Opinion ID: 2784541
Heading Depth: 2
Heading Rank: 3

Heading: Consent Decree Interpretation

Text: Consent decrees are construed according to “general principles of contract interpretation.” 28 “The primary concern of a court in construing a written contract is to ascertain the true intentions of the parties as expressed 26 See 11 WRIGHT, MILLER & KANE, supra note 24, § 2863 (“The first of the grounds set out in Rule 60(b)(5), that the judgment has been satisfied, released or discharged, has been relied on very rarely.”). 27 Johnson Waste Materials v. Marshall, 611 F.2d 593, 600 (5th Cir. 1980) (quoting Laguna Royalty Co. v. Marsh, 350 F.2d 817, 823 (5th Cir. 1965)). 28 Dean v. City of Shreveport, 438 F.3d 448, 460 (5th Cir. 2006). Furthermore, the court “look[s] to state law to provide the rules of contract interpretation.” Clardy Mfg. Co. v. Marine Midland Bus. Loans Inc., 88 F.3d 347, 352 (5th Cir. 1996). Plaintiffs cite to Texas contract law, and we have previously applied Texas law in cases involving consent decrees concluded between Texas parties. See, e.g., City of El Paso, Tex. v. El Paso Entm’t, Inc., 464 F. App’x 366, 372 (5th Cir. 2012) (per curiam) (unpublished). 9 Case: 14-40048 Document: 00512959210 Page: 10 Date Filed: 03/05/2015 No. 14-40048 in the instrument.” 29 Thus, courts examine the “unambiguous language in a contract” and enforce “‘the objective intent’ evidenced by the language used.” 30 This reliance on the written terms must include consideration of all the terms: “[C]ourts should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.” 31 “Indeed, courts must be particularly wary of isolating from its surroundings or considering apart from other provisions a single phrase, sentence, or section of a contract.” 32 Plaintiffs contend that the district court erred in focusing narrowly on Defendants’ satisfaction of specific provisions of CAO 637-8 and not considering the Decree’s broader goals, as found in ¶¶ 3, 6, and 190. The purpose of the Decree, according to Plaintiffs, is results-oriented: It is not enough for Defendants to perform the required action items mechanically; the court must also find that these actions were effective in improving EPSDT recipients’ access to health care. Plaintiffs conclude that, because the district court failed to construe the Decree as a whole document, it misapplied the rules of contract interpretation and erred as a matter of law. Plaintiffs’ recitation of the rules of contract interpretation is correct, but interpreting the Decree as an entire writing does not give Plaintiffs the victory they seek. In ¶¶ 3 and 190, the Decree states the uncontroversial position that Plaintiffs, including those served by managed care organizations, are entitled to EPSDT benefits as mandated by Medicaid. In ¶¶ 4 and 5, the Decree opines that Texas’s implementation of EPSDT could and should be improved. Then, in ¶ 6, the Decree introduces the “changes and procedures” agreed to by the 29Texas v. Am. Tobacco Co., 463 F.3d 399, 407 (5th Cir. 2006) (emphasis added). 30Clardy, 88 F.3d at 352. 31 Coker v. Coker, 650 S.W.3d 391, 393 (Tex. 1983). 32 Am. Tobacco Co., 463 F.3d at 408 (quoting State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 433 (Tex. 1995)) (internal quotation marks omitted). 10 Case: 14-40048 Document: 00512959210 Page: 11 Date Filed: 03/05/2015 No. 14-40048 parties to effectuate this improvement, noting that these actions are in place “[t]o address the parties’ concerns, to enhance recipients’ access to health care, and to foster the improved use of health care services by Texas EPSDT recipients.” These introductory paragraphs do not guarantee specific outcomes; rather, they show that the Decree is aimed at supporting EPSDT recipients in obtaining the health care services they are entitled to, by addressing concerns, enhancing access, and fostering use of services. Defendants therefore fulfill the purpose of the Decree by implementing the broad range of supportive initiatives memorialized in the Decree. 33 The whole point of negotiating and agreeing on a plethora of specific, highly detailed action plans was to establish a clearly defined roadmap for attempting to achieve the Decree’s purpose. In other words, the parties already agreed that substantial compliance with this roadmap would achieve their common goal. To read the Decree as implying a secondary assessment of the impact of each action item would introduce a new requirement to which the parties never agreed. The Decree makes no guarantees of success and sets no results-based milestones; neither do ¶¶ 124–30 establish any objective standard that pharmacists must achieve before Defendants’ educational efforts may be considered successful. Plaintiffs have not pointed to any discrete endpoint for CAO 637-8 or these Decree paragraphs. Indeed, they may never be satisfied with Defendants’ educational efforts: In their 2012 motion to enforce the Decree and CAO 637-8, Plaintiffs appeared to have given up on pharmacist training entirely. Acknowledging that “[n]o amount of education will cure the pervasive See id. at 407 (“The primary concern of a court in construing a written contract is 33 to ascertain the true intentions of the parties as expressed in the instrument.” (emphasis added)). 11 Case: 14-40048 Document: 00512959210 Page: 12 Date Filed: 03/05/2015 No. 14-40048 dysfunction in Defendants’ deeply flawed system,” Plaintiffs instead wanted Defendants to “propose a further action plan” to effectuate “systematic change” to the prescription drug program itself. Neither the rules of contract interpretation nor Frew III’s instruction to “promptly” return state programs to state control countenance this rewriting of the Decree. Plaintiffs also point to the word “effectively” in ¶ 129: Defendants were required to “implement an initiative to effectively inform pharmacists about EPSDT.” Plaintiffs reason that if many EPSDT recipients are still not receiving their prescription drug benefits, Defendants’ educational initiative must not have been effective. Reading ¶ 129 as a whole, however, reveals that “effectively” functions to require that all “presentations,” “articles,” and “mail out” initiatives conducted by Defendants convey information effectively. Paragraph 129 even provides some guidelines for effective communication, instructing Defendants to design mailings “to attract pharmacists’ attention” and “explain EPSDT coverage clearly.” Defendants were obligated to communicate information in an effective manner, no more. To infer a wholesale, results-oriented reevaluation of Defendants’ efforts from this one word, taken out of context, would be wholly inconsistent with the rules of contract interpretation. 34 Finally, Plaintiffs rely heavily on the Ninth Circuit’s opinion in Jeff D. v. Otter, which held that “[e]xplicit consideration of the goals of [the consent decree], and whether those goals have been adequately served, must be part of the determination to vacate.” 35 But Jeff D. is inapposite for two reasons. First, 34 See id. at 408 (“Indeed, courts must be particularly wary of isolating from its surroundings or considering apart from other provisions a single phrase, sentence, or section of a contract.” (quoting State Farm, 907 S.W.2d at 433) (internal quotation marks omitted)). 35 643 F.3d 278, 289 (9th Cir. 2011). 12 Case: 14-40048 Document: 00512959210 Page: 13 Date Filed: 03/05/2015 No. 14-40048 the Ninth Circuit’s reasoning rested on two school desegregation cases, 36 which present unique issues in consent decree jurisprudence, 37 and on a case that appears to have considered the flexible standard for modifying consent decrees, a standard associated with the third clause of Rule 60(b)(5). 38 Thus, Jeff D.’s persuasiveness is limited. Second, the consent decree at issue in Jeff D. “provided for continuing jurisdiction by the district court for five years ‘or until [the district court was] satisfied by stipulation or otherwise that the claims as alleged in the Complaint have been adequately addressed.’” 39 The Jeff D. parties bargained for a termination condition that included an independent assessment by the district court of whether the plaintiffs’ complaints had been resolved. Thus, when the district court vacated the consent decree after assessing compliance with the specific action items only, it did not give the plaintiffs the benefit of their bargain. 40 Although the Ninth Circuit did not emphasize this fact, we find Jeff D. to be distinguishable on this basis. In conclusion, we reject Plaintiffs’ contention that the district court incorrectly interpreted the Decree in deciding Defendants’ motion to terminate CAO 637-8 and Decree ¶¶ 124–30. If the Decree had explicitly guaranteed 36 See id. at 288 (citing Freeman v. Pitts, 503 U.S. 467 (1992); Youngblood v. Dalzell, 925 F.2d 954 (6th Cir. 1991)). 37 In Frew V, Defendants contended that the proper legal standard for terminating consent decrees was that found in the Supreme Court’s school desegregation cases, but we expressly declined to rule on that question. See Frazar v. Ladd, 457 F.3d 432, 440 (5th Cir. 2006). No party relies on the desegregation cases in this appeal. Owing to school desegregation’s unique legal history, the consent decree modification standards articulated in Freeman and similar cases may be of limited applicability. We have cited Freeman almost exclusively in other school desegregation cases. 38 See Jeff D., 643 F.3d at 288 (citing United States v. City of Miami, 2 F.3d 1497 (11th Cir. 1993) (considering the “flexible standard” from Rufo)). 39 Id. at 281 (emphasis added). 40 No similar provision exists in the Decree or in CAO 637-8. The closest analogue is CAO 637-8’s instruction for “counsel . . . [to] confer to determine what, if any, further action is required” after Defendants complete the second study of pharmacists’ claims history. If the parties cannot agree, then the court may step in. There is nothing, however, instructing the court to resolve the dispute with reference to the Decree’s overall purpose. 13 Case: 14-40048 Document: 00512959210 Page: 14 Date Filed: 03/05/2015 No. 14-40048 pharmacists’ compliance, provided an objective standard for assessing the effectiveness of Defendants’ actions, or set termination conditions referencing satisfaction of the Decree’s overall purpose, Plaintiffs might legitimately complain about the district court’s approach. As it is, the district court did not err in interpreting CAO 637-8 and ¶¶ 124–30 to mandate specific actions only, the performance of which would automatically satisfy the parties’ intent in concluding these agreements. D. Dissolution of Consent Decree ¶¶ 124–30 and CAO 637-8 Plaintiffs also challenge the district court’s conclusion that Defendants have substantially complied with CAO 637-8 and Decree ¶¶ 124–30. In determining that a party to a contract has fulfilled its contractual obligations, Texas law allows substantial compliance. 41 “Substantial compliance excuses deviations from a contract’s provisions that do not severely impair the contractual provision’s purpose.” 42 The district court found that Defendants had substantially complied with the requirements of bullet points 6 and 10 in CAO 637-8 and ¶¶ 124–30 of the Decree. It did not make any specific findings with respect to the other bullet points in the CAO, as it determined that “[a]t the court’s hearing on these motions, Plaintiffs acknowledged that Defendants substantially complied with all but two of the paragraphs of CAO 637-8.” Plaintiffs dispute that they made this concession, but their brief acknowledges that, during the hearing on Defendants’ motion, their counsel agreed with the court that “some discrete efforts took place.” A review of the hearing transcript confirms the propriety of the district court’s ruling. Counsel 41 See Turrill v. Life Ins. Co. of N. Am., 753 F.2d 1322, 1326 (5th Cir. 1985). 42 Interstate Contracting Corp. v. City of Dall., Tex., 407 F.3d 708, 727 (5th Cir. 2005); see also id. (noting that substantial compliance is not the legal equivalent of strict compliance if the contract expressly calls for the latter). 14 Case: 14-40048 Document: 00512959210 Page: 15 Date Filed: 03/05/2015 No. 14-40048 agreed that Defendants had (1) made a Medicaid PDL service available; (2) implemented an electronic system for filling EPSDT prescriptions; (3) worked with the Texas Pharmacy Association to educate its members; (4) conducted two studies of pharmacies’ claims histories; 43 (5) encouraged pharmacies to provide durable medical equipment; (6) provided EPSDT materials to pharmacies when concluding new contracts; and (7) encouraged managed care organizations to train their personnel in EPSDT. Although counsel consistently disputed the effectiveness of Defendants’ efforts, the relevant issue for determining substantial compliance is completion, and Plaintiffs have conceded that Defendants completed all but two of the bullet points in CAO 637-8. As for the two disputed bullet points, the district court’s determination that Defendants have substantially complied with their obligations is consistent with the record. With respect to bullet point 6, which required Defendants to educate pharmacies that filled below-expected numbers of 72hour emergency prescriptions in an “intensive, targeted” manner, Plaintiffs assert that Defendants’ efforts were not sufficiently “intensive.” But the district court found Defendants’ actions—mailing certified letters to 822 pharmacies, visiting or calling the ones that did not receive the letter, and contacting corporate chain offices—to be sufficient. During oral argument, Plaintiffs’ counsel also took issue with the content of the certified letter, contending that it “never told the pharmacists that they must provide the 72hour prescription.” According to counsel, the letter left out “the critical part” of the program—that this 72-hour emergency prescription was mandatory, not 43Plaintiffs’ counsel agreed that “[t]hey have conducted two studies fairly close to what the corrective action order required,” noting that the studies were “not compliant with [CAO 637-8], but fairly close.” The district court did not abuse its discretion to hold that this statement demonstrated a concession of substantial compliance. See id. 15 Case: 14-40048 Document: 00512959210 Page: 16 Date Filed: 03/05/2015 No. 14-40048 discretionary. Thus, “the whole system fell apart” because “the pharmacists think they have discretion, or they don’t have to, or it’s only permissive that they provide the 72-hour medication.” After reviewing the mailing, however, we see no basis for this complaint. The letter told pharmacies that they “should dispense the 72-hour emergency supply”; the enclosed “Texas Medicaid Pharmacists’ Guide to Dispensing 72-Hour Emergency Prescriptions” clearly stated that “[f]ederal and Texas law requires that a 72-hour emergency supply of a prescribed drug be provided.” The district court did not err in concluding that Defendants have fulfilled their obligations under bullet point 6. With respect to bullet point 10, which required Defendants to train personnel in their ombudsman’s office, Plaintiffs’ complaints, essentially, are that any evidence of training is insufficiently detailed and conclusional. The district court relied on three declarations from state employees who testified that multiple training sessions occurred for ombudsman’s office staff. Although Plaintiffs would prefer the district court not to credit these statements, absent any indicia of unreliability other than Plaintiffs’ unsubstantiated accusations of bias, the court’s decision to do so is not clearly erroneous. Finally, Plaintiffs contend that the district court erred in dissolving Decree ¶¶ 124–30 because it did not find that Defendants’ actions were effective. As already discussed, the word “effectively” in ¶ 129 applies to the Defendants’ communication obligation, not to the participating pharmacies’ compliance. The district court rejected Plaintiffs’ contention that the phrase “Defendants will implement an initiative to effectively inform pharmacists about EPSDT” meant ensuring that all Texas EPSDT recipients actually received all of their pharmacy benefits. The court noted that Plaintiffs had agreed that Defendants had completed the discrete, information-conveying 16 Case: 14-40048 Document: 00512959210 Page: 17 Date Filed: 03/05/2015 No. 14-40048 actions required by this section of the Decree. This determination was not clearly erroneous.