Cleanmaster Industries, Inc. v. Shewry
| Decision Date | 04 April 2007 |
| Docket Number | No. CV 06-2539 FMC (RZx).,CV 06-2539 FMC (RZx). |
| Citation | 491 F.Supp.2d 937 |
| Parties | CLEANMASTER INDUSTRIES, INC., dba Prescriptions Plus, Plaintiff, v. SANDRA SHEWRY, Director of the California Department of Health Services, Defendant. |
| Court | U.S. District Court — Central District of California |
Lil G. Delcampo, Patric Hooper, Hooper Lundy and Bookman, Los Angeles, CA, for Plaintiff.
Eric D. Bates, Karen L. Fried, Office of Attorney General of California, Los Angeles, CA, for Defendant.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on the Motion for Summary Judgment of Plaintiff Cleanmaster Industries Inc., dba Prescriptions Plus (Cleanmaster Industries), filed on October 3, 2006 (docket no. 27). The Court has read and considered the moving, opposition, and reply documents submitted in connection with this Motion, as well as the papers submitted in response to the Court's November 15, 2006, Order Requesting Further Briefing. The matter was heard on November 11, 2006, at which time the parties were in receipt of the Court's November 8, 2006, Tentative Order. For the reasons and in the manner set forth below, the Court hereby GRANTS IN PART AND DENIES IN PART Plaintiff's Motion for Summary Judgment.
Plaintiff Cleanmaster Industries operates a "closed door" pharmacy. (Def.'s Statement of Genuine Issues in Opp'n to Pl.'s Statement of Uncontroverted Facts (Opp'n Statement) ¶ 1.1) It delivers filled prescriptions to over 1,500 patients, many of whom are homebound. (Decl. of Joseph Kahan in Support of Application for TRO (Kahan Decl.) ¶ 4.) It participates in Medi-Cal, a California program that works in conjunction with Medicare to provide health care and medicine to those in need. (Id. at ¶ 6.) Cleanmaster Industries has been a Medi-Cal provider for approximately sixteen years and relies on the program for over 80 percent of its business. (Opp'n Statement ¶¶ 1, 4.)
As part of its efforts to expose and eliminate fraud, the California Department of Health Services (the Department) routinely chooses categories of providers to reenroll in the program. If the Department denies an application for reenrollment, the provider is removed from the program and may not reapply for three years from the date of denial. Cal. Welf. & Inst.Code § 14043.26 (West 2006). The Department's decision to deny an application may be contested through a written-only appeals process. Cal. Welf. & Inst. Code § 14043.65(a) (West 2006). Choosing to appeal the decision, however, causes the period of debarment to be extended such that the former provider may not reenroll in the Medi-Cal program for three years from the date of that appeal's final disposition. Cal. Welf. & Inst.Code § 14043.65(b) (West 2006).
In 2003, the Department required the plaintiff to reenroll in the Medi-Cal program and, on March 23, 2006, gave notice that its application was denied. (Opp'n Statement ¶¶ 6, 9.) The plaintiff chose not to appeal the Department's decision through the administrative process but instead filed the present action seeking declaratory relief and an injunction. The plaintiff argues that the process the Department employs to remove providers from the Medi-Cal program violates providers' due process rights by (1) denying them an opportunity to be heard prior to removal, (2) failing to provide a full, testimonial hearing promptly following debarment, and (3) penalizing applicants who appeal the Department's decisions by prolonging the period during which they are precluded from reenrolling in the Medi-Cal program.
On May 12, 2006, the Court issued a TRO enjoining the defendant from debarring Cleanmaster Industries or precluding it from continuing to operate as a Medi-Cal provider. On October 3, 2006, the plaintiff filed the present motion for summary judgment. The matter was heard on November 11, 2006, and, on November 15, 2006, the Court issued an order requesting additional briefing on whether the doctrine of collateral estoppel precluded Cleanmaster Industries from bringing an as applied challenge to § 14043.65 without first Challenging the Department's decision through a writ of administrative mandamus.
Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the initial responsibility of informing the court of the basis of its motion, and identifying those portions of "`pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)). Where the nonmoving party will have the burden of proof at trial, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case. See id. If the moving party meets its initial burden, the nonmoving party must then set forth, by affidavit or as otherwise provided in Rule 56, "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The substantive law governing a claim determines whether a fact is material. T.W. Elec. Sera v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). In judging evidence at the summary judgment stage, the Court does not make credibility determinations or weigh conflicting evidence and draws all inferences in the light most favorable to the nonmoving party. Id. at 630-31. The evidence presented by the parties must be admissible. Fed.R.Civ.P. 56(e). Mere disagreement or the bald assertion that a genuine issue of material fact exists does not preclude the use of summary judgment. Harper v. Wallingford, 877 F.2d 728 (9th Cir.1989).
The standard that applies to a motion for summary adjudication is the same as that which applies to a motion for summary judgment. See Gulf Ins. Co. v. Hi-Voltage Wire Works, Inc., 388 F.Supp.2d 1134, 1136 (E.D.Cal.2005) (citing Mora v. Chem-Tronics, Inc., 16 F.Supp.2d 1192, 1200 (S.D.Cal.1998)).
In its opposition to the plaintiff's Motion for Summary Judgment, the defendant has renewed its objection to the plaintiff's ability to bring this action under 42 U.S.C. § 1983. It insists that the plaintiff's claims are premised on violations of various agency regulations, which cannot support § 1983 actions as they do not create enforceable rights. As the Court made clear in its Order Granting in Part and Denying in Part Defendant's Motion to Dismiss (docket no. 26), the plaintiff has properly brought its claims under § 1983 because they concern violations of the plaintiff's due process rights guaranteed by the Fourteenth Amendment. See, e.g., Armendariz v. Penman, 75 F.3d 1311 (1996) ().
The Ninth Circuit has held that, although a provider does not have a right to continued participation in the Medicare, Medicaid, or related state programs, a provider's liberty interest is implicated, invoking procedural due process protections, where "a charge impairs [its] reputation for honesty or morality," "the accuracy of the charge is contested, there is some public disclosure of the charge, and it is made in connection with the termination of employment or the alteration of some right or status recognized by [] law." Erickson v. U.S. ex rel. Dep't of Health and Human Servs., 67 F.3d 858, 862 (9th Cir.1995) (internal quotations and citations omitted). Despite the Court's conclusions in its previous orders that these elements have been satisfied, the defendant attempts to resurrect this issue with a declaration by one of the Department's employees that the charges will not be made public.2 It also argues that the charges against the plaintiff did not concern the plaintiff's honesty or integrity.
Irrespective of the Department's policy, the law is clear that the defendant would have been required to report the plaintiff's exclusion from the Medi-Cal program to the Healthcare Integrity and Protection Data Bank (HIPDB). The HIPDB was created with the express purpose of "reporting and disclosing ... certain final adverse actions taken against health care providers, suppliers, or practitioners." 45 C.F.R. § 61.1 (2006). Such public disclosure would constitute precisely the type of publication found to affect a protected liberty interest in Erickson. Erickson, 67 F.3d at 862. Federal regulations provide that federal and state government agencies "must report health care providers ... excluded from participating in Federal or State health care programs" to the HIPDB and imposes sanctions on agencies that fail to comply. 45 C.F.R. § 61.10 (2006) (emphasis added). The regulations define "exclusion" as "a temporary or permanent debarment of an individual or entity from participation in any Federal or State health-related program, in accordance with which items or services furnished by such person or entity will not be reimbursed under any Federal or State health-related program." 45 C.F.R. § 61.3 (2006).3
It is undeniable that the Department's deactivation of the plaintiff's provider numbers, removal of the plaintiff from the Medi-Cal program, denial of any further reimbursements to the plaintiff under the Medi-Cal program, and exclusion of the plaintiff from reentering the Medi-Cal program for a period of at least three years constituted an "exclusion" under the regulations. The Department's contention that it need only report "permanent" suspensions has no legal support and flatly contradicts...
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...(2d Cir.1986) ); see also Vencor Nursing Centers v. Shalala, 63 F.Supp.2d 1, 10 (D.D.C.1999) ; Cleanmaster Industries , Inc. v. Shewry, 491 F.Supp.2d 937, 943 (C.D.Cal.2007). A provider's property interest in Medicaid participation is nonetheless only triggered when it is decertified, its p......
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