Opinion
Case No. 93-4045-RDR.
May 30, 2000.
MEMORANDUM AND ORDER
This case is a 1983 action alleging a violation of plaintiffs' rights under the Boren Amendment to the Medicaid Act, formerly 42 U.S.C. § 1396a(a)(13)(A). While this case has been pending, the Boren Amendment was repealed by the Balanced Budget Act of 1997, Pub.L. No. 105-33.
This case is now before the court upon a long-pending motion to dismiss. This case was set for trial when the court permitted defendants to bring this motion which reasserts Eleventh Amendment arguments which this court has previously rejected. The motion elaborates upon the arguments on the basis of new case law and the repeal of the Boren Amendment.
Background
Plaintiffs are a nursing home trade association and corporations that own nursing homes participating in the Medicaid program. Defendants administer the Medicaid program for the State of Kansas. Nursing homes are reimbursed under the Medicaid program for care delivered to qualified persons. On May 10, 1993, this court issued a preliminary injunction: enjoining the operation of reimbursement rates in defendants' Medicaid plan amendment TN 92-22; directing the development of new rates; and directing that an interim rate be paid pending the adoption of new rates. 822 F. Supp. 687. TN 92-22 established reimbursement rates for Kansas nursing homes in the Medicaid program for the fiscal year starting on July 1, 1992 and ending on June 30, 1993. When the preliminary injunction was entered, it was clear that the Ex Parte Young doctrine applied and that the Eleventh Amendment did not bar the court's action.
The plan amendment has also been referred to as "MS-92-22."
A sum of money representing the difference between the old and interim reimbursement rates over a period of approximately three months currently is on deposit in an escrow account as a result of the preliminary injunction. On August 4, 1994, after the challenged rates had expired, the preliminary injunction order was affirmed on appeal. 31 F.3d 1536.
Plaintiffs did not extend their challenge to reimbursement rates which took effect after June 30, 1993. There is no claim in this case of a continuing or ongoing violation of federal law. This fact prompts defendants' renewed argument that the Ex Parte Young doctrine no longer applies and that the Eleventh Amendment bars any further proceedings in this case.
Prior order
When the court rejected defendants' first motion to dismiss this case on Eleventh Amendment grounds, we reasoned that the money in question was in escrow, not in control of the state, and that any future judgment in this case would be ancillary to the prospective relief already ordered by the court. We cited Quern v. Jordan, 440 U.S. 332, 349 (1979) for the proposition that orders ancillary to prospective relief already directed by the court do not violate the Eleventh Amendment. We also quoted the holding in Hutto v. Finney, 437 U.S. 678, 690-92 (1978) that: "The line between retroactive and prospective relief cannot be so rigid that it defeats the effective enforcement of prospective relief."
In the court's prior order, we noted that the Eleventh Amendment provided a necessary condition for prospective relief. Since the Eleventh Amendment barred the possibility of compensatory damages, there would be irreparable harm without prospective relief. Consequently, to find under these facts that a final judgment would be retrospective relief, rather than relief ancillary to a prospective remedy, would undo what the preliminary injunction attempted to accomplish, that is to prevent the possibility of irreparable harm. This seemed inequitable in this case because defendants proposed to make payments ordered by the injunction to an escrow account instead of directly to the nursing homes. In this connection, we cited Toll v. Moreno, 458 U.S. 1 (1982). Finally, we distinguished Green v. Mansour, 474 U.S. 64 (1985) and other cases cited by defendants on the grounds that those cases did not involve money placed in a court-controlled escrow account pursuant to an injunction.
Consolidation of the preliminary injunction hearing with the trial on the merits would have prevented this problem. The court attempted to nudge the parties toward consolidation. Neither side supported the idea and the court was dissuaded from ordering it.
Instant motion
In the instant motion to dismiss, defendants' primary argument is that recent Tenth Circuit and Supreme Court cases have narrowed theEx Parte Young exception to the Eleventh Amendment and made clear that any relief requested by plaintiff is barred. Defendants cite the following cases, among others: Idaho v. Coeur D'Alene Tribe of Idaho, 521 U.S. 261 (1997); Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996); and ANR Pipeline Co. v. Lafaver, 150 F.3d 1178 (10th Cir. 1998).
Since the cases cited by defendants were decided, the Tenth Circuit in Elephant Butte Irrigation District v. Department of Interior, 160 F.3d 602 (10th Cir. 1998), has stated that the following factors must be assessed in determining whether the Ex Parte Young doctrine applies:
First, we must determine whether this is an action against the state officials or against the State . . . itself; second, whether the alleged conduct of the state officials constitutes a violation of federal law, or merely a tortious interference with Plaintiffs' property rights; third, whether the relief Plaintiffs seek is permissible prospective relief or is it analogous to a retroactive award of damages impacting the state treasury; [citation omitted] and finally whether the suit rises to the level of implicating "special sovereignty interests."160 F.3d at 609 (quoting ANR Pipeline, 150 F.3d at 1193).
The court shall attempt to discuss these factors in the present context.
Application of the factors
Regarding the first factor, state officials are the named defendants, not the State of Kansas. To this extent this case falls under the Ex Parte Young doctrine. Of course, since plaintiffs are requesting the payment of money which originated from the State of Kansas, not the officials named as defendants, it can be argued that this is actually a lawsuit against the state. But, the money in question, although it originated from the state, is now in an escrow account controlled by the Clerk of the Court pursuant to a legitimate exercise of the court's authority to issue a preliminary injunction. Any subsequent order directing the Clerk to pay the money to one party or the other will have no negative impact upon the state treasury. Accordingly, this case may still be considered a case against a state official, not the state itself.
The second factor is not disputed in our view. This case alleges a violation of federal law.
The third factor merits serious consideration. Defendants assert that any relief ordered by the court is too similar to a retroactive award of damages for the Ex Parte Young doctrine to apply chiefly because there is no ongoing violation of the law.
There are cases in which money which represents the damage or harm done to a plaintiff by past misconduct of a state official acting in an official capacity has been awarded in spite of the Eleventh Amendment. In Florida Association of Rehabilitation Facilities, Inc. v. State of Florida Agency for Health Care Administration, 47 F. Supp.2d 1352 (S.D.Fla. 1999), a preliminary injunction was issued in 1991 enjoining inadequate reimbursement in violation of the Boren Amendment. In 1999, the court held that a permanent order enjoining the violation of the Boren Amendment from 1991 forward and directing reimbursement plan changes retroactive to 1991 would not violate the Eleventh Amendment. The court held: "the portion of Plaintiffs' claim relating to inadequate reimbursement occurring since the Preliminary Injunction represents injuries arising after Defendants were ordered to comply with the Medicaid Act and are therefore prospective in nature." 47 F. Supp.2d at 1360. In Condell v. Bress, 983 F.2d 415 (2nd Cir. 1993), ten percent of state employees' salaries which had been withheld in 1991 was ordered returned to the employees in 1992. The Second Circuit affirmed the order and rejected an Eleventh Amendment challenge because the return of the money was ancillary to the prospective relief which enjoined the withholding scheme or so-called "lag payroll." See also, Association of Surrogates v. State of New York, 940 F.2d 766 (2nd Cir. 1991) cert. denied, 502 U.S. 1058 (1992).
As in the above-cited cases, if after trial an order is issued directing the Clerk of the Court to pay money to plaintiffs, such an order will not be analogous to a retrospective award of damages for the following reasons. First, the payment will be made by the Clerk of the Court, not the party allegedly responsible for the "damages." Second, the obligation to pay reimbursement in compliance with the Boren Amendment represents a continuing obligation under the terms of the preliminary injunction. That was the purpose of the injunction: to change the status quo and, in essence, suspend the application of the Eleventh Amendment, creating an ongoing, albeit indefinite, obligation to comply with the Boren Amendment for the three months in question. Finally, the relief requested by plaintiffs should not be considered similar to a retroactive award of damages because such a construction would paralyze the power of the court to enforce the supremacy of federal law in situations such as this. This is contrary to the purpose of the Ex Parte Young doctrine.
It also seems illogical. Defendants do not deny the power of the court under Ex Parte Young to issue a preliminary injunction. Moreover, the Tenth Circuit has affirmed the consideration of the Eleventh Amendment as an indication of irreparability. But, it would be pointless to consider the Eleventh Amendment in this connection if, after a preliminary injunction is entered and the violation ceases, it is determined that the Eleventh Amendment applies and the financial loss thereby becomes irreparable. In some situations the cessation of illegal conduct would still be a benefit. Not here. The rates under challenge could only be in force for three more months when the injunction was entered. The allegedly illegal rates were due to cease regardless of the preliminary injunction.
If a final judgment is entered for plaintiffs in this case, it will be better viewed as one not based on defendants' alleged wrongs prior to the preliminary injunction, but instead based on what was needed to comply with the law during the period of the injunction when it is not claimed that defendants violated the Boren Amendment. In this light, a future award to plaintiffs would not resemble a retrospective award of damages based on a past breach of a legal duty. Instead, it would be an award based upon a finding that a legal duty to comply with the Boren Amendment was being fulfilled, albeit under the duress of a preliminary injunction, when defendants made payments into the escrow fund.
Defendants concede that there would be no Eleventh Amendment challenge if the court had directed in the preliminary injunction order that money be paid directly to plaintiffs, instead of into an escrow fund. This does not appear to be a principled basis for distinction. Moreover, as noted before, defendants voluntarily agreed to the escrow approach.
The final factor to consider is whether the suit rises to the level of one implicating special sovereignty interests. This case does not fit in that category. This case is not an uncommon action. It is the kind of challenge which has been approved previously by the Supreme Court in spite of an Eleventh Amendment challenge before the district court.Wilder v. Virginia Hospital Association, 496 U.S. 498 (1990). There is no special sovereignty interest at jeopardy if this action proceeds which is comparable to the interests involved in the recent cases cited by defendants. This case is more comparable to J.B. ex re. Hart v. Valdez, 186 F.3d 1280, 1287 (10th Cir. 1999) where the Tenth Circuit found that a state's interest in a welfare program partially funded by the federal government was not such a "core sovereign interest as to preclude the application of Ex Parte Young." Repeal of the Boren Amendment
The court rejects defendants' arguments that the repeal of the Boren Amendment requires the dismissal of this case. The language of the statute repealing the Boren Amendment does not indicate that the repeal was meant to apply to pending cases. Just the opposite; the new amendments were to apply "for items and services on or after October 1, 1997." Pub.L. No. 105-33, § 4711(d). The Ninth Circuit has held that the repeal has no impact upon pending cases. SeeIndependent Acceptance Co. v. California, 204 F.3d 1247, 1249 n. 3 (9th Cir. 2000); Exeter Memorial Hospital Ass'n v. Belshe, 145 F.3d 1106, 1108-09 (9th Cir. 1998). We shall follow this approach. In addition, the Ninth Circuit has rejected an Eleventh Amendment challenge to Boren Amendment enforcement in spite of the repeal of the Boren Amendment by Congress. Consequently, we do not believe this can be considered a special factor counseling against the application of the Ex Parte Young doctrine. See Children's Hospital and Health Center v. Belshe, 188 F.3d 1090, 1095 (9th Cir. 1999).
Conclusion
In conclusion, for the reasons stated in this order and the court's previous order on this issue, the court shall deny defendants' motion to dismiss. Should defendants appeal this ruling, the court shall stay the trial of this case.
IT IS SO ORDERED.