Case: 15-40229 Document: 00513441673 Page: 1 Date Filed: 03/28/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 28, 2016
No. 15-40229
Lyle W. Cayce
Clerk
CARLA FREW; CHARLOTTE GARVIN, as next friend of her minor children
Johnny Martinez, Brooklyn Garvin and BreAnna Garvin; CLASS
MEMBERS; NICOLE CARROLL, Class Representative; MARIA AYALA, as
next friend of her minor children, Christopher Arizola, Leonard Jimenez, and
Joseph Veliz; MARY JANE GARZA, as next friend of her minor children,
Hilary Garza and Sarah Renea Garza,
Plaintiffs - Appellants
v.
M.D. KYLE JANEK; M.D. DAVID L. LAKEY,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Texas
Before HIGGINBOTHAM, SOUTHWICK, and HIGGINSON, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
This appeal represents another chapter in the long-running litigation
over Texas’s administration of the Early and Periodic Screening, Diagnosis,
and Treatment program (“EPSDT” or “the Program”). Plaintiffs represent a
class of children eligible for the Program. In 1996, they entered into a consent
decree with various Texas state officials (“Defendants”) calculated to improve
implementation of the Program. In 2007, the parties further agreed to a
“Corrective Action Order” aimed at bringing Defendants into compliance with
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No. 15-40229
the consent decree. In 2013, Defendants moved under Rule 60(b)(5) to
terminate a portion of the Corrective Active Order—CAO 637-9—and several
associated consent decree paragraphs. The district court granted this motion,
and Plaintiffs now appeal. We AFFIRM in part, VACATE in part, and
REMAND for further proceedings consistent with this opinion.
I.
The terrain is familiar. 1 In brief, in 1993, Plaintiffs as representative of
a class of children eligible for EPSDT sued Defendants under 42 U.S.C. § 1983
for violations of federal Medicaid law, leading to a 78-page consent decree. In
1998, Plaintiffs’ motion to enforce the consent decree was granted, resulting in
a lengthy order detailing the district court’s findings of non-compliance. 2 This
Court vacated the district court’s decision on the basis of Eleventh Amendment
immunity. 3 The Supreme Court reversed. 4 In 2005, Defendants moved to
dissolve the consent decree in its entirety under Rule 60(b)(5). The district
court denied this motion, 5 and this Court affirmed. 6
In 2007, Plaintiffs again moved to enforce the consent decree. Rather
than litigate the motion, the parties agreed to a Corrective Action Order
(“CAO”), consisting of a memorandum opinion approving the overall agreement
and “eleven particularized orders for enforcing specific portions” of the consent
decree. The eleven particularized orders are often referred to by their district
1 See Frew v. Janek, 780 F.3d 320 (5th Cir. 2015), cert. denied, 84 U.S.L.W. 3224 (U.S.
Feb. 29, 2016) (No. 15-483); Frazar v. Ladd, 457 F.3d 432 (5th Cir. 2006); Frazar v. Hawkins,
376 F.3d 444 (5th Cir. 2004); Frazar v. Gilbert, 300 F.3d 530 (5th Cir. 2002), rev’d sub nom.
Frew ex rel. Frew v. Hawkins, 540 U.S. 431 (2004).
2 Frew v. Gilbert, 109 F. Supp. 2d 579 (E.D. Tex. 2000), vacated sub nom. Frazar v.
Gilbert, 300 F.3d 530, rev’d sub nom. Frew ex rel. Frew v. Hawkins, 540 U.S. 431.
3 Frazar v. Gilbert, 300 F.3d 530.
4 Frew ex rel. Frew v. Hawkins, 540 U.S. 431.
5 Frew v. Hawkins, 401 F. Supp. 2d 619 (E.D. Tex. 2005), aff’d sub nom. Frazar v.
Ladd, 457 F.3d 432.
6 Frazar v. Ladd, 457 F.3d 432.
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court docket number (CAO 637-1, CAO 637-2, etc.). The memorandum opinion
provides that compliance with the orders is to be assessed separately. Once
Defendants comply with a particular order and the part of the consent decree
that the order is intended to enforce, “then the Court may terminate that part
of the Consent Decree and the Corrective Action Order.” Since 2012,
Defendants have moved to terminate three of the eleven orders: CAO 637-3,
CAO 637-8, and CAO 637-9. The district court has granted all three of these
motions. Plaintiffs appealed the termination of CAO 637-8 and CAO 637-9,
but not CAO 637-3. In March 2015, this Court affirmed the district court’s
order terminating CAO 637-8. 7 This appeal concerns the district court’s order
terminating CAO 637-9.
CAO 637-9 is entitled “Corrective Action Order: Adequate Supply of
Health Care Providers.” It is organized into thirteen bullet points, most of
which direct Defendants to take some action to ensure class members have
access to an “adequate supply of health care providers.” In May 2013, Plaintiffs
filed a renewed motion to enforce CAO 637-9. Defendants responded with a
joint motion to terminate CAO 637-9 under Rule 60(b)(5) and opposition to
Plaintiffs’ motion to enforce. Rule 60(b)(5) provides that “the court may relieve
a party . . . from a final judgment, order, or proceeding” if “the judgment has
been satisfied, released or discharged; it is based on an earlier judgment that
has been reversed or vacated; or applying it prospectively is no longer
equitable.” This list of reasons is “disjunctive,” that is “each of the provision’s
three grounds for relief is independently sufficient.” 8 Defendants argued that
they were entitled to relief under both prong 1—because they had “satisfied”
the provisions of CAO 637-9—and prong 3—because “applying [CAO 637-9]
7 Frew v. Janek, 780 F.3d 320 (5th Cir. 2015), cert. denied, 84 U.S.L.W. 3224 (U.S.
Feb. 29, 2016) (No. 15-483).
8 Horne v. Flores, 557 U.S. 433, 454 (2009).
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prospectively is no longer equitable.” 9 In January 2015, the district court
issued a detailed order terminating CAO 637-9. The court found that relief
was appropriate under both prongs 1 and 3. Plaintiffs timely appealed.
II.
“We review a district court’s decision to grant or deny relief pursuant to
Rule 60(b) for abuse of discretion. Under this standard, the district court’s
ruling is ‘entitled to deference,’ but we review de novo ‘any questions of law
underlying the district court’s decision.’” 10
III.
We first address Defendants’ contention that Plaintiffs have forfeited
their appeal by failing to challenge the district court’s conclusion that relief is
warranted under prong 3 of Rule 60(b)(5). The district court concluded that
relief was warranted under both prong 1 and prong 3—which this Court and
the Supreme Court have squarely held are “independent, alternative grounds
for relief.” 11 Plaintiffs’ opening brief is largely focused upon prong 1, offering
only the following limited argument with respect to prong 3: “Plaintiffs address
9 Rule 60(b) provides in full:
(b) Grounds for Relief from a Final Judgment, Order, or Proceeding. On motion
and just terms, the court may relieve a party or its legal representative from a
final judgment, order, or proceeding for the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable diligence, could not
have been discovered in time to move for a new trial under Rule 59(b);
(3) fraud (whether previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void;
(5) the judgment has been satisfied, released or discharged; it is based
on an earlier judgment that has been reversed or vacated; or applying
it prospectively is no longer equitable; or
(6) any other reason that justifies relief.
10 Janek, 780 F.3d at 326 (footnote omitted) (quoting Frazar v. Ladd, 457 F.3d at 435).
11 Id. at 326 (emphasis added); Horne, 557 U.S. at 454.
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only the satisfied prong because the District Court relies on the satisfaction of
the Decree as a basis for its findings as to the equitable prong. This makes
addressing the two prongs separately unnecessary.” 12 Defendants respond
that Plaintiffs are “wrong that the district court’s prong-three ruling rises or
falls with its prong-one ruling, legally or in application”; the district court’s
“prong-three ruling supports the entirety of the vacatur order”; and “appellate
forfeiture suffices to affirm that order and resolve this appeal.” 13 Plaintiffs do
not reply.
This Court has held that an appellant forfeits its appeal if the district
court provides several alternative grounds for its decision and the appellant
fails to brief one of those grounds. 14 Plaintiffs’ treatment of prong 3 was brief,
but adequate. Prong 3 provides that “the court may relieve a party . . . from a
final judgment, order, or proceeding” when “applying it prospectively is no
longer equitable.” This Court has recognized “a 2–step test for determining
whether modification is warranted” under prong 3: “First, the party seeking
modification must show that ‘a significant change either in factual conditions
or in law’ that ‘make compliance with the decree substantially more onerous
[or] . . . unworkable because of unforeseen obstacles[,] . . . or when enforcement
of the decree without modification would be detrimental to the public interest.’
Second, the court must then ‘consider whether the proposed modification is
12 Plaintiffs’ Corrected Opening Brief at 33 n.104.
13 Defendants’ Brief at 56.
14 See Lopez v. Sentrillon Corp., 749 F.3d 347, 352 (5th Cir. 2014); Bailey v. Shell W.
E&P, Inc., 609 F.3d 710, 722 (5th Cir. 2010); Atwood v. Union Carbide Corp., 847 F.2d 278,
280 (5th Cir. 1988) (per curiam).
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suitably tailored to the changed circumstance.’” 15 The party seeking
modification under prong 3 must meet its burden at both steps of this test. 16
Addressing the second step of prong 3, the district court observed that:
The proposed modification pursued by Defendants is
suitably tailored to the changed conditions because it seeks release
only from certain parts of the Decree that have been either
satisfied or become obsolete, and because the remaining Decree
provisions and CAOs will remain in place “thereby preserving
Defendants’ responsibilities for ensuring adequate provision of
EPSDT services to children under age 21 with Medicaid despite
the switch to a managed-care model.”
There is no challenge to terminating the “obsolete” paragraphs, so the district
court’s prong 3 analysis—at least with respect to the consent decree
paragraphs and CAO bullet points under review—is dependent upon its
conclusion that these provisions have been “satisfied” under prong 1. Plaintiffs
are thus correct that prong 3 cannot here serve as an independent ground for
affirmance—and they have not forfeited their appeal.
IV.
We now address the district court’s prong 1 findings. Before reaching
the merits, it is necessary to clarify the scope of this appeal. CAO 637-9
consists of thirteen bullet points. The district court’s order terminated all
thirteen of these bullet points, in addition to several related paragraphs of the
consent decree. 17 Plaintiffs, however, only offer argument with respect to six
of CAO 637-9’s bullet points and one of the consent decree’s paragraphs. They
15 League of United Latin Am. Citizens, Dist. 19 v. City of Boerne, 659 F.3d 421, 437
(5th Cir. 2011) (alterations in original) (quoting Rufo v. Inmates of the Suffolk Cty. Jail, 502
U.S. 367, 383-84 (1992)).
16 See id. at 439 (“Because we find that LULAC and the city failed to meet its burden
under the first step, we therefore need not reach the question of whether or not the district
court abused its discretion with regard to the second step of the Rufo test . . . .”); see also
Frazar v. Ladd, 457 F.3d 432, 436 (5th Cir. 2006).
17 The 78-page consent decree is organized into 308 paragraphs.
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have, therefore, waived any challenge to the district court’s decision to
terminate the other seven bullet points and related paragraphs of the consent
decree. 18 The six bullet points and one consent decree paragraph at issue
create three sets of obligations: (1) bullet points 8-10 order Defendants to
perform assessments of the Medicaid provider base and develop plans to
address any shortages identified by these assessments; (2) bullet points 6-7
and consent decree paragraph 93 order Defendants to maintain accurate lists
of Medicaid providers; and (3) bullet point 5 orders Defendants to maintain
adequate reimbursement rates for Medicaid providers.
Plaintiffs challenge the district court’s conclusion that Defendants have
“satisfied” all of these provisions under prong 1 of Rule 60(b)(5). Case law
interpreting prong 1 is limited, but this Court recently clarified the applicable
legal principles in our decision addressing CAO 637-8. Defendants can obtain
relief under prong 1 by demonstrating “substantial compliance” with CAO
637-9 and the consent decree. “Substantial compliance excuses deviations
from a contract’s provisions that do not severely impair the contractual
provision’s purpose.” 19 “As the party seeking relief,” Defendants “must bear
the burden of showing” substantial compliance. But in addressing Defendants’
request for relief, this Court must take heed of the Supreme Court’s
admonition that the continued enforcement of the consent decree poses
legitimate federalism concerns. 20 In all other respects, the consent decree—as
18 See United States v. Whitfield, 590 F.3d 325, 346 (5th Cir. 2009) (“As a general rule,
a party waives any argument that it fails to brief on appeal.”).
19 Frew v. Janek, 780 F.3d 320, 330 (5th Cir. 2015) (quoting Interstate Contracting
Corp. v. City of Dallas, 407 F.3d 708, 727 (5th Cir. 2005)), cert. denied, 84 U.S.L.W. 3224 (U.S.
Feb. 29, 2016) (No. 15-483).
20 Id. at 327; see Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 441-42 (2004) (“The state
officials warn that enforcement of consent decrees can undermine the sovereign interests and
accountability of state governments. . . . The concerns they express are legitimate ones. . . .
The federal court must exercise its equitable powers to ensure that when the objects of the
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a contract agreed to in Texas—is subject to Texas “principles of contract
interpretation.” 21
V.
Bullet points 8-10 address concerns about the adequacy of the Medicaid
provider base—that is, the number of doctors providing services to Medicaid
recipients. Together, these bullet points order Defendants to do two different
things: (1) conduct four assessments of the provider base between 2008 and
2011; and (2) “develop a plan to address” any “shortage[s]” “identifie[d]” by
these assessments. Plaintiffs contend that Defendants have failed to do either.
A.
Bullet points 8-10 are very specific about the timing and content of the
four assessments. In 2008 and 2010, Defendants were tasked with completing
“major” assessments of the entire provider base. These assessments had to
include:
a) all of those provider types that provide services to class
members; b) for each provider type, the number and percent of
providers who are “available” to class members; c) for each
provider type, the number and percent of providers who have
provided any service to any class member; and d) for each provider
type, the number of providers who are enrolled in Medicaid but
have not provided any services to class members.
In 2009 and 2011, Defendants were to complete “interim” assessments of the
“available” provider base. These assessments had to “include the [primary care
physician]s for class members, pediatricians, general dentists for class
members, orthodontists, psychiatrists for class members, and psychologists for
class members.” For purposes of both types of assessments, “available” is a
decree have been attained, responsibility for discharging the State’s obligations is returned
promptly to the State and its officials.”).
21 Janek, 780 F.3d at 327 & n.28 (quoting Dean v. City of Shreveport, 438 F.3d 448,
460 (5th Cir. 2006)).
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term of art defined in bullet point 10: “‘available’ means a health care provider
who has provided at least one service to at least one new class member in the
six months immediately preceding the start date of the assessment.”
Plaintiffs assert that Defendants did not properly conduct the four
assessments. Though bullet point 10 defines an “available” provider as one
“who has provided at least one service to at least one new class member in the
six months immediately preceding the start date of the assessment,”
Defendants initially submitted assessments using a definition of “available”
that included providers who had provided at least one service in the twelve
months immediately preceding the start date of the assessment. Plaintiffs
complained about this deviation after all four assessments had been completed,
and Defendants filed corrected assessments using the proper definition in
2012. Plaintiffs concede that these corrected assessments comply with bullet
points 8-10, but they insist that Defendants’ “initial refusal to abide by the
required six-month data periods, and . . . the resulting simultaneous correction
of the data periods for all four annual Assessments denied the court and the
class . . . a carefully negotiated opportunity to contemporaneously monitor
Defendants’ efforts to address provider shortages.” 22 Defendants do not
dispute that the initial assessments used a different definition of “available,”
but they argue that they had a good reason for using a broader definition: only
six months of data would have been “too small to draw meaningful conclusions
about some subspecialties” of providers. 23 They also suggest that Plaintiffs’
delay in objecting calls into question the sincerity of their complaints.
The district court expressed “concern[] about the actions taken by both
sides with regard to these Assessments.” Like Defendants, the court noted
22 Plaintiffs’ Reply Brief at 17.
23 Defendants’ Brief at 36.
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that Plaintiffs’ failure to complain until all four assessments had been
completed resulted in significant delay and expense for both parties. But it
fully agreed with Plaintiffs that Defendants’ initial assessments failed to
comply with the explicit requirements of bullet points 8-10. The court also
dismissed Defendants’ excuse for their non-compliance, explaining that they
“should have approached Plaintiffs about their concerns” rather than
unilaterally changing the definition of “available.” Nevertheless, the district
court concluded that Defendants have satisfied this element of bullet points
8-10 because they “have now produced the Assessments as required.”
We agree. Plaintiffs contend that the district court’s acceptance of the
corrected assessments has “deprive[d] the class of the benefit of their bargain”
because the corrected assessments do not cure the loss of the opportunity to
contemporaneously monitor Defendants. 24 Yet they do not explain how
declining to terminate bullet points 8-10 will make them whole. Plaintiffs have
lost the opportunity to contemporaneously monitor Defendants regardless of
whether bullet points 8-10 are terminated or not. If aggrieved, the proper
course would be to ask the district court to sanction Defendants for their initial
disregard of the clear terms of bullet points 8-10 25—not to oppose Defendants’
Rule 60(b)(5) motion. At this point in time, Defendants have fully satisfied
their obligation to produce four assessments. There is nothing left to do. We
conclude that the district court properly terminated the portion of bullet points
8-10 concerning the completion of the four assessments.
24 Plaintiffs’ Corrected Opening Brief at 40.
25 See, e.g., Frew ex rel. Frew v. Hawkins, 540 U.S. at 439-40 (explaining that “a
consent decree may be enforced” through sanctions (citing Hutto v. Finney, 437 U.S. 678
(1978))); Frew v. Hawkins, 401 F. Supp. 2d 619, 654 & n.57 (E.D. Tex. 2005) (warning
Defendants that they had exposed themselves “to equitable sanctions for willful violation of
Consent Decree provisions”), aff’d sub nom. Frazar v. Ladd, 457 F.3d 432 (5th Cir. 2006); see
also Wis. Hosp. Ass’n v. Reivitz, 820 F.2d 863, 869 (7th Cir. 1987) (noting that Hutto
establishes a “district court’s inherent power to impose sanctions for violation of its decrees”).
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B.
Plaintiffs also argue that Defendants have failed to “develop a plan to
address” any of the shortages identified by the corrected assessments.
Defendants “admit that they didn’t do anything in response to [the]
Assessments,” but they urge that the assessments did not identify any
“shortage[s]” as that term is used in bullet points 8-10. Plaintiffs counter that
Defendants’ argument is premised on an incorrect definition of “shortage.” The
parties’ dispute thus reduces to the proper definition of “shortage”—a term
defined in neither the consent decree nor CAO 637-9. Before addressing the
parties’ competing definitions, we pause to note that this dispute raises a legal
question that this Court must answer. Contrary to Defendants’ suggestion, we
may not affirm on the basis that the assessments did not identify any shortages
under a reasonable definition of that term, even if not the correct one. Unlike
some of our sister circuits, 26 this Court does not defer to a district court’s
interpretation of a consent decree. Instead, we review questions of consent
decree interpretation de novo. 27 Here, we must determine whether Defendants
have substantially complied with the obligation to develop plans to address
“shortage[s].” We cannot evaluate Defendants’ compliance with this obligation
until we have answered the antecedent legal question of what that obligation
is—i.e., what is a “shortage”? 28 We turn now to this question.
Plaintiffs contend that the assessments did identify several “shortage[s]”
because they showed “declines in the supply of providers relative to the number
26 See, e.g., Nehmer v. U.S. Dep’t of Veterans Affairs, 494 F.3d 846, 855 (9th Cir. 2007);
Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 371-72 (6th Cir. 1998);
Goluba v. Sch. Dist., 45 F.3d 1035, 1038 & n.5 (7th Cir. 1995); Berger v. Heckler, 771 F.2d
1556, 1576 n.32 (2d Cir. 1985).
27 See Janek, 780 F.3d 326.
28 See E.P. Towne Ctr. Partners, L.P. v. Chopsticks, Inc., 242 S.W.3d 117, 123 (Tex. Ct.
App. 2007) (“Whether a party’s conduct constitutes a breach is a question of law for the court
to determine.”); Trinity Indus., Inc. v. Ashland, Inc., 53 S.W.3d 852, 868 (Tex. Ct. App. 2001)
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of class members needing services.” 29 More specifically, they demonstrated
that the ratio of “available” Medicaid providers to class members has decreased
for (a) several subspecialties and (b) several geographic regions. 30 The district
court, however, declined to define “shortage” with reference to the number or
ratio of providers because “[n]either the Decree, CAO, nor federal Medicaid law
establish a number or ratio of providers to recipients that would constitute an
‘adequate’ supply and fulfill the requirements of the CAO and the objectives of
the Decree.” Instead, the district court “look[ed] to other provisions of the
Decree for guidance in determining what constitutes an ‘adequate’ supply of
providers.” The court found two provisions particularly instructive: paragraph
197 of the consent decree, which ensures that EPSDT recipients served by
managed care providers “do not face unreasonable 1) delay scheduling
appointments, 2) delay waiting for appointments once at the office or 3) travel
times to get to the office”; and bullet point 1 of CAO 637-9, which requires that
all class members have a choice of at least two primary care physicians. The
court chose to define “shortage” based upon these four metrics. Using this
standard, the district court concluded that Defendants have satisfied their
obligations under bullet points 8-10 and consent decree paragraph 197.
Defendants defend this methodology and urge that the court properly
interpreted “shortage” using “functional measures” that capture “whether
recipients can actually see appropriate providers without unreasonable delay
and travel.” 31
(“Where the evidence is undisputed regarding a person’s conduct under a contract, the court
alone must determine whether such conduct shows performance or breach of a contractual
obligation. . . . When an issue turns on a pure question of law, we do not give any particular
deference to legal conclusions of the trial court and apply a de novo standard of review.”).
29 Plaintiffs’ Corrected Opening Brief at 18.
30 See id. at 18-27 (summarizing data).
31 Defendants’ Brief at 42.
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While not without appeal, this interpretation ignores a fundamental
principle of Texas contract interpretation: “In construing a contract under
Texas law, courts must examine and consider the entire writing and give effect
to all provisions such that none are rendered meaningless.” 32 Although it may
be reasonable, the district court’s interpretation of “shortage” deprives bullet
points 8-10 of meaning in two different ways. First, the language of these
bullet points requires Defendants to develop plans to address shortages
identified by the assessments. The district court’s chosen metrics for
identifying a “shortage” may be sensible, but only one—whether all class
members have access to two primary care physicians—could be analyzed using
the data collected as part of the assessments. The number of providers, in a
vacuum, cannot reveal “1) delay scheduling appointments, 2) delay waiting for
appointments once at the office or 3) travel times to get to the office.” The
district court’s analysis also elides the metric that is the focal point of these
assessments, the level of “available” providers. The parties would have had
little reason to negotiate such a detailed definition for this term if they did not
intend to use it to identify “shortage[s].” 33 And second, other provisions
already require Defendants to address shortages identified using the metrics
relied upon by the district court. As we have observed, the district court
adopted these four metrics from bullet point 1 of CAO 637-9 and consent decree
paragraph 197, both of which are independently enforceable against
Defendants. Again, there would have been no reason for the parties to
32 Gonzalez v. Denning, 394 F.3d 388, 392 (5th Cir. 2004) (per curiam) (quoting Int’l
Turbine Servs., Inc. v. VASP Brazilian Airlines, 278 F.3d 494, 497 (5th Cir. 2002)).
33 Cf. Frew v. Janek, 780 F.3d 320, 328 (5th Cir. 2015) (“The whole point of negotiating
and agreeing on a plethora of specific, highly detailed action plans was to establish a clearly
defined roadmap for attempting to achieve the Decree’s purpose.”), cert. denied, 84 U.S.L.W.
3224 (U.S. Feb. 29, 2016) (No. 15-483).
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negotiate the very detailed language of bullet points 8-10 if these provisions
articulated already-existing obligations.
This still leaves the question of the proper definition of “shortage.”
Defendants insist that Plaintiffs’ proposed definition is equally flawed because
“provider headcount” cannot tell us anything “in a vacuum.” 34 That is, they
assert that the ratio of providers to class members is meaningless in the
absence of some benchmark. We agree. Plaintiffs argue that various
class-member-to-provider ratios show stark shortages, but they do not tell us
what an acceptable class-member-to-provider ratio would be. In the absence
of this benchmark, the numbers are just numbers—not, as we have
emphasized, meaningful parts of “a clearly defined roadmap” “aimed at
supporting EPSDT recipients in obtaining the health care services they are
entitled to.” 35 Both federal and Texas state law support this view. The
Department of Health and Human Resources provides numerous incentives for
health professionals to practice in underserved areas of the country, 36 which it
refers to as “health professional shortage areas.” 37 The Secretary designates a
region as a “shortage area” if the provider-to-population ratio exceeds a
prescribed benchmark. 38 Texas uses a similar procedure to designate
“medically underserved populations.” 39 If we are to glean anything from
Plaintiffs’ data, this Court, too, needs a benchmark. We must decline to adopt
Plaintiffs’ definition of “shortage.”
34 Defendants’ Brief at 42.
35 Janek, 780 F.3d at 328 (emphasis omitted).
36 See, e.g., 42 C.F.R. § 23.21-35 (loan program); id. § 57.2201-11 (scholarship
program); id. § 414.67 (incentive payments).
37 See 42 U.S.C. § 254e; 42 C.F.R. § 5.2.
38 See 42 C.F.R. pt. 5 apps. (setting benchmarks).
39 25 Tex. Admin. Code § 13.33 (setting benchmark at 3000:1).
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Instead, we adopt a third definition advanced by neither party. The
district court has twice—in published orders—concluded that the data showed
a “shortage” of Medicaid providers. 40 In Frew v. Gilbert, the court concluded
that there was a “shortage” of dentists because the ratio of dentists to class
members was higher than the client “load . . . currently being borne by the
active dentists.” 41 That is, there was a “shortage” because the ratio of providers
to class members was 1 to 876 while the evidence demonstrated that most
providers cared for less than 100 class members. 42 Given these numbers, all
of the class members could not receive the required care. Five years later, in
Frew v. Hawkins, the district court used this same methodology in concluding
that Defendants had not resolved the “shortage” of dentists. This time, the
ratio of dentists to class members was 1 to 1,621 while the evidence established
that less than one-sixth of the active dentists served more than 1,500 class
members. 43 Once again, in these circumstances, it was not possible for all of
the class members to receive the required care.
Though we do not owe “deference” to these district court decisions
construing the decree, 44 we conclude that they are grounded on and articulate
the proper interpretation of “shortage.” The point of the consent decree and
CAO 637-9 is to “support[] EPSDT recipients in obtaining the health care
services they are entitled to.” 45 If there are not enough providers to deliver
40 These orders were both entered by Judge William Wayne Justice, who approved the
consent decree and presided over this litigation for nearly sixteen years. In 2009, he
transferred supervision of the consent decree to Judge Richard A. Schell.
41 109 F. Supp. 2d 579, 604 (E.D. Tex. 2000), vacated sub nom. Frazar v. Gilbert, 300
F.3d 530 (5th Cir. 2002), rev’d sub nom. Frew ex rel. Frew v. Hawkins, 540 U.S. 431 (2004).
42 See id. at 604 & n.44.
43 401 F. Supp. 2d 619, 656-57 (E.D. Tex. 2005), aff’d sub nom. Frazar v. Ladd, 457
F.3d 432 (5th Cir. 2006).
44 See Frew v. Janek, 780 F.3d 320, 326 (5th Cir. 2015), cert. denied, 84 U.S.L.W. 3224
(U.S. Feb. 29, 2016) (No. 15-483).
45 Id. at 328 (emphasis omitted).
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these services, then there is a “shortage” of providers. The district court’s
definition—which compares the provider-to-class-member ratio with the
average client load of the relevant class of provider—is an objective way to
calculate when there are not enough providers. This methodology also is
consistent with the Corrective Action Order’s definition of “available.” And
unlike Defendants’ proposed definition, the assessments are well-suited to
identify “shortage[s]” using this definition, as both the “major” and the
“interim” assessments can be used to calculate the provider-to-class-member
ratio that forms one side of the “shortage” comparison. Furthermore, the
district court used this definition in two major orders prior to the negotiation
of CAO 637-9. Indeed, in the memorandum opinion approving the Corrective
Action Order, the district court cited to the relevant passages of these two
orders as evidence of a “longstanding, severe shortage of dentists who take care
of class members.” It is reasonable to assume that the parties intended to use
this same definition in the eleven particularized orders. 46
Using this interpretation of “shortage,” we conclude that the district
court erred in terminating the portion of bullet points 8-10 that orders
Defendants to develop plans to address “shortage[s]” identified by the
assessments. Defendants have put forth no evidence regarding
provider-to-class-member ratios or the average client loads of Medicaid
providers in Texas. This is understandable given the confusion over the proper
definition of “shortage,” but Defendants still have the burden to establish that
they have satisfied their obligations under Rule 60. 47 We thus vacate the
district court’s order in part and remand for further proceedings. If the
46 See, e.g., Va. Power Energy Mktg., Inc. v. Apache Corp., 297 S.W.3d 397, 402 (Tex.
Ct. App. 2009) (“We look at how a reasonable person would have used and understood the
language, by considering the circumstances surrounding the contract negotiations and
purposes the parties intended to accomplish by entering into the contract.”).
47 See Janek, 780 F.3d at 327.
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assessments still do not identify any “shortage[s],” Defendants are free to
renew their request to terminate bullet points 8-10. If the assessments do
identify “shortage[s],” Defendants of course remain obligated to develop plans
to address them.
VI.
Consent decree paragraph 93 requires Defendants to “maintain updated
lists of providers who serve EPSDT recipients.” Bullet points 6-7 augment this
obligation by, among other things, ordering Defendants to use their “best
efforts” to (1) “ensure the accuracy of lists of enrolled health care providers”
and (2) “ensure that only accurate information about enrolled health care
providers is provided to class members, whether the information is provided
by Defendants or by their contractors.” These bullet points define “accurate”
as follows:
“Accurate” means that the lists provide accurate and up to date
information about each enrolled health care provider, as follows:
a) name, b) address, c) telephone number, d) nature of practice
(pediatrician, general dentist, pediatric cardiologist, etc.), e)
language(s) spoken other than English, f) whether the provider is
accepting new patients and any limits on new patients accepted,
such as lengthy waits for a first appointment, and g) practice
limitations (only newborns, only teens, etc.).
Plaintiffs contend that Defendants have not used their “best efforts” to
ensure that the Medicaid provider lists are accurate. The district court
disagreed, citing evidence that Defendants have used a variety of means
to ensure accuracy of the OPL and contractors’ lists including
“requiring providers in their Medicaid provider agreement to
provide timely notification of any changes to their demographic
information, deactivating providers who have not submitted a
claim or had managed-care encounter activity for a period of 24
months, running nightly queries of the Encounters Online Data
Store to update the online provider lookup (OPL) (utilizing data
from files submitted by MCOs), and providing incentives to comply
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with [their] mandate that providers verify their information on the
website every six months.”
The district court also noted that managed care organizations (“MCOs”)—
which serve most of the class members 48—are contractually
required to maintain accurate and current online and print
versions of their respective lists, to update their lists twice a
month, and to update their hardcopy versions quarterly. All
Medicaid MCOs report their processes for updating their lists to [a
state agency], which monitors and confirms the MCOs’ efforts to
maintain accurate lists and reports a summary of those efforts to
the Court in [periodic reports].
Plaintiffs assail the district court’s conclusion that Defendants are
exercising their “best efforts” on a number of different grounds. They first
challenge the evidence of “best efforts” offered by Defendants. Plaintiffs assert
that the district court improperly relied on the self-serving declarations of
Defendants’ employees and their contractors “that they flawlessly and
systematically go to great efforts to assure that all their provider directory
information is accurate and up to date.” 49 This Court, however, rejected
similar “unsubstantiated accusations of bias” in our recent decision concerning
CAO 637-8. 50 Plaintiffs also argue that the district court erroneously relied on
Defendants’ contracts with their MCOs in the absence of any evidence that
these contractual obligations are actually enforced. This assertion is simply
48 R.74151 (“Defendants have represented to the court that 91% of children on
Medicaid in Texas are now served by MCOs.”); see also Janek, 780 F.3d at 325 n.14 (“All
Texas EPSDT recipients are now served by managed care organizations.”).
49 Plaintiffs’ Corrected Opening Brief at 53.
50 See Janek, 780 F.3d at 331 (“The district court relied on three declarations from
state employees who testified that multiple training sessions occurred for ombudsman’s office
staff. Although Plaintiffs would prefer the district court not to credit these statements,
absent any indicia of unreliability other than Plaintiffs’ unsubstantiated accusations of bias,
the court’s decision to do so is not clearly erroneous.”).
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belied by the record; the district court noted several different ways in which
Defendants ensure compliance with these contracts. 51
Plaintiffs next suggest that there are several issues with the procedures
used to ensure the accuracy of the provider lists. Plaintiffs note that the
incentives used to encourage providers to update their information only impact
providers who are interested in serving class members. 52 Plaintiffs also claim
that the provider lists are “very inaccurate and frustrating to use” because
providers are not removed unless they not have provided any services for two
years while the assessments have demonstrated that many of these providers
are “not in fact available.” 53 They further offer evidence assertedly
demonstrating the inadequacy of these procedures. This evidence includes
declarations from two mothers “who describe inaccuracies and discrepancies
in [the] directories,” affidavits from two employees of a doctor who claim they
are unable to remove their employer from the provider lists, an affidavit from
a “clerical employee of counsel” who struggled to find a listed doctor willing to
take a new Medicaid patient, and records reflecting dozens of complaints from
class members unable to find providers. 54 Plaintiffs contend that this evidence
compels the conclusion that Defendants are not using their “best efforts.”
We disagree. Plaintiffs overstate Defendants’ obligation. In their
briefing, Plaintiffs contend that “best efforts” “must include reasonable efforts
under the circumstances up to but not including efforts that would put the
51 See R.74162 (“HHSC monitors and confirms the MCOs’ efforts to maintain accurate
lists and reports a summary of those efforts to the Court in the MCO Activities Reports in
each QMR. HHSC also performs periodic random checks of provider director[ie]s. An MCO
that fails to comply is put on a corrective action plan until improved.” (footnotes omitted)).
52 The incentives prevent providers from accessing online claims submission or client
eligibility checks unless they have updated their information within the past six months. As
Plaintiffs urge, this is likely of no moment to a provider who does not serve class members.
53 Plaintiffs’ Corrected Opening Brief at 57-58.
54 Id. at 27-28, 54-55.
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promisor into insolvency.” 55 The case law does not support such a standard.
“Courts construing a best efforts provision that does not specify the
performance to be required commonly hold the promisor to the standard of the
diligence a reasonable person would use under the circumstances.” 56 And the
question of “[w]hether a contractual best efforts obligation has been met or
fulfilled is usually a question of fact because it is heavily dependent upon the
particular circumstances of the case.” 57 Accordingly, this Court may only
reverse if it is “left with the definite and firm conviction” that a “reasonable
person” would be doing more to ensure the accuracy of the provider lists. 58
Plaintiffs cannot demonstrate error under this standard of review. The
affidavits and other evidence of inaccuracies suggest that the provider lists are
not perfect, but they do not demonstrate any widespread issues. Plaintiffs’
more systemic criticisms are similarly unavailing. The incentives used by
Defendants to ensure the accuracy of the lists may not be effective in
themselves, but they are just one of many overlapping measures. There is also
nothing unreasonable about waiting two years to take providers off the lists.
As Defendants explain, this practice helps ensure that providers in rarely used
specialties or remote locales are not improperly removed for lack of activity.
To the extent Plaintiffs suggest that Defendants must employ “the agreed
definition of an ‘available’ provider” to determine when a provider should be
55 Id. at 53 (citing Bloor v. Falstaff Brewing Corp., 601 F.2d 609, 613-14 (2d Cir. 1979)).
56 DaimlerChrysler Motors Co., LLC v. Manuel, 362 S.W.3d 160, 171 (Tex. Ct. App.
2012) (collecting cases); see also Triple-A Baseball Club Assocs. v. Ne. Baseball, Inc., 832 F.2d
214, 225 (1st Cir. 1987) (noting that some courts have held that “best efforts” is synonymous
with “good faith”); United States v. Bd. of Educ., 799 F.2d 281, 292 (7th Cir. 1986) (noting
that courts “often have to be flexible in determining the amount of performance that would
constitute best efforts”).
57 DaimlerChrysler Motors Co., 362 S.W.3d at 174 (collecting cases).
58 See United States v. Haines, 803 F.3d 713, 744 (5th Cir. 2015) (quoting United States
v. Akins, 746 F.3d 590, 609 (5th Cir. 2014)).
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removed from the lists, this suggestion is misplaced. 59 Although bullet points
8-10 use this term, bullet points 6-7 do not. 60 This Court must interpret CAO
637-9 according to its “plain meaning” and cannot rewrite bullet points 6-7 to
include this highly technical term. 61 We affirm the portion of the district
court’s order terminating bullet points 6-7 and consent decree paragraph 93.
VII.
Bullet point 5 orders Defendants to take a number of different steps to
ensure that reimbursement rates for Medicaid providers are “adequate.” The
district court concluded that Defendants have satisfied this bullet point in its
entirety. Plaintiffs challenge this conclusion only with respect to one sentence:
“Payment levels will be sufficient to attract enough providers to serve the class,
and comply with the Decree and this Order with respect to all class members,
whether or not they are enrolled in managed care.” They argue that payment
levels are not “sufficient” given the “widespread provider shortages” identified
by the assessments. 62 That is, they contend that (1) “adequate rates are
whatever is necessary to provide the check ups and follow up care to all of the
class members” and (2) rates must be inadequate because many class members
are not receiving these services. 63
Defendants’ main response is that this argument fails on its own terms
because there are no provider shortages. This contention, however, is based
upon the same erroneous interpretation of “shortage” we earlier rejected.
Defendants also repeat the district court’s observation that “Plaintiffs have put
59 Plaintiffs’ Reply Brief at 29.
60 See Taracorp, Inc. v. NL Indus., Inc., 73 F.3d 738, 744 (7th Cir. 1996) (“[W]hen
parties to the same contract use such different language to address parallel issues (i.e.,
indemnification obligations regarding two different facilities), it is reasonable to infer that
they intend this language to mean different things.”).
61 United States v. Alcoa, Inc., 533 F.3d 278, 286 (5th Cir. 2008).
62 Plaintiffs’ Corrected Opening Brief at 59.
63 Plaintiffs’ Reply Brief at 25-26.
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forth no evidence of what they contend rates should be to attract enough
providers to serve the class. Further, Plaintiffs have not pointed to any
evidence that the small rate decreases in 2011 have decreased the provider
supply.” But Defendants, not Plaintiffs, have the burden to prove that bullet
point 5 has been satisfied. 64 We, therefore, must conclude that the district
court erred in terminating the challenged sentence of bullet point 5. As with
bullet points 8-10, we vacate this portion of the district court’s order and
remand for further proceedings.
VIII.
For the reasons stated above, we AFFIRM in part, VACATE in part, and
REMAND for further proceedings consistent with this opinion.
64See Frew v. Janek, 780 F.3d 320, 327 (5th Cir. 2015), cert. denied, 84 U.S.L.W. 3224
(U.S. Feb. 29, 2016) (No. 15-483).
22