Representing the class of persons under age twenty-one who were eligible for behavioral health services through Medicaid's Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) mandate, 42 U.S.C. § 1396 et seq., the Bazelon Center, Arizona Center for Disability Law, and National Center for Youth Law brought suit in 1991 in the U.S. District Court for the District of Arizona, against the state of Arizona.
Both parties sought summary judgment, but in 1993, District Judge John Roll denied the motions. The defendants argued that the challenged conduct did not constitute state action at all because the Arizona Department of Health Services contracted with private health care providers to provide behavioral health services to eligible children. The court disagreed, holding that even though the private providers made decisions about levels of care for children, the state was ultimately responsible for the providers' compliance with the federal Medicaid statute. J.K. v. Dillenberg, 836 F. Supp. 694 (D. Ariz. 1993).
In 1995, plaintiffs renewed their motion for partial summary judgment, and on May 13, 1996, the Court granted the motion, declaring certain aspects of the state's policy unlawful and enjoining the defendants from reducing any plaintiff's Title XIX covered services based on medical needs assessments without providing notice and a fair hearing. (The Court denied the state's cross motion for summary judgment.) The case continued to move towards trial on other issues, but on August 10, 1998, the court granted the parties' joint motion for a year-and-a-half stay of all litigation, on specified terms from the joint motion (not available in the Clearinghouse). The agreement was at least in part to allow time for an independent expert to assess the adequacy of mental health and substance abuse services provided to the plaintiffs.
After completion of the independent study, the parties began settlement negotiations. They reached a settlement on March 27, 2001, which the district court preliminarily approved on April 5, 2001. Notice was provided to the class, and a fairness hearing was held on June 26, 2001, at which time the court approved the settlement. Under the settlement, which was set to last until July 2007, the State agreed to increase funding for training, respite care, pilot projects, and improvements in the structure of the state's behavioral health managed care system.
The agreement rested on broad principles that "require initiatives to improve front-line practice, enhance the capacity of private agencies to deliver needed services, promote collaboration among public agencies, and develop a quality management and improvement system focused on sound practice." The defendants agreed to move as quickly as practicable to deploy a system in compliance with the principles. The agreement allowed for court enforcement, but did not impose any deadlines for compliance. However, it did specify that "none of the parties may engage in activities which delay, prolong or frustrate performance of the obligations of this Agreement with the aim of taking advantage of the time-limited nature of this Settlement Agreement. The Court may, after application and a hearing, impose severe sanctions for such conduct."
On December 3, 2001, after a stipulation by the parties, the court approved attorneys’ fees payable to the plaintiffs' counsel of $1.2 million. Over the next several years, attorney's fees were paid to plaintiffs' counsel for its work monitoring and enforcing the settlement.
In January 2006, the plaintiffs invoked the settlement agreement's dispute resolution process, claiming that the state had not complied with the agreement, and in particular had failed to "move as quickly as is practicable to develop a Title XIX behavioral health system that delivers services according to the [settlement's] Principles" as required. On November 21, 2006, the parties agreed to amend the 2001 settlement by extending its compliance date from July 2007 till July 2010.
On March 6, 2009, plaintiffs again invoked the dispute resolution provisions by sending a letter to defendants, listing six serious issues in dispute. Although the parties agreed to the basic rules governing contract interpretation, they disagreed about the test to apply to determine whether defendants have breached any contractual obligation. Plaintiffs asserted that the test is whether defendants have substantially complied with the terms of the Agreement, while Defendants asserted that performance should be measured under a standard of good faith.
The parties were unable to resolve their differences, and on November 13, 2009, the plaintiffs filed a motion to enforce the settlement agreement. Plaintiffs asserted that defendants were in noncompliance because there were still too few intensive community services for children with complex needs, no quality management system, inadequate substance abuse services , inadequate training, a lack of promised benefits for youth aged eighteen to twenty-one, and no system for determining whether children were being served according to the settlement agreement. The defendants objected, arguing that the plaintiffs had failed to use the agreement's dispute resolution process, and that as a result the entire case should be terminated. In September 2010, the Court denied the defendant's motion to dismiss and denied the plaintiff's motion to enforce. The plaintiff re-urged the Court to enforce the settlement, and defendant moved again to dismiss the case and terminate the Court's jurisdiction. In February 2012, the Court again denied the motions. Furthermore, because the parties could not resolve the matter through mediation, the Court recommended appointment of a Special Master.
The Court outlined that the Special Master was to issue a written report recommending to the Court a resolution of the parties' differences concerning the interpretation of the Settlement Agreement and to recommend how to proceed in resolving any disputes arising under the Agreement if necessary. On November 15, 2012, the Court (Judge A. Wallace Tashima) signed an order appointing Justice Ruth V. McGregor as Special Master.
On May 17, 2013, the Special Master submitted the Special Master’s Report and Recommendation to the Court. The Special Master recommended that the Court limit the disputes for resolution to the issues expressly raised in plaintiffs’ March 2009 letter. The Special Master determined that the defendants had complied with contractual obligations related to substance abuse treatment, and that all other issues either did not raise a dispute cognizable under the Settlement Agreement or required factual development.
On July 9, 2013, Judge Tashima Adopted Special Master’s Report and Recommendation and granted Motion Special Master’s Application for Compensation, requiring the defendants to pay 100% of the Special Master’s fee.
Parties continued litigation until March 12, 2014, when plaintiffs filed Notice of Withdrawal of Motion for Enforcement of Settlement Agreement. On March 21, 2014, Judge Tashima granted the parties’ Joint Motion to Vacate Hearing and Dismiss Litigation, and the case was dismissed without prejudice.Elizabeth Homan - 11/28/2012
Frances Hollander - 02/14/2016