Aids Healthcare Foundation v. Toby Douglas, 666 F. App'x 601

Background

AHF sued Director of California Dept. of Health Care Services challenging Cal. Welf. & Inst. Code § 14105.46, which treats 340B providers differently in Medi‑Cal drug purchasing and reimbursement.
AHF asserted claims under federal Medicaid law (42 U.S.C. § 1396a(a)(30)(A)) and alleged the State implemented the SPA without required prior CMS approval; it also raised federal and state equal protection claims.
The district court granted summary judgment for AHF on the § 30(A) and prior‑approval claims and enjoined implementation; it granted summary judgment to the Director on equal protection claims.
Both parties appealed: Director challenged the district court’s rulings for AHF and the injunction; AHF cross‑appealed the adverse equal protection rulings.
On appeal the Ninth Circuit reviewed summary judgment de novo and injunctive relief for abuse of discretion, and considered mootness after CMS retroactively approved the SPA.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether § 30(A) (42 U.S.C. § 1396a(a)(30)(A)) can be privately enforced in equity	AHF sought to enforce § 30(A) through an equitable action to invalidate § 14105.46	Director argued no private right of action exists to enforce § 30(A) in equity	Court: No private equitable enforcement available post‑Armstrong; AHF’s § 30(A) claims fail as a matter of law (reversed)
Whether state must obtain CMS approval before implementing the SPA and whether failure to do so is judicially redressable	AHF argued Director implemented the SPA without prior CMS approval and sought relief	Director noted CMS later retroactively approved the SPA and that prior‑approval claims can be mooted by CMS approval	Court: Claim moot because CMS retroactively approved the SPA; district court’s grant for AHF on this ground reversed
Whether § 14105.46 violates Equal Protection (U.S. and California Constitutions)	AHF argued the 340B/non‑340B classification lacked a rational basis and discriminated against 340B providers	Director argued the classification targets double‑discount problems, simplifies program administration, and is rationally related to legitimate interests	Court: Classification is rationally related to legitimate state interests; Director prevails; district court’s grant for Director affirmed
Whether permanent injunction against implementation should remain	AHF argued injunction necessary to prevent harm from implementation	Director argued injunction improper given loss on equal protection and mootness on prior‑approval, and that AHF did not prevail on claims	Court: Because AHF did not prevail on any claim after rulings, the permanent injunction was vacated

Key Cases Cited

Armstrong v. Exceptional Child Ctr., Inc., 135 S. Ct. 1378 (2015) (Supreme Court holding plaintiffs cannot use courts’ equitable powers to bring private enforcement actions under § 30(A))
City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432 (1985) (Equal protection review and presumption of legislative validity)
F.C.C. v. Beach Commc’ns, Inc., 508 U.S. 307 (1993) (burden on challenger to negate every conceivable rational basis for classification)
Nordlinger v. Hahn, 505 U.S. 1 (1992) (rational‑basis review satisfied by plausible policy reason)
Arc of Cal. v. Douglas, 757 F.3d 975 (9th Cir. 2014) (discussing prior‑approval claims and mootness after SPA approval)
Cal. Ass’n of Rural Health Clinics v. Douglas, 738 F.3d 1007 (9th Cir. 2013) (prior‑approval injunctions mooted by CMS approval)
Dev. Servs. Network v. Douglas, 666 F.3d 540 (9th Cir. 2011) (collecting cases permitting provider suits over state failure to secure CMS approval)
Fortyune v. Am. Multi‑Cinema, Inc., 364 F.3d 1075 (9th Cir. 2004) (standards of review for summary judgment and injunction issues)