Indep. Living Ctr. of S. Cal. v. Jennifer Kent, 909 F.3d 272

Background

In 2008 California enacted AB X3 5, cutting Medi‑Cal reimbursement rates by 10% effective July 1, 2008.
Independent Living filed a state‑court petition for a writ of mandate under Cal. Civ. Proc. Code § 1085 alleging AB 5 violated Medicaid Act § 30(A) and the Supremacy Clause; the Director removed to federal court.
The Ninth Circuit enjoined enforcement (including retroactive relief after holding California waived sovereign immunity); the Supreme Court vacated and remanded after CMS approved some plan amendments, then the parties settled.
The settlement preserved Appellants’ right to seek attorneys’ fees; Appellants moved for fees under Cal. Civ. Proc. Code § 1021.5 and for a 25% set‑aside of retroactive payments as a common fund.
The district court denied both fee motions; the Ninth Circuit reversed, holding the § 1085 writ was a state‑law claim allowing § 1021.5 fees in federal court and that denial of the set‑aside was an abuse of discretion.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the § 1085 writ was a federal or state claim	§1085 petition enforces federal Medicaid requirements but is a state‑law writ; thus plaintiffs may seek state fee statute §1021.5	Removal raised a federal question and therefore the claim is federal, barring state statutory fee awards	The §1085 writ is a state‑law claim (even though federal question jurisdiction was proper); §1021.5 may be invoked in federal court under Erie
Whether federal common law or federal courts should govern fee awards	State law §1021.5 applies; Erie principles require applying California substantive law on fees	Federal common law controls in federal question cases, precluding state fee awards here	Federal common law did not preempt state fee law; Erie supports applying §1021.5
Whether plaintiffs were “successful parties” under §1021.5	Preliminary injunction and public benefit satisfy §1021.5 (Maria P. precedent)	Subsequent CMS approval and settlement eliminate public‑interest success	Plaintiffs can be successful parties under §1021.5; entitlement and amount remanded to district court
Whether district court abused discretion denying set‑aside of common fund (25% of retroactive payments)	Retroactive monetary relief created an identifiable common fund benefiting non‑parties; set‑aside appropriate to secure fees	Denial was not reviewable as interlocutory; settlement/release bars recovery	Denial was an abuse of discretion; remanded to determine if and how fees can be recovered from the retroactive relief

Key Cases Cited

Armstrong v. Exceptional Child Care Ctr., Inc., 135 S. Ct. 1378 (Sup. Ct.) (Supremacy Clause and Medicaid §30(A) do not create a private federal cause of action)
Douglas v. Indep. Living Ctr. of S. Cal., 132 S. Ct. 1204 (Sup. Ct.) (vacating Ninth Circuit decision after CMS approvals; remanding)
Gunn v. Minton, 568 U.S. 251 (Sup. Ct.) (four‑part test for federal‑question jurisdiction over state law claims)
Grable & Sons Metal Prods. v. Darue Eng’g, 545 U.S. 308 (Sup. Ct.) (federal question jurisdiction where state claim necessarily raises a substantial federal issue)
Merrell Dow Pharm. v. Thompson, 478 U.S. 804 (Sup. Ct.) (limits on federal‑question jurisdiction where no federal private right of action exists)
Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (Sup. Ct.) (general rule that parties bear their own fees absent statute; state fee statutes may apply in federal court)
Boeing Co. v. Van Gemert, 444 U.S. 472 (Sup. Ct.) (common fund doctrine: fee awards may be paid from a fund conferring benefit on others)
Klein v. City of Laguna Beach, 810 F.3d 693 (9th Cir.) (federal courts apply state law for attorneys’ fees to state claims under Erie)