"Finally - A Victory in the Courts for Californians with Developmental Disabilities, Their Families, and Providers"
The Arc California and United Cerebral Palsy San Diego v Douglas, Department of Health Care Services, Delgadillo, Department of Developmental Services
September 1, 2015
1225 8th Street, Suite 350
Sacramento, California 95814
(916) 552-6619
Dear Advocates,

We just received notice this morning from the United States District Court Eastern District CA that the judge has denied the State's motion to vacate the order and judgment in our favor. This means the permanent injunction remains in effect - and the half-day billing rules and the mandatory holiday schedule are finally dead.

Significance of the Case: On a very practical level, many community providers are struggling today just to survive and have lost millions of dollars because of these recession cuts over the years.  These remaining reductions can not continue as determined earlier.  The courts have made it clear that the states have an obligation to operate under the guidelines of the MediCaid Act and have ruled that California's past cost cutting process was illegal.  However, in the future because of the Armstrong Supreme Court decision providers will not be able to seek an injunction to remedy these or other types violations but rather will be expected to appeal to the federal government directly.  While California's developmental services system remains in a continuous state of collapse, overturning this previous victory would have delivered a devastating blow.     
Tim Hornbecker,
Lawsuit Coalition Coordinator
The Arc California
Tony Anderson
Executive Director
The Arc California
A Little Background on this Latest Decision
After the US District Court Eastern California rules on Friday February 13th 2015 that provider cuts during the recession were done illegally, the State of California had 30 days to appeal the Court's decision.  The state did not appeal the Court's ruling by the deadline, March 16, 2015, therefore the decision was final after that date.

On March 31, 2015 the United States Supreme Court ruled in Armstrong v. Exceptional Child Center that, "the Supremacy Clause does not confer a private right of action, and that Medicaid providers cannot sue for an injunction requiring compliance with  section 30(a)" of the MediCaid Act. (US Supreme Court Justice Anthony Scalia). 

On April 15, 2015, despite the fact that the State failed to appeal by the deadline they filed an instant Motion to Vacate (ECF No. 186). "Defendants seek to vacate the permanent injunction and partial summary judgment in Plaintiffs' favor, and go so far as to ask the Court to dismiss the Medicaid Act claim upon which Plaintiffs were granted summary judgment..."

TODAY September 1, 2015:

The Motion to Vacate plainly fails as to the Court's decision finding that existing reimbursement practices violated the Medicaid Act and that the so-called "uniform holiday schedule" and "half-day billing rule" therefore had to be enjoined.
(Chief Judge US District Court, Morrison England, Jr.)

Final Ruling regarding a request to vacate 
More Information and History of the Lawsuit
The Court's Ruling is A Clear Victory (February 13, 2015)

"The Court finds as a matter of law that the subject provider reductions are invalid. Given that invalidity, the State is permanently enjoined from implementing and/or applying:

1) the so-called "uniform holiday schedule" as currently codified by California Welfare and Institutions Code § 4692; and
2) the "half -day billing rule" set forth in California Welfare and Institutions Code § 4690.6.

The State is further enjoined from making any future changes to payments perceived by providers without complying with the requirements of 42 U.S.C. § 1396(a)(30)(A) and demonstrating that approval has been obtained from the Center for Medicaid Services."

Final Ruling,  The Arc California, et al. v Douglas et al.

Support the work of The Arc California
Lawsuit Impact So Far
Exposed Unlawful Rate Reductions

We believe that our lawsuit and our advocacy was a major influencing factor in the sun setting of the two year 4.25% rate cut and the 1.25% cut which took its place.  While the panel held that the percentage reduction claim was moot because the reduction had sunset, it also stated that such cuts were unlikely to recur in the future given the Court's opinion that such cuts would likely be unlawful.   However, there has been no effort yet by the state to remove the other cuts to providers and consumer that have caused significant financial crisis throughout the system, namely the increased forced closure days and half/full day billing formula.  These practices were unacceptable and sets precedence for the way future cuts will be made and must be stopped.


At the court hearings to date, both DDS and DHCS representatives have argued that the State has no obligation to consider providers' costs in setting or adjusting rates, and that the State is not required to take into consideration factors such as consumers' access to quality care or even to their health, safety or welfare! Further still, they do not have to inform the Center for MediCare and Medicaid Services (CMS) of any changes made, even though Federal Medicaid dollars match the State dollars and require a basic maintenance of effort to provide uniform and statewide services.


Our lawsuit, which we reluctantly filed as a last resort, has succeeded in exposing the State's unlawful policies and practices, and it is requiring the State to try to justify its violation of state and federal laws. The lawsuit has also allowed the long-ignored voices of tens of thousands of consumers, families and community providers to be heard in the courts.

Unanimous Decision from the US Court of Appeals, 9th Circuit 


"The plaintiffs sought preliminary injunctive relief against the continued enforcement of California statutes reducing the state's compensation, partially funded under the Medicaid Act, of home- and community-based services provided to developmentally disabled persons. Those statutes included a "percentage payment reduction," a "uniform holiday schedule," and a "half-day billing rule." The plaintiffs claimed, among other things, that California's implementation of those statutes was inconsistent with the Medicaid Act. The panel held that because the percentage payment reduction, the primary state statute challenged by the plaintiffs, expired while the case was on appeal, that challenge was moot. The panel held that as to the other two statutes, the district court abused its discretion in denying the plaintiffs' motion for a preliminary injunction, because it misconstrued the Medicaid Act and applied deference to a federal agency decision where none was due. The panel also asserted pendent appellate jurisdiction over the dismissal of the plaintiffs' Medicaid Act claims, and reversed.


The panel held that California's implementation of the half-day billing rule and uniform holiday schedule was inconsistent with the Medicaid Act because the state failed to study the effect of those reductions, as required by Section 30(A) of the Medicaid Act. The panel held that the district court erred in construing the Centers for Medicare and Medicaid Services' approval of California's "HCBS" waiver renewal application, allowing a variety of noninstitutional care options, as a determination that California's payment reductions complied with the Medicaid Act, and in viewing that approval as an agency decision entitled to judicial deference.


The panel concluded that clearly erroneous fact finding marred the district court's evaluation of the irreparable harms facing the plaintiffs. The panel concluded that the current record was inadequate to adjudge whether the impact of the half-day billing rule and uniform holiday schedule amounted to irreparable harm. It remanded to allow augmentation of the record and reconsideration of the propriety of injunctive relief in the changed circumstances, applying the correct irreparable harm analysis."
Attorney Spotlight
William McLaughlin
Attorney Spotlight
Chad Carlock
"we hold that Arc has a substantial likelihood of success on the merits of its Medicaid Act claims, and we hold that the district court abused its discretion in certain respects in evaluating the harm suffered
by Arc's members."
9th Circuit Court o Appeals

"Knowing what they know from previous suits and then imposing cuts on top of our already inadequate rates was really unconscionable.
The suit is really not about providers as much as it is about who we provide for. Our Victory today will help to ensure their future tomorrow."Judy Rogers, Community Provider

More About Our Lawsuit

  1. Appeals Court Decision in The Arc CA favor 
  2. Audio Archive of the Appeals Case
  3. Update Presentation November 2012 
  4. The Federal Court decision to lift the stay  
  5. The US Supreme Court Decision 
  6. The State Filed A Motion to Dismiss 
  7. Filed Complaint: The Arc CA v Douglas
  8. The US District Judge Morrison England Jr. denies the state's request for dismissal but grants it's request to delay the hearing until after the US Supreme Court decides on DOuglas v ILC: Read more @ California Healthline 
  9. Gloves Off: Justices Ask Pointed Questions in Opening Day Case on Court Access (Douglas v ILC).  American Constitution Society for Law and Policy October 4, 2011, By Rochelle Bobroff, Directing Attorney, Herbert Semmel Federal Rights Project, National Senior Citizens Law Center
  10. Opening Oral Arguments to the US Supreme Court (Douglas v ILC) 
  11. Challenges to Sustaining California's Developmental Disabilities Service System, March 2011 UCLA Center for Health Policy Research, by Daphna Gans, Anna C. Davis, Christina M. Kinane, and Gerald F. Kominski.
  12. Filed P & As: Points & Authorities

San Diego
Press Release:

For Immediate Release:

September 28, 2011

State Budget Cuts Endanger Californians with Developmental Disabilities

Advocates Sue State of California Seeking to Protect People at Risk

(Sacramento, CA) – Advocates for Californians with developmental disabilities filed a lawsuit against the State of California Wednesday alleging the State is violating federal law by failing to adequately fund services needed by individuals with developmental disabilities. The suit illustrates how the State has abandoned people with developmental disabilities and exposed them to health and safety risks by failing to provide reasonable support services.  A decade of rate freezes, program closures and devastating budget cuts have destroyed many community-based services, leaving 245,000 Californians with developmental disabilities at serious risk.

 As California taxpayers, we fully appreciate the State’s need to reduce costs, but we cannot allow the State to endanger its citizens and risk their basic civil rights,” said Tony Anderson, Executive Director, The Arc California.

“It’s illegal to slash basic support services that allow Californians with developmental disabilities to live safely in their communities,” Anderson continued.  “These basic civil rights cannot be compromised or bargained away as part of a budget deal. The State of California must follow the law and honor its commitment to serve and protect the rights of Californians with developmental disabilities.”

The Arc California and UCP of San Diego filed the lawsuit against the California Department of Developmental Services (DDS) and the Department of Health Care Services.  The suit, filed in federal court, outlines how California’s failure to fund programs has devastated community service providers, whose reimbursement rates have been frozen since 2003.  Many community providers have been forced to limit services or close completely.  In some cases, staffing levels are dangerously low, jeopardizing care.

This crisis was predicted by the State’s own experts more than a decade ago. That’s when a report prepared by the Department of Developmental Services warned the State that its lack of reasonable funding would adversely affect tens of thousands of disabled individuals and place them at risk of harm. 

“Despite repeated warnings from top state experts and the State Auditor General, California continued to withhold necessary funding and push these programs to the brink of collapse,” said Dave Carucci, Executive Director UCP San Diego.

“It’s not right, fair or legal and must be stopped, Carucci added. “The State’s neglect has left Californians with developmental disabilities at great risk, their health and safety is in jeopardy. All we are asking is that California comply with both state and federal law to ensure the basic needs of these individuals with intellectual and developmental disabilities are met.” 

The federal lawsuit accuses the State of violating federal law, specifically the Federal Home and Community Based Service Providers (HCBS) waiver program, by reducing rates and reimbursements without federal approval, and without considering impacts on federally required safeguards.

The suit also accuses the State of violating California’s landmark Lanterman Act, which was signed by former Gov. Ronald Reagan in 1969.  That groundbreaking statute guarantees individuals with intellectual and developmental disabilities the right to obtain the support services necessary to live as independently as possible in their own communities. Prior to the Lanterman Act, people with developmental disabilities were confined to state-run institutions, where they were warehoused in overcrowded facilities far from their families.

However, after more than a decade of funding neglect, including another $174 Million funding cut this summer, support programs that allow Californians with developmental disabilities to live in their communities are shutting down, putting many in jeopardy. If Californians with developmental disabilities do not receive the community-based support they need and deserve, thousands may end up being shipped to state-run institutions where the cost to taxpayers soars. Community-based services cost a fraction of the $340,000 expense per person in State institutions. 

This lawsuit asks the Court to enforce laws which require the State to provide the necessary funding to ensure adequate care.

About The Arc:

The Arc is the largest national community-based organization advocating for and serving people with intellectual and developmental disabilities and their families.  The Arc serves all ages and all spectrums from autism, Down syndrome, cerebral palsy and various other developmental disabilities. 

About UCP:

United Cerebral Palsy Association is a non-profit 501 c (3) corporation and has provided programs and services to individuals with disabilities since 1958. Over 65% of the people served have disabilities other than cerebral palsy.

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The Arc of California, 1225 8th Street, Suite 350, Sacramento, CA 95814.  Office (916) 552-6619, Fax (916) 441-3494