SAN JOAQUIN COMMUNITY HOSPITAL, DBA Adventist Health Bakersfield, a California… v. Will Lightbourne

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SAN JOAQUIN COMMUNITY
HOSPITAL, DBA Adventist Health
Bakersfield, a California nonprofit
religious corporation; et al.,
Plaintiffs-Appellants,
v.
WILL LIGHTBOURNE, in his official
capacity as the Director of the California
Department of Health Care Services; et al.,
Defendants-Appellees,
and
RICHARD FIGUEROA,
Defendant.
No. 21-16294
D.C. No. 3:20-cv-01301-SK
MEMORANDUM*
DIGNITY HEALTH, a California non-
profit corporation; DIGNITY
COMMUNITY CARE, a Colorado non-
profit corporation,
Plaintiffs-Appellants,
No. 21-16295
D.C. No. 3:20-cv-00212-SK
FILED
NOV 28 2022
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.

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and
SAN JOAQUIN COMMUNITY
HOSPITAL; et al.,
Plaintiffs,
v.
WILL LIGHTBOURNE, in his official
capacity as the Director of the California
Department of Health Care Services; et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Sallie Kim, Magistrate Judge, Presiding
Argued and Submitted November 14, 2022
San Francisco, California
Before: S.R. THOMAS and BENNETT, Circuit Judges, and MOSKOWITZ,**
District Judge.
A group of California health care entities (“Hospitals”) appeal the district
court’s grant of judgment on the pleadings in their consolidated action brought
under 42 U.S.C. § 1983 and other statutes. The Hospitals challenge the process
and results of audits performed by the California Department of Health Care
** The Honorable Barry Ted Moskowitz, United States District Judge for
the Southern District of California, sitting by designation.
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Services (“Department”) that determined the Hospitals had been overpaid through
a federally-funded incentive program. This appeal presents issues we review de
novo. Tijerino v. Stetson Desert Project, LLC, 934 F.3d 968, 971 (9th Cir. 2019);
Aholelei v. Dep’t of Pub. Safety, 488 F.3d 1144, 1147 (9th Cir. 2007). We have
jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm in part, reverse in part,
and vacate and remand in part. Because the parties are familiar with the history of
this case, we need not recount it here.
I
In seeking declaratory and mandamus relief, the Hospitals alleged injuries
fairly traceable to the Department. See Lujan v. Defs. of Wildlife, 504 U.S. 555,
560 (1992) (describing standard). Therefore, they had Article III standing to
pursue their claims.
II
On the record before us, we hold the Hospitals’ claims are barred by
sovereign immunity in part.
A
The district court correctly concluded that to the extent the Hospitals are
seeking monetary damages, restitution, or recoupment from the Department, their
claims are barred by the doctrine of sovereign immunity, which generally
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precludes suits against states without their consent. See Alden v. Maine, 527 U.S.
706, 727 (1999). The protection of sovereign immunity extends to state agencies
and officers acting in their official capacity, such as the Defendants-Appellees
here. Pistor v. Garcia, 791 F.3d 1104, 1112 (9th Cir. 2015).
Sovereign immunity bars these claims even though the program at issue
involves exclusively federal funds. The state’s legal liability, not the ultimate
source of the funds, is the relevant concern. Regents of the Univ. of Cal. v. Doe,
519 U.S. 425, 431 (1997) (rejecting the argument that the Eleventh Amendment
“does not apply to this litigation because any award of damages would be paid by
the Department of Energy, and therefore have no impact upon the treasury of the
State of California”). Taylor v. Westly is not to the contrary, as that case involved
the return of property that had not yet formally escheated to the state and therefore
was not state property. 402 F.3d 924, 932 (9th Cir. 2005).
Sovereigns can waive immunity by actively litigating a case before asserting
immunity, but the Department has not done so here. Hill v. Blind Indus. & Servs.,
179 F.3d 754, 756 (9th Cir. 1999) amended by 201 F.3d 1186 (denial of reh’g en
banc). To waive immunity in this manner, the litigation conduct must
“unequivocally evidence the state’s intention to subject itself to the jurisdiction of
the federal court,” such as by initially defending on the merits and only belatedly
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raising immunity as a defense. Id. at 758–59. Here, the Department reserved
sovereign immunity as a defense in the removal notice, raised the defense in
answers, and sought to dismiss on sovereign immunity in its motion for judgment
on the pleadings, which was filed only ten days after the cases were consolidated
and before the magistrate judge had addressed the merits of the case. Therefore,
the Hill sovereign immunity waiver does not apply.1
Thus, to the extent the Hospitals seek recovery of money from the state, their
claims are barred by sovereign immunity.
B
To the extent that the Hospitals are seeking non-monetary prospective
relief against Department officials in their official capacities, sovereign immunity
does not apply, and the claims may proceed. Under the Ex Parte Young doctrine,
sovereign immunity does not bar suits seeking prospective equitable relief against
a state official engaged in “a present violation of federal law” in their official
capacity. Papasan v. Allain, 478 U.S. 265, 277–78 (1986).
1 We decline to consider the Hospitals’ argument, raised for the first time on
appeal, that the Department waived sovereign immunity by removal. Dream
Palace v. County of Maricopa, 384 F.3d 990, 1005 (9th Cir. 2004). Nothing in our
decision should be construed as foreclosing the Hospitals from raising such
argument on remand.
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Here, the Hospitals assert prospective claims against the Department
pertaining to future disbursements and potential future audits and recoupments. It
is not clear from the record whether the Department officials’ alleged illegal
actions related to the incentive program are continuing. To the extent that the
Hospitals are seeking non-monetary prospective relief under Ex Parte Young
against Department officials in their official capacities, sovereign immunity does
not apply, and the claims may proceed. Therefore, we must vacate the district
court’s judgment to the extent it foreclosed prospective relief under Ex Parte
Young. Whether those claims are viable or not, or whether the relief sought is truly
within the purview of Ex Parte Young, are matters to be decided by the district
court in the first instance.
III
The Hospitals also challenge the district court’s various remand decisions.
Because those decisions were informed by the district court’s subject matter
jurisdiction decision, we remand those decisions for reconsideration by the district
court.2
AFFIRMED IN PART; REVERSED IN PART; VACATED AND
REMANDED IN PART.
2 The parties shall bear their own costs.
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