Catholic Social Service v. Shalala

• Decision Date: 11 January 1994
• Docket Number: No. 92-5249,92-5249
• Citation: 12 F.3d 1123
• Parties: , 43 Soc.Sec.Rep.Ser. 277, Medicare&Medicaid Guide P 42,034 CATHOLIC SOCIAL SERVICE, et al., Appellants, v. Donna E. SHALALA, Secretary, Health and Human Services.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1123

12 F.3d 1123

304 U.S.App.D.C. 258, 43 Soc.Sec.Rep.Ser. 277,

Medicare&Medicaid Guide P 42,034

CATHOLIC SOCIAL SERVICE, et al., Appellants, v. Donna E. SHALALA, Secretary, Health and Human Services.

No. 92-5249.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 24, 1993.

Decided Jan. 11, 1994.

Appeal from the United States District Court for the District of Columbia (90cv1537).

James C. Pyles, Washington, DC, argued the cause for appellants. With him on the brief was Jenny A. Brody.

Edward T. Swaine, Atty., U.S. Dept. of Justice, Washington, DC, argued the cause for appellee. With him on the brief were J. Ramsey Johnson, Acting U.S. Atty. at the time the brief was filed, Barbara C. Biddle, Atty., U.S. Dept. of Justice, Harriet S. Rabb, Gen. Counsel, Darrel J. Grinstead, Associate Gen. Counsel, Henry R. Goldberg, Litigation Deputy, and Gerard Keating, Atty., U.S. Dept. of Health and Human Services, Anthony J. Steinmeyer, Asst. Director of Appellate Staff, U.S. Dept. of Justice, entered an appearance.

Before: EDWARDS and SILBERMAN, Circuit Judges, and RESTANI, ^* Judge, United States Court of International Trade.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

A group of home health care providers appeal from the district court's dismissal of their suit challenging a Health and Human Services regulation on grounds that they lack standing. We agree with appellants as to their standing but nevertheless affirm the district court because appellants' substantive claim is not valid.

I.

Appellants challenge a Medicare cost-limit rule promulgated by the Secretary of Health and Human Services in 1985. Under the Medicare Program, Congress undertook to reimburse, inter alia, home health services providers for the reasonable, actual costs of care delivered to Medicare beneficiaries. See 42 U.S.C. Sec. 1395f(b). The Secretary, pursuant to his authority under 42 U.S.C. Sec. 1395x(v)(1)(A), began promulgating regulations setting limits on the costs incurred by such providers that would be considered "reasonable," and hence reimbursable, under Medicare. See 44 Fed.Reg. 12,509 (1979). On July 5, 1985, the Secretary promulgated a new cost-limit rule that changed the method by which compliance with the specified cost limits would be determined. Prior to the rule, a health provider's costs were measured on an aggregate basis for purposes of applying the cost limits. That meant that a provider whose costs were above the permissible limits for one type of discipline, for example physical therapy, would nevertheless not have its costs disallowed if its costs for other disciplines, and accordingly its aggregate costs, were below the limits. Under the new rule, however, cost limits were to be applied on a per discipline basis, a change that the Secretary acknowledged could result in cost disallowances for more than 70% of home health providers. See 50 Fed.Reg. 20,188 (1985). Although the Secretary published the rule on July 5, 1985, he specified that "[t]he schedule of limits is effective for cost reporting periods beginning on or after July 1, 1985." 50 Fed.Reg. 27,734 (1985). Accordingly, on its face, the rule appeared to apply retroactively.

Subsequent to the promulgation of this rule, we held, and the Supreme Court agreed, that the Medicare statute did not authorize the Secretary to promulgate retroactive cost-limit rules. See Georgetown Univ. Hosp. v. Bowen, 821 F.2d 750, 758-60, (D.C.Cir.1987), aff'd, 488 U.S. 204, 215, 109 S.Ct. 468, 475, 102 L.Ed.2d 493 (1988). We also concluded that the Administrative Procedure Act (APA), 5 U.S.C. Sec. 553 (1988), generally prohibits the promulgation of so-called "legislative" rules retroactively, an issue that the Supreme Court did not reach. See Georgetown, 821 F.2d at 758, 488 U.S. at 216, 109 S.Ct. at 476 (Scalia, J., concurring).

A number of home health care providers, relying on those cases, filed suit in district court, challenging the rule's validity. During the pendency of the case, six of the providers, those with cost reporting periods beginning on July 1, 1985, entered into settlements with the Secretary. None of the remaining providers in the case had cost reporting periods that began prior to the rule's promulgation. ¹ On cross-motions for summary judgment, the district court, without reaching the rule's validity, dismissed the case on the grounds that appellants lacked standing to bring this challenge. ² The court reasoned that "according to the plain language of the rule, the new limits ... did not apply to plaintiffs until the start of their new cost periods" and "[t]hus ... had only prospective effect as applied to [them]." Any financial "injury" the home health care providers suffered from the rule had no connection to its retroactive character, and, therefore, the court thought that under the APA the providers were not "adversely affected or aggrieved by agency action within the meaning of a relevant statute." 5 U.S.C. Sec. 702.

II.

Appellants assert that the district court mischaracterized their substantive argument and that once their claim is properly understood it should also be recognized that they have standing to raise it. Although standing " 'focuses on the party seeking to get his complaint before a federal court and not on the issues he wishes to have adjudicated,' " see, e.g., Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 484, 102 S.Ct. 752, 765, 70 L.Ed.2d 700 (1982) (quoting Flast v. Cohen, 392 U.S. 83, 99, 88 S.Ct. 1942, 1952, 20 L.Ed.2d 947 (1968) (emphasis added)), a plaintiff's standing must be analyzed with reference to the particular claim made. See International Primate Protection League v. Administrators of Tulane Educ. Fund, 500 U.S. 72, ----, 111 S.Ct. 1700, 1704, 114 L.Ed.2d 134 (1991) ("[S]tanding is gauged by the specific common-law, statutory or constitutional claims that a party presents."). We think appellants are, therefore, correct. They have been quite deft in fashioning their claim so as to establish standing and to avoid pitfalls that would jeopardize their footing.

Appellants claim that the rule in question, which undeniably has retroactive aspects, is, as a matter of administrative law, ultra vires and void ab initio. It is as if the Secretary wrote the rule on a scratch pad, left it in her home, and never published it in the Federal Register. It follows, according to appellants, that the rule's retroactivity or defective aspects affect them because if the rule were void ab initio it would not be in effect for anyone and they would be entitled to greater reimbursement ($5 million more) from the government per the pre-rule cost-limit methodology. Appellants conceded forthrightly at oral argument that if they are wrong on their substantive administrative law claim--if the rule were not void ab initio, but only partially infirm and partially legal--then they lack standing to present a third-party claim on behalf of those providers against whom the rule has a specific retroactive impact.

The government challenges appellants' Article III injury and causation theory, stating that appellants' "account is deeply suspect [and] strain[s] every element of constitutional standing" because it "depends unabashedly on their attenuated theory that a rule which is effective retroactively as to any party is wholly invalid." Of course, as we have noted, appellants do not accept the proposition that the rule does not have a retroactive "effect" as to them, but, passing that dispute, if one takes out the adjectives and adverbs from the government's formulation, the government is not really contesting appellants' Article III standing. ³

The government's prudential standing argument is more substantial. It is based on two doctrines which federal courts have added to Article III standing requirements. A plaintiff's complaint must fall within the "zone of interests to be protected or regulated by the statute or constitutional guarantee in question," Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970), and, as a corollary, "the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties." Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975) (citations omitted).

The first doctrine, the zone of interests test, has given rise to a good deal of administrative law standing litigation. See 13 CHARLES ALAN WRIGHT, ARTHUR R. MILLER, AND EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE, Sec. 3531.7, at 516 (1984). Section 702 of the APA which limits judicial review to those "aggrieved by agency action within the meaning of a relevant statute " has been interpreted to incorporate the zone of interests limitations. Data Processing, 397 U.S. at 153-54, 90 S.Ct. at 830 (emphasis added). In other words, a plaintiff has to find in the statute under which he is making a substantive claim some indication that Congress wished--or at least tolerated--some sort of claim brought by that plaintiff to be entertained in federal court. Is he to be thought a suitable challenger?

It is argued that appellants are not suitable challengers because the defect in the regulation of which they complain is of no moment to them. The presumptive ban on retroactive rulemaking, drawn from both the Medicare Act and the APA itself, is designed to protect only those who would be directly affected by a retroactive aspect of a rule.

Appellants' substantive claim, however, is simply different than the government's description of the claim. Appellants argue that the principle of administrative law for which they contend necessarily assumes they fall within the zone of interests to be vindicated. If, as appellants argue, a rule that is retroactive in specific application is...