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Lizer v. Eagle Air Med Corporation

January 28, 2004


The opinion of the court was delivered by: Broomfield, Senior District Judge


On August 19, 2002, Plaintiffs brought this action seeking a declaration of their rights regarding a lien Eagle Air Med Corp. ("Eagle Air") placed on uninsured motorist insurance proceeds payable to Plaintiffs. Compl. (doc. # 1). Plaintiffs argue that federal Medicaid law preempts the state law under which Defendant filed its lien. Memo in Sup. of Pla.'s Mot. for Sum. Judg. ("MSPMSJ") (doc. # 16). This issue is before the Court on cross motions for summary judgment. Mot. (doc. # 15); Cross Mot. (doc. # 20). After considering all the arguments the Court is now prepared to rule.

I. Facts

In January of 2001 Plaintiffs were in a serious car accident. MSPMSJ (doc. # 16) p 2. They were transported to a hospital by Eagle Air's air ambulance service. Id. Eagle Air's bill for this service was a total of $22,415. Cross Mot. (doc. # 20) p 4. However, the individual who caused the car accident, Jesse Thomas, had no automobile insurance. MSPMSJ (doc. # 16) p 2. Plaintiffs were eligible participants of the Arizona Health Care Cost Containment System (AHCCCS) through which Arizona administers Medicaid funds. Id. p 8. Eagle Air received $4,827.68 from AHCCCS on behalf of Plaintiffs as payment for the air ambulance service. Id.

Plaintiffs made a claim for uninsured motorist compensation with their own carrier, Farmers Insurance Group. Cross Mot. (doc. # 20) p 7. Upon discovering this Eagle Air filed a "Notice and Claim of Health Care Provider Lien" for the total amount of their initial bill, $22,415. Id. p 10. Farmers settled the Plaintiffs' claims for a total of $41,710. Id. p 11. Plaintiffs filed this lawsuit disputing the validity and amount of Eagle Air's lien. Compl. (doc. # 1). Plaintiff moved for partial summary judgment on the issue of whether federal law prohibits Eagle Air from availing itself of the state lien statute in this situation. Mot. (doc. # 15). Eagle Air responded with a cross-motion for summary judgment. Cross Mot. (doc. # 20).

II. Legal Standard

To grant summary judgment, the Court must determine that the record before it contains "no genuine issue as to any material fact" and, thus, "that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In determining whether to grant summary judgment, the court will view the facts and inferences from these facts in the light most favorable to the nonmoving party. See Matsushita Elec. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A material fact is any factual dispute that might affect the outcome of the case under the governing substantive law. Id. at 248, 106 S.Ct. 2505. A factual dispute is genuine if the evidence is such that a reasonable jury could resolve the dispute in favor of the nonmoving party. Id. A party opposing a motion for summary judgment cannot rest upon mere allegations or denials in the pleadings or papers, but instead must set forth specific facts demonstrating a genuine issue for trial. See id. at 250, 106 S.Ct. 2505. Finally, if the nonmoving party's evidence is merely colorable or is not significantly probative, a court may grant summary judgment. See, e.g., California Architectural Build. Prods., Inc. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir.1987).

Both parties to this action have moved for summary judgment on the issue of whether federal law prevents Eagle Air from enforcing its lien pursuant to Arizona state law. Since the facts regarding this issue are undisputed the Court need only determine whether these facts entitle either party to judgment as a matter of law.

III. Preemption

As a preliminary matter the Court must determine whether Plaintiffs may even raise the preemption issue. In their reply and response Plaintiffs set forth the argument that 42 U.S.C. s 1983 provides them with a private cause of action. Pla.'s Reply (doc. # 25) at 1. Eagle Air objected to the fact that this argument appeared for the first time in the reply and the fact that it was based on the Second Amended Complaint which had not been filed when Plaintiffs' Motion for Partial Summary Judgment was filed. Def.'s Reply (doc. # 29) at 2- 3. However, these issues need not be addressed in order to resolve the motions before the Court. The Ninth Circuit has held that a private party may seek declaratory relief on the basis of federal preemption even when there is no statutory provision which explicitly establishes a private cause of action. See Bernhardt v. Los Angeles County, 339 F.3d 920, 929 (9th Cir.2003); Bud Antle, Inc. v. Barbosa, 45 F.3d 1261, 1269 (9th Cir.1994); see also Golden State Transit Corp. v. City of Los Angeles, 493 U.S. 103, 107-08, 110 S.Ct. 444, 107 L.Ed.2d 420 (1989).

The Supremacy Clause of the United States Constitution dictates that where federal and state law conflict, the state law is preempted and may not be applied. E.g. Bernhardt, 339 F.3d at 929 (quoting Nat'l Audubon Soc'y v. Davis, 307 F.3d 835, 851 (9th Cir.2002)). When state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" there is conflict preemption and the state law is nullified. Id. (quoting Ting v. AT&T, 319 F.3d 1126, 1135 (9th Cir.2003)). Plaintiffs argue that Arizona law which permits Eagle Air to file its lien against their uninsured motorist insurance proceeds is preempted by federal law. A close examination of both the state and federal law involved is necessary to determine if preemption is appropriate in this case.

A. Federal Medicaid Law

The federal laws which Plaintiffs argue preempt the state lien law are provisions concerning what is referred to as "balance billing." These provisions mandate that state programs which receive Medicaid funds must only distribute those funds to providers who agree to accept those funds as payment in full and not bill individual patients for the difference between the amount paid by the state and the provider's customary charge. See 42 U.S.C. s 1396a(a)(25)(c); 42 C.F.R. s 447.15. The applicable statute ...

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