Air Evac EMS, Inc. v. Texas, Department of Insurance, Division of Workers' Compensation

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

United States Court of Appeals

Fifth Circuit

FILED

No. 16-51023 March 20, 2017

Lyle W. Cayce

AIR EVAC EMS, INCORPORATED, Clerk

Plaintiff - Appellant

v.

STATE OF TEXAS, DEPARTMENT OF INSURANCE, DIVISION OF

WORKERS’ COMPENSATION; DAVID MATTAX, Texas Commissioner of

Insurance, in his official capacity; RYAN BRANNAN, Texas Commissioner of

Workers’ Compensation, in his official capacity,

Defendants - Appellees

v.

TEXAS MUTUAL INSURANCE COMPANY; LIBERTY MUTUAL

INSURANCE COMPANY; ZENITH INSURANCE COMPANY; HARTFORD

UNDERWRITERS INSURANCE COMPANY; TWIN CITY FIRE

INSURANCE COMPANY; TRANSPORTATION INSURANCE COMPANY;

VALLEY FORGE INSURANCE COMPANY; TRUCK INSURANCE

EXCHANGE,

Intervenor Defendants - Appellees

Appeal from the United States District Court

for the Western District of Texas

No. 16-51023

Before JONES, BARKSDALE, and COSTA, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

Primarily at issue is whether an air-ambulance company, claiming

federal preemption of Texas’ workers’-compensation scheme, satisfies the

equitable exception to the Eleventh Amendment, as provided in Ex parte

Young, 209 U.S. 123, 155–56 (1908). It does. For this and other reasons,

federal jurisdiction exists. Moreover, we decline to abstain under Colorado

River Water Conservation District v. United States, 424 U.S. 800 (1976).

VACATED and REMANDED.

I.

Air Evac EMS, Incorporated, filed this action against, inter alia, the

Texas Commissioner of Insurance and the Texas Commissioner of Workers’

Compensation (state defendants), claiming that, as applied to air-ambulance

entities, Texas’ workers’-compensation system is federally preempted.

Because the Airline Deregulation Act (ADA) expressly preempts all state laws

“related to a price, route, or service of an air carrier”, Air Evac maintains Texas

may not use state laws to regulate air-ambulance services. 49 U.S.C.

§ 41713(b)(1).

Air Evac’s air ambulances depart from more than 20 sites in Texas. And,

Air Evac holds an assortment of licenses from federal and state regulators,

including the United States Department of Transportation, Federal Aviation

Administration, and Texas. Being an emergency-transportation service, Air

Evac must accept patients regardless of either their ability to pay or the source

of their payment. As a result, Air Evac often seeks payment for its services

through the Texas Workers’ Compensation Act (TWCA).

TWCA established a state-regulated insurance market, in which Texas

licenses private insurers to sell workers’-compensation policies to employers.

2

No. 16-51023

See Tex. Labor Code §§ 401.001–419.007. Two critical features of this

framework are relevant to the action at hand: a maximum-reimbursement

system; and, a prohibition on “balance billing”. Id. §§ 413.011 (reimbursement

guidelines), 413.042 (“A health care provider may not pursue a private claim

against a workers’ compensation claimant”).

As for the reimbursement program, TWCA authorizes health-care

providers to seek payment directly from workers’-compensation insurers for

services provided patients covered by TWCA. Id. § 408.027(a). The insurer

then reimburses the health-care provider according to rate guidelines

promulgated by the Texas Workers’ Compensation Commission (commission).

See id. These rates are generally based on corresponding Medicare rates. An

insurer is not allowed to pay more than the maximum-reimbursement rate,

regardless of whether the rate satisfies the health-care provider’s billed

amount. Id. § 413.011(d).

Therefore, under this system, the initial bill goes to the insurer rather

than the patient. Furthermore, the balance-billing prohibition prevents a

health-care provider from billing the patient for any portion of the bill in excess

of the commission’s rate. Id. § 413.042. If a health-care provider violates this

prohibition, TWCA authorizes fines up to “$25,000 per day per occurrence”. Id.

§ 415.021(a).

If a health-care provider believes it was underpaid, or the commission

has not yet set a specific rate, it may dispute the fee with the Texas

Department of Insurance, Division of Workers’ Compensation (DWC). See id.

§ 413.031(a), (c). (Air Evac does not appeal the dismissal of DWC from this

action.)

DWC serves as a first-level administrative adjudicator, with the health-

care provider and insurer participating as interested parties. See id. DWC’s

3

No. 16-51023

decisions are appealable to the State Office of Administrative Hearings

(SOAH); SOAH’s decisions, to the Travis County, Texas, district court. See id.

§ 413.031(k-1); Tex. Gov. Code Ann. § 2001.176. And, an appeal may be taken

from a decision by that court. Tex. Gov. Code Ann. § 2001.901.

If the commission has not promulgated a reimbursement rate for a given

service, DWC must determine a “fair and reasonable” rate through

administrative proceedings. See 28 Tex. Admin. Code § 134.1(e)–(f). In 2002,

DWC adopted a rule setting a general reimbursement rate of 125% of the

Medicare rate. See id. § 134.203(d).

After adhering to this rule for ten years, numerous air-ambulance

companies―including Air Evac―challenged the 125% rate in the state-

administrative-dispute system, urging ADA preemption. Initially, DWC

stated it believed Texas’ reimbursement guidelines were preempted. In

September 2015, however, following an extensive series of administrative

hearings, an administrative law judge (ALJ) ruled TWCA’s scheme was not

preempted, and found the proper reimbursement rate to be 149% of the

Medicare rate.

The lead entity in the administrative proceeding, PHI Air Medical, LLC,

appealed the ALJ’s ruling to the Travis County district court. See Tex. Mut.

Ins. Co., et al. v. PHI Air Medical, LLC, No. D-1-GN-15-004940 (Tex. 53d Jud.

Dist. 15 Dec. 2016). In mid-December 2016, that court ruled: TWCA is not

preempted; and, a reimbursement rate of 125% of the Medicare rate is

adequate under TWCA. Id. On 31 January 2017, PHI appealed to the court of

appeals. In the meantime, hundreds of air-ambulance fee disputes have been

held at the SOAH level, pending the outcome of PHI’s judicial proceeding.

Approximately a year earlier, in January 2016, with the state proceeding

ongoing, Air Evac filed this action, seeking: a declaratory judgment that ADA

4

No. 16-51023

preempts TWCA with respect to air-ambulance companies; injunctive relief

against enforcement of the maximum-reimbursement-rate system; or, in the

alternative, declaratory and injunctive relief against the balance-billing

prohibition. The district court granted a joint motion to intervene on behalf of

numerous workers’-compensation insurers (insurers). Prior to the discovery

conference, Air Evac moved for summary judgment and each defendant moved

to dismiss.

The court granted defendants’ Federal Rule of Civil Procedure 12(b)(1)

motions to dismiss. Air Evac EMS, Inc. v. Texas, No. 1:16-CV-00060-SS, 2016

WL 4259552, at *9 (W.D. Tex. 11 Aug. 2016). In doing so, it first ruled subject-

matter jurisdiction existed, based on Shaw v. Delta Air Lines, Inc., 463 U.S.

85, 96 n.14 (1983) (ruling preemption claims present a federal question because

they rely on interpretation of federal statutes and the Supremacy Clause). Air

Evac EMS, 2016 WL 4259552, at *5. The court continued to explain that,

although Shaw confers federal-question jurisdiction under 28 U.S.C. 1331, the

Supremacy Clause, ADA, and Declaratory Judgment Act do not provide a

“private right of action”. Id. at *5–6.

Therefore, in the light of the Eleventh Amendment, the court concluded:

in order for this action to proceed, Air Evac must rely on a federal court’s

equitable jurisdiction to enjoin state officials under Ex parte Young. Id. at *6.

Looking to Ex parte Young’s basic requirements, the court first acknowledged

Air Evac: seeks prospective injunctive relief; and claims an ongoing violation

of federal law. Id. at *6–7.

The court next considered Okpalobi v. Foster, 244 F.3d 405 (5th Cir.

2001) (en banc), in which the lead, plurality opinion would have required

defendants in an Ex parte Young action to, inter alia, “be specially charged

with the duty to enforce the statute”, as well as to “be threatening to exercise

5

No. 16-51023

that duty”. Air Evac EMS, 2016 WL 4259552, at *7 (quoting Okpalobi, 244

F.3d at 414–15). Relying on the duty-to-enforce requirement, the court noted

TWCA’s maximum-reimbursement scheme cannot be enforced against Air

Evac because it constrains the amount insurers can pay, rather than the

amount air-ambulance companies can charge. Id. at *8. Without direct

enforcement against the health-care providers, the court concluded, the

maximum-reimbursement system does not qualify as the basis for the Ex parte

Young exception. Id.

Turning to Air Evac’s alternative challenge to the balance-billing

prohibition, the court recognized state defendants are charged with enforcing

the provision against entities which violate the rule. Id. The court, however,

held: “Air Evac’s claims fail under Young, as Air Evac has failed to show an

enforcement proceeding concerning the balance-billing prohibition is

imminent, threatened, or even intended”. Id. In doing so, the court specifically

rejected Air Evac’s assertion that it need not “expose itself” to liability by

violating the balance-billing prohibition in order to test the law’s

constitutionality under the Supremacy Clause. Id.

In sum, the court held: despite claiming an ongoing violation of federal

law and seeking only prospective relief, Air Evac could not avail itself of the Ex

parte Young exception because the maximum-reimbursement system is not

directly enforced against Air Evac, and state defendants have not threatened

to enforce the balance-billing prohibition. Id. at *9.

II.

For this appeal, our court granted expedited briefing and oral argument.

The parties raise four distinct threshold issues: whether Air Evac has Article

III standing; whether federal-question jurisdiction exists for this action under

28 U.S.C. § 1331; whether Ex parte Young’s exception applies; and whether, in

6

No. 16-51023

the light of the above-referenced ongoing state proceedings, we should abstain

from exercising otherwise-proper jurisdiction.

A motion to dismiss’ being granted is reviewed de novo, applying the

same standard as the district court. E.g., Bennett-Nelson v. La. Bd. of Regents,

431 F.3d 448, 450 n.2 (5th Cir. 2005). And, of course, a federal court must

always determine its own jurisdiction; if it decides it is lacking, it may proceed

no further. E.g., Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998).

Consistent with our above-described standard of review, “whether state

defendants are entitled to sovereign immunity is likewise reviewed de novo”.

Moore v. La. Bd. of Elementary & Secondary Educ., 743 F.3d 959, 962 (5th Cir.

2014) (internal citation omitted).

A.

State defendants’ challenge to Air Evac’s standing is adopted by

insurers. Federal standing has three well-known requirements: (1) injury-in-

fact; (2) “fairly traceable” causation; and (3) redressability. Lujan v. Defenders

of Wildlife, 504 U.S. 555, 560–61 (1992). In concluding Air Evac has standing,

the court stated:

Air Evac has suffered economic injury given its alleged

inability to recover the total amount of its billed

charges under the TWCA reimbursement scheme; the

causal connection between the scheme and Air Evac’s

injury is clear; and if the challenged provisions are

indeed preempted, the State Defendants will no longer

be able to enforce them. Air Evac has standing to sue.

Air Evac EMS, 2016 WL 4259552, at *4 n.2.

State defendants assert the district court’s analysis is too simplistic, that

Air Evac cannot establish causation or redressability. They maintain that, to

the extent not being able to recover full-billed charges is an injury, there is no

traceability or redressability because TWCA’s reimbursement cap is not

7

No. 16-51023

directly “enforced” against Air Evac, but against insurers. (As discussed infra,

there is significant overlap between standing and Ex parte Young’s

applicability.)

Under the above-described three-part test, an injury-in-fact—the first

requirement—must be “concrete and particularized” and “actual or imminent”.

Lujan, 504 U.S. at 560. Working in tandem, TWCA’s provisions effectively set

a reimbursement rate and prohibit air-ambulance entities from collecting any

more than that rate from other sources (i.e., the patient).

Along that line, Ex parte Young was a rate-setting case in which a

railroad was not allowed to charge more than the state-mandated rate. 209

U.S. at 127–28. There, the complaint claimed those rates were confiscatory, in

violation of the Fourteenth Amendment’s mandate that no State shall “deprive

any person of life, liberty, or property, without due process of law”. U.S. Const.

amend. XIV, § 1; see Ex parte Young, 209 U.S. at 149–50. Although Air Evac

does not contend that collecting 125% of the Medicare rate is confiscatory,

capping rates based on a federally-preempted state law (by virtue of the

Supremacy Clause) would limit a party’s financial recovery. Thus, prohibiting

collection in excess of the maximum-reimbursement rate is a pecuniary injury

sufficient to establish injury-in-fact. See, e.g., K.P. v. LeBlanc, 627 F.3d 115,

122 (5th Cir. 2010).

For the second standing requirement, there must be a “fairly traceable”

causal connection “between the injury and the conduct complained of”. Lujan,

504 U.S. at 560. Three of state defendants’ duties are “fairly traceable” to Air

Evac’s injury: (1) rate-setting; (2) fee-dispute resolution; and (3) the balance-

billing prohibition. For the reasons that follow, collectively, these three

instances of commission and DWC conduct are “fairly traceable” to Air Evac’s

injury.

8

No. 16-51023

First, the commission and DWC set the reimbursement rates insurers

are allowed to pay. Although defendants contend this rate-setting is too

attenuated to be the cause of Air Evac’s injury, “[t]racing an injury is not the

same as seeking its proximate cause”. K.P., 627 F.3d at 123. By setting the

reimbursement rates, state defendants initiate the first step in the workers’-

compensation-payment process.

Second, state defendants oversee the administrative fee-dispute process.

In K.P., described infra, a state regulatory board served as the “initial

arbiter[]” within a state-funded compensation system. Id. Our court ruled that

role “place[d] the Defendants among those who would contribute to Plaintiffs’

harm”. Id. Likewise, state defendants’ oversight of DWC―the “initial

arbiter[]” of fee-reimbursement disputes―places state defendants among those

who cause Air Evac’s injury. Id.

Third, state defendants are charged with enforcing the balance-billing

prohibition. Their ability to fine TWCA violators up to $25,000 per violation,

per day, prevents Air Evac from seeking additional payment outside of the

maximum-reimbursement scheme.

The final of the three standing requirements is that the court be able to

structure relief to redress plaintiff’s injury. Plaintiff must show a “favorable

decision will relieve a discrete injury to himself”, but not necessarily “that a

favorable decision will relieve his every injury”. Larson v. Valente, 456 U.S.

228, 243 n.15 (1982) (emphasis in original).

In Okpalobi, defendant state officials (governor and attorney general)

were found not to have “any duty or ability to do anything” relating to the

statute. 244 F.3d at 427 (emphasis in original). On the other hand, in K.P.,

defendant board members had “definite responsibilities relating to the

application of [the statute]”. 627 F.3d at 124.

9

No. 16-51023

Here, state defendants are more akin to the board members in K.P. than

the state-wide officials in Okpalobi. As explained above, state defendants

wield influence at multiple points in the workers’-compensation

reimbursement process. An injunction against their rate setting, fee-dispute

resolution, or enforcement of the balance-billing prohibition would remove a

“discrete injury” caused by state defendants’ enforcement of TWCA. See

Larson, 456 U.S. at 243 n.15.

In sum, state defendants’ duties concerning the workers’-compensation

reimbursement system and balance-billing prohibition cause Air Evac a

pecuniary injury that can be redressed with injunctive and declaratory relief.

In short, Air Evac has Article III standing.

B.

Next, state defendants (but not insurers) contend federal-question

jurisdiction for this action is lacking, based on Armstrong v. Exceptional Child

Care, Inc., 135 S. Ct. 1378, 1384 (2015). State defendants cite Armstrong for

the proposition that, in order for federal jurisdiction to exist, plaintiff, at this

threshold stage, must nevertheless establish the requirements for injunctive

relief.

The district court ruled federal-question jurisdiction existed, based on

the Court’s plain statement in Shaw. See Air Evac EMS, 2016 WL 4259552,

at *5 (citing Shaw, 463 U.S. at 96 n.14). The Shaw Court stated: “A plaintiff

who seeks injunctive relief from state regulation, on the ground that such

regulation is pre-empted by a federal statute which, by virtue of the Supremacy

Clause of the Constitution, must prevail, thus presents a federal question

which the federal courts have jurisdiction under 28 U.S.C. § 1331 to resolve”.

463 U.S. at 96 n.14. Because Air Evac’s complaint seeks injunctive relief on

10

No. 16-51023

the basis that the ADA preempts the TWCA, Shaw confers federal-question

jurisdiction. See id.

Despite state defendants’ assertions to the contrary, Armstrong does not

modify Shaw’s clear language. Armstrong holds the Supremacy Clause does

not create a right to challenge state laws on preemption grounds; rather, the

clause “instructs courts what to do when state and federal law clash, but is

silent regarding who may enforce federal laws in court”. Armstrong, 135 S. Ct.

at 1383. Thus, the Court held: “The ability to sue to enjoin unconstitutional

actions by state and federal officers is the creation of courts of equity”, not the

Supremacy Clause. Id. at 1384.

In Armstrong, the Court reaffirmed that plaintiffs’ seeking injunctive

relief against state officers must satisfy Ex parte Young’s equitable exception.

See id. This holding requires Air Evac proceed under Ex parte Young, if at all;

but, it does not contradict Shaw’s plain grant of federal-question jurisdiction

under Article III and 28 U.S.C. § 1331. See Shaw, 463 U.S. at 96 n.14.

C.

Having concluded jurisdiction existed, the district court next considered

Ex parte Young’s applicability. Air Evac EMS, 2016 WL 4259552, at *6. As

noted, Ex parte Young represents an equitable exception to Eleventh

Amendment sovereign immunity. 209 U.S. at 155–56. The doctrine allows

plaintiff to sue a state official, in his official capacity, in seeking to enjoin

enforcement of a state law that conflicts with federal law. See id. at 159–60.

It is a threshold question which, therefore, does not consider the merits of an

action, focusing instead on whether the complaint makes the requisite claims

against proper parties. See id. at 150. Air Evac contends the district court

misapplied Ex parte Young’s standard in two ways.

11

No. 16-51023

First, Air Evac challenges the court’s concluding the maximum-

reimbursement rates are not enforced against Air Evac because TWCA

regulates the amount insurers may pay, rather than the amount air-

ambulance entities can collect. Air Evac EMS, 2016 WL 4259552, at *8. Air

Evac asserts the statute is directly enforced against it every time it either seeks

reimbursement through TWCA or disputes a reimbursement amount through

DWC’s administrative process.

Second, Air Evac claims the court erred by requiring “initiated [or]

threatened enforcement proceedings” in order, under Ex parte Young, to

challenge TWCA’s balance-billing prohibition. See id. at *7. Air Evac contends

Ex parte Young, instead, requires only a “straightforward inquiry” for whether

the complaint seeks prospective equitable relief for an ongoing violation of

federal law, citing Verizon Maryland, Inc. v. Public Service Commission of

Maryland, 535 U.S. 635, 645 (2002).

State defendants and insurers maintain the court was correct to require

direct enforcement against Air Evac for the maximum-reimbursement

provisions. Likewise, for the balance-billing prohibition, defendants agree

with the court’s concluding there is no imminent or threatened enforcement

proceeding sufficient to meet the Ex parte Young exception. In addition to

echoing the court’s reasoning, defendants also contend: the dismissal should

be affirmed because, inter alia, Air Evac does not meet the traditional

requirements for equitable relief; therefore, no injunctive relief can be issued

pursuant to the Ex parte Young exception.

Ex parte Young concerned whether a federal court may enjoin a state

official from enforcing an unconstitutional state law. 209 U.S. at 126–27.

Underlying the issue was a railroad’s seeking an injunction against the

Minnesota attorney general, who threatened criminal action and civil fines

12

No. 16-51023

against any railroad that violated the state commission’s rate-setting order.

Id. at 127–28. The railroad asserted, as discussed supra, that the rates

amounted to a confiscatory taking, in violation of the Fourteenth Amendment;

the attorney general claimed protection from suit under the Eleventh

Amendment. See id. at 150.

Addressing the viability of a federal injunction, the Court held:

[I]ndividuals who, as officers of the State, are clothed

with some duty in regard to the enforcement of the

laws of the state, and who threaten and are about to

commence proceedings, either of a civil or criminal

nature, to enforce against parties affected an

unconstitutional act, violating the Federal

Constitution, may be enjoined by a Federal court of

equity from such action.

Id. at 155–56. In justifying its holding, the Court avoided the apparent conflict

with sovereign immunity by creating a legal “fiction”: a federal court does not

violate state sovereignty when it orders a state official to do nothing more than

uphold federal law under the Supremacy Clause. Va. Office for Prot. &

Advocacy v. Stewart, 563 U.S. 247, 255 (2011); see Ex parte Young, 209 U.S. at

159–60.

Because this legal fiction infringes on state sovereignty, Ex parte Young

and its progeny limit the exception. Idaho v. Coeur d’Alene Tribe of Idaho, 521

U.S. 261, 269 (1997) (affirming that, in applying Ex parte Young, courts “must

ensure that the doctrine of sovereign immunity remains meaningful, while also

giving recognition to the need to prevent violations of federal law”); see also

Pennhurst State Sch. and Hosp. v. Halderman, 465 U.S. 89, 104–06 (1984)

(limiting Ex parte Young jurisdiction only to violations of the federal

Constitution and statutes); Edelman v. Jordan, 415 U.S. 651, 677 (1974)

(limiting Ex parte Young plaintiffs only to prospective relief). Most relevant to

13

No. 16-51023

the action at hand, Ex parte Young requires defendants have “some connection”

to the state law’s enforcement and threaten to exercise that authority. Ex parte

Young, 209 U.S. at 157.

This “some connection” requirement is designed to ensure defendant is

not merely being sued “as a representative of the state, and thereby attempting

to make the state a party”. Id. For example, a state governor with a broad

duty to uphold state law is not a proper defendant. See Morris v. Livingston,

739 F.3d 740, 745–46 (5th Cir. 2014).

Despite these restrictions, the Court has reinforced Ex parte Young’s

being a “straightforward inquiry” and specifically rejected an approach that

would go beyond a threshold analysis. See Coeur d’Alene, 521 U.S. at 296

(O’Connor, J., concurring in part and in judgment). In Coeur d’Alene, the lead

opinion proposed a balancing test, weighing the significance of the federal

right, the availability of a state forum, and the importance of the state interest.

Id. at 270–80. Seven justices rejected this approach and agreed with Justice

O’Connor’s position that a case-by-case balancing test “unnecessarily

recharacterizes and narrows” Ex parte Young. Id. at 291 (O’Connor, J.,

concurring in part and in judgment); id. at 298 (Souter, J., dissenting).

Subsequently, in Verizon, 535 U.S. at 645 (quoting Coeur d’Alene, 521

U.S. at 296 (O’Connor, J., concurring in part and in judgment)), a majority of

the Court affirmed this principle, stating: “[A] court need only conduct a

‘straightforward inquiry into whether [the] complaint alleges an ongoing

violation of federal law and seeks relief properly characterized as prospective’”.

There, a state regulatory commission issued an order interpreting the scope of

a private contract, which had been subject to prior commission approval. Id.

at 639–40. Plaintiff’s subsequent federal-court action claimed the

commission’s order conflicted with federal law. Id. at 640.

14

No. 16-51023

The Court conducted a “straightforward inquiry” into the pleadings and

noted: “We have approved injunction suits against state regulatory

commissioners in like contexts”. Id. at 645 (collecting cases). Thus, the action

could proceed against state commissioners for their role in implementing a

state regulatory scheme. See id. at 645–48.

Our court has also considered Ex parte Young’s navigating between state

sovereignty and federal supremacy: specifically, how close a relationship is

required between the state actor and the claimed unconstitutional act.

Compare Okpalobi, 244 F.3d at 413–16 (lead plurality requiring a “special

relation” to “threatened enforcement”), with K.P., 627 F.3d at 124 (explicitly

declining to follow the Okpalobi plurality’s “special relation” standard). For

example, in our en-banc decision in Okpalobi, the Eleventh Amendment

question was whether defendants―Louisiana’s governor and attorney

general―had a sufficient duty, under Ex parte Young, to enforce a Louisiana

statute. See 244 F.3d at 410–11. The statute provided for private actions and

unlimited tort liability against doctors who performed abortions. Id. at 409.

The lead opinion interpreted Ex parte Young’s “some connection”

language to require a “special relation” or “close connection”. See id. at 413–

19 (citing Ex parte Young, 209 U.S. at 157; Fitts v. McGhee, 172 U.S. 516, 529

(1899)). Because the statute provided only for private enforcement by patients

(as opposed to state enforcement), and because the governor and attorney

general had only a “general duty” to see state laws enforced, the lead opinion

held such a tenuous connection was insufficient to invoke Ex parte Young.

Okpalobi, 244 F.3d at 423–24.

As noted supra, the Eleventh Amendment analysis in Okpalobi,

however, received support only from a plurality of our en banc court; the

majority decided the case on standing. See id. at 429 (Higginbotham, J.,

15

No. 16-51023

concurring); id. at 432–33 (Benavides, J., concurring in part and dissenting in

part); id. at 441 (Parker, J., dissenting). Subsequently, in K.P., 627 F.3d at

124, our court stated: “Because that part of the [Okpalobi] en banc opinion did

not garner majority support, the Eleventh Amendment analysis is not binding

precedent”.

The K.P. court considered the same Louisiana abortion statute as had

Okpalobi, but in a different context. K.P., 627 F.3d at 119–20, 122. There,

plaintiff physicians were members of Louisiana’s patients’-compensation fund,

which effectively capped physicians’ liability in medical-malpractice actions.

Id. at 119. An oversight board administered the fund by reviewing patient

claims and determining coverage. See id. But, when a patient filed a claim

asserting abortion-related tort damages, the board relied on the Louisiana

abortion statute to exclude the physicians from the fund’s coverage and

liability cap. Id. at 120; see La. Rev. Stat. Ann. § 9:2800.12(A), (B)(2), (C)(2)

(excluding abortion procedures from the “laws governing medical malpractice

or limitations of liability thereof”). Plaintiff physicians’ subsequent federal-

court action sought to enjoin the board’s denying them coverage based on the

claimed unconstitutional abortion statute. K.P., 627 F.3d at 120.

In its Eleventh Amendment analysis, the K.P. court defined

“enforcement” as involving “compulsion or constraint”. Id. at 124. It then held,

without adopting the “special relation” standard from Okpalobi, that “the

Board’s role starts with deciding whether to have a medical review panel

consider abortion claims and ends with deciding whether to pay them. By

virtue of these responsibilities, Board members are delegated some

enforcement authority”. Id. at 125. Unlike the governor and attorney general

in Okpalobi, the board in K.P. took specific action predicated on the abortion

16

No. 16-51023

statute; this was a sufficient connection to enforcement to trigger the Ex parte

Young exception. See id.

As these cases demonstrate, the Ex parte Young analysis can turn on

subtle distinctions in the complaint. Ex parte Young and Okpalobi each

involved a state attorney general as defendant. In Ex parte Young, the

attorney general had authority to enforce the statute at issue, while the

Louisiana abortion statute in Okpalobi provided for enforcement through

private actions, not public officials.

On the other hand, in Okpalobi and K.P., the same statute was at issue,

but defendants in the respective actions provided the determinative

distinction. Rather than suing the attorney general and governor, as in

Okpalobi, the K.P. plaintiffs sued the state-regulatory-board members, who

had a specific means through which to apply the abortion statute. Thus, the

Ex parte Young analysis turns on the complaint’s context―including the

challenged state law and defendants―to determine whether “the state officer,

by virtue of his office, has some connection with the enforcement of the act”.

Ex parte Young, 209 U.S. at 157.

1.

Turning to the matter at hand, we must decide whether state defendants

have the requisite connection to the enforcement of the maximum-

reimbursement system and balance-billing prohibition. In doing so, we bear

in mind the Court’s admonition that Ex parte Young presents a

“straightforward inquiry” into the complaint’s claims. See Verizon, 535 U.S. at

645.

First, as the district court noted, Air Evac claims an ongoing violation of

federal law and seeks prospective relief. See Air Evac EMS, 2016 WL 4259552,

at *7. The complaint claims the ADA expressly preempts the workers’-

17

No. 16-51023

compensation system with respect to air-ambulance entities and seeks an

injunction and declaratory judgment.

Next, we hold state defendants have a sufficient connection to the

enforcement of the TWCA through the maximum-reimbursement rates and

balance-billing prohibition. The district court was correct to recognize that

“enforcement” under the maximum-reimbursement scheme is not the same

type of direct enforcement found in Ex parte Young, for instance, where the

attorney general threatened civil and criminal prosecution. But, such

enforcement is not required. See, e.g., Verizon, 535 U.S. at 645–46; K.P., 627

F.3d at 124–25. In Verizon, the Court allowed an action against commissioners

who ordered specific payments between private parties. 535 U.S. at 645–46.

Likewise, in K.P., the board members’ reliance on the abortion statute to deny

liability protection qualified as enforcement. 627 F.3d at 125.

Employing K.P.’s definition of “enforcement” as “compulsion or

constraint”, state defendants obviously constrain Air Evac’s ability to collect

more than the maximum-reimbursement rate under the TWCA system.

Between their rate-setting authority and role in arbitrating fee disputes

through the administrative process, state defendants effectively ensure the

maximum-reimbursement scheme is enforced from start to finish. Therefore,

the district court erred in not considering, for the purpose of Ex parte Young’s

being applied, the maximum-reimbursement provision as a means of enforcing

TWCA against Air Evac.

The parties debate whether Ex parte Young applies only when there is a

threatened or actual proceeding to enforce the challenged state law. We need

not resolve that question. To the extent Ex parte Young requires that the state

actor “threaten” or “commence” proceedings to enforce the unconstitutional act,

state defendants’ pervasive enforcement satisfies that test. See 209 U.S. at

18

No. 16-51023

156. In K.P., our court held the prior denial of liability coverage fulfilled the

threatened-proceedings requirement; so, too, does state defendants’

enforcement of the 125% air-ambulance-reimbursement rate. See K.P., 627

F.3d at 125.

2.

Having held the Ex parte Young exception applies, we need not engage

in a separate analysis of the balance-billing prohibition. As discussed, the

district court concluded “Air Evac has failed to show an enforcement

proceeding concerning the balance-billing prohibition is imminent, threatened,

or even intended”. Air Evac EMS, 2016 WL 4259552, at *8. We note, however,

that the balance-billing prohibition works in concert with state defendants’

implementation of the reimbursement system, serving as a backstop against

alternative methods of fee collection. State defendants’ pervasive authority to

oversee and enforce Texas’ workers’-compensation system satisfies the Ex

parte Young exception.

3.

Finally, courts recognize the significant overlap between Article III

jurisdiction, Ex parte Young, and equitable relief. See, e.g., NiGen Biotech,

L.L.C. v. Paxton, 804 F.3d 389, 394 n.5 (5th Cir. 2015) (equating and

distinguishing Ex parte Young’s requirements with the “Article III minimum

for standing to request an injunction”). As with most jurisdictional questions,

Ex parte Young and standing turn on the specific details in the complaint.

These doctrines are both threshold questions, however, and do not

consider the action’s merits. In fact, the Ex parte Young Court acknowledged

the underlying action would rely on the Fourteenth Amendment, but noted “a

decision of this case does not require an examination or decision of the question

whether [the Fourteenth Amendment’s] adoption in any way altered or limited

19

No. 16-51023

the effect of the [Eleventh] Amendment”. 209 U.S. at 150. In doing so, the

Court recognized that its Eleventh Amendment analysis was distinct from any

subsequent question on the merits. See id.; see also Verizon, 535 U.S. at 646

(“But the inquiry into whether suit lies under Ex parte Young does not include

an analysis of the merits of the claim.”).

Therefore, having determined Air Evac’s action satisfies the Ex parte

Young exception, we need not consider—contrary to defendants’ assertion—

whether the requirements for temporary or permanent equitable relief are also

satisfied. Doing so is beyond the threshold jurisdictional question posed by Ex

parte Young and would consider the availability and scope of any eventual

relief.

D.

State defendants’ final contention (adopted by insurers) is that,

assuming jurisdiction exists for this action, Colorado River abstention should

be invoked in the light of PHI’s proceedings in Texas state court and the

administrative system. See Colo. River Water Conservation Dist. v. United

States, 424 U.S. 800 (1976). Because the district court based dismissal on the

Eleventh Amendment, it “decline[d] to consider the propriety of Colorado River

abstention”. Air Evac EMS, 2016 WL 4259552, at *9. Discretionary Colorado

River abstention may be applied when: a state proceeding is ongoing and is

parallel to the federal proceeding; and, extraordinary circumstances caution

against exercising concurrent federal jurisdiction. See Colorado River, 424

U.S. at 817–19.

“Parallel actions” typically involve the same parties, but the identity of

the parties is not determinative. See Afr. Methodist Episcopal Church v.

Lucien, 756 F.3d 788, 797 (5th Cir. 2014). Instead, a court may “look both to

the named parties and to the substance of the claims asserted” to determine

20

No. 16-51023

whether the state proceeding would be dispositive of a concurrent federal

proceeding. Id. If the matters are deemed parallel, the court must engage in

a six-factor balancing test, but “with the balance heavily weighted in favor of

the exercise of [federal] jurisdiction”. Moses H. Cone Mem. Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 16 (1983); see Kelly Inv., Inc. v. Cont’l Common Corp.,

315 F.3d 494, 497 (5th Cir. 2002) (listing the Colorado River factors).

For the requisite parallel action, state defendants point to the above-

described PHI litigation, which arose out of DWC’s administrative appeals

process. As discussed, Air Evac and numerous other air-ambulance entities,

in 2012, began challenging reimbursement rates through DWC’s fee-dispute

process. The appeals were consolidated; and, after extensive administrative

proceedings, an ALJ ruled against ADA preemption. PHI sought judicial

review in the Travis County district court; the other air-ambulance matters

were held in abeyance pending resolution of that appeal. Shortly after oral

argument in our court for the instant appeal, the state court ruled against

preemption and found a 125% reimbursement rate adequate. See Tex. Mut.

Ins. Co., et al. v. PHI Air Medical, LLC, Cause No. D-1-GN-15-00490 (Tex. 53d

Jud. Dist. 15 Dec. 2016). PHI has appealed to Texas’ court of appeals.

Nonetheless, given the differences between the two actions and lack of

preclusive effect, we do not consider the PHI state-court proceeding to be

“parallel” for the purpose of Colorado River abstention. For example, the

parties are different on both sides: neither Air Evac nor state defendants are

party to the PHI litigation. In addition, the state proceeding required the

adjudicator to determine an adequate reimbursement rate, an issue not before

our court. See id. at 2. And, most especially, the exceptional nature of federal

abstention cuts in favor of jurisdiction. Accordingly, we decline to abstain.

21

No. 16-51023

III.

For the foregoing reasons, the judgment is VACATED, and this matter

is REMANDED for further proceedings consistent with this opinion.

22