Beechwood Restorative Care Center v. Leeds

• Decision Date: 31 January 2006
• Docket Number: Docket No. 04-3248-CV.
• Citation: 436 F.3d 147
• Parties: BEECHWOOD RESTORATIVE CARE CENTER, Brook Chambery and Olive Chambery, Plaintiffs-Appellants, v. Laura E. LEEDS, Edmund Russell Altone, Robert W. Barnett, Anna D. Colello, Arlene L. Gray, Henry M. Greenberg, Antonia C. Novello, Steven B. Steinhardt, Dennis P. Whalen, Sanford Rubin, Susan T. Baker, Sharon A. Carlo, Cynthia T. Francis, Naomi B. Hauser, Joseph P. Moore, Mary Elizabeth Rich, Barbara W. Saner, Sue Kelly and Michael Daniel, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

436 F.3d 147

BEECHWOOD RESTORATIVE CARE CENTER, Brook Chambery and Olive Chambery, Plaintiffs-Appellants, v. Laura E. LEEDS, Edmund Russell Altone, Robert W. Barnett, Anna D. Colello, Arlene L. Gray, Henry M. Greenberg, Antonia C. Novello, Steven B. Steinhardt, Dennis P. Whalen, Sanford Rubin, Susan T. Baker, Sharon A. Carlo, Cynthia T. Francis, Naomi B. Hauser, Joseph P. Moore, Mary Elizabeth Rich, Barbara W. Saner, Sue Kelly and Michael Daniel, Defendants-Appellees.

Docket No. 04-3248-CV.

United States Court of Appeals, Second Circuit.

Argued: July 11, 2005.

Decided: January 31, 2006.

Mark A. Grannis, Harris, Witshire & Grannis, LLP, (Christopher J. Wright, Timothy J. Simeone, Harris, Witshire & Grannis, LLP, Kevin S. Cooman, Peter J. Weishaar, McConville, Considine, Cooman & Morin, P.C., Rochester, NY, on the brief), Washington, D.C., for Appellants.

Shaifali Puri, Assistant Solicitor General, State of New York (Eliot Spitzer, Attorney General of the State of New York, of counsel Michelle Arnowitz, Deputy Solicitor General, on the brief), for Appellees.

Before: JACOBS and B.D. PARKER, Circuit Judges, and HURD, District Judge.^*

JACOBS, Circuit Judge.

Beechwood Restorative Care Center, a partnership owned by Olive Chambery and (her son) Brook Chambery, operated a nursing home in Rochester, New York. Following a series of escalating disputes between Brook Chambery and regulatory authorities—disputes in which Brook Chambery sometimes at first prevailed— the Beechwood facility lost its operating certificate and closed in 1999. The Chamberys and the partnership appeal from a judgment entered on May 4, 2004 by the United States District Court for the Western District of New York (Larimer, J.), dismissing on summary judgment their complaint alleging under 42 U.S.C. § 1983 that certain employees of New York's State Department of Health ("DOH") and of the federal Health Care Financing Administration ("HCFA") arranged to revoke the state-required operating certificate for the facility [i] as retaliation for protected speech by which Brook Chambery challenged regulatory findings and rulings, in violation of the First and Fourteenth Amendments; and [ii] without notice and an opportunity for hearing, in violation of the Chamberys' rights under the Fifth and Fourteenth Amendments. We affirm in part and in part vacate and remand.

BACKGROUND

Until it closed its doors in July 1999, Beechwood Restorative Care Center was a skilled nursing facility operated by a partnership between Olive Chambery and her son Brook. Like all New York nursing homes, Beechwood was regulated jointly by DOH and HCFA.

A

In 1994, Brook Chambery and DOH began clashing over regulatory matters. When DOH denied Beechwood's application to add two short-term beds in 1994, Chambery challenged the denial in an Article 78 petition; DOH backed down and requested that the proceedings be dismissed. When DOH identified two D-level¹ deficiencies in the course of federally-mandated surveys of the Beechwood premises in 1995, Chambery challenged the deficiencies in an informal dispute resolution process afforded by federal regulation; DOH backed down and the deficiencies were withdrawn. Beechwood Restorative Care Center v. Leeds, 317 F.Supp.2d 248, 256 (W.D.N.Y.2004). In November 1996, three more D-level deficiencies were alleged by DOH, one of which was withdrawn after Chambery lodged a challenge. Id. In 1996, Chambery commenced an Article 78 proceeding challenging DOH's procedures for the transfer and discharge of residents from nursing homes; the proceeding was ultimately resolved by a consent order in March 1997. Id. at 256. According to the Chamberys, this pattern of challenged deficiencies continued through 1999, escalating in frequency and seriousness. Id. at 257.

Beginning in 1996, Chambery opened a new front. As the district court characterized it, Chambery "began sending . . . a `voluminous' series of letters and other papers to DOH and other state officials protesting various aspects of DOH's policies and practices, and advocating a number of changes." Id. at 256. Thus, from 1997 through 1999, Chambery engaged in a "campaign with DOH to either enforce or eliminate" a requirement that nursing home operators sign Medicaid Access Agreements in order to make major changes to their facilities. Id. at 257 (internal quotation omitted). Chambery contended that this requirement was onerous and unnecessary, and that it conferred competitive advantage on operators who signed the Agreements without intending to comply. Id. at 256.

In early 1999, surveys of Beechwood conducted by DOH identified new deficiencies, classified at the more serious K-level—i.e., a pattern of violations constituting immediate jeopardy to residents. DOH recommended to HCFA that Beechwood be terminated as a Medicare and Medicaic provider unless those deficiencies were removed within eighteen days. New surveys, conducted by DOH on May 12, 1999 and again on June 14, 1999, identified no K-level deficiency, but charged deficiencies at the G-level—i.e., actual harm with potential for more than minimal harm, though no immediate jeopardy. DOH later notified the partnership that HCFA was prepared to terminate Beechwood as a processor of Medicare and Medicaid—and HCFA ultimately did. For its part, DOH commenced an administrative hearing on June 23, 1999 to consider whether to revoke the facility's operating certificate—a document required to operate a nursing home under New York law. See Spiegel v. Whalen, 44 N.Y.2d 745, 405 N.Y.S.2d 679, 376 N.E.2d 1323, 1324 (1978).

The thrust of the complaint in this action is that all these measures were taken by DOH to humiliate the Chamberys and ruin their business as punishment for Chambery's exercise of his First Amendment right to stand up to the regulators, challenge them in proceedings, and criticize their requirements and procedures.

B

An administrative law judge ("ALJ") conducted an evidentiary hearing on DOH's claim that the partnership's operating certificate should be revoked, and issued a 97-page report upholding most of the charges, finding that:

• Beechwood neglected some residents "in several significant aspects of care," such as failing to notify a resident's physician of significant changes in the resident's condition.

• Beechwood had failed to timely notify a resident's physician regarding a "potentially serious or life threatening illness. . . ."

• Beechwood failed to fulfill its obligation to provide appropriate care and monitoring for a particular resident, and that "the record [wa]s devoid of documentation as to the last 5 hours of the resident's life . . . ."

• Beechwood failed to take adequate measures to prevent or treat some residents' pressure sores.

• One Beechwood resident was "subjected, without any reasonable explanation, to an indwelling catheter in place for almost 9 days instead of Beechwood following a physician order of 3 to 4 days."

• Beechwood took insufficient steps to safeguard residents who were at risk of falling.

• "[A] number of Beechwood residents were not provided adequate pain control," and in several instances physicians' orders were not carried out.

The ALJ rejected Beechwood's allegations of improper motive, finding that (1) DOH "took numerous steps in its attempt to keep Beechwood open;" (2) Beechwood failed to take advantage of the opportunities afforded by DOH to rectify the problems with the facility; and (3) the "plans of correction" submitted by Beechwood to DOH consisted in large part of "denials of events that were found, attacks on the messengers (surveyors) and a barrage of information not relevant or consequential to the cited deficiencies," while in fact "no correction was taking place." The ALJ emphatically rejected Beechwood's allegations of regulatory "bias or ill will."

Consistent with the recommendation of the ALJ, DOH issued an order revoking Chambery's operating certificate and imposing a $54,000 penalty.

The Chamberys inquired of DOH as to how Beechwood could be transferred as a nursing home to a third party, a transaction which would require transfer of the "establishment approval" that "gives the medical facility the right to exist." Spiegel, 405 N.Y.S.2d 679, 376 N.E.2d at 1324. DOH's general counsel (appellee Henry M. Greenberg) responded in a February 2, 2000 letter to Beechwood's lawyer, advising that "since the operating certificate of Beechwood has been revoked and the facility closed," there was no "establishment approval to be transferred," and noting that any potential buyer who wished to use the premises as a nursing home would be required to go through the normal authorization procedures for such facilities, but advising that such authorization was unlikely at that time. Id. at 258, 405 N.Y.S.2d 679, 376 N.E.2d 1323. The Beechwood property found no buyer, entered foreclosure, and was sold at public auction in March 2002.

C

The complaint in this action, served thereafter, named seventeen DOH defendants and two federal HCFA defendants, and alleged, inter alia: [i] section 1983 claims for First Amendment retaliation and denial of equal protection, based on the revocation of Beechwood's operating certificate; [ii] a section 1983 claim for denial of procedural due process, asserting that DOH annulled Beechwood's establishment approval without the required notice and opportunity for hearing; and [iii] a Bivens claim against the HCFA defendants. Id. at 261, 405 N.Y.S.2d 679, 376 N.E.2d 1323. The district court dismissed all claims on summary judgment. Id. at 286, 405 N.Y.S.2d 679, 376 N.E.2d 1323. Appellants appeal the grant of summary judgment as to the First Amendment, Equal Protection, and Due Process claims.²

DISCUSSION

We review the district court's grant of summary judgment de novo, reviewing the evidence in the light most favorable to Appellants. See Anthony v. City of New York, 339 F.3d 129, 134 (2d Cir.2003). Summary judgment is proper if "there is no...