Garay, Matter of

• Decision Date: 29 April 1982
• Citation: 444 A.2d 1107,89 N.J. 104
• Parties: , 32 A.L.R.4th 658 In the Matter of Ramon GARAY, M.D.
• Court: New Jersey Supreme Court

Page 104

89 N.J. 104

444 A.2d 1107, 32 A.L.R.4th 658

In the Matter of Ramon GARAY, M.D.

Supreme Court of New Jersey.

Argued Jan. 25, 1982.

Decided April 29, 1982.

Ivan J. Punchatz, Deputy Atty. Gen., for appellant and cross-respondent Division of Medical Assistance and Health Services, Dept. of Human Services (Irwin I. Kimmelman, Atty. Gen., attorney; Erminie L. Conley, Asst. Atty. Gen., of counsel).

John R. Schwartz, Jersey City, for respondent and cross-appellant Ramon Garay, M.D. (Miller, Hochman, Meyerson & Schaeffer, Jersey City, attorneys).

The opinion of the Court was delivered by

PASHMAN, J.

Dr. Ramon Garay was convicted of filing 58 false Medicaid claims totalling $1,290.20. After the criminal proceedings, the State Division of Medical Assistance and Health Services, pursuant to N.J.S.A. 30:4D-7(h) and 30:4D-17(e), directed him to pay a penalty of $121,603.41. This amount included (1) recovery of the money taken plus interest, (2) treble damages and (3) a $2,000 penalty for each claim. All these penalties except for recovery of the amount taken were added by a 1976 amendment to the Medicaid statute which became effective after Garay's fraudulent conduct but before these proceedings commenced.

Respondent urges that retroactive application of these penalties violates the ex post facto law prohibitions in the United States and New Jersey Constitutions, U.S.Const., Art. 1, § 10, cl 1; N.J.Const. (1947), Art. 4, § 7, p 3. He further argues that assessment of these penalties after his criminal trial constitutes double jeopardy, in violation of U.S.Const., Amend. 5; N.J.Const. (1947), Art. 1, p 11. Third, he contends that the excessive penalty constitutes cruel and unusual punishment, U.S.Const., Amend. 8; N.J.Const. (1947), Art. 1, p 12. Finally, Garay claims that the statutory penalties are fundamentally unfair as applied to him and therefore violate the due process clause, U.S.Const., Amend. 14.

The Appellate Division reversed the penalty of $2,000 per claim as fundamentally unfair, but affirmed the other penalties assessed.

We hold that these penalties do not violate the Constitutional prohibitions against ex post facto laws, double jeopardy and cruel and unusual punishment. We do not reach the due process argument. Instead, we hold that the Director of the Division of Medical Assistance and Health Services had discretion to seek less than the full penalty authorized by statute. Since the Director did not use his discretion to determine a reasonable penalty within the statutory limits, we remand so that he may do so.

I

Between 1970 and 1973, Doctor Ramon Garay filed 58 false Medicaid claims for services that he did not perform. He received a total of $1,290.20 on these illegal claims. On July 28, 1975, Garay was indicted and charged with twenty counts of Medicaid fraud, ¹ N.J.S.A. 30:4D-17, and one count of obstruction of justice, N.J.S.A. 2A:85-1. He was found guilty in a jury trial on October 21, 1976. When committed, these acts were a misdemeanor, N.J.S.A. 30:4D-17, punishable by three years' imprisonment and a $1,000 fine. ² N.J.S.A. 2A:85-7. Garay received 19 concurrent jail terms of 18 months and a $500 fine on each count for an aggregate of $9,500, but the entire prison term was suspended. Garay was required to pay the fine and serve three years probation. In addition, the State Board of Medical Examiners revoked his medical license.

The Appellate Division affirmed the conviction in 1978, and we denied certification, 77 N.J. 484, 391 A.2d 499 (1978).

After Garay's conviction, the State Division of Medical Assistance and Health Services (Division) began proceedings to recover the civil penalties provided by the 1976 amendments. Prior to those amendments, the only civil remedy available was recovery of the overpayment. The amendments added N.J.S.A. 30:4D-17(e), ³ which provides:

Any person, firm, corporation, partnership, or other legal entity who violates the provisions of any of the foregoing subsections of this section shall, in addition to any other penalties provided by law, be liable to civil penalties of (1) payment of interest on the amount of the excess benefits or payments at the maximum legal rate in effect on the date the payment was made to said person, firm, corporation, partnership or other legal entity for the period from the date upon which payment was made to the date upon which repayment is made to the State, (2) payment of an amount not to exceed three-fold the amount of such excess benefits or payments, and (3) payment in the sum of $2,000.00 for each excessive claim for assistance, benefits or payments.

The Division demanded that Garay pay $121,603.41 in civil penalties, including (1) the excess payment of $1,290.20; ⁴ (2) $442.61 in interest on the overpayment to June 15, 1977; (3) $3,870.60 in treble damages; and (4) $2,000 per claim ($116,000). Garay requested a hearing to determine his civil liability.

The Director of the Division of Medical Assistance and Health Services (Director) decided the case on stipulated facts. He found that Garay owed the entire $121,603.41 plus interest. The Director noted that L.1976, c. 89, § 3 stated that the civil penalty provisions "shall apply to all pending and subsequent judicial and administrative proceedings." Thus, he properly concluded that they apply to events that occurred prior to the effective date of the 1976 amendments. ⁵ He declined to rule on the constitutional issues raised by Garay.

The Appellate Division reversed the penalty of $2,000 per claim, holding that on the facts of this case, retroactive application of that penalty would be "harsh and oppressive" and "fundamentally unfair." Since the average false claim was only $22.25, the penalty imposed was nearly 100 times the amount taken. Otherwise, the court rejected Garay's constitutional claims on the ground that they were not applicable to civil penalties.

We granted cross-petitions for certification. The State challenges the Appellate Division's decision to overturn the $116,000 penalty. Secondarily, the State questions certain other Appellate Division actions concerning the amount of the penalty. ⁶ Garay defends the Appellate Division result and re-asserts his ex post facto, double jeopardy and cruel and unusual punishment claims.

II

At the outset, we hold that the penalty provisions of N.J.S.A. 30:4D-17(e) are civil remedies. Therefore the United States and New Jersey constitutional protections against ex post facto laws, double jeopardy and cruel and unusual punishments do not apply.

There is no dispute that the constitutional ban against the passage of ex post facto laws applies only to criminal laws. Galvan v. Press, 347 U.S. 522, 531, n.4, 74 S.Ct. 737, 743, n.4, 98 L.Ed. 911 (1954); Calder v. Bull, (U.S.) 3 Dall., 386, 1 L.Ed. 648 (1798); United States v. Gianoulis, 183 F.2d 378, 380 (3d Cir. 1950); The State, Bonney v. Collector of Bridgewater, 31 N.J.L. 133, 135 (Sup.Ct.1864). Similarly, the constitutional provisions concerning cruel and unusual punishment have been held to apply only to penal sanctions. Ingraham v. Wright, 430 U.S. 651, 97 S.Ct. 1401, 51 L.Ed.2d 711 (1977); In re Quinlan, 70 N.J. 10, 37-38, 355 A.2d 647 (1976). Finally, the double jeopardy provisions of both constitutions permit imposition of both criminal and civil penalties for the same act or course of conduct. One Lot Emerald Cut Stones v. United States, 409 U.S. 232, 235-36, 93 S.Ct. 489, 492, 34 L.Ed.2d 438 (1972); Helvering v. Mitchell, 303 U.S. 391, 399, 58 S.Ct. 630, 633, 82 L.Ed. 917 (1938); Orange Taxpayers Council, Inc. v. Orange, 83 N.J. 246, 261-62, 416 A.2d 353 (1980). Thus, the dispositive issue for each of the constitutional claims raised is whether the penalty provisions in N.J.S.A. 30:4D-17(e) are deemed civil or criminal.

The statute describes the penalties as "civil penalties." N.J.S.A. 30:4D-17(e). However, we will not allow form to prevail over substance. Where the statutory scheme is "so punitive either in purpose or effect as to negate" the civil label, it is deemed criminal for purposes of the constitutional protections at issue. ⁷ United States v. Ward, 448 U.S. 242, 249, 100 S.Ct. 2636, 2641, 65 L.Ed.2d 742 (1980).

Ward sets forth the inquiry to be followed in deciding whether a penalty is civil or criminal. Primarily it is a matter of statutory construction. Id. at 248, 100 S.Ct. at 2640. Where the legislature has labelled the penalty civil, that expression of legislative purpose is accorded substantial weight. Id. at 248-49, 100 S.Ct. at 2640-41. Such a penalty will be deemed criminal only upon "the clearest proof" that the sanction is punitive either in purpose or effect. Id.

Garay urges that although the penalties imposed upon him are denominated civil, they are actually punitive. While there have been cases in which the Supreme Court rejected Congress' designation of a penalty as civil, none of them has involved merely monetary penalties. ⁸ For example, Kennedy v. Mendoza-Martin, 372 U.S. 144, 83 S.Ct. 554, 9 L.Ed.2d 644 (1963), concerned forfeiture of citizenship for leaving or remaining outside the United States to evade military service. Similarly, in Trop v. Dulles, 356 U.S. 86, 78 S.Ct. 590, 2 L.Ed.2d 596 (1958), the Court overturned on cruel and unusual punishment grounds a provision stripping a person of citizenship upon court martial conviction and dishonorable discharge for desertion in wartime. The Court applied the Eighth Amendment even though the penalty was labelled civil. However, the qualitative difference between deprivation of citizenship and imposition of monetary sanctions is evident.

Mendoza-Martin, 372 U.S. at 168-69, 83 S.Ct. at 567-68, sets forth some of the factors that are helpful in determining whether a sanction is civil or criminal:

Whether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a...