PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

K.C., a minor child, by and 

through his mother and next

friend, Africa H.; ALLISON TAYLOR

JOHNS; L.S., a minor child, by and

through his father and next friend,

Ron S.; D.C., a minor child, by

his mother and next friend, Penny

C.,

Plaintiffs-Appellees,

M.S., a minor child, through his

parent and natural guardian,

Rachelle S.,

Intervenor/Plaintiff-Appellee,  No. 12-1575

v.

PAMELA SHIPMAN, in her official

capacity as Area Director of

Piedmont Behavioral Health Care

Area Mental Health,

Developmental Disabilities, and

Substance Abuse Authority;

PIEDMONT BEHAVIORAL HEALTHCARE

AREA MENTAL HEALTH,

DEVELOPMENTAL DISABILITIES AND

SUBSTANCE ABUSE AUTHORITY, d/b/a

PBH,

Defendants-Appellants, 
and 

LANIER M. CANSLER, in his official

capacity as Secretary of the

Department of Health and Human

Services; ALBERT A. DELIA, in his 

official capacity as Acting

Secretary of the Department of

Health and Human Services,

Defendants. 

Appeal from the United States District Court

for the Eastern District of North Carolina, at Raleigh.

Louise W. Flanagan, District Judge.

(5:11-cv-00354-FL)

Argued: March 21, 2013

Decided: May 10, 2013

Before WILKINSON, KING, and WYNN, Circuit Judges.

Appeal dismissed by published opinion. Judge Wilkinson

wrote the opinion, in which Judge King and Judge Wynn

joined.

COUNSEL

ARGUED: Wallace Churchill Hollowell, III, NELSON

MULLINS RILEY & SCARBOROUGH, LLP, Raleigh,

North Carolina, for Appellants. Douglas Stuart Sea, LEGAL

SERVICES OF SOUTHERN PIEDMONT, INC., Charlotte,

North Carolina, for Appellees. ON BRIEF: Stephen D. Mar2 K.C. v. SHIPMAN
tin, NELSON MULLINS RILEY & SCARBOROUGH, LLP,

Raleigh, North Carolina, for Appellants. Jane Perkins,

NATIONAL HEALTH LAW PROGRAM, Carrboro, North

Carolina; John R. Rittelmeyer, Jennifer L. Bills, Morris

McAdoo, DISABILITY RIGHTS NC, Raleigh, North Carolina, for Appellees.

OPINION

WILKINSON, Circuit Judge:

Plaintiffs are a class of Medicaid beneficiaries who suffer

from severe developmental disabilities. In July 2011, they

sued (1) the Secretary of the North Carolina Department of

Health and Human Services ("the Secretary" or "the

NCDHHS"); (2) Piedmont Behavioral Healthcare ("PBH"), a

local subdivision of the state that manages the delivery of

plaintiffs’ Medicaid services pursuant to a contract with the

NCDHHS; and (3) Pamela Shipman, the director of PBH.

Plaintiffs alleged that defendants violated their rights under

the Medicaid statute and the Due Process Clause of the Fourteenth Amendment by reducing their health care services

without notice and an opportunity for a hearing. The district

court awarded a preliminary injunction in plaintiffs’ favor,

ordering defendants to reinstate plaintiffs’ services to their

prior levels and enjoining defendants from reducing those services without a hearing. 

In this appeal, PBH and Shipman challenge the district

court’s entry of the preliminary injunction. Critically, however, the other defendant in this case—the Secretary of the

NCDHHS — did not join in the appeal. Under the Medicaid

statute and basic principles of justiciability, the Secretary’s

decision dictates the disposition of this case. That is because

a provision in the statute, 42 U.S.C. § 1396a(a)(5), requires

each state to designate a "single State agency" to administer

K.C. v. SHIPMAN 3
its Medicaid plan (here, the NCDHHS) and a regulation prohibits PBH from "chang[ing] or disapprov[ing] any administrative decision of that agency," 42 C.F.R. § 431.10(e)(3). Yet

PBH seeks to do exactly that through its appeal—to reduce

plaintiffs’ services immediately, notwithstanding the NCDHHS’s decision to comply with the injunction. Moreover, the

Secretary’s choice means that any judgment we could enter in

PBH’s favor would not provide PBH the redress it seeks:

because the NCDHHS would remain bound by the preliminary injunction, so too would PBH as its agent. We therefore

dismiss this appeal.

I.

A.

The case involves the delivery of Medicaid services to a

class of North Carolina Medicaid recipients who suffer from

chronic disabilities such as cerebral palsy, seizure disorders,

mental retardation, and autism. While plaintiffs’ conditions

are serious enough to qualify them for institutional placement,

they are able to live in community environments with the

assistance of certain support services. For example, named

plaintiff D.C. is a teenage Medicaid recipient with severe

autism. Although he is verbally non-communicative and

requires supervision at all times, D.C. is able to live at home

with the help of professionals who teach him basic skills such

as eating, dressing, and personal hygiene, and who provide

temporary care for him when his parents are unavailable. 

Plaintiffs receive these services through a type of Medicaid

program known as "managed care Medicaid." In contrast to

traditional fee-for-service Medicaid, where beneficiaries seek

services directly from providers who are then reimbursed by

the state, managed care Medicaid is a model in which the state

contracts with a managed care organization ("MCO"), which

oversees the delivery of services to beneficiaries in exchange

for a fixed, prospective payment from the state for each

4 K.C. v. SHIPMAN
enrollee. See Medicaid Program; Medicaid Managed Care:

New Provisions, 67 Fed. Reg. 40,989, 40,989 (June 14, 2002).

In this case, PBH is the MCO that manages the delivery of

plaintiffs’ Medicaid services, and Shipman is PBH’s director.1

More specifically, PBH is party to a contract with the

NCDHHS under which PBH provides managed care to

roughly 675 disabled individuals, including plaintiffs, as part

of a program known as the North Carolina Innovations

Waiver. The contract requires PBH to provide these enrollees

with a list of certain covered health care services. PBH does

so through a system in which it requires pre-authorization for

non-emergency services like the skill-building and temporary

care provided to plaintiff D.C. To obtain authorization, enrollees and their guardians meet each year with their physicians

and a PBH employee to design an individual support plan

identifying the services that the enrollee needs. The identified

services are then submitted to PBH for approval. Once an

enrollee’s services are authorized, the contract provides that

if PBH reduces or terminates those services, PBH must provide the enrollee with certain notice and appeal rights

described in 42 C.F.R. §§ 438.400-.424.

As part of its pre-authorization process, PBH sets annual

"base budget" amounts for each enrollee—the maximum level

of funding that is available for certain non-emergency services. Prior to 2011, PBH set plaintiffs’ base budget amounts

using a benchmark system that was intended to tailor the

amount of funding an enrollee could receive to his or her

medical needs. In light of increasing service requests and budget shortfalls, however, PBH designed a new system, which

established different funding categories for enrollees based on

factors such as the enrollee’s needs, safety risk, age, and place

of living. 

1For ease of reference, we generally refer to PBH and Shipman collectively as PBH. 

K.C. v. SHIPMAN 5
Pursuant to this updated system, PBH sent letters to Innovations Waiver enrollees in March and April of 2011 informing them of their newly assigned base budget amounts. For

some enrollees—in particular, the five named plaintiffs and

the members of the class eventually certified by the district

court—the letter indicated that their previous base budget

amounts would be reduced. The letter also stated that the new

base budget amounts would be "the maximum amount of base

service funds that can be authorized in your Individual Support Plan" and that PBH would be in contact to develop their

next plan. 

To illustrate, D.C.’s parents received a letter from PBH

informing them that D.C.’s base budget would be reduced

from $47,588.52 to $18,799.60 in graduated steps beginning

on July 1, 2011. The letter contained no information on how

to appeal or challenge the reduced amount. As a result, even

though D.C. was approved on April 21, 2011 to receive

$43,579.52 worth of skill-building and temporary care services, D.C.’s mother eventually signed a new plan (under

what she states were threats that PBH would terminate all of

D.C.’s services) reducing D.C.’s services to comply with his

new budget. Under the new plan, D.C.’s services were

reduced by seventy to one hundred hours per month from

their prior levels. In order to maintain D.C.’s services at those

prior levels and to avoid placing him in an institution, D.C.’s

parents paid for his care directly out of their savings. 

B.

On July 5, 2011, four Innovations Waiver enrollees filed a

class action against Lanier Cansler, the Secretary of the

NCDHHS;2 PBH; and Shipman. A fifth enrollee, M.S., inter2After then-Governor Beverly Perdue named Albert Delia Acting Secretary of the NCDHHS in 2012, Delia was substituted for Cansler as the

state defendant under Federal Rule of Civil Procedure 25(d). In January

2013, however, Pat McCrory succeeded Perdue as governor and named

Aldona Zofia Wos Secretary of the NCDHHS—making Wos the current

state defendant in the underlying action. 

6 K.C. v. SHIPMAN
vened as a plaintiff in December 2011. The plaintiffs (now

appellees) sought preliminary and permanent injunctions reinstating their services to previously authorized levels and

enjoining defendants (and their agents) from reducing their

services without complying with the notice and hearing

requirements of the Medicaid statute and the Fourteenth

Amendment. 

The district court ruled on plaintiffs’ motion for a preliminary injunction on March 29, 2012. Because the Medicaid

regulations require an MCO to provide notice and hearing

rights only when it has taken "action," 42 C.F.R.

§ 431.200(b), the court focused its attention on defendants’

argument that the reduction of plaintiffs’ budgets did not

amount to "action" in the first place. The court noted that "action" is defined in relevant part as the "reduction, suspension,

or termination of a previously authorized service," id.

§ 438.400(b). It then reasoned that PBH took "action" by

reducing the plaintiffs’ authorized service budgets and "communicat[ing] to [them] that as of July 2011, they must reduce

or terminate certain services to comply with" those reduced

budgets. The district court thus held that plaintiffs were entitled to the notice and appeal rights provided for by the Medicaid statute and the Fourteenth Amendment. The court further

ruled that defendants had failed to comply with those requirements and accordingly granted the motion for a preliminary

injunction. 

On April 27, 2012, defendants PBH and Shipman filed a

timely notice of their interlocutory appeal of the district

court’s order. The deadline to appeal expired fourteen days

later, see Fed. R. App. P. 4(a)(3), with no notice filed by the

remaining defendant, the Secretary of the NCDHHS.

II.

PBH contends that "the narrow legal question" before us is

"whether the budget communications that PBH sent to [plainK.C. v. SHIPMAN 7
tiffs] in March and April 2011 constituted agency ‘action,’ as

that term is defined in 42 C.F.R. § 438.400(b)." Appellants’

Br. 23. But before reaching that question, we must first

address the threshold issue of whether PBH may litigate this

appeal to begin with, given that the NCDHHS has decided not

to. For the reasons that follow, we conclude that the Medicaid

statute and accompanying regulations preclude PBH from

appealing in the absence of the NCDHHS. 

A.

We begin with the relevant provision of the Medicaid statute and its attendant regulations. At the heart of our inquiry

is Congress’ pronouncement that each state must "provide for

the establishment or designation of a single State agency to

administer or to supervise the administration" of its Medicaid

program, 42 U.S.C. § 1396a(a)(5), a command we shall refer

to as the "single state agency requirement." In implementing

this requirement, the U.S. Department of Health and Human

Services has set forth the following regulation: 

If other State or local agencies or offices perform

services for the Medicaid agency, they must not have

the authority to change or disapprove any administrative decision of that agency, or otherwise substitute their judgment for that of the Medicaid agency

with respect to the application of policies, rules, and

regulations issued by the Medicaid agency.

42 C.F.R. § 431.10(e)(3).

As implemented through this rule, the single state agency

requirement reflects two important values: an efficiency rationale and an accountability rationale. From an efficiency perspective, the requirement ensures that final authority to make

the many complex decisions governing a state’s Medicaid

program is vested in one (and only one) agency. The requirement thereby avoids the disarray that would result if multiple

8 K.C. v. SHIPMAN
state or even local entities were free to render conflicting

determinations about the rights and obligations of beneficiaries and providers. Thus, for example, where the designated

state agency determines that a person is eligible for Medicaid

benefits, administrative efficiency counsels that the agency

itself, the individual, and other affected parties should be able

to rely on the decision without worrying that some other state

or local entity may later "change or disapprove" it, in violation of 42 C.F.R. § 431.10(e)(3). See Forsyth Cnty. Bd. of

Soc. Servs. v. Div. of Soc. Servs., 346 S.E.2d 414, 416-17

(N.C. 1986) (holding that under 42 C.F.R. § 431.10(e)(3), a

county department of social services cannot sue seeking

reversal of the single state agency’s Medicaid eligibility determination). 

With respect to the accountability rationale, the vesting of

responsibility over a state’s Medicaid program in a single

agency safeguards against the possibility that a state might

seek to evade federal Medicaid requirements by passing the

buck to other agencies that take a less generous view of a particular obligation. As the Second Circuit has explained, "the

reason for the requirement that a state designate a ‘single

State agency’ to administer its Medicaid program . . . was to

avoid a lack of accountability for the appropriate operation of

the program." Hillburn v. Maher, 795 F.2d 252, 261 (2d Cir.

1986) (rejecting single state agency’s argument that it did not

need to comply with certain Medicaid regulations because of

contrary decisions by another agency). As a result, a single

state agency may not "diminish[ ] or alter[ ]" its Medicaid

responsibilities based on the "action or inaction of other state

offices or agencies." Id.

In sum, the single state agency requirement represents Congress’s recognition that in managing Medicaid, states should

enjoy both an administrative benefit (the ability to designate

a single agency to make final decisions in the interest of efficiency) but also a corresponding burden (an accountability

regime in which that agency cannot evade federal requireK.C. v. SHIPMAN 9
ments by deferring to the actions of other entities). See San

Lazaro Ass’n v. Connell, 286 F.3d 1088, 1100-01 (9th Cir.

2002) (noting that single state agency requirement ensures

"systemwide efficiency" and "systemwide accountability").

This does not mean, of course, that a single state agency may

never delegate responsibilities to other entities. Such agency

relationships are expressly contemplated, for example in the

context of MCOs like PBH that manage the provision of Medicaid on the state’s behalf. See 42 C.F.R. §§ 438.1(b), 438.6.

But the single state agency requirement does mean that a delegation can go only so far: where the agency makes a final

decision, it cannot be overridden by another state or local

entity. 

B.

In this case, there is no dispute that North Carolina law designates the NCDHHS as the agency responsible for operating

the state’s Medicaid plan. N.C. Gen. Stat. § 108A-54. Nor is

there any dispute that PBH is a "local political subdivision of

the State," N.C. Gen. Stat. § 122C-116(a), which has contracted with the NCDHHS to operate a managed care Medicaid program on the state’s behalf. Federal and state law thus

interlock, establishing the following propositions: the

NCDHHS is the "single State agency" with the final responsibility to administer the state’s Medicaid program under 42

U.S.C. § 1396a(a)(5), and as a local subdivision of the state,

PBH is forbidden to "change or disapprove any administrative

decision" made by the NCDHHS pursuant to 42 C.F.R.

§ 431.10(e)(3).

The question, then, is whether PBH’s appeal seeks to

"change or disapprove" an "administrative decision" of the

NCDHHS such that it is barred by § 431.10(e)(3). PBH contends that the answer is "no." It argues first that this appeal

does not change or disapprove any NCDHHS decision at all

because PBH and the NCDHHS still take "the same position

in this litigation"—namely that they did not violate plaintiffs’

10 K.C. v. SHIPMAN
notice and hearing rights. Appellants’ Reply Br. 22-23. But

this contention misses the mark for a simple reason: it focuses

on the wrong decision. 

The agency decision that PBH seeks to disapprove is not

the NCDHHS’s ultimate position on the merits of the underlying case. It is the NCDHHS’s decision not to appeal and

thereby to comply with the preliminary injunction. The

NCDHHS’s decision to comply means that the injunction is

binding not only on the NCDHHS itself, but also on the

NCDHHS’s "agents" and any who are in "active concert or

participation" with it. Fed. R. Civ. P. 65(d)(2). There is thus

no escaping the fact that the NCDHHS has effectively

decided that it and PBH—which is obligated to manage plaintiffs’ care in accordance with its contract with the NCDHHS

—will provide plaintiffs with their prior level of services (or

else notice and a hearing) until a final judgment permits otherwise. Yet the entire purpose of PBH’s appeal is to overturn

that decision: PBH seeks to reduce plaintiffs’ services immediately, without providing notice or a hearing. We must therefore reject PBH’s contention that this appeal does not "change

or disapprove" any decision by the NCDHHS.

PBH responds that even if its appeal does seek to change

or disapprove some decision made by the NCDHHS, the decision in question is not an "administrative decision of that

agency" protected under § 431.10(e)(3), but rather a mere "litigation" decision. Appellants’ Reply Br. 22. Again we disagree. 

To start, we find no support for the notion that litigation

decisions are somehow categorically precluded from constituting an "administrative decision" under the regulation.

Although the phrase is not expressly defined in the relevant

provisions, the plain meaning of an "administrative decision"

of a single state Medicaid agency naturally encompasses decisions that pertain to the management of the state’s Medicaid

program. See Random House Dictionary of the English LanK.C. v. SHIPMAN 11
guage 26 (2d ed. 1987) (defining "administrative" as "pertaining to administration" and "administration" as the

"management of any office, business or organization"). No

less than its decisions in other contexts, of course, an agency’s

litigation decisions can have substantial impacts on the management of a state’s Medicaid program. One need look no further than this case to see how: the NCDHHS’s choice to

comply with the preliminary injunction means that absent the

provision of notice and appeal rights, the state must provide

a class of Medicaid beneficiaries their previously authorized

level of services pending a final ruling from the courts.

Of course, our conclusion that the Secretary’s decision not

to appeal is an "administrative decision" protected from interference by another agency under § 431.10(e)(3) does not

mean every litigation decision by a single state agency qualifies as such. But we do not need to list every example of an

"administrative decision" in order to hold that where, as here,

an agency’s decision is tantamount to a substantial policy

choice, the decision falls within the sphere of agency judgment covered by § 431.10(e)(3). After all, it can hardly be disputed that if the NCDHHS had issued a policy statement

declaring that all PBH enrollees would be eligible to receive

their prior level of services (or else a fair hearing) until a contrary judicial ruling, that choice would surely constitute an

"administrative decision" that local agencies would not be

permitted to "change or disapprove" under § 431.10(e)(3).

The result should not be any different here simply because the

Secretary made the same decision in response to litigation

rather than before it. If anything, a decision made in the

instant context should be entitled to even greater respect

because it comes with the backing of a court order announcing a preliminary interpretation of federal law.

Our conclusion is all the more necessary when one considers the implications of PBH’s opposing approach. If important

litigation decisions made by a single state agency were not

"administrative decisions" protected from challenge by

12 K.C. v. SHIPMAN
another agency, the resulting inefficiency and turmoil would

be profound. Consider, for example, a case in which a single

state agency agrees to a consent decree confirming the Medicaid eligibility of a group of citizens. PBH’s position would

imperil that decision by permitting any county Medicaid

office or local MCO to embroil the courts in a collateral lawsuit seeking a reversal of the decree. Or consider the converse

situation where the designated agency elects to litigate a Medicaid case rather than to settle. Under PBH’s view of

§ 431.10(e)(3), the agency’s choice to pursue the lawsuit

could be subject to "change or disapprov[al]" by another state

or local entity that would prefer to settle the matter on whatever terms that other entity deemed satisfactory. The result of

PBH’s interpretation would be a constant state of confusion

in the litigation process in which parties (and judges) must not

only attempt to argue (or decide) the merits of each case, but

where they must first identify which of multiple state entities

is even speaking with the state’s final authority. 

PBH’s view would thus compromise both the efficiency

and accountability rationales for the single state agency

requirement. That requirement prevents improvident ends by

arresting their beginnings. Put simply, by directing states to

designate a single Medicaid agency the decisions of which

may not be overridden by other state and local actors, the

requirement prohibits precisely what PBH aims to achieve in

this appeal: to place itself in the driver’s seat and call the

shots on how the state’s Medicaid program is to be administered in the face of a clearly contrary decision by the

NCDHHS. PBH’s appeal thus contravenes 42 U.S.C.

§ 1396a(a)(5) and 42 C.F.R. § 431.10(e)(3), and must be dismissed. 

C.

The case for dismissal of the appeal is underscored not only

by the single state agency requirement, but also by the fact

that it follows from that very requirement that PBH is pushing

K.C. v. SHIPMAN 13
the court to issue an advisory opinion. For the Secretary’s

decision not to appeal means that PBH would remain bound

by the preliminary injunction regardless of any decision this

court might issue.

1.

A party seeking recourse must establish that it is "likely, as

opposed to merely speculative, that [its] injury will be

redressed by a favorable decision." Lujan v. Defenders of

Wildlife, 504 U.S. 555, 561 (1992) (internal quotation marks

omitted). Of course, the elements of standing must be satisfied not just at the outset of a suit, but also on appeal. See

Bond v. United States, 131 S. Ct. 2355, 2362 (2011). 

In this appeal, PBH seeks relief in the form of a reversal of

the district court’s preliminary injunction. PBH argues that

such a decision "would in no way be merely advisory"

because once the injunction is reversed, PBH’s injury will

necessarily be redressed: that is, PBH will be free to reduce

plaintiffs’ services (or as PBH argues, their budgets) without

first providing notice and hearing rights. Appellants’ Reply

Br. 27. 

PBH is mistaken. Its problem lies again in the Secretary’s

choice not to appeal and to instead comply with the preliminary injunction while litigating the case through to final judgment. In that context, the question becomes whether the fact

that the NCDHHS remains obligated to obey the injunction

means that PBH would also be bound to comply regardless of

any decision we might issue. Or, put slightly differently, the

question is whether PBH—the NCDHHS’s contractual agent

with respect to plaintiffs’ Medicaid services—may disregard

the injunction even as PBH’s principal is obligated to comply

with it. For several reasons, we cannot countenance that

result.

First, because the preliminary injunction binds the

NCDHHS, so too must it bind PBH under ordinary operation

14 K.C. v. SHIPMAN
of the Federal Rules of Civil Procedure. Federal Rule of Civil

Procedure 65(d)(2) dictates that every order granting an

injunction is binding not only on named parties, but also on

"the parties’ . . . agents" as well as any others with whom they

"are in active concert or participation." As the Supreme Court

has explained, the purpose of this rule is to prevent defendants

from "nullify[ing] a decree by carrying out prohibited acts

through aiders and abettors." Regal Knitwear Co. v. NLRB,

324 U.S. 9, 14 (1945). Echoing that purpose, the plaintiffs’

motion in this case specifically requested preliminary injunctive relief against not just the defendants, but also their

"agents . . . and all persons acting in concert or participating

with them." 

Applying Rule 65(d)(2) to this case, there is no dispute that

PBH is an agent of the NCDHHS due to its contract to administer plaintiffs’ Medicaid services on behalf of the state. Nor

is there any question that PBH is acting in participation with

the NCDHHS to that same end. Thus, PBH is restrained by

the preliminary injunction through not one, but two channels:

first, in its capacity as a named defendant, and second, in its

capacity as an agent and co-participant of the NCDHHS with

respect to plaintiffs’ Medicaid services. To be sure, a decision

in this appeal in PBH’s favor could negate the former channel

of restraint. But such a decision could in no way affect the latter channel because the NCDHHS’s choice not to appeal

means that the injunction remains binding on it—and, as a

consequence of Rule 65(d)(2), so too its agent and coparticipant PBH. See Tenn. Ass’n of Health Maint. Orgs. v.

Grier, 262 F.3d 559, 565 (6th Cir. 2001) (holding that under

Rule 65(d), consent decree issued against single state Medicaid agency was also binding on MCOs due to their agency

relationship with the state); U.S. ex rel. Rahman v. Oncology

Assocs., 198 F.3d 502, 511 (4th Cir. 1999) (citing Rule 65(d)

and holding that writ of mandamus issued against Medicare

agency was also binding on non-party Medicare contractors).

There is another reason why we may not allow PBH to

evade a preliminary injunction that continues to run against

K.C. v. SHIPMAN 15
the NCDHHS: the single state agency requirement. Recall

that this requirement embodies an important accountability

rationale: Congress’s desire to prevent states from backsliding

on their Medicaid obligations by deferring to the nonconforming actions of other agencies. See Hillburn, 795 F.2d

at 260-61. To that end, 42 C.F.R. § 431.10(e)(1) provides that

the single state agency "must not delegate . . . authority to

[e]xercise administrative discretion in the administration" of

the state’s Medicaid plan to others. Another regulation, id.

§ 435.903(b), requires the agency to "[t]ake corrective action

to ensure" the adherence of local agencies to the state’s Medicaid program. The single state agency requirement thus forbids the result that PBH seeks on appeal: it bars the NCDHHS

from escaping its legal responsibilities (i.e., to obey the

injunction) by acquiescing to the non-compliant actions of

another agency like PBH. 

In sum, PBH must show that it is likely, not just speculative, that a favorable decision will provide the redress it seeks.

See Lujan, 504 U.S. at 561. Yet the binding effect of the preliminary injunction on PBH pursuant to Rule 65(d)(2) and the

single state agency requirement makes it speculative at best

whether a decision in this appeal would enable PBH to engage

in the conduct that the district court enjoined. 

2.

PBH asserts that any decision reversing the injunction as to

it would automatically inure to the benefit of NCDHHS

because "it is not logical to argue that an order that is reversed

or vacated based on an erroneous interpretation of law would

somehow still be enforceable against a party simply because

that party did not also take an interlocutory appeal." Appellants’ Reply Br. 25-26. If PBH were correct, there would be

no redressability problem since a ruling in its favor would

negate both channels through which it is restrained by the preliminary injunction: the injunction would no longer bind PBH

either as a named defendant or as an agent of the NCDHHS.

16 K.C. v. SHIPMAN
But PBH is again mistaken. It is basic to appellate practice

that a "judgment will not be altered on appeal in favor of a

party who did not appeal"—a rule that applies even if "the

interests of the party not appealing are aligned with those of

the appellant." Smith v. Dairymen, Inc., 790 F.2d 1107, 1109

(4th Cir. 1986) (quoting 9 Moore’s Federal Practice

¶ 204.11[4], at 4-54 to -55 (2d ed. 1980)). Indeed, where "codefendants are held liable below, and one appeals and one

does not," if the district court’s order is reversed as to the

appealing party, "the party not appealing remains liable,

despite the fact that the liability of each depends upon the

same legal principles." Id.

We are thus powerless to provide the very relief that PBH

needs: an order reversing the preliminary injunction as against

both PBH and the NCDHHS. We lack that ability for good

reason, too, because offering a non-appealing party the automatic benefit of any appellate decision won without its participation would produce an intractable free-rider problem, not

to mention endless follow-on litigation by non-appealing parties to determine whether their interests are closely enough

aligned with those of the appealing party to warrant the benefit of the appellate judgment. We accordingly reject PBH’s

contention that a decision in its favor would as a matter of

course render the preliminary injunction unenforceable

against the NCDHHS.3

3PBH further argues that even if this appeal would not automatically

benefit the NCDHHS, a reversal would still redress PBH’s injury by

enabling the Secretary to file a motion in the district court for relief from

the preliminary injunction pursuant to Federal Rule of Civil Procedure

60(b). But "a preliminary injunction is not a ‘final judgment, order, or proceeding’ that may be addressed by a motion under Rule 60(b)." Prudential

Real Estate Affiliates v. PPR Realty, Inc., 204 F.3d 867, 880 (9th Cir.

2000) (quoting Fed. R. Civ. P. 60(b)). Moreover, even if a Rule 60(b)

motion were available, there is some question whether the Secretary

would apply for such relief if given the chance. After all, the Secretary had

the ability to appeal the preliminary injunction as a matter of right by simply filing a notice to that effect, but chose not to do so. In addition, even

K.C. v. SHIPMAN 17
III.

On March 28, 2013, one week after oral argument and

more than ten months after the Secretary’s deadline to file a

notice of appeal had expired, we received a motion from the

Secretary seeking leave to file a "Memorandum in Response

to Questions Raised at Oral Argument." In the motion, the

Secretary sought the court’s consent "to clarify [the NCDHHS’s] position to the extent it is relevant to the Court’s further

consideration of the matters presented in this case." Secretary’s Mot. for Leave to File Mem. in Resp. to Questions

Raised at Oral Arg. 4. Reflecting the unusual nature of its

request as a non-party to this appeal, the Secretary filed the

motion under Rule 2 of the Federal Rules of Appellate Procedure, which permits a court to "suspend any provision of [the

Rules]" for "good cause." The Secretary did not specify which

rules she would like us to suspend, but for the reasons that

follow we find no "good cause" to suspend any rules at all.

To start, the Secretary points to nothing close to good cause

for why this court should consider her views on the issues

raised by this appeal ten months after her deadline elapsed to

participate in it as a matter of right. The only explanation the

Secretary offers is that the NCDHHS "did not anticipate prior

to oral argument that this Court might view or interpret [its]

decision not to . . . appeal as precluding an appeal by [PBH]."

Secretary’s Mot. for Leave to File Mem. in Resp. to Questions Raised at Oral Arg. 4. We find that explanation wanting.

if a Rule 60(b) motion were available for relief from a preliminary injunction, and even if the Secretary were to file such a motion, there is no guarantee that it would succeed. The remedy afforded by Rule 60(b) is an

"extraordinary" one that is "only to be invoked upon a showing of exceptional circumstances." Compton v. Alton S.S. Co., 608 F.2d 96, 102 (4th

Cir. 1979). In any event, we need not (and may not) decide the ultimate

outcome of any hypothetical Rule 60(b) motion filed by the Secretary. Our

only point here is that PBH’s theory—that a ruling in its favor will redress

its injury by virtue of such a motion—is riddled with speculation. 

18 K.C. v. SHIPMAN
For one thing, the NCDHHS has been aware of its responsibilities under the single state agency requirement since at

least 2009, when it was the defendant in a Medicaid case that

held that "[a]s North Carolina’s ‘single state agency,’ . . . [the

NCDHHS] may not disclaim its responsibilities under federal

law by simply contracting away its duties." McCartney v.

Cansler, 608 F. Supp. 2d 694, 701 (E.D.N.C. 2009). Thus,

even though it is generally permissible for a single state

agency to enter into a contractual relationship with an MCO,

the Secretary was on clear notice that allowing such a contractor to take a particular action (i.e., an appeal)—while disavowing the opportunity to take the same action in the

agency’s own right—could be subject to attack. Even worse

for the Secretary, plaintiff/appellees filed their brief in this

case in August 2012, squarely arguing that the NCDHHS’s

failure to appeal should trigger dismissal of PBH’s appeal.

PBH responded to that argument in its reply brief two weeks

later. The NCDHHS nowhere disputes that it was (or at least

should have been) aware of both of these filings, yet it made

no effort to address either one. It thus defies reason for the

NCDHHS to suggest now, seven months after the issue was

briefed and years after a related ruling against it in district

court, that it was surprised by the panel’s questions at oral

argument. 

More fundamentally, we decline to find good cause here

because the basic rule from which the Secretary seeks relief

is as easy to follow as it is widely known. That is, the NCDHHS’s motion effectively asks for permission to participate in

this appeal despite the fact that it failed to appeal in a timely

fashion. Yet the NCDHHS is represented in this matter by the

North Carolina Attorney General, a sophisticated and frequent

litigant in this court. As such, the NCDHHS is surely aware

of the time limit for filing an appeal, as well as the fact that

this limit has been "treated as jurisdictional in American law

for well over a century." Bowles v. Russell, 551 U.S. 205, 209

n.2 (2007). The NCDHHS must also know that there is even

a special procedure to make things easier on entities that share

K.C. v. SHIPMAN 19
similar interests in an appeal: under Federal Rule of Appellate

Procedure 3(b)(1), such parties "may file a joint notice of

appeal" and "proceed on appeal as a single appellant." Thus,

literally all the Secretary had to do to participate in this

appeal, as it hopes to do now, was co-sign PBH’s notice one

year ago. 

Why the NCDHHS failed to take such an easy step, we

cannot say for certain. The NCDHHS suggests that it declined

to appeal because doing so would have been "duplicative,"

Secretary’s Mot. for Leave to File Mem. in Resp. to Questions Raised at Oral Arg. 3, but that answer only raises more

questions. Duplicative in what sense? Surely not in terms of

wasted effort, since the Secretary could simply co-sign PBH’s

papers. And surely not duplicative in the sense of "unnecessary," for the NCDHHS acknowledges that it will not automatically benefit from a ruling in PBH’s favor, instead

requiring the filing of a Rule 60(b) motion, a problematic

course for all the reasons we have discussed. See ante at

17-18 n.3. In short, we find it dubious that the Secretary

would think it permissible to allow some other litigant to be

its stalking horse in this court, only then to seek leave to participate in the case long after the time for doing so had run.

We recognize, of course, that there has been a change in

administrations since the Secretary’s failure to notice an

appeal. But if we let a state off the hook for its decision not

to appeal based on new electoral outcomes, what other rules

would we be called upon to bend when the political winds

shift and a new executive experiences buyer’s remorse for

decisions of the old? The better course by far is to enforce

consistently for all litigants the time-honored rules that have

long governed how an entity may participate in appeals in this

court. 

In the end, the Secretary’s motion serves only to reinforce

the weaknesses in PBH’s appeal. For if, as PBH argues, the

Secretary and PBH were truly in agreement all along that they

did not wish to comply with the preliminary injunction, all the

20 K.C. v. SHIPMAN
Secretary had to do to make that position clear was join in

PBH’s appeal. That the NCDHHS did not take that simplest

of steps indicates that it was actually making an administrative policy decision to comply with the injunction, which the

single state agency requirement forbids PBH to overrule.

Likewise, it is the Secretary’s failure to file a simple notice of

appeal that bars her late participation in this case.

Of course, our decision does not leave the Secretary without recourse. Quite the contrary. The Secretary is free to press

her views on the merits when the permanent injunction is litigated in the district court, as well as in any subsequent appeal

of such an injunction before this court. What the Secretary

may not do, however, is participate in the instant appeal of the

preliminary injunction, almost a year after the proper time for

doing so has passed, in order to respond to supposedly surprising questions posed at oral argument that she should have

known were on the way. The Secretary’s motion is accordingly denied.

IV.

Spanning hundreds of regulations across fourteen parts and

scores of subparts in the Code of Federal Regulations, Medicaid is—to put it mildly—a complicated program to administer. Seen in that light, the single state agency requirement is

a sensible measure aimed at eliminating the added layer of

complexity that would result if primary actors and courts were

required to ask in every case, "who actually speaks for the

state?" Because of this requirement, we cannot permit PBH to

override the NCDHHS’s decision not to appeal, but to comply

with, the preliminary injunction. One head chef in the Medicaid kitchen is enough.

The appeal is hereby dismissed.

DISMISSED

K.C. v. SHIPMAN 21