Developmental Services Network v. Toby Douglas ( 2011 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DEVELOPMENTAL SERVICES 
NETWORK; UNITED CEREBRAL
PALSY/SPASTIC CHILDREN’S
FOUNDATION OF LOS ANGELES AND
VENTURA COUNTIES,
Plaintiff-Appellee, No. 11-55851
v.  D.C. No.
2:10-cv-03284-
TOBY DOUGLAS,* Director of the CAS-MAN
Department of Health Care
Services, State of California;
CALIFORNIA DEPARTMENT OF HEALTH
CARE SERVICES,
Defendants-Appellants.

*Toby Douglas is the current Director of the California Department of
Health Care Services and has, therefore, been automatically substituted for
his predecessor, David Maxwell-Jolly. See Fed. R. Civ. P. 25(d).
20519
20520 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
CALIFORNIA ASSOCIATION OF HEALTH 
FACILITIES, No. 11-55852
Plaintiff-Appellee,
D.C. No.
v.
 2:10-cv-03259-
TOBY DOUGLAS, Director of the CAS-MAN
Department of Health Care
Services, State of California, OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the Central District of California
Christina A. Snyder, District Judge, Presiding
Argued and Submitted
October 12, 2011—Pasadena, California
Filed November 30, 2011
Before: Ferdinand F. Fernandez and Consuelo M. Callahan,
Circuit Judges, and Ralph R. Erickson,** District Judge.
Opinion by Judge Fernandez
**The Honorable Ralph R. Erickson, Chief United States District Judge
for the District of North Dakota, sitting by designation.
20522 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
COUNSEL
Kenneth K. Wang, Office of the Attorney General of Califor-
nia, Los Angeles, California, and Tracey L. Angelopoulos,
Office of the Attorney General of California, San Diego, Cali-
fornia, for the defendants-appellants.
Jordan B. Keville and Craig Cannizzo, Hooper, Lundy &
Bookman, P.C., San Francisco, California, for the plaintiffs-
appellees.
DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS 20523
OPINION
FERNANDEZ, Circuit Judge:
Toby Douglas, the Director of the California Department of
Health Care Services,1 appeals the district court’s preliminary
injunction precluding enforcement of California Welfare and
Institutions Code § 14105.191(f), which amended California’s
Medicaid Plan and set provider reimbursement rates for the
2009-2010 rate year, and for each year thereafter. The Devel-
opmental Services Network and the United Cerebral
Palsy/Spastic Children’s Foundation of Los Angeles and Ven-
tura County, and the California Association of Health Facilities2
challenged the law under 42 U.S.C. § 1983 and the Suprem-
acy Clause3 because the State did not obtain federal approval
of its State Plan Amendment (“SPA”) prior to implementing
the rate changes. The State argues that the district court
abused its discretion in ordering the preliminary injunction
because the Providers have not shown a likelihood of success
on the merits, or irreparable harm, or that the balance of equi-
ties and the public interest warrant an injunction. We vacate
the preliminary injunction and remand.
BACKGROUND
The Providers are trade associations representing, among
other facilities, intermediate care facilities for the mentally
retarded and for the developmentally disabled, and free stand-
ing pediatric subacute facilities. The Providers filed suit in
federal district court on April 30, 2011. They alleged that the
State’s implementation of Welfare and Institutions Code
§ 14105.191(f), which limited reimbursement rates under Cal-
ifornia’s Medicaid program, violated federal law. The section
1
Toby Douglas, as Director, is referred to as “the State” hereafter.
2
Together, all of these entities are referred to as “the Providers” hereaf-
ter.
3
U.S. Const. art. VI, cl. 2.
20524 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
amended the State’s Medicaid Plan so that the reimbursement
rates “for services rendered during the 2009-10 rate year and
each rate year thereafter, shall not exceed the reimbursement
rates that were applicable to those classes of providers in the
2008-09 rate year.” Cal. Welf. & Inst. Code § 14105.191(f).
The Providers argued, along with other claims, that imple-
mentation of the statute was unlawful because it violated 42
U.S.C. § 1396a(a)(30)(A)’s requirement that the State con-
sider quality of care in setting Medicaid payment rates4 and
because the State implemented the section before obtaining
federal approval5 of what amounted to an amendment of the
State Medicaid Plan.6 The district court then stayed the Pro-
viders’ cases on June 24, 2010, after the Supreme Court had
granted certiorari in two Ninth Circuit cases7 to consider
whether a private party may sue under the Supremacy Clause
to enforce 42 U.S.C. § 1396a(a)(30)(A). On March 28, 2011,
the district court lifted the stay. The court then granted the
motion for a preliminary injunction. It concluded that it was
likely that the Providers would succeed on the merits of their
42 U.S.C. § 1983 claim that the State had unlawfully failed to
obtain federal approval of the SPA effected by section
14105.191(f) prior to implementing it. In addition, the district
court determined that the Providers were likely to suffer irrep-
4
As pertinent here, the section provides that state plans must: “assure
that payments are consistent with efficiency, economy, and quality of care
and are sufficient to enlist enough providers so that care and services are
available under the plan at least to the extent that such care and services
are available to the general population in the geographic area . . . .”
5
To obtain approval of a state Medicaid plan, the state must submit the
plan or plan amendment to the Centers for Medicare & Medicaid Services
(“CMS”), which is a division of the Department of Health and Human
Services (“DHHS”). See 42 C.F.R. § 430.12(b), (c).
6
It still had not been obtained when the district court ruled.
7
See Cal. Pharmacists Ass’n v. Maxwell-Jolly, 596 F.3d 1098 (9th Cir.
2010), cert. granted, 79 U.S.L.W. 3419 (U.S. Jan. 18, 2011) (No. 09-
1158); Indep. Living Ctr. of S. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644
(9th Cir. 2009), cert. granted, 79 U.S.L.W. 3419 (U.S. Jan. 18, 2011) (No.
09-958). The Court limited its review to the Supremacy Clause issue.
DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS 20525
arable harm, and that the balance of hardships and the public
interest weighed in favor of granting the injunction.8 After its
motion for reconsideration was denied, the State timely
appealed.
JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction pursuant to 28 U.S.C.
§ 1331. We have jurisdiction pursuant to 28 U.S.C.
§ 1292(a)(1).
We review the grant of a preliminary injunction for abuse
of discretion. Am. Trucking Ass’ns, Inc. v. City of L.A., 559
F.3d 1046, 1052 (9th Cir. 2009). Our review is “limited and
deferential, and [w]e do not review the underlying merits of
the case.” Id. (internal quotation marks omitted). “Neverthe-
less, a district court necessarily abuses its discretion when it
bases its decision on an erroneous legal standard or on clearly
erroneous findings of fact.” Id. (internal quotation marks
omitted).
DISCUSSION
“Plaintiffs seeking a preliminary injunction in a case in
which the public interest is involved must establish that they
are likely to succeed on the merits, that they are likely to suf-
fer irreparable harm in the absence of preliminary relief, that
the balance of equities tips in their favor, and that an injunc-
tion is in the public interest.” Cal. Pharmacists Ass’n v.
Maxwell-Jolly, 563 F.3d 847, 849 (9th Cir. 2009). We have
glossed that standard by adding that there is a “sliding scale”9
8
The district court did not revisit the Supremacy Clause issue or base
its decision on that Clause.
9
We quote this phrase with some trepidation because we have ques-
tioned the use of a “sliding scale” metaphor: “nothing ‘slides’ ” and it is
“unnecessary and potentially confusing.” Abatie v. Alta Health & Life Ins.
Co., 458 F.3d 955, 968 (9th Cir. 2006) (en banc).
20526 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
approach which allows a plaintiff to obtain an injunction
where he has only shown “ ‘serious questions going to the
merits’ and a balance of hardships that tips sharply towards
the plaintiff . . . so long as the plaintiff also shows that there
is a likelihood of irreparable injury and that the injunction is
in the public interest.” Alliance for the Wild Rockies v. Cott-
rell, 632 F.3d 1127, 1135 (9th Cir. 2011). Nevertheless, if a
plaintiff fails to show that he has some chance on the merits,
that ends the matter. Global Horizons, Inc v. U.S. Dep’t of
Labor, 510 F.3d 1054, 1058 (9th Cir. 2007).
Here the State attacks the district court’s decision on all
four parts of the preliminary injunction test and on other bases
as well. We, however, will only consider whether the Provid-
ers can succeed on the merits, for, as we will show, our con-
clusion on that ground requires that we vacate the preliminary
injunction and remand for further proceedings. While we
agree with the district court that the State was required to
obtain approval of the amendment wrought in its Medicaid
Plan by section 14105.191(f)’s provisions, we disagree with
its determination that the Providers have a cause of action
pursuant to 42 U.S.C. § 1983.
I. Approval of the Change
[1] “Medicaid is a cooperative federal-state program
through which the Federal Government provides financial
assistance to States so that they may furnish medical care to
needy individuals.” Wilder v. Va. Hosp. Ass’n, 496 U.S. 498,
502, 110 S. Ct. 2510, 2513, 110 L. Ed. 2d 455 (1990). “To
qualify for federal assistance, a State must submit to the Sec-
retary [of the Department of Health and Human Services] and
have approved a ‘plan for medical assistance,’ § 1396a(a)”
that complies with statutory requirements. Id. If CMS deter-
mines that a state plan or plan amendment does not comply
with those requirements, it may deny the state federal funds.
42 C.F.R. §§ 430.15, 430.18; see also San Lazaro Ass’n, Inc.
v. Connell, 286 F.3d 1088, 1092 (9th Cir. 2002).
DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS 20527
The State argues that although it must obtain approval
before its Medicaid plan goes into effect, it may make and
implement material amendments to the plan before the
amendments are approved, even though it is undoubtedly
required to submit an SPA to CMS. See 42 C.F.R. § 430.12.
We disagree with that counterintuitive and banausic argu-
ment.
We say counterintuitive because it would be surprising if a
state were required to adhere to a complex list of requirements10
in order to obtain approval of a plan in the first place, but
then, perhaps immediately after approval, materially change
that plan to its heart’s content without first having the changes
themselves approved. For example, despite the fact that a plan
must “assure that payments are consistent with efficiency,
economy, and quality of care and are sufficient to enlist
enough providers so that care and services are available under
the plan at least to the extent that such care and services are
available to the general population in the geographic area,”11
the State suggests that if it adopted changes that did not meet
those requirements, even though it must submit an SPA, it
could implement the changes forthwith. We suppose that the
law could have been written that way, but we question why
it would have been. As it turns out, we have previously held
that it was not.
[2] Our first foray into this area was over twenty-five years
ago. See Wash. State Health Facilities Ass’n v. Wash. Dep’t
of Soc. & Health Servs., 698 F.2d 964 (9th Cir. 1982) (per
curiam). We were then faced with a claim that a state could
enforce a state regulation which conflicted with the approved
Medicaid plan before it obtained approval of the amendment.
Id. at 964-65. We would have none of it. We held:
10
See 42 U.S.C. § 1396a(a) (setting out more than 80 requirements for
plan contents).
11
42 U.S.C. § 1396a(a)(30)(A).
20528 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
We previously have held that proper [DHHS] evalu-
ation and approval is a prerequisite to enforcement
of a state Medicaid plan. In addition, federal regula-
tions specify the procedures a state must follow if it
wishes to amend provisions of its federally approved
plan. Accordingly, we find without merit appellants’
contention that [the state] may enforce changes in its
method of reimbursing nursing care facilities without
receiving federal approval.
Id. at 965 (citations and footnote references omitted).
[3] Nor was that our only visit to this territory. In 1993, a
state, again, insisted that it could change its standards and
methods under Medicaid before it submitted an SPA. Or.
Ass’n of Homes for the Aging, Inc. v. Oregon, 5 F.3d 1239,
1241 (9th Cir. 1993). We rejected that position again. We
noted that the state plan must be amended to reflect “material
changes in state law, organization, policy, or operation” and
that the amendments “must be submitted for . . . approval.”
Id. We went on to point out that: “[a] law that effects a change
in payment methods or standards without [DHHS] approval is
invalid.” Id.
Finally, in 1998, we were again required to enter that terri-
tory. See Exeter Mem’l Hosp. Ass’n v. Belshe, 145 F.3d 1106,
1108 (9th Cir. 1998) (Exeter II), adopting 943 F. Supp. 1239
(E.D. Cal. 1996) (Exeter I). That time the State asked us to
hold that it could implement changes before the federal gov-
ernment approved them. Id. at 1107. We were no more
impressed with the argument than we had been some sixteen
years earlier. We rejected it and said:
Most important, our opinion in Washington was
premised on the overall statutory framework rather
than the particular language of the statute relating to
amendments to state plans. That framework required
then, and at all relevant times since, that all plans
DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS 20529
receive approval by the federal government before
they may be implemented, and that all amendments
to plans must also be federally approved. In Wash-
ington, we held that from these requirements logi-
cally flows the requirement that amendments to
plans be approved before implementation. See Wash-
ington, 698 F.2d at 965. That conclusion is as valid
now as it was then . . . .
Id. at 1108. But here we are again. Why?
Well, the State now says that our prior cases were decided
when the Boren Amendment12 was in effect, but that the cur-
rent version of the statute has removed the Boren Amendment
language.13 No doubt there is some truth in that statement.14
We, however, fail to see how it makes even a minim of differ-
ence for this purpose. The fact remains that the State’s obliga-
tion to follow the substantive provisions of 42 U.S.C. § 1396a
12
The Boren Amendment, previously codified at 42 U.S.C.
§ 1396a(a)(13)(E), required that the state plan provide for payment to
skilled nursing facilities and intermediate care services:
which the State finds, and makes assurances satisfactory to the
Secretary, are reasonable and adequate to meet the costs which
must be incurred by efficiently and economically operated facili-
ties in order to provide care and services in conformity with
applicable State and Federal laws, regulations, and quality and
safety standards . . . .
Omnibus Reconciliation Act of 1980, Pub. L. No. 96-499, § 962, 94 Stat.
2599, 2650-51; see also Exeter II, 145 Fd. 3d at 1108 n.1.
13
The current version of § 1396a(a)(13) no longer requires a state to
make “assurances” that its reimbursement rates will achieve certain objec-
tives. Rather, a state now must provide “a public process for determination
of rates of payment” for nursing facilities, and intermediate care facilities
that allows for provider participation. See § 1396a(a)(13)(A) (2006).
14
Our first foray did refer to the Boren Amendment, but it also referred
to the pre-Boren Amendment statute. Washington, 698 F.3d at 965. Never-
theless, in Exeter II, 145 F.3d at 1108, we deemed Washington to be
addressing the law under the Boren Amendment, for whatever that was
worth.
20530 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
did not change;15 nor has there been a material change in regu-
lations regarding the submission of amendments.16 And as we
carefully explained in Exeter II, 145 F.3d at 1108, the frame-
work in place made it apparent that just as all plans require
federal approval, “all amendments to plans must also be fed-
erally approved.” Id. And that must occur “before implemen-
tation.” Id.
[4] Thus, we repeat an old refrain: the State was obligated
to submit and obtain approval of its SPA before implementa-
tion. But that leads us to the next question before us, and there
the Boren Amendment repeal has a bit more bite.
II. Cause of Action Under Section 1983
[5] It is pellucid that the mere fact that an action by the
State, like obtaining approval of a SPA before implementa-
tion, is required does not mean that the Providers have a cause
of action under § 1983. See San Lazaro, 286 F.3d at 1097
(“‘[i]n order to seek redress through § 1983, . . . a plaintiff
must assert the violation of a federal right, not merely a viola-
tion of federal law.’ ”). Moreover, it is well known that when
Congress repealed the Boren Amendment, it hoped to reduce
litigation, which would clog the system, and “[i]n doing so,
Congress intended that there be no ‘cause of action for [pro-
viders] relative to the adequacy of the rates they receive.’ ”
Alaska Department of Health, 424 F.3d at 941. Because Wash-
ington,17 Homes for the Aging,18 and Exeter II19 were decided
on the law as it existed before the Boren Amendment was
15
See Alaska Dep’t of Health & Soc. Servs. v. Ctrs. for Medicare &
Medicaid Servs., 424 F.3d 931, 941 (9th Cir. 2005).
16
See 45 C.F.R. §§ 201.3-201.7 (2010); see also 45 C.F.R.
§§ 201.3-201.7 (1979).
17
698 F.2d at 964.
18
5 F.3d at 1239.
19
145 F.3d at 1106.
DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS 20531
repealed, that does give some pause, although it is not disposi-
tive.
[6] More important is the relatively recent refinement of
federal law by the Supreme Court. As the Court noted, when
our court considered a claim that plaintiffs were entitled to
child support services, we had held that a right of action was
based on the overall scheme of the statute in question. Bless-
ing v. Freestone, 520 U.S. 329, 332-33, 117 S. Ct. 1353,
1356, 137 L. Ed. 2d 569 (1997). The Court eschewed that
approach and declared:
In order to seek redress through § 1983, however, a
plaintiff must assert the violation of a federal right,
not merely a violation of federal law. We have tradi-
tionally looked at three factors when determining
whether a particular statutory provision gives rise to
a federal right. First, Congress must have intended
that the provision in question benefit the plaintiff.
Second, the plaintiff must demonstrate that the right
assertedly protected by the statute is not so “vague
and amorphous” that its enforcement would strain
judicial competence. Third, the statute must unam-
biguously impose a binding obligation on the States.
In other words, the provision giving rise to the
asserted right must be couched in mandatory, rather
than precatory, terms.
Id. at 340-41, 117 S. Ct. at 1359 (citations omitted). The
Court vacated our decision. Id. at 349, 117 S. Ct. at 1363. Lest
there be any doubt, the Court returned to the issue a few years
later. Gonzaga Univ. v. Doe, 536 U.S. 273, 122 S. Ct. 2268,
153 L. Ed. 2d 309 (2002). There, the Court emphasized: “We
now reject the notion that our cases permit anything short of
an unambiguously conferred right to support a cause of action
brought under § 1983.” Id. at 283, 122 S. Ct. at 2275. And it
concluded by stating that if Congress wants to create “new
rights enforceable under § 1983, it must do so in clear and
20532 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
unambiguous terms . . . .” Id. at 290, 122 S. Ct. at 2279; see
also Watson v. Weeks, 436 F.3d 1152, 1158-59 (9th Cir.
2006); Sanchez v. Johnson, 416 F.3d 1051, 1059-60 (9th Cir.
2005).
We do not overlook the fact that Washington20 and Homes
for the Aging21 did allow for a § 1983 action, but neither actu-
ally discussed the question about what specific provision con-
ferred a cause of action upon providers; they were quite
general, even ambiguous, in that regard. In fact, in Exeter I,22
which we adopted in Exeter II,23 the district court stated that
the parties had agreed that a § 1983 action was available.24 For
our part, we made it quite clear that Washington was decided
based upon “the overall statutory framework rather than the
particular language of the statute.” Exeter II, 145 F.3d at
1108. Also, while Exeter II itself was issued after Blessing, its
adoption of Exeter I demonstrates that it was not really
focused on the question of whether a § 1983 action was avail-
able, and, of course, it came before the added clarification in
Gonzaga University.
[7] Therefore, when we consider Congress’ intent in
repealing the Boren Amendment, the fact that no provision
appears to unambiguously confer a right upon the Providers,
the fact that the requirement of the submission of SPAs to the
federal authority appears to be a general25 or administrative26
20
698 F.2d at 965 n.4. We recognize that the court also relied upon
agency regulations, but regulations alone cannot create rights enforceable
under § 1983. See Guzman v. Shewry, 552 F.3d 941, 952 (9th Cir. 2009).
21
5 F.3d at 1241.
22
943 F. Supp. at 1239.
23
145 F.3d at 1108.
24
943 F. Supp. at 1241.
25
See Sanchez, 416 F.3d at 1059-60 (finding no right to enforce 42
U.S.C. § 1396a(a)(30)(A)).
26
San Lazaro, 286 F.3d at 1099 (finding no right to enforce single state
agency requirement).
DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS 20533
provision rather than one which confers individual entitle-
ments, and the fact that our prior cases do not require a differ-
ent decision under the circumstances, we are constrained to
the view that notwithstanding our prior cases,27 no individual
right has been created for the Providers.28
The Providers also argue that the federal authorities are of
the opinion that SPAs must be approved before they are
implemented, a proposition with which we agree. But, as we
have already noted, an agency cannot create a right enforce-
able through § 1983 where Congress has not done so. See
Guzman, 552 F.3d at 952; Save Our Valley v. Sound Transit,
335 F.3d 932, 939 (9th Cir. 2003). Nor is there a basis for
deciding that an agency can accomplish the same result by
taking a litigating position as an amicus in one or more cases,
or by issuing dire warnings that a private individual might
sue.
[8] In fine, the Providers have not shown that they have an
unambiguously conferred right to bring a § 1983 action. That
being so, we must hold that there is no likelihood of success
on the merits and that the preliminary injunction cannot stand.29
27
Miller v. Gammie, 335 F.3d 889, 899-900 (9th Cir. 2003) (en banc)
(panel can deem prior opinions of the court to be “effectively overruled”).
28
We have not overlooked the Providers’ claim that the so called “Suter
fix” shows that they can bring an action here. See 42 U.S.C. §§ 1320a-2,
1320a-10; Suter v. Artist M., 503 U.S. 347, 112 S. Ct. 1360, 118 L. Ed.
2d 1 (1992). But those provisions make it clear that they are not intended
to “expand the grounds for determining the availability of private actions
to enforce State plan requirements . . . .” 42 U.S.C. §§ 1320a-2, 1320a-10.
They do not help to answer the question before us, which is, precisely,
whether a private action is available.
29
The Providers and the State each devote a small handful of pages to
the question of whether the injunction can be upheld under the Supremacy
Clause. We decline to decide that issue. The district court expressly
refused to proceed on that basis, and it should decide the issue in the first
instance. See Am. Trucking, 559 F.3d at 1060; see also Warren v. Comm’r,
302 F.3d 1012, 1015 (9th Cir. 2002). Moreover, because the Supremacy
20534 DEVELOPMENTAL SERVICES NETWORK v. DOUGLAS
See Global Horizons, 510 F.3d at 1058; Gonzales v. DHS, 508
F.3d 1227, 1242 (9th Cir. 2007).
CONCLUSION
[9] Despite our contrary holdings over the past decades,
the State has allowed its economic difficulties to obnebulate
its analysis and render it purblind to the simple fact that it
cannot properly implement changes to its Medicaid plan
before the federal government (DHHS through CMS at this
time) has approved a submitted SPA. Yet, while it is regretta-
ble that the State refuses to abide by the law, that does not
mean that a right which will support a cause of action under
§ 1983 has been unambiguously conferred upon the Provid-
ers; they cannot maintain an action under that section. There-
fore, we must vacate the preliminary injunction.
VACATED and REMANDED.
Clause issue is now before the Supreme Court, see n.7, supra, prudence
suggests that consideration of the issue should be put off for another day.
After all, the preliminary injunction order did not even touch on that issue.
We also see no reason to take up other issues raised by the State; they
would not affect our ultimate decision.