Air Evac EMS, Inc. v. Texas, Department of Insurance, Division of Workers' Compensation

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 16-51023 March 20, 2017
Lyle W. Cayce
AIR EVAC EMS, INCORPORATED, Clerk
Plaintiff - Appellant
v.
STATE OF TEXAS, DEPARTMENT OF INSURANCE, DIVISION OF
WORKERS’ COMPENSATION; DAVID MATTAX, Texas Commissioner of
Insurance, in his official capacity; RYAN BRANNAN, Texas Commissioner of
Workers’ Compensation, in his official capacity,
Defendants - Appellees
v.
TEXAS MUTUAL INSURANCE COMPANY; LIBERTY MUTUAL
INSURANCE COMPANY; ZENITH INSURANCE COMPANY; HARTFORD
UNDERWRITERS INSURANCE COMPANY; TWIN CITY FIRE
INSURANCE COMPANY; TRANSPORTATION INSURANCE COMPANY;
VALLEY FORGE INSURANCE COMPANY; TRUCK INSURANCE
EXCHANGE,
Intervenor Defendants - Appellees
Appeal from the United States District Court
for the Western District of Texas
No. 16-51023
Before JONES, BARKSDALE, and COSTA, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
Primarily at issue is whether an air-ambulance company, claiming
federal preemption of Texas’ workers’-compensation scheme, satisfies the
equitable exception to the Eleventh Amendment, as provided in Ex parte
Young, 209 U.S. 123, 155–56 (1908). It does. For this and other reasons,
federal jurisdiction exists. Moreover, we decline to abstain under Colorado
River Water Conservation District v. United States, 424 U.S. 800 (1976).
VACATED and REMANDED.
I.
Air Evac EMS, Incorporated, filed this action against, inter alia, the
Texas Commissioner of Insurance and the Texas Commissioner of Workers’
Compensation (state defendants), claiming that, as applied to air-ambulance
entities, Texas’ workers’-compensation system is federally preempted.
Because the Airline Deregulation Act (ADA) expressly preempts all state laws
“related to a price, route, or service of an air carrier”, Air Evac maintains Texas
may not use state laws to regulate air-ambulance services. 49 U.S.C.
§ 41713(b)(1).
Air Evac’s air ambulances depart from more than 20 sites in Texas. And,
Air Evac holds an assortment of licenses from federal and state regulators,
including the United States Department of Transportation, Federal Aviation
Administration, and Texas. Being an emergency-transportation service, Air
Evac must accept patients regardless of either their ability to pay or the source
of their payment. As a result, Air Evac often seeks payment for its services
through the Texas Workers’ Compensation Act (TWCA).
TWCA established a state-regulated insurance market, in which Texas
licenses private insurers to sell workers’-compensation policies to employers.
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See Tex. Labor Code §§ 401.001–419.007. Two critical features of this
framework are relevant to the action at hand: a maximum-reimbursement
system; and, a prohibition on “balance billing”. Id. §§ 413.011 (reimbursement
guidelines), 413.042 (“A health care provider may not pursue a private claim
against a workers’ compensation claimant”).
As for the reimbursement program, TWCA authorizes health-care
providers to seek payment directly from workers’-compensation insurers for
services provided patients covered by TWCA. Id. § 408.027(a). The insurer
then reimburses the health-care provider according to rate guidelines
promulgated by the Texas Workers’ Compensation Commission (commission).
See id. These rates are generally based on corresponding Medicare rates. An
insurer is not allowed to pay more than the maximum-reimbursement rate,
regardless of whether the rate satisfies the health-care provider’s billed
amount. Id. § 413.011(d).
Therefore, under this system, the initial bill goes to the insurer rather
than the patient. Furthermore, the balance-billing prohibition prevents a
health-care provider from billing the patient for any portion of the bill in excess
of the commission’s rate. Id. § 413.042. If a health-care provider violates this
prohibition, TWCA authorizes fines up to “$25,000 per day per occurrence”. Id.
§ 415.021(a).
If a health-care provider believes it was underpaid, or the commission
has not yet set a specific rate, it may dispute the fee with the Texas
Department of Insurance, Division of Workers’ Compensation (DWC). See id.
§ 413.031(a), (c). (Air Evac does not appeal the dismissal of DWC from this
action.)
DWC serves as a first-level administrative adjudicator, with the health-
care provider and insurer participating as interested parties. See id. DWC’s
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decisions are appealable to the State Office of Administrative Hearings
(SOAH); SOAH’s decisions, to the Travis County, Texas, district court. See id.
§ 413.031(k-1); Tex. Gov. Code Ann. § 2001.176. And, an appeal may be taken
from a decision by that court. Tex. Gov. Code Ann. § 2001.901.
If the commission has not promulgated a reimbursement rate for a given
service, DWC must determine a “fair and reasonable” rate through
administrative proceedings. See 28 Tex. Admin. Code § 134.1(e)–(f). In 2002,
DWC adopted a rule setting a general reimbursement rate of 125% of the
Medicare rate. See id. § 134.203(d).
After adhering to this rule for ten years, numerous air-ambulance
companies―including Air Evac―challenged the 125% rate in the state-
administrative-dispute system, urging ADA preemption. Initially, DWC
stated it believed Texas’ reimbursement guidelines were preempted. In
September 2015, however, following an extensive series of administrative
hearings, an administrative law judge (ALJ) ruled TWCA’s scheme was not
preempted, and found the proper reimbursement rate to be 149% of the
Medicare rate.
The lead entity in the administrative proceeding, PHI Air Medical, LLC,
appealed the ALJ’s ruling to the Travis County district court. See Tex. Mut.
Ins. Co., et al. v. PHI Air Medical, LLC, No. D-1-GN-15-004940 (Tex. 53d Jud.
Dist. 15 Dec. 2016). In mid-December 2016, that court ruled: TWCA is not
preempted; and, a reimbursement rate of 125% of the Medicare rate is
adequate under TWCA. Id. On 31 January 2017, PHI appealed to the court of
appeals. In the meantime, hundreds of air-ambulance fee disputes have been
held at the SOAH level, pending the outcome of PHI’s judicial proceeding.
Approximately a year earlier, in January 2016, with the state proceeding
ongoing, Air Evac filed this action, seeking: a declaratory judgment that ADA
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preempts TWCA with respect to air-ambulance companies; injunctive relief
against enforcement of the maximum-reimbursement-rate system; or, in the
alternative, declaratory and injunctive relief against the balance-billing
prohibition. The district court granted a joint motion to intervene on behalf of
numerous workers’-compensation insurers (insurers). Prior to the discovery
conference, Air Evac moved for summary judgment and each defendant moved
to dismiss.
The court granted defendants’ Federal Rule of Civil Procedure 12(b)(1)
motions to dismiss. Air Evac EMS, Inc. v. Texas, No. 1:16-CV-00060-SS, 2016
WL 4259552, at *9 (W.D. Tex. 11 Aug. 2016). In doing so, it first ruled subject-
matter jurisdiction existed, based on Shaw v. Delta Air Lines, Inc., 463 U.S.
85, 96 n.14 (1983) (ruling preemption claims present a federal question because
they rely on interpretation of federal statutes and the Supremacy Clause). Air
Evac EMS, 2016 WL 4259552, at *5. The court continued to explain that,
although Shaw confers federal-question jurisdiction under 28 U.S.C. 1331, the
Supremacy Clause, ADA, and Declaratory Judgment Act do not provide a
“private right of action”. Id. at *5–6.
Therefore, in the light of the Eleventh Amendment, the court concluded:
in order for this action to proceed, Air Evac must rely on a federal court’s
equitable jurisdiction to enjoin state officials under Ex parte Young. Id. at *6.
Looking to Ex parte Young’s basic requirements, the court first acknowledged
Air Evac: seeks prospective injunctive relief; and claims an ongoing violation
of federal law. Id. at *6–7.
The court next considered Okpalobi v. Foster, 244 F.3d 405 (5th Cir.
2001) (en banc), in which the lead, plurality opinion would have required
defendants in an Ex parte Young action to, inter alia, “be specially charged
with the duty to enforce the statute”, as well as to “be threatening to exercise
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No. 16-51023
that duty”. Air Evac EMS, 2016 WL 4259552, at *7 (quoting Okpalobi, 244
F.3d at 414–15). Relying on the duty-to-enforce requirement, the court noted
TWCA’s maximum-reimbursement scheme cannot be enforced against Air
Evac because it constrains the amount insurers can pay, rather than the
amount air-ambulance companies can charge. Id. at *8. Without direct
enforcement against the health-care providers, the court concluded, the
maximum-reimbursement system does not qualify as the basis for the Ex parte
Young exception. Id.
Turning to Air Evac’s alternative challenge to the balance-billing
prohibition, the court recognized state defendants are charged with enforcing
the provision against entities which violate the rule. Id. The court, however,
held: “Air Evac’s claims fail under Young, as Air Evac has failed to show an
enforcement proceeding concerning the balance-billing prohibition is
imminent, threatened, or even intended”. Id. In doing so, the court specifically
rejected Air Evac’s assertion that it need not “expose itself” to liability by
violating the balance-billing prohibition in order to test the law’s
constitutionality under the Supremacy Clause. Id.
In sum, the court held: despite claiming an ongoing violation of federal
law and seeking only prospective relief, Air Evac could not avail itself of the Ex
parte Young exception because the maximum-reimbursement system is not
directly enforced against Air Evac, and state defendants have not threatened
to enforce the balance-billing prohibition. Id. at *9.
II.
For this appeal, our court granted expedited briefing and oral argument.
The parties raise four distinct threshold issues: whether Air Evac has Article
III standing; whether federal-question jurisdiction exists for this action under
28 U.S.C. § 1331; whether Ex parte Young’s exception applies; and whether, in
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No. 16-51023
the light of the above-referenced ongoing state proceedings, we should abstain
from exercising otherwise-proper jurisdiction.
A motion to dismiss’ being granted is reviewed de novo, applying the
same standard as the district court. E.g., Bennett-Nelson v. La. Bd. of Regents,
431 F.3d 448, 450 n.2 (5th Cir. 2005). And, of course, a federal court must
always determine its own jurisdiction; if it decides it is lacking, it may proceed
no further. E.g., Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998).
Consistent with our above-described standard of review, “whether state
defendants are entitled to sovereign immunity is likewise reviewed de novo”.
Moore v. La. Bd. of Elementary & Secondary Educ., 743 F.3d 959, 962 (5th Cir.
2014) (internal citation omitted).
A.
State defendants’ challenge to Air Evac’s standing is adopted by
insurers. Federal standing has three well-known requirements: (1) injury-in-
fact; (2) “fairly traceable” causation; and (3) redressability. Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560–61 (1992). In concluding Air Evac has standing,
the court stated:
Air Evac has suffered economic injury given its alleged
inability to recover the total amount of its billed
charges under the TWCA reimbursement scheme; the
causal connection between the scheme and Air Evac’s
injury is clear; and if the challenged provisions are
indeed preempted, the State Defendants will no longer
be able to enforce them. Air Evac has standing to sue.
Air Evac EMS, 2016 WL 4259552, at *4 n.2.
State defendants assert the district court’s analysis is too simplistic, that
Air Evac cannot establish causation or redressability. They maintain that, to
the extent not being able to recover full-billed charges is an injury, there is no
traceability or redressability because TWCA’s reimbursement cap is not
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No. 16-51023
directly “enforced” against Air Evac, but against insurers. (As discussed infra,
there is significant overlap between standing and Ex parte Young’s
applicability.)
Under the above-described three-part test, an injury-in-fact—the first
requirement—must be “concrete and particularized” and “actual or imminent”.
Lujan, 504 U.S. at 560. Working in tandem, TWCA’s provisions effectively set
a reimbursement rate and prohibit air-ambulance entities from collecting any
more than that rate from other sources (i.e., the patient).
Along that line, Ex parte Young was a rate-setting case in which a
railroad was not allowed to charge more than the state-mandated rate. 209
U.S. at 127–28. There, the complaint claimed those rates were confiscatory, in
violation of the Fourteenth Amendment’s mandate that no State shall “deprive
any person of life, liberty, or property, without due process of law”. U.S. Const.
amend. XIV, § 1; see Ex parte Young, 209 U.S. at 149–50. Although Air Evac
does not contend that collecting 125% of the Medicare rate is confiscatory,
capping rates based on a federally-preempted state law (by virtue of the
Supremacy Clause) would limit a party’s financial recovery. Thus, prohibiting
collection in excess of the maximum-reimbursement rate is a pecuniary injury
sufficient to establish injury-in-fact. See, e.g., K.P. v. LeBlanc, 627 F.3d 115,
122 (5th Cir. 2010).
For the second standing requirement, there must be a “fairly traceable”
causal connection “between the injury and the conduct complained of”. Lujan,
504 U.S. at 560. Three of state defendants’ duties are “fairly traceable” to Air
Evac’s injury: (1) rate-setting; (2) fee-dispute resolution; and (3) the balance-
billing prohibition. For the reasons that follow, collectively, these three
instances of commission and DWC conduct are “fairly traceable” to Air Evac’s
injury.
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First, the commission and DWC set the reimbursement rates insurers
are allowed to pay. Although defendants contend this rate-setting is too
attenuated to be the cause of Air Evac’s injury, “[t]racing an injury is not the
same as seeking its proximate cause”. K.P., 627 F.3d at 123. By setting the
reimbursement rates, state defendants initiate the first step in the workers’-
compensation-payment process.
Second, state defendants oversee the administrative fee-dispute process.
In K.P., described infra, a state regulatory board served as the “initial
arbiter[]” within a state-funded compensation system. Id. Our court ruled that
role “place[d] the Defendants among those who would contribute to Plaintiffs’
harm”. Id. Likewise, state defendants’ oversight of DWC―the “initial
arbiter[]” of fee-reimbursement disputes―places state defendants among those
who cause Air Evac’s injury. Id.Third, state defendants are charged with enforcing the balance-billing
prohibition. Their ability to fine TWCA violators up to $25,000 per violation,
per day, prevents Air Evac from seeking additional payment outside of the
maximum-reimbursement scheme.
The final of the three standing requirements is that the court be able to
structure relief to redress plaintiff’s injury. Plaintiff must show a “favorable
decision will relieve a discrete injury to himself”, but not necessarily “that a
favorable decision will relieve his every injury”. Larson v. Valente, 456 U.S.
228, 243 n.15 (1982) (emphasis in original).
In Okpalobi, defendant state officials (governor and attorney general)
were found not to have “any duty or ability to do anything” relating to the
statute. 244 F.3d at 427 (emphasis in original). On the other hand, in K.P.,
defendant board members had “definite responsibilities relating to the
application of [the statute]”. 627 F.3d at 124.
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Here, state defendants are more akin to the board members in K.P. than
the state-wide officials in Okpalobi. As explained above, state defendants
wield influence at multiple points in the workers’-compensation
reimbursement process. An injunction against their rate setting, fee-dispute
resolution, or enforcement of the balance-billing prohibition would remove a
“discrete injury” caused by state defendants’ enforcement of TWCA. See
Larson, 456 U.S. at 243 n.15.
In sum, state defendants’ duties concerning the workers’-compensation
reimbursement system and balance-billing prohibition cause Air Evac a
pecuniary injury that can be redressed with injunctive and declaratory relief.
In short, Air Evac has Article III standing.
B.
Next, state defendants (but not insurers) contend federal-question
jurisdiction for this action is lacking, based on Armstrong v. Exceptional Child
Care, Inc., 135 S. Ct. 1378, 1384 (2015). State defendants cite Armstrong for
the proposition that, in order for federal jurisdiction to exist, plaintiff, at this
threshold stage, must nevertheless establish the requirements for injunctive
relief.
The district court ruled federal-question jurisdiction existed, based on
the Court’s plain statement in Shaw. See Air Evac EMS, 2016 WL 4259552,
at *5 (citing Shaw, 463 U.S. at 96 n.14). The Shaw Court stated: “A plaintiff
who seeks injunctive relief from state regulation, on the ground that such
regulation is pre-empted by a federal statute which, by virtue of the Supremacy
Clause of the Constitution, must prevail, thus presents a federal question
which the federal courts have jurisdiction under 28 U.S.C. § 1331 to resolve”.
463 U.S. at 96 n.14. Because Air Evac’s complaint seeks injunctive relief on
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the basis that the ADA preempts the TWCA, Shaw confers federal-question
jurisdiction. See id.Despite state defendants’ assertions to the contrary, Armstrong does not
modify Shaw’s clear language. Armstrong holds the Supremacy Clause does
not create a right to challenge state laws on preemption grounds; rather, the
clause “instructs courts what to do when state and federal law clash, but is
silent regarding who may enforce federal laws in court”. Armstrong, 135 S. Ct.
at 1383. Thus, the Court held: “The ability to sue to enjoin unconstitutional
actions by state and federal officers is the creation of courts of equity”, not the
Supremacy Clause. Id. at 1384.
In Armstrong, the Court reaffirmed that plaintiffs’ seeking injunctive
relief against state officers must satisfy Ex parte Young’s equitable exception.
See id. This holding requires Air Evac proceed under Ex parte Young, if at all;
but, it does not contradict Shaw’s plain grant of federal-question jurisdiction
under Article III and 28 U.S.C. § 1331. See Shaw, 463 U.S. at 96 n.14.
C.
Having concluded jurisdiction existed, the district court next considered
Ex parte Young’s applicability. Air Evac EMS, 2016 WL 4259552, at *6. As
noted, Ex parte Young represents an equitable exception to Eleventh
Amendment sovereign immunity. 209 U.S. at 155–56. The doctrine allows
plaintiff to sue a state official, in his official capacity, in seeking to enjoin
enforcement of a state law that conflicts with federal law. See id. at 159–60.
It is a threshold question which, therefore, does not consider the merits of an
action, focusing instead on whether the complaint makes the requisite claims
against proper parties. See id. at 150. Air Evac contends the district court
misapplied Ex parte Young’s standard in two ways.
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No. 16-51023
First, Air Evac challenges the court’s concluding the maximum-
reimbursement rates are not enforced against Air Evac because TWCA
regulates the amount insurers may pay, rather than the amount air-
ambulance entities can collect. Air Evac EMS, 2016 WL 4259552, at *8. Air
Evac asserts the statute is directly enforced against it every time it either seeks
reimbursement through TWCA or disputes a reimbursement amount through
DWC’s administrative process.
Second, Air Evac claims the court erred by requiring “initiated [or]
threatened enforcement proceedings” in order, under Ex parte Young, to
challenge TWCA’s balance-billing prohibition. See id. at *7. Air Evac contends
Ex parte Young, instead, requires only a “straightforward inquiry” for whether
the complaint seeks prospective equitable relief for an ongoing violation of
federal law, citing Verizon Maryland, Inc. v. Public Service Commission of
Maryland, 535 U.S. 635, 645 (2002).
State defendants and insurers maintain the court was correct to require
direct enforcement against Air Evac for the maximum-reimbursement
provisions. Likewise, for the balance-billing prohibition, defendants agree
with the court’s concluding there is no imminent or threatened enforcement
proceeding sufficient to meet the Ex parte Young exception. In addition to
echoing the court’s reasoning, defendants also contend: the dismissal should
be affirmed because, inter alia, Air Evac does not meet the traditional
requirements for equitable relief; therefore, no injunctive relief can be issued
pursuant to the Ex parte Young exception.
Ex parte Young concerned whether a federal court may enjoin a state
official from enforcing an unconstitutional state law. 209 U.S. at 126–27.
Underlying the issue was a railroad’s seeking an injunction against the
Minnesota attorney general, who threatened criminal action and civil fines
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No. 16-51023
against any railroad that violated the state commission’s rate-setting order.
Id. at 127–28. The railroad asserted, as discussed supra, that the rates
amounted to a confiscatory taking, in violation of the Fourteenth Amendment;
the attorney general claimed protection from suit under the Eleventh
Amendment. See id. at 150.
Addressing the viability of a federal injunction, the Court held:
[I]ndividuals who, as officers of the State, are clothed
with some duty in regard to the enforcement of the
laws of the state, and who threaten and are about to
commence proceedings, either of a civil or criminal
nature, to enforce against parties affected an
unconstitutional act, violating the Federal
Constitution, may be enjoined by a Federal court of
equity from such action.
Id. at 155–56. In justifying its holding, the Court avoided the apparent conflict
with sovereign immunity by creating a legal “fiction”: a federal court does not
violate state sovereignty when it orders a state official to do nothing more than
uphold federal law under the Supremacy Clause. Va. Office for Prot. &
Advocacy v. Stewart, 563 U.S. 247, 255 (2011); see Ex parte Young, 209 U.S. at159–60.
Because this legal fiction infringes on state sovereignty, Ex parte Young
and its progeny limit the exception. Idaho v. Coeur d’Alene Tribe of Idaho, 521
U.S. 261, 269 (1997) (affirming that, in applying Ex parte Young, courts “must
ensure that the doctrine of sovereign immunity remains meaningful, while also
giving recognition to the need to prevent violations of federal law”); see also
Pennhurst State Sch. and Hosp. v. Halderman, 465 U.S. 89, 104–06 (1984)
(limiting Ex parte Young jurisdiction only to violations of the federal
Constitution and statutes); Edelman v. Jordan, 415 U.S. 651, 677 (1974)
(limiting Ex parte Young plaintiffs only to prospective relief). Most relevant to
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No. 16-51023
the action at hand, Ex parte Young requires defendants have “some connection”
to the state law’s enforcement and threaten to exercise that authority. Ex parte
Young, 209 U.S. at 157.
This “some connection” requirement is designed to ensure defendant is
not merely being sued “as a representative of the state, and thereby attempting
to make the state a party”. Id. For example, a state governor with a broad
duty to uphold state law is not a proper defendant. See Morris v. Livingston,
739 F.3d 740, 745–46 (5th Cir. 2014).
Despite these restrictions, the Court has reinforced Ex parte Young’s
being a “straightforward inquiry” and specifically rejected an approach that
would go beyond a threshold analysis. See Coeur d’Alene, 521 U.S. at 296(O’Connor, J., concurring in part and in judgment). In Coeur d’Alene, the lead
opinion proposed a balancing test, weighing the significance of the federal
right, the availability of a state forum, and the importance of the state interest.
Id. at 270–80. Seven justices rejected this approach and agreed with Justice
O’Connor’s position that a case-by-case balancing test “unnecessarily
recharacterizes and narrows” Ex parte Young. Id. at 291 (O’Connor, J.,
concurring in part and in judgment); id. at 298 (Souter, J., dissenting).
Subsequently, in Verizon, 535 U.S. at 645 (quoting Coeur d’Alene, 521
U.S. at 296 (O’Connor, J., concurring in part and in judgment)), a majority of
the Court affirmed this principle, stating: “[A] court need only conduct a
‘straightforward inquiry into whether [the] complaint alleges an ongoing
violation of federal law and seeks relief properly characterized as prospective’”.
There, a state regulatory commission issued an order interpreting the scope of
a private contract, which had been subject to prior commission approval. Id.at 639–40. Plaintiff’s subsequent federal-court action claimed the
commission’s order conflicted with federal law. Id. at 640.
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The Court conducted a “straightforward inquiry” into the pleadings and
noted: “We have approved injunction suits against state regulatory
commissioners in like contexts”. Id. at 645 (collecting cases). Thus, the action
could proceed against state commissioners for their role in implementing a
state regulatory scheme. See id. at 645–48.
Our court has also considered Ex parte Young’s navigating between state
sovereignty and federal supremacy: specifically, how close a relationship is
required between the state actor and the claimed unconstitutional act.
Compare Okpalobi, 244 F.3d at 413–16 (lead plurality requiring a “special
relation” to “threatened enforcement”), with K.P., 627 F.3d at 124 (explicitly
declining to follow the Okpalobi plurality’s “special relation” standard). For
example, in our en-banc decision in Okpalobi, the Eleventh Amendment
question was whether defendants―Louisiana’s governor and attorney
general―had a sufficient duty, under Ex parte Young, to enforce a Louisiana
statute. See 244 F.3d at 410–11. The statute provided for private actions and
unlimited tort liability against doctors who performed abortions. Id. at 409.
The lead opinion interpreted Ex parte Young’s “some connection”
language to require a “special relation” or “close connection”. See id. at 413–
19 (citing Ex parte Young, 209 U.S. at 157; Fitts v. McGhee, 172 U.S. 516, 529
(1899)). Because the statute provided only for private enforcement by patients
(as opposed to state enforcement), and because the governor and attorney
general had only a “general duty” to see state laws enforced, the lead opinion
held such a tenuous connection was insufficient to invoke Ex parte Young.
Okpalobi, 244 F.3d at 423–24.
As noted supra, the Eleventh Amendment analysis in Okpalobi,
however, received support only from a plurality of our en banc court; the
majority decided the case on standing. See id. at 429 (Higginbotham, J.,
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concurring); id. at 432–33 (Benavides, J., concurring in part and dissenting in
part); id. at 441 (Parker, J., dissenting). Subsequently, in K.P., 627 F.3d at
124, our court stated: “Because that part of the [Okpalobi] en banc opinion did
not garner majority support, the Eleventh Amendment analysis is not binding
precedent”.
The K.P. court considered the same Louisiana abortion statute as had
Okpalobi, but in a different context. K.P., 627 F.3d at 119–20, 122. There,
plaintiff physicians were members of Louisiana’s patients’-compensation fund,
which effectively capped physicians’ liability in medical-malpractice actions.
Id. at 119. An oversight board administered the fund by reviewing patient
claims and determining coverage. See id. But, when a patient filed a claim
asserting abortion-related tort damages, the board relied on the Louisiana
abortion statute to exclude the physicians from the fund’s coverage and
liability cap. Id. at 120; see La. Rev. Stat. Ann. § 9:2800.12(A), (B)(2), (C)(2)
(excluding abortion procedures from the “laws governing medical malpractice
or limitations of liability thereof”). Plaintiff physicians’ subsequent federal-
court action sought to enjoin the board’s denying them coverage based on the
claimed unconstitutional abortion statute. K.P., 627 F.3d at 120.
In its Eleventh Amendment analysis, the K.P. court defined
“enforcement” as involving “compulsion or constraint”. Id. at 124. It then held,
without adopting the “special relation” standard from Okpalobi, that “the
Board’s role starts with deciding whether to have a medical review panel
consider abortion claims and ends with deciding whether to pay them. By
virtue of these responsibilities, Board members are delegated some
enforcement authority”. Id. at 125. Unlike the governor and attorney general
in Okpalobi, the board in K.P. took specific action predicated on the abortion
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statute; this was a sufficient connection to enforcement to trigger the Ex parte
Young exception. See id.As these cases demonstrate, the Ex parte Young analysis can turn on
subtle distinctions in the complaint. Ex parte Young and Okpalobi each
involved a state attorney general as defendant. In Ex parte Young, the
attorney general had authority to enforce the statute at issue, while the
Louisiana abortion statute in Okpalobi provided for enforcement through
private actions, not public officials.
On the other hand, in Okpalobi and K.P., the same statute was at issue,
but defendants in the respective actions provided the determinative
distinction. Rather than suing the attorney general and governor, as in
Okpalobi, the K.P. plaintiffs sued the state-regulatory-board members, who
had a specific means through which to apply the abortion statute. Thus, the
Ex parte Young analysis turns on the complaint’s context―including the
challenged state law and defendants―to determine whether “the state officer,
by virtue of his office, has some connection with the enforcement of the act”.
Ex parte Young, 209 U.S. at 157.
1.
Turning to the matter at hand, we must decide whether state defendants
have the requisite connection to the enforcement of the maximum-
reimbursement system and balance-billing prohibition. In doing so, we bear
in mind the Court’s admonition that Ex parte Young presents a
“straightforward inquiry” into the complaint’s claims. See Verizon, 535 U.S. at
645.
First, as the district court noted, Air Evac claims an ongoing violation of
federal law and seeks prospective relief. See Air Evac EMS, 2016 WL 4259552,
at *7. The complaint claims the ADA expressly preempts the workers’-
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No. 16-51023
compensation system with respect to air-ambulance entities and seeks an
injunction and declaratory judgment.
Next, we hold state defendants have a sufficient connection to the
enforcement of the TWCA through the maximum-reimbursement rates and
balance-billing prohibition. The district court was correct to recognize that
“enforcement” under the maximum-reimbursement scheme is not the same
type of direct enforcement found in Ex parte Young, for instance, where the
attorney general threatened civil and criminal prosecution. But, such
enforcement is not required. See, e.g., Verizon, 535 U.S. at 645–46; K.P., 627
F.3d at 124–25. In Verizon, the Court allowed an action against commissioners
who ordered specific payments between private parties. 535 U.S. at 645–46.
Likewise, in K.P., the board members’ reliance on the abortion statute to deny
liability protection qualified as enforcement. 627 F.3d at 125.
Employing K.P.’s definition of “enforcement” as “compulsion or
constraint”, state defendants obviously constrain Air Evac’s ability to collect
more than the maximum-reimbursement rate under the TWCA system.
Between their rate-setting authority and role in arbitrating fee disputes
through the administrative process, state defendants effectively ensure the
maximum-reimbursement scheme is enforced from start to finish. Therefore,
the district court erred in not considering, for the purpose of Ex parte Young’s
being applied, the maximum-reimbursement provision as a means of enforcing
TWCA against Air Evac.
The parties debate whether Ex parte Young applies only when there is a
threatened or actual proceeding to enforce the challenged state law. We need
not resolve that question. To the extent Ex parte Young requires that the state
actor “threaten” or “commence” proceedings to enforce the unconstitutional act,
state defendants’ pervasive enforcement satisfies that test. See 209 U.S. at
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156. In K.P., our court held the prior denial of liability coverage fulfilled the
threatened-proceedings requirement; so, too, does state defendants’
enforcement of the 125% air-ambulance-reimbursement rate. See K.P., 627
F.3d at 125.
2.
Having held the Ex parte Young exception applies, we need not engage
in a separate analysis of the balance-billing prohibition. As discussed, the
district court concluded “Air Evac has failed to show an enforcement
proceeding concerning the balance-billing prohibition is imminent, threatened,
or even intended”. Air Evac EMS, 2016 WL 4259552, at *8. We note, however,
that the balance-billing prohibition works in concert with state defendants’
implementation of the reimbursement system, serving as a backstop against
alternative methods of fee collection. State defendants’ pervasive authority to
oversee and enforce Texas’ workers’-compensation system satisfies the Ex
parte Young exception.
3.
Finally, courts recognize the significant overlap between Article III
jurisdiction, Ex parte Young, and equitable relief. See, e.g., NiGen Biotech,
L.L.C. v. Paxton, 804 F.3d 389, 394 n.5 (5th Cir. 2015) (equating and
distinguishing Ex parte Young’s requirements with the “Article III minimum
for standing to request an injunction”). As with most jurisdictional questions,
Ex parte Young and standing turn on the specific details in the complaint.
These doctrines are both threshold questions, however, and do not
consider the action’s merits. In fact, the Ex parte Young Court acknowledged
the underlying action would rely on the Fourteenth Amendment, but noted “a
decision of this case does not require an examination or decision of the question
whether [the Fourteenth Amendment’s] adoption in any way altered or limited
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the effect of the [Eleventh] Amendment”. 209 U.S. at 150. In doing so, the
Court recognized that its Eleventh Amendment analysis was distinct from any
subsequent question on the merits. See id.; see also Verizon, 535 U.S. at 646(“But the inquiry into whether suit lies under Ex parte Young does not include
an analysis of the merits of the claim.”).
Therefore, having determined Air Evac’s action satisfies the Ex parte
Young exception, we need not consider—contrary to defendants’ assertion—
whether the requirements for temporary or permanent equitable relief are also
satisfied. Doing so is beyond the threshold jurisdictional question posed by Ex
parte Young and would consider the availability and scope of any eventual
relief.
D.
State defendants’ final contention (adopted by insurers) is that,
assuming jurisdiction exists for this action, Colorado River abstention should
be invoked in the light of PHI’s proceedings in Texas state court and the
administrative system. See Colo. River Water Conservation Dist. v. United
States, 424 U.S. 800 (1976). Because the district court based dismissal on the
Eleventh Amendment, it “decline[d] to consider the propriety of Colorado River
abstention”. Air Evac EMS, 2016 WL 4259552, at *9. Discretionary Colorado
River abstention may be applied when: a state proceeding is ongoing and is
parallel to the federal proceeding; and, extraordinary circumstances caution
against exercising concurrent federal jurisdiction. See Colorado River, 424
U.S. at 817–19.
“Parallel actions” typically involve the same parties, but the identity of
the parties is not determinative. See Afr. Methodist Episcopal Church v.
Lucien, 756 F.3d 788, 797 (5th Cir. 2014). Instead, a court may “look both to
the named parties and to the substance of the claims asserted” to determine
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whether the state proceeding would be dispositive of a concurrent federal
proceeding. Id. If the matters are deemed parallel, the court must engage in
a six-factor balancing test, but “with the balance heavily weighted in favor of
the exercise of [federal] jurisdiction”. Moses H. Cone Mem. Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 16 (1983); see Kelly Inv., Inc. v. Cont’l Common Corp.,
315 F.3d 494, 497 (5th Cir. 2002) (listing the Colorado River factors).
For the requisite parallel action, state defendants point to the above-
described PHI litigation, which arose out of DWC’s administrative appeals
process. As discussed, Air Evac and numerous other air-ambulance entities,
in 2012, began challenging reimbursement rates through DWC’s fee-dispute
process. The appeals were consolidated; and, after extensive administrative
proceedings, an ALJ ruled against ADA preemption. PHI sought judicial
review in the Travis County district court; the other air-ambulance matters
were held in abeyance pending resolution of that appeal. Shortly after oral
argument in our court for the instant appeal, the state court ruled against
preemption and found a 125% reimbursement rate adequate. See Tex. Mut.
Ins. Co., et al. v. PHI Air Medical, LLC, Cause No. D-1-GN-15-00490 (Tex. 53d
Jud. Dist. 15 Dec. 2016). PHI has appealed to Texas’ court of appeals.
Nonetheless, given the differences between the two actions and lack of
preclusive effect, we do not consider the PHI state-court proceeding to be
“parallel” for the purpose of Colorado River abstention. For example, the
parties are different on both sides: neither Air Evac nor state defendants are
party to the PHI litigation. In addition, the state proceeding required the
adjudicator to determine an adequate reimbursement rate, an issue not before
our court. See id. at 2. And, most especially, the exceptional nature of federal
abstention cuts in favor of jurisdiction. Accordingly, we decline to abstain.
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III.
For the foregoing reasons, the judgment is VACATED, and this matter
is REMANDED for further proceedings consistent with this opinion.
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