Case: Sierra Medical Services Alliance v. Maxwell-Jolly

On June 6, 2010, a coalition of medical transportation providers filed this action against the California Department of Health Care Services in the U.S. District Court for the Central District of California, Western Division, challenging Assembly Bill 5 (AB 5), the California state budget bill for the fiscal year of 2009-2010. Plaintiffs, represented by private counsel, brought their suit under the Supremacy Clause; 42 U.S.C. § 1983; the Declaratory Judgment Act, 28 U.S.C. § 2201; and Title XIX of the Social Security Act, 42 U.S.C. § 1396, claiming that the rate freeze on medical transportation imposed by AB 5 was unlawful. Specifically, plaintiffs claimed that the rate freeze was preempted by the Medicaid Act, an unconstitutional taking under the Fifth Amendment, and a violation of equal protection and procedural and substantive due process under the Fourteenth Amendment. They sought declaratory, injunctive and monetary relief.

This suit was one of many filed challenging the State of California's reduction in Medicaid reimbursement rates due to its budgetary crisis. Other cases in the Clearinghouse include Douglas v. Independent Living Center, No. 2:08−cv−03315 (C.D. Cal.); California Association For Health Services At Home v. Shewry, No. 2:08-cv-07045 (C.D. Cal.); California Medical Transportation Association, Inc. v. Shewry, No. 2:08-cv-07046 (C.D. Cal.); Managed Pharmacy Care v. Maxwell-Jolly, No. 2:09-cv-00382 (C.D. Cal.); California Pharmacists Association v. Maxwell-Jolly, No. 2:09-cv-00722 (C.D. Cal.); California Medical Association v. Shewry, No. 2:08-cv-03363 (C.D. Cal.); California Hospital Association v. Maxwell-Jolly, No. 2:09-cv-03694 (C.D. Cal.); National Association of Chain Drug Stores v. Schwarzenegger, No. 2:09-cv-07097 (C.D. Cal.); California Hospital Association v. Maxwell-Jolly, No. 2:09-cv-08642 (C.D. Cal.); Development Services Network v. Maxwell-Jolly, No. 2:10-cv-03284 (C.D. Cal.); California Association of Health Facilities v. Maxwell-Jolly, No. 2:10-cv-03259  (C.D. Cal.); California Pharmacists Association v. Maxwell-Jolly, No. 2:09-cv-08200 (C.D. Cal.).

On June 4, 2010, plaintiffs filed a motion seeking to enjoin application of the rate freeze. Rather than deciding on this motion, however, on July 16, 2010, the Court (Judge Christina A. Snyder) stayed the case, finding that pending actions in the Supreme Court could be dispositive of some of plaintiffs' claims, and ordered the parties to file quarterly status reports until the case was reactivated or dismissed.

In a status report, dated May 2, 2012, the parties noted that all of the cases before the Supreme Court had been decided. Plaintiffs stated their intent to once again move for a lifting of the stay, while defendants believed the stay should be continued, citing key issues still pending before the Ninth Circuit on remand from the Supreme Court.

On September 11, 2012, the court granted the plaintiffs leave to file an amended complaint, lifted the stay, and placed the case on the court's active list.

Plaintiffs filed their amended complaint on September 20, 2012. The complaint made essentially the same claims as the original complaint, including unconstitutional takings without just compensation, procedural due process violations, equal protection violations, and violations of the Contract and Interstate Commerce Clauses. The plaintiffs again sought injunctive relief and compensatory damages.

On October 25, 2013, the state moved for summary judgment. After the court ordered and then later lifted another temporary stay, it (Judge Christina A. Snyder) granted the state's motion for summary judgment on August 11, 2014. The court held that the takings and due process claims failed because plaintiffs did not have a property interest in the reimbursement rates set by the California Code of Regulations. The Contracts Clause claim failed because plaintiffs did not show that the state's failure to increase the reimbursement rates has substantially impaired their contracts with the cities and special districts they contracted with. Finally, the Commerce Clause claim failed because all plaintiffs could show was that the new reimbursement rates burdened them "by not compensating them as well as they would prefer."

On September 10, 2014, the plaintiffs appealed the court's decision to the U.S. Court of Appeals for the 9th Circuit. There is no docket activity after June 10, 2015, when the docket indicated that the appeal was still pending.

However, the case is likely closed because of a settlement reached in the related cases ending their suits.