North East Medical Services, Inc. v. California Department of Health Care Services, Health & Human Services Agency

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

NORTH EAST MEDICAL SERVICES, No. 11-16795

INC.,

Plaintiff-Appellant, D.C. No.

3:10-cv-02433-

v. RS

CALIFORNIA DEPARTMENT OF

HEALTH CARE SERVICES, HEALTH

AND HUMAN SERVICES AGENCY ,

STATE OF CALIFORNIA ; DAVID

MAXWELL-JOLLY , Director of

California Department of Health

Care Services, Health and Human

Services Agency, State of California;

THE STATE OF CALIFORNIA ,

Defendants-Appellees.

LA CLINICA DE LA RAZA , INC., No. 11-16796

Plaintiff-Appellant,

D.C. No.

v. 3:10-cv-04605-

RS

CALIFORNIA DEPARTMENT OF

HEALTH CARE SERVICES, HEALTH

AND HUMAN SERVICES AGENCY , OPINION

STATE OF CALIFORNIA ; DAVID

MAXWELL-JOLLY , Director of

California Department of Health

2 NORTH EAST MED . SVCS. V . CAL. DHCS

Care Services, Health and Human

Services Agency, State of California;

THE STATE OF CALIFORNIA ,

Defendants-Appellees.

Appeals from the United States District Court

for the Northern District of California

Richard Seeborg, District Judge, Presiding

Argued and Submitted

February 13, 2013—San Francisco, California

Filed April 4, 2013

Before: Jerome Farris, Sidney R. Thomas, and

N. Randy Smith, Circuit Judges.

Opinion by Judge N.R. Smith

SUMMARY*

Eleventh Amendment / Medicare

The panel affirmed in part and reversed in part the

dismissal, on the basis of Eleventh Amendment immunity, of

two federally funded healthcare clinics’ actions alleging that

the California Department of Health Care Services incorrectly

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

NORTH EAST MED . SVCS. V . CAL. DHCS 3

calculated payments for Medicaid-covered pharmacy services

provided to “dual-eligible” Medicare beneficiaries who also

receive Medicaid.

Affirming in part, the panel held that where the clinics

had already paid money to California, they could not avoid

the Eleventh Amendment’s general bar to seeking money

damages from a state simply by alleging that California was

not entitled to the payments. The panel rejected the argument

that the Eleventh Amendment did not bar the clinics’ claims

because they brought suit as agents of the federal government

to protect a federal interest in the grant funds they claimed

California wrongfully seized. The panel also rejected the

argument that the clinics sought only the return of improperly

seized property.

The panel reversed the dismissal of claims alleging

prospective relief and remanded to allow the district court to

assess whether the clinics may proceed with those claims

pursuant to the Ex parte Young doctrine.

COUNSEL

James L. Feldesman (argued) and Marisa B. Guevara,

Feldesman Tucker Leifer Fidell LLP, Washington, D.C., for

Plaintiffs-Appellants.

Joshua Sondheimer, Deputy Attorney General, San Francisco,

California, for Defendants-Appellees.

4 NORTH EAST MED . SVCS. V . CAL. DHCS

OPINION

N.R. SMITH, Circuit Judge:

Where North East Medical Services, Inc. (“NEMS”) and

La Clínica de la Raza, Inc. (“La Clínica,” and, together with

NEMS, the “Centers”)1 have already paid money to the

California Department of Health Care Services

(“California”), they may not avoid the Eleventh

Amendment’s general bar to seeking money damages from a

state simply by alleging that California was not entitled to the

payments. The Centers’ claims must fall within a recognized

Eleventh Amendment exception. See Edelman v. Jordan,

415 U.S. 651, 667–69 (1974); Ford Motor Co. v. Dep’t of

Treasury of Ind., 323 U.S. 459, 463–64 (1945), abrogated on

other grounds by Lapides v. Bd. of Regents of Univ. Sys. of

Ga., 535 U.S. 613 (2002); Taylor v. Westly, 402 F.3d 924,

929–30 (9th Cir. 2005). Accordingly, we affirm the district

court’s dismissal of the Centers’ claims seeking

reimbursement for money already paid to California.

However, we reverse the district court’s dismissal of the

Centers’ claims alleging genuine prospective relief and

remand to allow the district court to assess whether the

Centers may proceed with those claims pursuant to the Ex

parte Young, 209 U.S. 123 (1908), doctrine.

FACTS AND PROCEDURAL HISTORY

The Centers provide medical services to the poor,

uninsured, or otherwise medically underserved. The Centers

receive funds from a number of sources. Federal grants under

Section 330 of the Public Health Service Act, 42 U.S.C.

1

The Centers’ cases are consolidated for the purpose of this opinion.

NORTH EAST MED . SVCS. V . CAL. DHCS 5

§ 254b (“Section 330 grants”) serve as an important source of

funds for these healthcare clinics. In addition, the Centers

receive payment from individual patients and patients’

insurers, including Medicaid.

Medicaid is a joint Federal-State program that provides

money for health care services to certain needy and

underprivileged populations. Participating states administer

the Medicaid program, and the Centers must provide services

to Medicaid patients to be eligible for the Section 330 grants.

See 42 U.S.C. § 254b(k)(3)(E). Section 330 also requires the

Centers to “make every reasonable effort to collect

appropriate reimbursement for its costs” of providing services

to Medicaid patients. See 42 U.S.C. § 254b(k)(3)(F).

The Centers’ complaints in these cases chronicle a long

history of tension between Section 330 grantees (like the

Centers) and state Medicaid programs. Before 1989, state

Medicaid programs often under-reimbursed federally funded

health centers. Because state underpayment forced Section

330 grantees to use federal Section 330 grant funds to cover

Medicaid expenses, Section 330 grants began to function as

a de facto subsidy of state Medicaid programs.

In 1989, Congress attempted to remedy the problem.

First, Congress created a new designation called a “Federally

Qualified Health Center” (“FQHC”). See Omnibus Budget

Reconciliation Act of 1989, Pub. L. No. 101-239, Title VI,

§ 6404 (codified at 42 U.S.C. § 1396d). The Centers argue

that Congress mandated that state Medicaid programs pay

100 percent of the FQHCs’ reasonable costs. To meet this

mandate, state Medicaid programs currently pay FQHCs a

fixed, per-visit fee for services provided to Medicaid patients.

The fee is based on a formula intended to approximate the

6 NORTH EAST MED . SVCS. V . CAL. DHCS

FQHCs’ actual costs. This calculation method saves state

Medicaid programs and FQHCs from the administrative

burden of calculating each FQHC’s actual costs each year.

The dispute in this case arises from California’s

implementation of a change to Medicare in 2006. In 2006,

Congress made available (under “Part D” of the Medicare

statute) the Medicare Prescription Drug Benefit to Medicare

beneficiaries. Some Medicare beneficiaries also receive

Medicaid and are known as “dual-eligibles.” The Part D

legislation shifted the responsibility for payment of dual-

eligibles’ prescription drug costs from state Medicaid

programs to the new, federal Medicare Part D Program. See

42 U.S.C. § 1396u-5(d)(1).

The Centers argue that California mishandled the shift in

payment responsibility. They allege that California should

have calculated how much of the per-visit rate would be

attributable to dual-eligibles’ prescription costs. Then by

subtracting only that portion from the per-visit rate, the

Centers claim the per-visit rate would remain an accurate

reflection of the Centers’ actual costs. However, California

determined that subtracting only dual-eligibles’ prescription

drug costs was inconsistent with state law and would be

“administratively burdensome.” Instead, California gave the

Centers two options. First, the Centers could choose not to

bill California for the per-visit rate for Medicaid services and

reduce the per-visit rate by subtracting the cost of all

pharmacy services (not just the services to dual-eligibles).

California would then pay the Centers for Medicaid-covered

pharmacy services to non dual-eligibles on a different, fee-

for-service basis. The Centers refer to this as “Option 1.” In

the alternative, the Centers could elect to keep their per-visit

rate the same but pay over to California any payments that the

NORTH EAST MED . SVCS. V . CAL. DHCS 7

Centers received from Part D at the end of each fiscal year

(“Option 2”).

While the Centers claim that both options are inconsistent

with federal law, they both initially chose Option 2. NEMS

paid California its Medicare Part D payments for fiscal years

2006 and 2007. To date, NEMS has made no payments for

fiscal year 2008. Instead, NEMS omitted Part D payments

from its 2008 year-end reconciliation report to California,

even though Option 2 required such payment. In 2009,

NEMS changed course and elected Option 1. NEMS

conceded in both its briefing and at oral argument that it

suffers no ongoing harm since proceeding under Option 1.

La Clínica provides in-house pharmacy services at only

two of its twenty-five locations. La Clínica chose Option 2

after weighing the administrative burden of both options.

Unlike NEMS, La Clínica continues to proceed under

Option 2.

The Centers brought suit for declaratory and injunctive

relief. Among other things, the Centers urge the federal

courts to declare unlawful California’s “seizure” of the

Centers’ Medicare Part D funds, in excess of what would be

owed under the per-visit rate for the Centers’ expenses. The

Centers also seek reimbursement for all amounts previously

paid to California under Medicare Part D, interest, and

attorney’s fees. For NEMS, this includes payments made for

fiscal years 2006 and 2007, and La Clínica seeks

reimbursement for all payments to date.

California moved to dismiss the Centers’ complaints for

lack of subject matter jurisdiction, failure to state a claim, and

failure to exhaust administrative remedies. In a written order,

8 NORTH EAST MED . SVCS. V . CAL. DHCS

the district court dismissed the Centers’ complaints under the

Eleventh Amendment. The court reasoned:

In essence, plaintiffs are saying that they

themselves spent monies given to them by the

federal government under Section 330 when

they should not have found it necessary to do

so. While that might mean, if correct, that

California received a subsidy to its Medi-Cal

program in a metaphorical sense, the money

that California should have paid—the money

plaintiffs seek to recover in this action—is

still California’s money, that would have to be

paid from its coffers.

The district court declined to reach whether the Centers failed

to state a claim or exhaust administrative remedies.

STANDARD OF REVIEW

We review “de novo dismissals on the basis of Eleventh

Amendment immunity.” Cholla Ready Mix, Inc. v. Civish,

382 F.3d 969, 973 (9th Cir. 2004).

DISCUSSION

In general, the Eleventh Amendment shields

nonconsenting states from suits for monetary damages

brought by private individuals in federal court. See Taylor,

402 F.3d at 929; Beentjes v. Placer Cnty. Air Pollution

Control Dist., 397 F.3d 775, 777 (9th Cir. 2005). The

Eleventh Amendment also bars “declaratory judgments

against the state governments that would have the practical

effect of requiring the state treasury to pay money to

NORTH EAST MED . SVCS. V . CAL. DHCS 9

claimants.” Taylor, 402 F.3d at 929–30. However, there are

exceptions to this general bar. See id. at 930. First,

“Congress, using its authority to enforce by legislation the

provisions of the . . . Fourteenth Amendment, can ‘abrogate’

Eleventh Amendment state governmental immunity by

expressing its intent to do so with sufficient clarity.” Id. at

930. Second, we have held that the Eleventh Amendment

does not bar a suit for the return of property that the State of

California has seized and holds in trust pursuant to that state’s

unique escheat scheme. Suever v. Connell, 439 F.3d 1142,

1146–47 (9th Cir. 2006); Taylor, 402 F.3d at 936. Finally,

under Ex parte Young, the Eleventh Amendment generally

does not bar suits for prospective, non-monetary relief against

state officers. See Agua Caliente Band of Cahuilla Indians v.

Hardin, 223 F.3d 1041, 1045 (9th Cir. 2000).

Here, the Centers claim that they are entitled to

reimbursement for money they paid to California under the

allegedly unlawful Option 2. NEMS seeks to recover monies

paid in fiscal years 2006 and 2007, and La Clínica seeks

reimbursement for all Part D payments it has made to

California to date. While the Centers couch these claims as

injunctive and declaratory, the claims actually seek

retroactive monetary relief barred by the Eleventh

Amendment. See Edelman, 415 U.S. at 665–67.

Some of the Centers’ claims arguably seek genuine

prospective relief. NEMS claims that the state will

eventually demand payment of NEMS’s Part D revenues for

fiscal year 2008—that California will, in the future, enforce

Option 2 and want payment from NEMS. Similarly, La

Clínica may be entitled to injunctive relief to bar California’s

prospective application of Option 2 to La Clínica.

10 NORTH EAST MED . SVCS. V . CAL. DHCS

1. The Eleventh Amendment bars the Centers’ claims

for money damages.

The Centers advance two main arguments that the

Eleventh Amendment does not bar their claims for money

damages against California. First, they argue that they bring

suit as agents of the federal government to protect a federal

interest in the grant funds they claim California wrongfully

seized under Option 2 (the “Disputed Funds”). Second, they

argue that the Eleventh Amendment does not bar suit under

Taylor and Suever. The Centers contend that they may bring

suit, because recovery of the Disputed Funds would require

California merely to return the Centers’ funds that California

improperly seized.

We reject each of these arguments. With respect to the

Centers’ “federal interest” theory, the Centers’ argument fails

for two reasons. First, the statutes the Centers cite do not

abrogate the Eleventh Amendment and, thus, fail to meet the

well-settled abrogation exception.2 See Douglas v. Cal. Dep’t

of Youth Auth., 271 F.3d 812, 818 (9th Cir. 2001), amended

by 271 F.3d 910; Taylor, 402 F.3d 924 at 930. Second, there

is no authority for a stand-alone “federal interest” exception.

With respect to the Centers’ Taylor argument, Taylor and

Suever are distinguishable, and the Centers’ claims do not

bring this case within Taylor’s extremely narrow Eleventh

Amendment “exception.”

2

To support their federal interest theory, the Centers cite various

Medicaid provisions, e.g., 42 U.S.C. § 254b(k)(3)(F)–(G) and federal

appropriations statutes, e.g., 31 U.S.C. §§ 1301(a), 1341(a)(1). The

Centers also cite 42 U.S.C. §§ 1983, 1985, and the Supremacy Clause as

authorizing the remedy they seek.

NORTH EAST MED . SVCS. V . CAL. DHCS 11

A. The Centers’ “federal interest theory” does not

defeat application of the Eleventh Amendment.

Courts conduct a two-part inquiry to determine whether

Congress validly abrogated the state’s sovereign immunity.

Douglas, 271 F.3d at 818. First, the court decides whether

“Congress unequivocally expressed its intent to abrogate the

states’ immunity in the legislation itself.” Id. (internal

quotation marks omitted). If so, the court must determine

whether Congress acted “pursuant to a valid grant of

constitutional authority under § 5 of the Fourteenth

Amendment.” Id.

Here, none of the statutes the Centers claim support their

“federal interest” theory abrogated California’s Eleventh

Amendment immunity. The closest the Centers come to

statutory authorization for this suit is in their charge to “make

every reasonable effort” to collect the reimbursements owed

them. See 42 U.S.C. § 254b(k)(3)(F). However, this

language falls far short of the “clear statement” that our cases

require to demonstrate Congress’s intent to abrogate. See,

e.g., Townsend v. Univ. of Alaska, 543 F.3d 478, 484 (9th Cir.

2008); Pittman v. Or., Emp’t Dep’t, 509 F.3d 1065, 1072 (9th

Cir. 2007). Accordingly, because the statutes upon which the

Centers rely do not abrogate California’s sovereign immunity,

the Centers cannot obtain monetary relief. See Holley v. Cal.

Dep’t of Corr., 599 F.3d 1108, 1111 (9th Cir. 2010) (“The

Eleventh Amendment bars [a suit for money damages] unless

Congress has abrogated state sovereign immunity under its

power to enforce the Fourteenth Amendment or a state has

waived it.”); Hibbs v. Dep’t of Human Res., 273 F.3d 844,

850 (9th Cir. 2001) (same).

12 NORTH EAST MED . SVCS. V . CAL. DHCS

The Centers attempt to avoid this result by denying that

they seek a federal interest “exception” to the Eleventh

Amendment. Instead, the Centers argue that, because they

seek to vindicate a federal interest in Section 330 grant funds,

the Eleventh Amendment does not apply as a threshold

matter. This argument fails. The Eleventh Amendment

clearly bars the remedy they seek—a monetary award paid

from the state treasury to a private party. See Edelman,

415 U.S. at 667–69.

None of the authorities the Centers cite persuade us that

the Eleventh Amendment does not apply. Nor do they

persuade us to recognize (even if we could) a stand-alone

federal interest exception. For example, the Centers contend

that Hans v. Louisiana, 134 U.S. 1 (1890), which extended

the Eleventh Amendment to suits brought by a state’s own

“citizen,” dealt only with private parties advancing their own,

private claims. While this may be true, 134 U.S. at 1, nothing

in Hans provides a right to money damages against a state

any time the litigation furthers a federal interest. Similarly,

the Centers may not rely on McCulloch v. Maryland, 17 U.S.

(4 Wheat) 316 (1819), and other Supremacy Clause cases.

These cases do not establish a specific right to represent the

federal interest and to recover money from a state.

Finally, the Centers rely on the complicated statutory

framework underlying the Section 330 grants, Medicare

reimbursement, and federal appropriations. Again, the

Centers point to federal law that requires them to “make

every reasonable effort” to collect the reimbursements owed

them. However, these statutes do not authorize the Centers

to sue on behalf of the federal government. Elsewhere,

federal law makes clear that “[e]xcept as otherwise authorized

by law, the conduct of litigation in which the United States,

NORTH EAST MED . SVCS. V . CAL. DHCS 13

an agency, or officer thereof is a party, or is interested . . . is

reserved to officers of the Department of Justice, under the

direction of the Attorney General.” 28 U.S.C. § 516.

Congress has authorized private parties to bring suit on the

United States’ behalf in some limited circumstances. See,

e.g., 28 U.S.C. §§ 49, 515, 591–99; 31 U.S.C. §§ 3729–3733.

The statutes and other materials the Centers cite do not

demonstrate that this is such a circumstance.

The Supreme Court rejected an argument similar to the

Centers’ in Edelman, 415 U.S. at 678. In Edelman, the Court

held that a group of would-be disability beneficiaries could

not recover retroactive payment of benefits. Id. at 653, 678.

The majority rejected the dissent’s argument that § 1983 and

an amalgamation of other federal statutes and regulations

indicated “that Congress intended a cause of action for public

aid recipients . . . .” Id. at 674–75. The majority concluded

that § 1983 did not create a right of action for money

damages in that case. Id. at 675–77. The Court reasoned, in

part, that although private parties may sue a state under

§ 1983 in some cases, “a federal court’s remedial power,

consistent with the Eleventh Amendment, is necessarily

limited to prospective injunctive relief [under Ex parte

Young] . . . .” Id. at 677. Accordingly, the federal courts are

powerless to make “a retroactive award which requires the

payment of funds from the state treasury.” Id. As such, we

reject the Centers’ similar argument under Edelman.3 See

3

The Centers also cite several out-of-circuit cases to support their

argument that they assert a federal interest in federal funds. E.g.,

Kauffman v. Anglo-Am. Sch. of Sofia, 28 F.3d 1223 (D.C. Cir. 1994); In

re Joliet-Will Cnty. Cmty. Action Agency, 847 F.2d 430 (7th Cir. 1988);

Palmiter v. Action, Inc., 733 F.2d 1244 (7th Cir. 1984); and Henry v. First

Nat’l Bank of Clarksdale, 595 F.2d 291 (5th Cir. 1979).

14 NORTH EAST MED . SVCS. V . CAL. DHCS

also Windward Partners v. Ariyoshi, 693 F.2d 928, 929 (9th

Cir. 1982) (“[S]ection 1983 does not abrogate or ‘override’

the sovereign immunity of the states under the eleventh

amendment.” (citing Quern v. Jordan, 440 U.S. 332 (1979)).

Thus, the Centers’ “federal interest” argument does not fall

within the Eleventh Amendment’s abrogation exception, and

we decline the Centers’ invitation to create a stand alone

exception from whole cloth.

B. The Eleventh Amendment bars the Centers’

claims, even though they argue they seek only the

return of improperly seized property.

In certain cases, the Eleventh Amendment does not bar a

suit to recover property in a state’s possession, or funds held

by the state arising from the sale of seized property. See

Suever, 439 F.3d at 1146–47; Taylor, 402 F.3d at 925, 929,

934–35. In Taylor, we held that property owners could

recover money held in the California state escheat fund. State

law allowed California to seize “unclaimed property” after

three years of inactivity by the property owner. 402 F.3d at

927. The unclaimed property was then subject to “a custodial

escheat system,” requiring the state Controller to “‘safeguard

and conserve’ unclaimed property in a trust fund for the

interests of all parties having an interest in the property.” Id.

These cases are readily distinguishable from this case. None of those

cases implicated the Eleventh Amendment, because they did not involve

a private citizen’s attempt to sue a state. Rather, they were attempts to

bring suit against a federal instrumentality, Kauffman, 28 F.3d at 1224–25,

or to obtain funds from federally funded organizations, Joliet-Will,

847 F.2d at 431; Palmiter, 733 F.2d at 1245; Henry, 595 F.2d at 295.

Accordingly, these cases do not persuade us that the Centers may allege

a federal interest in money in order to recover it from a state in derogation

of the Eleventh Amendment.

NORTH EAST MED . SVCS. V . CAL. DHCS 15

at 930 (quoting Cal. Civ. Proc. Code §§ 1300(c), (d)). Even

funds under the State Treasurer’s control (i.e., general state

funds) would be subject to the unclaimed property trust. Id.

at 931.

We concluded that the property owners’ claims were

permissible, because they sought only the return of their own

property, or the proceeds from the sale of their property.4 We

reasoned that funds held in California’s unclaimed property

trust were like cars held in an impound lot. Id. at 931. We

observed that “[t]he State of California’s sovereign immunity

applies to the state’s money. Money that the state holds in

custody for the benefit of private individuals is not the state’s

money, any more than towed cars are the state’s cars.” Id. at

932. Even proceeds transferred to the state’s general fund

were still subject to the trust under state law—demonstrating

that the funds still belonged to the individuals, not the state.

Id. at 931; see also Suever, 439 F.3d at 1147 (“Taylor held

that the Eleventh Amendment did not apply to funds that

[were] escheated, but not permanently escheated, because the

State held such funds in custodial trust for the benefit of

property owners—the funds were not State funds.”).

In this case, we conclude that Suever and Taylor do not

control, because this is not a suit for return of the Centers’

property. The Centers argue that the funds they seek “are no

different than the property sought by the plaintiffs in Suever

and Taylor.” However, unlike in Suever and Taylor,

California did not receive the Disputed Funds pursuant to a

unique statutory regime. There is no California state law

4

W e interpreted United States v. Lee, 106 U.S. 196 (1882), and Malone

v. Bowdoin, 369 U.S. 643 (1962), to allow a suit for return of the

unclaimed property. Taylor, 402 F.3d at 933.

16 NORTH EAST MED . SVCS. V . CAL. DHCS

requiring the state to hold the Disputed Funds in a custodial

trust. Any monetary award to the Centers would necessarily

come from the state treasury.

Again, we are constrained by Edelman. In Edelman, the

district court found an Illinois regulation inconsistent with

federal law and ordered retroactive payment of benefits

withheld under the invalidated state regulation. 415 U.S. at

655–56. The Supreme Court rejected the plaintiffs’ claims to

retroactive payment of benefits. The Court reasoned that

plaintiffs’ claims were “measured in terms of a monetary loss

resulting from a past breach of a legal duty on the part of the

defendant state officials.” Id. at 668. The Court further

reasoned: “The funds to satisfy the award in this case must

inevitably come from the general revenues of the State of

Illinois, and thus the award resembles far more closely the

monetary award against the State itself than it does the

prospective injunctive relief awarded in Ex parte Young.” Id.

at 665 (internal citation omitted).

Here, like the claim at issue in Edelman, the Centers

specifically pray for monetary relief measured in terms of

their loss resulting from California’s alleged violation of

federal law under Option 2.5 Edelman makes clear that the

5

The Centers acknowledge that the issue is essentially one of statutory

interpretation. In other words, the Centers argue that California

misinterprets, and thereby violates, federal law through its implementation

of Part D. As such, the Centers’ claims are more similar to the claim at

issue in Edelman, than to the property owners’ claims in Suever and

Taylor. In Edelman, the district court even concluded that the state

regulation at issue violated federal law. The Centers (at least implicitly)

ask us to reach the same conclusion. However, even if such a violation

exists, the Eleventh Amendment bars the retroactive, monetary remedy

sought.

NORTH EAST MED . SVCS. V . CAL. DHCS 17

Eleventh Amendment bars a monetary award to recompense

such loss. The same is true here even though the Centers

previously held the Disputed Funds. See Ford Motor,

323 U.S. at 463–64 (holding that Eleventh Amendment bars

suit by taxpayer to obtain funds taxpayer paid pursuant to an

allegedly unconstitutional exaction); Cardenas v. Anzai,

311 F.3d 929, 938 (9th Cir. 2002) (holding that Eleventh

Amendment did not bar a claim for prospective relief,

“emphasiz[ing] that the plaintiffs do not seek a recovery of

funds previously paid to the state”); Big Horn Cnty. Elec. Co-

op., Inc. v. Adams, 219 F.3d 944, 954 (9th Cir. 2000) (“The

Supreme Court has recognized that a retrospective award of

taxes is barred by sovereign immunity.”).

In sum, Suever and Taylor do not control. The Centers do

not seek the return of their own property seized pursuant to a

unique statutory scheme. No provision of state law provides

that the “seized” Disputed Funds are held in trust like the

seized property in Suever and Taylor. Thus, because the

cases and statutes cited by the Centers do not bring their

claims under a recognized exception to the Eleventh

Amendment, their claims for retroactive monetary relief are

barred.

2. The Centers may seek genuine prospective relief.

While both Centers maintain that they seek prospective

relief in addition to any claim for reimbursement, their

grounds for prospective relief differ. As discussed above,

NEMS cannot obtain monetary relief for funds it paid to

California in fiscal years 2006 and 2007. Further, NEMS

conceded in its briefing and at oral argument that it has

suffered no ongoing harm since it elected to proceed under

Option 1 in 2009. However, NEMS has not paid California

18 NORTH EAST MED . SVCS. V . CAL. DHCS

for the Part D payments California claims it owes for fiscal

year 2008. While California has not demanded payment, it

has maintained that it is entitled to it. This leaves open the

possibility that California will prospectively apply Option 2

to NEMS for fiscal year 2008 when California tries to extract

payment from NEMS in the future.

La Clínica continues to pay Medicare Part D payments

over to California under Option 2. As such, it argues that it

is entitled to declaratory and injunctive relief barring any

future attempt by California to collect La Clínica’s Part D

payments.

The Centers brought their respective grounds for

prospective relief to the district court’s attention in pleadings

and at oral argument on the motion to dismiss their

complaints. However, the district court apparently

overlooked this aspect of their claims. “In determining

whether the doctrine of Ex parte Young avoids an Eleventh

Amendment bar to suit, 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.’” Verizon Md., Inc. v. Public

Serv. Comm’n of Md., 535 U.S. 635, 645 (2002) (alteration in

original) (quoting Idaho v. Coeur d’Alene Tribe of Idaho,

521 U.S. 261, 296 (1997) (O’Connor, J., concurring)). There

is no indication in the district court’s opinion that it made this

inquiry.6 Thus, we reverse the district court’s order on this

portion of the Centers’ claims. We remand to allow the

6

The district court stated the Centers “expressly acknowledge that they

are not suffering any current financial injury.” But La Clínica has, in fact,

alleged ongoing financial injury, and the court did not address NEMS’s

argument about fiscal year 2008.

NORTH EAST MED . SVCS. V . CAL. DHCS 19

district court to assess Ex parte Young’s application to: (1)

NEMS’s claim to injunctive relief for fiscal year 2008, and

(2) La Clínica’s claims arising from prospective application

of Option 2. See Suever, 439 F.3d at 1148 (“[W]e leave it to

the district court upon remand to determine which types of

requested relief are permissibly prospective . . . .”).

CONCLUSION

The Eleventh Amendment bars the Centers’ claims for

retroactive monetary relief. We affirm the district court’s

dismissal of the Centers’ claims to the extent that they seek

money damages. However, we reverse the district court and

remand to allow the district court to assess Ex parte Young’s

application to the Centers’ remaining claims.7

AFFIRMED in part; REVERSED and REMANDED in

part. Each party shall bear its own costs on appeal.

7

W e decline to address for the first time on appeal California’s

argument that the Centers were required to exhaust administrative

remedies and failed to do so.