# Petition for Writ of Certiorari — Maxwell-Jolly v. Independent Living Center of Southern California (No. 08-1223)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_0356%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2009

## Text

reme Court, U.S.
Supreme Court

(24

~ oO 081223 APR 1 - 2009

Inthe OFFICE OF THE CLERK
Supreme Court of the United States

*

DAVID MAXWELL-JOLLY, DIRECTOR OF THE
DEPARTMENT OF HEALTH CARE SERVICES,
STATE OF CALIFORNIA,

Petitioner,
Vv.

INDEPENDENT LIVING CENTER OF SOUTHERN
CALIFORNIA, A NONPROFIT CORPORATION, ET AL.,

Respondents.
S

On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Ninth Circuit

¢

PETITION FOR WRIT OF CERTIORARI
*

EDMUND G. BROWN JR.
Attorney General of California
MANUEL M. MEDEIROS
State Solicitor General
DAVID S. CHANEY
Chief Assistant Attorney General
GORDON BURNS
Deputy Solicitor General
RICHARD T. WALDOW
KARIN S. SCHWARTZ*
JENNIFER M. KIM
Supervising Deputy Attorneys Gencral
*Counsel of Record
455 Golden Gate Avenue, Suite 11000
San Francisco, CA 94102
Telephone: (415) 703-1382
Fax: (415) 703-5480

Counsel for Petitioners

COCKLE LAW BRIEF PRINTING CO (800) 225-6964
OR CALL COLLECT (402) 342-2831

Of counsel:

DAN SCHWEITZER

2030 M Street, NW, 8th Floor
Washington, DC 20036
Telephone: (202) 326-6010

QUESTION PRESENTED

Under 42 U.S.C. § 1396a(a)(30)(A) of the Medi-
caid Act, a state that accepts federal Medicaid funds
must adopt a state plan containing methods and
procedures to “safeguard against unnecessary utiliza-
tion of ... [Medicaid] services and ... assure that
payments are consistent with efficiency, economy, and
quality of care and are sufficient to enlist enough
providers so that care and services are available ...
at least to the extent that such care and services are
available to the general population.” Virtually all of
the Circuits to have considered the issue, including
the Ninth Circuit, have concluded that this provision
may not be enforced by private parties under 42
U.S.C. § 1983, and respondents do not contend oth-
erwise.

The question presented is whether Medicaid
recipients and providers may nonetheless maintain a
private cause of action under the Supremacy Clause
to enforce § 1396a(a)(30)(A) by asserting that the
provision preempts a state law reducing reimburse-
ment rates.

il

LIST OF PARTIES

Petitioner is David Maxwell-Jolly, Director of the
Department of Health Care Services, State of Cali-
fornia, a position that he assumed effective January
1, 2009.

Respondents are Independent Living Center of
Southern California, Gray Panthers of Sacramento,
Gray Panthers of San Francisco, Gerald Shapiro,
Pharm.D (d/b/a Uptown Pharmacy and Gift Shop),
Sharon Steen (d/b/a Central Pharmacy), Mark Beck-
with, Margaret Dowling, Tran Pharmacy, Inc. (d/b/a
Tran Pharmacy), and Jason Young.

Respondent-Intervenors are Sacramento Family
Medical Clinics, Inc., Theordore Mazer, M.D., Ronald
B. Mead, D.D.S., and Acacia Adult Day Services.’

' Respondent-Intervenors did not participate in the briefing
in the Ninth Circuit, but first sought to appear in that court on
October 1, 2008, approximately two weeks after the Ninth
Circuit issued the opinion at issue here. On February 2, 2009,
the Ninth Circuit recalled its mandate, entered the appearances
of Respondent-Intervenors, and issued a new mandate providing
that “[t]he judgment of this Court, entered 9/17/08, takes effect
this date. This constitutes the formal mandate of this Court
issued pursuant to Rule 41(a) of the Federal Rules of Appellate
Procedure.”

TABLE OF CONTENTS

Page
ORE ogy 8 4 ey 1 | rs i
ee Te Pio viieiccnes snavcencosnovncvcedscdacsvecss ii
py i FOS PS byw ie oy yh +. nn Vv
PETITION FOR WRIT OF CERTIORARI] .......... 1
i I SI ovis eden pivtnidniieniasncreaaisncereerionnss 1
STATEMENT OF JURISDICTION ..................... 1
CONSTITUTIONAL AND STATUTORY PRO-
VISIONS INVOLVED................ di ataandioinews 2
STATEMENT OF THE CASE..........c..ccccesccscscsseees 3
A. The State Statutes at Issue (AB 5)........... 3
Bs Be ee FI aso iaa Si chvks tess bindccicssssiccccccs 4
C. District Court Proceedings........................ 8
D. Ninth Circuit's Decision ................c..cccsce 9

I. THE NINTH CIRCUITS DECISION
UNDERMINES THIS COURTS DECI-
SIONS LIMITING WHEN FEDERAL
STATUTES MAY BE ENFORCED IN
§ 1983 ACTIONS OR THROUGH IM-
PLIED CAUSES OF ACTION..................... 13

1V

TABLE OF CONTENTS - Continued
Page

II. RECENT CIRCUIT COURT DECISIONS
HAVE MISREAD THIS COURT'S PRECE-
DENT AND CREATED A SPLIT WITH
THE ELEVENTH CIRCUIT REGARDING
THE AVAILABILITY OF PRIVATE PRE-
EMPTION LAWSUITS BASED ON FED-
ERAL STATUTES THAT ARE NOT
OTHERWISE PRIVATELY ENFORCE-
UE a boli svecins sendnnspilnahetsseenemdbbabaagpaantbeisadivees 21

Ill. THE NINTH CIRCUIT WRONGLY DE-
CIDED A RECURRING AND IMPOR-

TE TUE hanks ss cinidnadigicsjcidiusercchnencasies 31
TITIES Gok Sid vecdonsashcvcvensotcesntemacaemaniada 36
APPENDIX
Order and Opinion of the Ninth Circuit Court

of Appeals, filed on September 17, 2008 ................ la

District Court’s Order Denying Petitioners’
Motion for a Preliminary Injunction, filed on

SN pes eee ice Tass tomes ence cndentnraeeiovaeees 37a
Order of the Ninth Circuit Court of Appeals,
filed on November 3, 2008 .......0.0.0c0.0ccccsccscccssccseses 52a

California Assembly Bill No. 5, Chapter 3, filed
with the Secretary of State on February 16,
SND cisashitntieiniacaliiin Aisa viviveaaneia tiem 54a

State Plan Amendment 08-009, submitted by
the California Department of Health Care
Services to the Centers for Medicare & Medi-
caid Services on September 30, 2008................... 67a

Vv

TABLE OF AUTHORITIES
Page
CASES
31 Foster Children v. Bush, 329 F.3d 1255 (11th

doc snansenmaniaoniiannnenes 20
Alexander v. Sandoval, 532 U.S. 275

es iahasihanictniicn Grinshandsbenes 14, 15, 19, 20
Almendares v. Palmer, No. 3:00-CV-7524, 2002

WL 31730963 (N.D. Ohio Dec. 3, 2002).................. 21
Arrington v. Helms, 438 F.3d 1336 (11th Cir.

i ss secesctapebuonsenneedanes 20
Bell v. Food, S27 U.S. 678 (1946) ..........cccccocscesssoessess 24
Bellsouth Telecomm. v. Town of Palm Beach,

EE Me Ee TERE GAT, BE) veccesesssssseccnsessccescnssess 31
Biotechnology Indus. Org. v. District of Colum-

bia, 496 F.3d 1362 (Fed. Cir. 2007)...................2c000 28
Blessing v. Freestone, 520 U.S. 329 (1997) .......... 16, 20
Burgio & Campofelice, Inc. v. N.Y.S. Dep't of

Labor, 107 F.3d 1000 (2d Cir. 1997) ..................c000 28
Chapman v. Houston Welfare Rights Org., 441

Tee sp hdisisdvantaaubenes 20
City of Rancho Palos Verdes v. Abrams, 544

Nee so scichouiadlentinsesaiabahavenan 25
Cort v. Aeh, 422 U.S. 66 (1078) .......0c00cccorccrccsseee passim
Day v. Bond, 511 F.3d 1030 (10th Cir. 2007) ............. 28
Dennis v. Higgins, 498 U.S. 439 (1991)... ee. 20

Edelman v. Jordan, 415 U.S. 651 (1974)... 17

TABLE OF AUTHORITIES — Continued

Page

Equal Access for El Paso, Inc. v. Hawkins, 509
F.3d 697 (5th Cir. 2007), cert. denied, 129

i Se i teieiissbivakvealiindcnesdoaensvquacsocanithiabeniiaindianss 7
Ex parte Young, 209 U.S. 123 (1908)........ 28, 30, 33, 34
Golden State Transit Corp. v. City of Los Angeles,

a Be a ccide seni dasestiedas sce paciadcbatgans 19, 27

Gonzaga Univ. v. Doe, 536 U.S. 273 (2002)....... passim

Grammar v. John J. Kane Reg’ Ctrs.-Glen
Hazel, No. 06-781, 2007 WL 1087751 (W.D.

Braj HA, A PINE Fn acdabcinicsGoidencuscénvacsacuiebtsensbebeheavcsaaveian 20
Joseph A. ex rel. Corrine Wolf v. Ingram, 275

ik Re | RE SEU, DUE 6c do hv eoncsccreisivousnvensasesss 28
Lankford v. Sherman, 451 F.3d 496 (8th Cir.

ii nisaccskeccidiansctasndesWiebccidindmkaideanntactascenes 27
Lawrence County v. Lead-Deadwood School

Dist. No. 40-1, 469 U.S. 256 (1985) .................. 33, 34
Legal Envtl. Assistance Found., Inc. v. Pegues,

904 F.2d 640 (11th Cir. 1990).......... 22, 29, 30, 31, 34
Long Term Care Pharmacy Alliance v. Ferguson,

Se Be er CA Cr, BG ones vcicenssncescnvanisonesvesess 7, a0
Maine v. Thiboutot, 448 U.S. 1 (1980) ........ 0. eee ee 17

Mandy R. ex rel. Mr. & Mrs. R. v. Owens, 464
F.3d 1139 (10th Cir. 2006), cert. dented, 549
a ce asi as sncagiektin 7

Middlesex County Sewerage Authority v. Na-
tional Sea Clammers Association, 453 U.S. 1
4. SREREE ET Balam env art ane PR a eet Pale Se 29, 30

TABLE OF AUTHORITIES — Continued

Page
Newark Parents Ass’n v. Newark Pub. Sch., 547
I IE IN, SD ick ccssnsvccssnnssecvecsascenescusscscsvess 20
Owasso Independent School District v. Falvo,
See I I acces concsencuvasncnsavsossoavtasionstvanrsedsese 25
Pa. Pharmacists Ass’n v. Houstoun, 283 F.3d
ee Fe Ge ID vibcc svcceseicccessevesscversss 6, 7, 11, 17, 18
Pediatric Specialty Care, Inc. v. Ark. Dep’t of
Human Servs., 443 F.3d 1005 (8th Cir. 2006),
cert. granted, judgment vacated in part, 127
a IG Fibs Kan cnnsichaceddecnceimsantsdsicesverscercseens q
Pennhurst State Sch. & Hosp. v. Halderman,
Oe Be ai de ca stakvscnsnivacinndingeusmilebabniageson passim

Pharmaceutical Research and Manufacturers
of America v. Concannon, 249 F.3d 66 (1st
Cir. 2001), aff’d, 538 U.S. 644 (2003) .............. 22, 23

Pharmaceutical Research and Manufacturers
of America v. Thompson, 362 F.3d 817 (D.C.
2 "SSS ieee cnn Fa cote 10, 23, 24

Pharmaceutical Research and Manufacturers
of America v. Walsh, 538 U.S. 644 (2003) ...... passim

Planned Parenthood of Houston & Se. Tex. v.
Sanchez, 403 F.3d 324 (5th Cir. 2005)........ 10, 26, 28

Qwest Corp. v. City of Santa Fe, 380 F.3d 1258

I CS a 28
Sanchez v. Johnson, 416 F.3d 1051 (9th Cir.
0 SSE Sea a tees 7, 8,11, 17,18

Shaw v. Delta Air Lines, Inc., 463 U.S. 85
Ne eerie Nusa aids da ug ara sebuadpenobardaiaesteas passim

vill

TABLE OF AUTHORITIES — Continued

Page
St. Thomas-Si. John Hotel & Tourism Ass’n v.
Virgin Islands, 218 F.3d 232 (3d Cir. 2000) ........... 23
Steel Co. v. Citizens for a Better Env’t, 523 U.S.
Be NE icaixcuxsssieaaseasovadnicdejassesaateonuanaeacueaaeeee 24
Stoneridge Investment Partners v. Scientific-
Atlanta, Inc., 128 S. Ct. 761 (2008) ................00.0000 14
Texae v. Cobb, 582 U.S. 162 (ZOOL) .....crccccccsosseserccceses 33
Touche Ross & Co. v. Redington, 442 U.S. 560
De UD ick vn iax sinsdecaidestuceaswuntupayeaennseves sven aia 15
Transamerica Mortg. Advisors Inc. v. Lewis,
BE ES Ms BE CRT vss vckepiccessicnccceses sopeanp eee 15
Verizon Md., Inc. v. Public Serv. Comm’n of
Md., 535 U.S. 635 (2002) ................ 12, 24, 32, 33, 34
W. Air Lines, Inc. v. Port Auth. of N.Y. & N.d.,
SAF Fe Bae (OG Cie. BOGE} oc evcsexsvssvsnncisnanwaneneen 28
Westside Mothers v. Olszewski, 454 F.3d 532
SE i. BOD aircinconciinansssncnsnenacziuneesenatageinenneaenneenaae 7
Wilder v. Va. Hosp. Ass’n, 496 U.S. 498
CET hinsndeissvnisnconestnaesivascepinieisciaaaanee 4, 5,6, 18, 32

Williams v. U.S. Dep’t of Hous. & Urban Dev.,
No. 04-CV-3488, 2006 WL 2546536 (E.D.N.Y.
E., 1, scene caasnntvsniecndssvtenmnadsaraeeaae 21

Wyeth v. Levine, No. 06-1249, __ US.
2009 WL 529172 (March 04, 2009)..............cccceeee ees 18

1x

TABLE OF AUTHORITIES — Continued

Page
CONSTITUTIONAL PROVISIONS
Spending Clause, United States Constitution,
Me EE MINNIE TE ss ccocescesccccasessoussescscsevesenes passim
Commerce Clause, United States Constitution,
EEE SUIS 5 sca nseneunbeedacbecsaseasscsese 20
Supremacy Clause, United States Constitution,
Es MIND SB buxcnscocciecresrescecosnssscrsnnascecsess passim
United States Constitution, amendment X1] ............. 34
STATUTES
28 U.S.C.
ee lial cc cai ciaieehisassecovencdsustusencerecniees 1
Nai sinueak histekd tb sesencvenscsstntonsdconessseue 26, 31, 33
42 U.S.C.
ia ila ac dan ah bse debiiiwsishateenubauunicesokennveds 4
ESET S UE a eee 5, 6, 11, 17, 22
§ 13896a(a)(13)(A) (1982 ed., Supp. V)....5, 6, 7, 17, 18
re ci cis iceudshnancebnesesantvevens 27
SEE ee a 22
TE i ciicasccs sasdseretecstessecssvaiversesnies passim
sks cca ncndnevuasscveniedeevisesosteasevans 5, 32
ic isa venbncbiesaneiexpeseneneduain 22
ies cna ssichcscusins ch ovaiestwccakneweniaes 22
as scx cvaicidunasedentsasosinuietensadena 22

x

TABLE OF AUTHORITIES - Continued

Page
49 U.S.C.
IR ne eee Ae Pe POET UT IED 28
California Welfare & Institutions Code
Ca a al a i baeeaen ge 3
a er a 3
has i ania ia acldainagelaspiinpeaaieiiasileniaaa ale 4
I ins sais ccsdvisunnciionesseurisdesebubenikvensceastiesepune 4
| ETO SOCEM MEET aE eS: 3
SIREN ROE Doe ma PRN BEN ey Be 4
Se TT is. iislddiietcguenmenanksinsicedetinsuiddiainatbalah 4
OTHER AUTHORITIES
13B C. Wright, A. Miller & E. Cooper, Federal
Practice & Procedure: Jurisdiction 2d § 3566
5 A IEA en DOLE ER NEO RSA PERMA AD TD 28, 30
ee ais ilk ccas iis eccrine cteesecpenceeneogsnacans 5
Balanced Budget Act of 1997, Pub. L. No. 105-
SS, 6 ATUL, TIT Stat. BEL (LGOTZ).....csccecccrcsccsccsscsccccsece 6
H.R. Rep. No. 105-140 (1997).......ccccrccsscccsoscccceseeees 6,17

Office of Mgmt. & Budget, A New Era of Re-
sponsibility: Renewing America’s Promise,
sg fat ENED RES LENT NOTE SRO ENE eer 35

Reply Brief of Petitioner, PhRMA v. Walsh, 538
SF ee Oe Cre) CIO, Ga iio vceccecsesessvncseccsesesescsssnans 25

1

PETITION FOR WRIT OF CERTIORARI

The Attorney General of the State of California,
on behalf of David Maxwell-Jolly, Director, Depart-
ment of Health Care Services, State of California,
respectfully petitions for a writ of certiorari to review
the judgment of the United States Court of Appeals
for the Ninth Circuit in this case.

+

OPINION BELOW

The opinion of the court of appeals, App., infra,
la, is reported at 543 F.3d 1050. The opinion of the
district court, App., infra, 37a, is unreported.

¢

STATEMENT OF JURISDICTION

The decision under review was issued on Sep-
tember 17, 2008. App., infra, 2a. Petitioner filed a
Petition for Panel Rehearing and Petition for Rehear-
ing En Banc, which the court of appeals denied on
November 3, 2008. App., infra, 52a. On January 16,
2009, Justice Kennedy extended the time within
which to file a petition for writ of certiorari to and
including April 2, 2009. The jurisdiction of this Court
is invoked under 28 U.S.C. § 1254(1).

¢

2

CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED

The Supremacy Clause of the United States
Constitution states:

This Constitution, and the Laws of the Unit-
ed States which shall be made in Pursuance
thereof; and all Treaties made, or which shall
be made, under the Authority of the United
States, shall be the supreme Law of the
Land; and the Judges in every State shall be
bound thereby, any Thing in the Constitution
or Laws of any State to the Contrary not-
withstanding.

U.S. Const. art. VI, cl. 2.

Title 42, section 1396a(a)(30)(A) of the Medicaid
Act states in pertinent part:

(a) Contents

A State plan for medical assistance must —

* oO

(30)A) provide such methods and proce-
dures relating to the utilization of, and the
payment for, care and services available un-
der the plan .. . as may be necessary to safe-
guard against unnecessary utilization of
such care and services and to assure that
payments are consistent with efficiency,
economy, and quality of care and are suffi-
cient to enlist enough providers so that care
and services are available under the plan
at least to the extent that such care and

3

services are available to the general popula-
tion in the geographic area. . .

S

STATEMENT OF THE CASE
A. The State Statutes at Issue (AB 5)

On January 10, 2008, the Governor of California
declared a fiscal emergency and directed the Califor-
nia legislature into a special session. App., infra, 59a.
In response, on February 15, 2008, the legislature
enacted Assembly Bill No. 5 (AB 5). App., infra, 54a,
66a. The legislature found “that the state faces a
fiscal crisis that requires unprecedented measures to
be taken ‘to reduce General Fund expenditures to
avoid reducing vital government services necessary
for the protection of the health, safety, and welfare of
the citizens of the State of California.” App., infra,
64a. AB 5 enacted spending reductions to a variety of
benefits programs, including Medi-Cal, the state’s
implementation of Medicaid. App., infra, 60a-66a.

Newly enacted California Welfare and Institu-
tions Code § 14105.19(b)(1) reduced by 10 percent
payments under Medi-Cal’s fee-for-service program
for physicians, dentists, pharmacies, adult day health
care centers, clinics, health systems, and other pro-
viders. Section 14105.19(b)(3) reduced payments to
managed care plans by the actuarial equivalent of 10
percent. Finally, section 14166.245(b) reduced pay-
ments to acute care hospitals not under contract with
the Department of Health Care Services (DHCS) for

4

inpatient services by 10 percent. Some services were
exempted from the cuts, including services provided
by certain acute care hospitals, federally qualified
health centers, rural health clinics, hospices, public
hospitals, and hospitals under contract with the state.
Cal. Welf. & Inst. Code §§ 14105.19(c), 14166.245(d).

The legislature directed DHCS to “promptly seek
any necessary federal approvals for the implementa-
tion of” the rate reductions. Cal. Welf. & Inst. Code
§ 14105.19(g); see also id., § 14166.245(f). On Septem-
ber 30, 2008, DHCS submitted a state plan amend-
ment to the Centers for Medicare and Medicaid
Services, which remains pending. App., infra, 67a-79a.

Respondents and intervenors are Medicaid
beneficiaries, service providers, and advocacy groups
that seek to enjoin DHCS’s implementation of the
payment reductions on the ground that they violate
42 U.S.C. § 1396a(a)(30)(A).

B. The Medicaid Act

Medicaid is a cooperative federal-state program
that provides federal financial assistance to partici-
pating states to reimburse certain costs of medical
treatment for the poor, elderly, and disabled. 42
U.S.C. § 1396. A state’s participation in Medicaid is
voluntary, but if it chooses to participate, it must
comply with the Medicaid Act and implementing
regulations promulgated by the Secretary of Health
and Human Services (HHS). See Wilder v. Va. Hosp.
Ass’n, 496 U.S. 498, 502 (1990). To receive funds, a

5

state must establish and administer its Medicaid
program through a state plan approved by HHS. 42
U.S.C. §1396a. The receipt of federal funding is
expressly conditioned on compliance with the Medi-
caid Act, and HHS is authorized to withhold funds for
noncompliance. 42 U.S.C. § 1396c; see also 42 C.F.R.
§ 430.35.

At issue here is a provision of the Medicaid Act,
42 U.S.C. § 1396a(a)(30)(A), that establishes some
general principles regarding the utilization of, and
the payment for, Medicaid care and services. A state
plan must

provide such methods and procedures relat-
ing to the utilization of, and the payment for,
care and services available under the plan
... aS may be necessary to safeguard against
unnecessary utilization of such care and ser-
vices and to assure that payments are con-
sistent with efficiency, economy, and quality
of care and are sufficient to enlist enough
providers so that care and services are avail-
able under the plan at least to the extent
that such care and services are available to
the general population in the geographic
area....

42 U.S.C. § 1396a(a)(30)(A).

This Court has not previously considered wheth-
er § 1396a(a)(30)(A) is privately enforceable. How-
ever, in Wilder, this Court considered whether a
different (now repealed) provision of the M dicaid
Act, 42 U.S.C. § 1396a(a)(13)(A) (1982 ed., Supp. V),

6

known as the Boren Amendment, could be privately
enforced under 42 U.S.C. § 1983. The Boren Amend-
ment required states, as part of their state plans, to
find and make assurances that payments to hospitals
under Medicaid were reasonable and adequate to
meet the costs incurred by efficiently and economi-
cally operated facilities. Wilder, 496 U.S. at 502-03;
see also Pa. Pharmacists Ass’n v. Houstoun, 283 F.3d
531, 537 (3d Cir. 2002). In Wilder, this Court held
that the Boren Amendment created an individual
“right,” enforceable by providers under § 1983, to “the
adoption of reimbursement rates that are reasonable
and adequate to meet the costs of an efficiently and
economically operated facility.” 496 U.S. at 510.

Congress subsequently repealed the Boren
Amendment. Balanced Budget Act of 1997, Pub. L.
No. 105-33, § 4711, 111 Stat. 251, 507-08 (1997). In so
doing, it stated its intent not only to reverse Wilder,
but to preclude any provider challenges to rates
under the Medicaid Act. A House Report noted that
under the Boren Amendment, “[a] number of Federal
courts have ruled that State systems failed to meet
the test of ‘reasonableness’ and some States have had
to increase payments to these providers as a result of
these judicial interpretations.” H.R. Rep. No. 105-149,
at 590 (1997). Therefore, the House Report stated: “It
is the Committee’s intention that, following enact-
ment of this Act, neither this nor any other provision
of [§ 1396a] will be interpreted as establishing a
cause of action for hospitals and nursing facilities
relative to the adequacy of the rates they receive.” Jd.

7

at 591. Courts have therefore concluded that “{o)ne of
Congress’s main objectives — perhaps its dominant
objective — in repealing the Boren Amendment was to
take away the right to sue under § 1983.” Pa. Phar-
macists, 283 F.3d at 540 n.15 (Alito, J.).

Since the Boren Amendment’s repeal, seven courts
of appeals have considered whether § 1396a(a)(30)(A)
may be enforced by Medicaid providers or beneficiar-
ies under 42 U.S.C. § 1983. The First, Third, Fifth,
Sixth, Ninth, and Tenth Circuits have concluded that
it does not, a conclusion that respondents do not
dispute. Long Term Care Pharmacy Alliance v. Fergu-
son, 362 F.3d 50, 56-59 (1st Cir. 2004) (not enforceable
by providers); Pa. Pharmacists, 283 F.3d at 541-42
(not enforceable by providers); Equal Access for El
Paso, Inc. v. Hawkins, 509 F.3d 697, 702-03 (5th Cir.
2007) (not enforceable by beneficiaries of services or
providers), cert. denied, 129 S. Ct. 34 (2008); Westside
Mothers v. Olszewski, 454 F.3d 532, 541-43 (6th Cir.
2006) ‘not enforceable by recipients of services);
Sanchez v. Johnson, 416 F.3d 1051, 1062 (9th Cir.
2005) (not enforceable by providers or recipients of
services); Mandy R. ex rel. Mr. & Mrs. R. v. Owens,
464 F.3d 1139, 1146-48 (10th Cir. 2006) (not enforce-
able by providers or recipients of services), cert.
denied, 549 U.S. 1305 (2007). The Eighth Circuit
alone has reached a contrary result. Pediatric Spe-
cialty Care, Inc. v. Ark. Dept of Human Servs., 443
F.3d 1005, 1013-16 (8th Cir. 2006) (enforceable by
providers and recipients of services), cert. granted,

8

judgment vacated in part, 127 S.Ct. 3000 (2007)
(mem.).

C. District Court Proceedings

Respondents filed their lawsuit on April 22,
2008, in Los Angeles superior court. App., infra, 37a.
DHCS removed the case to federal court. App., infra,
39a. In May 2008, respondents filed the operative
first amended complaint and a motion for prelimi-
nary injunction. App., infra, 39a. They contended
that the 10 percent payment reductions violate
§ 1396a(a)(30)(A) because, they claimed, the Califor-
nia legislature failed to consider the factors set forth
within the federal statute when it enacted the pay-
ment reductions, and because the cuts could result in
insufficient providers to provide care to Medi-Cal
recipients. App., infra, 42a.

The district court denied respondents’ motion for
preliminary injunction. App., infra, 5la. The court
observed that, in Sanchez v. Johnson, the Ninth
Circuit held that § 1396a(a)(30)(A) did not confer
individually enforceable rights. App., infra, 43a-46a.
It concluded that respondents could not use a pre-
emption claim under the Supremacy Clause to effec-
tuate an end run around Sanchez. App., infra, 46a,
50a-51la. Accordingly, the court found that respon-
dents had no likelihood of success on the merits and
denied their motion. App., infra, 50a.

9

D. Ninth Circuit’s Decision

The Ninth Circuit reversed the district court. As
framed by the Ninth Circuit, the question presented
on appeal was “whether the Supremacy Clause
provides a valid cause of action to seek injunctive
relief on the basis of federal preemption.” App., infra,
16a. Ultimately, the Ninth Circuit held in the af-
firmative: that private parties “maintain[] a valid
cause of action under the Supremacy Clause to assert

. a claim for injunctive relief” where they claim
that state legislation allegedly is preempted by fed-
eral law. App., infra, 36a.

The Ninth Circuit relied on a number of cases
from this Court, including Shaw v. Delta Air Lines,
Inc., 463 U.S. 85 (1983), in which this Court permit-
ted preemption claims to proceed without analyzing
whether the federal statutes at issue created pri-
vately enforceable rights. App., infra, lla-l5a. The
Ninth Circuit characterized Shaw as “reaffirml[ing]
the general rule that a plaintiff seeking to enjoin
state law based on federal preemption maintains a
valid federal cause of action.” App., infra, 14a. In
support, the Ninth Circuit quoted language from a
footnote in Shaw that only addressed the jurisdic-
tional basis for such suits. App., infra, 14a (quoting
Shaw, 463 U.S. at 96 n.14) (“It is beyond dispute that
federal courts have jurisdiction over suits to enjoin
state officials from interfering with federal rights.”).

The Ninth Circuit considered and rejected DHCS’s
suggestion that the analysis might be different as to

10

federal Spending Clause statutes because it believed
that this Court already had rejected such an argu-.
ment in Pharmaceutical Research and Manufacturers
of America (PhRMA) v. Walsh, 538 U.S. 644 (2003):

The Director provides little, if any, justifica-
tion for treating a claim of preemption under
a federal statute passed pursuant to Con-
gresss spending power differently from a
claim of preemption under any of the federal
statutes discussed above. But even if she
had, this argument has also been flatly re-
jected by the Supreme Court and other cir-
cuits that have addressed the question.

App., infra, 20a. According to the Ninth Circuit, in
Walsh, this Court “implicitly” assumed that “a private
party seeking to enjoin implementation of a state law
allegedly preempted by the federal Medicaid Act may
bring suit for injunctive relief directly under the
Supremacy Clause.” App., infra, 24a. The court cited
in support the fact that seven justices of this Court
reached the merits of PhRMA’s claim without ad-
dressing whether plaintiff had stated a valid claim for
relief. App., infra, 23a. The Ninth Circuit also found
“nersuasive” recent decisions from the D.C. and Fifth
Circuits that similarly construed Walsh as authoriz-
ing preemption challenges based on Spending Clause
statutes that do not themselves create privately
enforceable rights. App., infra, 24a-26a (citing
PhRMA v. Thompson, 362 F.3d 817 (D.C. Cir. 2004)
and Planned Parenthood of Houston & Se. Tex. v.
Sanchez, 403 F.3d 324 (5th Cir. 2005)).

+

11

REASONS FOR GRANTING THE PETITION

If it remains unreviewed, the Ninth Circuit’s
decision will negate the limitations on private en-
forcement of federal statutes that this Court has
carefully crafted and applied over several decades.
See, e.g., Cort v. Ash, 422 U.S. 66 (1975); Pennhurst
State Sch. & Hosp. v. Halderman, 451 U.S. 1 (1981);
Gonzaga Univ. v. Doe, 536 U.S. 273 (2002). Under the
reasoning adopted by the Ninth Circuit, a “valid
cause of action” exists to enforce a federal statute and
enjoin state conduct any time a private party alleges
a conflict between state and federal law. Thus, the
Ninth Circuit concluded that the private parties here
could state a claim under the Supremacy Clause
based solely on their allegation of a federal-state
conflict, even though § 1396a(a)(30)(A) is not pri-
vately enforceable under § 1983; even though the
Ninth Circuit and other appellate courts have found
§ 1396a(a)(30)(A) to be “ill-suited” to judicial en-
forcement; even though HiiS has not yet determined
if there really is a conflict; and despite evidence that
Congress does not want any provision of § 1396a to be
privately enforced. See Sanchez, 416 F.3d at 1060; Pa.
Pharmacists, 283 F.3d at 540 & n.15. If it stands, the
Ninth Circuit’s decision will result in a massive
expansion in the states’ liability under the Medicaid
Act and potentially other Spending Clause statutes,
and will render a nullity entire lines of cases that
previously limited the circumstances in which private
parties may sue a state.

12

The need for Court review is compelling because
several courts of appeals — including the D.C., First,
Second, Fifth, Eighth, Ninth, Tenth, and Federal
Circuits — have now erroneously concluded that this
Court already has resolved the question presented
here. In permitting preemption claims to proceed
based on Spending Clause legislation that is other-
wise unenforceable under § 1983, several of these
courts have relied on this Court’s decision in PhRARMA
v. Walsh, which they believed (incorrectly) foreclosed
arguments to the contrary. Walsh did not, however,
address whether petitioner there had stated a valid
cause of action under the Medicaid provision at issue,
but simply rejected its claim on the merits. The
courts of appeals’ conclusions that this Court implic-
itly reached the validity of plaintiff’s cause of action,
which they saw as “jurisdictional,” was clear error
under this Court’s precedent — error that only this
Court may correct. See Verizon Md., Inc. v. Public
Serv. Comm’n of Md., 535 U.S. 635, 642-43 (2002).

The issues in this lawsuit are important and
recurring. The federalism concerns are especially
substantial because of the Spending Clause context.
A state’s voluntary participation in Medicaid effec-
tuates a contractual relationship between that state
and the federal government. Congress itself has
specified the remedy that applies when a state
breaches the agreement and then fails to cure its
breach on proper notice: HHS may withhold federal
money. To allow private parties to sue to compel, in

13

effect, a different contract remedy — a state’s specific
performance — is to disrespect the voluntary nature of
the state’s continuing participation in a “cooperative”
program. Because so many state decisions are prem-
ised on funds received under exactly this type of
arrangement with the federal government, the states’
liability under the type of lawsuit sanctioned here
would be virtually unlimited.

I.

THE NINTH CIRCUIT’S DECISION UNDER-
MINES THIS COURT’S DECISIONS LIMITING
WHEN FEDERAL STATUTES MAY BE EN-
FORCED IN § 1983 ACTIONS OR THROUGH
IMPLIED CAUSES OF ACTION

The Ninth Circuit adopted an expansive theory of
state liability that, if unaddressed, will nullify over
30 years of decisions from this Court establishing
limitations on private suits against the states. Under
the Ninth Circuit’s theory, to state a valid cause of
action for injunctive relief, all a plaintiff need do is
allege the existence of a conflict between a state
statute (here, AB 5) and a federal law (here,
§ 1396a(a)(30)(A)). Such an exceptionally broad-brush
approach cannot be reconciled with the limitations on
private suits that this Court has recognized in two
separate lines of cases: Cort v. Ash and its progeny;
and Pennhurst State School and Hospital v. Halder-
man and its progeny, including Gonzaga University v.
Doe.

14

1. In the Cort and Pennhurst-Gonzaga lines of
cases, this Court has repeatedly addressed and
effectively resolved a difficult problem: when to
permit private enforcement of a federal statute
enacted by Congress when Congress itself has de-
clined expressly to authorize private lawsuits. Al-
though there are analytical differences, in both
contexts this Court has explained that there must be
clear and unambiguous evidence that Congress
intended for the federal provision at issue to be
privately enforceable before a private suit may be
implied or recognized. See Gonzaga, 536 U.S. at 283
(“(T]he inquiries overlap in one meaningful respect —
in either case we must first determine whether
Congress intended to create a [privately enforceable]
federal right.”). This is because Congress, as the
authority that enacts federal statutes, has the pre-
rogative to determine when and how they may be
privately enforced. Alexander v. Sandoval, 532 U.S.
275, 286 (2001) (“Like substantive federal law itself,
private rights of action to enforce federal law must be
created by Congress.”); see also Stoneridge Investment
Partners v. Scientific-Atlanta, Inc., 128 S. Ct. 761, 773
(2008).

Thus, in Cort v. Ash, this Court recognized four
significant limitations on when a private cause of
action may be implied directly under a federal stat-
ute. The relevant considerations are: (1) “does the
statute create a federal right in favor of the plain-
tiff”; (2) “is there any indication of legislative intent,
explicit or implicit, either to create such a remedy or

15

to deny one”; (3) “is it consistent with the underlying
purposes of the legislative scheme to imply such a
remedy for the plaintiff”; and (4) “is the cause of
action one traditionally relegated to state law, in an
area basically the concern of the States, so that it
would be inappropriate to infer a cause of action
based solely on federal law?” 422 U.S. at 78. Since its
decision in Cort, this Court has focused on the over-
arching importance of the second factor, requiring
clear evidence of Congressional intent to create both a
private right and a private remedy. See, e.g.,
Sandoval, 532 U.S. at 286 (“The judicial task is to
interpret the statute Congress has passed to deter-
mine whether it displays an intent to create not just a
private right but also a private remedy.”); Transamerica
Mortg. Advisors Inc. v. Lewis, 444 U.S. 11, 24 (1979)
(“The dispositive question remains whether Congress
intended to create any such remedy.”); Touche Ross &
Co. v. Redington, 442 U.S. 560, 568 (1979).

The Court has also adopted significant limita-
tions on when a private suit may be brought under
§ 1983. Here, specifically with respect to Spending
Clause legislation such as the Medicaid Act, this
Court has held that, “unless Congress ‘speak[s] with
a clear voice, and manifests an ‘unambiguous’ intent
to confer individual rights, federal funding provisions
provide no basis for private enforcement.” Conzaga,
536 U.S. at 280 (quoting Pennhurst, 451 US. at 17, 28
& n.21). Thus, a “‘plaintiff must demonstrate that the
right assertedly protected by the statute is not so
“vague and amorphous” that its enforcement would

16

strain judicial competence,’” and the provision “‘must
be couched in mandatory, rather than precatory,
terms.’” Id. at 282 (quoting Blessing v. Freestone, 520
U.S. 329, 340-41 (1997)). “[W]here the text and struc-
ture of a statute provide no indication that Congress
intends to create new individual rights, there is no
basis for a private suit, whether under § 1983 or
under an implied right of action.” Jd. at 286.

These limitations are especially important as to
Spending Clause legislation such as the Medicaid Act.
Here, “the typical remedy for state noncompliance
with federally imposed conditions is not a private
cause of action for noncompliance but rather action
by the Federal Government to terminate funds to the
State.” Pennhurst, 451 U.S. at 28; see also Gonzaga,
536 U.S. at 280; Walsh, 538 U.S. at 675 (Scalia, J.,
concurring in judgment) (“I would reject petitioner’s
statutory claim on the ground that the remedy for the
State’s failure to comply with the obligations it has
agreed to undertake under the Medicaid Act . . . is set
forth in the Act itself: termination of funding by the
Secretary of the Department of Health and Human
Services.” (citations omitted)); 538 U.S. at 681-82
(Thomas, J., concurring in judgment).

2. The theory adopted by the Ninth Circuit
would undermine the Cort and Pennhurst-Gonzaga
lines of cases by authorizing a Supremacy Clause-
based cause of action that does not require considera-
tion of Congressional intent, judicial enforceability, or
any of the other factors previously considered so
important by this Court. The potential impact of such

17

a theory is dramatically demonstrated by its applica-
tion in the present case, where it was utilized by the
Ninth Circuit to revive a type of claim that heretofore
was precluded by this Court’s and the Ninth Circuit’s
own precedents.

Respondents do not dispute that the provision at
issue here, § 1396a(a)(30)(A), may not be privately
enforced under any of the traditional theories of
state liability previously recognized by this Court.
That is, respondents may not sue directly under
§ 1396a(a)(30)(A) because no implied right of action
exists under the Social Security Act, of which Medi-
caid is a part. Maine v. Thiboutot, 448 U.S. 1, 6
(1980); Edelman v. Jordan, 415 U.S. 651, 674 (1974).

In addition, private enforcement of § 1396a(aX30)(A)
is unavailable under § 1983 because, as the Ninth
and five other circuits have held (and respondents do
not dispute), § 13896a(a)(30)(A) does not create any
privately enforceable rights. See, e.g., Sanchez, 416
F.3d at 1059 (“[T]Jhe flexible, administrative stan-
dards embodied in the statute do not reflect a Con-
gressional intent to provide a private remedy for their
violation.”); see also Long Term Care Pharmacy
Alliance, 362 F.3d at 58 (concluding, based on struc-
ture and text of § 1396a(a)(30)(A), that “plan review
by the Secretary is the central means of enforcement
intended by Congress”). To the contrary, through its
repeal of the Boren Amendment, Congress indicated
its intention to preclude private suits under § 1396a.
Pa. Pharmacists, 283 F.3d at 540 n.15; H.R. Rep. No.
105-149, supra, at 590. Moreover, as the Ninth

18

Circuit itself explained in Sanchez: “|t|he language of
§ 30(A) is ... ill-suited to judicial remedy; the inter-
pretation and balancing of the statute’s indetermi-
nate and competing goals would involve making
policy decisions for which this court has little exper-
tise and even less authority.” 416 F.3d at 1060. In this
respect, § 1396a(a)(30)(A) contrasts significantly from
the Boren Amendment that this Court considered in
Wilder. See Pa. Pharmacists, 283 F.3d at 538 (Alito,
J.) (contrasting § 1396a(a\(30)(A) and the Boren
Amendment).

Dressing the lawsuit up as a preemption chal-
lenge should not change the conclusion that the
statute is not privately enforceable. This Court’s
preemption cases make clear that, here too, congres-
sional intent is relevant and potentially dispositive.
See Wyeth v. Levine, No. 06-1249, US. , 2009
WL 529172, at *5 (March 04, 2009) (congressional
intent is the “ultimate touchstone in every pre-
emption case”). It is entirely illogical to consider
evidence of congressional intent before permitting a
cause of action to be implied directly under the stat-
ute itself (or to authorize suit under § 1983), but to
ignore such evidence in a preemption case — indeed,
to authorize a “valid cause of action” despite evidence
that Congress intended to preclude private suits.
Further, adopting a theory under which private
preemption claims may proceed under the Supremacy
Clause as to purported conflicts with any and all
federal statutes, independent of congressional intent,
would negate the principle that “private rights of

19

action to enforce federal law must be created by
Congress.” Sandoval, 532 U.S. at 286.

In addition, the same cencerns about judicial
enforcement that the courts have identified with
respect to § 1396a(a)(30)(A) in the § 1983 cases also
apply here. State compliance with such policy-laden
objectives is appropriately reviewed by HHS, the
federal agency charged with enforcing the Medicaid
Act, rather than the courts acting at the request of
private parties. Indeed, implying a private cause of
action in this case would effectuate a judicial usurpa-
tion of HHS’s obligation to review California’s pend-
ing state plan amendment. See Walsh, 538 U.S. at
661 (Secretary of HHS’s determinations with respect
to proposed state plan amendments under the Medi-
caid Act are “presumptively valid”). The principle of
deference to agency decisions is substantially under-
mined if a court can determine on its own, in a pri-
vate suit brought preemptively before HHS has acted,
whether a state’s proposed plan amendment complies
with the Medicaid Act. The Court can avoid separa-
tion-of-powers problems by limiting judicial involve-
ment to that expressly contemplated by the Medicaid
Act itself —i.e., review of the Secretary’s decision. See
Walsh, 538 U.S. at 675 (Scalia, J., concurring in
judgment).

Finally, this Court already has twice rejected
efforts to convert what are, fundamentally, statutory
claims into constitutional claims via the Supremacy
Clause. See Golden State Transit Corp. v. City of Los
Angeles, 493 U.S. 103, 107 (1989) (agreeing that “the

20

Supremacy Clause, of its own force, does not create
rights enforceable under § 1983”); Chapman v. Hous-
ton Welfare Rights Org., 441 U.S. 600, 615 (1979)
(holding that “an allegation of incompatibility be-
tween federal and state statutes and regulations does
not, in itself, give rise to a claim ‘secured by the
Constitution’ within the meaning of § 1343”). Indeed,
the Court has contrasted the Supremacy Clause,
which cannot of its own force create a right of action,
with the Commerce Clause, which can. Dennis v.
Higgins, 498 U.S. 439, 450 (1991) (“By contrast, the
Commerce Clause of its own force imposes limitations
on state regulation of commerce and is the source of a
right of action in those injured by regulations that
exceed such limitations.”).

This Court should act to ensure that its decisions
in cases such as Cort, Pennhurst, Bless:ig, Sandoval,
and Gonzaga, and the plethora of lower court deci-
sions issued in reliance on this Court’s precedent, are
not effectively nullified.” This Court has developed a

* The courts have held that various spending statutes do
not create “rights” and therefore are not privately enforceable
under § 1983. See, e.g., Gonzaga, 536 U.S. 273 (Family Educa-
tional Rights and Privacy Act, 20 U.S.C. § 1232g); Blessing, 520
U.S. 329 (Child Support Enforcement Act, 42 U.S.C. §§ 651-
669b); Newark Parents Ass’n v. Newark Pub. Sch., 547 F.3d 199
(3d Cir. 2008) (No Child Left Behind Act, 20 U.S.C.
§§ 6311(h)\(6), 6316(b\(6)); Arrington v. Helms, 438 F.3d 1336
(llth Cir. 2006) (Temporary Assistance to Needy Families Act,
42 U.S.C. § 657(a)); 31 Foster Children v. Bush, 329 F.3d 1255
(11th Cir. 2003) (Adoption Assistance and Child Welfare Act,
42 U.S.C. § 675(5\D), (E)); Grammar v. John J. Kane Reg’l

(Continued on following page)

21

sensible and workable scheme for determining when
a private cause of action may be implied in the ab-
sence of express congressional authorization. That
scheme will be rendered meaningless if, as the Ninth
Circuit has held (along with the D.C., First, Fifth,
and Eighth Circuits, see infra Part II), a cause of
action for injunctive relief lies any time there is an
alleged conflict between a state and a federal statute.

II.

RECENT CIRCUIT COURT DECISIONS HAVE
MISREAD THIS COURT’S PRECEDENT AND
CREATED A SPLIT WITH THE ELEVENTH
CIRCUIT REGARDING THE AVAILABILITY OF
PRIVATE PREEMPTION LAWSUITS BASED ON
FEDERAL STATUTES THAT ARE NOT OTH-
ERWISE PRIVATELY ENFORCEABLE

There is a compelling need for this Court’s review
because of confusion and conflict among the courts of
appeal regarding the viability of private suits like the
present one, which only this Court can resolve. In
addition to the Ninth Circuit, the D.C., First, Fifth,
and Eighth Circuits also have recently authorized

Ctrs.-Glen Hazel, No. 06-781, 2007 WL 1087751 (W.D. Pa., Apr.
6, 2007) (Federal Nursing Home Reform Act, 42 U.S.C. §§ 1395i-
3 & 1396r); Williams v. U.S. Dep't of Hous. & Urban Dev., No.
04-CV-3488, 2006 WL 2546536 (E.D.N.Y. Sept. 1, 2006) (Housing
& Urban Development Act, 12 U.S.C. § 1701u); Almendares uv.
Palmer, No. 3:00-CV-7524, 2002 WL 31730963 (N.D. Ohio Dec. 3,
2002) (Food .’ -mp Act, 7 U.S.C. § 2020(e\1)(B)).

22

such lawsuits, based largely on a misperception that
this Court already resolved the issue presented here
in PhRMA v. Walsh. Further, the Ninth Circuit’s
decision has deepened a circuit split with the Elev-
enth Circuit, which has rejected precisely the implied
cause of action theory adopted here. See Legal Envitl.
Assistance Found., Inc. v. Pegues, 904 F.2d 640, 643-
44 (11th Cir. 1990).

1. The Ninth Circuit's decision is the latest in a
series of court of appeals decisions to permit preemp-
tion suits to go forward based on spending legislation
that is not privately enforceable under § 1983. These
decisions stem in large part from confusion over the
scope of this Court’s decision in Walsh.

On review in Walsh was the First Circuit’s deci-
sion in PhRMA v. Concannon, 249 F.3d 66 (1st Cir.
2001), aff’d, 538 U.S. 644 (2003). In Concannon, the
First Circuit rejected, on the merits, a Medicaid Act-
based preemption challenge to Maine’s Act to Estab-
lish Fairer Pricing for Prescription Drugs. Under the
Act, drug manufacturers were required to enter into
agreements with the state, similar to those used in
the state’s Medicaid program, to provide rebates for
non-Medicaid customers, or else have their drugs
subject to a prior-authorization requirement in Medi-
caid. Jd. at 71-72. Plaintiff contended that the pro-
gram conflicted with the Medicaid Act, specifically 42
U.S.C. §§ 1396a, 1396a(aX(19), 1396r-8(d)(1)(A), and
1396r-8(d)(5)(A), (B). See id. at 76-79. The First
Circuit reached the merits of the case only after
explaining that “‘a state or territorial law can be

23

unenforceable as preempted by federal law even when
the federal law secures no individual substantive
rights for the party arguing preemption.’” 249 F.3d at
73 (emphasis added, quoting St. Thomas-St. John
Hotel & Tourism Ass’n v. Virgin Islands, 218 F.3d 232,
241 (3d Cir. 2000)). Accordingly, the court rejected
Maine’s argument that plaintiff lacked “prudential
standing” to bring its challenge, and proceeded to an
analysis of the merits of plaintiff’s lawsuit.

This Court affirmed the First Circuit’s decision in
Walsh. However, the plurality opinion did so without
considering whether the underlying Medicaid stat-
utes created any privately enforceable rights or
whether Congress intended to create a private rem-
edy in the federal courts for violations of the statutes
at issue. Instead, this Court held, as had the First
Circuit, that on the merits, Maine’s Act did not con-
flict with the Medicaid Act. 538 U.S. at 662-68. As
alluded to earlier, two justices of this Court wrote
separately to suggest that plaintiff may not have
stated a valid cause of action, and a third to suggest
that the district court should have respected the
primary jurisdiction of HHS. Id. at 675 (Scalia, J.,
concurring in judgment); id. at 675-83 (Thomas, J.,
concurring in judgment); id. at 672-73 (Breyer, J.,
concurring in part, and concurring in judgment).

The D.C. Circuit subsequently interpreted Walsh
as having implicitly held that plaintiff had stated a
valid preemption cause of action under the Medicaid
Act. In PhRRMA v. Thompson, 362 F.3d 817 (D.C. Cir.

24

2004), the court rejected a preemption challenge to a
different state’s drug rebate program, the Michigan
Best Practices Initiative, again on the merits. Signifi-
cantly, the court rejected the state’s argument that
there could be no preemption lawsuit because the
Medicaid provisions at issue did not support a private
right of action. 362 F.3d at 819 n.3 (explaining that
defendant argued that there was “no private right of
action for injunctive relief against the state based on
Justices Scalia’s and Thomas’s separate opinions in
PhRMA v. Walsh.”). The court held that, “[bly ad-
dressing the merits of the parties’ arguments without
mention of any jurisdictional flaw, the remaining
seven Justices [in PhRRMA v. Walsh] appear to have
sub silentio found no flaw.” Id.

The D.C. Circuit erred to the extent that it
interpreted this Court’s willingness to review the
merits of the preemption challenge in Walsh as
containing an implicit holding that a valid cause of
action existed. This Court has repeatedly emphasized
that the absence of a valid cause of action is not a
jurisdictional flaw. See, e.g., Verizon, 535 U.S. at 642-
43 (“‘(TJke absence of a valid (as opposed to arguable)
cause of action does not implicate subject-matter
jurisdiction, i.e., the courts’ statutory or constitu-
tional power to adjudicate the case.’” (quoting Steel
Co. v. Citizens for a Better Env't, 523 U.S. 83, 89
(1998))); Bell v. Hood, 327 U.S. 678, 682 (1946).
Accordingly, this Court has often been willing to
assume ~— without deciding — that a valid cause of

25

action existed in order to proceed to an analysis of the
merits of plaintiffs’ claims.

Thus, in Owasso Independent School District v.
Falvo, 534 U.S. 426, 431 (2002), this Court “as-
sume[d], but without so deciding or expressing an
opinion on the question, that private pariies may sue
an educational agency under § 1983 to enforce” the
Family Educational Rights and Privacy Act (FERPA),
in order to proceed to the merits of the case. Yet, in a
separate case decided that very same term, the Court
held that no such right exists under FERPA. Gon-
zaga, 536 U.S. 273; see also City of Rancho Palos
Verdes v. Abrams, 544 U.S. 118, 120 (2005) (assuming
for the purpose of the case, based on parties’ conces-
sions, that Telecommunications Act created rights
enforceable under 42 U.S.C. § 1983).°

* There are two additional reasons why this Court did not
implicitly rule that petitioner had stated a valid cause of action
in Walsh. First, Maine did not specifically argue that petitioner
lacked a private right of action, but only that it lacked pruden-
tial standing. Indeed, Justice Thomas, in his opinion concurring
in judgment, stated that “careful consideration” should be given
“to whether Spending Clause legislation can be enforced by third
parties in the absence of a private right of action” through a
preemption lawsuit, but that the Court could not reach the issue
because “Respondents have not advanced this argument in this
case.” Walsh, 538 U.S. at 683 (Thomas, J., concurring in judg-
ment). Second, as petitioner argued in its reply brief on the
merits in this Court, Maine was foreclosed from pressing its
contention in this Court because the state did not file a cross-
petition on that issue. Reply Brief of Petitioner at 1 n.1, PhRMA
v. Walsh, 538 U.S. 644 (2002) (No. 01-88).

26

The Fifth Circuit also (mis)relied on this Court’s
decision in Walsh to authorize a preemption challenge
based on a federal spending statute that did not
create any “rights” enforceable by plaintiffs. In
Planned Parenthood of Houston and Southeast Texas
v. Sanchez, 403 F.3d 324 (5th Cir. 2005), family
planning and abortion services providers challenged a
Texas funding restriction on the ground that it “vio-
late[d] the Supremacy Clause ... by imposing addi-
tional eligibility requirements on Appellees’ receipt of
federal funds that are inconsistent with the federal
funding statutes,” including Title X of the Public
Health Service Act and Title XX of the Social Security
Act. 403 F.3d at 328, (footnote omitted). Citing this
Court’s decision in Shaw v. Delta Air Lines, Inc., the
court of appeals held that the district court had
“jurisdiction,” under 28 U.S.C. § 1331, over a “pre-
emption claim seeking injunctive and declaratory
relief.” Jd. at 331. The court then rejected the state’s
argument that, “even with federal jurisdiction over
the claim, it was improper for the district court to
resolve it because Appellees were not seeking to
vindicate any right or to enforce any duty running to
them.” Jd. Citing this Court’s decision in Walsh, the
court asserted that “seven Justices [there] assumed
both that the federal courts have jurisdiction and that
a claim was stated for Spending Clause preemption,
tacitly rejecting the suggestion advanced by two
concurring Justices — and today espoused by [defen-
dant] — that no claim was stated.” Jd. at 332. The
court also cited, with approval, authorities suggesting
that the Supremacy Clause may be the source of an

27

implied right of action to enjoin state or local regula-
tions that are federally preempted. Jd. at 334 n.47.

Based on similar reasoning, the Eighth Circuit
has also recently held that a preemption claim may
proceed under the Medicaid Act even if the provision
at issue does not create any privately enforceable
rights. In Lankford v. Sherman, 451 F.3d 496 (8th
Cir. 2006), disabled Medicaid recipients sought to
challenge a Missouri Medicaid regulation that cur-
tailed provision of durable medical equipment to most
categorically-needy Medicaid recipients on the ground
that it conflicted with, inter alia, the “reasonable-
standards” requirement of federal Medicaid Act, 42
U.S.C. § 1396a(a)(17). The court of appeals held that
§ 1396a(a)(17) does not create an “individual right,”
and that its language is “‘too vague and amorphous
for judicial enforcement.’” 451 F.3d at 509. And, the
court recognized that the Supremacy Clause “is not
the direct source of any federal right, but ‘secures
federal rights by according them priority whenever
they come in conflict with state law.’” Jd. (quoting
Golden State Transit, 496 U.S. at 107). Nonetheless,
the court allowed plaintiff’s claim to proceed because
“(plreemption claims are analyzed under a different
test than section 1983 claims, affording plaintiffs an
alternative theory for relief when a state law conflicts
with a federal statute or regulation.” Jd.

The remaining circuits have not addressed
whether a Spending Clause statute that does not
create any privately enforceable rights may nonethe-
less be the basis for a preemption claim under the

28

Supremacy Clause. However, the Federal,‘ Second,”
and Tenth® Circuits appear to accept that, at least
with respect to other sorts of federal claims, the
Supremacy Clause may create a preemption cause of
action independently of whether the underlying
federal statute creates privately enforceable rights.

‘ See Biotechnology Indus. Org. v. District of Columbia, 496
F.3d 1362, 1368 (Fed. Cir. 2007) (holding that court had jurisdic-
tion over preemption challenge to District of Columbia’s Pre-
scription Drug Excessive Pricing Act; “though the plaintiffs’
claim is created by principles of supremacy law, its resolution
necessarily requires us to construe the patent statutes”).

* See W. Air Lines, Inc. v. Port Auth. of N.Y. & N.J., 817 F.2d
222 (2d Cir. 1987) (holding that airline could bring Supremacy
Clause challenge to local aviation regulation as preempted by
federal statute, 49 U.S.C. § 1305(a)(1), even though no private
right of action could be implied directly under the statute);
Burgio & Campofelice, Inc. v. N.Y.S. Dep’t of Labor, 107 F.3d
1000, 1006 (2d Cir. 1997) (citing 13B C. Wright, A. Miller & E.
Cooper, Federal Practice & Procedure: Jurisdiction 2d § 3566, at
102 (1984)).

* See Qwest Corp. v. City of Santa Fe, 380 F.3d 1258, 1266
(10th Cir. 2004) (“A party may bring a claim under the Suprem-
acy Clause that a local enactment is preempted even if the
federal law at issue does not create a private right of action.”);
Joseph A. ex rel. Corrine Wolf v. Ingram, 275 F.3d 1253, 1265
(10th Cir. 2002) (explaining, in rejecting Eleventh Amendment
defense, that plaintiffs “are not trying to create a private right of
action against the Department under the Social Security Act,”
but rather were pursuing “an implied cause of action” under Ex
parte Young, 209 U.S. 123 (1908) and the Supremacy Clause);
see also Day v. Bond, 511 F.3d 1030, 1033-34 (10th Cir. 2007)
(citing Qwest, 380 F.3d 1258, with approval and harmonizing
decision with Planned Parenthcod, 403 F.3d 324), cert. denied,
128 S. Ct. 2987 (2008).

29

2. The Ninth Circuit’s decision, together with
those from the D.C., First, Second, Fifth, Eighth,
Tenth, and Federal Circuits, conflicts with the Elev-
enth Circuit’s decision in Legal Environmental Assis-
tance Foundation v. Pegues. In Pegues, the Eleventh
Circuit rejected the contention that a “cause of action
... may be implied from the Supremacy Clause” as to
a federal statute that is not itself a source of privately
enforceable rights. 904 F.2d at 642.

In Pegues, an environmental group sued a state
entity that issued national pollution discharge elimi-
nation system permits that purportedly did not
comply with the Federal Water Pollution Control Act.
Although the Act at issue expressly authorized cer-
tain private party suits (e.g., a citizen suit against an
alleged polluter for violating the Act), it did not
expressly authorize the type of suit at issue. The
court of appeals observed that this Court had previ-
ously concluded that no additional private causes of
action could be implied directly under the Act:

In Middlesex County Sewerage Authority v.
National Sea Clammers Association [453
U.S. 1 (1981)], the Supreme Court reviewed
the “unusually elaborate” enforcement and
review provisions of the Act, and held that
“both the structure of the Act[] and [its] leg-
islative history lead us to conclude that Con-
gress intended that private remedies in
addition to those expressly provided should
not be implied.”

30

904 F.2d at 643 (footnotes omitted). Consequently, the
court said that plaintiff was “[sleeking to sidestep the
holding of Sea Clammers” by arguing that “a consti-
tutional cause of action should be implied directly
from the Supremacy Clause.” Jd.

The court refused to permit plaintiff to “sidestep”
Sea Clammers, and affirmed dismissal of plaintiff’s
case because “the Supremacy Clause does not grant
an implied cause of action for the relief sought.” 904
F.2d at 641. The court recognized that some authori-
ties, including Wright and Miller’s Federal Practice
and Procedure, have suggested that the Supremacy
Clause creates an implied right of action for injunc-
tive relief:

A leading treatise has concluded that “(t]he
best explanation of Ex Parte Young and its
progeny is that the Supremacy Clause cre-
ates an implied right of action for injunctive
relief against state officials who are threat-
ening to violate the federal Constitution or
laws.” ... In addition, [plaintiff] cites dicta
in footnotes from Shaw v. Delta Air Lines ...
and Franchise Tax Board v. Construction La-
borers Vacation Trust, ... which suggest that
a federal cause of action might be implied to
permit a declaratory adjudication that fed-
eral law pre-empts a contrary state law, even
if the federal statute does not expressly pro-
vide a cause of action.

Id. at 643 (footnotes omitted). However, the court
explained that “[t)]hese expressions ... do no more
than indicate that the Supremacy Clause provides

3l

federal jurisdiction ... for a cause of action implied
from the statute.” Id. (citing 28 U.S.C. § 1331) (foot-
note omitted).’ The court’s reasoning and holding
flatly contradicts that of the D.C., First, Second,
Fifth, Eighth, Ninth, Tenth, and Federal Circuits.

III.

THE NINTH CIRCUIT WRONGLY DECIDED A
RECURRING AND IMPORTANT ISSUE

The question presented in this lawsuit is both
important and recurring. The rule adopted by the
Ninth Circuit implicates important principles of
federalism, and could, if left unaddressed, radically
change the means by which alleged conflicts between
state and federal laws are resolved when they arise,
by shifting some of the burden of resolving such
issues from federal agencies to federal courts. The
federalism concerns are especially sensitive in this
case because of its Spending Clause context. The
Medicaid Act creates, in effect, a contractual relation-
ship between the states and the federal government

" The Eleventh Circuit has continued to insist that plain-
tiffs demonstrate congressional intent to create a private right of
action before a preemption claim may proceed. See, e.g., Bell-
south Telecomm. v. Town of Palm Beach, 252 F.3d 1169, 1189-92
(llth Cir. 2001) (holding that telecommunications companies
could bring preemption claim only after determining, based on
analysis of Congressional intent, that the “Act creates a private
right of action” for private parties seeking preemption of a state
or local statute, ordinance, or regulation).

32

in which the agreement itself provides the remedies
for noncompliance (i.e., potential loss of federal
funding). See 42 U.S.C. § 1396c; Gonzaga, 536 U.S. at
280; Pennhurst, 451 U.S. at 11-12, 28; see also Wilder,
496 U.S. at 527 (Rehnquist, C.J., O'Connor, J., Scalia,
J. & Kennedy, J., dissenting). To allow private parties
to sue to, in effect, compel a state’s specific perform-
ance — a contract remedy that Congress did not itself
provide — is to eviscerate the voluntary nature of the
underlying agreement in derogation of the state’s
sovereign right to choose not to comply.

As discussed in Part I, this Court’s precedents
make clear that Congress’s intent is key in determin-
ing whether and how a federal statute may be pri-
vately enforced. Consistent with this precedent, a
private preemption claim should not be authorized
where there is no evidence that Congress intended
such private enforcement and instead only provided
an administrative remedy.

Here, the Ninth Circuit erred by ignoring these
principles, and by instead relying on other decisions
from this Court for propositions that this Court did
not actually reach. The Ninth Circuit — like the D.C.
Circuit and Fifth before it — misread this Court’s
decision in PhRMA v. Walsh. It erred when it con-
cluded that this Court’s willingness to reach the
merits of petitioners’ preemption claim carried an
implicit determination that petitioner had stated a
valid, as opposed to merely arguable, cause of action
upon which relief may be granted. See supra Part
II(1) (citing Verizon, 535 U.S. at 642, and other

33

authorities); cf. Texas v. Cobb, 532 U.S. 162, 169
(2001) (“Constitutional rights are not defined by
inferences from opinions which did not address the
question at issue.”).

The Ninth Circuit also misread the scope of this
Court’s decision in Shaw v. Delta Air Lines and its
progeny. In Shaw, this Court stated that the courts
have “jurisdiction” over lawsuits to “enjoin state
officials from interfering with federal rights,” and did
not reach the separate issue of whether such claims
always state a “valid cause of action.” See 463 U.S. at
96 n.14. This Court explained:

It is beyond dispute that federal courts have
jurisdiction over suits to enjoin state officials
from interfering with federal rights. See Ex
parte Young, 209 U.S. 123, 160-162 (1908). 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.

Id. This Court has reiterated the limited, purely
jurisdictional nature of this language in subsequent
cases. Verizon, 535 U.S. at 642 (citing and quoting
Shaw for proposition that claim that local regulation
is preempted “‘presents a federal question which the
federal courts have jurisdiction under 28 U.S.C. § 1331
to resolve’”); Lawrence County v. Lead-Deadwood

34

School Dist. No. 40-1, 469 U.S. 256, 259 n.6 (1985)
(similar); see also Pegues, 904 F.2d at 643.°

The Ninth Circuit appears to have.recognized the
limited jurisdictional nature of this language from
Shaw, but again assumed that this Court must have
implicitly determined that there always is a valid
cause of action to enjoin state action from the Court’s
willingness to reach the merits of plaintiffs’ preemp-
tion claims in Shaw and its progeny. App., infra, 11a,
13a. In this respect, the court made the same error
that it made with respect to this Court’s decision in
Walsh.

Nor could the Ninth Circuit properly rely upon
Ex parte Young for the expansive theory of state
liability that it adopted. This Court did not purport to
create, in Ex parte Young, a new, stand-alone private
cause of action t« enforce federal statutes, but only
eliminated a jurisdictional defense: it described an
“exception” to the states’ immunity under the Elev-
enth Amendment. See Pennhurst, 465 U.S. at 102.
Thus, a section 1983 action against a state official in
his or her official capacity that seeks purely injunc-
tive relief may be brought under the Ex parte Young
exception. But to go further, and construe Ex parte

* Thus, the Ninth Circuit’s belief that Verizon and Lawrence
“reaffirmed” that a plaintiff asserting preemption under the
Supremacy Clause necessarily states a valid cause of action, see
App., infra, 15a, also was incorrect as the cited portions of the
decisions only referenced jurisdiction. Verizon, 535 U.S. at 642;
Lawrence, 469 U.S. at 259 n.6.

35

Young as the source of a private right of action to
enforce federal statutes against state officials, would
vitiate any and all limitations on private rights of
action under federal statutes.

The issues presented here are likely to recur.
Hundreds of billions of dollars are distributed to the
states each year for cooperative federal-state pro-
grams such as Medicaid, the Temporary Assistance to
Needy Families Act, No Child Left Behind Act, Food
Stamp Act, FERPA, and Adoption Assistance and
Child Welfare Act. See Office of Mgmt. & Budget, A
New Era of Responsibility: Renewing America’s Prom-
ise, Table S-4 (2009) (proposed budget would provide,
inter alia, $695 billion for Social Security, $453 billion
for Medicare, $290 billion for Medicaid, and $571
billion for other programs in FY 2010) available at
http://www. whitehouse.gov/omb/assets/fy2010_new_era/
A_New_Era_of_Responsibility2.pdf); see also supra
n.2. These funds become the basis for an uncountable
number of program decisions at the state level. If any
program decision that allegedly is inconsistent with a
federal statute may be the basis for a federal lawsuit
— regardless of Congressional intent, and regardless
of whether a federal “right” is involved — then the
states’ liability under such programs will be com-
pletely unbounded.

36

CONCLUSION

For the foregoing reasons, the petition for a writ
of certiorari should be granted.

Respectfully submitted,

EDMUND G. BROWN JR.
Attorney General of California

MANUEL M. MEDETROS
State Solicitor General

Davip 8S. CHANEY
Chief Assistant Attorney General

GORDON BURNS
Deputy Solicitor General

RICHARD T. WALDOW

KARIN S. SCHWARTZ*

JENNIFER M. KIM

Supervising Deputy Attorneys General

*Counsel of Record

Counsel for Petitioners

Of counsel:

DAN SCHWEITZER

2030 M Street, NW, 8th Floor
Washington, DC 20036

(202) 326-6010

Dated: April 1, 2009

la

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

INDEPENDENT LIVING CENTER OF
SOUTHERN CALIFORNIA, INC., a
nonprofit corporation; GRAY
PANTHERS OF SACRAMENTO, a
nonprofit corporation; GRAY
PANTHERS OF SAN FRANCISCO, a
nonprofit corporation; GERALD
SHAPIRO, PHARM. D. doing
business as UPTOWN PHARMACY
AND GIFT SHOPPE; SHARON
STEEN doing business as
Central Pharmacy; MARK
BECKWITH; MARGARET DOWLING;
TRAN PHARMACY, INC., doing
business as TRAN PHARMACY;
JASON YOUNG,

Petitioners-Appellants,
v.

SANDRA SHEWRY, Director of the
Department of Health Care
Services, State of California,

Respondent-Appellee.

No. 08-56061

D.C. No.
2:08-cv-03315-
CAS-MAN

OPINION

Appeal from the United States District Court
for the Central District of California
Christina A. Snyder, District Judge, Presiding

2a

Argued and Submitted
July 11, 2008 — Pasadena, California

Filed September 17, 2008

Before: Stephen Reinhardt, Marsha S. Berzon, and
Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Berzon

COUNSEL

Lynn S. Carman and Stanley L. Friedman (argued)
for Independent Living Center of Southern Califor-
nia, et al., petitioners-appellants.

Edmund G. Brown, Jr., Attorney General of the State
of California; Richard T. Waldow, Supervising Deputy
Attorney General; Jennifer M. Kim (argued), Super-
vising Deputy Attorney General; Phillip J. Matsu-
moto, Tara L. Newman, Gregory M. Cribs, and Sara
Ugaz, Deputy Attorneys General; for Sandra Shewry,
Director of the Department of Health Care Services of
the State of California, respondent-appellee.

OPINION
BERZON, Circuit Judge:
Petitioner-appellants, a group of pharmacies,

health care providers, senior citizens’ groups, and
Medi-Cal beneficiaries (collectively “ILC”),' seek to

' Petitioner-appellants include the Independent Living Center
of Southern California, a non-profit corporation providing services
(Continued on following page)

3a

enjoin a state official from implementing legislation
reducing payments to medical service providers under
the state’s Medicaid program, known as “Medi-Cal,”
by ten percent. ILC alleged in its complaint that the
state legislation violates certain provisions of the
federal Medicaid Act, and is therefore preempted
under the Supremacy Clause.’ Although ILC sought
preliminary relief, the district court denied any
such relief, holding that ILC could not allege any
viable claim for injunctive relief because none of the

to over 8,000 disabled individuals annually; Gray Panthers of
Sacramento and San Francisco, senior citizens’ advocacy groups
whose members include a number of Medi-Cal recipients; Gerald
Shapiro, a licensed registered pharmacist operating Uptown
Pharmacy & Gift Shoppe, which delivers prescription drugs to
roughly 5,000 home-bound patients in Los Angeles; Sharon
Steen, co-owner of Central Pharmacy in Santa Monica; Mark
Beckwith, a quadriplegic suffering from spinal muscular atrophy
who receives medical and pharmacy services under Medi-Cal;
Margaret Dowling, a paraplegic who receives part of her medical
services under Medi-Cal; Jason Young, an individual suffering
from blindness and brain damage who receives in-home support
services from a Medi-Cal managed care program; and Tran
Pharmacy, Inc., a California corporation operating a retail
pharmacy in Garden Grove. Independent Living Center, the
Gray Panthers, and the pharmacy petitioners also sued to assert
the interests of their respective patients and members. We refer
to petitioner-appellants collectively as “petitioners,” “Independ-
ent Living Center,” or “ILC.”

* The Supremacy Clause provides that “(tJhis Constitution,
and the Laws of the United States which shall be made in
Pursuance thereof ... shall be the supreme Law of the Land;
and the Judges in every State shall be bound thereby, any Thing
in the Constitution or Laws of any State to the Contrary not-
withstanding.” U.S. Const. art. VI, cl. 2.

4a

petitioners or their members have any federal right to
Medi-Cal payments or benefits. We do not agree that
this suit fails for this threshold reason, and therefore
reverse.

I.
A.

Under Title XIX of the Social Security Act, 42
U.S.C. § 1396 et seg. (the “Medicaid Act”), the federal
government provides funds to participating states to
“enabl{e] each State, as far as practicable ... to
furnish [] medical assistance on behalf of families
with dependent children and of aged, blind, or dis-
abled individuals, whose income and resources are
insufficient to meet the costs of necessary medical
services[.]” 42 U.S.C. § 13896. Medicaid is a coopera-
tive federal-state program, enacted by Congress
pursuant to its powers under the Spending Clause,
see U.S. Const. art. I, § 8, cl. 1, that “‘directs federal
funding to states to assist them in providing medical
assistance to low-income individuals.’” Ball v. Rod-
gers, 492 F.3d 1094, 1098 (9th Cir. 2007) (quoting
Katie A. v. Los Angeles County, 481 F.3d 1150, 1153-
54 (9th Cir. 2007)). To receive federal funds, states
are required to administer their programs in compli-
ance with individual “State plans for medical assis-
tance” approved by the federal Secretary of Health
and Human Services. 42 U.S.C. § 1396. The Act sets
forth detailed requirements for state plans, see id.

5a

§ 1396a(a)(1)-(71), including the specific provision at
issue in this appeal.

Under that provision, § 1396a(a)(30)(A) (“Section
30(A)”), a state plan must:

provide such methods and procedures relat-
ing to... the payment for [] care and ser-
vices ... aS may be necessary ... to assure
that payments are (consistent with efficiency,
economy, and quality of care and are suffi-
cient to enlist enough providers so that care
and services are available under the plan at
least to the extent that such care and ser-
vices are available to the general (population
in the geographic area|[.]

That is, a state plan must establish reimbursement
rates for health care providers that are both consis-
tent with high-quality medical care (the “quality of
care provision”) and sufficient to enlist enough pro-
viders to ensure that medical services are generally
available to Medicaid recipients (the “access to care
provision”). See generally Orthopaedic Hosp. v. Bel-
she, 103 F.3d 1491 (9th Cir. 1997).

B.

California Assembly Bill X3 5 (“AB 5”), enacted
on February 16, 2008, during a special session con-
vened by the Governor to address the state’s budget
deficit, reduces payments to medical providers par-
ticipating in the state’s Medi-Cal program by ten
percent. Section 14 of AB 5 instructs the Director of

6a

the Department of Health Care Services, the state
agency responsible for administering the Medi-Cal
program, to reduce payments to physicians, dentists,
pharmacies, adult day health care centers, clinics,
health systems and other providers participating in
Medi-Cal’s fee-for-service program by ten percent. See
CAL. WELF. & INST. CODE § 14105.19 (2008). Section
14 also reduces payments to managed health care
plans under contract with the Department by the
“actuarial equivalent” of ten percent. Jd. Section 15 of
AB 5 instructs the Director to reduce payments for
inpatient services provided by acute care hospitals
not under contract with the Department by ten
percent. See id. § 14166.245. All of these cuts were
scheduled to take effect July 1, 2008.

ILC filed this suit in California state court seek-
ing to enjoin implementation of AB 5 on April 22,
2008, maintaining that the ten-percent rate reduction
violates both the “quality of care” and “access to care”
provisions of § 30(A) and is therefore invalid under
the federal Constitution’s Supremacy Clause, as it
conflicts with governing federal law. The complaint
alleged that even prior to passage of AB 5, a substan-
tial percentage of medical care providers — 45% of
primary care providers and 50% of specialists — were
unwilling to participate in the Medi-Cal program due
to low reimbursement rates; that 90% of dentists
refused to accept Medi-Cal patients; and that Medi-
Cal’s reimbursement rates for prescription drugs
allowed pharmacies to “uniformly earn less than a

7a

10% net profit.” By further reducing already-low
reimbursement rates, ILC argued, AB 5 would drive
even more primary care physicians, specialists,
dentists, and pharmacies out of the Medi-Cal pro-
gram and force existing providers to reduce services.
As a result, ILC contended, Medi-Cal recipients
would be “denied quality medical services and access
to quality medical services,” in violation of § 30(A).
ILC also maintained that nothing in the legislative
history of AB 5 demonstrated that the legislature had
considered whether reduced payments would be
consistent with efficiency, economy, and quality of
care, or whether such payments would be sufficient to
enlist an adequate network of health care providers.
Rather, the sole purpose cited in the legislation was
to “address [| the fiscal emergency declared by the
Governor” and “implement cost containment meas-
ures affecting health services, at the earliest possible
time.” ILC therefore requested a peremptory writ of
mandate or injunction to prevent the Department of
Health Care Services’ and its Director, Sandra She-
wry (“the Director”), from implementing AB 5.“

* ILC voluntarily dismissed the Department from suit on
June 1, 2008, leaving the Director as the sole defendant.

* ILC also alleged in its complaint that the ten-percent rate
reduction both violated and was preempted by the Americans
with Disabilities Act of 1990 (“ADA”), 42 U.S.C. § 12181 et seq.
ILC voluntarily dismissed these claims without prejudice.

8a

C.

The state defendants removed the suit to federal
court, where ILC filed a motion for preliminary
injunction. The district court denied relief, holding
that although it was “acutely cognizant of the poten-
tial adverse consequences of the ten percent rate
reduction,” ILC had “no likelihood of succeeding on
the merits” because they “do not have any federal
rights under § 30(A).”

In reaching this conclusion, the district court
relied heavily on this court’s decision in Sanchez v.
Johnson, which held that § 30(A) does not “create an
individual right that either Medicaid recipients or
providers would be able to enforce under [42 U.S.C.]
§ 1983.” 416 F.3d 1051, 1062 (9th Cir. 2005). Although
the district court acknowledged that ILC in this case
filed suit under 28 U.S.C. § 1331 and the Supremacy
Clause rather than under § 1983, the court viewed
this as a distinction without a difference, reasoning
that the Supremacy Clause — like § 30(A) — “‘is not a
source of any federal rights.’” Golden State Transit
Corp. v. City of Los Angeles, 493 U.S. 103, 107 (1989)
{quoting Chapman v. Houston Welfare Rights Org.,
441 U.S. 600, 613 (1979)). In the absence of any
“right,” the district court concluded, ILC almost
surely had failed to state a claim for injunctive relief.

In so ruling, the district court rebuffed ILC’s
argument that it was entitled to seek purely injunc-
tive relief — which is all it is seeking — on the basis of
federal preemption under the doctrine recognized in

9a

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983).
Shaw held that “[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... , must prevail,
thus presents a federal question which the federal
courts have jurisdiction under 28 U.S.C. § 1331 to
resolve.” Id. at 96 n.14. The district court held Shaw
and its progeny — which, as we shall see, are legion —
inapplicable to ILC’s claims, holding that Shaw
preemption claims have been permitted in only three
“circumstances”: (1) “where the plaintiff claims that a
state law requires him to act in violation of federal
law;” (2) “where the plaintiff contends that his con-
duct will be restricted by a state law that is pre-
empted by federal law;” and (3) “where state law
interferes with federally created rights.” The court
concluded that ILC’s claims did not fall under any of
these three categories, as “AB 5 neither compels nor
restricts petitioners own conduct” and “§ 30(A) does
not give rise to a federally created right.” ILC’s claims
thus fell outside the Shaw Supremacy Clause doc-
trine, rendering its probability of success on the
merits “low, if not wholly lacking.”

ILC immediately sought emergency relief in this
court. We granted ILC’s motion to expedite oral
argument, but denied the balance of its emergency
motion. We heard argument on July 11, 2008, and
issued an order the same day reversing the district

10a

court’s decision and remanding for consideration of
the merits of ILC’s motion for preliminary injunction.”
This opinion more fully sets forth the rationale for
our July 11 order.

If.

We review a district court’s denial of a prelimi-
nary injunction for abuse of discretion. The Lands
Council v. McNair, __ F.3d __., 2008 WL 2640001, at
*3 (9th Cir. 2008) (en banc). “A district court abuses
its discretion in denying a request for a preliminary
injunction if it ‘base[s] its decision on an erroneous
legal standard or clearly erroneous findings of facts.’”
Id. (quoting Earth Island Inst. v. U.S. Forest Serv.,
442 F.3d 1147, 1156 (9th Cir. 2006)) (alteration in
original). We therefore review the district court’s legal
rulings de novo and its findings of fact for clear error.
Id.; see also Perfect 10, Inc. v. Amazon.com, Inc., 508

F.3d 1146, 1157 (9th Cir. 2007).

[1] In this case, the district court denied ILC’s
motion for a preliminary injunction based solely on
its legal ruling that ILC could not bring suit under
the Shaw Supremacy Clause doctrine. The only issue

* The district court heard argument on the merits of ILC’s
motion for a preliminary injunction on August 1, 2008, and
subsequently entered an order granting ILC’s motion in part.
See Indep. Living Ctr. v. Shewry, No. CV 08-3315 (C.D. Cal. Aug.
18, 2008), appeal filed, No. 08-56422 (9th Cir. 2008).

lla

before this court is thus whether ILC may maintain a
valid cause of action to enjoin implementation of AB 5
on the basis of federal preemption.

A.

[2] The Supreme Court has repeatedly enter-
tained claims for injunctive relief based on federal
preemption, without requiring that the standards for
bringing suit under § 1983 be met, and without
intimating that such claims must fit into one of three
categories or “circumstances” in order to be cogniza-
ble. In City of Burbank v. Lockheed Air Terminal,
Inc., 411 U.S. 624 (19'73), for example, the Court
enjoined a city ordinance prohibiting jet aircraft from
taking off between 11 p.m. and 7 a.m. Id. at 625-26.
Plaintiffs, the owner and operator of a private airport,
filed suit under the Supremacy Clause, arguing that
the Federal Aviation Act preempted the city’s ordi-
nance. Id. at 626-27. As the Court noted, the Act
permitted the federal government “‘to possess and
exercise complete and exclusive national sovereignty
in the airspace of the United States,’” id. at 626-27
(quoting 49 U.S.C. § 1508(a)), displacing both state
and local regulation of airspace and — presumably —
any private “right” to occupy airspace at a given time
or place. Without questioning plaintiffs’ authority to
bring suit, the Court proceeded directly to the merits
of their claim for injunctive relief, holding the city’s
ordinance preempted under the Supremacy Clause.
See id. at 633, 640.

12a

[3] In Ray v. Atlantic Richfield Co., 435 U.S.
151 (1978), the Court proceeded along much the same
path. Ray involved a claim for injunctive relief
brought by the operators of an oil refinery and tanker
vessels, who argued that the State of Washington’s
Tanker Law, which regulated the design, size, and
movement of oil tankers in Puget Sound, was pre-
empted by the federal Ports and Waterways Safety
Act (PWSA). Jd. at 154-56. Without comment on
plaintiffs’ authority to bring suit under the Suprem-
acy Clause, the Court once again proceeded straight
to the preemption analysis. See id. at 157. Indeed,
none of the Court’s seminal preemption cases casts
any doubt on the presumptive availability of declara-
tory and injunctive relief under the Supremacy
Clause; to the contrary, the Court has consistently
assumed — without comment — that the Supremacy
Clause provides a cause of action to enjoin implemen-
tation of allegedly unlawful state legislation. See
Gade v. Natl Solid Wastes Mgmt. Ass’n, 505 U.S. 88
(1992); Pac. Gas & Elec. Co. v. State Energy Res.
Conservation & Dev. Comm’n, 461 U.S. 190 (1983);
Fla. Lime & Avocado Growers, Inc. v. Paul, 373 U.S.
132 (1963); see also RICHARD H. FALLON, DANIEL J.
MELTZER, & DAVID L. SHAPIRO, HART & WECHSLER’S
THE FEDERAL COURTS & THE FEDERAL SYSTEM 903 (5th
ed. 2003) (describing “the rule that there is an im-
plied right of action to enjoin state or local regulation
that is preempted by a federal statutory or constitu-
tional provision” as “well-established”).

13a

[4] Perhaps the most well-known in this line of
cases is Shaw v. Delta Air Lines, Inc. Shaw involved
the claims of several large employers, who brought
suit against the Acting Commissioner of the New
York State Division of Human Rights, arguing that
the State’s Human Rights and Disability Benefits
Laws — which required employers to treat pregnancy
no differently than any other non-occupational dis-
ability — were preempted by the federal Employee
Retirement Income Security Act (“ERISA”). 463 U.S.
at 92. ERISA does not confer any express cause of
action on employers to challenge state benefits laws
in federal court,° but the Court — much as it had in
City of Burbank and Ray — reached the merits of the
preemption claims anyway, holding that the state
legislation was preempted only insofar as it prohib-
ited practices that were otherwise lawful under
ERISA. 7d. at 108-09. In an oft-cited footnote, the
Court emphasized that its decision in Franchise Tax

* Section 502(a) of the Act expressly allows participants,
beneficiaries, and fiduciaries of a covered employee benefits
plan, as well as the Secretary of Labor, to maintain a cause of
action under ERISA. See 29 U.S.C. § 1132(a). The same provi-
sion, however, is silent as to employers, and has generally been
interpreted to mean that an employer cannot maintain an action
directly under ERISA. See, e.g., DeMarco v. C & L Masonry, Inc.,
891 F.2d 1236, 1240-41 (6th Cir. 1989); Tuvia Convalescent Ctr.,
Inc. v. Nat’l Union of Hosp. & Health Care Employees, 717 F.2d
726, 729-30 (2d Cir. 1983). But see Associated Builders &
Contractors v. Carpenters Vacation & Holiday Trust Fund, 700
F.2d 1269, 1278 (9th Cir. 1983) (allowing suits by employers in
narrow circumstances).

14a

Board v. Construction Laborers Vacation Trust, 463
U.S. 1 (1983), decided the same day, “does not call
into question the lower courts’ jurisdiction to decide
these cases.” 463 U.S. at 96 n.14. Rather, the Court
reaffirmed the general rule that a plaintiff seeking to
enjoin state law based on federal preemption main-
tains a valid federal] cause of action. As the Court
explained,

It is beyond dispute that federal courts have
jurisdiction over suits to enjoin state officials
from interfering with federal rights.[*] A
plaintiff who seeks injunctive relief from
state regulation, on the ground that such

" Franchise Tax Board applied the “well-pleaded complaint
rule” to hold that federal courts lacked jurisdiction to hear cases
in which a defendant asserted ERISA preemption as a defense to
an action brought by state tax authorities to enforce its levies
against funds held in ERISA-covered employee benefit plans.
463 U.S. at 28. Shaw distinguished Franchise Tax Board by
noting that the Tax Board sought a declaration that state laws
were not preempted, whereas the employers in Shaw presented
an affirmative claim that the state laws at issue were pre-
empted. See Shaw, 463 U.S. at 96 n.14.

* Although Shaw utilized the term “federal rights,” it did so
before that term had taken on the added significance attributed
to it in more recent cases such as Gonzaga University v. Doe, 536
U.S. 273 (2002), discussed below. Shaw’s description of ERISA
makes clear that the Court did not view the statute as creating
any substantive “rights” in employers. To the contrary, the Court
described ERISA as “a comprehensive statute designed to
promote the interests of employees and their beneficiaries in
employee benefit plans,” 463 U.S. at 90 (emphasis added), and
noted that the statute itself “does not mandate that employers
provide any particular benefits,” id. at 91.

l5a

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.

Id. (internal citations omitted). The Court concluded
by noting that it “frequently has resolved pre-emption
disputes in a similar jurisdictional posture,” citing,
inter alia, Ray and Florida Lime & Avocado Growers.
Id. Thus, Shaw did not give rise to some unique line
of “Shaw preemption” cases, but merely reaffirmed
the traditional rule that injunctive relief is presump-
tively available in federai court to enjoin state officers
from implementing a law allegedly preempted under
the Supremacy Clause.’ See Lawrence County v. Lead-
Deadwood Sch. Dist. No. 40-1, 469 U.S. 256, 259 n.6
(1985) (describing Shaw as “reaffirming the general
rule” that a plaintiff asserting preemption under the
Supremacy Clause has stated a federal claim for
injunctive relief).

° Indeed, Shaw itself traced the roots of the doctrine to Ex
parte Young, 209 U.S. 123 (1908), decided seventy-five years
earlier. See 463 U.S. at 96 n.14. In Young, the Court found
“ample justification” in the case law to support its conclusion
that “individuals 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 . . . to
enforce against parties affected an unconstitutional act, violat-
ing the Federal Constitution, may be enjoined by a Federal court
of equity from such action.” 209 U.S. at 155-56.

16a

B.

[5] Contrary to the district court’s conclusion
that “Shaw preemption claims” have been permitted
in only three “circumstances,” we know of no author-
ity limiting Shaw in this manner, nor has the Direc-
tor cited any. In fact, the Supreme Court recently
reaffirmed Shaw’s holding, maintaining that it had
“no doubt” as to the authority of private parties to
seek injunctive relief on the basis of federal preemp-
tion under 28 U.S.C. § 1331 and the Supremacy
Clause. See Verizon Md. Inc. v. Pub. Serv. Comm’n,
535 U.S. 635, 642-43 (2002).

Nor are we certain on what grounds the district
court concluded that ILC lacked a valid cause of
action in this case. The first two of the district court’s
three “circumstances” — whether the challenged stat-
ute “restricts” or “compels” petitioners’ own conduct —
appear to reflect traditional standing doctrine, which
requires a litigant to “demonstrate that it has suf-
fered a concrete and particularized injury that is
either actual or imminent, that the injury is fairly
traceable to the defendant, and that it is likely that a
favorable decision will redress that injury.” Massa-
chusetts v. E.P.A., 127 S. Ct. 1438, 1453 (2007). We
address [LC’s standing to bring suit separately below,
as that inquiry raises questions apart from whether
the Supremacy Clause provides a valid cause of
action to seek injunctive relief on the basis of federal
preemption.

17a

The parties have proceeded on the assumption
that the district court denied relief because ILC
lacked any judicially enforceable “rights” under the
federal statute." The Director specifically urges this
court to deny ILC relief “because [§ 30(A)} does not
confer a private right of enforcement upon petition-
ers, which is the necessary predicate to seeking relief
under the Supremacy Clause.” Were we to accept it,
this argument would work a fundamental change in
Supremacy Clause jurisprudence. We decline to do so,
and thus join several other circuits in holding that a
plaintiff seeking injunctive relief under the Suprem-
acy Clause on the basis of federal preemption need

® As noted above, the district court also concluded that the
Supremacy Clause itself does not give rise to any federal “right”
to legal relief. In reaching this conclusion, however, the district
court relied on a series of cases holding that the Supremacy
Clause does not give rise to rights enforceable under $ 1983, an
altogether separate remedial scheme. See Golden State Transit
Corp., 493 U.S. at 107-08 (“Given the variety of situations in
which preemption claims may be asserted, in state court and in
federal court, it would obviously be incorrect to assume that a
federal right of action pursuant to $ 1983 exists every time a
federal rule of law preempts state regulatory authority. Con-
versely, the fact that a federal statute has preempted certain
state action does not preclude the possibility that the same
federal statute may create a federal mght for which § 1983
provides a remedy.” (emphasis added)); Chapman, 441 U.S. at
612-15 (holding that the Supremacy Clause “is not a source of
any federal rights” falling under 28 U.S.C. § 1343(3), the
jurisdictional counterpart to § 1983). We explore the distinction
between claims for relief under § 1983 and claims for injunctive
relief on the basis of federal preemption more fully in Part B-3
below.

18a

not assert a federally created “right,” in the sense
that term has been recently used in suits brought
under § 1983, but need only satisfy traditional stand-
ing requirements.

1,

[6] Although the Director asserts that the
express conferral of a “private right of enforcement”
on petitioners is a “necessary predicate” to a claim for
injunctive relief under the Supremacy Clause, the
well-established rule in both this court and in other
circuits is precisely the opposite. In Bud Antle, Inc. v.
Barbosa, 45 F.3d 1261 (9th Cir. 1994), we addressed a
claim for injunctive relief brought by a large agricul-
tural employer, who sought to enjoin the California
Agricultural Relations Board (ALRB) from adjudicat-
ing various unfair labor practice charges. Id. at 1264.
The employer argued that the ALRB proceedings
were preempted by the National Labor Relations Act
(NLRA), and were therefore invalid. Jd. We held that
a private party may bring an action in a federal
district court seeking to enjoin allegedly unlawful
state conduct, noting the “general rule that a private
party may seek declaratory and injunctive relief
against the enforcement of a state statutory scheme
on the ground of federal preemption.” Jd. at 1269-71
(citing Shaw). We reached this conclusion “[e]ven
in the absence of an explicit statutory provision
establishing a cause of action,” id. at 1269, and re-
gardless of whether the NLRA conferred a federal
“right” on employers, see id. at 1271 n.13 (finding it

19a

unnecessary to apply the four-factor test set forth in
Cort v. Ash, 422 U.S. 66 (1975)).

Our holding in Bud Antle is consistent with
established practice in the other circuits, which have
universally affirmed the right of private parties to
seek injunctive relief under the Supremacy Clause
regardless of whether the allegedly preemptive statute
confers any federal “right” or cause of action. As the
Tenth Circuit explained,

A federal statutory right or right of action is
not required where a party seeks to enjoin
the enforcement of a regulation on the
grounds that the local ordinance is pre-
empted by federal law. A party may bring a
claim under the Supremacy Clause that a lo-
cal enactment is preempted even if the fed-
eral law at issue does not create a private
right of action.

Qwest Corp. v. City of Santa Fe, 380 F.3d 1258, 1266
(10th Cir. 2004) (internal citations omitted); see also
Local Union No. 12004 v. Massachusetts, 377 F.3d 64,
75 (1st Cir. 2004) (holding that “in suits against state
officials for declaratory and injunctive relief, a plain-
tiff may invoke the jurisdiction of the federal courts
by asserting a claim of preemption, even absent an
explicit statutory cause of action”); Jll. Ass’n of Mort-
gage Brokers v. Office of Banks & Real Estate, 308
F.3d 762, 765 (7th Cir. 2002); St. Thomas-St. John
Hotel & Tourism Ass’n v. Virgin Islands, 218 F.3d 232,
241 (3d Cir. 2000) (holding that “a state or territorial
law can be unenforceable as preempted by federal law

20a

even when the federal law secures no individual
substantive rights for the party arguing preemp-
tion”); Village of Westfield v. Welch’s, 170 F.3d 116,
124 n.4 (2d Cir. 1999) (holding that a cause of action
under the Supremacy Clause “do[es] not depend on
the existence of a private right of action under the
[preempting statute]”); Burgio & Campofelice, Inc. v.
N.Y. State Dep’t of Labor, 107 F.3d 1000, 1005-07 (2nd
Cir. 1997) (holding that plaintiff could assert ERISA
preemption under the Supremacy Clause, even
though it was “beyond dispute” that plaintiff fell
outside ERISA’s express enforcement provisions);
First Nat'l Bank of E. Ark. v. Taylor, 907 F.2d 775, 776
n.3 (8th Cir. 1990).

2.

{7] The Director acknowledges these general
principles but argues for a different result in this
case, based on the specific statutory provision at
issue. The Director provides little, if any, justification
for treating a claim of preemption under a federal
statute passed pursuant to Congress’s spending
power differently from a claim of preemption under
any of the federal statutes discussed above. But even
if she had, this argument has also been flatly rejected
by the Supreme Court and the other circuits that
have addressed the question.

In Pharmaceutical Research & Manufacturers of
America (“PhRMA”) v. Concannon, 249 F.3d 66 (1st
Cir. 2001), aff’d sub nom. PhRMA v. Walsh, 538 U.S.

2la

644 (2003), a pharmaceutical manufacturers trade
group challenged a Maine statute designed to lower
prescription drug prices for low-income residents by
essentially requiring manufacturers to issue re-
bates.” Id. at 71-72. PhRMA argued, inter alia, that
Maine’s statute was preempted by the federal Medi-
caid Act under the Supremacy Clause, and moved for
injunctive relief to prevent implementation of the
program. Id. at 72. In response, the defendants
contended that PhRMA could not bring suit in this
manner, as the Medicaid Act was not intended to
confer any private right on pharmaceutical manufac-
turers. Id. at 73. The First Circuit rejected the defen-
dants’ argument, explaining that “PhRMA has not
asserted an action to enforce rights under the Medi-
caid statute ... but rather a preemption-based chal-
lenge under the Supremacy Clause. In this type of
action, it is the interests protected by the Supremacy
Clause, not by the preempting statute, that are at
issue.” Jd. Citing a decision from the Third Circuit,
the court noted:

We know of no governing authority to
the effect that the federal statutory provision
which allegedly preempts enforcement of lo-
cal legislation by conflict must confer a right

To ensure pharmaceutical companies’ participation in the
program, the statute subjected all drugs produced by manufac-
turers refusing to offer rebates to “prior authorization require-
ments,” meaning that the drug could not be prescribed to a
Medicaid beneficiary unless the state Medicaid administrator
specifically approved the prescription. See id. at 71-72.

22a

on the party that argues in favor of preemp-
tion. On the contrary, a state or territorial
law can be unenforceable as preempted by
federal law even when the federal law se-
cures no individual substantive rights for the
party arguing preemption.

Id. (quoting St. Thomas-St. John Hotel & Tourism
Ass’n, 218 F.3d at 241). The court thus concluded — in
stark contrast to the Director’s position in this case —
that “regardless of whether the Medicaid statute’s
relevant provisions were designed to benefit PhRMA,
PhRMA can invoke the statute’s preemptive force.”
Id.

Although the First Circuit permitted PhRMA to
bring suit, the court ultimately held that Maine’s
statute was not preempted by federal law because
there was no conflict between its requirements and
those of the Medicaid Act. See id. at 74-79. PhRMA
successfully petitioned the Supreme Court for certio-
rari, and the state defendants renewed their claim
that PhRMA lacked any federal right to bring suit.
Like the Director in our case, defendants argued that
“ithe Supremacy Clause] does not, by its own force,
protect or regulate any interests,” and that PhRMA
must therefore “look to the allegedly preempting
federal statute to find an interest to support stand-
ing.” Brief for Respondents at 13-17, PhRMA uv.
Walsh, 538 U.S. 644 (2003) (No. 01-188). PhRMA took
issue with this claim in its reply brief, noting that the
Supreme Court and the lower federal courts had
“decided innumerable cases in which parties claiming

23a

to be injured by a state law have challenged it as
preempted by federal law” and that the Court had
never held “that a party directly claiming a Suprem-
acy Clause violation must demonstrate an enforce-
able right under the preemptive federal law.” Reply
Brief of Petitioner at 2-3, PhRMA v. Walsh, 538 U.S.
644 (2003) (No. 01-188).

Not acceding to the defendants’ argument that
PhRMA lacked a cause of action under the Suprem-
acy Clause, seven Justices reached the merits of
PhRMA’s claim for injunctive relief. See PhRMA uv.
Walsh, 538 U.S. at 668 (Stevens, J., joined by Souter,
J., and Ginsburg, J.); id. at 671 (Breyer, J.); id. at 684
(O’Connor, J., joined by Rehnquist, C.J., and Ken-
nedy, J.). Only Justices Scalia and Thomas would
have denied PhRMA’s ability to bring suit for preemp-
tion, although they ultimately concurred in the
Court’s judgment that Maine’s statute was likely not
preempted by the federal Medicaid Act. See id. at 675
(Scalia, J., concurring in judgment); id. at 675-83
(Thomas, J., concurring in judgment). Faced with

Justices Scalia would have held that PhRMA could not
bring suit, because “the remedy for the State’s failure to comply
with the obligations it has agreed to undertake under the
Medicaid Act is set forth in the Act itself: termination of fund-
ing.” See id. at 675 (Scalia, J., concurring in judgment). Justice
Thomas argued that the broad discretion conferred by statute on
the Secretary of Health and Human Services defeated any
preemption claim, and doubted whether “Spending Clause
legislation can be enforced by third parties in the absence of a
private right of action.” See id. at 675-83 (Thomas, J., concurring
in judgment).

24a

arguments similar to those presented by the Director
in this case, the Court necessarily assumed — albeit
implicitly — that a private party seeking to enjoin
implementation of a state law allegedly preempted by
the federal Medicaid Act may bring suit for injunctive
relief directly under the Supremacy Clause.

Although the Supreme Court’s decision in Walsh
affirmed PhRMA’s ability to bring swit under the
Supremacy Clause sub silentio, two circuits have
expressly relied on Walsh to permit suits for injunc-
tive relief. In PhRMA v. Thompson, 362 F.3d 817
(D.C. Cir. 2004), the D.C. Circuit addressed a similar
challenge to Michigan’s “Best Practices Initiative,”
which was designed — much like Maine’s statute — to
provide low-cost prescription drug coverage to state
residents. Jd. at 819. Citing Justice Thomas’s opinion
in Walsh, the defendants argued that there were
“serious questions as to whether third parties may
sue to enforce Spending Clause legislation — through
pre-emption or otherwise.” Jd. at 819 n.3. The D.C.
Circuit rejected defendants’ argument, holding that
by reaching the merits of PhRMA’s preemption claim
in Walsh, the Supreme Court implicitly affirmed
PhRMA’s authority to bring suit for injunctive relief
under the Supremacy Clause. Id.

In Planned Parenthood of Houston v. Sanchez,
403 F.3d 324 (5th Cir. 2005), the Fifth Circuit relied
in part on the Supreme Court’s decision in Walsh
to permit a claim for injunctive relief under the
federal Social Security and Public Health Services
Acts. Id. at 331-32. Several local branches of Planned

25a

Parenthood claimed that a Texas statute known as
“Rider 8,” which restricted the distribution of public
funds for family planning services to contractors who
pledged not to perform, or to contract with any indi-
vidual or entity that performed, any elective abortion
procedures, was preempted by federal law.” Id. at
328. Plaintiffs argued, inter alia, that the state stat-
ute violated the Supremacy Clause by imposing
eligibility requirements that were inconsistent with
those imposed under the federal funding statutes. Id.

In assessing plaintiff’s claims for injunctive
relief, the Fifth Circuit began by noting that “(i]t is
well-established that the federal courts have jurisdic-
tion under 28 U.S.C. § 1331 over a preemption claim
seeking injunctive and declaratory relief.” Jd. at 331
(citing Shaw). The court then cited Walsh and
Thompson for the principle that “asserting the pre-
emptive force of federal Spending Clause legislation”
itself states a claim for relief, even if “(Planned Par-
enthood was] not seeking to vindicate any right or to
enforce any duty running to them.” Jd. at 331-32.
After a thorough canvassing of preemption cases, see
id. at 331-34 & nn.25, 27-28, 37, 46-47, the court had
“little difficulty ... holding that (Planned Parenthood
had] an implied right of action to assert a preemption

'’ Texas accepted federal funds for family planning services
by voluntarily participating in a number of federal programs,
including the Public Health Services Act and the Social Security
Act. Id. at 327.

26a

claim seeking injunctive and declaratory relief.” Jd. at
335.

[8] We find the reasoning of the D.C. and Fifth
Circuits persuasive.* For more than a century, fed-
eral courts have entertained suits seeking to enjoin
state officials from implementing state legislation
allegedly preempted by federal law, and we see no
reason to depart from the general rule in this case, or
in this category of cases. We therefore join several
other circuits in holding that a party may seek in-
junctive relief under the Supremacy Clause regard-
less of whether the federal statute at issue confers
any substantive rights on would-be plaintiffs.

“ The district court stated that ILC’s reliance on Concan-
non was misplaced because plaintiffs in that case had “estab-
lished a concrete injury in fact” — standing language, as we shall
see — whereas “(hJere, § 30(A) does not give petitioners any right
to Medi-Cal funds.” In fact, Concannon expressly permitted
PhRMA to bring suit for injunctive relief in the absence of any
statutory right to Medicaid funds. See 249 F.3d at 73. The
pharmaceutical manufacturers bringing suit in Concannon had
no greater “right” to Medicaid funds than the pharmacies and
health care providers in this case, and ILC has adequately
alleged injury-in-fact. See Part II-C, infra.

Similarly, there is no viable distinction for present purposes
between the restrictions on Planned Parenthood’s activities
imposed by the statute at issue in Planned Parenthood uv.
Sanchez and the impact of AB 5 on the Medi-Cal providers in
this case. AB 5 allegedly prevents petitioners from providing
services to Medi-Cal beneficiaries unless they are willing to do
so at a financial loss, and thus assuredly “restricts” petitioners’
provision of professional services.

27a

3.

[9] The reasoning adopted by the other circuits
is also helpful in identifying the fundamental flaw
with the Director’s position. By maintaining that ILC
cannot proceed unless it can demonstrate that AB 5
interferes with some federally created right, the
Director essentially asks us to apply the test for
determining whether a plaintiff may seek relief under
42 U.S.C. § 1983, which provides a remedy for “the
deprivation of any rights, privileges, or immunities
secured by the Constitution and laws.” The Supreme
Court has interpreted the text of § 1983 to require a
plaintiff to show the deprivation of “an unambigu-
ously conferred right” in order to support a cause of
action brought under § 1983. Gonzaga Univ. v. Doe,
536 U.S. 273, 283 (2002). But both the Supreme
Court and the courts of appeal have consistently
rejected attempts to extend this analysis to claims for
purely prospective injunctive relief under the Su-
premacy Clause, rendering the “rights” requirement
inapplicable to ILC’s claims in this case.

Section 1983 provides: “Every person who, under color
of any statute, ordinance, regulation, custom, or usage, of any
State, ... subjects, or causes to be subjected, any citizen of the
United States or other person within the jurisdiction thereof to
the deprivation of any rights, privileges, or immunities secured
by the Constitution and laws, shall be liable to the party injured
in an action at law, suit in equity, or other proper proceeding for
redress... .” 42 U.S.C. § 1983.

28a

The Fighth Circuit’s decision in Lankford v.
Sherman, 451 F.3d 496 (8th Cir. 2006), is instructive.
In response to severe “budget constraints,” the Mis-
souri state legislature amended its state Medicaid
plan to eliminate coverage for durable medical
equipment (“DME”) for most categorically-needy
Medicaid recipients. Jd. at 500-01. Plaintiffs, a group
of adult Medicaid recipients, brought suit under both
§ 1983 and the Supremacy Clause to enjoin state
regulations implementing the amendment, arguing
that the cuts violated certain provisions of the federal
Medicaid Act. Jd. at 500-02. Like the Director in our
case, the defendant argued “that there is no individu-
alized federal right to reasonable Medicaid stan-
dards.” Id. at 507. The court agreed with the
defendant as to the $1983 claim, holding that
“(rjather than focusing on an individualized entitle-
ment to medical services, the reasonable-standards
provision [of the Medicaid Act] focuses on the aggre-
gate practices of the states in establishing reasonable
Medicaid services.” Id. at 509. The court noted, how-
ever, that the § 1983 issue was not dispositive, as
plaintiffs had also brought suit under the Supremacy
Clause. “Preemption claims are analyzed under a
different test than section 1983 claims, affording
plaintiffs an alternative theory for relief when a state
law conflicts with a federal statute or regulation.” Jd.
The lack of any federally created “right” under the
Medicaid Act was inconsequential to the Supremacy
Clause analysis, and plaintiffs’ preemption claim
was remanded for consideration on the merits. /d. at

513.

29a

The Fifth Circuit reached a similar conclusion in
Planned Parenthood v. Sanchez. As noted above,
plaintiffs sought to enjoin implementation of Texas’s
Rider 8, which required recipients of federal funds to
cut all ties with any organization performing elective
abortions. Sanchez, 403 F.3d at 328. Advancing the
same arguments asserted by the Director in our case,
the Texas Department of Health contended that to
seek injunctive relief, “plaintiffs must meet the
requirements for an action under § 1983, as recently
enunciated in Gonzaga University v. Doe,” namely,
that the federal statutes at issue confer privately
enforceable “rights.” Jd. at 335. The Fifth Circuit
flatly rejected this argument, finding that it “mis-
characterize[d]” Planned Parenthood’s claim:

Appellees are not asking the courts to en-
force their “right” under § 1983 to secure en-
forcement of [the Public Health Safety Act],
as TDH asserts. Rather, Appellees’ Suprem-
acy Clause argument is fundamentally dif-
ferent: they argue that Rider 8 imposes
conditions on the receipt of federal funds
that are incompatible with [the Act]. There-
fore, we need not be concerned that the Su-
premacy Clause does not of its own force
create rights enforceable under § 1983.

Id. The court then noted that “Gonzaga, by its terms,
applies only to § 1983 claims.... The Supremacy
Clause claim advanced here ... is not based on a
claim of right under [the Act], nor is it a claim for
damages; it is a preemption claim. The Gonzaga
Court gave no indication that it intended to alter its

30a

prior practice regarding such claims.” Jd. The court
therefore concluded that a claim of preemption under
the Supremacy Clause “does not require a showing,
as per Gonzaga, that a § 1983 action would also be
proper.” Id.; see also Local Union No. 12004, 377 F.3d
at 75-76 (distinguishing between claims brought
under § 1983 and claims for injunctive relief under
the Supremacy Clause); Qwest, 380 F.3d at 1266 &
n.5 (same); Burgio & Campofelice, 107 F.3d at 1005-
07 & n.2 (same).

For the reasons identified by the Fifth Circuit in
Planned Parenthood v. Sanchez, the Director’s heavy
reliance on our decision in Sanchez v. Johnson, 416
F.3d 1051 (9th Cir. 2005), is misplaced. Johnson
merely applied Gonzaga to a claim seeking to enforce
the substantive provisions of § 30(A) of the Medicaid
Act brought under § 1983. We held that the quality of
care and access provisions of § 30(A) do not give rise
to the type of unambiguously conferred “rights”
required under Gonzaga. See id. at 1055-60. But our
decision ir Johnson had nothing to say about a claim
for injunctive relief brought under the Supremacy
Clause.

[10] Indeed, even as the Supreme Court has
tightened the requirements for seeking damages
under § 1983, it has consistently reaffirmed the
availability of injunctive relief to prevent state offi-
cials from implementing state legislation allegedly
preempted by federal law. In Green v. Mansour, 474
U.S. 64 (1985), two classes of plaintiffs alleged that
the State of Michigan’s method of calculating benefits

3la

under the federal Aid to Families With Dependent
Children (AFDC) program violated federal law. Jd. at
65. While the suits were pending in federal district
court, the State altered its program to comply with
recent congressional amendments. Jd. at 65-66. These
changes mooted plaintiffs’ claims for prospective
relief, since it was “undisputed that respondent’s
calculations thereafter have conformed to federal
law.” Id. at 65. Plaintiffs nonetheless sought “notice
relief” and a declaration that Michigan’s prior con-
duct violated federal law. Id.

The Court denied relief, holding that plaintiffs’
requests for notice and declaratory relief constituted
claims for retrospective damages and were thus
barred by state sovereign immunity under the Elev-
enth Amendment. Jd. at 71-74. All nine justices
agreed, however, that injunctive relief would have
been available under the Supremacy Clause if
changes to the state program had not mooted plain-
tiffs’ prospective claims. See id. at 68; id. at 77 (Bren-
nan, J., dissenting). Writing for the majority, then-
Justice Rehnquist noted that “the availability of
prospective relief of the sort awarded in Ex parte
Young gives life to the Supremacy Clause. Remedies
designed to end a continuing violation of federal law
are necessary to vindicate the federal interest in
assuring the supremacy of that law.” Jd. at 68.

[11] The Director’s arguments fail to honor this
distinction, broadly asserting instead that because
§ 30(A) of the Medicaid Act does not confer any sub-
stantive “rights,” ILC is not entitled to relief of any

32a

kind, whether prospective or retrospective. Green
cautioned against conflating claims for prospective
and retrospective relief in precisely this manner,
recognizing that a state’s interest in continuing to
flout binding federal law is illegitimate. 474 U.S. at
68; see also Idaho v. Coeur d’Alene Tribe, 521 U.S.
261, 281 (1997) (“An allegation of an ongoing viola-
tion of federal law where the requested relief is
prospective is ordinarily sufficient” to seek injunctive
relief under Ex parte Young). We therefore adhere to
the general rule that injunctive relief is presump-
tively available to remedy a state’s ongoing violation
of federal law.

C.

[12] Because it held that ILC could not bring
suit under the Supremacy Clause, the district court
did not technically reach petitioners’ standing to
bring suit. As noted above, however, the first and
second prongs of the district court’s Shaw analysis —
which focused on whether AB 5 “restricts” or “com-
pels” petitioners’ conduct — appear to reflect the
traditional requirement that a litigant demonstrate
an injury-in-fact to establish Article III standing. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560
(1992). On appeal, the Director expressly “does not
allege that the named Petitioners do not have stand-
ing to bring this action on their own behalf,” but
rather argues simply that “Petitioners cannot state a

33a

claim for relief under the Supremacy Clause.” We
nonetheless recognize our “independent obligation” to
examine our own jurisdiction, see FW/PBS, Inc. v.
City of Dallas, 493 U.S. 215, 230-31 (1990), and
therefore briefly address ILC’s Article III standing."

" Although the Director does not contest petitioners’
standing, she does argue that the interests protected by § 30(A)
are not judicially enforceable because § 30(A) concerns “overall
methodology” and “merely requires states to consider various
factors in setting reimbursement rates.” We express no opinion
regarding the correct interpretation of the substantive provi-
sions of § 30(A), as such arguments are properly addressed to
the merits of petitioners’ preemption claim. See Wilder v. Va.
Hosp. Ass'n, 496 U.S. 498, 519 (1990) (“That [the statutory
provision at issue] gives the States substantial discretion in
choosing among reasonable methods of calculating rates may
affect the standard under which a court reviews whether the
rates comply with the [statute], but it does not render the
[statute] unenforceable by a court.”); Orthopaedic Hosp., 103
F.3d at 1496-1500 (interpreting the substantive provisions of
§ 30(A)).

" Unlike the Article II] standing inquiry, whether ILC
maintains prudential] standing “is not a jurisdictional limitation
on our review.” See Bd. of Natural Res. v. Brown, 992 F.2d 937,
945-46 (9th Cir. 1993). By failing to articulate any argument
challenging I[LC’s prudential standing, the Director has waived
that argument. Id. at 946; Greenwood v. F-A.A., 28 F.3d 971, 977
(9th Cir. 1994) (“We review only issues which are argued specifi-
cally and distinctly in a party’s opening brief. We will not
manufacture arguments for an appellant, and a bare assertion
does not preserve aclaim... .” (internal citation omitted)).

34a

[13] To satisfy Article II] standing require-
ments, a plaintiff must demonstrate three elements:

First, the plaintiff must have suffered an in-
jury in fact — an invasion of a legally pro-
tected interest which is (a) concrete and
particularized; and (b) actual or imminent,
not conjectural or hypothetical. Second, there
must be a causal connection between the
injury and the conduct complained of — the
injury has to be fairly traceable to the chal-
lenged action of the defendant, and not the
result of the independent action of some
third party not before the court. Third, it
must be likely, as opposed to merely specula-
tive, that the injury will be redressed by a
favorable decision.

Lujan, 504 U.S. at 560-61 (internal citations and
quotation marks omitted). “The general rule applica-
ble to federal court suits with multiple plaintiffs is
that once the court determines that one of the plain-
tiffs has standing, it need not decide the standing of
the others.” Leonard v. Clark, 12 F.3d 885, 888 (9th
Cir. 1993). In this case, we have no doubt that several
of the petitioners, at least, have standing to challenge
the implementation of AB 5.

[14] Petitioners include independent pharma-
cies and health care providers participating in the
State’s Medi-Cal program that, according to their
complaint, will be “directly injured, by loss of gross
income,” when the ten-percent rate reduction takes
effect. The Supreme Court “repeatedly has recognized

35a

that such [direct economic] injuries establish the
threshold requirements” of Article III standing. Craig
v. Boren, 429 U.S. 190, 194-95 (1976). Moreover, this
injury is directly traceable to the Director’s imple-
mentation of AB 5, and would certainly be redressed
by a favorable decision of this court enjoining the ten-
percent rate reduction.

[15] Petitioners also include several individual
Medi-Cal beneficiaries, who “will be injured or put at
risk of injury by implementation of the 10% provider
payments cuts” because those cuts will reduce “qual-
ity services, and access to quality services.” This
injury, like the injury to medical providers discussed
above, is the direct result of the Director’s implemen-
tation of AB 5, and would certainly be remedied by a
decision granting injunctive relief. Such an injury “to
those individuals most directly affected by the ad-
ministration of [a state welfare] program” is sufficient
to allow petitioners to seek injunctive relief in federal
court. Rosado v. Wyman, 397 U.S. 397, 420 (1970).

Conclusion

Under well-established law of the Supreme
Court, this court, and the other circuits, a private
party may bring suit under the Supremacy Clause to
enjoin implementation of

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_0356%3A1. Public record. Not legal advice.