Beverly K. BARTON, Plaintiff-Appellant, v. Paul G. SUMMERS, et al., Defendants-Appellees. Harshell C. Downs, Jr.; Kathleen D. Downs, Plaintiffs-Appellants, v. Commonwealth of Kentucky, et al., Defendants-Appellees.
Nos. 00-5942, 00-6282.
United States Court of Appeals, Sixth Circuit.
Argued: Nov. 29, 2001. Decided and Filed: June 13, 2002.
Rehearing and Suggestion for Rehearing En Banc Denied: Aug. 9, 2002.
293 F.3d 944
Russell T. Perkins (argued and briefed), Office of the Attorney General, Nashville, TN, D. Brent Irvin (argued), S. Elizabeth Martin (briefed), Office of the Attorney General, Nashville, TN, Scott White
James C. Gulick (briefed), N.C. DEPARTMENT OF JUSTICE, Raleigh, NC, for Amici Curiae.
Before RYAN, BOGGS, and DAUGHTREY, Circuit Judges.
OPINION
BOGGS, Circuit Judge.
Plaintiffs-appellants, Medicaid recipients with tobacco-related illnesses, appeal the dismissal of their actions seeking injunctions against two states, Kentucky and Tennessee (the States). Plaintiffs seek to intercept tobacco settlement money due to the States under the Master Settlement Agreement between a number of settling states and tobacco manufacturers. We affirm the dismissal of Plaintiffs’ claims, because actions seeking money damages from a state contravene the Eleventh Amendment of the United States Constitution. We also hold that Plaintiffs’ suits fail because. they have not asserted a valid claim.
I
Plaintiffs seek to represent Kentucky and Tennessee Medicaid recipients with tobacco-related illnesses, for whom the States paid medical bills. Under the November 1998 Tobacco Master Settlement Agreement (MSA) between 45 states and many tobacco manufacturers, both Kentucky and Tennessee will receive large payments in settlement of their claims. The monies to be paid were placed in escrow, pending the time that a specified percentage of the signatory states achieved “finality” under the terms of the agreement. Now that finality has been achieved, payments are being made from escrow to the States.
In order to implement the national settlement, the M.S.A. required states that did not have a pending lawsuit to institute proceedings in the appropriate state courts. Both of the States filed, and then settled, their MSA-required suits. Plaintiffs, claiming that the States’ recoveries were in the form of subrogation actions (i.e., that the States were actually suing on Plaintiffs’ behalf), have brought this
This suit is part of a nationwide series of suits in which Medicaid recipients are seeking to recoup “overage” amounts from a number of settling states. All but one of the Medicaid recipient suits, including the two instant cases, have been dismissed for failure to state a claim upon which relief could be granted or for Eleventh Amendment immunity. See Strawser v. Atkins, 290 F.3d 720, (4th Cir.2002), 2002 U.S.App. LEXIS 9648; Greenless v. Almond, 277 F.3d 601 (1st Cir.2002); Harris v. Owens, 264 F.3d 1282 (10th Cir.2001); Watson v. Texas, 261 F.3d 436 (5th Cir.2001); McClendon v. Georgia Dep‘t of Cmty. Health, 261 F.3d 1252 (11th Cir.2001); Tyler v. Douglas, 280 F.3d 116 (2d Cir.2001); Floyd v. Thompson, 227 F.3d 1029 (7th Cir.2000); Lewis v. State ex rel. Miller, 2002 WL 663711 (Iowa Ct.App.2002), 2002 Iowa App. LEXIS 436; Cardenas v. Anzai, 128 F.Supp.2d 704 (2001); Clark v. Stovall, 158 F.Supp.2d 1215 (D.C.Kan. 2001); Skillings v. Illinois, 121 F.Supp.2d 1235 (C.D.Ill.2000); Martin v. New Mexico, 197 F.R.D. 694 (D.N.M.2000); Brown v. State, 617 N.W.2d 421 (Minn.Ct.App. 2000); State v. Superior Court, 83 Cal. App.4th 597, 99 Cal.Rptr.2d 735 (2000); Oliva v. Florida, No. 99-2234 (Leon Co. Cir. Ct., 2d Cir. May 12, 2000);
II
A. The Eleventh Amendment Bars Suits Seeking to Intercept Future Payments to the States.
This case poses the question of whether Plaintiffs can escape the Eleventh Amendment bar blocking suits for money damages against the states by phrasing their requests for monetary relief as requests for future payments. We hold that they cannot.
Whether an action is barred by the Eleventh Amendment is a question of law, and is reviewed de novo. Timmer v. Michigan Dep‘t of Commerce, 104 F.3d 833, 836 (6th Cir.1997). The Eleventh Amendment provides:
The Judicial Power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.
States are, therefore, immune from private suit in both federal and state courts. There are three generally recognized exceptions to this rule. First, a state may consent to suit. Alden v. Maine, 527 U.S. 706, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999). The States have not consented to this suit. Second, Congress may, pursuant to its powers under the Fourteenth Amendment, abrogate the state‘s immunity. Seminole Tribe, 517 U.S. at 72-73. Congress has provided in
The third exception is the one at issue here. Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), holds that the Eleventh Amendment does not bar a federal court from issuing an injunction ordering prospective relief against a state official in order to prevent future constitutional violations. Id. at 159-60. However, it is “well established that even though a State is not named as a party to the action, the suit may nonetheless be barred by the Eleventh Amendment.” Edelman v. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974).
“[W]hen the action is in essence one for the recovery of money from the state, the state is the real, substantial party in interest and is entitled to invoke its sovereign immunity from suit even though individual officials are nominal defendants.” Ford Motor Co. v. Dept. of Treasury of the State of Indiana, 323 U.S. 459, 464, 65 S.Ct. 347, 89 L.Ed. 389 (1945). Thus, “the rule has evolved that a suit by private parties seeking to impose a liability which must be paid from public funds” is
As a result, even though the formal requirements of Ex Parte Young may be met by naming officials (rather than the state) as defendants, and seeking injunctive relief, relief should not be granted if “the relief is tantamount to an award of damages for a past violation of federal law, even though styled as something else.” Papasan v. Allain, 478 U.S. 265, 278, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).
There is an exception to the exception, of course. If the injunctive relief sought by the plaintiff is truly prospective non-monetary relief, sovereign immunity will not bar the suit simply because the state may be required to make incidental expenditures in complying with the injunction. Milliken v. Bradley, 433 U.S. 267, 289, 97 S.Ct. 2749, 53 L.Ed.2d 745 (1977) (federal courts are permitted to enjoin state officials to conform their conduct to requirements of federal law via injunction, notwithstanding a direct and substantial impact on the state treasury); Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974) (suit was proper to the extent it sought “payment of state funds as a necessary consequence of compliance with a substantive federal-question determination“). The dividing line, therefore, is whether the money or the non-monetary injunction is the primary thrust of the suit.
Plaintiffs have couched their claim in prospective language: in essence, they seek an order forcing the States to turn over portions of future installments of the monies due under the States’ settlement agreement with the tobacco manufacturers. Plaintiffs claim that these monies are not yet sufficiently the property of the States for such an order to be an order for monetary relief. Plaintiffs thereby hope to escape the Eleventh Amendment bar on suits for monetary relief against states.
Plaintiffs argue that their action is, in fact, merely one to force the States to comply with the federal distribution scheme for Medicaid recoupments, under
However, attempts to seize upon a state‘s “continuing income” by means of a prospective injunction have been held by the Supreme Court to be attempts to obtain compensation for an “accrued monetary liability.” Papasan, 478 U.S. at 281. In Papasan, several Mississippi school districts sued state officials, claiming that those officials had breached trust obligations under federal law in managing school trust lands. Id. at 274. The districts sought compensation for their losses; they phrased their claim as one seeking an injunction forcing the state officials to meet their continuing federal obligations to fund the schools properly. The Supreme Court rejected this argument, determining that the claim served a purely compensatory purpose. Id. at 281. In the case at hand, Plaintiffs seek court orders requiring the States to hand over money. This does not make the relief sought nonmonetary or prospective. As the Papasan Court stated:
[C]ontinuing payment of the income from the lost corpus is essentially equivalent in economic terms to a one-time restoration of the lost corpus itself: It is in substance the award, as continuing
income rather than as a lump sum, of an accrued monetary liability.
Ibid. (internal citations omitted). The attempt to seize on the settlement monies awarded to the States is an attempt to recover money damages and is barred by the Eleventh Amendment.
The case law does not support an argument that the requested relief has a purely “ancillary” effect on the States’ treasuries. A court may enter a prospective injunction that costs the state money, but only if the monetary impact is ancillary, i.e., not the primary purpose of the suit. Edelman, 415 U.S. at 668; see also Quern v. Jordan, 440 U.S. 332, 349, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979) (enjoining a state to provide notice to recipients of welfare as to how to collect welfare benefits). For example, in Milliken v. Bradley, the Court enjoined a state to provide education programs in order to remedy racial discrimination; the expenditure of funds was ancillary to the non-compensatory goal. 433 U.S. at 289-90.
However, in Kelley v. Metropolitan County Bd. of Educ., 836 F.2d 986 (6th Cir.1987), the Sixth Circuit held that the relief sought, an order requiring the state to assume a percentage of the costs to a school of desegregating, was not ancillary. The court noted that when “[t]he order to pay is ancillary only to itself ...” the Eleventh Amendment bar applies. Id. at 992. In the instant case, an order to pay out future amounts awarded to the States under the M.S.A. would be “ancillary only to itself“: there is no other purpose underlying the requested “injunctive” relief other than the recovery of cash that is the property of the state. It is therefore barred by the Eleventh Amendment.
Plaintiffs’ reliance on the Tenth Circuit‘s decisions in Elephant Butte Irrigation Dist. v. Dep‘t of the Interior, 160 F.3d 602, 610 (10th Cir.1998), and Harris v. Owens, 264 F.3d 1282 (10th Cir.2001), on the issue of sovereign immunity is misplaced. In Elephant Butte, a local water district sued the federal government and state officials claiming that the state violated federal law by retaining net profits under a recreational land lease with the federal government. The Elephant Butte court determined that relief would not be retrospective: the interference was not with a present entitlement but with a future possibility of earnings. Elephant Butte, 160 F.3d at 610. The difference between that case and this is obvious: the States here have a present and settled interest in payments that happen to be made in installments. If the settlement were already paid over as a lump sum, Plaintiffs would clearly have no case: the States’ established property interest would be unassailable. Plaintiffs recognize this when they assert that they are not claiming funds already paid to the States from escrow. The States have a present financial interest in the payment of the settlement, even though that payment will occur in installments rather than a lump sum.
For similar reasons, therefore, Plaintiffs cannot rely on Harris v. Owens, 264 F.3d 1282 (10th Cir.2001). In that case, the Tenth Circuit determined that the Eleventh Amendment did not bar a suit by a Medicaid recipient. Id. at 1297. However, the court found that an amendment to the Medicaid Act did block the Medicaid-recipient suit (a discussion of which is found below). Ibid.
The Harris court disagreed with those courts “that have found it ‘wholly irrelevant that payments [under the Master Settlement Agreement] will be made in fixed future installments rather than a lump sum.‘” Id. at 1291. Although the Harris court conceded that “[f]rom a purely economic perspective, it may be irrelevant that the settlement funds are to be paid
There is a final layer of sovereign immunity analysis that also blocks Plaintiffs’ suit. The Supreme Court in Idaho v. Coeur d‘Alene Tribe, 521 U.S. 261, 117 S.Ct. 2028, 138 L.Ed.2d 438 (1997), noted that even prospective relief (in Coeur d‘Alene, a declaratory judgment) would be barred if the relief sought is the functional equivalent of relief otherwise barred by the Eleventh Amendment and “special sovereignty interests” are implicated. Id. at 281. In Coeur d‘Alene, the plaintiffs sought a declaratory judgment establishing their rights to certain lands. The Court found that the suit was a “functional equivalent of a quiet title action,” which implicated “special sovereignty interests.” Id. at 281-82.
As appellees here point out, the Sixth Circuit noted in Kelley that the interest of a sovereign in allocating state funds is a “very serious” one. Kelley, 836 F.2d at 995. Although the analysis in Kelley was not expressly undertaken under the Coeur d‘Alene analytical scheme, the point is a good one: an attempt to force the allocation of state funds implicates core sovereign interests. Congress has stated, in its legislation modifying the Medicaid Act in anticipation of the MSA, that the states are specifically allowed to allocate the M.S.A. proceeds as they see fit.
Because Plaintiffs attempt to recover money damages from the States, their claims are barred by the Eleventh Amendment.
B. Plaintiffs Lack a Valid Claim.
We need go no further. However, we note that even were Plaintiffs able to pass the Eleventh Amendment bar on suits for monetary damages against a state, Plaintiffs have not asserted a valid claim. First, Plaintiffs’ characterization of the States’ recovery as a subrogation action is incorrect. Second, Plaintiffs do not have a private right of action to enforce federal rights under
Federal law requires states or local administering agencies to take “all reasonable measures to ascertain the legal liability of third parties” for costs incurred under state Medicaid plans.
If a state pursues an assigned claim,
Such part of any amount collected by the State under an assignment made under the provisions of this section shall be retained by the State as is necessary to reimburse it for medical assistance payments made on behalf of an individual with respect to whom such assignment was executed (with appropriate reimbursement to the Federal Government to the extent of its participation in the financing of such medical assistance) and the remainder of such amount collected shall be paid to such individual.
Plaintiffs have sued under
Even if the States had sued as assignees, the alleged “overage” amounts could not have come from Plaintiffs’ assigned claims. Under the assignment and third-party recovery provisions upon which Plaintiffs rely, the States are only assignees to the degree that they have paid out for services, and no more.
This point alone was sufficient for the Seventh Circuit to dismiss its Medicaid-recipient suit, Floyd v. Thompson, 227 F.3d 1029, 1035 (7th Cir.2000). Judge Wood noted that the “plaintiffs’ case hinges critically on the assumption that the M.S.A. settled claims that originally belonged to them.” Id. at 1035. Even if the States had sued on the assigned claims, rather than the States’ own claims, “[i]f the only thing the individuals assigned was their rights to recover the amounts paid by the Medicaid program—not their right to recover any excess—then there is nothing left to distribute to them to which they could have any claim.” Id. at 1036.
Moreover, the M.S.A. itself does not mention or allocate funds paid for restitution of Medicaid expenses. On the contrary, the M.S.A. states that the funds are paid “[i]n settlement of the Settling States’ antitrust, consumer protection, common law negligence, statutory, common law and equitable claims for monetary, restitutionary, equitable and injunctive relief alleged by the Settling States.” (MSA § XVIII(d)).
Plaintiffs’ claims must also fail because the provisions of the Medicaid Act that they rely on do not create a private cause of action for violation of their terms. The Supreme Court, in Wilder v. Virginia Hospital Ass‘n, 496 U.S. 498, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990), set forth the scheme for determining whether or not an implied private right of action under
The first inquiry (whether an enforceable federal right was created) requires a three-step analysis. First, courts ask whether the aspiring § 1983 plaintiff was the intended (or “especial“) beneficiary of the statute. Second, the court seeks to determine “enforceability” by asking whether the statute created a binding obligation upon the state. Third, the right sought to be enforced may not be vague or amorphous. Wilder, 496 U.S. at 509-12.
The intended beneficiary of the Medicaid recoupment statutes is the federal government. The provisions require states to pursue remedies against responsible third parties, instead of relying on the federal government‘s assistance in paying citizens’ medical bills. When a recovery against a responsible third party is made on an assigned claim, the federal government receives a share equal to its outlay. The “overage” provisions simply exist to prevent states from pocketing excess monies received, should they recover an amount in excess of their costs (which they are not, under the statute, allowed to do). The focus of the statute therefore is facilitating federal recoupment of Medicaid costs, not providing a windfall to Plaintiffs, whose medical needs have been covered by the States.
The second step in a Wilder analysis is to determine whether the statute imposes a binding requirement on the States. Wilder, 496 U.S. at 512. It is clear that the Medicaid Act is binding on
The third Wilder step requires that the rights sought to be enforced not be vague or amorphous. Wilder, 496 U.S. at 509-10. Supreme Court precedent dictates that the statutes here at issue do not create a sufficiently defined right for enforcement via an implied private right of action. In Suter v. Artist M., 503 U.S. 347, 112 S.Ct. 1360, 118 L.Ed.2d 1 (1991), the Supreme Court held that when a state is required to make “reasonable” efforts to reach a standard, the right is too ambiguous for enforcement by implied private right of action under
What Plaintiffs fail to realize is that the States are only required to undertake “reasonable measures” in pursuing assigned claims (for which Plaintiffs could recover overage amounts), and that, under Suter, Plaintiffs have no private right of action to sue to enforce reasonable compliance with these federal statutes. If, as the States claim, bringing an action based on each individual assigned claim from a smoking case would be very complicated and time-consuming (in short, unreasonable), and the States have chosen to refrain from doing so, Plaintiffs have no private cause of action under
The Sixth Circuit has previously found that
However, the Sixth Circuit has only recognized a private right of action to enforce Medicaid Act provisions when the putative plaintiffs were very clearly the intended beneficiaries of the law in question. See, e.g., Boatman, 164 F.3d at 289; Wood v. Tompkins, 33 F.3d 600 (6th Cir.1994). In the statutes at issue here, Medicaid recipients are an afterthought. These statutes were clearly meant to (1) require the States to seek recovery from third parties when reasonably possible, and (2) require states to turn over a portion of the proceeds from such recoveries to the federal government. Medicaid recipients as a whole are entirely ancillary to this provision, and are simply the “residual bucket” in which any monies that were improperly received by the state would be deposited.
Even were we to determine that there is a valid, unambiguous and enforceable federal right granted to Plaintiffs by
Congress has amended the Medicaid Act to state that M.S.A. funds are not considered recoupments under federal Medicaid law, but are the States’ money to allocate as the States see fit. In May 1999, Congress amended
(B)(i) Subparagraph (A) and paragraph 2(B) [requiring states to recoup overpayments and reimburse HCFA for the federal share] shall not apply to any amount recovered or paid to a State as part of the comprehensive settlement of November 1998 between manufacturers of tobacco products and State Attorneys General .... (ii) Except as provided in subsection (i)(19)[referring to costs incurred in pursuing the lawsuits] a State may use amounts recovered or paid to the State as part of a comprehensive or individual settlement, or a judgment, described in clause (i) for any expenditures determined appropriate by the State.
III
For the foregoing reasons, the district courts’ judgments are AFFIRMED.
CONCURRING IN PART, DISSENTING IN PART
RYAN, Circuit Judge, concurring in part and dissenting in part.
Because I am not convinced that the plaintiffs’ claims are barred by the Eleventh Amendment of the United States Constitution, I decline to join Part II(A) of the lead opinion.
I do agree, however, for the reasons so well expressed in Part II(B) of my brother‘s opinion, that the plaintiffs have not made out an actionable claim for relief under