Springfield Hospital v. Hofmann et al

Filing 113

OPINION AND ORDER granting 96 Defendants' Motion for Summary Judgment; and denying 92 Plaintiff's Motion for Summary Judgment. The Court finds that the declaratory judgment and injunctive prayers for relief do not constitute independent causes of action; that all the federal claims in this case have been dismissed. The Court declines to exercise supplemental jurisdiction over Plaintiff's state law claim, pursuant to 28 U.S.C. § 1367(c)(3), which is dismissed without prejudice. Signed by Chief Judge Christina Reiss on 8/4/2011. (pam)

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT

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DISTRICT OF V£}U-WHT
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2011 AUG -4 AM If: 34
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BY

SPRINGFIELD HOSPITAL,

CLERK

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)
)

Plaintiff,

)
)

v.

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Case No.5 :09-cv-254

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ROBERT HOFMANN, Secretary,
Vermont Agency of Human Services,
and SUSAN BESIO, Director,
Office of Vermont Health Access,

)
)
)
)
)

Defendants.

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OPINION AND ORDER

GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

(Docs. 92, 96)

This matter came before the court on June 27,2011 for oral argument on the
parties' cross-motions for summary judgment. Springfield Hospital ("Plaintiff') seeks
summary judgment on its requests for declaratory and injunctive relief, and its state law
claim. (Doc. 92.) Robert Hofmann, Secretary of the Vermont Agency of Human
Services, and Susan Besio, Director of the Office of Vermont Health Access
(collectively, "Defendants"), in turn, seek summary judgment because Plaintiffs
declaratory and injunctive relief claims are not independent legal claims, and therefore
the only claim that remains in this lawsuit is Plaintiff s state law claim, which must be
dismissed because it is barred by the Eleventh Amendment. (Doc. 96.)
Plaintiff is represented by Michael A. Duddy, Esq. Defendants are represented by
Assistant Vermont Attorneys General David R. Cassetty and Jana M. Brown.

I.

Factual and Procedural Background.
In November 2009, Plaintiff filed a Complaint, contending that Defendants made

unauthorized and unlawful adjustments to Plaintiff's Disproportionate Share Hospital
("DSH") payments under Vermont's Medicaid State Plan ("State Plan"). In particular,
Plaintiff asserted that, in Fiscal Year 2010 ("FY 2010"), Defendants did not pay Plaintiff
according to the DSH payment methodology that had been approved in 2008 and was
then currently in effect, but rather paid it according to a new methodology that had not
been approved (at the time Plaintiff filed suit) which cut Plaintiff's DSH payment by $1.2
million from the previous year.
The Complaint alleged violations of: (1) federal Medicaid DSH procedural
requirements, pursuant to 42 U.S.C. § 1396a(a)(13), § 1396a(a)(30), § 1396r-4, and
related federal regulations, including 42 C.F.R. § 447.205; (2) federal Medicaid DSH
substantive protections, pursuant to 42 U.S.C. § 1396a(a)(30), § 1396r-4, and related
regulations; (3) 42 U.S.C. § 1983; (4) the Due Process Clause of the U.S. Constitution;
(5) the Supremacy Clause of the U.S. Constitution; and (6) Vermont law, including: §
7201.2 of Vermont's Medicaid Rules; the Vermont Administrative Procedure Act
("VAPA"); Section 4.19 of the State Plan; and 33 V.S.A. §§ 1901 and 1905. The
Complaint's Prayer for Relief included two requests for declaratory relief (,-r,-r B, C) and
two requests for injunctive relief (,-r,-r E, F), as well as a request for costs and attorney's
fees pursuant to 42 U.S.C. § 1988(b).
Defendants filed a motion to dismiss arguing, inter alia, that the Eleventh
Amendment barred the suit, and that Plaintiff did not state a claim under § 1983, the
federal Medicaid statutes, the Due Process Clause, and the Supremacy Clause. Plaintiff
responded that the Eleventh Amendment did not bar the suit, as it had several grounds
upon which it could obtain prospective relief, including under the Declaratory Judgment
Act, 28 U.S.C. § 2201 ("DJA"). On April 9, 2010, the court granted in part and denied in
part Defendants' motion to dismiss. See Springfield Hasp. v. Haf[]man[nJ, 2010 WL
3322716 (D. Vt. Apr. 9, 2010). The court found that Plaintiff had no private right of
action under 42 U.S.C. §§ 1396a(a)(13)(A), (30)(A), or 1396r-4. It also held that
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Plaintiff failed to state a claim based on these statutory provisions pursuant to 42 U.S.C. §
1983. The court dismissed Plaintiffs federal causes of action (Counts I-V), but did not
dismiss Plaintiffs state law claim (Count VI) because the parties raised no argument for
or against dismissal. The court also dismissed one of the requests for declaratory relief
and one of the requests for injunctive relief (~~ B, F) on the ground that Plaintiff sought
retroactive monetary relief barred by the Eleventh Amendment. The court denied
Defendants' motion to dismiss the remaining requests for declaratory and injunctive
relief (~~ C, E) on the ground that Plaintiff sought prospective relief that was not barred
by the Eleventh Amendment. 1
Based upon certain undisputed facts, Plaintiff asks the court to declare, among
other things, whether Plaintiff had actual notice of the new DSH payment methodology
for FY 2010, whether the public notice of that new methodology complied with 42 C.F.R.

§ 447.205, and when the new methodology had actually been determined.
II.

Analysis and Conclusions of Law.
A. Standard of Review.
A party is entitled to summary judgment only "if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter oflaw." Celotex Corp. v. Catrett, 477 U.S. 317, 322
1 The

remaining prayer for declaratory relief provides:
That the [c]ourt declare the [new] DSH Payment Methodology violates federal
and state statutes and regulations and is contrary to law, null, void, and cannot be
used as the basis to calculate, limit, or cut Springfield Hospital's DSH payments.

(Doc. 1, Prayer for Relief~ C.) The remaining prayer for injunctive relief provides:
That the [c]ourt provide permanent injunctive relief ordering the Defendants to
calculate the Hospital's SFY 2010 DSH funding according to the DSH payment
methodology approved by CMS on October 9, 2009 and contained in Vermont's
Medicaid State Plan.
(Doc. 1, Prayer for Relief ~ E.)
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(1986) (quoting former Fed. R. Civ. P. 56(c), now Rule 56(a)). A fact is "material" if it
"might affect the outcome of the suit under the governing law[.]" Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if "the evidence is such that
a reasonable jury could return a verdict for the nonmoving party." Id.; see also Overton
v. NY: State Div. ofMilitary & Naval Affairs, 373 F.3d 83, 89 (2d Cir. 2004). "On cross­
motions for summary judgment, the [c]ourt applies the rule that 'each party's motion
must be examined on its own merits,' with all reasonable inferences drawn against the
movant." In re M/V RlCKMERS GENOA Litig., 2011 WL 2118743, at *2 (S.D.N.Y.
May 26, 2011) (quoting Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir.
2001)).

B. Viability of the Prayers for Declaratory and Injunctive Relief.
In its motion, Plaintiff focuses on the many ways in which Defendants allegedly
ran afoul of the notice requirements contained in 42 C.F.R. § 447.205 when they changed
the DSH payment methodology for FY 2010. This federal regulation, entitled "Public
notice of changes in Statewide methods and standards for setting payment rates,"
provides that the state agency responsible for administering the State Plan "must provide
public notice of any significant proposed change in its methods and standards for setting
payment rates for services." It then sets forth the information that the notice must contain
and how it is to be published. 42 C.F.R. § 447.205(a), (c), (d). Although Plaintiff clearly
identifies concerns regarding how the DSH payment methodology came to be changed,
this court must first decide whether it should reach those claims in the absence of a
federal cause of action.
The DJA provides a remedy, not a cause of action. See Nat 'I Union Fire Ins. Co.

ofPittsburgh, Pa. v. Karp, 108 F.3d 17,21 (2d Cir. 1997) ("The DJA is procedural in
nature, and merely offers an additional remedy to litigants.") (citing Wilton v. Seven Falls

Co., 515 U.S. 277, 287 (1995)). Similarly, a request for injunctive relief is not a separate
cause of action. See Chiste v. Hotels. com L.P., 756 F. Supp. 2d 382, 406-07 (S.D.N.Y.
2010) ("Declaratory judgments and injunctions are remedies, not causes of action.")
(citations omitted). Accordingly,
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a request for relief in the form of a declaratory judgment does not by itself
establish a case or controversy involving an adjudication of rights. Skelly
Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72, 70 S. Ct. 876,
879-80, 94 L. Ed. 1194 (1950). In fact, the statute authorizing the
declaratory judgment remedy explicitly incorporates the Article III case or
controversy limitation. See 28 U.S.C. § 2201 (1988) ("In a case of actual
controversy within its jurisdiction...."); Aetna Life Ins. Co. v. Haworth,
300 U.S. 227,239-40,57 S. Ct. 461, 463-64,81 L. Ed. 617 (1937). The
Declaratory Judgment Act does not expand jurisdiction. Skelly Oil, 339
U.S. at 671, 70 S. Ct. at 878. Nor does it provide an independent cause of
action. Its operation is procedural only-to provide a form of relief
previously unavailable. Aetna Life Ins. Co., 300 U.S. at 240,57 S. Ct. at
464. Therefore, a court may only enter a declaratory judgment infavor of
a party who has a substantive claim ofright to such relief

In re Joint E. & S. Dist. Asbestos Litig., 14 F.3 d 726, 731 (2d Cir. 1993) (emphasis
supplied); see also Alabama v. Us. Army Corps ofEng 'rs, 424 F.3d 1117, 1127 (l lth
Cir. 2005) ("An injunction is a remedy potentially available only after a plaintiff can
make a showing that some independent legal right is being infringed-if the plaintiffs
rights have not been violated, he is not entitled to any relief, injunctive or otherwise.")
(citation and internal quotation marks omitted).
Plaintiff relies on Karp, a case decided four years after Asbestos Litig., for the
following proposition: "[T]he ultimate authority to grant declaratory relief in a case rests
with the DJA itself, whether or not the claim for declaratory relief is brought solely under
the DJA or is added to claims for relief brought under other auspices." Karp, 108 F.3d at
21. 2 However, no cases in this Circuit, or elsewhere, have followed Karp's lead in
ostensibly allowing DJA claims for relief to stand on their own, rather than as "added to
claims for relief brought under other auspices." Id. To the contrary, the distinct trend in
the law is to hold that the DJA does not create a separate cause of action. See, e.g., Davis

v. United States, 499 F.3d 590,594 (6th Cir. 2007) (stating that the DJA "does not create
an independent cause of action"); Okpalobi v. Foster, 244 F.3d 405, 424 n.31 (5th Cir.
2001) (noting that the DJA "does not provide an additional cause of action with respect to
This is dicta as it merely describes a DJA claim in the context of an interpleader action to
explain the Supreme Court's then-recent holding in Wilton v. Seven Falls Co., 515 U.S. 277
(1995).
2

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the underlying claim."); Kesselman v. The Rawlings Co., LLC, 668 F. Supp. 2d 604,610
(S.D.N.Y. 2009) (quoting Asbestos Litig. for holding that DJA does not provide an
independent cause of action); Wyly v. CA, Inc., 2009 WL 3128034, at * 15 (E.D.N.Y.
Sept. 29, 2009) (same) (citing cases); In re Methyl Tertiary Butyl Ether Prods. Liab.

Litig., 247 F.R.D. 420, 422-23 (S.D.N.Y. 2007) (opining that "declaratory relief is not a
claim but only a remedy that Congress has created..." and that the claim, or the legal
theory under which relief is sought "must be based on other laws that the defendant
allegedly violated in order to receive [declaratory] relief."). Karp itself acknowledges
that the DJA "is procedural in nature" and "merely offers an additional remedy[.]" Karp,
108 F.3d at 21.
The same rationale applies to injunctions. See, e.g., Warren v. Rodriguez­

Hernandez, 2010 WL 3668063, at *3 (N.D. W. Va. Sept. 15,2010) ("A request for
injunctive relief does not constitute an independent cause of action; rather, the injunction
is merely the remedy sought for the legal wrongs alleged in the ... substantive counts.")
(citations and internal quotation marks omitted); Jensen v. Quality Loan Servo Corp., 702
F. Supp. 2d 1183, 1201 (E.D. Cal. 2010) ("A request for injunctive relief by itself does
not state a cause of action."); Plan Pros, Inc.

V.

Zych, 2009 WL 928867, at *2 (D. Neb.

Mar. 31, 2009) ("[N]o independent cause of action for injunction exists[.]").
Plaintiffs remaining declaratory and injunctive prayers for relief ask the court to
redress the alleged wrongs wrought by Defendants' use of the new DSH methodology
which cut payments to Plaintiff by $1.2 million. However, no substantive federal claim
remains upon which Plaintiff can base its requests for declaratory and injunctive relief.

See Porat V. Lincoln Towers Cmty. Ass 'n, 2005 WL 646093, at *7 (S.D.N.Y. Mar. 21,
2005) ("Here... all of Plaintiffs federal claims are dismissed ... Because there is no
other basis for federal jurisdiction, the declaratory judgment claim is dismissed.t'j.' The
only remaining substantive cause of action that has not been dismissed is Plaintiffs state

Plaintiff argues that the court did, and apparently should continue to, exercise its discretion in
the public interest by keeping these equitable "claims" in the lawsuit.

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law claim (Count VI). Thus, what remains of Plaintiffs declaratory prayer for relief is a
request to declare the Plaintiffs rights under state law.

C. The State Law Claim: Whether the Court Should Exercise
Supplemental Jurisdiction.
In Count VI of its Complaint, Plaintiff alleges that Defendants "violated Vermont
law by changing the DSH payment methodology through actions, processes, procedures
and/or the adoption of rules inconsistent with the requirements set forth in Title XIX of
the Social Security Act, Vermont's Medicaid rules and regulations, [VAPA], and
Vermont's Medicaid State Plan." (Doc. 1 ,-r 175.) Plaintiff argues that, through its State
Plan, Vermont agreed to administer the DSH program according to the Medicaid Act and
applicable federal regulations, and any violation of the Medicaid Act and regulations
constitutes a violation of Vermont law.
Plaintiff also asserts that § 7201.2 of Vermont's Medicaid Rules required
Defendant Besio to determine the amount of funds to be distributed among qualifying
hospitals pursuant to the approved method set forth in the 2008 Medicaid State Plan. It
adds that, until May 26, 2010 (the date when the Centers for Medicare and Medicaid
Services retroactively approved the amendment to the State Plan containing the new DSH
payment methodology), the only approved method for making DSH payments was the
FY 2008 methodology. Plaintiff points out that the State was required to amend § 7201.2
under the VAPA, 3 V.S.A. §§ 831(a) and 836-843, in order to have legally proceeded
under Vermont law, which it did not do. It concludes that Defendant Besio violated
Vermont's Medicaid law by using the FY 2010 DSH payment methodology to pay
Plaintiff, rather than the methodology contained in the 2008 State Plan. In addition,
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Plaintiff contends that Defendants violated 33 V.S.A. §§ 1901(a)(1) and 1905 by failing
to administer the DSH program according to the Medicaid Act and applicable

433 V.S.A. § 1901(a)(1) provides: "The secretary of human services or designee shall take
appropriate action, including making of rules, required to administer a medical assistance
program under Title XIX (Medicaid) and Title XXI (SCRIP) ofthe Social Security Act." 33
V.S.A. § 1905 provides: "The secretary of human services shall adopt a disproportionate share
program for hospitals consistent with the requirements of Title XIX of the Social Security Act."

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regulations. Plaintiffs state law claim includes a request for relief under the Vermont
Declaratory Judgment Act, 12 V.S.A. § 4711.
With the federal claims dismissed, the court addresses whether it should continue
to exercise supplemental jurisdiction over this case. Although Defendants argue that the
Eleventh Amendment bars Plaintiff s remaining state law claims, a court must first
determine whether to exercise supplemental jurisdiction before it determines whether the
Eleventh Amendment requires dismissal of Plaintiffs claims. Cf Melrose v. NY State
Dep 't ofHealth Office ofProf'I Med. Conduct, 2009 WL 211029, at * 10 (S.D.N.Y. Jan.

26,2009) (stating that "the grant of supplemental jurisdiction given by 28 U.S.C. §
1367(a) does not constitute a congressional abrogation of the states' Eleventh
Amendment immunity.") (citations omitted).
A district court may decline to exercise supplemental jurisdiction over a state
claim, if:
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over
which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original
jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for
declining jurisdiction.
28 U.S.C. § 1367(c). Section 1367(c) "confirms the discretionary nature of supplemental
jurisdiction by enumerating the circumstances in which district courts can refuse its
exercise[.]" City

of Chicago v. Int'l Coli. ofSurgeons, 522 U.S. 156, 173 (1997).

The general practice in this circuit is that "if a plaintiffs federal claims are
dismissed before trial, the state claims should be dismissed as well." Brzak v. United
Nations, 597 F.3d 107, 113-14 (2d Cir. 2010) (internal quotation marks and citation

omitted); see also Edmonds v. Seavey, 379 F. App'x 62, 64 n.l (2d Cir. 2010) ("As there
existed no independent basis for subject matter jurisdiction over appellant's remaining
state law claims, the district court was well within its discretion to decline to exercise
supplemental jurisdiction over those claims.") (citing Matican v. City ofNew York, 524
F.3d 151, 154-55 (2d Cir. 2008)); S & R Dev. Estates, LLC v. Bass, 588 F. Supp. 2d 452,
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464 (S.D.N.Y. 2008) (dismissing all federal claims, declining to exercise supplemental
jurisdiction over state claims, and declining to exercise jurisdiction over plaintiffs
request for declaratory relief which arose under state law).
As the Supreme Court explained in Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343
(1988), where "all federal-law claims are eliminated before trial, the balance of factors to
be considered under the [supplemental] jurisdiction doctrine-judicial economy,
convenience, fairness, and comity-will point toward declining to exercise jurisdiction
over the remaining state law claims." Id. at 350 n.7; see id. at 350 ("When the balance of
these factors indicates that a case properly belongs in state court, as when the federal-law
claims have dropped out of the lawsuit in its early stages and only state-law claims
remain, the federal court should decline the exercise ofjurisdiction by dismissing the case
without prejudice.") (citing United Mine Workers v. Gibbs, 383 U.S. 715,726-27
(1966)).
Although this case is not in its early stages, it is also not on the eve of trial, and the
parties' cross-motions for summary judgment represent the first time that Plaintiffs state
law claim has been addressed. Comity is better served by having a state court decide the
many state law questions that Plaintiff poses," "Needless decisions of state law should be
avoided both as a matter of comity and to promote justice between the parties, by
procuring for them a surer-footed reading of applicable law," and state law claims should
be "left for resolution to state tribunals." Gibbs, 383 U.S. at 726, 726-27; see also

Locantore v. Hunt, 2011 WL 1326015, at *6 (S.D.N.Y. Mar. 31, 2011) ("Plaintiffs
federal claims are all dismissed prior to trial, and there is no reason to believe that
judicial economy, convenience, or fairness would be served by this [c]ourt exercising
supplemental jurisdiction over [pjlaintiff's state law claims, and to do so would be
inconsistent with the principle of comity.").

In particular, there is no state jurisprudence concerning whether the VAPA applies to Medicaid
rules, whether 33 V.S.A. § 1901(a)(1) applies to rulemaking procedures that amend the State
Plan, or whether a Medicaid provider has a private right of action under §§ 1901 and 1905 or §
4.190) of the State Plan.
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Finally, although the court notes the potential inconvenience to Plaintiff in relitigating its state law claims in state court, this inconvenience must give way in face of
the conclusion that Vermont's state courts are the more appropriate forum. This
conclusion is underscored by Defendants' arguably persuasive argument that the
Eleventh Amendment bars litigation of those state law claims in federal court. The court,
however, need not address that argument, because it has concluded that supplemental
jurisdiction should be declined.

CONCLUSION
For the foregoing reasons, the court finds that the declaratory judgment and
injunctive prayers for relief do not constitute independent causes of action; that all the
federal claims in this case have been dismissed. The court declines to exercise
supplemental jurisdiction over Plaintiff's state law claim, pursuant to 28 U.S.C. §
1367(c)(3), which is dismissed without prejudice.>

rp.....

SO ORDERED.
Dated at Rutland, in the District of Vermont, this

if

day of August, 2011.

~

Christina Reiss, Chief Judge
United States District Court

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