Allen v. FamilyCare, Inc.

PATRICK ALLEN, in his official capacity as DIRECTOR OF OREGON HEALTH AUTHORITY,an agency of the State of Oregon, Plaintiff-Appellant, v. FAMILYCARE, INC., an Oregon non-profit corporation, Defendant-Appellee.

FAMILYCARE, INC., an Oregon non-profit corporation, Plaintiff-Appellant, 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,andLYNNE SAXTON, Defendant.

FAMILYCARE, INC., an Oregon non-profit corporation, Plaintiff-Appellee, v. PATRICK ALLEN, in his individual capacity, Defendant-Appellant,andOREGON HEALTH AUTHORITY, an agency of the State of Oregon; LYNNE SAXTON, Defendants.

FAMILYCARE, INC., an Oregon non-profit corporation, Plaintiff-Appellee, v. LYNNE SAXTON, Defendant-Appellant,andPATRICK ALLEN, in his individual capacity;

OREGON HEALTH AUTHORITY, an agency of the State of Oregon, Defendants.

FAMILYCARE, INC., an Oregon non-profit corporation, Plaintiff-Appellant, v. LYNNE SAXTON, Defendant-Appellee,andPATRICK ALLEN, in his individual capacity; OREGON HEALTH AUTHORITY,an agency of the State of Oregon, Defendants.

No. 18-35593

Nos. 19-35103

No. 18-35891

No. 18-36009

No. 18-36048

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted: March 2, 2020

April 30, 2020

NOT FOR PUBLICATION

D.C. No. 3:18-cv-00212-MO

MEMORANDUM^*

D.C. No. 6:18-cv-00296-MOAppeal from the United States District Court for the District of Oregon

Michael W. Mosman, District Judge, Presiding

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 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 ratesmust 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 and2018. 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 stateaction 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 AgrosciencesLLC, 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);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.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...