DOUGLAS v. INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

Nos. 09–958, 09–1158, and 10–283

_________________

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, PETITIONER

09–958 v.

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC., et al.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, PETITIONER

09–1158 v.

CALIFORNIA PHARMACISTS ASSOCIATION et al.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, PETITIONER

10–283 v.

SANTA ROSA MEMORIAL HOSPITAL et al.

on writs of certiorari to the united states court of appeals for the ninth circuit

[February 22, 2012]

Justice Breyer delivered the opinion of the Court.

We granted certiorari in these cases to decide whether Medicaid providers and recipients may maintain a cause of action under the Supremacy Clause to enforce a federal Medicaid law—a federal law that, in their view, conflicts with (and pre-empts) state Medicaid statutes that reduce payments to providers. Since we granted certiorari, however, the relevant circumstances have changed. The federal agency in charge of administering Medicaid, the Centers for Medicare & Medicaid Services (CMS), has now approved the state statutes as consistent with the federal law. In light of the changed circumstances, we believe that the question before us now is whether, once the agency has approved the state statutes, groups of Medicaid providers and beneficiaries may still maintain a Supremacy Clause action asserting that the state statutes are inconsistent with the federal Medicaid law. For the reasons set forth below, we vacate the Ninth Circuit’s judgments and remand these cases for proceedings consistent with this opinion.

I A

Medicaid is a cooperative federal-state program that provides medical care to needy individuals. To qualify for federal funds, States must submit to a federal agency (CMS, a division of the Department of Health and Human Services) a state Medicaid plan that details the nature and scope of the State’s Medicaid program. It must also submit any amendments to the plan that it may make from time to time. And it must receive the agency’s approval of the plan and any amendments. Before granting approval, the agency reviews the State’s plan and amendments to determine whether they comply with the statutory and regulatory requirements governing the Medicaid program. See 42 U. S. C. §§1316(a)(1), (b), 1396a(a), (b); 42 CFR §430.10 et seq. (2010); Wilder v. Virginia Hospital Assn., 496 U. S. 498, 502 (1990) . And the agency’s director has specified that the agency will not provide federal funds for any state plan amendment until the agency approves the amendment. See Letter from Timothy M. Westmoreland, Director, Center for Medicaid & State Operations, Health Care Financing Admin., U. S. Dept. of Health and Human Servs., to State Medicaid Director (Jan. 2, 2001), online at http://www.cms.gov/SMDL/downloads/SMD010201.pdf (as visited Feb. 17, 2012, and available in Clerk of Court’s case file).

The federal statutory provision relevant here says that a State’s Medicaid plan and amendments must:

“provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan . . . as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.” 42 U. S. C. §1396a(a)(30)(A) (emphasis added).

B

In 2008 and 2009, the California Legislature passed three statutes changing that State’s Medicaid plan. The first statute, enacted in February 2008, reduced by 10% payments that the State makes to various Medicaid providers, such as physicians, pharmacies, and clinics. See 2007–2008 Cal. Sess. Laws, 3d Extraordinary Sess. ch. 3, §§14, 15. The second statute, enacted in September 2008, replaced the 10% rate reductions with a more modest set of cuts. See 2008 Cal. Sess. Laws ch. 758, §§45, 57. And the last statute, enacted in February 2009, placed a cap on the State’s maximum contribution to wages and benefits paid by counties to providers of in-home supportive services. See 2009–2010 Cal. Sess. Laws, 3d Extraordinary Sess. ch. 13, §9.

In September and December 2008, the State submitted to the federal agency a series of plan amendments designed to implement most of the reductions contained in these bills. Before the agency finished reviewing the amendments, however, groups of Medicaid providers and beneficiaries filed a series of lawsuits seeking to enjoin the rate reductions on the ground that they conflicted with, and therefore were pre-empted by, federal Medicaid law, in particular the statutory provision that we have just set forth. They argued that California’s Medicaid plan amendments were inconsistent with the federal provision because the State had failed to study whether the rate reductions would be consistent with the statutory factors of efficiency, economy, quality, and access to care. In effect, they argued that California had not shown that its Medicaid plan, as amended, would “enlist enough providers” to make Medicaid “care and services” sufficiently available. 42 U. S. C. §1396a(a)(30)(A).

The consolidated cases before us encompass five lawsuits brought by Medicaid providers and beneficiaries against state officials. Those cases produced seven decisions of the Court of Appeals for the Ninth Circuit. See 572 F. 3d 644 (2009); 342 Fed. Appx. 306 (2009); 596 F. 3d 1098 (2010); 563 F. 3d 847 (2009); 374 Fed. Appx. 690 (2010); 596 F. 3d 1087 (2010); and 380 Fed. Appx. 656 (2010). The decisions ultimately affirmed or ordered preliminary injunctions that prevented the State from implementing its statutes. They (1) held that the Medicaid providers and beneficiaries could directly bring an action based on the Supremacy Clause; (2) essentially accepted the claim that the State had not demonstrated that its Medicaid plan, as amended, would provide sufficient services; (3) held that the amendments consequently conflicted with the statutory provision we have quoted; and (4) held that, given the Constitution’s Supremacy Clause, the federal statute must prevail. That is to say, the federal statute pre-empted the State’s new laws.

In the meantime, the federal agency was also reviewing the same state statutes to determine whether they satisfied the same federal statutory conditions. In November 2010, agency officials concluded that they did not satisfy those conditions, and the officials disapproved the amendments. California then exercised its right to further administrative review within the agency. The cases were in this posture when we granted certiorari to decide whether respondents could mount a Supremacy Clause challenge to the state statutes and obtain a court injunction preventing California from implementing its statutes.

About a month after we heard oral argument, the federal agency reversed course and approved several of California’s statutory amendments to its plan. See Letter from Donald M. Berwick, Administrator, CMS, to Toby Douglas, Director, Cal. Dept. of Health Care Servs. (Oct. 27, 2011); Letter from Larry Reed, Director, Division of Pharmacy, Disabled and Elderly Health Programs Group, CMS, to Toby Douglas, Director, Cal. Dept. of Health Care Servs. (Oct. 27, 2011). In doing so, the agency also approved a limited retroactive implementation of some of the amendments’ rate reductions. The State, in turn, withdrew its requests for approval of the remaining amendments, in effect agreeing (with one exception) that it would not seek to implement any unapproved reduction. See Letter from Michael E. Kilpatrick, Assistant Chief Counsel, Cal. Dept. of Health Care Servs., to Benjamin R. Cohen, Director, Office of Hearings, CMS (Oct. 27, 2011). (The exception consists of one statute for which California has submitted no amendment and which, by its own terms, cannot take effect unless and until this litigation is complete, see 2010 Cal. Sess. Laws ch. 725, §25.)

II

All parties agree that the agency’s approval of the enjoined rate reductions does not make these cases moot. For one thing, the providers and beneficiaries continue to believe that the reductions violate the federal provision, the agency’s view to the contrary notwithstanding. For another, federal-court injunctions remain in place, forbidding California to implement the agency-approved rate reductions. And, in light of the agency’s action, California may well ask the lower courts to set those injunctions aside.

While the cases are not moot, they are now in a different posture. The federal agency charged with administering the Medicaid program has determined that the challenged rate reductions comply with federal law. That agency decision does not change the underlying substantive question, namely whether California’s statutes are consistent with a specific federal statutory provision (requiring that reimbursement rates be “sufficient to enlist enough providers”). But it may change the answer. And it may require respondents now to proceed by seeking review of the agency determination under the Administrative Procedure Act (APA), 5 U. S. C. §701 et seq., rather than in an action against California under the Supremacy Clause.

For one thing, the APA would likely permit respondents to obtain an authoritative judicial determination of the merits of their legal claim. The Act provides for judicial review of final agency action. §704. It permits any person adversely affected or aggrieved by agency action to obtain judicial review of the lawfulness of that action. §702. And it requires a reviewing court to set aside agency action found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” §706(2)(A).

For another thing, respondents’ basic challenge now presents the kind of legal question that ordinarily calls for APA review. The Medicaid Act commits to the federal agency the power to administer a federal program. And here the agency has acted under this grant of authority. That decision carries weight. After all, the agency is comparatively expert in the statute’s subject matter. And the language of the particular provision at issue here is broad and general, suggesting that the agency’s expertise is relevant in determining its application.

Finally, to allow a Supremacy Clause action to proceed once the agency has reached a decision threatens potential inconsistency or confusion. In these cases, for example, the Ninth Circuit, in sustaining respondents’ challenges, declined to give weight to the Federal Government’s interpretation of the federal statutory language. (That view was expressed in an amicus curiae brief that the United States submitted in prior litigation.) See Independent Living Center of Southern Cal., Inc. v. Maxwell-Jolly, 572 F. 3d 644, 654 (CA9 2009) (referring to the United States’ certiorari-stage invitation brief in Belshe v. Orthopaedic Hospital, 522 U. S. 1044 (1998) (denying writ of certiorari)). And the District Court decisions that underlie injunctions that now forbid California to implement its laws may rest upon similar analysis.

But ordinarily review of agency action requires courts to apply certain standards of deference to agency decisionmaking. See National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967 (2005) (describing deference reviewing courts must show); Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984) (same). And the parties have not suggested reasons why courts should not now (in the changed posture of these cases) apply those ordinary standards of deference.

Nor have the parties suggested reasons why, once the agency has taken final action, a court should reach a different result in a case like this one, depending upon whether the case proceeds in a Supremacy Clause action rather than under the APA for review of an agency decision. Indeed, to permit a difference in result here would subject the States to conflicting interpretations of federal law by several different courts (and the agency), thereby threatening to defeat the uniformity that Congress intended by centralizing administration of the federal program in the agency and to make superfluous or to undermine traditional APA review. Cf. Astra USA, Inc. v. Santa Clara County, 563 U. S. ___, ___ (2011) (slip op., at 2) (noting that the treatment of lawsuits that are “in substance one and the same” “must be the same, ‘[n]o matter the clothing in which [plaintiffs] dress their claims’ ” (quoting Tenet v. Doe, 544 U. S. 1, 8 (2005) ). If the two kinds of actions should reach the same result, the Supremacy Clause challenge is at best redundant. And to permit the continuation of the action in that form would seem to be inefficient, for the agency is not a participant in the pending litigation below, litigation that will decide whether the agency-approved state rates violate the federal statute.

III

In the present posture of these cases, we do not address whether the Ninth Circuit properly recognized a Supremacy Clause action to enforce this federal statute before the agency took final action. To decide whether these cases may proceed directly under the Supremacy Clause now that the agency has acted, it will be necessary to take account, in light of the proceedings that have already taken place, of at least the matters we have set forth above. It must be recognized, furthermore, that the parties have not fully argued this question. Thus, it may be that not all of the considerations that may bear upon the proper resolution of the issue have been presented in the briefs to this Court or in the arguments addressed to and considered by the Court of Appeals. Given the complexity of these cases, rather than ordering reargument, we vacate the Ninth Circuit’s judgments and remand the cases, thereby permitting the parties to argue the matter before that Circuit in the first instance.

It is so ordered.

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

Nos. 09–958, 09–1158, and 10–283

_________________

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, PETITIONER

09–958 v.

INDEPENDENT LIVING CENTER OF SOUTHERN

CALIFORNIA, INC., et al.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, PETITIONER

09–1158 v.

CALIFORNIA PHARMACISTS ASSOCIATION et al.

TOBY DOUGLAS, DIRECTOR, CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES, PETITIONER

10–283 v.

SANTA ROSA MEMORIAL HOSPITAL et al.

on writs of certiorari to the united states court of appeals for the ninth circuit

[February 22, 2012]

Chief Justice Roberts, with whom Justice Scalia, Justice Thomas, and Justice Alito join, dissenting.

The Medicaid Act established a collaborative federal-state program to assist the poor, elderly, and disabled in obtaining medical care. The Act is Spending Clause legislation; in exchange for federal funds a State agrees to abide by specified rules in implementing the program. One of those rules is set forth in §30(A) of the Act, which requires States to meet particular criteria in establishing Medicaid reimbursement rates for those providing services under the Act. 42 U. S. C. §1396a(a)(30)(A). In 2008 and 2009, California enacted legislation reducing the rates at which it would compensate some providers. Certain providers and individuals receiving Medicaid benefits thought the new reimbursement rates did not comply with the criteria set forth in §30(A). They sued the State to prevent the new rates from going into effect.

But those plaintiffs faced a significant problem: Nothing in the Medicaid Act allows providers or beneficiaries (or anyone else, for that matter) to sue to enforce §30(A). The Act instead vests responsibility for enforcement with a federal agency, the Centers for Medicare & Medicaid Services (CMS). See, e.g., 42 U. S. C. §1316(a)(1). That is settled law in the Ninth Circuit. See Sanchez v. Johnson, 416 F. 3d 1051, 1058–1062 (2005) (“[T]he flexible, administrative standards embodied in [§30(A)] do not reflect a Congressional intent to provide a private remedy for their violation”). And it is the law in virtually every other circuit as well. See, e.g., Long Term Care Pharmacy Alliance v. Ferguson, 362 F. 3d 50, 57–59 (CA1 2004) (holding that it would be inconsistent with this Court’s precedent to find that §30(A) creates rights enforceable by private parties). The respondents have never argued the contrary. Thus, as this case comes to us, the federal rule is that Medicaid reimbursement rates must meet certain criteria, but private parties have no statutory right to sue to enforce those requirements in court.

The providers and beneficiaries sought to overcome that difficulty by arguing that they could proceed against the State directly under the Supremacy Clause of the Constitution, even if they could not do so under the Act. They contended that the new state reimbursement rates were inconsistent with the requirements of §30(A). The Supremacy Clause provides that a federal statute such as §30(A) preempts contrary state law. Therefore, the providers and beneficiaries claimed, they could sue to enforce the Supremacy Clause, which requires striking down the state law and giving effect to §30(A). The Ninth Circuit agreed with this argument and blocked the new state reimbursement rates.

During briefing and argument in this case, the parties have debated broad questions, such as whether and when constitutional provisions as a general matter are directly enforceable. It is not necessary to consider these larger issues. It is not even necessary to decide whether the Supremacy Clause can ever provide a private cause of action. The question presented in the certiorari petitions is narrow: “Whether Medicaid recipients and providers may maintain a cause of action under the Supremacy Clause to enforce [§30(A)] by asserting that the provision preempts a state law reducing reimbursement rates.” To decide this case, it is enough to conclude that the Supremacy Clause does not provide a cause of action to enforce the requirements of §30(A) when Congress, in establishing those requirements, elected not to provide such a cause of action in the statute itself.

The Supremacy Clause operates differently than other constitutional provisions. For example, if Congress says in a law that certain provisions do not give rise to a taking without just compensation, that obviously does not resolve a claim under the Takings Clause that they do. The Supremacy Clause, on the other hand, is “not a source of any federal rights.” Chapman v. Houston Welfare Rights Organization, 441 U. S. 600, 613 (1979) ; accord, Dennis v. Higgins, 498 U. S. 439, 450 (1991) (contrasting, in this regard, the Supremacy Clause and the Commerce Clause). The purpose of the Supremacy Clause is instead to ensure that, in a conflict with state law, whatever Congress says goes. See The Federalist, No. 33, p. 205 (C. Rossiter ed. 1961) (A. Hamilton) (the Supremacy Clause “only declares a truth which flows immediately and necessarily from the institution of a federal government”).

Thus, if Congress does not intend for a statute to supply a cause of action for its enforcement, it makes no sense to claim that the Supremacy Clause itself must provide one. Saying that there is a private right of action under the Supremacy Clause would substantively change the federal rule established by Congress in the Medicaid Act. That is not a proper role for the Supremacy Clause, which simply ensures that the rule established by Congress controls.

Indeed, to say that there is a federal statutory right enforceable under the Supremacy Clause, when there is no such right under the pertinent statute itself, would effect a complete end-run around this Court’s implied right of action and 42 U. S. C. §1983 jurisprudence. We have emphasized that “where the text and structure of a statute provide no indication that Congress intends to create new individual rights, there is no basis for a private suit, whether under §1983 or under an implied right of action.” Gonzaga Univ. v. Doe, 536 U. S. 273, 286 (2002) . This body of law would serve no purpose if a plaintiff could overcome the absence of a statutory right of action simply by invoking a right of action under the Supremacy Clause to the exact same effect. Cf. Astra USA, Inc. v. Santa Clara County, 563 U. S. ___, ___ (2011) (slip op., at 7) (rejecting contention that contract incorporating statutory terms could be enforced in private action when statute itself could not be; “[t]he absence of a private right to enforce the statutory ceiling price obligations would be rendered meaningless if [contracting] entities could overcome that obstacle by suing to enforce the contract’s ceiling price obligations instead”).

The providers and beneficiaries argue, however, that the traditional exercise of equity jurisdiction supports finding a direct cause of action in the Supremacy Clause. This contention fails for the same reason. It is a longstanding maxim that “[e]quity follows the law.” 1 J. Pomeroy, Treatise on Equity Jurisprudence §425 (3d ed. 1905). A court of equity may not “create a remedy in violation of law, or even without the authority of law.” Rees v. Watertown, 19 Wall. 107, 122 (1874). Here the law established by Congress is that there is no remedy available to private parties to enforce the federal rules against the State. For a court to reach a contrary conclusion under its general equitable powers would raise the most serious concerns regarding both the separation of powers (Congress, not the Judiciary, decides whether there is a private right of action to enforce a federal statute) and federalism (the States under the Spending Clause agree only to conditions clearly specified by Congress, not any implied on an ad hoc basis by the courts).

This is not to say that federal courts lack equitable powers to enforce the supremacy of federal law when such action gives effect to the federal rule, rather than contravening it. The providers and beneficiaries rely heavily on cases of this kind, most prominently Ex parte Young, 209 U. S. 123 (1908) . Those cases, however, present quite different questions involving “the pre-emptive assertion in equity of a defense that would otherwise have been available in the State’s enforcement proceedings at law.” Virginia Office for Protection and Advocacy v. Stewart, 563 U. S. ___, ___ (2011) (Kennedy, J., concurring) (slip op., at 1). Nothing of that sort is at issue here; the respondents are not subject to or threatened with any enforcement proceeding like the one in Ex parte Young. They simply seek a private cause of action Congress chose not to provide.

*  *  *

The Court decides not to decide the question on which we granted certiorari but instead to send the cases back to the Court of Appeals, because of the recent action by CMS approving California’s new reimbursement rates. But the CMS approvals have no impact on the question before this Court. If, as I believe, there is no private right of action under the Supremacy Clause to enforce §30(A), that is the end of the matter. If, on the other hand, the Court believes that there is such a cause of action, but that CMS’s recent rate approvals may have an effect on that action going forward, then the Court should say just that and then remand to the Ninth Circuit for consideration of the effect of the agency approvals.

I am not sure what a remand without answering the preliminary question is meant to accomplish. The majority claims that the agency’s recent action “may change the [lower courts’] answer” to the question whether the particular state rates violate §30(A). Ante, at 6. But that fact-specific question is not the one before us; we chose not to grant certiorari on the question whether California’s rates complied with §30(A), limiting our grant to the cause of action question. 562 U. S. ___ (2011).

The majority also asserts that the lower courts must “decide whether these cases may proceed directly under the Supremacy Clause now that the agency has acted.” Ante, at 8. The majority contends that the parties have not “fully argued this question.” Ibid. But the agency proceedings that ultimately led to the CMS approvals were well underway when this Court granted certiorari. The parties debated the import of the parallel administrative proceedings in their initial briefs and at oral argument. See, e.g., Brief for Petitioner 28–29 (“Private lawsuits . . . interfere with . . . CMS’s own enforcement procedures,” as is “vividly demonstrated in the present cases”); Brief for Respondents Santa Rosa Memorial Hospital et al. in No.10–283, p. 46 (“This case vividly illustrates why the [administrative] enforcement scheme . . . cannot substitute for a constitutional preemption claim”). No party—nor the United States as amicus curiae—argued that any action by CMS would affect the answer to the question we granted certiorari to review. See, e.g., Tr. of Oral Arg. 53–54 (counsel for respondents) (arguing that, “to be sure,” there would be a cause of action under the Supremacy Clause even after the agency took action on the challenged rates).

Once the CMS approvals were issued, this Court directed the parties to file supplemental briefs to address “the effect, if any, of the [CMS approvals] on the proper disposition of this case.” 565 U. S. ___ (2011). Again, no one argued on supplemental briefing that the CMS approvals affected the answer to the question before this Court. See, e.g., Supp. Letter Brief for Certain Respondents 6 (“The CMS findings do not directly resolve whether the Constitution supports a right of action”); Supp. Letter Brief for Petitioner 6 (agreeing that “if a preemption cause of action may be stated here against the State, [CMS] approval may affect its merits but not its existence”). It seems odd, then, to claim that the parties have not had the opportunity to fully address the impact of the agency action on the question that we granted certiorari to review: whether the Ninth Circuit correctly recognized a private cause of action under the Supremacy Clause to enforce §30(A).

So what is the Court of Appeals to do on remand? It could change its view and decide that there is no cause of action directly under the Supremacy Clause to enforce §30(A). The majority itself provides a compelling list of reasons for such a result: “The Medicaid Act commits to the federal agency the power to administer a federal program”; “the agency is comparatively expert in the statute’s subject matter”; “the language of the particular provision at issue here is broad and general, suggesting that the agency’s expertise is relevant”; and APA review would provide “an authoritative judicial determination.” Ante, at 6–7. Allowing for both Supremacy Clause actions and agency enforcement “threatens potential inconsistency or confusion,” and imperils “the uniformity that Congress intended by centralizing administration of the federal program in the agency.” Ante, at 7–8; see Gonzaga, 536 U. S., at 291–293 (Breyer, J., concurring in judgment) (explaining that Congress often means to preclude a private right of action in statutes where it employs an administrative enforcement scheme that achieves “expertise, uniformity, widespread consultation, and resulting administrative guidance,” while “avoid[ing] the comparative risk of inconsistent interpretations and misincentives that can arise out of an occasional inappropriate application of the statute in a private action for damages”).

The majority acknowledges, in light of all this, that the Supremacy Clause challenge appears “at best redundant,” and that “continuation of the action in that form would seem to be inefficient.” Ante, at 8. Still, according to the majority, the Court of Appeals on remand could determine that the Supremacy Clause action may be brought but then must abate “now that the agency has acted,” ibid.—as everyone knew the agency would. A Court concerned with “inefficien[cy]” should not find that result very palatable, and the majority cites no precedent for a cause of action that fades away once a federal agency has acted. Such a scenario would also create a bizarre rush to the courthouse, as litigants seek to file and have their Supremacy Clause causes of action decided before the agency has time to arrive at final agency action reviewable in court.

Or perhaps the suits should continue in a different “form,” by which I understand the Court to suggest that they should morph into APA actions. The APA judicial review provisions, however, seem to stand in the way of such a transformation. To convert the litigation into an APA suit, the current defendant (the State) would need to be dismissed and the agency (which is not currently a party at all) would have to be sued in its stead. 5 U. S. C. §§701–706. Given that APA actions also feature—among other things—different standards of review, different records, and different potential remedies, it is difficult to see what would be left of the original Supremacy Clause suit. Or, again, why one should have been permitted in the first place, when agency review was provided by statute, and the parties were able to and did participate fully in that process.

I would dispel all these difficulties by simply holding what the logic of the majority’s own opinion suggests: When Congress did not intend to provide a private right of action to enforce a statute enacted under the Spending Clause, the Supremacy Clause does not supply one of its own force. The Ninth Circuit’s decisions to the contrary should be reversed.

Print this transcript Transcript: 

ORAL ARGUMENT OF KARIN S. SCHWARTZ ON BEHALF OF THE PETITIONER

Chief Justice John G. Roberts: We will hear argument first this morning in Case 09-958, Douglas v. Independent Living Center of Southern California and the consolidated cases.

Ms. Schwartz.

Ms Schwartz: Mr. Chief Justice, and may it please the Court:

There are many reasons why this Court should not recognize a private cause of action to enforce 30(A) and I would like to focus on three.

First, the separation of powers.

Congress controls who can enforce Federal law, and it has not provided for -- for private enforcement of 30(A).

Instead it has provided for administrative enforcement.

Second is the Spending Clause context in which the case arises.

The very legitimacy of Spending Clause legislation depends on the State's voluntary and knowing acceptance of its obligations.

For this reason, if Congress wants to provide for private party litigation, it must do so clear and unambiguously, and it has not done so in this case.

And third is the language of 30(A) itself, which is broad and undefined and which includes competing policy interests.

These are suited to administrative enforcement, with all the expertise and judgment and discretion and administrative know-how that can be brought to bear.

These three principles all focus -- all point to one conclusion -- that section 30(A) is not enforceable.

Justice Ruth Bader Ginsburg: Ms. Schwartz, the government doesn't have the injunctive power.

As far as California's rates are concerned, California puts them into effect.

The government can't stop that from happening, even if the government thinks that they are in violation of the Medicaid Act; is that right?

Ms Schwartz: No, Your Honor, it -- it is not.

I mean, in the sense that it can't go out immediately and get an injunction, Your Honor is correct.

However, the government has the power to deny a State--

Justice Ruth Bader Ginsburg: Yes, but that's a very drastic remedy that's going to hurt the people that Medicaid was meant to benefit.

Does the Government have any injunctive power, or is its only -- only remedy a fund cutoff?

Ms Schwartz: --Well, its only remedy provided by statute is to terminate funds.

However, it is not a drastic remedy, it -- and it is the remedy that's provided by statute.

Justice Ruth Bader Ginsburg: How often has it happened?

Ms Schwartz: How often does it happen?

Justice Ruth Bader Ginsburg: How -- how often has in the Medicaid context--

Ms Schwartz: Very rarely, and the reason for that is because the way that most State plan amendments operate is that these issues are resolved on a consensual basis, generally within the 90 days provided by regulation.

This case is the exception that proves the rule.

Justice Elena Kagan: Well, Ms. Schwartz, isn't it the exception because in fact you end-run -- end-ran the administrative process, that you put your regulations, your new rate schedules, into effect even before you submitted them to HHS, and continued them in effect while HHS was considering them, and continued them in effect to the extent that you were allowed to do so by injunction, even after HSS disapproved them?

Ms Schwartz: There is no end run here because HHS's own regulations provide that our time for submitting the State -- State plan amendment is within the 90 days that the amendment will take effect, and HHS will confirm that -- it's the position of the Federal Government that the State may implement its rate reductions while the State plan amendment is pending.

It does so at the risk that, if a State plan amendment is disapproved, that it may have to pay additional funds.

But we did not do an end run around anything.

We are entirely consistent with the administrative process.

Justice Anthony Kennedy: Could a State in its own courts provide for procedures whereby adversely affected parties could test the regulation?

Ms Schwartz: I don't believe so.

And that's because in--

Justice Anthony Kennedy: It seems to me you have to say that.

Otherwise the next question would be under Gonzaga, you wouldn't say that a State can entertain a monetary cause of action, so I think that's consistent with your position.

Ms Schwartz: --Well, and I think what's very important to focus on here is that this is not just any Federal statute that is being enforced, but it is a Spending Clause provision that is vague and ambiguous in its terms.

It cries -- it has all these policy elements to it and it cries out for administrative review.

Justice Anthony Kennedy: Well, when you say -- that brings me to a slightly different point.

You -- you introduce the fact or the consideration of what's administratively workable.

The brief by the former HHS officials says quite to the contrary.

It -- it says that there are almost $400 billion of HHS expenditures that are supervised by 50 people.

That works out to 800 million each; and they say, we don't have time for this, and it's much more efficient and it's much more consistent with the application of -- proper application of Federal law, to allow this action be brought in the -- in the courts.

Ms Schwartz: I have two answers, Your Honor.

One is that I don't think it is more efficient to have 700 district court judges interpreting a statute that does not have any objective standard, but that is susceptible to many different interpretations.

Justice Elena Kagan: Well, Ms. Schwartz, the agency--

Justice Anthony Kennedy: Well, I mean, that's 7 -- 700 judges.

It would be just each district if it were in every district.

And it -- it -- and certainly to the extent we are involving a State, there would be only one State involved.

So -- so there is just the State of California and only four districts there and the suit could only be brought in one.

So -- I think that's an -- you know, I don't think that the "sky is falling" argument really works.

Ms Schwartz: But California is now subject to standards that don't apply anywhere else in the country, and I believe the Court acknowledged exactly this problem just last term in Astra v. Santa Clara when it declined to allow private parties to use a contract provision to do an end run around Gonzaga, Sandoval versus -- Sandoval v. Alexander; I think I have that reversed -- and the other cases that, based on separation of powers of principles, based on Spending Clause principles, limit the -- the circumstances in which private parties can sue.

Justice Samuel Alito: Are you asking us to adopt a rule that is good for this one case only?

Ms Schwartz: Yes.

Justice Samuel Alito: You gave -- or is there -- could you state the rule in broader terms or more neutral terms?

And you gave three reasons why we should reverse.

One, Congress hasn't created a cause of action here.

Well, Congress has never created causes of action, never creates a cause of action in any case in the Ex parte Young line or cases like that.

The Supremacy Clause, because this is a Spending Clause, this was an act under the Spending Clause.

But you are not asking us to hold that a Spending Clause legislation can never preempt State legislation, I take it.

And then the language of 30(A), where you -- are you arguing that 30 -- that the Medicaid Act affirmatively precludes any action like this.

I don't understand that.

Is -- is any of those arguments sufficient by itself, or do you have to take them all together, and you are asking for a rule that only applies here?

Ms Schwartz: All of those arguments are sufficient, as is the fact that, as we briefed, the Supremacy Cause itself is an implied cause of action.

But let me focus on those three points.

These are points -- the rule that we are seeking is that a Federal statute is not enforceable unless Congress intended for it to be enforceable, and that that principle has special force with respect to Spending Clause provisions where Congress has to clearly and unambiguously provide for that enforcement, because the State has to be on fair notice due to the nature of the Spending Clause of the obligations to which it is agreeing.

That is Pennhurst; and that is applied with even greater force with respect to 30(A) because of the type of standards that it incorporates.

If it's not suitable for -- if a determination applying Gonzaga if that if you are finding under 1983 the administrative nature and flexible nature of those standards is not appropriate for private enforcement, that shouldn't matter what vehicle you are using to bring the case.

And I want to just -- to put this into real clear context, in the 3 years that this case has been pending, California has submitted 68 State plan amendments outside of the rate context.

36 of them were approved.

The rest were withdrawn voluntarily.

These cases -- and they were all approved, almost all of them within the 90-day period.

So the administrative process works.

Justice Sonia Sotomayor: Excuse me.

Were those -- were those amendments submitted before they took effect or after they had taken affect, like here?

Ms Schwartz: I don't know the answer to that question.

These are non-rate -- rate-related amendments, State plan amendments.

But the point is the administrative process is working.

We obtained -- and it resolves in the usual case in a consensual resolution that is consistent with the cooperative nature of the joint venture between the States and the Federal Government--

Justice Sonia Sotomayor: That's where I'm a little bit confused.

The injunction here only stopped you from implementing the rate changes until you got approval from HHS in its administrative process that it was going to approve the amendment, correct?

Ms Schwartz: --No, I don't believe the injunctions were that limited.

So if we obtained State plan approval we then would have to go back to the court and argue over what the impact is of the State plan.

Justice Sonia Sotomayor: That's a separate question about whether the courts are required to give deference to an HHS finding.

But the injunction here wasn't one that said you could never do this.

It just said go finish the process, right?

Ms Schwartz: No, the injunctions were not so conditional.

And the point I want to make is, the injunctions have disrupted the administrative process as it is intended to work by drawing out the process, by politicizing the process, by prejudicing our ability to get State plan approval because now there is the concern about what about retroactive relief when they approve your State plan?

Justice Anthony Kennedy: Well, the courts I take it have the prerogative, perhaps even the obligation, under the primary jurisdiction rational to simply withhold adjudication until the agency acts.

Ms Schwartz: We requested that in some of these cases and the courts ignored that argument.

And so the upshot is that we are now--

Justice Anthony Kennedy: But that's an abuse of discretion, not an absence of power.

You're arguing an absence of power.

Ms Schwartz: --There is no cause of action, that's correct, Your Honor.

Our position is that there is no cause of action here.

Justice Elena Kagan: --Can I go back to the question that Justice Alito asked you about why there's no cause of action.

You are asking us to treat the Supremacy Clause differently that every other constitutional provision.

Why should we?

Ms Schwartz: For several reasons, Your Honor.

First, what you're doing here, what the Court is doing here, is enforcing a Federal statute.

You look through the Supremacy Clause to the obligation--

Justice Elena Kagan: The Supremacy Clause is part of the Constitution--

Ms Schwartz: --It is.

Justice Elena Kagan: --And the Petitioners here -- excuse me.

The plaintiffs here essentially said that the Supremacy Clause as part of the Constitution had been violated and sought, not damages, but only a prospective injunction.

And the question is why should the Court do what the Court has done many, many, many times before, tens and tens and tens of times before, and say, yes, that's our prerogative and we'll proceed to the merits.

Ms Schwartz: Two points, Your Honor.

First, they did seek damages and they obtained damages in Independent Living.

The second is the obligations that are imposed, the study requirement, the data requirement, all these obligations are imposed by 30(A).

We look through the Supreme Clause to the statute to see the obligations.

So the question is, does Congress get to control who enforces those obligations or not.

Justice Elena Kagan: In a -- in a cause of -- in a suit that's brought under a statute directly, a person could be claiming damages.

Here that is not the case.

A person is only claiming injunctive relief.

And that should -- there should be a difference between those two in terms of when the cause of action is available.

Ms Schwartz: First just one point: In Independent Living they did claim damages and they obtained damages.

But setting that issue aside, no, Your Honor, this Court has the obligation and the right with respect to constitutional provisions to determine how they will be enforced subject potentially to congressional action, but there is far more latitude for the court.

With respect to statutes, of course, as this Court is explained in Davis v. Passman, deference to congressional intent is appropriate.

And here--

Justice Samuel Alito: Well, suppose the plaintiffs here were facing an imminent State enforcement action.

Would your argument be different?

Ms Schwartz: --Well, if -- if the plaintiffs fell within -- yes.

If the plaintiffs fell within of the bill in equity to restrain enforce proceedings that was in issue in Ex parte Young and that Justice Kennedy has discussed in terms of the immunity to invalid regulation, then the result would be different.

But there are several reasons why--

Justice Samuel Alito: But how does that square with the argument that you made relying on separation of powers, Spending Clause and the language of 30(A)?

All of those are still in play--

Ms Schwartz: --For a couple--

Justice Samuel Alito: --in that situation.

Ms Schwartz: --Well, for a couple of different reasons.

First of all, a defense, which is what you're asserting in such a case, is not a cause of action, and so it doesn't implicate the separation of powers concerns to the same degree as a stand-alone cause of action to compel the State to comply with an obligation owed to another entity.

Also, in those cases there, in the equity cases -- equity doesn't provide a remedy just for an injury.

You have to have an invasion of what in old times was called a primary right.

But what that means is a right to property or a right in the person.

And there are other kinds of primary rights.

Justice Ruth Bader Ginsburg: --But what about the providers who say, but under -- under the State law, if we charge more than the hospitals -- if we charge more than the State ceiling, we are subject to sanctions, so this does fit into the category of anticipatory defenses?

Ms Schwartz: No it does not, because we have not threatened to enforce that statute.

They are not arguing that statute is preempted.

The statute that they--

Justice Ruth Bader Ginsburg: But wouldn't they be -- the rates go into effect.

Someone charges more on the theory that the rates are impermissible under the Supremacy Clause.

That person would be subject to sanction under State law.

Ms Schwartz: --And that would be a different case and it would be a closer case, although even in that context, because in the Spending Clause context in which the case arises I don't believe that they would be able to challenge that under the Supremacy Clause.

But that is not this case.

That case at least presents the fact -- and the reason why it's a closer case is because in that case there is regulation and we are potentially infringing on their property.

However, what's the law that they are trying to assert defensively there is, as a Spending Clause provision that has administrative standards that have been entrusted to Congress.

So shouldn't Congress be able to enforce it?

Fundamentally, this Court--

Justice Antonin Scalia: Excuse me.

You spoke of that, Justice Ginsburg's question, as though it were a hypothetical.

But that could happen, couldn't it?

What if one of these Respondents charged more than the State law permits?

Wouldn't -- wouldn't the State move against them?

Ms Schwartz: --Of course we would, and they would have a decision about whether to stay in the Medicaid program or not.

But the question is does this Court exercise its equitable powers to create a cause of action directly that Congress itself has not?

That's really the question for this Court.

In the Spending Clause context with respect to this kind of standard that is suited for administrative standards, we submit you should not.

Unless there are any further questions, Your Honor, I would like to reserve our remaining time for rebuttal.

Chief Justice John G. Roberts: Thank you, counsel.

Mr. Kneedler?

ORAL ARGUMENT OF EDWIN S. KNEEDLER ON BEHALF OF THE UNITED STATES, AS AMICUS CURIAE, SUPPORTING PETITIONER

Mr. Kneedler: Mr. Chief Justice and may it please the Court:

Medicaid is a cooperative program between the Federal Government and the States.

Congress has not created a cause of action under that act for private parties to enforce particular provisions of it.

Nor does paragraph 30(A) confer private rights that are enforceable under 1983.

Rather paragraph 30(A) is written in general terms that describe the general undertaking by the State in its bilateral relationship with the Federal Government.

Chief Justice John G. Roberts: Mr. Kneedler, is your argument in this case limited to Spending Clause legislation?

Mr. Kneedler: Yes.

And what--

Justice Sonia Sotomayor: And if it's not, could you please -- you said yes, it is.

Mr. Kneedler: --Yes.

Justice Sonia Sotomayor: But give me the theoretical foundation?

The Supremacy Clause doesn't, I am assuming you agree with your -- with Petitioner that it doesn't provide for a cause of action?

Mr. Kneedler: Yes.

Justice Sonia Sotomayor: Is that your position?

Mr. Kneedler: Yes.

Justice Sonia Sotomayor: Then what gets all of the cases that we've had since 1824 into this Court that have granted injunctive relief on supremacy arguments?

Mr. Kneedler: I think that the great majority of those cases are ones in which the plaintiff in the suit in equity is bringing an action anticipating an action at law.

Justice Sonia Sotomayor: Well, but we have plenty that don't -- King, Townsend, Carlson.

We have had many others that are not dissimilar to this case.

Mr. Kneedler: I think though that they do not reflect a general assumption that there is a cause of action directly under the Supremacy Clause, because as this Court said, the Supremacy Clause is not itself a source of rights--

Justice Sonia Sotomayor: So go back and explain to me how all of those cases, what's the theoretical.

Mr. Kneedler: --I think there is -- I think one has to look to an equitable cause of action, which I think is the way ex parte Young describes what is going on in that way is anticipating a defense, and to--

Justice Sonia Sotomayor: So go to your Petitioner's response to one of my colleague's -- to Justice Scalia, when she said yes, if these providers decide to charge the old rate to their patients, the State will go after them.

How is that any different than the cases where we are talking about railroads charging -- not charging customers more than a State commands because the penalty's too high, or those types of cases that fall into this preemptive category that you're talking about?

Mr. Kneedler: --That has not been plaintiff's theory of this case.

They have not said we are going to resort to self-help and charge more than the State allows.

What they want to do is they brought this suit to challenge the rates in the first instance.

They are not claiming that they are going to violate State law and charge more; they are simply wanting to challenge the rates that the State is charging, but--

Justice Sonia Sotomayor: But you haven't explained how that's theoretically different than the example I just gave you.

Mr. Kneedler: --Yes, I think it is, and if I could explain--

Justice Antonin Scalia: So all they have to do as far as the government is concerned is amend their complaint to say,

"we intend to charge higher rates than the State law allows. "

And then you would agree that the suit would lie.

Mr. Kneedler: --I'm not sure.

There would be further questions that would arise in that context.

For example, I don't know whether -- whether -- whether in a prosecution under the statute for charging -- that prohibits charging more than State regs allow, whether you can raise as a defense in that prosecution a challenge to the validity of the rates.

Justice Antonin Scalia: Well, gee, we're not deciding a whole lot here, then.

It's just a matter of pleading that we're deciding.

Mr. Kneedler: That's why I'm saying there might be a further question in -- in what you're describing as to whether that would be a valid defense in the State prosecution, because I could certainly imagine the State saying, we don't want our rates tested in individual criminal prosecutions any more than we would want them tested in an affirmative--

Justice Elena Kagan: Mr. Kneedler, why should this even matter so much whether there is a defense available in a regulation that's brought against a person or not.

In your brief, you admit that there are numerous cases that don't fit within that category, where the -- but where the State has acted in some sense to change the behavior of the person, to regulate the person, even if that person doesn't have a proceeding in which to mount a defense.

And this Court has treated those cases in exactly the same way, haven't they?

Mr. Kneedler: --Yes, unexamined.

And let me say, we are not challenging those cases.

And the Court, we think, doesn't need to look more broadly to a theory -- to an all-encompassing theory.

We are focusing on Spending Clause legislation in a particular cooperative federal/state--

Chief Justice John G. Roberts: So you think--

Mr. Kneedler: --Under the Spending Clause.

Chief Justice John G. Roberts: --So you think there may well be implied rights of action outside the Spending Clause context.

Mr. Kneedler: I think probably the best way to explain it is equitable cause of action drawing on the Court's traditional equitable jurisdiction; you can call that an implied cause of action under the Supremacy Clause, but I think historically, it's been described as an--

Chief Justice John G. Roberts: So--

Mr. Kneedler: --Exercise of the Court's equitable authority.

The Court has equitable discretion, and we think because of the Spending Clause nature of this legislation, it should not create the cause of action--

Chief Justice John G. Roberts: --So your answer to my earlier question was that you were not arguing about that in this case?

Mr. Kneedler: --Right -- we are focusing on--

Chief Justice John G. Roberts: So the government -- the government, we don't have a position from the government on whether or not there is an implied right of action under other constitutional provisions--

Mr. Kneedler: --Under--

Chief Justice John G. Roberts: --I mean outside the Spending Clause context.

Mr. Kneedler: --We are certainly not challenging the existence of a cause of action in equity.

I'm -- I'm -- I'm just -- I think we would view it as a cause of action in equity rather than implied under the Supremacy Clause, but I think you may -- you might get to the same place, but I think it's judicial creation of a cause of action.

But if I could before my time is--

Justice Antonin Scalia: You do not even exclude all Spending Clause cases.

You only exclude those Spending Clause cases where -- where the plaintiff does not say we are -- you know, we are going to violate the State law, and they are going to come after us.

So you haven't made an exception for the Spending Clause--

Mr. Kneedler: --Well -- I don't think there is any categorical rule because, for example, under Spending Clause cases, you can have rights enforceable under 1983.

Our basic point is, a Spending Clause is a contractual relationship between the Federal Government and the State, and the Respondents here are in the position of the people asserting rights as third-party beneficiaries to the bilateral relationship between the United States and the States.

Under standard contract law principles--

Justice Elena Kagan: But Mr. Kneedler--

Mr. Kneedler: --The third-party can sue only if the parties intending them to be.

Justice Elena Kagan: --Mr. Kneedler, this is what you said in your cert stance brief: You said

"those programs in which the drastic measure of withholding all or a major portion of the Federal funding is the only available remedy. "

and you are talking here about Spending Clause programs, obviously --

"would be generally less effective than a system that also permits awards of injunctive relief in private actions. "

Mr. Kneedler: Yes, and the circumstances in which the Court has made that point and we agree with are often in situations where you have Title 6, Title 9 instances of individual discrimination that are arising under federal programs, or where you have a right under 1983 where -- whether as an enforceable right that a party has and is going into court and is supplementing the agency's oversight.

Here, under paragraph 30(A), you have only general standards that are really suitable for administrative review, balancing general--

Justice Elena Kagan: Can that really be the difference?

I mean, do you think if 30(A) were written -- were drafted as a formula, a rate schedule formula, that there would be a cause of action, but because 30(A) is more general in nature, that there is no cause of action?

I mean, surely that's a question for the merits of whether there is preemption or not.

Mr. Kneedler: --Well, I don't think it's just a merits question, I think it also goes to the question whether the parties to the contract intended third-party beneficiary-type rights to be able to sue under what is really analogous to a contract.

I would also point out that this Court's decision in Maine v. Thibotout first recognized a 1983 cause of action, pointed to prior cases enforcing Social Security programs, on the assumption that 1983 could have been the only source of the cause of action.

If there was an implied judge-made cause of action in those circumstances, that assumption would have been unwarranted.

Justice Ruth Bader Ginsburg: Then Mr. Kneedler, before you sit down, could you please enlighten us on two fact points.

One is, what is the status of the 30(A) rulemaking?

I take it once the rule is made, it would get Chevron deference.

You said that there would be a final rule in December.

Is that still--

Mr. Kneedler: I am informed that it may slip past December, that there's been a lot of interaction with comments on it.

I don't know a precise date, but I'm informed that that may be possible.

Justice Ruth Bader Ginsburg: --How about the status of the hearing on California's compliance?

Mr. Kneedler: That is still pending.

There have been extensions that have also been planned amendments that have been submitted covering some of these same regs, Justice Ginsburg I also wanted to respond to one of your questions I do believe that the United States would have injunctive actions under certain cases, for example, if the State itself accepted a plan and the State continued to follow the terms of the disapproved final amendment, I think the United States would have a cause of action to enforce as the party to the contract.

Justice Anthony Kennedy: Under a preemption, would it be a preemption argument.

Mr. Kneedler: No it would be enforcing the terms of its agreement with the United States.

It can't rely on preemption in those -- those circumstances.

Justice Anthony Kennedy: Do you agree with the Petitioner that if the state shows to allow its courts to issue an injunction on Supremacy Clause grounds in the state courts that that would be impermissible?

Mr. Kneedler: We think it's a harder question, but probably so, because we believe paragraph 38 does not confer private rights and that would be true in the state court as well as the federal court.

Chief Justice John G. Roberts: Thank you, Mr. Kneedler.

Mr. Phillips?

ORAL ARGUMENT OF CARTER G. PHILLIPS ON BEHALF OF THE RESPONDENTS

Mr. Phillips: Thank you Mr. Chief Justice and may it please the Court: I've would like to focus on two points that came out of the questioning in the first part of the oral argument today.

First of all I would like to focus on the question -- the comment at least and the question that flows from it from justice Alito which is that there has never been a recognition of a third-party action in the ex parte Young case.

That is true and I didn't hear anything from the other side that suggests anything to the contrary.

And that what this court said in the Verizon case and in Shaw when you look to the Supremacy Clause arising-under jurisdiction and if you look to jurisdiction you look to the traditional equitable standards to determine whether they have been satisfied in a particular case.

And under this Court's decision in Ex parte Young, what the Court said was an injunction which restrains the State from taking any steps to the enforcement of an unconstitutional enactment to the injury of the complainant is the basis for relief.

And that's exactly the circumstance we have in this case.

Chief Justice John G. Roberts: Why isn't -- Why doesn't your position constitute a complete end run around all of our implied right of action jurisprudence?

We have wasted a lot of time trying to figure out whether there's an implied right of action under a particular statute if there has always been one under the Supremacy Clause.

Mr. Phillips: Mr. Chief Justice, there is a very fundamental difference between an implied right of action or an action under section 1983 and a very simple and straightforward Ex parte Young remedy that is otherwise available.

Under 1983, in private rights of action, the district courts, the Federal courts, State courts for that matter in enforcing them, have authority to grant damages, they have much broader injunctive relief, and under section 1983--

Chief Justice John G. Roberts: How can they have much broader -- broader -- First of all, all of those cases -- I don't know if all of them did, but certainly a lot of them did -- included claims for injunctive relief.

And I would have thought the court's authority under your equitable action under the Constitution would be at least as broad as it would be under the Statute.

Mr. Phillips: --Well, Ex parte Young has been pretty consistently evaluated as saying simply you cannot do what the Constitution immediately prohibits you from doing.

So frankly, the Ex parte Young remedy has been a negative--

Chief Justice John G. Roberts: But your position--

Mr. Phillips: --not to violate -- not to violate the Supremacy Clause.

Chief Justice John G. Roberts: --Your position is that the Constitution prohibits you from doing anything where the State law is preempted by the Federal law.

That doesn't sound very narrow to me.

Mr. Phillips: Well, but if you go back and look at the cases in which 1983 relief has been involved, a case like Blessing -- in Blessing, the complaint there sought essentially to take over the entire State law function of providing support for children.

And that was the injunctive relief that was requested.

And if the Court had adopted the motion that 1983 carried with it a private right of action, that would have been available relief; there would have been a claim for damages in that circumstance; and there would have been access to attorneys' fees.

None of those things is available here.

Chief Justice John G. Roberts: What if -- what if the law that Congress passes sets forth certain Federal standards, it's a cooperative Federal-State law like this one, and it says: And there is no private right of action for any individual to enforce this.

That's limited to the Federal Government.

Mr. Phillips: In that -- in that situation, there is obviously no authority to bring a private right of action under the statute.

That still doesn't answer the question whether or not there is a right to invoke the Supremacy Clause--

Chief Justice John G. Roberts: So Congress can say--

Mr. Phillips: --when there is a conflict between Federal and State law.

Chief Justice John G. Roberts: --Congress can say in the same statute that confers the allegedly preemptive Federal standards that we do not want individuals bringing actions in Court to enforce this.

We want to leave that up to HHS.

And you are saying, even though Congress said that, individuals can nonetheless bring a suit under the Supremacy Clause, the theory of which is we are making sure that Federal law controls.

Mr. Phillips: Right.

Chief Justice John G. Roberts: The same Federal law that says you can't bring a claim of action.

Mr. Phillips: No, I understand that, Mr. Chief Justice, but you still have the problem that even under those circumstances a regime can arise in which there is a square and, in this case I think undeniable, conflict between Federal and State law, and the question is -- and that that conflict imposes not only injury in fact to an individual, but also imposes irreparable harm.

Justice Ruth Bader Ginsburg: But you are saying then, if Congress loud and clear says, we want HHS to be the sole enforcer of this law, You're saying--

Mr. Phillips: Of the Federal statute.

Justice Ruth Bader Ginsburg: --You are saying that that would be ineffective because there could still be a Supremacy Clause claim.

Mr. Phillips: Yes.

Whether or not you would in fact get relief under the Supremacy Clause seems to me a very--

Justice Ruth Bader Ginsburg: That's on the merits, but Congress says we don't want anybody coming into the court.

We want--

Mr. Phillips: --I don't think Congress has the authority to essentially say there are some conflicts between Federal and State law that we will simply ignore even though it causes irreparable harm--

Justice Elena Kagan: Is that necessary to your position, Mr. Phillips?

Mr. Phillips: --Absolutely not.

It doesn't say anything about--

Justice Elena Kagan: Because you could take the view, right, that if Congress speaks to cut off a claim, that's one thing, and a very different thing, than if Congress has not spoken at all.

Mr. Phillips: --Right.

And it seems to me here is a situation where you would expect Congress to have spoken explicitly--

Justice Ruth Bader Ginsburg: --Then it's a question of what would be the default rule.

Congress is silent.

Mr. Phillips: --Of course.

Justice Ruth Bader Ginsburg: Is the default rule that there is a Supremacy Clause action or that Congress must expressly allow it?

Mr. Phillips: And the reason why the default rule would almost certainly be that in fact you can bring the Ex parte Young cause of action is because the effect -- the spending clause has been subject to the -- to preemption claims since 1968.

This whole notion that they contracted against this background of what obligations did they assume, the obligation that they clearly would have assumed is that if in fact there is a violation of Federal law based on a failure to satisfy one of the conditions of spending under these circumstances, you would -- they would be susceptible to an Ex parte Young injunctive action.

Justice Stephen G. Breyer: Why?

I am not certain, as I find this a difficult case.

It seems to me the government is prepared to concede that if an individual has a Federal right that he would like to enforce and someone is trying to block it by asserting a State law that he thinks is preempted, he can go ahead.

If it looks as if the State is going to take something from him that a Federal law guarantees and he has a defense that he would like to make to that under Federal law, the State law seems to allow, it is preempted, he can make it.

Our problem arising where neither of those things is true.

So we say, what is true here?

What kind of Federal claim does he have?

And the word is that rates have to be -- that the rate that the State has to pay back to the doctor has to be "sufficient".

Okay, "sufficient".

That's basically the word.

Mr. Phillips: Right.

Justice Stephen G. Breyer: So I see three possibilities.

One is you say, sure, let all the doctors go and sue.

There are only 50,000 kinds of reimbursement.

Maybe there are a million.

I don't know how many.

And they only take place in like, say, 400,000 counties.

And we will have Federal judges reaching different views about what is sufficient in each of those different places.

And sometimes they will agree.

Did Congress want that?

Well, hm, a problem.

The second way of going about it is cure that and say you win, but you have to use primary jurisdiction and you have to get the government's view on it, Judge; and before you decide, you have to pay attention.

Mr. Phillips: Can I just--

Justice Stephen G. Breyer: There is a long line of cases -- I have one more thing and then you'll get all three.

Mr. Phillips: --Can I deal with that one immediately?

Justice Stephen G. Breyer: Yes.

Mr. Phillips: Because I think it's important in the context of this case to recognize it.

We are talking about the issuance of a preliminary injunction that was designed to hold everything until matters could be avoided.

We realize that we're talking about a situation where the State, solely for budgetary reasons, without regard to Federal law whatsoever, simply made a slash in the reimbursements.

Justice Stephen G. Breyer: If I want your view, I want your view on whether the right approach -- you are saying what is the status quo pending.

And I want your view on these three possibilities:

One is the possibility the judges just do it in all the different places, try to figure out what is sufficient.

The second is the possibility that we try primary jurisdiction, and that's the -- then the curlicue on that is what do you do pending.

And that's your injunction.

Mr. Phillips: That's what I just wanted to be clear on.

Justice Stephen G. Breyer: Yes.

And the third possibility is, you say I'm just sorry, that this is just too vague, the sufficient, et cetera.

It has to be centralized.

There is no way to work this out with all these different judges and different rates and different kinds of provisions, and so this is an instance where you cannot bring your claim that something violates the Supremacy Clause because you don't have a Federal right to a thing, and you are not trying to take away a thing that the Federal right gives you, et cetera.

Do you see those three possibilities?

Mr. Phillips: Right.

Justice Stephen G. Breyer: And what I wanted you to do is address them.

Mr. Phillips: The third possibility it seems to me, Justice Breyer, is not different from a lot of the other cases that this Court has already decided, Crosby and like Engine Manufacturers, where there's this vague standard out here and they're not asserting a right not to have an enforcement action brought against them, and this Court has routinely held in that circumstance that there is in fact a Supremacy Clause action available.

So I don't think the third option is really an option.

And it also ultimately goes to the merits of the preemption claim.

If it turns out that all of this is just too squishy to evaluate, then it would seem to me that on the merits you would say it is not a clear enough statement on the Federal law to justify saying there is a conflict, and therefore you would lose on the merits.

But that wouldn't prevent you from going into Court and trying to make the showing that we made here.

Justice Stephen G. Breyer: You think primary jurisdiction is the way to do it.

Mr. Phillips: Yes.

Justice Stephen G. Breyer: I see a practical problem and the practical problem is millions of rates all judged by the term "sufficient" and instead of the agency in charge deciding what's sufficient, we do have a lot of judges.

Mr. Phillips: But Justice Breyer, the agency always has the ultimate authority to step in and take action and the real question is to think that Congress meant to place this in an agency to circumstances where the agency isn't going to receive notice of the implementation of the change before it gets implemented, where the state is permitted to take no -- to make no response to a request for information and allow the unlawful rates to go into effect for years on end.

Justice Sonia Sotomayor: Can I ask -- why are you fighting Justice Breyer so much?

Mr. Phillips: I didn't think I was.

Justice Sonia Sotomayor: It sounds like you are and that's why I am having some difficulty.

There are two points.

Following up on his and then my second question.

Engage the Solicitor General's question that this isn't a cause of action under the Supremacy Clause, but that it is a cause of action under some implied equitable--

Mr. Phillips: Doctrine.

Justice Sonia Sotomayor: --doctrine, okay?

Which may square enough now.

Coming back to Justice Breyer's question.

I agree with all you were trying to say about what the State did or didn't do here, but if it's a primary jurisdiction question, what's wrong with just saying that the court's power is limited under equity to issuing an injunction that gives the matter over to the administrative agency that puts in the status quo -- assuming there is some sort of violation of Federal law or seeming violation of Federal law -- a preventive injunction that just stops the State from acting until the administrative process concludes?

Mr. Phillips: Justice Sotomayor--

Justice Sonia Sotomayor: What's wrong with that?

Mr. Phillips: --There is nothing wrong with that.

Candidly, we -- we would be perfectly comfortable about that; but I don't understand the other side to be complaining about the scope of the injunctive relief.

It is not that they are saying--

Justice Sonia Sotomayor: No, no; they are saying you can't have any.

Mr. Phillips: --Right.

And so--

Justice Sonia Sotomayor: But -- but Justice Breyer's question I think was slightly different, which is, what's the limit on the court's power?

And how do you--

Mr. Phillips: --We did have an alternative argument that the injunction should stay into effect at least until HHS acts, and the -- the district court granted a broader preliminary injunction and didn't consider the alternative argument that was -- that was there.

But again, it seems to me, you know, the court ought to recognize that you are in the context of preliminary injunctive relief in this situation, and -- and there will be plenty of time to kind of work through the nature of the injunctive relief if in fact the court's allowed to go forward and take up the Ex parte Young issue -- in the circumstance.

Justice Sonia Sotomayor: --But you engaged the question that -- the approach that the Solicitor General has been making, which is don't find a cause of action under the Supremacy Clause; find it in the court's -- an implied cause of action.

Mr. Phillips: I am not perfectly comfortable with that rationale.

I think the answer is it's sort of a combination of the Supremacy Clause and the -- and broad equitable relief, rather than -- I mean, clearly one or the other.

They seem to go pretty much hand-in-glove in the ex parte line of cases.

And so I don't have any particular problem with that.

Justice Sonia Sotomayor: Well, I might, if you continue in your earlier position that a Supremacy Clause cause of action would stop Congress from having a -- a voice in enforcement and cutting it off clearly.

If Congress were to write a law that says no one can enforce this, either in damages or in injunctive relief, your earlier answer seemed to suggest that Congress didn't have the power under the Supremacy Clause to do that.

Mr. Phillips: Well, I--

Justice Sonia Sotomayor: If this were an equitable--

Mr. Phillips: --It will depend on the -- on the circumstances of the case, but I do think there is some gap between the full extent of Congress's power in this area and -- and the protections of the Supremacy Clause, if for no other reason -- and because the Executive Branch certainly has the authority, and certainly acting within its own exclusive authority could -- could preempt State law or could create a situation where State law would be preempted, and I don't think Congress would have the authority to -- to take away the Ex parte Young remedy under -- under those particular circumstances.

Justice Samuel Alito: What is your response to the argument that the equitable power exercised in Ex parte Young and similar cases is limited to certain specific situations such as where there is an imminent threat of the State enforcement action, and a few others where there is a trespass, where there's a clearly defined Federal right.

I mean, it doesn't encompass every situation in which the plaintiff simply has Article III standing and wants to obtain an injunction that a particular State law is preempted by a Federal law.

Mr. Phillips: The -- I mean, to be sure, the Court in Ex parte Young was dealing with a specific situation in trying to prevent enforcement.

But the -- the Supreme Court -- this Court in all of its decisions post Ex parte Young has never said that that's the only circumstance and has certainly never said that in exercising the judicial power under Article III that extends to all cases in equity, that it means only the equity that existed in -- in the 18th Century at that point in time.

So it seems to me the right answer at this stage is for this Court to look at the situation and safe is this a context in which equitable relief would be appropriate?

And if you just use the preliminary injunction standards, it clearly would be appropriate under -- under these particular circumstances, where we have a likelihood of success on the merits, irreparable harm and the balance of harms favor the -- favor the--

Justice Stephen G. Breyer: Right.

Justice Anthony Kennedy: What is the best authority in our cases other than Ex parte Young or in a treatise or in recognized statements of the difference in law and equity, for the proposition that in this area we can make a distinction between law and equity after centuries in which we have tried to say that that distinction ought to be blurred?

Mr. Phillips: --Well--

Justice Anthony Kennedy: I mean, do you want us -- do you want us to write an opinion and say oh, there is a difference in damages and equity?

Mr. Phillips: --Well, all--

Justice Anthony Kennedy: What do I -- other than Ex parte Young, what do I site for that?

Mr. Phillips: --Well, any of the cases in which the Court has recognized that obviously in order to get -- in order to get injunctive relief you have to demonstrate that there -- that there is no adequate remedy at law.

So, I mean, the distinction has always been there, even after of the merging of law and equity--

Justice Antonin Scalia: That -- that's not--

Mr. Phillips: --in the earlier part of the -- century.

Justice Antonin Scalia: --That's not the theory on which we've said you can't get damages under Ex parte Young.

The theory that prevents damages is the theory of sovereign immunity.

The -- the fiction that you're -- the fiction that you're moving against the individual and not against the State simply cannot be maintained when you are taking money out of the State treasury.

That's the basis for it, not -- not just what you just described.

Mr. Phillips: No, but I'm -- I'm not asking for -- for -- I mean, we are not asking for damages here, Justice Scalia.

All we're asking for is injunctive relief.

Justice Anthony Kennedy: I know, but see -- but that -- but that wouldn't explain the case like Gonzaga where there was no State entity.

Gonzaga was a private institution.

Mr. Phillips: Right.

But--

Justice Anthony Kennedy: So I'm -- I'm wondering.

I understand the Eleventh Amendment dynamic which--

Mr. Phillips: --Right.

Justice Anthony Kennedy: --as Justice Scalia pointed out was the whole driving force of -- of Ex parte Young.

Is there -- is there any other basis for us to say there has to be a law/equity distinction?

You say well, that's because there is no adequate remedy at law; but that's circular; that assumes because there is no cause of action.

So that doesn't work.

Mr. Phillips: No, but I -- I mean all of the cases that come out of the Ex parte Young line of authority seem to base -- you know, they all tee up, obviously, the problem that exists in this context which is -- which is the one Justice Scalia identified.

Justice Stephen G. Breyer: There must be a limit.

There must be a limit because if there is not a limit under what you can do under Ex parte Young, I can go in my office and I look at the statute books and they are just filled with statutes, and I -- Federal; and if I have all the State statute books there would be 15 offices or 20 or 100; and I know perfectly well that a lot of those statutes in the Federal books have to do with Federal agencies, and they give jobs to agencies, and it's perfectly apparent that the ones who run those statutes in many instances are the agencies, and really judges are out of it.

Now if I adopt your line, it seems to me I am saying that any time that a person has an individual of saying that a State law is contrary to one of those statutes, he can run right into court.

And I can see we've done that where he has some kind of right that he is protecting that is threatened in some way or that he wants to assert.

I can see that we could do that in the foreign policy case like Burma; I see that we could do that where Federal voting rights are at stake, which are very important.

But a principle that says you can do that any time you want, seems to me a little -- it seems to me the real fear of far reaching, in the extent that it just stops the agency of doing their business at the behest of anyone who would like to assert a State law, or States -- it's a mess, in other words.

Mr. Phillips: Justice Breyer, can I -- two points here.

First of all, we are not talking about a situation of somebody seeking a roving commission to go find all Federal -- all situations where State law violates Federal law.

We're -- the beneficiaries in this case--

Justice Stephen G. Breyer: No, no.

Your people have your problem.

But some other people have another problem.

Mr. Phillips: --But my people have a life and death problem, Justice Breyer.

So if there were ever a situation where you would say, let's look to see whether or not there is relief available, this would be the situation where -- where I would hope--

Justice Stephen G. Breyer: The doctors want to be paid more money or at least not paid as much as they were, I understand that.

Mr. Phillips: --But the beneficiaries--

Justice Stephen G. Breyer: Yes.

Mr. Phillips: --The patients are the one whose lose access to--

Justice Stephen G. Breyer: So is there a medical exception?

Mr. Phillips: --I'm sorry.

Justice Stephen G. Breyer: Is there a medical exception?

Is it that you can have this generalized claim if you are a doctor, but not others?

Mr. Phillips: No, to be sure, Justice Breyer.

The exception is that we have to satisfy the requirements of Article III, we have to have injury and redressability, and in order to get equitable relief, we ultimately are going to have to demonstrate that the injury is irreparable, that there is no adequate remedy at law.

Those are high burdens--

Justice Elena Kagan: Mr. Phillips--

Mr. Phillips: --and in a circumstance where you cannot get damages and you cannot get attorneys' fees.

Justice Elena Kagan: --Mr. Phillips, can I ask you a little bit more about how this interacts with the agency process?

Now suppose that California had done what, the way I read the statute, it was supposed to do, which is to go to the agency and say we want to change our rates?

We can't afford these rates any more and we think these lower rates would do just as well.

All right.

And then the agency and California sit down and discuss the matter.

Would this suit have ever come into being?

Mr. Phillips: If they had just discussed the matter?

Justice Elena Kagan: You know, they did not impose them unilaterally.

They go to the -- to HHS and they wait for HHS to approve what they want to do.

If HHS approves--

Mr. Phillips: We wouldn't be here.

I guarantee you we wouldn't be here.

Justice Elena Kagan: --Well, if HHS approved, maybe somebody does sue.

And then there is great deference to the agency, isn't that right?

Mr. Phillips: That's -- that's exactly right.

Justice Elena Kagan: And if HHS doesn't approve, then what's there to talk about?

There is no suit.

Mr. Phillips: Right.

So there's no question.

Justice Elena Kagan: So either way, the agency wins; right?

Mr. Phillips: Right.

The agency always wins.

That's the rule that they--

[Laughter]

Chief Justice John G. Roberts: Why is there no suit -- why is there no suit if the agency doesn't approve,--

Mr. Phillips: Well, if -- I mean -- I mean, if the agency--

Chief Justice John G. Roberts: --You're saying Congress can't say there's no implied right of action--

Mr. Phillips: --Right.

Chief Justice John G. Roberts: --But the agency can?

Justice Elena Kagan: Well, it's the -- I was just saying if the agency didn't approve, your clients don't have anything to complain about.

Mr. Phillips: Right, because--

Chief Justice John G. Roberts: Do you have the same answer or--

Mr. Phillips: --Well, it also depends on whether they go ahead and -- if California, in the face of disapproval, continues to violate the law -- and I would -- I assume you meant that California complied.

Justice Elena Kagan: Correct.

Justice Samuel Alito: What happens when the agency approves rates and someone is dissatisfied with the rate sues and says these rates are ridiculously low?

Mr. Phillips: You can bring a lawsuit, Justice Alito--

Justice Samuel Alito: They can still bring a suit--

Mr. Phillips: --But the bottom line is you're going to lose that -- that litigation, and in a circumstance where you have no realistic--

Justice Samuel Alito: --Well, how do you know they're going to lose the litigation?

Why should they lose the litigation if it's really -- if there really is a cause of action there?

Some of the Medicaid rates are very low, aren't they?

Mr. Phillips: --Well, ultimately, they have to demonstrate that there's -- that there is a -- by clear and convincing evidence a conflict between Federal and State law, and the agency that has made -- that evaluates the standards of Federal law will have said in a very authoritative way that there is not a violation under those--

Chief Justice John G. Roberts: --But you still have a cause of action under the Supremacy Clause.

Mr. Phillips: --One has to be sure of a cause of action.

Chief Justice John G. Roberts: I thought you were saying you didn't, if the--

Mr. Phillips: No, no.

Chief Justice John G. Roberts: --Agency that--

Mr. Phillips: I'm not saying you don't, I'm just -- all I'm saying is that if the process works appropriately, there would be not the litigation that Justice Breyer was worried about, where you would have hundreds of thousands of cases going forward.

If the process -- which again, it goes back to the default rule--

Justice Antonin Scalia: You've lost me here.

You say there would be a cause of action under the Supremacy Clause if the agency approves the rates, but your clients don't think the rates are high enough?

Mr. Phillips: --Sure, we would still say there's a--

Justice Antonin Scalia: Under the--

Mr. Phillips: --We would still have an argument that there is a conflict between Federal and State law.

Justice Antonin Scalia: --Well, Federal law is determined by the agency, surely.

So long as the agency is complying with the Administrative Procedure Act, I don't see how you have any cause of action under the Supremacy Clause; you may have an APA cause of action.

Mr. Phillips: Well, the problem with the APA -- we might have an APA cause of action, but I also think that there is a -- again, look, that hypothetical is so far afield--

Justice Antonin Scalia: Federal law is not determined by the agency?

Mr. Phillips: --I'm sorry, Justice Scalia?

Justice Antonin Scalia: Federal law is not determined by of the agency?

Mr. Phillips: No, of course Federal law is determined by the--

Justice Antonin Scalia: Well, then you don't have a Supremacy Clause cause of action.

Mr. Phillips: --I think you -- I still think you can bring an action under the Supremacy Clause.

I think ultimately you have very -- you have zero ultimately prevailing--

Chief Justice John G. Roberts: --Why does the agency get to determine Federal law when Congress doesn't?

You told me earlier if Congress--

Mr. Phillips: --Because Congress--

Chief Justice John G. Roberts: --Congress says it its statute no implied right of action, that that doesn't control.

Mr. Phillips: --That doesn't -- that controls, to the extent of trying to enforce directly the Federal statute; it doesn't control with respect to trying to enforce the Supremacy Clause.

Justice Anthony Kennedy: The Supremacy Clause says that judges in every State shall be bound thereby, but you want to amend it so that judges in every State and all administrators should be bound thereby, then you have a Supremacy Clause action against every Federal agency.

That doesn't make sense.

Mr. Phillips: But there, what the Supremacy Clause says is that Federal law will be supreme in all circumstances, notwithstanding State law--

Justice Anthony Kennedy: Number one, it doesn't say that.

There's no -- it doesn't say "all circumstances".

It doesn't say that.

Mr. Phillips: --The Supremacy Clause -- well, I don't know of any exceptions in the Supremacy Clause where State law gets to remain supreme--

Justice Anthony Kennedy: Well, Justice Scalia's question was related to a Federal agency.

The Federal agency does something that's inconsistent with the statute, arguably, and you say there is a Supremacy Clause violation?

That's -- I don't--

Mr. Phillips: --Not -- not -- not that -- not that -- not what the agency has done violates the Supremacy Clause, it's the State acting pursuant to what the agency has approved, that if you still thought it violated Federal law would be a basis for seeking a Supremacy Clause action.

But no, Justice Scalia's right, the obvious solution to the immediate problem is to seek review of the decision by HHS, and to follow it under those circumstances.

The second point that I wanted to focus a little bit about, because it does seem to me -- again, it goes to what are -- what should be the background principles that operate here.

And a couple of justices specifically raised the question of, you know, would this case be different if we were seeking to balance the bill -- that is to bill the extent to which we were allowed to bill prior to the time the State of California reduced by 10 percent.

If we brought that lawsuit, would that be perfectly permissible?

And I understand California I think suggested that it would be, and I heard Mr. Kneedler suggest that well, there might be some additional issues there.

But the reality is, is it seems to me that shows you just how unrealistic the distinction is in this particular case, because we are talking about individuals -- the question is not, you know, how are you going to implement this down the road.

The question is, what do you do with someone who is suffering a lack of access to vital medical care in a way that is irreparable, and is it realistic to think that Congress meant under those circumstances to deprive the individual plaintiff of any kind of rights.

And the answer is no.

And that's -- that's as far as the Court needs to go.

It doesn't need to figure out exactly how far Congress could deal with the Supremacy Clause.

I realize that there is some skepticism on that score.

But on the core question here, did Congress intend to deprive these plaintiffs of their rights under Ex parte Young?

The answer is no.

Chief Justice John G. Roberts: The answer is yes, they intended to deprive them of the right to sue under the statute.

I understand that you're not challenging the proposition that this statute, when Congress was specifically focused on the question of how to enforce this provision, they did not provide a right of action.

And under our implied right of action jurisprudence, that means there isn't one.

So why when they are confronted with the precise question did they say no, we don't want these people to sue, but you say well, they knew under the Constitution they were going to be able to anyway?

Mr. Phillips: Because there is a difference between providing a private right of action and all the bells and whistles that go with that, as opposed to recognizing that Ex parte Young is the background principle that has been in place for well over a century, and that it says that when the standards for equitable relief are satisfied, the Courts have the power, and they can prevent the violation of the Supremacy Clause.

Justice Ruth Bader Ginsburg: You said you would be satisfied with a limitation that the Court can issue an injunction pending the administrative procedure without going on to then the substance of the question, was there compliance with 30(A) by California?

Mr. Phillips: Yes, Justice Ginsburg, I would have been perfectly comfortable with that.

I mean, that was one of the alternative grounds for relief that we sought.

The district judge didn't happen to go down that particular path.

But clearly from our perspective, the important element is to maintain the status quo ante until a resolution of the legality of California statute can be made, either by the agency or the courts.

But the one thing you shouldn't be allowed to do is simply to -- to permit this to drift without any remedy and without any ability to get access to medical care that's clearly consistent with what Congress intended, and where a remedy is available under the Ex parte Young formulation.

If there are no further questions, Your Honor.

Chief Justice John G. Roberts: Thank you, Mr. Phillips.

Ms. Schwartz, you have 4 minutes remaining.

REBUTTAL ARGUMENT OF KARIN SCHWARTZ, ON BEHALF OF THE PETITIONER

Ms Schwartz: Thank you, Your Honor, so there are other provisions of the Medicaid Act that are privately enforceable.

This one is not.

I've would like to address the court's questions about Ex parte Young.

Ex parte Young of course involved a Constitution -- the Due Process Clause and not the Supremacy Clause of the substance of the Constitution that was being enforced and the plaintiff had an independent pre-standing personal right in ex parte Young in all of the cases that are its progeny.

Now there is another -- I want to address Justice Alito's point about do we apply the right's required in Ex parte Young causes of action.

Yes you do, Alexander v. Sandoval, California v. Sierra Club, Blessing versus Freestone.

Look at Alexander v. Sandoval.

The State passes a constitutional amendment that says English only.

The State adopts a policy, English-only drivers tests.

This is challenged as conflicting with Federal law and specifically a Federal regulation.

The Court said no court is satisfied.

Congress drafted that statute, it controls who gets to enforce them.

Justice Elena Kagan: I'm sorry Ms. Schwartz.

Are you saying -- this is the way I understood you and tell me if I am right: Are you saying that the test for determining whether there is a 1983 suit is the same as the test for determining whether there is an Ex parte Young action?

Because you talked about whether somebody has a right, which is usually the language we use in the 1983 context.

Ms Schwartz: No, I'm not.

The test for whether there is an Ex parte -- there is different means of Ex parte Young, but none of them apply here.

You can see Ex parte Young as construing a cause of action under the Due Process clause.

This not a cause of action under the Due Process Clause.

You can see Ex parte Young as involving a specific kind of bill in equity which is a defense of regulation of your conduct where that regulation infringes a personal or property right.

That is not this case.

There is no regulation of Respondent's conduct and there is no infringement of a personal or property right in this case.

The only entity that's being regulated by the State -- by the State statute that purportedly is being -- well, that is being challenged as preempted, is the state of California itself because we are the entity that sets rates and so the statute tells the agency, this is how you will set rates.

So however you look at ex parte Young, plaintiffs cannot satisfy the elements of an ex parte Young cause of action.

What I'm saying with respect to Alexander v. Sandoval and these other cases is injury is not enough.

You have to have a -- a right.

Under equity injury, it's never been enough, and it's not enough under this Court's separation of powers decisions and its Spending Clause cases.

And I wanted to segue very quickly to this idea that there is a default rule that a Supremacy Clause cause of action exists by default the.

That is absolutely not true, and it's not true in this context, and I'd like to identify two reasons.

First, the Suter fix.

The -- Congress acted in this Court in Suter, said that there was no cause of action.

And it said just because something is in a -- in an estate plan, doesn't render it unenforceable.

But we want to preserve the holding in Suter.

Look, it -- That suggests that other things are unenforceable; that Congress is not act -- legislating against a backdrop of an assumption that there is an injunctive relief to the claim, or it wouldn't have required it.

In Maine v. Thibotout, another case that assumes, that recognizes that with respect to spending clause actions, the sole means -- the Spending Clause statute, the means, the vehicle for enforcing is 1983.

And finally, in the Spending Clause context, we have the clear state role which is incompatible with the assumption that a cause of action always exists.

Because the State has to have knowing and acceptance -- knowing and accepting its obligations, we require that they reassert statement.

Thank you, Your Honor.

Chief Justice John G. Roberts: Thank you, Counsel.

Counsel.

The case is submitted.

Print this transcript Transcript: 

Chief Justice John G. Roberts: Justice Breyer has our opinion this morning in Case 09-958, Douglas versus Independent Living Center and the consolidated cases.

Justice Stephen G. Breyer: The difficult thing is to explain what this case is about.

It's about Medicaid and Medicaid is a cooperative federal state program that provides medical care for needy individuals.

To qualify, a State has to have its Medicaid statutes approved by a federal agency, the one that administers the program, it's called the Centers for Medicare and Medicaid Services or initials are CMS, which reviews the statutes, the states statutes to determine if they comply with the federal law.

The federal law that's involved here is a federal law that says states statutes have to "assure that payments to the ultimate -- to the Medicaid providers like doctors are consistent with the efficiency, economy and quality of care and are sufficient to enlist enough providers to make Medicaid care and services available.

So you have to pay the providers enough money so that -- now, few years ago, California enacted three statutes reducing its payments to various of the Medicaid providers.

The State submitted them to the federal agency for approval, but before the agency finished reviewing them, certain groups of Medicaid providers and beneficiaries filed a series of lawsuits, seeking to enjoin the state statutes on the ground that they didn't -- they conflicted with the statute I just read and that they were so preempted by federal Medicaid law.

In other words, that heart of it, as they were saying the payments that California now wanted to make weren't sufficient to enlist enough providers like the doctors.

The providers and beneficiaries brought their suits based directly on the Constitution's Supremacy Clause which says that federal law takes precedence over state law.

They were saying these California state laws weren't good enough to comply with the federal law which says you have to pay them enough money.

California in response argued that the providers and beneficiaries don't have the right to bring a suit like this.

There is no such thing as a Supremacy Clause action in this situation to enforce this federal law, but the lower court decisions that we were reviewing said, yes, they can.

They can bring this action addressed -- based right on the Supremacy Clause and the other courts like the Ninth Circuit and certain federal courts said, the state statutes are invalid, they do conflict.

And in the meantime, the agency officials, proceeding on a separate agency reviewing track, were reviewing the same statutes to make up their mind whether they could -- they've conflicted.

California initially lost in the agency, but then it sought further administrative tract review in the agency.

That's the posture of the cases wherein when we decided to grant certiorari to decide whether the providers and beneficiaries could mount a Supremacy Clause challenge.

I told it was complicated just to figure out what's going on.

Since we granted certiorari, the relevant circumstances have changed.

After oral argument, the federal agency reversed course and it approved the state statutes.

Now, the agency's approval doesn't moot the case, but it does put them in a different posture.

The agency that's charged with administering the Medicaid statutes has now said that the state statutes do comply with the federal law.

That decision doesn't change the underlying substantive question, namely, whether they really do comply, but it does change possibly the answer.

And it may require the respondents who are trying to attack the state statutes as being inconsistent with federal law that may require them to proceed through a procedure that seeks review of the agency determination under the Administrative Procedure Act, the APA, rather than an action against California under the Supremacy Clause.

And in our opinion, we explain why it might change, how you are supposed to go about getting the review of these state statutes.

We also recognize, however, that the parties have not fully argued the question in the cases' new posture.

So given the complexity of these cases, which you may be convinced about, rather than ordering re-argument here, we vacate the Ninth Circuit's judgment and we remand the cases thereby permitting the parties to argue the matter more fully before that circuit in the first instance.

The Chief Justice has filed a dissenting opinion which Justices Scalia, Thomas and Alito have joined.