West Allis Memorial Hosp., Inc. v. Bowen

• Decision Date: 14 July 1988
• Docket Number: No. 87-1974,87-1974
• Citation: 852 F.2d 251
• Parties: , 22 Soc.Sec.Rep.Ser. 353, Medicare&Medicaid Gu 37,198 WEST ALLIS MEMORIAL HOSPITAL, INC., a Wisconsin non-profit corporation, Plaintiff-Appellant, v. Otis BOWEN, in his capacity as Secretary of the United States Department of Health and Human Services, along with his successors, agents, servants, employees and attorneys; Edwin Meese, in his capacity as Attorney General of the United States, along with his successors, agents, servants, employees and attorneys; and St. Luke's Hospital, Inc., a Wisconsin non- profit corporation, along with its officers, agents, servants, employees and attorneys, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 251

852 F.2d 251

57 USLW 2076, 22 Soc.Sec.Rep.Ser. 353,

Medicare&Medicaid Gu 37,198

WEST ALLIS MEMORIAL HOSPITAL, INC., a Wisconsin non-profit

corporation, Plaintiff-Appellant, v. Otis BOWEN, in his capacity as Secretary of the United

States Department of Health and Human Services, along with

his successors, agents, servants, employees and attorneys;

Edwin Meese, in his capacity as Attorney General of the

United States, along with his successors, agents, servants,

employees and attorneys; and St. Luke's Hospital, Inc., a

Wisconsin non- profit corporation, along with its officers,

agents, servants, employees and attorneys, Defendants-Appellees.

No. 87-1974.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 9, 1987.

Decided July 14, 1988.

Robert H. Friebert, Friebert, Finerty & St. John, S.C., Milwaukee, Wis., for plaintiff-appellant.

Kathy L. Nusslock, Cook & Franke, S.C., John J. Meyer, Asst. U.S. Atty. (Patrica J. Gorence, U.S. Atty.), Milwaukee, Wis., for defendants-appellees.

Before CUMMINGS and FLAUM, Circuit Judges, and GRANT, Senior District Judge. ^*

GRANT, Senior District Judge.

West Allis Memorial Hospital, Inc. ("West Allis") brought suit against St. Luke's Hospital, Inc. ("St. Luke's"), the Secretary of Health and Human Services, Otis Bowen, and the Attorney General of the United States, Edwin Meese (the "federal defendants"), challenging the applicability of the Medicare-Medicaid antifraud provisions of 42 U.S.C. Sec. 1395nn(b)(2)(B) to a program instituted and advertised by St. Luke's and known as "Freedom 55/65." ¹

The "Freedom 55/65" program was commenced on or about January 1, 1987, ² and offers a number of advantages to Medicare patients who enroll in the program. This lawsuit focuses on but one of those advantages--the waiver of the deductible and coinsurance obligations of Medicare patients who receive items or services from St. Luke's in the event the patient does not have supplemental insurance which would otherwise pay those obligations. The waiver program applies to items and services covered under both Medicare Part A and B. ³

As a competitor for Medicare patients in the Milwaukee area, West Allis fears the effects St. Luke's waiver program will have on its ability to remain competitive. West Allis maintains that it is prepared to meet that threat by implementing its own waiver program, but believes such a program to be violative of the anti-fraud provisions of 42 U.S.C. Sec. 1395nn(b)(2)(B) and fears criminal prosecution under the statute if it chooses to implement such a program.

Fearing the loss of business on the one hand, and the risk of prosecution on the other, West Allis turned to the courts for resolution of its dilemma. In its complaint, West Allis alleges that St. Luke's waiver program is violative of not only Sec. 1395nn(b)(2)(B), but also federal and state antitrust laws, and the Wisconsin common law against conspiracy, tortious interference with prospective contractual relations, and unfair competition. West Allis moved for preliminary injunctive relief against St. Luke's under each count of the complaint, and for alternative injunctive relief against the federal defendants under Sec. 1395nn(b)(2)(B). With respect to the Sec. 1395nn claim, West Allis asked that the district court either declare St. Luke's waiver program violative of the statute and enjoin St. Luke's continuation of that program, or alternatively declare such programs nonviolative of Sec. 1395nn(b)(2)(B) and enjoin the federal defendants from enforcing the provisions thereof against Medicare providers such as West Allis which may seek to implement a similar program.

A hearing on West Allis' motion for preliminary injunction was conducted on January 23, 1987, and on May 28, 1987, the district court issued an order denying the motion in its entirety. West Allis Memorial Hospital, Inc. v. Bowen, 660 F.Supp. 936 (E.D.Wis.1987). This appeal followed.

I. Standard of Review

"In reviewing the decision of a district court to grant or deny a preliminary injunction, this court has continued to invoke the phrase 'abuse of discretion' in articulating the applicable standard." Darryl H. v. Coler, 801 F.2d 893, 897 (7th Cir.1986); see also Baja Contractors, Inc. v. City of Chicago, 830 F.2d 667, 674 (7th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 1301, 99 L.Ed.2d 511 (1988). Under Fed.R.Civ.P. 52(a), the district court is required to make findings of fact and conclusions of law in support of its decision to grant or refuse preliminary injunctive relief. The ultimate decision, however, rests within the court's discretion. Baja Contractors, 830 F.2d at 674; Lawson Products, Inc. v. Avnet, Inc., 782 F.2d 1429, 1436-37 (7th Cir.1986). The district court's findings of fact are reviewed under the clearly erroneous standard of Fed.R.Civ.P. 52(a); with the legal conclusions subject to de novo review. Baja Contractors, 830 F.2d at 674; Manbourne, Inc. v. Conrad, 796 F.2d 884, 887 (7th Cir.1986); Lawson Products, 782 F.2d at 1437. "[A] factual or legal error may alone be sufficient to establish that the court 'abused its discretion' in making its final determination.... However, in the absence of such an error, the district judge's weighing and balancing of the equities should be disturbed on appeal only in the rarest of cases." Lawson Products, 782 F.2d at 1437. We review the district court's denial of a preliminary injunction in the present case with these principles in mind.

II. Discussion

West Allis, as the party seeking a preliminary injunction, bears the burden of showing:

(1) that it has no adequate remedy at law; (2) that it will suffer irreparable harm if the preliminary injunction is not issued; (3) that the irreparable harm it will suffer if the preliminary injunction is not granted outweighs the irreparable harm the defendant will suffer if the injunction is granted; (4) that it has a reasonable likelihood of prevailing on the merits; and (5) that the injunction will not harm the public interest.

Baja Contractors, 830 F.2d at 675; Manbourne, Inc., 796 F.2d at 887; Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 386-88 (7th Cir.1984). Under the "sliding scale" approach adopted by this circuit, the likelihood of success that West Allis needs to show will vary inversely with the degree of harm it will suffer if the injunction is not granted. Illinois Psychological Ass'n v. Falk, 818 F.2d 1337, 1340 (7th Cir.1987); Brunswick Corp. v Jones, 784 F.2d 271, 275 (7th Cir.1986); Roland Machinery Co., 749 F.2d at 387. If, however, "both parties are likely to suffer the same amount of irreparable harm, so far as estimation is possible, then likelihood of success becomes decisive." Dynamics Corp. of America v. CTS Corp., 794 F.2d 250, 252 (7th Cir.1986), rev'd on other grounds, 481 U.S. 69, 107 S.Ct. 1637, 95 L.Ed.2d 67 (1987).

A. Medicare Fraud: 42 U.S.C. Sec. 1395nn(b)(2)(B)

West Allis sought preliminary injunctive relief against St. Luke's waiver program under 42 U.S.C. Sec. 1395nn(b)(2)(B) which provides:

Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person--to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any item or service for which payment may be made in whole or in part under this subchapter ... shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

In denying the preliminary injunction, the district court assumed, without specifically finding, that great irreparable harm would be suffered by West Allis if the injunction were to be denied, but concluded that there was "almost no likelihood that West Allis [would] succeed on the merits," because it could not show any entitlement to the injunctive relief sought. West Allis Memorial Hospital, 660 F.Supp. at 938-39. In so ruling, the court relied on a long-standing doctrine that "equity will not enjoin the commission of a crime," and found that no exception to that doctrine was warranted under the circumstances. Id. at 939-40. The district court therefore did not reach the ultimate issue of whether St. Luke's waiver program was violative of Sec. 1395nn(b)(2)(B).

West Allis contends on appeal that the district court abused its discretion when it found that it could not employ its equitable powers to enjoin the criminal activity complained of. While West Allis acknowledges that courts generally will not enjoin a crime, it maintains that the present case falls within one of the recognized exceptions to that doctrine under which a court may enjoin criminal activity when statutorily authorized to do so. United States v. Jalas, 409 F.2d 358, 360 (7th Cir.1969). Arguing that such authority exists under Sec. 1395nn, and that the statute creates an implied private right of action in favor of Medicare providers, West Allis concludes that the denial of the preliminary injunction constitutes a reversible error of law. We do not agree.

While the district court did not address the issue of standing under an implied right of action, our review must begin at that point, for the power of the federal courts to entertain an action is not unlimited. As the Supreme Court recently noted in Bender v. Williamsport Area School District, 475 U.S. 534, 106 S.Ct. 1326, 1328, 89 L.Ed.2d 501 (1986):

[E]very federal appellate court has a special obligation to "satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review,".... Mitchell v. Maurer, 293 U.S. 237, 244 [55 S.Ct. 162, 165, 79 L.Ed. 338] (1934). See Juidice v. Vail, 430 U.S. 327, 331-332 [97 S.Ct. 1211, 1215, 51 L.Ed.2d 376] (1977) (standing).... "[When the lower court] lack[s] jurisdiction, we have jurisdiction on appeal, not of the merits but merely for the...