Broselow v. Fisher , 319 F.3d 605 ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
2-12-2003
Broselow v. Fisher
Precedential or Non-Precedential: Precedential
Docket 01-3933
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PRECEDENTIAL
Filed February 11, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-3933
PETER BROSELOW, ON HIS OWN BEHALF AND ON
BEHALF OF ALL OTHERS SIMILARLY SITUATED; MARY
A. BROUGHTON, ON HER OWN BEHALF AND ON
BEHALF OF ALL OTHERS SIMILARLY
SITUATED; ALFONSO BROUGHTON, ON HIS OWN
BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED,
Appellants
v.
D. MICHAEL FISHER, ATTORNEY GENERAL; FEATHER
O. HOUSTON, SECRETARY OF THE PENNYSLVANIA
DEPARTMENT OF PUBLIC WELFARE; PEG DIERKERS,
DEPUTY SECRETARY FOR PUBLIC WELFARE
FOR MEDICAL ASSISTANCE PROGRAMS; CITIBANK N.A.
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil Action No. 00-cv-00493)
District Judge: Honorable Louis H. Pollak
Argued on August 1, 2002
Before: ROTH, AMBRO and RENDELL,*
Circuit Judges
_________________________________________________________________
*The Honorable Marjorie O. Rendell participated in the oral argument
and conference and joined in the decision in this case on August 1,
2002, but became recused from this matter prior to filing of the opinion.
This opinion and judgment are being entered insofar as the remaining
judges are unanimous in this decision.
(Filed: February 11, 2003)
Antonio Ponvert, III,
Esquire (Argued)
Koskoff, Koskoff & Bieder, PC
350 Fairfield Avenue, 5th Floor
Bridgport, CT 06604
Edward B. McDaid, Esquire
McDaid, Flum & Bloom
2001 Market Street
Two Commerce Sq., 32nd Floor
Philadelphia, PA 19103
COUNSEL FOR APPELLANTS
Mike Fisher
Attorney General
Joel M. Ressler (Argued)
Chief Deputy Attorney General
Chief, Tobacco Enforcement Section
Office of Attorney General
15th Floor, Strawberry Square
Harrisburg, PA 17120
COUNSEL FOR APPELLEES
OPINION OF THE COURT
ROTH, Circuit Judge:
In 1998, a number of States, including the
Commonwealth of Pennsylvania, settled their lawsuits
against the major tobacco companies. Under the Tobacco
Settlement, the Tobacco Companies agreed to pay the
Commonwealth of Pennsylvania more than $11 billion.
Plaintiffs, a class of Pennsylvania Medicaid recipients who
have various smoking-related illnesses, believe that a
provision of the Medicaid Act, 42 U.S.C. S 1396k, entitles
them to part of the Tobacco Settlement. They contend that
the Commonwealth recovered the Tobacco Settlement funds
under an assignment from them. Accordingly, they assert
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that pursuant to the provisions of S 1396k(b) they are
individuals to whom the remainder of the amount collected
should be paid.
The District Court dismissed plaintiffs’ action against the
Commonwealth, finding that the Eleventh Amendment
barred the suit. We will affirm that dismissal, but not on
Eleventh Amendment grounds.
I. Procedural History
On January 27, 2000, plaintiffs filed a complaint in the
United States District Court for the Eastern District of
Pennsylvania, pursuant to 42 U.S.C. S 1983. They named
as defendants three officers of the Commonwealth of
Pennsylvania and Citibank N.A. They sought declaratory
and injunctive relief to compel the officers of the
Commonwealth to comply with 42 U.S.C. S 1396k(b), which
they contend requires the Commonwealth to pay them
whatever portion of the Tobacco Settlement is not used to
reimburse the Commonwealth for its Medicaid expenses.
On April 27, 2001, the District Court granted the
Commonwealth’s motion to dismiss for failure to state a
claim, Fed. R. Civ. P. 12(b)(6), on the grounds that the
Eleventh Amendment barred the suit. The court also denied
plaintiffs’ motion for reconsideration.
II. Jurisdiction and Standard of Review
Because these claims were brought pursuant to 42
U.S.C. S 1983 and the Medicaid Act, the District Court had
subject matter jurisdiction under 28 U.S.C. S 1331. We
have appellate jurisdiction under 28 U.S.C. S 1291.
We exercise plenary review over decisions to grant a
motion to dismiss. See Malia v. General Electric , 23 F.3d
828, 830 (3d Cir. 1994). Thus, we will reverse only if,
accepting all well pleaded allegations in the complaint as
true, the plaintiff is not entitled to relief.
III. Discussion
As the District Court concluded, before plaintiffs can
prevail in this suit they must demonstrate that the relief
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they seek is not barred by the Eleventh Amendment of the
United States Constitution, which generally bars suits
brought by individuals against state officers acting in their
official capacity. See MCI Telecommunications Corp. v. Bell
Atlantic Pennsylvania, 271 F.3d 491, 503 (3rd Cir. 2001).
Before we address the difficult Eleventh Amendment issues,
however, we can consider whether there are alternative
grounds, logically antecedent to the Eleventh Amendment
inquiry, upon which we can base a decision in favor of the
State. See Amchem Prods. v. Windsor, 521 U.S. 591, 612
(1997). The Supreme Court has specifically held, for
example, that it is appropriate to decide whether a statute
permits a cause of action against a State before deciding
whether the Eleventh Amendment bars the suit. See
Vermont Agency of Natural Res. v. United States, 529 U.S.
765, 779-80. We will, therefore, bypass the issue of the
Eleventh Amendment bar because we conclude that, for two
antecedent reasons, plaintiffs’ action fails to state a claim
for which relief can be granted. See Strawser v. Condon,
290 F.3d 720, 729 (4th Cir. 2002) (holding, in appeal of
Medicaid recipients’ actions against the States of West
Virginia, North Carolina, and South Carolina, that actions
could be dismissed on basis of 1999 amendment to
Medicaid statute without resolving Eleventh Amendment
bar).
As to the first of these antecedent grounds, we have
determined that S 1396k(b) does not authorize the relief
plaintiffs seek because the funds from the Tobacco
Settlement were not collected under an assignment from
plaintiffs. Second, even if the funds were collected on
assignment, a 1999 amendment to the Medicaid Act bars
plaintiffs’ claims to any portion of the Tobacco settlement.
See 42 U.S.C. S 1396b(d)(3)(B)(ii). That amendment allows
the States to use the funds from the Tobacco Settlement for
any purpose the States find appropriate. Thus, even if
S 1396k(b) had given the plaintiffs a right to some of the
Tobacco Settlements funds, the amendment absolved the
Commonwealth of the obligation to pass on any of the
funds to Medicaid beneficiaries. We note that our sister
circuit courts of appeals that have considered these claims
by Medicaid beneficiaries for Tobacco Settlement funds
have come to the same conclusion. See Cardenas v. Anzai,
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311 F.3d 929, 937-40 (9th Cir. 2002) (holding
S 1396b(d)(3)(B)(ii) expressly allowed State to use all
Tobacco Settlement funds for any purpose); Strawser, 290
F.3d at 730-31 (same); Greenless v. Almond, 277 F.3d 601,
608 (1st Cir. 2002) (same); Tyler v. Douglas, 280 F.3d 116,
123 (2d Cir. 2001) (same); Harris v. Owens, 264 F.3d 1282,
1295 (10th Cir. 2001) (same); Watson v. Texas , 261 F.3d
436, 444-45 (5th Cir. 2001) (holding complaint did not
plead an assignment from Medicaid beneficiaries under
S 1396k(b); cf. Barton v. Summers, 293 F.3d 944 (6th Cir.
2002) (holding Medicaid beneficiaries’ claims barred by
Eleventh Amendment but, even if not barred, plaintiffs had
no implied private right of action under S 1983 and
S 1396b(d)(3)(B)(ii) permits use of Tobacco Settlement funds
as States determine appropriate).
We turn first to the question whether the funds were
collected on assignment from plaintiffs.
A. Does S 1396k(b) Entitle Plaintiffs to a Portion of the
Tobacco Settlement Funds?
Subsection (a) of S 1396k requires Medicaid recipients to
assign to the State their right to recover medical expenses
from a third party. Subsection (b) provides that whenever a
State recovers Medicaid costs from a third party under
such an assignment, it must distribute that recovery, first,
to itself to pay for its share of Medicaid expenses and, next,
to the federal government to pay for the federal share of
Medicaid expenses. The State must pay any remainder to
the Medicaid recipient whose illness prompted the Medicaid
expenditure.1 Section 1396k(b) applies, however, only when
_________________________________________________________________
1. Section 1396k provides in pertinent part:
(a) For the purpose of assisting in the collection of medical support
payments and other payments for medical care owed to recipients of
medical assistance under the State plan approved under this
subchapter, a State plan for medical assistance shall--
(1) provide that, as a condition of eligibility for medical assistance
under the State plan to an individual who has the legal capacity to
execute an assignment for himself, the individual is required--
(A) to assign the State any rights, of the individual or of any other
person who is eligible for medical assistance under this subchapter
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the recovery is made "under an assignment" from the
Medicaid recipient.
Our review of the complaint in the Commonwealth of
Pennsylvania’s action against the Tobacco Companies
indicates that the Tobacco Settlement funds were not
collected "under an assignment" from Medicaid recipients.
Instead, the Commonwealth recovered those funds by suing
the Tobacco Companies directly, under a parens patria
theory. That theory allows a state to bring suit on its own
behalf to protect the well being of its residents. See Alfred
L. Snapp & Son, Inc. v. Puerto Rico, ex rel., Barez , 458 U.S.
592 (1982).
There is substantial evidence in the Commonwealth’s
complaint that the Commonwealth proceeded against the
Tobacco Companies under a parens patria theory. The
Commonwealth expressly invoked this theory as the basis
for its complaint. It also attempted to defuse any statute of
limitations issues by invoking the doctrine of nullum tempus
occurrit regi, a doctrine that exempts a State from the
statute of limitations when the State brings suit itself to
protect the public’s rights. See Dep’t of Trans. v. J.W.
Bishop & Co., 439 A.2d 101, 104 (Pa. 1981). This
exemption from the statute of limitations would not exist
for claims assigned to the State by Medicaid beneficiaries,
and, indeed, the claims of many of these beneficiaries
would have been barred by the statute of limitations.
_________________________________________________________________
and on whose behalf the individual has the legal authority to
execute an assignment of such rights, to support (specified as
support for the purpose of medical care by a court or administrative
order) and to payment for medical care from any third party.
* * *
(b) Such part of any amount collected by the State under an
assignment made under the provisions of this section shall be
retained by the State as is necessary to reimburse it for medical
assistance payments made on behalf of an individual with respect to
whom such assignment was executed (with appropriate
reimbursement of the Federal Government to the extent of its
participation in the financing of such medical assistance), and the
remainder of such amount collected shall be paid to such individual.
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In the form of pleading the Commonwealth chose for the
Complaint, as to each cause of action, the Commonwealth
made clear that one item of damage it was seeking was the
Medicaid expenditures it had paid out. The Commonwealth
does not claim a right to recover all the medical
expenditures by and for Medicaid beneficiaries. For each
cause of action, the Complaint cites, as a direct and
foreseeable result of defendants’ wrongful conduct, that the
"Commonwealth has paid and will continue to be required
to pay medical costs of Medicaid . . . incurred because of
tobacco-related disease."
Plaintiffs point out, nevertheless, that the
Commonwealth, in Paragraph 9 of the Damages and
Injunctive Relief Requested, prays for "restitution,
including, but not limited to, health care costs of Medicaid
and state medical assistance recipients for diagnosis and
treatment of tobacco-related disease." This language is
broader and could be read to refer not only to the
Commonwealth’s share of expenditures but also to the
federal government’s and that of the Medicaid recipients. In
view, however, of the specific description of damage in each
cause of action, we conclude that the language of the
prayer for relief reflects that specifically described damage,
i.e., the Commonwealth’s share of Medicaid costs.
Thus, the language of the complaint demonstrates that
the Commonwealth did not proceed "under an assignment"
from Medicaid recipients. See Watson, 261 F.3d at 444-445
(holding that complaint, seeking to recover funds"expended
by the State" to provide medical treatment, does not plead
an assignment to enforce the rights of smokers).
Accordingly, we conclude that, in view of the nature of the
remedy sought by the Commonwealth, plaintiffs do not
have a claim under S 1396k(b) for any recovery assigned to
the Commonwealth by them. Id.
Plaintiffs contend, however, that this result empowers
States to ignore their obligations to Medicaid recipients and
to the federal government. They urge that, by prosecuting
all recovery actions under a parens patria theory, a State
could avoid paying Medicaid recipients and the federal
government their shares of any Medicaid recovery. Plaintiffs
overestimate this threat. The doctrine of parens patria can
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only be used in certain, well-defined cases. A State may
seek recovery under parens patria only when it can show
that it has a "quasi-sovereign interest." Alfred L. Snapp &
Son, Inc, 458 U.S. at 607-08. To do so, the State must
articulate "an interest apart from the interests of particular
private parties" that affects a "sufficiently substantial"
segment of its residents. Id. at 607.
Here, the Commonwealth cited in its Complaint how the
defendants had misled its residents about the dangers of
smoking and how defendants had manipulated nicotine
content and delivery to cause addiction. The Complaint
particularly focussed on the targeting by the Tobacco
Companies of children, adolescents, and African-
Americans. Few, if any, S 1396k(b) Medicaid suits for
recovery from third parties could assert such a broad
interest in the well-being of the people of a State, as
opposed to the narrower interests of individual Medicaid
beneficiaries who have suffered a particular illness or
injury.
B. Does the 1999 Amendment to the Medicaid Act Bar
Plaintiff’s Claims?
Even if Pennsylvania had recovered the Tobacco
Settlement funds "under an assignment" from Medicaid
recipients, we would still find that plaintiffs have failed to
state a claim for which relief could be granted. In a rider to
a 1999 appropriations bill, Congress amended the Medicaid
Act by promulgating what is now S 1396b(d)(3)(B)(i) and (ii)
and renumbering S 1396b(d)(3) as S 1396b(d)(3)(A). In this
amendment, Congress absolved the states from any
potential liability to the federal government or to Medicaid
recipients for any part of the Tobacco Settlement funds by
explicitly giving to the States the authority to use the
Tobacco Settlement funds for any purpose the States
deemed appropriate. Plaintiffs’ arguments to the contrary
cannot overcome the plain meaning of the language of that
amendment. Thus, even if S 1396k(b) applied to the
Tobacco Settlement funds, the 1999 amendment would
absolve the Commonwealth of its obligation to share its
recovery with the plaintiffs.
The amended Act now reads:
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(A) The pro rata share to which the United States is
equitably entitled, as determined by the
Secretary, of the net amount recovered during
any quarter by the State or any political
subdivision thereof with respect to medical
assistance furnished under the State plan shall
be considered an overpayment to be adjusted
under this subsection.
(B)(i) Subparagraph (A) and paragraph (2)(B) shall not
apply to any amount recovered or paid to a State
as part of the comprehensive settlement of
November 1998 between manufacturers of
tobacco products, as defined in section 5702(d)
of Title 26 [26 U.S.C.A. S 5702(d)], and State
Attorneys General, or as part of any individual
State settlement or judgment reached in
litigation initiated or pursued by a State against
one or more such manufacturers.
(ii) Except as provided in subsection (i)(19), a State
may use amounts recovered or paid to the State
as part of a comprehensive or individual
settlement, or a judgment, described in clause (i)
for any expenditures determined appropriate by
the State.2
These provisions outline the federal government’s
response to the Tobacco Settlement. Subsection (A)
provides that, in most cases, when a State recovers funds
spent on Medicaid expenses, the federal government is
entitled to its share. Subsections (B)(i) and (ii) directly
address the Tobacco Settlement funds. Subsection (B)(i)
waives the federal entitlement to a share of the Tobacco
Settlement. Subsection (B)(ii) expressly grants the states
the authority to use the Tobacco Settlement funds"for any
expenditures determined appropriate by the State." The
meaning of the above language is plain. It allows the States
to refuse to compensate Medicaid recipients as otherwise
_________________________________________________________________
2. The exception in clause (ii) refers to a prohibition against making
payments "with respect to any amount expended on administrative costs
to initiate or pursue litigation described in subsection (d)(3)(B)." 42
U.S.C. S 1369b(i)(19).
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would be required by 42 U.S.C. S 1396k(b). As we set out
above, many of our sister circuits agree. See Cardenas, 311
F.3d at 939-40; Strawser, 290 F.3d at 730-31; Greenless,
277 F.3d at 608; Tyler, 280 F.3d at 123; Harris, 264 F.3d
at 1295.
Plaintiffs advance several arguments in an attempt to
overcome this plain language. First, they contend that,
while subsection (B)(ii) permits the States to use the federal
share of the Tobacco Settlement for any appropriate
expenditure, that permission does not extend to the share
of Medicaid beneficiaries. To support this contention,
plaintiffs argue that subsection (B)(ii) refers only to the
sums described in subsection (B)(i) -- sums which they
contend include only the federal share. Unfortunately for
the plaintiffs, "the amount recovered" as stated in
subsection (B)(ii) is not merely a reference to the federal
share which is the subject of subsection (B)(i). There is no
language in subsection (B)(ii) containing such a limitation.
There is reference in subsection (B)(ii) to subsection (B)(i)
but the pertinent language is in the phrase "a
comprehensive or individual settlement, or a judgment,
described in clause (i);" this constitutes a specific reference
to the Tobacco Settlement and its progeny as set out in
subsection (B)(i). See Strawser, 790 F.3d at 731. As such,
it does not limit the use of "the amounts recovered."
Plaintiffs also argue that the plain meaning of subsection
(B)(ii) is contradicted by the legislative history of the
enactment. They claim that once Congress decided to let
the States keep the federal share, the debate surrounding
the enactment of subsection (B)(ii) then focussed on
whether to attach conditions on the use of the federal
share. Subsection (B)(ii), they claim, merely makes explicit
that Congress decided not to do so. Although this point was
raised in the debate, plaintiffs’ argument skips over other
equally significant parts of the debate.
In fact, the legislative history indicates that Congress was
not entirely convinced that Medicaid even covered the
Tobacco Settlement and that S 1396b(d)(3)(B)(ii) was passed
to remove doubt and to avoid costly litigation -- litigation
like the case before us. See Harris, 264 F.3d at 1294-95
(setting forth significant portions of the floor debate). Thus,
10
despite plaintiffs’ contentions, the legislative history also
supports the plain meaning of S 1396b(d)(3)(B)(ii) -- that it
allows states to use the Tobacco Settlement funds for any
purpose they deem appropriate.
In addition, plaintiffs argue that applying the plain
meaning of S 1396b(d)(3)(B)(ii) contradicts several canons of
interpretation: (1) statutes should be read to avoid
surplusage, TRW Inc. v. Andrews, 534 U.S. 19, 24 (2001);
(2) implied repeals are disfavored, United States v. United
Continental Tuna Corp., 425 U.S. 164, 168 (1976); and (3)
retroactive application is disfavored, I.N.S. v. St. Cyr, 533
U.S. 289 (2001). None of these canons is applicable here.
Deciding whether a statute is retroactive is primarily a
question of legislative intent, see DeSousa v. Reno, 190
F.3d 175, 186 (3d Cir. 1999). Here, subsection (B)(i)
specifically states that it applies to "any amount" received
under the Tobacco Settlement. We conclude that this
reference to "any amount" includes funds received prior to
the passage of the amendment. For that reason, the
amendment is clearly retroactive.
As to implied repeal, plaintiffs argue that the plain
meaning of S (B)(ii) should be ignored because it would
implicitly repeal S 1396k(b). Subsection (B)(ii), however,
does not repeal S 1396k(b). It applies only to the Tobacco
Settlement funds and applies to those funds explicitly. For
that reason, S 1396k(b), as it applies to the usual action to
recover Medicaid costs from a third party, continues in
effect.
We also reject plaintiffs’ argument that the plain meaning
of subsection (B)(ii) makes the rest of the 1999 amendment
superfluous. Plaintiffs argue that if subsection (B)(ii) means
what it says, then that subsection in and of itself gives up
the federal share of recovery. Subsection (B)(i) is therefore
meaningless. Plaintiffs assert that statutes should be read
to avoid surplusage. See TRW Inc. v. Andrews, 534 U.S. at
24. This argument fails, however, because the plain
meaning of subsection B(ii) does not make subsection B(i)
meaningless. If Congress had enacted subsection (B)(ii)
without subsection (B)(i), the language of the amendment
would have been ambiguous. The question of whether the
11
federal government had given up its share of the recovery
would not have been expressly dealt with. That ambiguity
might eventually have been resolved in favor of releasing
the federal share. We should not, however, mistake for
surplusage Congress’s attempts to clarify its intent.
We conclude, therefore, that S 1396b(d)(3)(B)(ii) explicitly
allows the States to use the Tobacco Settlement funds for
any appropriate expenditure and, as a result, that Medicaid
beneficiaries have no claim to those funds.
IV. Conclusion
For the reasons stated above, we will affirm the judgment
of the District Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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