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California Law to Reduce Medicaid Expenditures Challenged

Independent Living Center of Southern California, Inc. v. Shewry, 543 F.3d 1050 (C.A. 9, Sept. 17, 2008)

Under California Assembly Bill X3.5 (“AB 5”), enacted in February 2008, the State of California reduced by 10% payments to medical providers participating in California’s Medicaid program (“Medi-Cal"). The federal Medicaid Act requires that, in order for a state to receive federal funding for its medical plan, the state plan must provide payment “consistent with efficiency, economy, and quality of care” that is “sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available” to the general population in that area, 42 U.S.C. 1396a(a)(30)(A).

Various pharmacies, health care providers, senior citizens’ groups, and Medi-Cal beneficiaries (collectively, “Citizens”) filed suit in California state court for injunctive relief against the enforcement of AB 5, alleging that it was in conflict with 30(A) of the Medicaid Act and therefore preempted under the Supremacy Clause of the U.S. Constitution. The State removed the suit to U.S. District Court (C.D. Calif.), which denied the preliminary injunction on the grounds that 30(A) of the Medicaid Act did not create a private right of action.

The Citizens appealed, and argued that the Supremacy Clause permits suits for injunctive relief from state laws that are allegedly preempted by a federal statute even where the federal statute contains no private right of action.

At the outset, the Court of Appeals pointed out that the Supreme Court has frequently heard claims made for injunctive relief based on federal preemption without requiring statutory authorization of a private right of action, relying on federal question jurisdiction and the Supremacy Clause. The Court rejected the notion that the Supremacy Clause permits such suits only if they fall within one of three specific categories.

The Court also rejected the State’s argument that because 30(A) was a federal statute based upon Congress’ spending power, a private right of action should be a prerequisite to using it as the basis for an injunction. According to the Court, the Citizens gave no rational justification for such a distinction, nor was it supported by precedent.

Ultimately, the Court held that it was irrelevant that section 30(A), the allegedly preemptive statute, did not confer a private right of enforcement on individuals; a suit for injunctive relief may be brought under the Supremacy Clause regardless.

Finally, the Court held that the Citizens had standing to bring the suit, as there was evidence that they would be directly injured by the 10% rate reduction mandated by AB 5.

The Court of Appeals reversed the ruling of the District Court and remanded the case for a hearing on the merits of the Citizens’ claim for preliminary relief.
 

 

Judge(s): Berzon
Jurisdiction: U.S. Court of Appeals, Ninth Circuit
Related Categories: Civil Procedure , Government / Politics , Health Care
 
Appellant Lawyer(s) Appellant Law Firm(s)
Lynn S. Carman Medicaid Defense Fund
Stanley L. Friedman Stanley L Friedman Law Offices

 
Appellee Lawyer(s) Appellee Law Firm(s)
Edmund G. Brown, Jr. Office of the California Attorney General
Gregory M. Cribs Office of the California Attorney General
Phillip J. Matsumoto Office of the California Attorney General
Tara L. Newman Office of the California Attorney General
Sara Ugaz Office of the California Attorney General
Jennifer M. Kim Supervising Deputy Attorney General
Richard T. Waldow Supervising Deputy Attorney General

 

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id. (internal citations omitted). the court concluded by noting and its director, of action pursuant to 1983 exists every time a federal rule of law pre- 1132(a). the same provision, however, is silent as to employers, and has emption claims have been permitted in only three "circum- the distinction between claims for relief under 1983 and claims for enforced by third parties in the absence of a private right of action." see injunctive relief from state regulation, on the ground must confer a right on the party that argues in favor may maintain a valid cause of action to enjoin implementation suit for injunctive relief directly under the supremacy clause. case, the texas department of health contended that to seek to some unique line of "shaw preemption" cases, but merely "right" under 1983 to secure enforcement of [the 1453 (2007). we address ilc's standing to bring suit sepa- indeed, shaw itself traced the roots of the doctrine to ex parte young, in planned parenthood of houston v. sanchez, 403 f.3d fare rights org., 441 u.s. 600, 613 (1979)). in the absence establish article iii standing. see lujan v. defenders of wild- u.s. 190, 194-95 (1976). moreover, this injury is directly below. shaw's description of erisa makes clear that the court did not advancing the same arguments asserted by the director in our for injunctive relief based on federal preemption, without be the supreme law of the land; and the judges in every state shall be tion for abuse of discretion. the lands council v. mcnair, "budget constraints," the missouri state legislature amended refinery and tanker vessels, who argued that the state of brought suit under the supremacy clause. "preemption claims act was inconsequential to the supremacy clause analysis, eral statutes discussed above. but even if she had, this argu- claim . . . ." (internal citation omitted)). absent an explicit statutory cause of action"); ill. ass'n of reaffirmed the traditional rule that injunctive relief is pre- cir. 2004) (internal citations omitted); see also local union to bring suit, the court proceeded directly to the merits of authorities to enforce its levies against funds held in erisa-covered [ 30(a)] does not confer a private right of enforcement upon a private airport, filed suit under the supremacy clause, argu- of 1983 to require a plaintiff to show the deprivation of "an milan d. smith, jr., circuit judges. 14 f.3d 817 (d.c. cir. 2004), the d.c. circuit addressed a simi- absence of any statutory right to medicaid funds. see 249 f.3d at 73. the attorney general; phillip j. matsumoto, tara l. newman, ceutical manufacturers trade group challenged a maine statute 1396 et seq. (the "medicaid act"), the federal government same federal statute may create a federal right for which 1983 provides diction, see fw/pbs, inc. v. city of dallas, 493 u.s. 215, actual or imminent, not conjectural or hypothetical. (1985), two classes of plaintiffs alleged that the state of stantive provisions of the federal medicaid act, and are there- federal court, it would obviously be incorrect to assume that a federal right c. general rule that a plaintiff seeking to enjoin state law based united states,' " id. at 626-27 (quoting 49 u.s.c. 1508(a)), id. at 328. plaintiffs argued, inter alia, that the primary care physicians, specialists, dentists, and pharmacies ments similar to those presented by the director in this case, relief from state regulation, on the ground that such regulation preemptive force." id. nize our "independent obligation" to examine our own juris- had "no doubt" as to the authority of private parties to seek the other circuits that have addressed the question. not acceding to the defendants' argument that phrma id. at 91. man 15 law that is preempted by federal law;" and (3) "where state within the jurisdiction thereof to the deprivation of any rights, privileges, nor are we certain on what grounds the district court con- 3 below. is pre-empted by a federal statute which, by virtue of the we review a district court's denial of a preliminary injunc- although shaw utilized the term "federal rights," it did so before that to support its conclusion that "individuals who, as officers of the state, are be concerned that the supremacy clause does not of than a 10% net profit." by further reducing already-low reim- tation of ab 5, and would certainly be remedied by a decision programs in compliance with individual "state plans for med- supremacy clause doctrine, rendering its probability of suc- circuits in holding that a plaintiff seeking injunctive relief differently from a claim of preemption under any of the fed- cluded that ilc's claims did not fall under any of these three 13045independent living center v. shewry court had "little difficulty . . . holding that [planned parent- (1992); pac. gas & elec. co. v. state energy res. conserva- enforceable under 1983, an altogether separate remedial scheme. see tion. justices scalia would have held that phrma could not bring suit, 13032 independent living center v. shewry 13036 independent living center v. shewry to enforce rights under the medicaid statute . . . but rather a tion over suits to enjoin state officials from interfer- lynn s. carman and stanley l. friedman (argued) for inde- petitioners-appellants, appellees are not asking the courts to enforce their and plaintiffs' preemption claim was remanded for consider- required where a party seeks to enjoin the enforce- in pharmaceutical research & manufacturers of america 13051independent living center v. shewry insufficient to meet the costs of necessary medical services[.]" parties may sue to enforce spending clause legislation -- ture arguments for an appellant, and a bare assertion does not preserve a from implementing a law allegedly preempted under the of the department of health care services, the state agency the court proceeded along much the same path. ray involved the federal government " `to possess and exercise complete similarly, there is no viable distinction for present purposes between the 3 ments. has preempted certain state action does not preclude the possibility that the and "implement cost containment measures affecting health percent rate reduction," ilc had "no likelihood of succeeding ary 16, 2008, during a special session convened by the gover- "right" conferred by statute; instead, they argue that the cuts fact" -- standing language, as we shall see -- whereas "[h]ere, 30(a) id. citing a decision from the third circuit, the court noted: ("phrma") v. concannon, 249 f.3d 66 (1st cir. 2001), aff'd spending clause, see u.s. const. art. i, 8, cl. 1, that " `di- were not preempted, whereas the employers in shaw presented an affirma- system 903 (5th ed. 2003) (describing "the rule that there is of 1990 ("ada"), 42 u.s.c. 12181 et seq. ilc voluntarily dismissed medical providers participating in the state's medi-cal pro- one or more of the plaintiffs and the other requirements of u.s.c. 1331 to resolve." id. at 96 n.14. the district court family planning services to contractors who pledged not to several large employers, who brought suit against the acting receives in-home support services from a medi-cal managed care pro- to articulate any argument challenging ilc's prudential standing, the 13035independent living center v. shewry [14] petitioners include independent pharmacies and health aid to families with dependent children (afdc) program placed because plaintiffs in that case had "established a concrete injury in reaching this conclusion, however, the district court relied on a series of angeles county, 481 f.3d 1150, 1153-54 (9th cir. 2007)). to joined by souter, j., and ginsburg, j.); id. at 671 (breyer, j.); this claim in its reply brief, noting that the supreme court and a 1983 action would also be proper." id.; see also local "right" to medicaid funds than the pharmacies and health care providers ficient to enlist enough providers to ensure that medical ser- because "the remedy for the state's failure to comply with the obligations under well-established law of the supreme court, this must demonstrate three elements: federal statute at issue confers any substantive rights on sistent with this opinion. eral claim for injunctive relief). patients; and that medi-cal's reimbursement rates for pre- enjoin implementation of texas's rider 8, which required their claim for injunctive relief, holding the city's ordinance preemption-based challenge under the supremacy clause. in the majority, then-justice rehnquist noted that "the availabil- statute was likely not preempted by the federal medicaid act. cognizant of the potential adverse consequences of the ten california assembly bill x3 5 ("ab 5"), enacted on febru- id. christina a. snyder, district judge, presiding citing justice thomas's opinion in walsh, the defendants supremacy clause . . . , must prevail, thus presents a federal empted by federal law because there was no conflict between panthers of san francisco, a id. at 71-72. phrma argued, inter alia, that we know of no governing authority to the effect the payment for[ ] care and services . . . as may be thers, and the pharmacy petitioners also sued to assert the interests of their parenthood v. sanchez. as noted above, plaintiffs sought to created right." ilc's claims thus fell outside the shaw its prior practice regarding such claims." id. the court there- in so ruling, the district court rebuffed ilc's argument that with efficiency, economy, and quality of care and are state law conflicts with a federal statute or regulation." id. action of the defendant, and not the result of the petitioners, which is the necessary predicate to seeking relief bring a claim under the supremacy clause that a order. precedent and hold that ilc maintains a valid cause of action [9] the reasoning adopted by the other circuits is also help- union no. 12004, 377 f.3d at 75-76 (distinguishing between 13046 independent living center v. shewry at 154-56. without comment on plaintiffs' authority to bring panthers of sacramento, a of any "right," the district court concluded, ilc almost surely aid recipients. id. at 500-01. plaintiffs, a group of adult the eighth circuit's decision in lankford v. sherman, 451 legion -- inapplicable to ilc's claims, holding that shaw pre- relief, since it was "undisputed that respondent's calculations law." id. at 68. benefits laws -- which required employers to treat preg- for publication argue that the interests protected by 30(a) are not judicially enforceable affording plaintiffs an alternative theory for relief when a the petitioners or their members have any federal right to trust, 463 u.s. 1 (1983), decided the same day, "does not call unambiguously conferred right" in order to support a cause of enforce against parties affected an unconstitutional act, violating the fed- fornia; richard t. waldow, supervising deputy attorney individualized federal right to reasonable medicaid stan- law interferes with federally created rights." the court con- to prevent implementation of the program. id. at 72. in michigan's prior conduct violated federal law. id. as the tenth circuit explained, shoppe; sharon steen doing d.c. no. vent the department of health care services3 inc. v. amazon.com, inc., 508 f.3d 1146, 1157 (9th cir. the court necessarily assumed -- albeit implicitly -- that a cases such as gonzaga university v. doe, 536 u.s. 273 (2002), discussed a. lime & avocado growers. id. thus, shaw did not give rise asserted erisa preemption as a defense to an action brought by state tax f.3d 971, 977 (9th cir. 1994) ("we review only issues which are argued under [42 u.s.c.] 1983." 416 f.3d 1051, 1062 (9th cir. given time or place. without questioning plaintiffs' authority them." id. at 331-32. after a thorough canvassing of preemp- faced with argu- stances": (1) "where the plaintiff claims that a state law in assessing plaintiff's claims for injunctive relief, the fifth generally been interpreted to mean that an employer cannot maintain an we nonetheless recog- bound thereby, any thing in the constitution or laws of any state to the the director to reduce payments for inpatient services pro- that term has been recently used in suits brought under the supremacy clause provides that "[t]his constitution, and the laws traceable to the director's implementation of ab 5, and relations act (nlra), and were therefore invalid. id. we the merits of ilc's motion for preliminary injunction.5 ment has also been flatly rejected by the supreme court and argument, explaining that "phrma has not asserted an action ing to vindicate any right or to enforce any duty running to on the merits" because they "do not have any federal rights in reaching this conclusion, the district court relied heavily 13031independent living center v. shewry tary of labor, to maintain a cause of action under erisa. see 29 u.s.c. supremacy clause.9 are analyzed under a different test than section 1983 claims, position. by maintaining that ilc cannot proceed unless it suit to go forward. [4] perhaps the most well-known in this line of cases is tently reaffirmed the availability of injunctive relief to prevent argued that there were "serious questions as to whether third manner, nor has the director cited any. in fact, the supreme second, there must be a causal connection between the state legislation violates certain provisions of the federal statutory provision at issue. the director provides little, if action under 1983, as recently enunciated in gonzaga uni- enjoin implementation of allegedly unlawful state legislation. relief under the supremacy clause regardless of whether the life, 504 u.s. 555, 560 (1992). on appeal, the director implementing state legislation allegedly preempted by federal implementation of ab 5 on april 22, 2008, maintaining that mentation of ab 5. cases."7 2005). although the district court acknowledged that ilc in broadly asserting instead that because 30(a) of the medic- 463 u.s. at 96 n.14. rather, the court reaffirmed the act], nor is it a claim for damages; it is a preemption claim. nat'l union of hosp. & health care employees, 717 f.2d 726, 729-30 (2d counsel or disabled individuals, whose income and resources are suffered a concrete and particularized injury that is either law, and we see no reason to depart from the general rule in 442 f.3d 1147, 1156 (9th cir. 2006)) (alteration in original). hart & wechsler's the federal courts & the federal out of the medi-cal program and force existing providers to injunctive relief under the supremacy clause; to the contrary, v. facturers. id. at 73. the first circuit rejected the defendants' actual or imminent, that the injury is fairly traceable to the the court has consistently assumed -- without comment -- empts state regulatory authority. conversely, the fact that a federal statute medi-cal payments or benefits. we do not agree that this suit uations in which preemption claims may be asserted, in state court and in the states substantial discretion in choosing among reasonable methods of 8 to ensure pharmaceutical companies' participation in the program, own conduct" and " 30(a) does not give rise to a federally supremacy clause regardless of whether the allegedly pre- at 96 n.14. contrary, the court described erisa as "a comprehensive statute designed suit under the supremacy clause, the court once again pro- doctrine recognized in shaw v. delta air lines, inc., 463 u.s. 13030 independent living center v. shewry to the general rule that injunctive relief is presumptively fact -- an invasion of a legally protected interest (same); burgio & campofelice, 107 f.3d at 1005-07 & n.2 edmund g. brown, jr., attorney general of the state of cali- circuit began by noting that "[i]t is well-established that the 13048 independent living center v. shewry its state medicaid plan to eliminate coverage for durable med- and human services. 42 u.s.c. 1396. the act sets forth even though it was "beyond dispute" that plaintiff fell outside marks omitted). "the general rule applicable to federal court ment would work a fundamental change in supremacy clause the injury and the conduct complained of -- the these claims without prejudice. rebates.11 u.s. 624 (1973), for example, the court enjoined a city ordi- cases holding that the supremacy clause does not give rise to rights this case filed suit under 28 u.s.c. 1331 and the supremacy washington's tanker law, which regulated the design, size, (same). 10 phrma lacked any federal right to bring suit. like the direc- violation must demonstrate an enforceable right under the pre- 79. phrma successfully petitioned the supreme court for cumstances," we know of no authority limiting shaw in this steen, co-owner of central pharmacy in santa monica; mark beckwith, nonprofit corporation; gray available to remedy a state's ongoing violation of federal law. allegedly preempted by the federal medicaid act may bring trict court seeking to enjoin allegedly unlawful state conduct, state program had not mooted plaintiffs' prospective claims. [1] in this case, the district court denied ilc's motion for and exclusive national sovereignty in the airspace of the operating uptown pharmacy & gift shoppe, which delivers prescription tory and injunctive relief against the enforcement of a state opinion by judge berzon preempts enforcement of local legislation by conflict appeal from the united states district court the federal courts by asserting a claim of preemption, even clause rather than under 1983, the court viewed this as a we express no opinion on the merits of ilc's preemption eral constitution, may be enjoined by a federal court of equity from such could assert erisa preemption under the supremacy clause, ilc voluntarily dismissed the department from suit on june 1, 2008, have standing to bring this action on their own behalf," but specifically and distinctly in a party's opening brief. we will not manufac- most directly affected by the administration of [a state wel- 7 formed, any elective abortion procedures, was preempted by doctrine. the only issue before this court is thus whether ilc 124 n.4 (2d cir. 1999) (holding that a cause of action under maintained that nothing in the legislative history of ab 5 trast to the director's position in this case -- that "regardless of three categories or "circumstances" in order to be cogniza- standing of the others." leonard v. clark, 12 f.3d 885, 888 violated federal law. id. at 65. while the suits were pending that, according to their complaint, will be "directly injured, by employee benefit plans. 463 u.s. at 28. shaw distinguished franchise tax of facts.' " id. (quoting earth island inst. v. u.s. forest serv., requirements for seeking damages under 1983, it has consis- 2005), is misplaced. johnson merely applied gonzaga to a law even when the federal law secures no individual relief. see phrma v. walsh, 538 u.s. at 668 (stevens, j., individualized entitlement to medical services, the reasonable- reduced payments would be consistent with efficiency, econ- ily participating in a number of federal programs, including the public claim seeking to enforce the substantive provisions of 30(a) tioners' own conduct -- appear to reflect traditional standing our holding in bud antle is consistent with established preliminary injunction on august 1, 2008, and subsequently entered an cir. 1983). but see associated builders & contractors v. carpenters see id. at 68; id. at 77 (brennan, j., dissenting). writing for the petitioners, at least, have standing to challenge the imple- legislation allegedly preempted by federal law. in this case, 493 u.s. 103, 107 (1989) (quoting chapman v. houston wel- 13041independent living center v. shewry under the supremacy clause to enjoin implementation of state court enjoining the ten-percent rate reduction. in an oft-cited footnote, the court emphasized that its decision seek to enjoin a state official from clause] does not, by its own force, protect or regulate any [2] the supreme court has repeatedly entertained claims shapiro, pharm. d. doing business percentage of medical care providers -- 45% of primary care that such [direct economic] injuries establish the threshold under the supremacy clause on the basis of federal preemp- supreme court implicitly affirmed phrma's authority to "address[ ] the fiscal emergency declared by the governor" unlike the article iii standing inquiry, whether ilc maintains pruden- argues for a different result in this case, based on the specific designed to benefit phrma, phrma can invoke the statute's tices that were otherwise lawful under erisa. id. at 108-09. cir. 2008). rebates to "prior authorization requirements," meaning that the drug could party injured in an action at law, suit in equity, or other proper proceeding held that a private party may bring an action in a federal dis- which is (a) concrete and particularized; and (b) 11 2 services are available under the plan at least to the cluded that ilc lacked a valid cause of action in this case. on this court's decision in sanchez v. johnson, which held qwest corp. v. city of santa fe, 380 f.3d 1258, 1266 (10th [12] because it held that ilc could not bring suit under the medi-cal providers in this case. ab 5 allegedly prevents petitioners from under the supremacy clause, rendering the "rights" require- tion cases, see id. at 331-34 & nn. 25, 27-28, 37, 46-47, the reversed and remanded for further proceedings con- gation of an ongoing violation of federal law where the a remedy." (emphasis added)); chapman, 441 u.s. at 612-15 (holding that acy clause, not by the preempting statute, that are at issue." nancy no differently than any other non-occupational disabil- income security act ("erisa"). 463 u.s. at 92. erisa does health services act and the social security act. id. at 327. would certainly be redressed by a favorable decision of this this supremacy clause to enjoin state regulations implementing rights, arguing that the state's human rights and disability ilc immediately sought emergency relief in this court. we its own force create rights enforceable under 1983. into question the lower courts' jurisdiction to decide these a preemption claim seeking injunctive and declaratory relief." ilc alleges that the cuts mandated by ab 5 violate the sub- petitioner-appellants, a group of pharmacies, health care court. third, it must be likely, as opposed to merely or immunities secured by the constitution and laws, shall be liable to the public health safety act], as tdh asserts. rather, a continuing violation of federal law are necessary to vindi- decision in sanchez v. johnson, 416 f.3d 1051 (9th cir. met, and without intimating that such claims must fit into one of whether the medicaid statute's relevant provisions were the gonzaga court gave no indication that it intended to alter before: stephen reinhardt, marsha s. berzon, and tive claim that the state laws at issue were preempted. see shaw, 463 u.s. local enactment is preempted even if the federal law gio & campofelice, inc. v. n.y. state dep't of labor, 107 categories, as "ab 5 neither compels nor restricts petitioners the balance of its emergency motion. we heard argument on sufficient to enlist enough providers so that care and cuts were scheduled to take effect july 1, 2008. (71), including the specific provision at issue in this appeal. (holding that "a state or territorial law can be unenforceable acy clause "does not require a showing, as per gonzaga, that court, and the other circuits, a private party may bring suit southern california, inc., a id. at 684 (o'connor, j., joined by rehnquist, c.j., and ken- which parties claiming to be injured by a state law have chal- ilc could not bring suit under the shaw supremacy clause u.s.c. 1331 and the supremacy clause. see verizon md. [10] indeed, even as the supreme court has tightened the held shaw and its progeny -- which, as we shall see, are shaw v. delta air lines, inc. shaw involved the claims of ern california, a non-profit corporation providing services to over 8,000 the first and second prongs of the district court's shaw analy- defendant, and that it is likely that a favorable decision will department of health care standing.17 vision" as "well-established"). the amendment, arguing that the cuts violated certain provi- a claim for injunctive relief brought by the operators of an oil permit suits for injunctive relief. in phrma v. thompson, 362 statutory scheme on the ground of federal preemption." id. at requiring that the standards for bringing suit under 1983 be director in our case, the defendant argued "that there is no tor in our case, defendants argued that "[the supremacy that federal courts lacked jurisdiction to hear cases in which a defendant golden state transit corp., 493 u.s. at 107-08 ("given the variety of sit- a. viders participating in medi-cal's fee-for-service program by spective. green cautioned against conflating claims for pro- does not give petitioners any right to medi-cal funds." in fact, concannon sandra shewry, director of the conclusion secures no individual substantive rights for the party arguing mortgage brokers v. office of banks & real estate, 308 f.3d reduce services. as a result, ilc contended, medi-cal recipi- "rider 8," which restricted the distribution of public funds for 13025 injunctive relief on the basis of federal preemption more fully in part b- contrary notwithstanding." u.s. const. art. vi, cl. 2. vacation & holiday trust fund, 700 f.2d 1269, 1278 (9th cir. 1983) it is beyond dispute that federal courts have jurisdic- force of federal spending clause legislation" itself states a 13029independent living center v. shewry 28 u.s.c. 1343(3), the jurisdictional counterpart to 1983). we explore rately below, as that inquiry raises questions apart from loss of gross income," when the ten-percent rate reduction because 30(a) concerns "overall methodology" and "merely requires fare] program" is sufficient to allow petitioners to seek services of the state of california, respondent-appellee. plaintiff contends that his conduct will be restricted by a state injunctive relief under ex parte young). we therefore adhere state officials from implementing state legislation allegedly rise to the type of unambiguously conferred "rights" required sary predicate" to a claim for injunctive relief under the flatly rejected this argument, finding that it "mischarac- noting the "general rule that a private party may seek declara- providing services to medi-cal beneficiaries unless they are willing to do michigan's method of calculating benefits under the federal view the statute as creating any substantive "rights" in employers. to the nity under the eleventh amendment. id. at 71-74. all nine director has waived that argument. id. at 946; greenwood v. f.a.a., 28 ers. rather, the sole purpose cited in the legislation was to gic who receives part of her medical services under medi-cal; jason employer, who sought to enjoin the california agricultural nlra conferred a federal "right" on employers, see id. at law can be unenforceable as preempted by federal emption claim, and doubted whether "spending clause legislation can be performing elective abortions. sanchez, 403 f.3d at 328. allege any viable claim for injunctive relief because none of and fiduciaries of a covered employee benefits plan, as well as the secre- 1500 (interpreting the substantive provisions of 30(a)). ful in identifying the fundamental flaw with the director's although the director does not contest petitioners' standing, she does 9 see lawrence county v. lead-deadwood analysis to claims for purely prospective injunctive relief although the first circuit permitted phrma to bring suit, of preemption. on the contrary, a state or territorial the lower federal courts had "decided innumerable cases in that is, a state plan must establish reimbursement rates for respondent-appellee. health care providers that are both consistent with high- section 14 also reduces payments to managed health care ment inapplicable to ilc's claims in this case. a private right of action under the [preempting statute]"); bur- and violate federal standards. as ab 5 is causing injury to quality medical services," in violation of 30(a). ilc also petitioner-appellants include the independent living center of south- section 1983 provides: "every person who, under color of any statute, it is seeking -- on the basis of federal preemption under the the 1983 claim, holding that "[r]ather than focusing on an (allowing suits by employers in narrow circumstances). that one of the plaintiffs has standing, it need not decide the on federal preemption maintains a valid federal cause of interests," and that phrma must therefore "look to the alleg- 1983, but need only satisfy traditional standing require- demonstrated that the legislature had considered whether and movement of oil tankers in puget sound, was preempted 2007). nonprofit corporation; gray ism ass'n v. virgin islands, 218 f.3d 232, 241 (3d cir. 2000) planned parenthood claimed that a texas statute known as 13042 independent living center v. shewry 3. preemption claims" have been permitted in only three "cir- fails for this threshold reason, and therefore reverse. it was entitled to seek purely injunctive relief -- which is all 13039independent living center v. shewry see gade v. nat'l solid wastes mgmt. ass'n, 505 u.s. 88 mandated by ab 5 are themselves unenforceable, because pels" petitioners' conduct -- appear to reflect the traditional that such regulation is pre-empted by a federal stat- that 30(a) does not "create an individual right that either son had nothing to say about a claim for injunctive relief not be prescribed to a medicaid beneficiary unless the state medicaid ilar jurisdictional posture," citing, inter alia, ray and florida its requirements and those of the medicaid act. see id. at 74- tution and laws."15 pharmacy in garden grove. independent living center, the gray pan- claim for relief, even if "[planned parenthood was] not seek- claim. rather, we simply reaffirm over a century's worth of clause, as it conflicts with governing federal law. the com- issue in planned parenthood v. sanchez and the impact of ab 5 on the as far as practicable . . . to furnish [ ] medical assistance on 13033independent living center v. shewry notice and declaratory relief constituted claims for retrospec- (9th cir. 1993). in this case, we have no doubt that several of supreme court's decision in walsh to permit a claim for state, and who threaten and are about to commence proceedings . . . to and 7 a.m. id. at 625-26. plaintiffs, the owner and operator of under 28 u.s.c. 1331 to resolve. intended to confer any private right on pharmaceutical manu- detailed requirements for state plans, see id. 1396a(a)(1)- of medi-cal recipients; gerald shapiro, a licensed registered pharmacist 496 u.s. 498, 519 (1990) ("that [the statutory provision at issue] gives 2. an implied right of action to enjoin state or local regulation as preempted by federal law even when the federal law under the supremacy clause." were we to accept it, this argu- of a "private right of enforcement" on petitioners is a "neces- for sandra shewry, director of the department of health care standing." brief for respondents at 13-17, phrma v. walsh, injunctive relief on the basis of federal preemption under 28 891 f.2d 1236, 1240-41 (6th cir. 1989); tuvia convalescent ctr., inc. v. ing federal law is illegitimate. 474 u.s. at 68; see also idaho pendent living center of southern california, et al., but the court -- edly preempting federal statute to find an interest to support terize[d]" planned parenthood's claim: [15] petitioners also include several individual medi-cal supremacy clause, the well-established rule in both this court under the supremacy clause to assert such a claim for injunc- express no opinion regarding the correct interpretation of the substantive that the federal statutory provision which allegedly doctrine, which requires a litigant to "demonstrate that it has injunctive relief under the federal social security and public these changes mooted plaintiffs' claims for prospective state statute violated the supremacy clause by imposing eligi- in franchise tax board v. construction laborers vacation sch. dist. no. 40-1, 469 u.s. 256, 259 n.6 (1985) (describing sandra shewry ("the director"), from implementing ab 5.4 claim seeking injunctive and declaratory relief." id. at 335. supremacy clause, the district court did not technically reach under the supremacy clause); qwest, 380 f.3d at 1266 & n.5 230-31 (1990), and therefore briefly address ilc's article iii question which the federal courts have jurisdiction under 28 gram; and tran pharmacy, inc., a california corporation operating a retail statute on the secretary of health and human services defeated any pre- 13044 independent living center v. shewry standards provision [of the medicaid act] focuses on the trict court denied any such relief, holding that ilc could not we therefore review the district court's legal rulings de novo court recently reaffirmed shaw's holding, maintaining that it sions of the federal medicaid act. id. at 500-02. like the private party seeking to enjoin implementation of a state law expressly "does not allege that the named petitioners do not nance. id. at 626-27. as the court noted, the act permitted pharmaceutical manufacturers bringing suit in concannon had no greater care" and "access to care" provisions of 30(a) and is there- the district court heard argument on the merits of ilc's motion for a maine's statute was preempted by the federal medicaid act ilc filed this suit in california state court seeking to enjoin federal courts have jurisdiction under 28 u.s.c. 1331 over 17 natural res. v. brown, 992 f.2d 937, 945-46 (9th cir. 1993). by failing at issue does not create a private right of action. 5 and in other circuits is precisely the opposite. in bud antle, action. as the court explained, nonprofit corporation; gerald id. (quoting st. thomas - st. john hotel & tourism ass'n, action brought under 1983. gonzaga univ. v. doe, 536 u.s. 83 (thomas, j., concurring in judgment).12 cussed above, is the direct result of the director's implemen- fore unlawful. they do not seek to enforce any substantive a federal statutory right or right of action is not lar challenge to michigan's "best practices initiative," which ing the merits of phrma's preemption claim in walsh, the term had taken on the added significance attributed to it in more recent hood had] an implied right of action to assert a preemption responsible for administering the medi-cal program, to on an erroneous legal standard or clearly erroneous findings tive relief. the district court's opinion is therefore ] a plaintiff who seeks vices are generally available to medicaid recipients (the trict court denied relief, holding that although it was "acutely e. ark. v. taylor, 907 f.2d 775, 776 n.3 (8th cir. 1990). judgment). justice thomas argued that the broad discretion conferred by set forth in cort v. ash, 422 u.s. 66 (1975)). independent living center of 13026 independent living center v. shewry rather argues simply that "petitioners cannot state a claim for provides funds to participating states to "enabl[e] each state, through pre-emption or otherwise." id. at 819 n.3. the d.c. mentally different: they argue that rider 8 imposes ilc also alleged in its complaint that the ten-percent rate reduction conditions on the receipt of federal funds that are injury has to be fairly traceable to the challenged incompatible with [the act]. therefore, we need not tion & dev. comm'n, 461 u.s. 190 (1983); fla. lime & avo- id. the court then noted that "gonzaga, by its terms, applies question which the federal courts have jurisdiction it has agreed to undertake under the medicaid act is set forth in the act gram by ten percent. section 14 of ab 5 instructs the director independent action of some third party not before the this type of action, it is the interests protected by the suprem- reduce payments to physicians, dentists, pharmacies, adult implementing legislation reducing payments to medical ser- was designed -- much like maine's statute -- to provide low- "access to care provision"). see generally orthopaedic hosp. for the central district of california v. coeur d'alene tribe, 521 u.s. 261, 281 (1997) ("an alle- nor to address the state's budget deficit, reduces payments to determining whether a plaintiff may seek relief under 42 specifically urges this court to deny ilc relief "because receive federal funds, states are required to administer their 6 response, the defendants contended that phrma could not itself: termination of funding." see id. at 675 (scalia, j., concurring in 1269-71 (citing shaw). we reached this conclusion "[e]ven in 324 (5th cir. 2005), the fifth circuit relied in part on the merits of the preemption claims anyway, holding that the state ute which, by virtue of the supremacy clause of the bring suit in this manner, as the medicaid act was not sufficient to enlist an adequate network of health care provid- services, state of california, any doubt on the presumptive availability of declaratory and ordinance is preempted by federal law. a party may [3] in ray v. atlantic richfield co., 435 u.s. 151 (1978), fore concluded that a claim of preemption under the suprem- lenge state benefits laws in federal court,6 nonetheless sought "notice relief" and a declaration that spective and retrospective relief in precisely this manner, young, an individual suffering from blindness and brain damage who federal law.13 the right of private parties to seek injunctive relief under the 538 u.s. 644 (2003) (no. 01-188). phrma took issue with as uptown pharmacy and gift no. 08-56061 filed september 17, 2008 of any rights, privileges, or immunities secured by the consti- can demonstrate that ab 5 interferes with some federally cre- circuit rejected defendants' argument, holding that by reach- although the supreme court's decision in walsh affirmed july 11, 2008--pasadena, california the court denied relief, holding that plaintiffs' requests for cate the federal interest in assuring the supremacy of that advanced here . . . is not based on a claim of right under [the no. 12004 v. massachusetts, 377 f.3d 64, 75 (1st cir. 2004) united states court of appeals cado growers, inc. v. paul, 373 u.s. 132 (1963); see also under that provision, 1396a(a)(30)(a) ("section 30(a)"), 13053independent living center v. shewry the lack of any federally created "right" under the medicaid the 1983 issue was not dispositive, as plaintiffs had also order granting ilc's motion in part. see indep. living ctr. v. shewry, no. action directly under erisa. see, e.g., demarco v. c & l masonry, inc., b. aid act does not confer any substantive "rights," ilc is not leaving the director as the sole defendant. injunctive relief in federal court. rosado v. wyman, 397 u.s. in federal district court, the state altered its program to com- a preliminary injunction based solely on its legal ruling that f.3d 1000, 1005-07 (2nd cir. 1997) (holding that plaintiff opiniondoing business as tran pharmacy; the ten-percent rate reduction violates both the "quality of texas accepted federal funds for family planning services by voluntar- the absence of an explicit statutory provision establishing a constitution, must prevail, thus presents a federal jason young, "medi-cal," by ten percent. ilc alleged in its complaint that of the medicaid act brought under 1983. we held that the tial standing "is not a jurisdictional limitation on our review." see bd. of ing that the federal aviation act preempted the city's ordi- under gonzaga. see id. at 1055-60. but our decision in john- lacked a cause of action under the supremacy clause, seven u.s.c. 1983, which provides a remedy for "the deprivation suits with multiple plaintiffs is that once the court determines ment of a regulation on the grounds that the local action." 209 u.s. at 155-56. 13049independent living center v. shewry been available under the supremacy clause if changes to the redress that injury." massachusetts v. e.p.a., 127 s. ct. 1438, the director sub nom. phrma v. walsh, 538 u.s. 644 (2003), a pharma- ical equipment ("dme") for most categorically-needy medic- gram, enacted by congress pursuant to its powers under the pate in the medi-cal program due to low reimbursement id. at 675-83 (thomas, j., concurring in judgment). 13043independent living center v. shewry 12 causes to be subjected, any citizen of the united states or other person indeed, none of the court's seminal preemption cases casts general (population in the geographic area[.] the statute subjected all drugs produced by manufacturers refusing to offer 13034 independent living center v. shewry a claim for injunctive relief brought by a large agricultural this case, or in this category of cases. we therefore join sev- the supremacy clause "is not a source of any federal rights" falling under relief under the supremacy clause."16 vice providers under the state's medicaid program, known as cause of action," id. at 1269, and regardless of whether the banc). "a district court abuses its discretion in denying a 1 the parties have proceeded on the assumption that the dis- justices agreed, however, that injunctive relief would have ical assistance" approved by the federal secretary of health providers and 50% of specialists -- were unwilling to partici- cost prescription drug coverage to state residents. id. at 819. to promote the interests of employees and their beneficiaries in employee the supreme court has interpreted the text nance prohibiting jet aircraft from taking off between 11 p.m. commissioner of the new york state division of human [6] although the director asserts that the express conferral ing with federal rights.[8 those cuts will reduce "quality services, and access to quality (collectively "ilc"),1 and its findings of fact for clear error. id.; see also perfect 10, request for a preliminary injunction if it `base[s] its decision 273, 283 (2002). but both the supreme court and the courts ble. in city of burbank v. lockheed air terminal, inc., 411 [7] the director acknowledges these general principles but first, the plaintiff must have suffered an injury in respective patients and members. we refer to petitioner-appellants collec- itself "does not mandate that employers provide any particular benefits," phrma's ability to bring suit under the supremacy clause 762, 765 (7th cir. 2002); st. thomas - st. john hotel & tour- implementation of the 10% provider payments cuts" because bility requirements that were inconsistent with those imposed of professional services. emptive federal law." reply brief of petitioner at 2-3, aggregate practices of the states in establishing reasonable although ilc sought preliminary relief, the dis- 42 u.s.c. 1396. medicaid is a cooperative federal-state pro- restrictions on planned parenthood's activities imposed by the statute at preempted under the supremacy clause. see id. at 633, 640. of ab 5 on the basis of federal preemption. the alrb proceedings were preempted by the national labor services, at the earliest possible time." ilc therefore board by noting that the tax board sought a declaration that state laws acy clause.2 cv 08-3315 (c.d. cal. aug. 18, 2008), appeal filed, no. 08-56422 (9th eral other circuits in holding that a party may seek injunctive ity of prospective relief of the sort awarded in ex parte young enforceable "rights" under the federal statute.10 13054 independent living center v. shewry rates; that 90% of dentists refused to accept medi-cal cal and pharmacy services under medi-cal; margaret dowling, a paraple- ordinance, regulation, custom, or usage, of any state, . . . subjects, or sis -- which focused on whether ab 5 "restricts" or "com- bring suit for injunctive relief under the supremacy clause. 13052 independent living center v. shewry bursement rates, ilc argued, ab 5 would drive even more july 11, 2008, and issued an order the same day reversing the ity -- were preempted by the federal employee retirement the fifth circuit reached a similar conclusion in planned dards." id. at 507. the court agreed with the defendant as to substantive rights for the party arguing preemption. 397, 420 (1970). ated right, the director essentially asks us to apply the test for suasive.14 the supremacy clause "do[es] not depend on the existence of petitioners-appellants. [13] to satisfy article iii standing requirements, a plaintiff phrma's ability to bring suit for preemption, although they district court's decision and remanding for consideration of extent that such care and services are available to the would-be plaintiffs. as noted above, the district court also concluded that the supremacy expressly permitted phrma to bring suit for injunctive relief in the lujan, 504 u.s. at 560-61 (internal citations and quotation department by ten percent. see id. 14166.245. all of these see id. at 675 (scalia, j., concurring in judgment); id. at 675- whether the rates comply with the [statute], but it does not render the [stat- residents by essentially requiring manufacturers to issue 13038 independent living center v. shewry b. tion need not assert a federally created "right," in the sense clause -- like 30(a) -- " `is not a source of any federal administrator specifically approved the prescription. see id. at 71-72. beneficiaries, who "will be injured or put at risk of injury by whether the challenged statute "restricts" or "compels" peti- [8] we find the reasoning of the d.c. and fifth circuits per- where ilc filed a motion for preliminary injunction. the dis- presumably -- any private "right" to occupy airspace at a under the supremacy clause, and moved for injunctive relief rights.' " golden state transit corp. v. city of los angeles, berzon, circuit judge: requested relief is prospective is ordinarily sufficient" to seek opinion calculating rates may affect the standard under which a court reviews vided by acute care hospitals not under contract with the of appeal have consistently rejected attempts to extend this tive damages and were thus barred by state sovereign immu- clause itself does not give rise to any federal "right" to legal relief. in medicaid recipients, brought suit under both 1983 and the ultimately concurred in the court's judgment that maine's 85 (1983). shaw held that "[a] plaintiff who seeks injunctive thereafter have conformed to federal law." id. at 65. plaintiffs ute] unenforceable by a court."); orthopaedic hosp., 103 f.3d at 1496- behalf of families with dependent children and of aged, blind, thompson for the principle that "asserting the preemptive 209 u.s. 123 (1908), decided seventy-five years earlier. see 463 u.s. at requirements" of article iii standing. craig v. boren, 429 emptive statute confers any federal "right" or cause of action. entitled to relief of any kind, whether prospective or retro- c. benefit plans," 463 u.s. at 90 (emphasis added), and noted that the statute plans under contract with the department by the "actuarial justices reached the merits of phrma's claim for injunctive so at a financial loss, and thus assuredly "restricts" petitioners' provision plaint alleged that even prior to passage of ab 5, a substantial favorable decision. day health care centers, clinics, health systems and other pro- brought under the supremacy clause. ___ f.3d ___, 2008 wl 2640001, at *3 (9th cir. 2008) (en for more than a century, federal courts have enter- ents would be "denied quality medical services and access to the state defendants removed the suit to federal court, 218 f.3d at 241). the court thus concluded -- in stark con- ten percent. see cal. welf. & inst. code 14105.19 (2008). of the united states which shall be made in pursuance thereof . . . shall federal statute passed pursuant to congress's spending power merits of petitioners' preemption claim. see wilder v. va. hosp. ass'n, they exceed the scope of the state's discretion under the act cess on the merits "low, if not wholly lacking." petitioners' standing to bring suit. as noted above, however, that is preempted by a federal statutory or constitutional pro- quality medical care (the "quality of care provision") and suf- states to consider various factors in setting reimbursement rates." we medicaid services." id. at 509. the court noted, however, that the district court stated that ilc's reliance on concannon was mis- requested a peremptory writ of mandate or injunction to pre- much as it had in city of burbank and ray -- reached the disabled individuals annually; gray panthers of sacramento and san fran- takes effect. the supreme court "repeatedly has recognized claims brought under 1983 and claims for injunctive relief inc. v. pub. serv. comm'n, 535 u.s. 635, 642-43 (2002). (holding that "in suits against state officials for declaratory recognizing that a state's interest in continuing to flout bind- labor practice charges. id. at 1264. the employer argued that lenged it as preempted by federal law" and that the court had 4 for redress . . . ." 42 u.s.c. 1983. ceeded straight to the preemption analysis. see id. at 157. id. at 331 (citing shaw). the court then cited walsh and drugs to roughly 5,000 home-bound patients in los angeles; sharon a state plan must: argued and submitted services." this injury, like the injury to medical providers dis- gregory m. cribs, and sara ugaz, deputy attorneys general; fore invalid under the federal constitution's supremacy i. richard h. fallon, daniel j. meltzer, & david l. shapiro, legislation was preempted only insofar as it prohibited prac- designed to lower prescription drug prices for low-income care providers participating in the state's medi-cal program 492 f.3d 1094, 1098 (9th cir. 2007) (quoting katie a. v. los trict court denied relief because ilc lacked any judicially displacing both state and local regulation of airspace and -- opinion more fully sets forth the rationale for our july 11 the first two of the district court's three "circumstances" -- perform, or to contract with any individual or entity that per- providers, senior citizens' groups, and medi-cal beneficiaries clothed with some duty in regard to the enforcement of the laws of the preemption"); village of westfield v. welch's, 170 f.3d 116, 1271 n.13 (finding it unnecessary to apply the four-factor test gives life to the supremacy clause. remedies designed to end 13050 independent living center v. shewry parenthood v. sanchez, the director's heavy reliance on our tained suits seeking to enjoin state officials from nedy, j.). only justices scalia and thomas would have denied that the supremacy clause provides a cause of action to article iii standing are met, no more is required to allow this infra. under 30(a)." under the federal funding statutes. id. requirement that a litigant demonstrate an injury-in-fact to a quadriplegic suffering from spinal muscular atrophy who receives medi- injunctive relief, "plaintiffs must meet the requirements for an speculative, that the injury will be redressed by a sub silentio, two circuits have expressly relied on walsh to in this case, and ilc has adequately alleged injury-in-fact. see part ii-c, action to seek injunctive relief on the basis of federal preemp- distinction without a difference, reasoning that the supremacy ii. provide such methods and procedures relating to . . . f.3d 496 (8th cir. 2006), is instructive. in response to severe ation on the merits. id. at 513. dowling; tran pharmacy, inc., erisa's express enforcement provisions); first nat'l bank of medicaid recipients or providers would be able to enforce business as central pharmacy; 2:08-cv-03315-cas-mark beckwith; margaret equivalent" of ten percent. id. section 15 of ab 5 instructs 13040 independent living center v. shewry inc. v. barbosa, 45 f.3d 1261 (9th cir. 1994), we addressed phrma v. walsh, 538 u.s. 644 (2003) (no. 01-188). never held "that a party directly claiming a supremacy clause scription drugs allowed pharmacies to "uniformly earn less requires him to act in violation of federal law;" (2) "where the and injunctive relief, a plaintiff may invoke the jurisdiction of by the federal ports and waterways safety act (pwsa). id. ply with recent congressional amendments. id. at 65-66. necessary . . . to assure that payments are (consistent health services acts. id. at 331-32. several local branches of recipients of federal funds to cut all ties with any organization v. belshe, 103 f.3d 1491 (9th cir. 1997). preempted by federal law. in green v. mansour, 474 u.s. 64 16 franchise tax board applied the "well-pleaded complaint rule" to hold cisco, senior citizens' advocacy groups whose members include a number practice in the other circuits, which have universally affirmed whether the supremacy clause provides a valid cause of relations board (alrb) from adjudicating various unfair section 502(a) of the act expressly allows participants, beneficiaries, sumptively available in federal court to enjoin state officers [5] contrary to the district court's conclusion that "shaw rects federal funding to states to assist them in providing med- had failed to state a claim for injunctive relief. the court ultimately held that maine's statute was not pre- for the ninth circuit ing preemption under the supremacy clause has stated a fed- 13 jurisprudence. we decline to do so, and thus join several other 1. for the reasons identified by the fifth circuit in planned not confer any express cause of action on employers to chal- that it "frequently has resolved pre-emption disputes in a sim- under title xix of the social security act, 42 u.s.c. quality of care and access provisions of 30(a) do not give 13037independent living center v. shewry 96 n.14. in young, the court found "ample justification" in the case law certiorari, and the state defendants renewed their claim that medicaid act, and is therefore preempted under the suprem- granting injunctive relief. such an injury "to those individuals only to 1983 claims. . . . the supremacy clause claim [11] the director's arguments fail to honor this distinction, 13047independent living center v. shewry versity v. doe," namely, that the federal statutes at issue con- shaw as "reaffirming the general rule" that a plaintiff assert- provisions of 30(a), as such arguments are properly addressed to the any, justification for treating a claim of preemption under a omy, and quality of care, or whether such payments would be general; jennifer m. kim (argued), supervising deputy tively as "petitioners," "independent living center," or "ilc." granted ilc's motion to expedite oral argument, but denied both violated and was preempted by the americans with disabilities act appellees' supremacy clause argument is funda- ical assistance to low-income individuals.' " ball v. rodgers, fer privately enforceable "rights." id. at 335. the fifth circuit


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