Jennifer Matthew Nursing And Rehab. Ctr. v. United States Dep't Of Health And Human Serv.

• Decision Date: 18 June 2010
• Docket Number: Docket No. 08-5052-ag.
• Citation: 607 F.3d 951
• Parties: JENNIFER MATTHEW NURSING AND REHABILITATION CENTER, Petitioner,v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent.
• Court: U.S. Court of Appeals — Second Circuit

607 F.3d 951

JENNIFER MATTHEW NURSING AND REHABILITATION CENTER, Petitioner,v.UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent.^*

Docket No. 08-5052-ag.

United States Court of Appeals, Second Circuit.

Argued: Oct. 1, 2009.

Supplemental Briefing Received: Oct. 30, 2009.

Decided: June 18, 2010.

Joseph L. Bianculli, Health Care Lawyers, PLC, Arlington, VA, for Petitioner.

Abby C. Wright, Appellate Staff Attorney, Civil Division, Department of Justice, for Tony West, Assistant Attorney General (Mark B. Stern, on the brief), for Respondent.

Before SACK, LIVINGSTON, and LYNCH, Circuit Judges.

SACK, Circuit Judge:

Petitioner Jennifer Matthew Nursing and Rehabilitation Center (“Jennifer Matthew”), the former owner and operator of a nursing facility of the same name in Rochester, New York, petitions for review of a ruling by the Appeals Board (the “Board”) of the United States Department of Health and Human Services (“HHS” or the “Agency”), affirming the decision of an Administrative Law Judge (“ALJ”) that upheld the assessment of an $80,000 civil monetary penalty by the Centers for Medicare and Medicaid Services (“CMS”) against the facility for regulatory violations. During the pendency of the administrative proceedings, the facility was sold by the petitioner. Subsequent to the filing of this petition for review, the new owner-operator made a payment to CMS in satisfaction of the penalty assessed against the facility.

The parties dispute whether the petitioner had standing under Article III of the United States Constitution to bring this petition at the time it was filed in light of the prior sale of the facility to another owner-operator. They also dispute the merits of the penalty imposed against the facility by CMS. We need not reach either of these questions, however, because we conclude that the satisfaction of the penalty by the facility's current owner-operator, from which CMS sought payment, has rendered this petition moot. We therefore lack jurisdiction over the petition and dismiss it on that basis.

BACKGROUND

“Jennifer Matthew Nursing and Rehabilitation Center” was, until July 2006, the name of a skilled nursing facility located in Rochester, New York. It was also the trade name or “d/b/a” of the original owner-operator of that facility, a closely-held corporation by the name of NRNH, Inc. In February 2006, the original owner-operator sold the facility and ceased using the Jennifer Matthew name. Throughout the administrative record and the proceedings before this Court, however, the original owner-operator, who is the petitioner here, is often referred to as “Jennifer Matthew Nursing and Rehabilitation Center” or “Jennifer Matthew,” even though it no longer owns the facility and is in fact a separate entity incorporated under a different name. We accordingly refer to the original owner-operator hereinafter as “Jennifer Matthew” or “NRNH,” and to the rehabilitation center as the “Jennifer Matthew facility.”

The Jennifer Matthew facility participated in the Medicare program. In order to participate, it entered into a provider agreement with the administrator of that program, the Centers for Medicare and Medicaid Services (“CMS”), one of eleven operating divisions of HHS. See United States Department of Health & Human Services Homepage, http:// www. hhs. gov/ about (last visited June 7, 2010). Participants in the Medicare program are required to remain in “substantial compliance” with various statutes and agency regulations. Compliance is “substantial” to the extent that any failure to meet the participation requirements gives rise to no more than a risk of “minimal harm” to the health or safety of a provider's residents. See 42 C.F.R. § 488.301. If a provider's non-compliance causes a greater risk of harm, CMS has the authority to, among other things, impose a civil monetary penalty against the provider. See 42 C.F.R. §§ 488.404, 488.406, 488.408.

In June 2005, the New York State Department of Health investigated the Jennifer Matthew facility following an anonymous complaint from within the facility that one of its residents had choked to death without receiving appropriate aid from the staff. On July 21, 2005, CMS issued a determination, based mostly on the investigation by the Department of Health, that for eight days in July 2005, the Jennifer Matthew facility had failed to remain in substantial compliance with various regulations, including regulations governing conduct relating to the choking death. It also cited sub-par care that the facility had provided to its residents during a heat wave that had prevailed for those eight days.¹ CMS imposed a civil monetary penalty of $80,000 against the facility, $10,000 for each day.

The facility protested the penalty and requested an administrative hearing. Proceedings before the ALJ ensued, but the case was remanded to CMS on the consent of the parties for reasons not relevant here.

On July 18, 2006, CMS issued a revised determination that cited additional regulatory violations by the Jennifer Matthew facility and retained the $80,000 penalty. The case was returned to the ALJ who, in rulings dated February 15 and December 27, 2007, upheld the CMS findings in relevant part, and the $80,000 penalty. The Board issued a Final Decision on August 21, 2008, affirming the rulings of the ALJ.

Meanwhile, in February 2006, while the administrative proceedings were ongoing, NRNH agreed to sell the Jennifer Matthew facility to an unrelated entity, Blossom North, LLC (“Blossom North”), pursuant to a purchase and sale agreement entered into by the parties that month (the “Purchase and Sale Agreement”). The sale closed in July 2006. The intangible property acquired by Blossom North in the transaction included the name “Jennifer Matthew Nursing and Rehabilitation Center.” The facility was nonetheless renamed “Blossom North Nursing & Rehabilitation Center” (the “Blossom North facility”) by its new owner.

The Purchase and Sale Agreement provided in relevant part that “any health facility assessment liabilities, relating to services rendered by, or the operation of, the Facility [under Jennifer Matthew's ownership and operation],” “shall be retained and satisfied by Seller, shall not be assumed by Buyer, and are expressly excluded from the Assumed Liabilities.” Resp't Supp. Br., Ex. A § 1.04(b). The agreement also provided that the seller “shall be solely responsible for the satisfaction of all Retained Liabilities.” Id. § 6.01. And it contained a “Survival and Indemnification” clause reading: “Seller hereby agrees to indemnify ... Buyer ... from and against all ... liabilities ... suffered by Buyer ... on account of ... the ownership and operation of the Facility [under Jennifer Matthew] (except with respect to ... liabilities of Seller expressly assumed under this Agreement)....” Id. § 10.01.

Thus, after the acquisition, there was no longer a “Jennifer Matthew Nursing and Rehabilitation Center” in existence. NRNH was no longer entitled to the use of that name, pursuant to the terms of the Purchase and Sale Agreement, and appears to have stopped using that name altogether. The Agency nevertheless permitted NRNH, continuing to appear as “Jennifer Matthew Nursing and Rehabilitation Center,” to pursue its appeal of CMS's determination to the ALJ and the Board. And the administrative rulings following the acquisition make no mention of the renaming of the facility as “Blossom North Nursing & Rehabilitation Center,” continuing to speak in terms of upholding a monetary penalty against “Jennifer Matthew Nursing and Rehabilitation Center.”

This petition for review was filed with the Clerk of this Court on October 14, 2008, by “Jennifer Matthew Nursing and Rehabilitation Center.” Although the petitioner referred to itself there and in its initial brief to this Court as the Jennifer Matthew facility see Pet'r Br. 1 (“Petitioner is a ... certified nursing facility”), neither the actual facility nor the corporation that, by then, owned and operated it, Blossom North, petitioned for review. We therefore understand the petitioner to be the former owner-operator of the facility, NRNH, despite its continued use of the Jennifer Matthew name. We accordingly refer to the petitioner as “Jennifer Matthew” or “NRNH.”

In its initial brief, filed on March 17, 2009, Jennifer Matthew discussed only the merits of its challenge to the civil monetary penalty. In the mandatory corporate disclosure statement included in its brief, Jennifer Matthew asserted that the facility “is currently owned and operated under a different name by an unrelated third party, ... which is [not] affected by this appeal.” Pet'r Br., Corporate Disclosure Stmt.

On April 14, 2009, six months after this petition was filed, CMS sent a letter to the administrator at Blossom North Nursing & Rehabilitation Center-previously the Jennifer Matthew facility. Despite the fact that the Agency had referred only to the “Jennifer Matthew” facility during the administrative proceedings, this letter referred to the civil monetary penalty “imposed on Blossom North Nursing & Rehabilitation Center (formerly known as Jennifer Matthew Nursing & Rehabilitation Center),” and “inform[ed] [the administrator] that the [penalty was] due and payable on May 9, 2009.” Resp't Supp. Br., Ex. C at 1. The letter advised: “[Y]our facility did not waive its right to a hearing.... Your facility requested a hearing and subsequently a review of the [ALJ's] decision to uphold the imposition of the [penalty]. The final decision of the [Board] affirms the ALJ's decision to uphold the imposition of the [penalty].” Id. The letter made no mention of the Blossom North facility petitioning for review of the Board's ruling. Neither the Blossom North facility nor Blossom North challenged the Board's ruling.

Two weeks after the date of the letter, CMS sent a follow-up letter to the administrator of the Blossom North facility amending the amount due on the penalty...