UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

JUDITH CLARK; JOHN C. PULEO; TAMMY THOMAS; ALFRED CAIRE; MITCHELL DAVISON; OREN HAMILTON; NADINE PERGESON; FELIX H. STROMAN, JR., and all others similarly situated, their next of kin, heirs, or personal representatives,

Plaintiffs - Appellants,

v.

CARLA STOVALL, Attorney General; JANET SCHALANSKY, Secretary of Kansas Department of Social and Rehabilitation Services; CITIBANK NA,

Defendants - Appellees.

No. 01-3097

(D.C. No. 00-CV-4054-SAC)

(District of Kansas)

ORDER AND JUDGMENT*

Before SEYMOUR, Circuit Judge, McWILLIAMS, Senior Circuit Judge, and GIBSON, Senior Circuit Judge**

Judith Clark ("Clark") and seven others brought a class action suit on April 12, 2000, under the Medicaid Act (42 U.S.C. § 1396, et. seq.) in the District Court for the District of Kansas, naming as defendants the Attorney General of Kansas, Carla Stovall ("Stovall"), the Secretary of the Kansas Department of Social and Rehabilitation Services, Janet Schalansky ("Schalansky"), and Citibank N.A. ("Citibank"). Citibank was described in the complaint as the escrow agent designated by the parties to the tobacco litigation Master Settlement Agreement to receive, manage and disburse settlement monies to be paid by the tobacco companies to the State of Kansas. In their amended complaint filed May 3, 2000, the class sought, inter alia, prospective relief, and relied on 42 U.S.C. § 1396k(b), which provides that the amounts of monies received pursuant to the Master Settlement Agreement by a State should be disbursed in a certain manner, with the further prevision that "the remainder of such amount collected shall be paid to such individual."

Stovall and Schalansky filed a joint motion to dismiss under Fed.R.Civ.P. 12(b)(1) and 12(b)(6) for lack of subject matter jurisdiction and failure to state a claim and also sought dismissal on the grounds that the action was barred by the Tenth and Eleventh Amendments to the United States Constitution. Citibank filed a separate motion to dismiss, alleging that the class had failed to state a claim upon which relief could be granted and, also alleging that if the claim against Stovall and Schalansky was dismissed, such "would require dismissal of all claims against Citibank as well." Memorandum briefs were filed both in support of, and in opposition to, these motions.

In a 22-page "Memorandum and Order" filed by the district court on March 2, 2001, the court granted both the joint motion to dismiss filed by Stovall and Schalansky and the separately filed motion to dismiss of Citibank. On that same date, judgment was entered ordering that the "plaintiff take nothing and the action is dismissed," and that the defendants recover from the plaintiffs "its costs of action." Clark v. Stovall, 158 F.Supp.2d 1215 (D. Kan. 2001). The class now appeals the judgment thus entered.

In granting the defendants' motions to dismiss, the district court specifically stated in its "Memorandum and Order" that as to each motion and each defendant the court granted the respective motion "on Eleventh Amendment immunity grounds." No mention whatsoever was made by the court on the alternative ground urged by the defendants that the action was subject to dismissal for failure to state a claim under Rule 12(b)(6).

Subsequent to the district court's order and judgment in the instant case and, after briefing in this Court, we filed our opinion in Harris v. Owen, 264 F.3d 1282 (10th Cir. September 10, 2001). The parties to the present appeal thereafter filed "supplemental authority" concerning Harris. The problem is whether Harris controls the outcome of the present case. We conclude that it does.

In Harris, a panel of this Court held, contrary to the holding of the district court, that an action of the same type brought by Clark, and the others, in the instant case is not barred by the Eleventh Amendment. However, in Harris we then went on to hold that the complaint in that case failed to state a claim upon which relief could be granted because Congress in 1999 added a rider to the Emergency Supplemental Appropriations Act, Pub. L. No. 10631, 113 Stat. 57, 103-04 (1999), which provided that "funds received under the Master Settlement Agreement are not subject to the distribution requirements of § 1396k(b)." Harris at1297. That rider, which now appears as 42 U.S.C. § 1396b(d)(3)(B)(ii), provides as follows:

Except as provided in subsection (i)(19) [which prevents federal funding for the states' administrative costs of tobacco litigation], a State may use amounts recovered or paid to the State as part of a comprehensive or individual settlement, or a judgment, described in clause (i) [which specifically names the 1998 Master Settlement Agreement] for any expenditures determined appropriate by the State.

The district court in Harris dismissed the action on two grounds, i.e., it was barred by the Eleventh Amendment and the complaint failed to state a claim upon which relief could be granted. The district court in the instant case relied solely on the Eleventh Amendment and did not discuss the "failure to state a claim" question. However, in view of our "intervening" opinion in Harris, we conclude that based on the present record we are in a position to rule on the question of whether the amended complaint states a claim upon which relief can be granted. In other words, we need not reverse the present judgment and remand to the district court so that it, in the first instance, would consider the question of whether the amended complaint states a claim for relief. Accordingly, we elect to decide that particular question now.1

Harris clearly dictates the conclusion that because of 42 U.S.C. § 1396 b(d)(3)(B)(ii) the amended complaint in the instant case does not allege a claim upon which relief could be granted and is subject to a Rule 12(b)(6) motion. Indeed, at oral argument, counsel's position was that Harris was "wrongly decided," and should be disavowed by the Court, sitting en banc, in the instant case. In thus arguing, counsel recognized that this panel is "bound by the precedent of prior panels absent en banc reconsideration or a superseding contrary decision by the Supreme Court." In re Smith, 10 F.3d 723, 724 (10th Cir. 1993). We are not persuaded by counsel's suggestion that two superseding decisions by the Supreme Court render Harris "suspect and open for reconsideration." Whether Harris is "suspect" is doubtful, and, of course, "reconsideration," if any, would be by the en banc court, and not by this panel.

Accordingly, we affirm the district court's judgment dismissing the action against all defendants, although we disapprove the district court's ground for so dismissing, i.e., the Eleventh Amendment. Rather, relying on Harris, we affirm the district court's judgment on the ground that the amended complaint fails to state a claim upon which relief can be granted.

Judgment affirmed.

Entered for the Court

Robert H. McWilliams

Senior Circuit Judge

.