Pedreira v. Sunrise Children's Servs., Inc.

79 F.4th 741

Alicia M. PEDREIRA; Johanna W.H. Van Wijk-Bos; Elwood Sturtevant, Plaintiffs-Appellees, v. SUNRISE CHILDREN'S SERVICES, INC.,fka Kentucky Baptist Homes for Children, Inc., Defendant-Appellant,Eric Friedlander, in His Official Capacity as the Secretary of the

Cabinet for Health and Family Services; Kerry B. Harvey, in His Official Capacity as the Secretary of the

Justice and Public Safety Cabinet, Defendants-Appellees.

No. 21-5857

United States Court of Appeals, Sixth Circuit

Decided and Filed: August 22, 2023

Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 3:00-cv-00210—Charles R. Simpson III, District Judge.

ON BRIEF: John O. Sheller, Jeffrey A. Calabrese, Steven T. Clark, STOLL KEENON OGDEN PLLC, Louisville, Kentucky, for Appellant. Stephen K. Wirth, David B. Bergman, R. Stanton Jones, ARNOLD & PORTER KAYE SCHOLER LLP, Washington, D.C., Daniel Mach, ACLU FOUNDATION, Washington, D.C., Alex J. Luchenitser, AMERICANS UNITED FOR

SEPARATION OF CHURCH AND STATE, Washington, D.C., Corey M. Shapiro, Heather L. Gatnarek, ACLU OF KENTUCKY FOUNDATION, INC., Louisville, Kentucky, for Kentucky Taxpayers Appellees. Wesley W. Duke, LeeAnne Applegate, COMMONWEALTH OF KENTUCKY, Frankfort, Kentucky, for Kentucky Officials Appellees.

Before: STRANCH, BUSH, and LARSEN, Circuit Judges.

STRANCH, J., delivered the opinion of the court in which BUSH and LARSEN, JJ., joined. BUSH, J. (pp. 753-55), delivered a separate concurring opinion.

OPINION

JANE B. STRANCH, Circuit Judge.

This is the fourth appeal in the case before this court. We summarized the claim in the last appeal: "Kentucky taxpayers sued the State of Kentucky and Sunrise Children's Services, a religiously affiliated organization, alleging that Kentucky violated the Establishment Clause by paying Sunrise for religious services that the taxpayers allege Sunrise imposes on children in State custody." Pedreira v. Sunrise Child.'s Servs., Inc., 826 F. App'x 480, 482 (6th Cir. 2020). After proceedings resumed, the taxpayers and Kentucky, without Sunrise, entered into a settlement agreement in which the taxpayers agreed to dismiss the suit in exchange for Kentucky's agreement to make certain changes to its foster-care system, and jointly moved to dismiss the case with prejudice. The district court granted the motion, dismissed the case, and refused to review the settlement agreement. Sunrise appealed. We AFFIRM the decision below.

I. BACKGROUND

Over 20 years ago, individual plaintiffs and Kentucky taxpayers sued Kentucky officials and Sunrise Children's Services (formerly known as Kentucky Baptist Homes for Children), alleging employment discrimination under federal and state law and violations of the Establishment Clause of the First Amendment. The district court granted Defendants' motion to dismiss the suit for lack of standing. We reversed as to the Establishment Clause claims, holding that Plaintiffs did have standing as Kentucky taxpayers to bring those claims. See Pedreira v. Ky. Baptist Homes for Child., Inc. (Pedreira I), 579 F.3d 722, 725 (6th Cir. 2009).

On remand, in 2012, Plaintiffs filed the operative Second Amended Complaint, which stated only one claim for relief against Kentucky—not against Sunrise—for violating the Establishment Clause. Sunrise remained a named defendant pursuant to Federal Rule of Civil Procedure 19. Over the next decade, Plaintiffs and Kentucky made numerous attempts to settle this case.

A. The 2013 Agreement

In 2013, Plaintiffs and Kentucky (also referred to as the Settling Parties) entered a settlement agreement (the 2013 Agreement) to resolve the case, without Sunrise's approval. The 2013 Agreement denied that Kentucky or Sunrise violated the Establishment Clause or otherwise violated the rights of children in Sunrise's case, but it required Kentucky to change some of the terms in its standard two-year contracts with Sunrise and other providers and it included monitoring provisions that singled out Sunrise in some ways. The 2013 Agreement also contemplated the possibility of Kentucky enacting new regulations to implement some of its provisions; Kentucky did not have to guarantee that it would enact or modify any regulation, and failure to do so would not constitute a violation of the agreement. Plaintiffs promised to dismiss their lawsuit with prejudice and waive any claims based on conduct that occurred before the settlement. The 2013 Agreement provided that the court that entered it would have exclusive jurisdiction over enforcement, and terms indicated that the agreement was not a "consent decree." The Settling Parties agreed on the settlement terms and asked the district court to dismiss the suit and retain jurisdiction to enforce the 2013 Agreement. Sunrise objected and moved to dismiss for lack of jurisdiction. The court denied Sunrise's motion, granted Plaintiffs' motion to dismiss, entered a dismissal order incorporating the 2013 Agreement, and retained jurisdiction to enforce the order. Sunrise appealed.

On appeal, we determined that Sunrise had standing to object to and appeal the 2013 Agreement. Pedreira v. Sunrise Child.'s Servs., Inc. (Pedreira II), 802 F.3d 865, 869 (6th Cir. 2015). We reaffirmed Plaintiffs' standing and held that the district court had not abused its discretion by labelling its dismissal a dismissal with prejudice. Id. at 870-71. But, examining the 2013 Agreement, we found that it had the key attributes of a consent decree, and remanded the case for further consideration, instructing the district court to address whether the 2013 Agreement was fair, reasonable, and consistent with the public interest. Id. at 872. Specifically, the district court was to determine whether the consent decree was fair to Sunrise and to allow anyone affected by the decree an opportunity to present evidence and have their objections heard. Id.

B. The 2015 Amendment

In 2015, the parties to the original agreement entered into an amendment to the settlement agreement (the 2015 Amendment) in order to address concerns about singling out Sunrise for special monitoring. The 2015 Amendment deleted the monitoring provisions that mentioned Sunrise, replacing them with general language about "any Agency." The 2015 Amendment also clarified that no regulatory changes were needed to comply with or enforce the agreement, though it did not remove or change language concerning the enactment or modification of regulations. In other respects, the 2015 Amendment provided that "all the terms of the [2013] Agreement shall remain in full force and effect, and the Parties shall continue to comply with the [2013] Agreement, as amended herein, including during the pendency of any further proceedings in, or relating to dismissal of, the Lawsuit."

Following a change in Kentucky's administration, the newly elected Governor's Office notified Plaintiffs' counsel in April of 2016 that it would not consent to the 2015 Amendment. That June, Plaintiffs separately and individually moved the district court to enter the 2015 Amendment and to dismiss the suit. Both Kentucky and Sunrise opposed, arguing that the 2015 Amendment was unenforceable for lack of consent and that the district court lacked authority to enter and enforce it. The district court determined that, regardless of the change of administration, the 2015 Amendment was a viable proposed consent decree and that it would schedule the matter for a fairness hearing.

Sunrise moved for reconsideration, challenging the 2015 Amendment's lawfulness and contending that it could not be lawfully implemented without modifying or expanding Kentucky regulations. The court granted that motion, concluding that the 2015 Amendment violated Kentucky law because it required enactment of new or modified administrative regulations for implementation. See Pedreira v. Sunrise Child.'s Servs., Inc., No. 3:00-CV-210, 2018 WL 2435424, at *12 (W.D. Ky. May 30, 2018). Plaintiffs filed an interlocutory appeal, and while it was pending, there was another change of administration in Kentucky.

We upheld our jurisdiction to hear the appeal and, for the third time, held that Plaintiffs had standing to bring their Establishment Clause claim. Pedreira v. Sunrise Child.'s Servs., Inc. (Pedreira III), 826 F. App'x 480, 486 (6th Cir. 2020). We next reviewed the court's refusal to enter the 2015 Amendment, which functioned as a consent decree. The issue of Kentucky's consent was not dispositive, but we determined that multiple provisions of the 2015 Amendment required new regulations or modifications to existing regulations for implementation, which meant the 2015 Amendment violated Kentucky law. Id. at 489-95. So, we affirmed the district court's ruling, and proceedings resumed. Id. at 496.

C. The 2021 Agreement

Upon issuance of our mandate, Plaintiffs and Kentucky jointly moved to stay proceedings pending further settlement negotiations. At this point, Sunrise's eight-year-old motion for summary judgment—which Kentucky had originally moved to join before entering the 2013 Agreement with Plaintiffs—remained pending. The district court denied the motion to stay and ordered Plaintiffs to respond to Sunrise's motion for summary judgment. They did so in January of 2021; for its part, Kentucky withdrew its motion for joinder and explained that it had reached a settlement in principle with Plaintiffs. A month later, the Settling Parties jointly moved to dismiss the case with prejudice based on their entry into a new settlement agreement (the 2021 Agreement).

According to the Settling Parties, the 2021 Agreement cured the 2015 Amendment's defects and fully disposed of Plaintiffs' claims. Under the terms of the 2021 Agreement, Kentucky agreed to pursue new regulations in good faith and in accordance with Kentucky's rulemaking process, and certain provisions of the 2021 Agreement would not take effect unless those regulations were adopted. Also, the Settling Parties emphatically did "not"...