Exceptional Child Center, Inc. v. Richard Armstrong; Leslie Clement

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
EXCEPTIONAL CHILD CENTER, INC.;
INCLUSION, INC.; TOMORROW’S
HOPE SATELLITE SERVICES, INC.;
WDB, INC.; LIVING INDEPENDENTLY
FOR EVERYONE, INC.,
Plaintiffs - Appellees,
v.
RICHARD ARMSTRONG; LESLIE
CLEMENT,
Defendants - Appellants.
No. 12-35382
D.C. No. 1:09-cv-00634-BLW
MEMORANDUM*
Appeal from the United States District Court
for the District of Idaho
B. Lynn Winmill, Chief District Judge, Presiding
Argued and Submitted December 2, 2013
Seattle, Washington
Before: TALLMAN and BEA, Circuit Judges, and MURPHY, District Judge.**
FILED
APR 04 2014
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The Honorable Stephen Joseph Murphy, III, United States District
Judge for the Eastern District of Michigan, sitting by designation.

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Defendants-Appellants Richard Armstrong, the Director of Idaho’s
Department of Health and Welfare (“IDHW”), and Leslie Clement, an IDHW
Deputy Director and former IDHW Division of Medicaid Administrator
(collectively, “the Directors”), appeal the district court’s grant of summary
judgment in favor of Plaintiffs-Appellees, a group of agencies providing supported
living services to Medicaid-eligible individuals in Idaho (collectively “the
Providers”). We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
We review a district court’s grant of summary judgment and its rulings on
matters of statutory interpretation de novo. See Newton-Nations v. Betlach, 660
F.3d 370, 378 (9th Cir. 2011). Summary judgment is appropriate where the
pleadings, the discovery and disclosure materials on file, and any affidavits show
that there is no genuine issue as to any material fact and that the movant is entitled
to judgment as a matter of law. See Fed. R. Civ. P. 56(a).
The Providers have an implied right of action under the Supremacy Clause
to seek injunctive relief against the enforcement or implementation of state
legislation. See Indep. Living Ctr. of S. Cal. v. Shewry, 543 F.3d 1050, 1065 (9th
Cir. 2008) (“Under well-established law of the Supreme Court, this court, and the
other circuits, a private party may bring suit under the Supremacy Clause to enjoin
implementation of state legislation allegedly preempted by federal law.”).
2

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Although the dissenting justices in Douglas v. Independent Living Center of
Southern California, Inc., 132 S. Ct. 1204, 1212 (2012) (Roberts, J., dissenting),
would have held otherwise, we remain bound by the prior holdings of the Supreme
Court, and of our court, that have recognized a private right of action under the
Supremacy Clause. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983);
Bud Antle, Inc. v. Barbosa, 45 F.3d 1261, 1269 (9th Cir. 1994).
Section 30(A) of the Medicaid Act requires that state Medicaid plans contain
procedures to ensure that reimbursement rates for healthcare providers “are
consistent with efficiency, economy, and quality of care and are sufficient to enlist
enough providers” to meet the need for care and services in the geographic area.
42 U.S.C. § 1396a(a)(30)(A). We have interpreted Section 30(A) to require that
reimbursement rates bear a reasonable relationship to provider costs.1 Orthopaedic
Hosp. v. Belshe, 103 F.3d 1491, 1499 (9th Cir. 1997). Where rates fail to
“substantially reimburse providers their costs,” there must be some justification
other than “purely budgetary reasons.” Id. at 1499, 1499 n.3.
1 The Directors call on us to abandon the requirements of Orthopaedic
Hospital. Nonetheless, “[w]e are bound by circuit precedent unless there has been
a substantial change in relevant circumstances, or a subsequent en banc or Supreme
Court decision that is clearly irreconcilable with our prior holding.” See United
States v. Vasquez-Ramos, 531 F.3d 987, 991 (9th Cir. 2008) (internal citations
omitted). Neither circumstance is present here.
3

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The Directors conducted yearly cost studies between 2006 and 2009,
developed a new rate setting methodology, and recommended substantial increases
in reimbursement rates for supported living services based on the cost study
results. The Stipulated Facts provide that the Directors did not implement the
proposed rate changes because the Idaho legislature did not appropriate the
necessary funds. Because the reimbursement rates at issue fail to “substantially
reimburse providers their costs,” and because the Directors concede that the 2006
rates remained in place for “purely budgetary reasons,” the district court did not err
in granting summary judgment to the Providers.2
AFFIRMED.
2 We express serious doubt over whether the Directors’ inaction constitutes a
“Thing” in state law that can be preempted under the Supremacy Clause.
However, the Directors failed to make this argument to the district court and they
did not raise the issue in their briefing to our court. Therefore, we deem the issue
waived. See Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (“[A]n appellate
court will not consider issues not properly raised before the district court.
Furthermore, on appeal, arguments not raised by a party in its opening brief are
deemed waived.”).
4

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