Court Opinion

ID: 7715
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:30:41+00
Date Added: 2024-06-11T16:46:18.091382
License: Public Domain

UNITED STATES COURT OF APPEALS

                        FOR THE FIFTH CIRCUIT

                            No. 94-40710

PEARL CHEZEM, ET AL.,

                                              Plaintiffs-Appellees,

TEXAS DEPARTMENT OF HUMAN SERVICES
ET AL.,

                                              Defendants-Third Party-
                                              Plaintiffs-Appellees,

                               versus

BEVERLY ENTERPRISES-TEXAS, INC., ET AL.,

                                              Intervenors-Defendants-
                                              Appellants.

          Appeal from the United States District Court
                for the Eastern District of Texas

                          (October 2, 1995)

Before POLITZ, Chief Judge, HILL* and DeMOSS, Circuit Judges.

POLITZ, Chief Judge:

     Beverly Enterprises-Texas, John R. Folowell, Mary P. Folowell,

and Woodhaven, Inc. appeal an adverse summary judgment. Finding no

reversible error, we affirm.

     *
       Circuit Judge of the Eleventh Circuit, sitting by
designation.
     Beverly Enterprises and its principals, the Folowells and

Woodhaven, were nursing home owners and operators.                They brought

suit in Texas state court against the Texas Department of Human

Services, challenging its decision to assign the Medicaid contract

of a competitor, Regency Terrace Nursing Center, Inc., to its

successor, Carriage House Manor, Inc.          Neither Carriage House nor

its residents was joined in the state court action.               The Beverly

Enterprises group obtained an injunction against the transfer as

violative of state regulations.         Efforts by Carriage House and

certain   residents   to    intervene   were    objected     to    by   Beverly

Enterprises.   The district court declined to consider their motion

on the grounds that it no longer had jurisdiction.

     Pending the Carriage House appeal of that decision,1 residents

filed suit to enjoin TDHS from terminating their Medicaid benefits.

Carriage House intervened in the new action, as did the Beverly

Enterprises group, which joined TDHS in removing to federal court.

The federal district court entered summary judgment in favor of the

plaintiffs   and,   after   unsuccessful   attempts     at    post-judgment

relief, the Beverly Enterprises defendants timely appealed.

     At the threshold the appellants invoke the Anti-Injunction

Act2 as a bar to a federal declaratory judgment that would have the

effect of nullifying the state court judgment.               As the Supreme

     1
      The court of appeals ultimately decided that the "Final
Summary Judgment" was not final and dismissed the appeal for want
of jurisdiction. No further action was taken.

     2
      28 U.S.C. § 2283.

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Court has taught, the Anti-Injunction Act has no application herein

because Carriage House and its residents were neither parties nor

privies of parties to the state court action.3      The appellants

further contend that the district court should have abstained

because the suit poses "difficult questions of state law involving

policy considerations."   To the contrary, the dispositive issue

herein involves the question of federal preemption of state law. 4

The Texas administrative agency charged with implementing the state

law acknowledges federal preemption.     We find no fault in the

district court's refusal to abstain.   The appellants did not name

the plaintiffs herein as parties in the state court action and they

opposed their effort to intervene.     Further, we agree with the

district court that a party removing a case to federal court, as

the appellants did herein, may not thereafter advocate abstention.

     On the merits we address whether a federal regulation which

requires the automatic assignment of a Medicaid contract to the new

owner upon change of ownership preempts a TDHS regulation which

prohibits transfer of the contract if ownership changes during the

     3
      See County of Imperial v. Munoz, 449 U.S. 54 (1980), appeal
after remand, Munoz v. County of Imperial, 667 F.2d 811 (9th
Cir.), cert. denied, 459 U.S. 825 (1982); Pelfresne v. Village of
Williams Bay, 917 F.2d 1017, 1020 (7th Cir. 1990) ("Only a party,
or, . . . one who is in privity with a party, is barred by the
Anti-Injunction Act.").
     4
      Cf. New Orleans Public Service, Inc. v. Council of City of
New Orleans, 491 U.S. 350 (1989) (Burford abstention is not
appropriate in suit claiming that local ratemaking authority is
preempted by federal law).

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first three years.5      It is undisputed that Regency Terrace, which

was in bankruptcy, transferred its nursing home to Carriage House

during the three-year period.      The federal regulation, 42 C.F.R. §

442.14, provides:

     (a) Assignment of agreement. When there is a change of
     ownership, the Medicaid agency must automatically assign
     the agreement to the new owner.

     (b) Conditions that apply to assigned agreements. An
     assigned agreement is subject to all applicable statutes
     and regulations and to the terms and conditions under
     which it was originally issued, including, but not
     limited to, the following:

            (6) Compliance with any additional requirements
            imposed by the Medicaid agency.

The appellants contend that section 442.14(b)(6) qualifies section

442.14(a), and therefore, that TDHS's three-year rule is a valid

condition to the automatic-assignment requirement.              We are not

persuaded.    The interpretation appellants suggest contravenes the

plain    language   of   the   regulation,   which   requires    automatic

assignment without qualification. Because the TDHS three-year rule

is in direct conflict with the automatic-assignment requirement, it

is to be given no effect for it is preempted by federal law.6

     AFFIRMED.

     5
      The regulation is a condition for the grant of a waiver to
TDHS's moratorium on the award of new Medicaid contracts.
     6
      See Hetzel v. Bethlehem Steel Corp., 50 F.3d 360 (5th Cir.
1995) (state law is preempted when it conflicts with federal law;
a conflict occurs when compliance with both federal and state
regulation is impossible or when state law is an obstacle to the
achievement of congressional purposes).

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