court established a three-pronged

test for determining whether a federal statutory provision

creates a federal right: (1) “Congress must have intended that

the provision in question benefit the plaintiff,” (2) “the plaintiff must demonstrate that the right assertedly protected by the

statute is not so ‘vague and amorphous’ that its enforcement

would strain judicial competence,” and (3) “the statute must

unambiguously impose a binding obligation on the States.”

520 U.S. at 340-41 (internal citations omitted). 

[4] Following Blessing, the Court “reject[ed] the notion that

[its] cases permit anything short of an unambiguously conferred right to support a cause of action brought under

§ 1983.” Gonzaga Univ. v. Doe, 536 U.S. 273, 283 (2002).

The Court made it plain that it was not sufficient for § 1983

to assert “interests” or “benefits” under a statute; it is only

“rights . . . that may be enforced under the authority of that

section.” Id. To create a federal right, a statute’s “text must be

phrased in terms of the persons benefited . . . with an unmistakable focus on the benefited class.” Id. at 284 (internal quotation marks omitted). Thus, statutes that have an “aggregate

focus,” and “are not concerned with whether the needs of any

particular person have been satisfied,” do not give rise to individual rights. Id. at 288 (internal quotations omitted). 

In Gonzaga, the Supreme Court cited Title VI of the Civil

Rights Act of 1964 and Title IX of the Education Amend8814 ALOHACARE v. STATE OF HAWAII
ments of 1972 as examples of this rights-creating language.

Id. at 287. Title VI states that “No person in the United States

shall . . . be subjected to discrimination,” 42 U.S.C. § 2000d,

while Title IX states that “No person in the United States

shall, on the basis of sex . . . be subjected to discrimination,”

20 U.S.C. § 1681(a). “Although our inquiry should not be

limited to looking for those precise phrases, statutory language less direct than the individually-focused ‘No person

shall . . .’ must be supported by other indicia so unambiguous

that we are left without any doubt that Congress intended to

create an individual, enforceable right remediable under

§ 1983.” Sanchez, 416 F.3d at 1058.

2

[5] In contrast to the language of Title VI and Title IX,

nothing in 42 U.S.C. § 1396b(m) clearly and unambiguously

confers a federal right to contract eligibility for FQHCs and

FQHC-controlled entities. “[T]he provisions entirely lack the

sort of ‘rights-creating’ language critical to showing the requisite congressional intent to create new rights.” Gonzaga, 536

U.S. at 287. 

[6] Section 1396b(m) contains two paragraphs. Paragraph

(1) simply defines what “[t]he term ‘medicaid managed care

organization’ means”; it does not focus on the rights of

FQHCs other than to point out that for FQHCs and three other

types of organizations § 1396b(m)(1)(C)(i) “shall not apply.”

42 U.S.C. § 1396b(m)(1)(A), (C)(ii). This is hardly the “unmistakable focus on the benefited class” that clearly indicates

Congressional intent to confer a federal right. Gonzaga, 536

U.S. at 284. 

[7] Similarly, Paragraph (2) prescribes at great length the

conditions under which the States will receive reimbursement

for Medicaid expenditures. It does not address the rights of

FQHCs or create an unambiguous entitlement to contract eligibility. The language of this paragraph is focused on the proALOHACARE v. STATE OF HAWAII 8815
cedural requirements of the Medicaid Act and is squarely

“directed to governmental agencies” and “phrased in aggregate terms.” Price v. City of Stockton, 390 F.3d 1105, 1113

(9th Cir. 2004) (internal quotation marks omitted). This falls

well short of the “specific articulation of the entitlements

guaranteed [by the statute]” that our precedent requires. Ball

v. Rodgers, 492 F.3d 1094, 1109 (9th Cir. 2007) (emphasis

added).

[8] In other words, we find that the plaintiffs here are “simply cogs in a grander statutory scheme.” Id. Although FQHCoperated entities may benefit from the programs authorized

under § 1396b(m), that section does not create any rights in

FQHCs or FQHC-controlled entities such as AlohaCare that

may be enforced under § 1983. As in Gonzaga, “[s]ince the

Act confer[s] no specific, individually enforceable rights,

there [is] no basis for private enforcement.” 536 U.S. at 281.

3

[9] AlohaCare also argues that HHS’s regulations enforcing

§ 1396b(m) demonstrate that Congress intended to confer a

right of eligibility on FQHCs. However, we have held that

“[p]laintiffs suing under § 1983 must demonstrate that a statute—not a regulation—confers an individual right.” Save Our

Valley v. Sound Transit, 335 F.3d 932, 943 (9th Cir. 2003).

Although “a regulation may be relevant in determining the

scope of the right conferred by Congress,” ultimately “the

inquiry must focus squarely on Congress’s intent.” Id.

(emphasis added). Because we have already concluded that

Congress did not intend to confer a federal right, “[i]n this

case, our analysis begins and ends with Congress’s intent.” Id.

at 944.

C

[10] AlohaCare also argues, for the first time on appeal,

that it has associational standing to assert the rights of its

8816 ALOHACARE v. STATE OF HAWAII
FQHC members. An entity has associational standing where

“(a) its members would otherwise have standing to sue in

their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim

asserted nor the relief requested requires the participation of

individual members in the lawsuit.” Or. Advocacy Ctr. v.

Mink, 322 F.3d 1101, 1109 (9th Cir. 2003) (quoting Hunt v.

Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343

(1977)). Because we have concluded that the Medicaid Act

does not confer an unambiguous federal right to contract eligibility on FQHCs, AlohaCare’s appeal fails under the first

prong of our analysis. Because its FQHC members could not

sue in their own right, AlohaCare cannot bring claims on their

behalf.

III

We hold that 42 U.S.C. § 1396b(m) does not confer a federal right to contract eligibility on FQHCs, and AlohaCare has

forfeited any arguments under the Supremacy Clause.

The judgment of the district court is AFFIRMED.

ALOHACARE v. STATE OF HAWAII 8817