Monday, November 26, 2018
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Ninth Circuit:
Removal to Federal Court Didn’t Defeat State-Law Fee Claim
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has held that a group of medical providers who successfully challenged a law reducing Medi-Cal reimbursements can seek their attorney fees under California statute, despite the case’s proper removal due to federal-question jurisdiction.
The opinion by Circuit Judge Milan D. Smith Jr. reverses the denial of the attorney fees motion by District Judge Christina A. Snyder of the Central District of California. Circuit Judge Morgan Christen wrote a concurring opinion.
Independent Living—a group of health care advocacy organizations and medical care providers—in 2008 filed a petition for a writ of mandate in the Los Angeles Superior Court, pursuant to Code of Civil Procedure §1085, challenging a new law which reduced the reimbursements due such organizations under Medi-Cal by 10 percent.
The petitioner argued that the Department of Health Care Services, by implementing the law, was violating the federal Medicare Act, under which Medi-Cal operates. The respondents in the case removed the action to federal court, due to the preemption issue being a federal question.
The case eventually settled in mediation, with the department making changes to its implementation of the 2008 law that satisfied both the petitioners and the federal agency tasked with oversight of Medicare.
Fee-Shifting Statute
Smith referenced California Code of Civil Procedure §1021.5, which provides in part:
“Upon motion, a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest….”
This fee-shifting statute, he noted, applies only to cases brought under California law. He wrote:
“The central question in this appeal is whether Appellants brought a state-law claim or a federal claim, for the answer to that question will determine whether they are entitled to seek attorneys’ fees pursuant to California’s § 1021.5 in federal court.”
No Federal Claim
The jurist noted that the U.S. Supreme Court in 2014 held in Inclusion Inc. v. Armstrong that the Supremacy Clause itself does not provide a cause of action and is not the source of any federal rights.
“Thus,” he wrote, “in short order, the Supreme Court determined that neither the federal statute nor the Constitutional provision at issue here provides similar plaintiffs a cause of action. Accordingly, Appellants’ cause of action must be grounded in state law, if a cause of action is to exist under the circumstances alleged.”
The federal question jurisdiction supporting the case’s removal to U.S. District Court did not affect his analysis. He said:
“Of course, federal question jurisdiction encompasses more than just federal causes of action. Federal courts have jurisdiction to hear ‘cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law.’ ”
State-Law Claim
He went on to say:
“Ultimately, it is clear that, under California law, §1085 Writs may issue to compel state agencies to comply with federal requirements. That is the essence of Appellants’ claim. Moreover, a significant portion of Appellants’ success was due to our interpretation of state law….
“Accordingly, we conclude that Appellants’ claim pursuant to § 1085 is properly characterized as a state-law cause of action and its removal to federal court does not compel a conclusion otherwise.”
Although the petitioners will be able, on remand, to renew their request for attorney fees from the department, other respondents in the case were released from liability for fees pursuant to the settlement agreement.
In a 2009 decision, a differently-composed panel of the Ninth Circuit held that an injunction issued by the District Court preventing implementation of the 10 percent reduction applied retroactively. That ruling (subsequently vacated on other grounds by the Supreme Court) allowed for a $70 million payment to Medi-Cal providers from the Department of Health Care Services.
The petitioners’ request for an order setting aside $17.5 million for attorney fees was denied. Explaining why this was error, Smith declared:
“First, the retroactive relief obtained satisfied the common fund requirements. The identifiable class of beneficiaries was comprised of Medi-Cal health providers who received reduced reimbursement for services provided between July 1, 2008 and August 18, 2008. Each member of this class had an ‘undisputed and mathematically ascertainable claim to part of a lump sum judgment recovered on his behalf.’…
“Second, contrary to the district court’s statement, a final settlement agreement or adjudication on the merits is not a prerequisite to the formation of a common fund.”
Christen’s concurrence agrees with the majority’s holding, but on the grounds that the declaratory relief inherent in the §1085 writ petition was “enough to anchor Appellants’ fees petition.”
The case is Independent Living Center v. Kent, No. 15-56142.
Berkeley School of Law Dean Erwin Chemerinsky argued before the panel on behalf of the petitioners, while Craig J. Cannizzo of Hooper, Lundy & Bookman in San Francisco represented another group of medical care providers which intervened in the case. Supervising Deputy Attorney General Susan M. Carson was counsel for the state.
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