recipients certain deductions from income before the income was required to be applied to nursing home costs. CDHS moved to join the United States pursuant to Rule 14(a) of the Federal Rules of Civil Procedure on the ground that FFP should be required if the plaintiffs prevailed in the suit.
The Johnson court denied CDHS's motion on two bases. First, it found that because the third-party complaint was not based upon the plaintiffs' claim against California, but was a wholly separate claim, joinder was not appropriate under Rule 14(a). Id. at 101. Second, it found that the plaintiffs' claim was not justiciable as required by Article III, because "several contingencies must occur before a disallowance of FFP will result." Id. These contingencies include the state failing HHS's "quality control program" by having an error rate of greater than three percent, and the federal government refusing to waive the disallowance upon a showing by the state of a good faith?" effort to reduce the error rate. Id. at 100-01. These contingencies would also have to be met in this case before California would be charged with a disallowance. See 42 C.F.R. § 431.800 et seq. As in Johnson, this case is not ripe for judicial review.
CDHS's argument in opposition to HHS's motion to dismiss the third-party complaint focuses on the fact that this Court would be making a purely legal determination in ordering HHS to continue financial participation. Because this is so, "hardship" to HHS is reduced. See Abbott, 387 U.S. at 154. Furthermore, the hardship to California is great because of the financial liability involved and because the federal government has been equivocal in indicating whether it will continue FFP if SDI is treated as earned income.
CDHS's argument does not lead to the conclusion that this potential conflict between California and the United States is sufficiently ripe for judicial review. The hardship to CDHS resulting from dismissal of the complaint is purely speculative, because, as discussed above, federal regulations currently require HHS to provide FFP for court-ordered benefits. If withdrawal of FFP were imminent, the claim would be ripe. This, however, is not the case. The federal government has never indicated that it would ignore its own regulations and refuse to provide FFP if SDI is treated as earned income under Medi-Cal. Therefore, CDHS's claim against HHS is not ripe.
Justiciability doctrine underlying Article III requires that a party have standing to bring a claim. In order to demonstrate that a party has standing, the following requirements must be met: (1) the party must show that it has suffered some actual or threatened harm as a result of the illegal conduct of the defendant; (2) the injury must be fairly traceable to the challenged action; and (3) the injury must be likely to be redressed by a favorable decision. Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 472, 70 L. Ed. 2d 700, 102 S. Ct. 752 (1982).
CDHS lacks standing because it has not alleged a sufficiently concrete threat of harm. As discussed above, California would lose FFP only if HHS decided to disobey its own regulations or abandon them. Because the possibility of future disallowance of FFP is remote, CDHS does not have standing to pursue the third-party action against HHS at this time. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 n.2, 119 L. Ed. 2d 351, 112 S. Ct. 2130 (1992) (Article III requires that injury by "certainly impending").
IT IS HEREBY ORDERED that:
1. Plaintiff's motion for summary judgment is GRANTED.
2. CDHS' motion for summary judgment is DENIED.
3. HHS' motion to dismiss CDHS's third-party complaint is GRANTED on the grounds of ripeness and standing.
4. CDHS' policy, as set forth in § 50507(a)(5) of Title 22, California Code of Regulations is illegal, and in violation of § 14005.7 of the Welfare and Institutions Code, 42 U.S.C. §§ 1396a(10)(C), (r)(2), and (a)(17)(B), and 42 C.F.R. 435.601.
5. CDHS is permanently enjoined from enforcing § 50507(a)(5) of Title 22, California Code of Regulations, and is further enjoined from failing to treat SDI as it is treated in the AFDC program and affording it all the earned income deductions and exclusions afforded SDI in California's AFDC program.
6. CDHS must adopt regulations forthwith, and must as soon as practicable communicate this policy to all appropriate county officials in this state.
7. A case management conference will be held on Thursday, November 9, 1995, at 2:00 p.m., to discuss further remedies to which the class is entitled as well as procedures for notifying the class of their rights under the terms of this Opinion and Order.
Dated: October 30, 1995.
William H. Orrick
United States District Judge