Opinion ID: 777287
Heading Depth: 3
Heading Rank: 2

Heading: Preliminary injunctive relief and summary judgment on the merits

Text: 29 The district court granted preliminary injunctive relief in all three cases. Then, in three successive rulings, the district court granted summary judgment in favor of each Plaintiff. 30 The district court held that the alleged violations of Medicaid's single state agency requirement were actionable under § 1983. In concluding that Defendants had violated the single state agency requirement, the district court relied primarily on 42 C.F.R. § 431.10(e)(1)(i), which prohibits a State's designated Medicaid agency from delegating authority to [e]xercise administrative discretion in the administration or supervision of the plan. The district court interpreted that provision to mean that no state agency other than California's Medicaid agency (DHS) could undertake any programmatic Medi-Cal task that requires any form of review or discretion. Concluding that the Controller's audits required review and discretionary analysis, the district court held that the audits violated 42 C.F.R. § 431.10 and could not be the basis for withholding payments to providers. 3 31 The district court also ruled that DHS violated 42 C.F.R. § 455.23 4 when it failed to obtain reliable evidence of fraud before withholding payments. The district court ultimately excluded from DHS's consideration any evidence from the Controller's audits, reasoning that the single state agency requirement prohibited the Controller from gathering evidence of fraud. 32 The district court granted Plaintiffs' motions for summary judgment and permanently enjoined the Controller and her agents from auditing, reviewing, or investigating Medi-Cal reimbursement claims by Plaintiffs. The district court also enjoined DHS from withholding Medi-Cal payments on the basis, either directly or indirectly, of the Controller's audits. Finding that each of the Plaintiffs were prevailing parties under 42 U.S.C. § 1988, the district court awarded each of them attorney's fees. 33 Defendants filed timely notices of appeal from the district court's orders and from its entry of judgment in each case. II. Mootness 34 Before addressing the merits, we must determine whether the issues presented to us on appeal have been rendered moot by intervening developments. See Arizonans for Official English v. Arizona, 520 U.S. 43, 66-67, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997) (holding that mootness is jurisdictional); Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (plurality opinion) (holding that jurisdictional questions must be addressed before merits); id. at 110-11, 118 S.Ct. 1003 (O'Connor, J., concurring) (observing that federal courts should be certain of their jurisdiction before reaching the merits of a case). 35 A case loses its quality as a present, live controversy and becomes moot when there can be no effective relief. Cantrell v. City of Long Beach, 241 F.3d 674, 678 (9th Cir.2001). Here, because of the doctrine of sovereign immunity, Plaintiffs can seek only prospective, injunctive relief. 5 Thus, for Plaintiffs to have a live case or controversy with the State, they must be in a position to benefit from prospective, injunctive relief. 36 We conclude that San Lazaro's claim on the merits is moot. However, the other Plaintiffs' challenges to the Controller's audits and to DHS' reliance on those audits present live controversies over which we have jurisdiction. We also have jurisdiction to review the district court's awards of attorney's fees to Plaintiffs. A. San Lazaro 37 Shortly after the district court entered summary judgment, San Lazaro voluntarily canceled its laboratory license. By canceling its license, San Lazaro became ineligible to participate in the Medi-Cal program. See Cal. Bus. & Prof.Code § 1265(a); Cal.Code Regs. tit. 22, §§ 51200, 51211.2. Defendants then moved under Rule 60(b) of the Federal Rules of Civil Procedure to alter or amend the district court's order granting summary judgment, arguing that San Lazaro's claim had become moot. Because San Lazaro no longer could benefit from the injunctive relief the district court had granted, the district court agreed with Defendants, vacating its summary judgment and dismissing the case as moot. 6 The district court nonetheless awarded San Lazaro attorney's fees on the ground that San Lazaro was the prevailing party under 42 U.S.C. § 1988 because it had obtained injunctive relief that for a time altered the legal relationship between San Lazaro and Defendants. 38 We agree with the district court that San Lazaro's claims became moot when it canceled its laboratory license. See City News & Novelty, Inc. v. City of Waukesha, 531 U.S. 278, 283, 121 S.Ct. 743, 148 L.Ed.2d 757 (2001) (holding that challenge to adult business licensing determination was moot where plaintiff has ceased to operate as an adult business and no longer seeks to renew its license). 7 Although San Lazaro's substantive claims are moot, its entitlement to attorney's fees is not. See Zucker v. Occidental Petroleum Corp., 192 F.3d 1323, 1329 (9th Cir. 1999) (holding that [n]o Article III case or controversy is needed with regard to attorneys' fees as such, because they are but an ancillary matter over which courts retain jurisdiction even when the underlying case is moot). B. Simonyan and Nagapetyan 39 There are no facts in the record that suggest that the dispute between Simonyan and Defendants is moot. With respect to Nagapetyan, after entry of the district court's judgment, he was convicted of Medi-Cal fraud, and as a result was disqualified from participating in the Medi-Cal program for at least five years. Defendants therefore argue that his case is moot. The district court concluded that Nagapetyan's claim was not moot, because he still might seek to participate in the Medi-Cal program at the expiration of the five-year period. 40 On the record before us, we have no basis for concluding that Nagapetyan will not seek to participate in the Medi-Cal program at the end of the five-year period or that he would be barred from participation at that time. We therefore agree with the district court that Nagapetyan's claim is not moot. See United States v. Concentrated Phosphate Exp. Ass'n, 393 U.S. 199, 203, 89 S.Ct. 361, 21 L.Ed.2d 344 (1968) (holding that case may become moot if subsequent events ma[ke] it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur) (emphasis added). Also, independent of our conclusion that neither Simonyan's nor Nagapetyan's claims are moot, we have jurisdiction to hear Defendants' appeal from the district court's order granting attorney's fees to Simonyan and Nagapetyan. C. Clinical Care Laboratory 41 After Clinical Care filed its complaint, it ceased its business operations and DHS canceled the licenses and certifications that Clinical Care needed to participate in the Medi-Cal program. Also, the Controller completed a final audit report concluding that Clinical Care had claimed payment for services it had not performed. In response to the final audit, Clinical Care requested an administrative hearing with DHS to challenge the audit and DHS's decision to withhold payments. The district court held that the case was not moot because Clinical Care could still seek to enjoin DHS from using the Controller's audits in those proceedings. 42 We agree with the district court that, because of the potential availability of such relief, Clinical Care's claims are not moot. And, independent of that conclusion, we have jurisdiction over the district court's order granting attorney's fees to Clinical Care. III. Merits 43 In a preliminary ruling that was essential to its ultimate judgment granting injunctive relief to Plaintiffs, the district court accepted Plaintiffs' argument that they have an enforceable right under § 1983 to have the Medi-Cal program administered in accordance with Medicaid's single state agency requirement. We disagree with the district court's determination, and therefore hold that Plaintiffs were not entitled to summary judgment. 44 In order to seek redress through § 1983, ... a plaintiff must assert the violation of a federal right, not merely a violation of federal law.  Blessing v. Freestone, 520 U.S. 329, 340, 117 S.Ct. 1353, 137 L.Ed.2d 569 (1997) (emphasis in original). In Blessing, the Supreme Court summarized the approach charted by previous cases: 45 We have traditionally looked at three factors when determining whether a particular statutory provision gives rise to a federal right. First, Congress must have intended that the provision in question benefit the plaintiff. [ Wright v. Roanoke Redev. & Hous. Auth., 479 U.S. 418, 430, 107 S.Ct. 766, 93 L.Ed.2d 781 (1987) ]. Second, 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. [ Id. at 431-32, 107 S.Ct. 766]. Third, the statute must unambiguously impose a binding obligation on the States ... [ Wilder, 496 U.S. at 510-511, 110 S.Ct. 2510; Pennhurst State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17, 101 S.Ct. 1531, 67 L.Ed.2d 694 (1981).] 520 U.S. at 340-41, 117 S.Ct. 1353. 8 46 Unless Plaintiffs establish that they are the intended beneficiaries of 42 U.S.C. § 1396a(a)(5) and of the regulations interpreting that provision, they do not have an enforceable right, and cannot maintain an action, under § 1983. Wilder, 496 U.S. at 509, 110 S.Ct. 2510 (The inquiry turns on whether the provision in question was intended to benefit the putative plaintiff. If so, the provision creates an enforceable right unless it reflects merely a congressional preference for a certain kind of conduct rather than a binding obligation on the governmental unit, or unless the interest the plaintiff asserts is too vague and amorphous such that it is beyond the competence of the judiciary to enforce.) (internal quotation marks, citations and brackets omitted); see also Wesley Health Care Ctr., Inc. v. DeBuono, 244 F.3d 280, 283 (2d Cir.2001) (A plaintiff must show that the violation of the federal law also amounts to the violation of a federal right possessed by the plaintiff. ) (emphasis added). In analyzing Plaintiffs' contention that they are the intended beneficiaries of the single state agency requirement, we find Blessing 's application of the intended beneficiary prong highly instructive. 47 In Blessing, the plaintiffs were mothers whose children were eligible for child support services under Arizona's Aid to Families with Dependent Children (AFDC) program. The plaintiffs claimed that Arizona had not taken adequate steps to obtain child support payments from their childrens' fathers. Blessing, 520 U.S. at 337, 117 S.Ct. 1353. They argued that Arizona's allegedly deficient performance violated various provisions of Title IV-D of the Social Security Act and that such violations were actionable under § 1983. Id. 48 The Court noted that the plaintiffs in Blessing had not identif[ied] with particularity the rights they claimed, and went on to note that some of the provisions of Title IV-D were systemic or structural. Id. at 342-44, 117 S.Ct. 1353. For example, Title IV-D provides that States, if they are to receive federal funds, must include, inter alia, a comprehensive system to establish paternity, locate absent parents, and help families obtain support orders. Id. at 333-34, 117 S.Ct. 1353. The statute at issue in Blessing also provides specific guidelines for the structure of the state agency designated to administer this system, such as a requirement for sufficient staffing levels. Id. at 333-35, 117 S.Ct. 1353. Additionally, Title IV-D contains the more general requirement that state AFDC plans must be in substantial compliance with these and other federal guidelines. Id. 49 The Court concluded that the requirements on which the plaintiffs relied were not intended to benefit individual children and custodial parents and therefore did not create individual entitlement[s]. Id. at 343, 117 S.Ct. 1353. The Court viewed provisions requiring substantial compliance and sufficient staffing as designed only to guide the State in structuring its systemwide efforts at enforcing support obligations. Id. at 344-45, 117 S.Ct. 1353. Obviously, state AFDC programs are intended to benefit dependent children and their supporting parents, but, with respect to the systemwide requirements in Title IV-D the Court noted that [t]hese provisions may ultimately benefit individuals who are eligible for [AFDC] services, but only indirectly. Id. at 344, 117 S.Ct. 1353. 9 The structural requirements were simply intended to improve the overall efficiency of the States' child support enforcement scheme. Id. at 345, 117 S.Ct. 1353. 50 Our analysis of Medicaid's single state agency requirement leads us to a similar conclusion. The text of 42 U.S.C. § 1396a(a)(5) and 42 C.F.R. § 431.10(e), along with the legislative and regulatory history, persuade us that the single state agency requirement is a structural programmatic requirement that facilitates federal oversight of state Medicaid programs. 10 Blessing, 520 U.S. at 344, 117 S.Ct. 1353. It does not create individual entitlement[s]. Id. at 343, 117 S.Ct. 1353. A. Single state agency requirement 1. Statutory and regulatory scheme 51 Neither the statute nor the regulations are phrased in terms that define a legal right possessed by providers, and neither focus[es] on providers. Cf. Wilder, 496 U.S. at 510, 527, 110 S.Ct. 2510 (There can be little doubt that health care providers are the intended beneficiaries of the Boren Amendment. The provision establishes a system for reimbursement of providers and is phrased in terms of benefiting... providers); Wright, 479 U.S. at 430, 107 S.Ct. 766 (holding that where limitations on public housing rent levels focus[] on the individual family and its income ... [t]he intent to benefit tenants is undeniable). To the contrary, the single state agency requirement mandates an administrative structure for state Medicaid programs. This administrative scheme imposes a systemwide requirement that administration and overall supervision of state Medicaid programs be centralized. The single state agency requirement allows Congress to specify how state Medicaid agencies must carry out their Medicaid functions, from providing benefits to Medicaid recipients to keeping statistics and reporting those statistics and other information to the federal government. 52 In short, although the single state agency requirement may ultimately benefit many of those who have dealings with state Medicaid programs, it cannot be said to do so in any targeted manner. Blessing, 520 U.S. at 344, 117 S.Ct. 1353. To the extent there is a benefit to such individuals, it is an indirect one. Id. 2. Legislative history 53 The legislative history of the single state agency requirement supports this conclusion. The requirement in the Medicaid Act is patterned after the single state agency requirement imposed on the States by the Social Security Act of 1935. See 42 U.S.C. §§ 302, 1202. Congress' purpose in including the requirement in the Social Security Act of 1935 is not entirely clear, but it suffices to note that nothing in the legislative history of the Social Security Act suggests that the single state agency requirement was included for the benefit of providers of services. 11 54 Congress included a parallel single state agency requirement in the Medicaid Act in 1965 without significant discussion. The only debate was whether the Medicaid Act should require a particular type of state agency to serve as the single state agency or instead whether States should be permitted to designate an agency of their choice. See Sobky v. Smoley, 855 F.Supp. 1123, 1145-46 (E.D.Cal.1994) (reviewing legislative history). Nothing in the legislative history of the Medicaid Act ties the single state agency requirement to the interests of providers.