Chezem v. Beverly Enterprises-Texas, Inc. , 66 F.3d 741 ( 1995 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 94-40710
PEARL CHEZEM, ET AL.,
Plaintiffs-Appellees,
TEXAS DEPARTMENT OF HUMAN SERVICES
ET AL.,
Defendants-Third Party-
Plaintiffs-Appellees,
versus
BEVERLY ENTERPRISES-TEXAS, INC., ET AL.,
Intervenors-Defendants-
Appellants.
Appeal from the United States District Court
for the Eastern District of Texas
(October 2, 1995)
Before POLITZ, Chief Judge, HILL* and DeMOSS, Circuit Judges.
POLITZ, Chief Judge:
Beverly Enterprises-Texas, John R. Folowell, Mary P. Folowell,
and Woodhaven, Inc. appeal an adverse summary judgment. Finding no
reversible error, we affirm.
*
Circuit Judge of the Eleventh Circuit, sitting by
designation.
Beverly Enterprises and its principals, the Folowells and
Woodhaven, were nursing home owners and operators. They brought
suit in Texas state court against the Texas Department of Human
Services, challenging its decision to assign the Medicaid contract
of a competitor, Regency Terrace Nursing Center, Inc., to its
successor, Carriage House Manor, Inc. Neither Carriage House nor
its residents was joined in the state court action. The Beverly
Enterprises group obtained an injunction against the transfer as
violative of state regulations. Efforts by Carriage House and
certain residents to intervene were objected to by Beverly
Enterprises. The district court declined to consider their motion
on the grounds that it no longer had jurisdiction.
Pending the Carriage House appeal of that decision,1 residents
filed suit to enjoin TDHS from terminating their Medicaid benefits.
Carriage House intervened in the new action, as did the Beverly
Enterprises group, which joined TDHS in removing to federal court.
The federal district court entered summary judgment in favor of the
plaintiffs and, after unsuccessful attempts at post-judgment
relief, the Beverly Enterprises defendants timely appealed.
At the threshold the appellants invoke the Anti-Injunction
Act2 as a bar to a federal declaratory judgment that would have the
effect of nullifying the state court judgment. As the Supreme
1
The court of appeals ultimately decided that the "Final
Summary Judgment" was not final and dismissed the appeal for want
of jurisdiction. No further action was taken.
2
28 U.S.C. § 2283.
2
Court has taught, the Anti-Injunction Act has no application herein
because Carriage House and its residents were neither parties nor
privies of parties to the state court action.3 The appellants
further contend that the district court should have abstained
because the suit poses "difficult questions of state law involving
policy considerations." To the contrary, the dispositive issue
herein involves the question of federal preemption of state law. 4
The Texas administrative agency charged with implementing the state
law acknowledges federal preemption. We find no fault in the
district court's refusal to abstain. The appellants did not name
the plaintiffs herein as parties in the state court action and they
opposed their effort to intervene. Further, we agree with the
district court that a party removing a case to federal court, as
the appellants did herein, may not thereafter advocate abstention.
On the merits we address whether a federal regulation which
requires the automatic assignment of a Medicaid contract to the new
owner upon change of ownership preempts a TDHS regulation which
prohibits transfer of the contract if ownership changes during the
3
See County of Imperial v. Munoz, 449 U.S. 54 (1980), appeal
after remand, Munoz v. County of Imperial, 667 F.2d 811 (9th
Cir.), cert. denied, 459 U.S. 825 (1982); Pelfresne v. Village of
Williams Bay, 917 F.2d 1017, 1020 (7th Cir. 1990) ("Only a party,
or, . . . one who is in privity with a party, is barred by the
Anti-Injunction Act.").
4
Cf. New Orleans Public Service, Inc. v. Council of City of
New Orleans, 491 U.S. 350 (1989) (Burford abstention is not
appropriate in suit claiming that local ratemaking authority is
preempted by federal law).
3
first three years.5 It is undisputed that Regency Terrace, which
was in bankruptcy, transferred its nursing home to Carriage House
during the three-year period. The federal regulation, 42 C.F.R. §
442.14, provides:
(a) Assignment of agreement. When there is a change of
ownership, the Medicaid agency must automatically assign
the agreement to the new owner.
(b) Conditions that apply to assigned agreements. An
assigned agreement is subject to all applicable statutes
and regulations and to the terms and conditions under
which it was originally issued, including, but not
limited to, the following:
(6) Compliance with any additional requirements
imposed by the Medicaid agency.
The appellants contend that section 442.14(b)(6) qualifies section
442.14(a), and therefore, that TDHS's three-year rule is a valid
condition to the automatic-assignment requirement. We are not
persuaded. The interpretation appellants suggest contravenes the
plain language of the regulation, which requires automatic
assignment without qualification. Because the TDHS three-year rule
is in direct conflict with the automatic-assignment requirement, it
is to be given no effect for it is preempted by federal law.6
AFFIRMED.
5
The regulation is a condition for the grant of a waiver to
TDHS's moratorium on the award of new Medicaid contracts.
6
See Hetzel v. Bethlehem Steel Corp., 50 F.3d 360 (5th Cir.
1995) (state law is preempted when it conflicts with federal law;
a conflict occurs when compliance with both federal and state
regulation is impossible or when state law is an obstacle to the
achievement of congressional purposes).
4