The Arc of California, et al v. Douglas, et al

Filing 33

ORDER signed by Judge Morrison C. England, Jr. on 12/13/2011 GRANTING 12 Ex Parte Application for Stay of Proceedings; DENYING 7 Motion for Preliminary Injunction and 23 Motion to Dismiss without prejudice to being reinstituted when the instant stay is limited. Joint Status Report due within 60 days or upon the disposition of the matters set forth, whichever occurs first. CASE STAYED. (Michel, G)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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THE ARC OF CALIFORNIA;
UNITED CEREBRAL PALSY
ASSOCIATION OF SAN DIEGO,

No. 2:11-cv-02545-MCE-CKD

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Plaintiffs,
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ORDER STAYING PROCEEDINGS

v.
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TOBY DOUGLAS, in his official
capacity as Director of the
California Department of
Health Care Services;
CALIFORNIA DEPARTMENT OF
HEALTH CARE SERVICE; TERRI
DELGADILLO, in her official
capacity as Director of the
California Department of
Developmental Services;
CALIFORNIA DEPARTMENT OF
DEVELOPMENTAL SERVICES; and
DOES 1-100, inclusive,

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Defendants.
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Defendants David Maxwell-Jolly, Director of the California

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Department of Health Care Services, the California Department of

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Health Care Services (“DHCS”), Terri Delgadillo, Director of the

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California Department of Developmental Services, and the

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California Department of Developmental Services (“DDS”) have

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filed an ex parte application for stay of the instant proceedings

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on grounds that pending decisions both from the Supreme Court, as

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well as new regulations expected to be promulgated in December

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2011 by the Centers for Medicare and Medicaid (“CMS”), may

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substantially resolve the issues underlying this lawsuit within

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the next four months.

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that good cause has been demonstrated for the requested stay.

As set forth below, the Court concludes

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As the Supreme Court has long noted, “the power to stay

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proceedings is incidental to the power inherent in every court to

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control the disposition of the causes on its docket with economy

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of time and effort for itself, for counsel, and for litigants.”

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Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936).

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foster both its own efficiency and in fairness to the parties, a

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court may properly stay an action pending the resolution of

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independent proceedings which bear upon a case.

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Certified Grocers of Cal., Ltd., 593 F.2d 857, 863-64 (9th Cir.

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1979).

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In order to

Leyva v.

The present matter, like many other cases pending before the

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Supreme Court, the Ninth Circuit and the Central and Eastern

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Districts of California, challenges Medi-Cal reimbursement rates

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on grounds that such rates run afoul of the requirements of

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Section 30(A) of the Medicaid Act, 42 U.S.C. § 1396a(30)(A).

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Plaintiffs specifically claim that Section 30(A) was violated by

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1) failing to obtain federal approval before modifying

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reimbursement rates; 2) implementing and enforcing reduction in

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payments with adequate study as to the impact of such reductions

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on efficiency, economy, quality of care and access to care;

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3) failing to consider the impact of reimbursement reductions on

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home-and-community-based-services (“HCBS”) financed by federal

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Medicaid funds; and 4) failing to conduct or consider appropriate

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rate studies when modifying reimbursement rates.

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See Pls.’

Compl., 8:14-20.

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Fundamental to Plaintiffs’ claims is whether private parties

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like Plaintiffs herein can enforce Section 30(A) under a

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Supremacy Clause cause of action, since the Ninth Circuit has

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recently confirmed that a Section 1983 action may not be brought

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to challenge a state’s alleged violation of the Medicaid Act.

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Developmental Services Network v. Douglas, 2011 WL 5966363 (9th

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Cir. Nov. 30, 2011) at *4.

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Clause challenge is squarely before the Supreme Court in the

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consolidated cases of Maxwell-Jolly v. Independent Living Center

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of Southern California, No. 09-958 (U.S. Feb. 26, 2010)

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(“Independent Living”), Maxwell-Jolly v. California Pharmacists

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Ass’n, No. 09-1158 (U.S. March 24, 2010) (“California

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Pharmacists”), and Maxwell-Jolly v. Santa Rosa Memorial Hospital,

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et al., No. 10-283 (U.S. Aug. 27, 2010).

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represent that oral argument before the Supreme Court in these

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matters was heard on October 3, 2011, with a decision expected in

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the next four months.

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The availability of a Supremacy

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Counsel for Defendants

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In addition, whether Defendants must conduct a study of

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health care provider costs as part of their obligations under

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Section 30(a), a violation Plaintiffs also assert was committed

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by Defendants, is expected to be resolved by CMS through issuance

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of a final rule in that regard expected in December 2011.

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Given the fact that both the Supreme Court and CMS will

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apparently be providing key guidance on both issues shortly, and

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since the Supreme Court’s decision in particular may well dictate

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whether Plaintiffs have standing to pursue this lawsuit in the

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first place, a stay pending the aforementioned determinations is

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in the interest of justice and necessary to avoid the waste of

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this Court’s and the parties’ continued resources– a waste that

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would occur through adjudication of further motion practice and

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pretrial proceedings that may be rendered moot, either in whole

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or in part, by said decisions.

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Significantly, a stay determination in this regard is

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consistent with findings made by other courts.

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has stayed several of its Chapter 30(A) cases, including Cal.

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Hosp. Ass’n v. Maxwell-Jolly, No. 10-55462, pending guidance from

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the Supreme Court.

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done the same.

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The Ninth Circuit

At least three Central District cases have

See Defs.’ Ex Parte Application, 9:5-11.

While Plaintiffs oppose any stay on grounds that the subject

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reductions will adversely impact the disabled, it appears that

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the reductions at issue have been in effect at least a year, and

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in some cases much longer.

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Consequently, particularly given what appears to be the imminent

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nature of the Supreme Court’s decision as well as new CMS

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regulations which are expected literally within two weeks, a stay

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under the circumstances appears warranted.

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This Court accordingly orders that the above-entitled case

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be stayed for all purposes during the pendency of the issues

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before the Supreme Court, as enumerated above, and pending final

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rules from CMS regarding Chapter 30(a), as expected in December

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of 2011.

Given that stay, Plaintiffs’ Motion for Preliminary

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Injunction (ECF No. 7) is denied, without prejudice to being

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reinstituted when the instant stay is limited.

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Defendants’ Motion to Dismiss (ECF No. 23) is similarly denied

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without prejudice subject to the same condition.

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no further obligation to respond to Plaintiffs’ Complaint during

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the pendency of the stay.

In addition,

Defendants have

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The parties are directed to file a joint status report

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within sixty (60) days following the date of this Order, or upon

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the disposition of the matters set forth above, whichever occurs

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first.

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IT IS SO ORDERED.

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Dated: December 13, 2011

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_____________________________
MORRISON C. ENGLAND, JR.
UNITED STATES DISTRICT JUDGE

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