Patrick Allen v. Familycare, Inc. ( 2020 )

FILED
NOT FOR PUBLICATION
APR 30 2020
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PATRICK ALLEN, in his official capacity No. 18-35593
as DIRECTOR OF OREGON HEALTH
AUTHORITY, an agency of the State of D.C. No. 3:18-cv-00212-MO
Oregon,
Plaintiff-Appellant, MEMORANDUM*
v.
FAMILYCARE, INC., an Oregon non-
profit corporation,
Defendant-Appellee.
FAMILYCARE, INC., an Oregon non- Nos. 19-35103
profit corporation,
Plaintiff-Appellant, D.C. No. 6:18-cv-00296-MO
v.
OREGON HEALTH AUTHORITY, an
agency of the State of Oregon; PATRICK
ALLEN, in his official capacity as Director
of Oregon Health Authority,
Defendants-Appellees,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
and
LYNNE SAXTON,
Defendant.
FAMILYCARE, INC., an Oregon non- No. 18-35891
profit corporation,
D.C. No. 6:18-cv-00296-MO
Plaintiff-Appellee,
v.
PATRICK ALLEN, in his individual
capacity,
Defendant-Appellant,
and
OREGON HEALTH AUTHORITY, an
agency of the State of Oregon; LYNNE
SAXTON,
Defendants.
FAMILYCARE, INC., an Oregon non- No. 18-36009
profit corporation,
D.C. No. 6:18-cv-00296-MO
Plaintiff-Appellee,
v.
LYNNE SAXTON,
2
Defendant-Appellant,
and
PATRICK ALLEN, in his individual
capacity; OREGON HEALTH
AUTHORITY, an agency of the State of
Oregon,
Defendants.
FAMILYCARE, INC., an Oregon non- No. 18-36048
profit corporation,
D.C. No. 6:18-cv-00296-MO
Plaintiff-Appellant,
v.
LYNNE SAXTON,
Defendant-Appellee,
and
PATRICK ALLEN, in his individual
capacity; OREGON HEALTH
AUTHORITY, an agency of the State of
Oregon,
Defendants.
Appeal from the United States District Court
for the District of Oregon
Michael W. Mosman, District Judge, Presiding
3
Argued and Submitted March 2, 2020
Portland, Oregon
Before: WOLLMAN,** FERNANDEZ, and PAEZ, Circuit Judges.
These appeals arise out of a 2014 contract between FamilyCare, Inc.
(FamilyCare) and the Oregon Health Authority (OHA). FamilyCare was a
Coordinated Care Organization (CCO)1 and participated in Oregon’s Medicaid2
program. The contract was subject to federal oversight by the Centers for
Medicare & Medicaid Services (CMS), which must “review[] and approve[] all of
Oregon[.s] contracts with [CCOs] and requires that capitation rates . . . be
actuarially sound.” Oregon v. Campbell, 438 P.3d 448, 456 (Or. Ct. App. 2019).
**
The Honorable Roger L. Wollman, United States Circuit Judge for the
U.S. Court of Appeals for the Eighth Circuit, sitting by designation.
1
See Or. Rev. Stat. §§ 414.620(1), 414.625(1). Oregon received a
demonstration waiver from the federal government for its Medicaid program,
pursuant to which Oregon’s CCOs meet the requirements of managed care
organizations (MCOs) under federal law. See 42 U.S.C. §§ 1315(a),
1396b(m)(1)(A); see also 42 C.F.R. § 438.2 (defining “[m]anaged care
organization (MCO)”).
2
See Planned Parenthood Ariz. Inc. v. Betlach, 727 F.3d 960, 963 (9th
Cir. 2013); see also 42 U.S.C. § 1315(a); Or. Rev. Stat. § 413.032(1)(i).
4
The district court dismissed certain claims and granted or denied summary
judgment on others. We have jurisdiction pursuant to 28 U.S.C. § 1291,3 the
collateral order doctrine,4 and the doctrine of pendent jurisdiction.5 We affirm in
part, reverse in part, and vacate in part.
No. 19-35103
The district court properly granted summary judgment to OHA on
FamilyCare’s Oregon Administrative Procedure Act (APA)6 claims that OHA
failed to set actuarially sound capitation rates in 2017 and 2018. The parties agree
that Oregon law requires OHA to comply with federal Medicaid law. See, e.g., Or.
Rev. Stat. § 413.071; Or. Admin. R. 410-141-3010(7); see also Adamson v. Or.
Health Auth., 412 P.3d 1193, 1194, 1196 (Or. Ct. App. 2017). As relevant to the
contract at issue here,7 federal law explicitly requires CMS to “review[] and
approve[]” capitation rates “as actuarially sound,” describes the standards rates
3
See Fed. R. Civ. P. 54(b).
4
Isayeva v. Sacramento Sheriff’s Dep’t, 872 F.3d 938, 944–45 (9th
Cir. 2017).
5
Cunningham v. Gates, 229 F.3d 1271, 1284–85 (9th Cir. 2000).
6
Or. Rev. Stat. § 183.484(5)(a)–(c).
7
See 42 C.F.R. § 438.3(a).
5
must satisfy to qualify for approval,8 and defines “[a]ctuarially sound capitation
rates” to include both CMS approval and the criteria CMS uses to bestow that
approval.9 Because capitation rates cannot be approved by CMS unless they are
actuarially sound,10 CMS could not approve them if they were not.11 In light of
that truism, in these circumstances neither Oregon nor federal law required OHA to
do more than seek and obtain CMS approval of the 2017 and 2018 rates. Thus, the
district court did not err in granting summary judgment to OHA as to FamilyCare’s
Oregon APA claims.12
However, the district court erred in dismissing FamilyCare’s contract claim
against OHA, in which FamilyCare alleged that OHA had breached the implied
covenant of good faith and fair dealing in their 2014 contract, as amended and
extended, by presenting FamilyCare with unreasonable capitation rates in 2017 and
8
42 C.F.R. § 438.4(b)(1)–(9); see also id. at (a).
9
Id. at (a).
10
Id. at (a)–(b).
11
Of course, this does not mean that CMS could not approve a later
adjustment. Nor would it preclude a proper attack on a CMS determination
pursuant to the provisions of federal law. See 5 U.S.C. § 706; see also Douglas v.
Indep. Living Ctr. of S. Cal., Inc., 565 U.S. 606, 614, 132 S. Ct. 1204, 1210, 182 L.
Ed. 2d 101 (2012).
12
The district court properly entered judgment on all of FamilyCare’s
Oregon APA claims, because all shared a common factual basis: OHA’s purported
failure to set rates that were actuarially sound.
6
2018. The district court determined that the implied covenant of good faith and
fair dealing was inapplicable because each annual rate-setting amendment was
essentially a new contract. The district court failed to properly apply Oregon law13
to interpret the 2014 contract. It did not identify the contractual provision it
perceived to be disputed,14 nor did it examine extrinsic evidence of the parties’
intent, or apply maxims of construction to resolve the perceived ambiguity. The
district court also erred in failing to interpret the contract alleged in the operative
complaint— the 2014 contract, as amended and extended— as a whole. Thus, we
vacate the dismissal of FamilyCare’s contract claim and remand to allow the
district court to consider the contract to which FamilyCare’s claim applies.
No. 18-35593
The district court did not err in dismissing OHA’s declaratory judgment
action, which claimed that federal law preempted FamilyCare’s state law claims.
OHA argues that because the federal regulatory scheme governing actuarial
soundness is so extensive and specific, Congress intended to foreclose all state
13
Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ.,
489 U.S. 468, 474, 109 S. Ct. 1248, 1253, 103 L. Ed. 2d 488 (1989); see also
Yogman v. Parrott, 937 P.2d 1019, 1021–22 (Or. 1997); Riverside Homes, Inc. v.
Murray, 214 P.3d 835, 841 (Or. Ct. App. 2009).
14
Oregon law requires contracts of this type have a five-year term. See
Or. Rev. Stat. § 414.652(2)(a). That itself indicates that the yearly rate changes
were not new contracts at all.
7
action in that field. See Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 377, 135 S. Ct.
1591, 1595, 191 L. Ed. 2d 511 (2015). We disagree. Congress purposefully
structured Medicaid as a cooperative endeavor between the federal government and
the governments of individual states,15 and that structure plainly requires state
regulation; thus, Congress plainly did not intend to foreclose state action in the
Medicaid field. See N.Y. State Dep’t of Soc. Servs. v. Dublino, 413 U.S. 405, 411
n.9, 93 S. Ct. 2507, 2512 n.9, 27 L. Ed. 2d 688 (1973); id. at 421, 93 S. Ct. at 2517.
We also reject OHA’s attempt to infer preemption from the comprehensive nature
of the federal regulatory scheme, which is “virtually tantamount to saying that
whenever a federal agency decides to step into a field, its regulations will be
exclusive.” Hillsborough Ctv. Automated Med. Labs., Inc., 471 U.S. 707, 717, 105
S. Ct. 2371, 2377, 85 L. Ed. 2d 714 (1985); Dublino, 413 U.S. at 415, 93 S. Ct. at
2514. Moreover, the Supreme Court’s determination in Armstrong v. Exceptional
Child Ctr., Inc., 575 U.S. 320, 323–24, 328, 135 S. Ct. 1378, 1382, 1385, 191 L.
Ed. 2d 471 (2015), that the Medicaid Act had no private enforcement mechanism
says nothing about a Congressional intent to preclude a state from imposing its
own sanctions for violating federal requirements. See Bates v. Dow Agrosciences
15
Planned Parenthood, 727 F.3d at 963.
8
LLC, 544 U.S. 431, 441–42, 125 S. Ct. 1788, 1797, 161 L. Ed. 2d 687 (2005). The
district court properly dismissed OHA’s declaratory relief action.
Nos. 18-36009, 18-35891, and 18-36048
Patrick Allen and Lynne Saxton each appeal the district court’s denial of
qualified immunity from FamilyCare’s 42 U.S.C. § 1983 claim that they retaliated
against it for its constitutionally-protected speech. See Ashcroft v. Iqbal, 556 U.S.
662, 672, 129 S. Ct. 1937, 1946, 173 L. Ed. 2d 868 (2009); Isayeva, 872 F.3d at
944–45; see also Howard v. City of Coos Bay, 871 F.3d 1032, 1044 (9th Cir.
2017). FamilyCare cross-appeals the district court’s partial grant of qualified
immunity to Saxton. See Woodward v. City of Tucson, 870 F.3d 1154, 1159 (9th
Cir. 2017). The district court erred in denying Allen qualified immunity, and it
erred in granting Saxton qualified immunity in part.
An official should receive qualified immunity “unless the official’s conduct
violated a clearly established constitutional right.” Pearson v. Callahan, 555 U.S.
223, 232, 129 S. Ct. 808, 816, 172 L. Ed. 2d 565 (2009). In order for FamilyCare
to establish that its First Amendment rights were violated,“[it] must prove that (1)
[it] engaged in protected speech; (2) the defendants took an adverse . . . action
against [it]; and (3) [its] speech was a substantial or motivating factor for the
adverse . . . action.” Howard, 871 F.3d at 1044 (internal quotation marks omitted);
9
Clairmont v. Sound Mental Health, 632 F.3d 1091, 1101, 1102–03 (9th Cir. 2011)
(applying that test to an independent contractor). In order to show that its right
was clearly established, FamilyCare must demonstrate “‘that every reasonable
official would have understood that what he is doing violates that right.’” Mullenix
v. Luna, __ U.S. __, __, 136 S. Ct. 305, 308, 193 L. Ed. 2d 255 (2015) (per
curiam).
(1) Allen
FamilyCare argues that Allen retaliated against it. We disagree. Assuming
for present purposes that an independent contractor should be treated as a public
employee in the context presented here,16 Allen was entitled to summary judgment
as to the 2018 rate-setting because there was no genuine dispute of material fact
regarding whether FamilyCare’s speech was a substantial or motivating factor for
Allen’s commissioning the independent reports and retaining the rate
methodology. See Ellins v. City of Sierra Madre, 710 F.3d 1049, 1056, 1062 (9th
Cir. 2013). FamilyCare’s speculation about Allen’s motive is insufficient to show
a genuine dispute of material fact. See Pratt v. Rowland, 65 F.3d 802, 808 (9th
Cir. 1995); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475
U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986); Nat’l Indus., Inc. v.
16
See Clairmont, 632 F.3d at 1101
10
Republic Nat’l Life Ins. Co., 677 F.2d 1258, 1267 (9th Cir. 1982). Because
FamilyCare failed to adduce sufficient evidence that Allen acted with a retaliatory
motive, Allen was entitled to qualified immunity as to his rate-setting conduct. See
Keyser v. Sacramento City Unified Sch. Dist., 265 F.3d 741, 752–53 (9th Cir.
2001); Pratt, 65 F.3d at 808; see also Howard, 871 F.3d at 1045 (proximity in time
must be such “that a ‘jury logically could infer’” a retaliatory motive); Coszalter v.
City of Salem, 320 F.3d 968, 978 (9th Cir. 2003).
Allen was likewise entitled to summary judgment as to his conduct in
issuing the purported ultimatum and failing to timely provide the 2018 rates to
FamilyCare. FamilyCare presented no evidence that Allen’s issuing of essentially
empty threats during a negotiation, even if done in retaliation for protected activity,
rises to the level of a constitutional violation. Cf. Alpha Energy Savers, Inc. v.
Hansen, 381 F.3d 917, 923, 928 (9th Cir. 2004) (government agency workers
“tampered with files, altered bidding sheets, manipulated the department’s
computer database, and engaged in other schemes” to divert work from a
contractor who had engaged in protected speech). And even if Allen’s negotiation
tactics could amount to a constitutional violation in certain contexts, FamilyCare
points to no authority that clearly established a violation in the particular
circumstances presented here: an agency head making empty threats, or taking
11
obdurate and intransigent (or even bad faith) positions in contract amendment
negotiations with a sophisticated contractor that was ready and able to aggressively
assert and protect its rights. See Karl v. City of Mountlake Terrace, 678 F.3d 1062,
1073–74 (9th Cir. 2012). Thus, the district court should have granted Allen
qualified immunity from FamilyCare’s § 1983 claim.
(2) Saxton
FamilyCare also brought a § 1983 claim against Saxton for speech
retaliation, alleging that she retaliated against it by cutting its 2017 contract rates
and disparaging it in a public relations campaign.
As to the 2017 retaliatory rate-setting, we decline to consider Saxton’s
argument that she was entitled to qualified immunity because she failed to present
that argument to the district court. See Greisen v. Hanken, 925 F.3d 1097, 1115
(9th Cir. 2019); Crawford v. Lungren, 96 F.3d 380, 389 n.6 (9th Cir. 1996).
Moreover, we lack jurisdiction to review the district court’s denial of Saxton’s
motion for summary judgment arising from the 2017 rate-setting, and to consider
any of her arguments on appeal that fail to view the facts in the light most
favorable to FamilyCare. See Moss v. U.S. Secret Serv., 572 F.3d 962, 972–73 (9th
Cir. 2009).
12
As to the public relations campaign, we hold that the district court erred in
partially granting Saxton qualified immunity because, taking the facts in the light
most favorable to FamilyCare,17 it was clearly established that Saxton’s conduct
violated the Constitution. At the time Saxton acted, a reasonable official would
have been on notice that retaliating against a contractor’s protected speech with a
campaign that improperly disparaged it, while simultaneously reducing the
contractor’s compensation, violated the contractor’s First Amendment rights. See
Greisen, 925 F.3d at 1113–14; Allen v. Scribner, 812 F.2d 426, 434 & n.17 (9th
Cir.), amended by 828 F.2d 1445 (9th Cir. 1987). FamilyCare presented sufficient
evidence suggesting that Saxton retaliated against its protected speech by
implementing the campaign. On this record, whether Saxton’s statements were
accurate or she had a benign motive were quintessential disputes of fact that could
not be resolved at the summary judgment stage. See Allen, 812 F.2d at 435; see
also O’Brien v. Welty, 818 F.3d 920, 932 (9th Cir. 2016). Thus, the district court
should have denied her motion for summary judgment in full.
AFFIRMED in part and VACATED in part in No. 19-35103;
AFFIRMED in Nos. 18-35593 and 18-35891; REVERSED in Nos. 18-36009
and 18-36048. The parties shall bear their own costs in No. 19-35103.
17
See Isayeva, 872 F.3d at 945.
13