Opinion
NOT TO BE PUBLISHED
Alameda County Super. Ct. No. RG10524741.
SIMONS, J.
Aegis Medical Systems, Inc. (appellant) appeals the denial of its petition, which sought a declaratory judgment that the policy set out in a bulletin issued by California’s Department of Alcohol and Drug Programs (ADP) and its director, Renee Zito (respondents), is a “regulation” and therefore violated the rulemaking requirements of the Administrative Procedure Act (APA) (Gov. Code, § 11370 et seq.). The petition also sought a writ of mandate to compel respondents to carry out their duties under the APA, and sought to enjoin respondents from terminating appellant’s Drug Medi-Cal (DMC) contracts in Kern and Stanislaus Counties and from refusing to enter into new contracts in accordance with the policy and practices preceding the bulletin’s issuance. Appellant contends the court’s denial of the petition was erroneous. We conclude that respondents’ bulletin is a regulation issued in violation of the APA and reverse.
On September 22, 2010, we denied appellant’s motion for a stay/petition for writ of supersedeas/mandate to enjoin respondent Zito from terminating appellant’s DMC contracts in Kern and Stanislaus counties on September 30, 2010.
BACKGROUND
Appellant operates a network of 24 narcotic treatment clinics in 14 California counties. The state’s DMC program reimburses appellant for the methadone maintenance services appellant provides to eligible patients. The ADP is responsible for administering and coordinating the State’s efforts in alcohol and drug abuse prevention and treatment. Appellant has direct contracts with the ADP to administer methadone maintenance treatment services to Medi-Cal eligible patients in Kern, Stanislaus and other counties. At issue here are appellant’s direct contracts with the ADP regarding Kern and Stanislaus Counties. Pursuant to those contracts, appellant has operated two methadone maintenance clinics in Kern County and one in Stanislaus County.
The Statutory Scheme
“In 1965, the Congress added Title XVIII to the Social Security Act and thereby created ‘Medicare.’ (42 U.S.C. § 1395 et seq.) In Title XIX, the Congress enacted the ‘Medicaid’ law. (42 U.S.C. § 1396 et seq.) ‘Medi-Cal’ is this state’s program enacted pursuant to the federal law.” (California Medical Assn. v. Brian (1973) 30 Cal.App.3d 637, 642.) California provides certain drug treatment services to eligible Medi-Cal beneficiaries through the Medi-Cal Drug Treatment Program, also known as the DMC. (Health & Saf. Code, §§ 11758.40, 11758.46, 11758.421, subd. (b)(1)). Those services are administered through an interagency agreement between California’s Department of Health Services and the ADP. (Sobky v. Smoley (E.D.Cal. 1994) 855 F.Supp. 1123, 1127 (Sobky).) Methadone maintenance services are offered as part of the DMC. (Ibid.) “The key feature of California’s drug abuse scheme is that services are administered through locally controlled community drug abuse programs, in which each individual county is vested with the discretion to determine the appropriate mix and level of drug abuse services needed in the community. [Citation.] Each county may, but is not required to, seek funds allocated by the [ADP] for the purpose of alleviating drug abuse problems within its jurisdiction.” (Id. at p. 1128, fn. omitted.)
All undesignated section references are to the Health and Safety Code.
In Sobky, the federal district court ordered the ADP to develop and institute a plan for assuring the availability of DMC methadone maintenance treatment services. (Sobky, supra, 855 F.Supp. at p. 1151.) As a result, the Legislature enacted sections 11758.40, 11758.43, 11758.45, and 11758.46, providing that the ADP could enter into DMC contracts with each county for the provision of drug treatment services.
Section 11758.40 provides, in relevant part: “... the [ADP] may enter into a [DMC] contract with each county for the provision of services within the county service area.”
Section 11758.43 provides, “To the extent any county refuses to execute the [DMC] contract in accordance with the requirements of federal medicaid and state Medi-Cal laws, and in accordance with [Sobky, supra, 855 F.Supp.1123], the [ADP] shall contract directly with the certified providers in that county, and retain that portion of that county’s state General Fund allocation necessary to meet the cost of providing services to eligible beneficiaries and the costs to the state of administering the [DMC] contracts.”
Section 11758.45 provides, “The [ADP] may enter into procurement contracts... for the procurement of services to assist the [ADP] in administering the [DMC] Program.”
Section 11758.46, provides in relevant part:
“(d) A county or a contractor for the provision of [DMC] services shall notify the [ADP], within 30 days of the receipt of the county allocation, of its intent to contract, as a component of the single state-county contract, and provide certified services pursuant to Section 11758.42, for the proposed budget year. The notification shall include an accurate and complete budget proposal....
“(e)(1) Within 30 days of receipt of the proposal described in subdivision (d), [the ADP] shall provide, to counties and contractors proposing to provide [DMC] services in the proposed budget year, a proposed multi-year contract, as a component of the single state-county contract....
“(2) A county contracting for alcohol and drug services shall receive a single state-county contract for the net negotiated amount and [DMC] services.
“(3) Contractors contracting for [DMC] services shall receive a [DMC] contract.
“(f)(1) Upon receipt of a contract proposal pursuant to subdivision (d), a county and a contractor seeking to provide reimbursable [DMC] services and the [ADP] may begin negotiations and the process for contract approval.
“(2) If a county does not approve a contract by July 1 of the appropriate fiscal year..., the county shall have 30 additional days in which to approve a contract. If the county has not approved the contract by the end of that 30-day period, the [ADP] shall contract directly for services within 30 days.”
Since Sobky, the ADP has directly contracted with methadone maintenance providers when a county was unable or unwilling to enter into a DMC contract with a provider. This has included counties that refuse to enter into a contract with a provider despite the county’s willingness to enter into contracts with other providers in the county or its willingness to operate its own, county-run DMC narcotic treatment program.
On January 26, 2010, the ADP wrote a letter to appellant and other certified DMC providers, county ADP program administrators, and applicants for DMC certification stating there had been an increase in the number of requests for direct DMC contracts between the ADP and prospective providers, and the ADP was studying its capacity to administer and manage direct DMC contracts with service providers. The letter also stated, “It is expected the deliberations on capacity to administer direct [DMC] contracts will include possible impacts to all [DMC] direct contracts currently held by [the] ADP.” The letter reminded its recipients that certification as a DMC provider does not guarantee a contract with a county or the state, and that denial of a contract by the county does not guarantee a direct contract between the provider and the state.
The Bulletin
On June 21, 2010, the ADP issued Bulletin 10-06 (Bulletin) entitled, “[DMC] Direct Provider Contracts, ” and designed to “transmit [the ADP’s] policy regarding direct provider contracts for [DMC] services.” The Bulletin was distributed to county [ADP] administrators, DMC direct provider contractors, DMC certified providers, “Strategic Local Government Services, LLC, ” and the “Director’s Advisory Council, ” presumably state-wide.
In its discussion section, the Bulletin explained that as a result of Sobky, the ADP is required to assure appropriate access to DMC methadone maintenance services by, among other things, directly contracting for those services in counties that chose to decline a contract with the ADP to administer local DMC services. It noted that under section 11758.40, the ADP may enter into a DMC treatment program contract with each county for the provision of DMC services, and, under section 11758.43, the ADP must contract directly with certified providers in a county that refused to execute a DMC treatment program contract. The Bulletin also explained: “Recent increases in direct services contracts with [the] ADP beyond those as required above has led to the creation of two uncoordinated treatment systems by shifting the focus from a ‘county run’ continuum of care services to the state. This is in contradiction to... Section 11760.5 which supports maintaining the local continuum of services at the county level... [and] Sections 11755 [ADP duties], 11760.3 [limited role of state government], 11760.5 and 11772[, subd.] (c) [counties encouraged to apply for funds for alcohol and drug abuse services and programs]. [¶] Consistent with the legislative intent and supporting law discussed above as well as California’s existing public policy on the delivery of health care services, the ADP believes that the following approach to managing the DMC direct contracts has multiple benefits for counties and the State, including improved patient care, strengthening the local continuum of [substance use disorder] services and providing improved monitoring of contract services.”
Section 11760.5, subdivision (b) provides in part: “It is the intent of the Legislature that community alcohol and other drug abuse services shall be organized in the counties for alcohol and other drug abusers through locally administered and locally controlled community alcohol and other drug abuse programs.”
The Bulletin stated: “The policy on direct provider contracts for DMC services is as follows: [¶] 1. To the extent required by state and federal law, [the] ADP will continue to contract with providers for DMC services within counties that are not operating or contracting for any DMC services or operating a single specific service type (e.g., [Narcotic Treatment Programs], Outpatient Drug Free). Where a county is not operating or contracting for a specific service type, [the] ADP will only contract for that service type. [¶] 2. ADP will terminate all other current direct provider contracts and will not enter into any new contracts that do not fall under [No.] 1 above.”
In its “Implementation” section, the Bulletin also stated that September 30, 2010, would be the effective date for termination of any direct provider contract that did not meet the requirements of the policy of entering into or continuing direct provider contracts, as identified in No. 1 above.
On June 21, 2010, the ADP sent appellant written notice that, pursuant to the Bulletin, the DMC contracts between the ADP and appellant for Kern and Stanislaus Counties were being terminated, effective September 30. The notice to each of those counties stated that the county was participating in the DMC program for the services appellant is certified to provide.
The Instant Action
On July 12, 2010, appellant filed the instant petition alleging the Bulletin was a “regulation” that was not adopted in accordance with the rulemaking provisions of the APA, and requesting that respondent be commanded to carry out their duties under the APA. Appellant also argued that the Bulletin is invalid because it is inconsistent with the requirements of section 11758.46, which sets out the contracting process for DMC contracts. The supporting declaration of appellant’s president and chief operating officer, Ehud Barkai, stated the following: Kern County participates in the DMC program and as of fiscal year 2009 does not contract with appellant. Appellant has contracted directly with the ADP for DMC services in Kern County. Stanislaus County operates its own methadone maintenance program and has not contracted with appellant. However, appellant has contracted directly with the ADP for DMC services in Stanislaus County because the county program cannot accommodate all eligible DMC patients. The Bulletin is a “marked change in policy that directly affects [appellant] and its [DMC] patients.”
Appellant’s pleading was entitled “Complaint for Declaratory and Injunctive Relief; Petition for Writ of Mandate.” Like the trial court, we refer to the entire pleading as the petition.
Dave Nielsen, the ADP’s Deputy Director of Program Services Division, stated in a declaration opposing the writ that, since Sobky, there has been significant growth in the numbers of new requests for direct DMC contracts with the ADP, although there has been a reduction in the ADP staff. The expansion of direct DMC contracts with the ADP beyond those required by Sobky or statute has exacerbated tensions between county and state treatment systems. Additionally, the increase in state administered service contracts is at odds with the legislative intent that services be county-run and locally administered and controlled. Nielsen also stated that contracts with providers, such as appellant, allow for termination of the contracts for any reason the ADP determines is in the best interest of the ADP or the state. Nielsen further stated that, aside from the methadone maintenance clinics appellant operates in Kern and Stanislaus Counties, those counties also provide the same DMC methadone maintenance services under their own direction and administration. Through the Bulletin, the ADP is requesting that “the counties participating within the [DMC] program assume the responsibility of coordinating patient care and determining their providers to deliver these services.”
The Trial Court’s Order
The trial court’s nine-page order gave three reasons for denying appellant’s petition. First, the Bulletin is “entirely consistent with and does no more than track” section 11758.46 and, therefore, was not an exercise of quasi-legislative power. The Bulletin did not announce an intention to cease compliance with section 11758.46; instead, it stated the ADP will continue to contract with providers for DMC services as necessary to comply with state and federal law.
Second, appellant failed to establish that section 11758.46 is ambiguous or convoluted, such that any policy issued in relation to it must be promulgated as a regulation. Section 11758.46 provides an unambiguous, county-oriented framework for funding DMC services, including methadone treatment. Only when the county is unable or unwilling to finalize a contract providing sufficient DMC services in accordance with Sobky, is the ADP required to provide for necessary services through direct contracts with private providers. “No regulation is necessary to terminate [appellant’s] existing contract with [the] ADP and therefore, [respondents were] not required to comply with the APA prior to issuing the Bulletin.”
Third, appellant failed to establish that the Bulletin is a rule of general applicability and implements, interprets or makes specific section 11758.46. “The Bulletin does no more than set forth an intent to enforce an existing statute and do so on a case by case basis. [¶]... [T]he Bulletin was no more than a management decision implementing existing law and a notice that [the] ADP intends to terminate some of its private direct contracts, as is its prerogative under existing law.... The Bulletin is no more than a statement of existing law and a notice that actions will be taken pursuant to existing law.”
Appellant filed a timely appeal from the order.
DISCUSSION
I. The APA
The APA provides: “No state agency shall issue, utilize, enforce, or attempt to enforce any... bulletin, ... which is a regulation.. unless the... bulletin... has been adopted as a regulation and filed with the Secretary of State pursuant to [the APA].” (Gov. Code, § 11340.5, subd. (a).) It applies to “the exercise of any quasi-legislative power conferred by any statute.” (Gov. Code, § 11346, subd. (a).)
Government Code section 11342.600, subdivision (a) defines “regulation” as “every rule, regulation, order, or standard of general application or the amendment, supplement, or revision of any rule, regulation, order, or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure.”
“The APA establishes the procedures by which state agencies may adopt regulations. The agency must give the public notice of its proposed regulatory action [citation]; issue a complete text of the proposed regulation with a statement of the reasons for it [citation]; give interested parties an opportunity to comment on the proposed regulation [citation]; respond in writing to public comments [citation]; and forward a file of all materials on which the agency relied in the regulatory process to the Office of Administrative Law [citation], which reviews the regulation for consistency with the law, clarity, and necessity [citation]. [¶] One purpose of the APA is to ensure that those persons or entities whom a regulation will affect have a voice in its creation [citation]; as well as notice of the law’s requirements so that they can conform their conduct accordingly [citation]. The Legislature wisely perceived that the party subject to regulation is often in the best position, and has the greatest incentive, to inform the agency about possible unintended consequences of a proposed regulation. Moreover, public participation in the regulatory process directs the attention of agency policymakers to the public they serve, thus providing some security against bureaucratic tyranny. [Citation.]” (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 568-569 (Tidewater).) Any doubt as to the applicability of the APA’s requirements should be resolved in favor of the APA. (Morales v. California Dept. of Corrections & Rehabilitation (2008) 168 Cal.App.4th 729, 736.)
“A regulation subject to the APA... has two principal identifying characteristics. [Citation.] First, the agency must intend its rule to apply generally, rather than in a specific case. The rule need not, however, apply universally; a rule applies generally so long as it declares how a certain class of cases will be decided. [Citation.] Second, the rule must ‘implement, interpret, or make specific the law enforced or administered by [the agency], or... govern [the agency’s] procedure.’ [Citation.]” (Tidewater, supra, 14 Cal.4th at p. 571.)
“A regulation need not be adopted pursuant to the APA... if it would... duplicate statutory standards or procedures.” (California School Bds. Assn. v. State Bd. of Education (2010) 186 Cal.App.4th 1298, 1329 (California School Bds).) “ ‘ “[I]f certain policies and procedures... are... ‘essentially [] a reiteration of the extensive statutory scheme which the Legislature has established’... then there is obviously no duty... to enact regulations to cover such reiterations.... [Citation.] But to the extent any of the contents of the [statement of policy or procedure] depart from, or embellish upon, express statutory authorization and language, the [agency] will need to promulgate regulations.” [Citation.]’ [Citation.]” (Ibid.)
“The APA... does not govern a ‘regulation that relates only to the internal management of the state agency.’ (Gov. Code, § 11340.9, subd. (d).)” (California School Bds., supra, 186 Cal.App.4th at p. 1329.)
“The APA was designed in part to prevent the use by administrative agencies of ‘underground’ regulations [citation], and it is the courts, not administrative agencies, which enforce that prohibition. ‘[A]gencies are normally not empowered to determine, in an authoritative way, the decision-making criteria that relevant statutes require them to consider when they formulate and adopt rules. As a result, courts must review wholly de novo the propriety of the decision-making criteria utilized by agencies when they make rules. That is, in almost every instance involving the judicial review of a rule, courts are entitled to substitute their judgments for those of the agencies on this question of law. They need not defer to any extent to the judgment of the agencies on such matters. The same is true with respect to compliance by agencies with applicable procedural requirements. Agencies are not normally delegated power to determine authoritatively whether they complied with generally applicable rule-making procedures, ... As a result, courts may usually determine the lawfulness of agencies’ compliance with those rule-making procedures entirely de novo, simply substituting their judgment on that question for that of the agencies.’ [Citation.]” (California Advocates for Nursing Home Reform v. Bontá (2003) 106 Cal.App.4th 498, 506.)
Here, it is undisputed respondents’ Bulletin was not promulgated in compliance with the APA; the question is whether the APA applies to it.
II. The Bulletin Is a Regulation Subject to the APA
A. The Bulletin Applies Generally
Appellant contends the Bulletin is a regulation subject to the APA because on its face, it is directed generally to counties, providers, patients, and DMC beneficiaries statewide. Respondents argue the Bulletin does not apply generally because it applies differently in each different circumstance, i.e., the ADP will still contract directly with DMC providers in counties not operating or contracting for services, and will stop contracting directly with providers “who [are] not needed to fill a gap in service by the county.” Respondents assert that because the assessment of county-based need is individual, the Bulletin is not a rule of general application. Respondents rely on Taye v. Coye (1994) 29 Cal.App.4th 1339 (Taye), in which a State Controller audit determined that a provider in the state medical program (Taye) had been overpaid, and Taye asserted that the method used for calculating the overpayment was a regulation subject to the APA. (Taye, at pp. 1342, 1344.) The court concluded that, because the audit procedures were designed to flexibly apply to particular conditions and unique situations, the audit method was not a standard of general application and, therefore, not a regulation. (Id. at p. 1345.) In Tidewater, supra, 14 Cal.4th at page 571, the Supreme Court cited the Taye decision and others in stating, “interpretations that arise in the course of case-specific adjudication are not regulations.”
We conclude Taye is factually distinguishable. The Bulletin does not enunciate a policy that interprets the law on a case-by-case basis. Instead, it puts recipients on notice that the ADP will no longer contract with the statewide class of private DMC providers where counties provide the same methadone services. That the ADP will still contract directly with DMC providers in counties not operating or contracting for methadone services does not diminish its general application to the specified group of DMC providers.
B. The Bulletin Implements And Makes Specific the Law Administered by the ADP
Appellant argues the Bulletin implements and makes specific the statutory scheme for DMC funding by describing the specific circumstances under which the ADP will and will not enter into direct DMC contracts with providers.
Appellant asserts that prior to issuance of the Bulletin: (1) the ADP could contract with a particular county and allow the county to contract with all DMC providers or (2) the ADP could contract with a county and allow the county to contract with some DMC providers while the ADP contracted with the remaining DMC providers in the county. Appellant argues that as a result of the Bulletin, the ADP eliminated the second option allowing direct ADP contracts with DMC providers when a county chooses to contract with some, but not all DMC providers, and replaced it with the following option: the ADP could contract with a county and allow the county to contract with all DMC providers, and refuse any ADP direct contract with a provider so long as the county contracts with any provider or operates its own DMC program in the county. Appellant argues the Bulletin discontinued the “old policy and practice” which “allowed for case-by-case discretionary decision-making.”
Respondents concede the Bulletin provides notice that the ADP will no longer contract with private DMC providers where counties provide the same services. However, they argue the Bulletin did not “implement, interpret or make specific” the law (§§ 11758.43, 11758.45, 11758.46) enforced by the ADP; it merely gave notice of how the ADP “intended to improve its compliance with that law, ” and “did nothing more than restate and summarize existing law.” Respondents also argue the Bulletin merely explained how the ADP intended to comply with sections 11760.5 and 11760.6, which express the Legislature’s intent that community alcohol and drug abuse services be organized in counties, be locally administered and controlled, and be “high quality” and “cost-effective.”
The gist of sections 11758.40, 11758.43, 11758.45 and 11758.46 is that the ADP must enter into direct contracts with DMC providers within a county when that county is unable or unwilling to contract to provide such services or contract with a DMC provider for such services, but the ADP otherwise has discretion to enter into direct contracts with DMC providers within a county. The parties agree that up until the Bulletin issued, the ADP exercised its discretion, within the parameters established in sections 11758.40, 11758.43 and 11758.46, to enter into direct contracts with private DMC providers even where a county provided the same services. The Bulletin does not restate or summarize these sections. Instead, it establishes a new “policy” regarding the ADP’s exercise of discretion to enter into direct contracts with DMC providers; to wit, the ADP will no longer contract with private DMC providers where counties provide the same services or are already contracting with a provider for those services. Thus, the Bulletin serves to implement and specify the circumstances in which the ADP will exercise its discretion under the statutory scheme. That the new policy does not conflict with sections 11758.40, 11758.43 and 11758.46, does not diminish that implementation and specification.
Similarly, the Bulletin does not restate, summarize or conflict with the Legislature’s stated intent in sections 11760.5 and 11760.6. Instead, it serves to implement and specify the circumstances in which the ADP will exercise its discretion in light of the Legislature’s stated intent.
C. The Internal Management Exception Does Not Apply
The APA’s definition of “regulation” excludes any rule, regulation, order, or standard of general application “that relates only to the internal management of a state agency.” (Gov. Code, § 11340.9, subd. (d); Californians for Pesticide Reform v. Department of Pesticide Regulation (2010) 184 Cal.App.4th 887, 907.) The exception is a narrow one and is inapplicable where a rule is to have general application and affects the interests of persons other than the agency itself. (California School Bds., supra, 186 Cal.App.4th at p. 1334.)
Barkai’s declaration establishes that the Bulletin is a “marked change in policy that directly affects [appellant] and its [DMC] patients.” Appellant thus argues the Bulletin affects the interests of persons other than the ADP itself and, therefore, the internal management exception does not apply. Respondents disagree, arguing the Bulletin was giving notice of how it planned to better effectuate legislative intent, and therefore the trial court concluded it was “no more than a management decision implementing existing law.” Once again, respondents’ argument fails. The evidence establishes that the Bulletin was directed to and directly affects the interests of persons other than the ADP. Thus, the internal management exception does not apply.
III. Conclusion
The procedural requirements designated by the APA for administrative regulations are applicable to the Bulletin. Respondents’ failure to comply with them invalidates the challenged Bulletin.
IV. Remedies
As we noted previously, the petition sought: (1) a declaratory judgment that the policy set out in the Bulletin violated the APA; (2) a writ of mandate to compel respondents to carry out their duties under the APA; and (3) an injunction prohibiting respondents from terminating appellant’s DMC contracts in Kern and Stanislaus Counties and from refusing to enter into new contracts in accordance with the policy and practices preceding the bulletin’s issuance.
Respondents contend, even assuming the Bulletin is a regulation requiring APA compliance, the writ of mandate was properly denied because appellant sought such relief in order to force the ADP to reverse its decision to terminate appellant’s DMC contract with the ADP. They argue, to the extent that appellant was seeking to litigate a contractual dispute, mandamus relief was unavailable and appellants’ contract claim could have been raised in a civil breach of contract action. For the same reasons, respondents argue appellants were not entitled to injunctive or declaratory relief.
“ ‘A traditional writ of mandate brought under Code of Civil Procedure section 1085 lies “to compel the performance of an act which the law specifically enjoins, as a duty resulting from an office, trust, or station.” Under this section, mandate will lie to compel performance of a clear, present, and usually ministerial duty in cases where a petitioner has a clear, present and beneficial right to performance of that duty. [Citations.] Mandamus has long been recognized as the appropriate means by which to challenge a government official’s refusal to implement a duly enacted legislative measure. [Citation.]...’ [Citation.]” (Corrales v. Bradstreet (2007) 153 Cal.App.4th 33, 47-48.) Traditional mandamus relief “will not lie to control discretion conferred upon a public officer or agency.” (People ex rel Younger v. County of El Dorado (1971) 5 Cal.3d 480, 491.)
Appellant’s petition properly sought a declaratory judgment that the Bulletin was a regulation subject to APA compliance and properly sought a writ of mandate to compel respondents’ compliance with the APA prior to issuance or use of the Bulletin.
DISPOSITION
The judgment is reversed with directions to the trial court to enter a judgment granting declaratory relief, to issue a peremptory writ of mandate, and to issue such injunctive relief as may be appropriate and consistent with this opinion. Costs to appellant.
We concur. JONES, P.J., BRUINIERS, J.