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., DBA Uptown Pharmacy and Gift Shoppe; Sharon Steen, DBA Central Pharmacy; Tran Pharmacy, Inc.; Mark Beckwith; Margaret Dowling, Petitioners-Appellants,
Jennifer Kent, Director of Department of Health Care Services of the State of California; Department of Health Care Services, Respondents-Appellees. SACRAMENTO FAMILY MEDICAL CLINICS, INC.; ACACIA ADULT DAY SERVICES; RONALD B. MEAD, D.D.S.; THEODORE M. MAZER, M.D., Intervenors-Appellants,
JENNIFER KENT, Director of Department of Health Care Services of the State of California; DEPARTMENT OF HEALTH CARE SERVICES, Respondents-Appellees.
and Submitted September 26, 2018 Pasadena, California
from the United States District Court Nos.
2:08-cv-03315-CAS-MAN, 2:08-cv-03315-CAS-MAN for the Central
District of California Christina A. Snyder, District Judge,
Chemerinsky (argued), University of California, Berkeley,
School of Law, Berkeley, California; Stanley L. Friedman and
Rafael Bernardino, Jr., Law Offices of Stanley L. Friedman,
Los Angeles, California; for Petitioners-Appellants.
J. Cannizzo (argued), Hooper, Lundy & Bookman, P.C., San
Francisco, California; Lloyd A. Bookman and Jordan B.
Keville, Hooper, Lundy & Bookman, P.C., Los Angeles,
California; for Intervenors-Appellants.
M. Carson (argued), Supervising Deputy Attorney General;
Julie Weng-Gutierrez, Senior Assistant Attorney General;
Xavier Becerra, Attorney General of California; Office of the
Attorney General, San Francisco, California; for
Before: WILLIAM A. FLETCHER, MILAN D. SMITH, JR., and MORGAN
CHRISTEN, Circuit Judges.
panel reversed the district court's denial of
plaintiffs' request for attorneys' fees following the
settlement of litigation concerning California's Assembly
Bill X3 5, which reduced the Medi-Cal rate of reimbursement
for healthcare providers by ten percent.
sought a writ of mandamus under Cal. Civ. Proc. Code §
1085 on the ground that AB 5 violated Section 30(A) of the
Medicaid Act, thereby conflicting with federal law and
violating the Supremacy Clause. The Ninth Circuit upheld the
district court's preliminary injunction against
enforcement of the ten percent reduction, to apply both
prospectively and retroactively. The Supreme Court vacated
and remanded in light of the Centers for Medicare &
Medicaid Services' approval of certain plan amendments to
implement AB 5. The parties subsequently entered into a
settlement agreement in which plaintiffs reserved the right
to move for attorneys' fees. Plaintiffs did so pursuant
to Cal. Civ. Proc. Code § 1021.5, and the district court
denied their motions.
panel held that, even though the case was properly removed
from state court based on federal question jurisdiction,
plaintiffs brought a state-law claim and were therefore
permitted to seek attorneys' fees pursuant to §
1021.5. The panel concluded that plaintiffs' § 1085
Writ was not a federal claim following Armstrong v.
Exceptional Child Care Ctr., Inc., 135 S.Ct. 1378
(2015), which held that neither the federal Medicaid statute
nor the Constitution provides a cause of action for
enforcement of Section 30(A). The panel concluded that the
§ 1085 Writ endured as a state-law claim because, under
California law, § 1085 Writs may issue to compel state
agencies to comply with federal requirements. The panel held
that federal common law did not govern the award of fees and
preclude an award pursuant to state law. The panel concluded
that the Erie doctrine supported allowing plaintiffs
to seek fees under § 1021.5. The panel reversed the
district court's holding that plaintiffs were precluded
from seeking an award of attorneys' fees under §
1021.5, and remanded to the district court to determine
whether plaintiffs met the requirements of § 1021.5 to
obtain a fee award, and if so, to calculate that award.
panel further held that the district court abused its
discretion in denying plaintiffs' motion to set aside
funds for attorneys' fees following the decision
permitting retroactive monetary relief from the Medi-Cal
reimbursement reduction. The panel remanded for a
determination of whether plaintiffs could recover any fees
from the retroactive relief.
Judge Christen wrote that she concurred in the result reached
by the majority opinion but reached the same conclusion in a
different way. Judge Christen wrote that plaintiffs could
seek attorneys' fees under § 1021.5 because the
parties' settlement included a state-law request for
declaratory relief under § 1085. Judge Christen agreed
that it was an abuse of discretion to deny plaintiffs'
motion to set aside attorneys' fees from the
D. SMITH, JR. JUDGE.
case comes before us once again after a decade-long journey
within the federal court system. In these final stages of the
litigation, Petitioners-Appellants (Independent Living), a
group of health care advocacy organizations and medical care
providers, and Intervenors-Appellants (Intervenors, and
together with Independent Living, Appellants), another group
of health care providers and organizations, seek an award of
attorneys' fees from the Director of the California
Department of Health Care Services (the Director), and
possibly others. We hold that the district court erroneously
concluded that Appellants were not entitled to seek fees
pursuant to California Civil Procedure Code § 1021.5. In
addition, we hold that the district court abused its
discretion in denying Independent Living's motion to set
aside fees from the retroactive monetary relief obtained in
2010. Accordingly, we remand to the district court to
determine whether, in light of our ruling, Appellants meet
the requirements to obtain attorneys' fees pursuant to
§ 1021.5 and Section III (C)(1)(a) and (b) of the
Settlement Agreement (infra), and whether it is
possible and appropriate at this stage of the litigation for
Independent Living to recoup attorneys' fees "from
Medicaid providers that purportedly obtained a benefit from
counsel's work," pursuant to Section III (C)(1)(c)
of the Settlement Agreement, and that received payments from
the Department of Health Care Services (DHCS) as a result of
AND PROCEDURAL BACKGROUND
Medicaid Act authorizes the federal government to distribute
funds to states for the purpose of providing medical
assistance to low-income persons. Participating states are
subject to certain conditions. Armstrong v. Exceptional
Child Care Ctr., Inc., 135 S.Ct. 1378, 1382 (2015). One
such condition is the "equal access" provision
(Section 30(A)), which requires that states set provider
reimbursement rates that are "sufficient to enlist
enough providers so that care and services are available
under the plan at least to the extent that such care and
services are available to the general population in the
geographic area." 42 U.S.C. § 1396a(a)(30)(A).
February 16, 2008, the California legislature enacted
Assembly Bill X3 5 (AB 5). AB 5 reduced the
Medi-Cal-California's Medicaid program-rate of
reimbursement for healthcare providers by ten percent. These
cuts took effect on July 1, 2008.
April 22, 2008, Independent Living filed in Los Angeles
County Superior Court a petition for a writ of mandamus
against the DHCS and the Director, pursuant to California
Code of Civil Procedure § 1085 (the § 1085 Writ).
The petition alleged that the ten percent rate reduction
enacted pursuant to AB 5 violated Section 30(A), thereby
conflicting with federal law, and violating the Supremacy
Clause. In addition to the § 1085 Writ, Independent
Living sought an injunction preventing the implementation of
AB 5, as well as attorneys' fees pursuant to
California's Private Attorney General Act, Cal. Civ.
Proc. Code § 1021.5. On May 19, 2008, the Director
removed this action to federal court based on federal
question jurisdiction, and Independent Living filed the
§ 1085 Writ in federal court. On June 1, 2008,
Independent Living dismissed the DHCS from its action,
leaving only the Director as a defendant.
25, 2008, the district court denied Independent Living's
motion for a preliminary injunction preventing the
enforcement of AB 5. We vacated that decision on July 11,
2008, holding that a plaintiff "may bring suit under the
Supremacy Clause to enjoin implementation of a state law
allegedly preempted by federal statute." Indep.
Living Ctr. of S. Cal. v. Shewry, 543 F.3d 1047, 1049
(9th Cir. 2008) (per curiam); see Indep. Living Ctr. of
S. Cal. v. Shewry, 543 F.3d 1050 (9th Cir. 2008)
August 18, 2008, the district court enjoined enforcement of
the ten percent reduction. On August 27, 2008, the court
modified its injunction to apply only prospectively from the
date of the injunction because sovereign immunity purportedly
barred retroactive relief.
appeal, we analyzed whether retroactive application of the
injunction violated California's sovereign immunity.
Indep. Living Ctr. of S. Cal. v. Maxwell-Jolly, 572
F.3d 644, 660-63 (9th Cir. 2009), vacated and remanded on
other grounds sub nom. Douglas v. Indep. Living Ctr. of S.
Cal., 132 S.Ct. 1204 (2012). We first found this
retroactive relief would violate California's sovereign
immunity absent the Director's waiver of that immunity.
Id. at 661. We then noted that the Director would
have waived sovereign immunity by removing the suit to
federal court if California had previously consented to
similar suits in state court. Id. Consequently,
after reviewing numerous California state court decisions
that permitted § 1085 mandamus actions seeking
disbursement of unlawfully withheld funds, we held that the
Director had waived sovereign immunity. Id. at 663.
Therefore, we concluded that the injunction should also have
applied retroactively to Medi-Cal payments between the time
of AB 5's implementation and the date of the district
court's injunction (the retroactive period). Id.
March 15, 2010, Independent Living moved to set aside a
portion of the monies paid, or to be paid, to Medicaid
providers for the retroactive period to set up a fund from
which attorneys' fees could be paid. The district court
dismissed this motion because it believed it was premature
and that "[n]either side has provided any reason why
[the court] at the conclusion of the case could not fashion
an order requiring . . . California to pay attorneys'
fees based on what is ultimately the value of any judgment or
2011, the United States Supreme Court granted the
Director's petition for a writ of certiorari with respect
to the Supremacy Clause issue. Preceding oral argument before
the Supreme Court, the Centers for Medicare & Medicaid
Services (CMS), the federal agency in charge of administering
Medicaid, disapproved the Director's submitted plan
amendments to implement AB 5 because they did not satisfy
Section 30(A). Douglas, 132 S.Ct. at 1209. However,
after oral argument, and before the Supreme Court issued its
opinion, CMS approved some of the pending amendments.
Supreme Court ultimately held that CMS's decisions
regarding the plan amendments changed the procedural posture
of the case, and remanded it to our court to consider whether
the providers could maintain an action pursuant to the
Supremacy Clause. Id. at 1209-11. The Supreme Court
thus vacated, but did not reverse, our decision affirming the
Douglas, the parties resolved this case in
mediation, and produced a Settlement Agreement specifying the
terms of their concord. In Sections III (C)(1)(a) and (b) of
the Settlement Agreement, Appellants reserved the right to
move for attorneys' fees before the district court. The
state retained the right to oppose any such request. In
addition, Section III (C)(1)(c) of the Settlement Agreement
permitted "any plaintiffs' attorney" who had
appeared in one of the listed cases to seek attorneys'
fees "from Medicaid providers that purportedly obtained
a benefit from counsel's work," but not from
"DHCS or any of the State Released Entities."
Living and Intervenors separately moved for attorneys'
fees pursuant to § 1021.5. The district court denied the
motions, reasoning that this case involved only federal law
claims, so the district court could not award attorneys'
fees pursuant to a state-law provision like § 1021.5.
Independent Living and Intervenors timely appealed, and their
consolidated appeals are before us now.