Guzman v. Shewry

• Decision Date: 23 September 2008
• Docket Number: No. 08-55326.,08-55326.
• Citation: 544 F.3d 1073
• Parties: Eduardo J. GUZMAN, M.D., Plaintiff-Appellant, v. Sandra SHEWRY, Director of the California State Department of Health Care Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

544 F.3d 1073

Eduardo J. GUZMAN, M.D., Plaintiff-Appellant, v. Sandra SHEWRY, Director of the California State Department of Health Care Services, Defendant-Appellee.

No. 08-55326.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 4, 2008.

Filed September 23, 2008.

Patric Hooper, Hooper, Lundy & Bookman, Inc., Los Angeles, CA, argued the cause for the plaintiff-appellant and filed briefs.

Janet E. Burns, Deputy Attorney General, State of California, Los Angeles, CA, argued the cause for the defendant-appellee and filed a brief; Phillip J. Matsumoto, Deputy Attorney General, Richard T. Waldow, Supervising Attorney General, Douglas M. Press, Senior Assistant Attorney General, and Edmund G. Brown, Jr., Attorney General for the State of California, were on the brief.

Appeal from the United States District Court for the Central District of California; Margaret M. Morrow, District Judge, Presiding. D.C. No. 08-CV-00769-MMM.

Before: DAVID R. THOMPSON, DIARMUID F. O'SCANNLAIN, and RICHARD C. TALLMAN, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must decide whether a district court abused its discretion in denying a physician a preliminary injunction to halt his temporary suspension from California's Medi-Cal program based on his claims that such suspension violates federal Medicaid law and is prohibited by the Due Process Clause of the Fourteenth Amendment.

I

A

Medicaid is a cooperative federal-state program that authorizes the United States Government to provide funds to participating states to administer medical assistance to individuals "whose income and resources are insufficient to meet the costs of necessary medical services." 42 U.S.C. § 1396. The program operates by authorizing the Federal Government to pay a percentage of the costs a state incurs for patient care, and, in return, the state complies with certain federal requirements. See 42 U.S.C. § 1396a. Administration of the program is entrusted to the Secretary of Health and Human Services ("HHS"), who also has the authority to promulgate regulations under the Medicaid Act. California participates in Medicaid through the California Medical Assistance Program ("Medi-Cal"), and has designated its Department of Health Care Services ("DHCS" or the "Department")¹ as the agency responsible for its administration. See id. § 1396a(a)(5); Cal. Welf. & Inst. Code §§ 10720, 14000.

B

Dr. Eduardo J. Guzman, M.D., is an obstetrician/gynecologist who provides services through Medi-Cal. Sometime in 2006, DHCS opened an investigation into certain claims Guzman had submitted to Medi-Cal for payment. On August 30, 2006, after several searches of his offices in Downey and Norwalk, California, DHCS filed an Accusation against Guzman alleging that he had imported large quantities of intrauterine devices ("IUDs") from Mexico that had not been approved by the Food and Drug Administration ("FDA") for use in this country; that he had inserted such devices into his patients, Medi-Cal beneficiaries; and that he had billed Medi-Cal for his services, fraudulently claiming that the devices used were FDA-approved. The Accusation notified Guzman that DHCS would seek permanently to suspend him from the Medi-Cal program as a result of these allegations. See Cal. Welf. & Inst.Code § 14123. Some time later, the California Attorney General's Office filed felony criminal charges against Guzman arising from the same alleged conduct.²

DHCS scheduled an administrative hearing on the Accusation for August 2007, but Guzman requested that it be post-poned until the criminal proceedings against him were concluded.³ DHCS granted the request. Nevertheless, on January 22, 2008, DHCS sent Guzman a letter informing him that he would be suspended temporarily from participating in Medi-Cal because of the pending criminal proceedings against him. The letter stated that the suspension would take effect on February 6, 2008, and would continue until Medi-Cal determined that he was "no longer under investigation" or until "after legal proceedings related to the alleged fraud or abuses are completed." Once enforced, the suspension would prohibit Guzman from billing Medi-Cal for any services rendered.⁴

As the letter explained, California law entitled Guzman to appeal the temporary suspension. DHCS concedes, however, that such appeal is limited to the question of whether a provider is, in fact, under investigation for fraud or abuse. Thus, Guzman would not have been able to contest the underlying allegations against him in such an appeal. In addition, the letter explained that Guzman also had the right to "request a meeting with [DHCS] representatives" if he believed the information on which Medi-Cal was relying was erroneous. See Cal. Welf. & Inst.Code § 14123.05. It is not clear whether Guzman would have been able to challenge the validity of the underlying fraud allegations at such a meeting. In any event, Guzman decided not to avail himself of either procedure.

C

On February 5, 2008, Guzman filed a complaint against DHCS in the district court under 42 U.S.C. § 1983 seeking a preliminary injunction to halt the temporary suspension. Guzman asserted that a preliminary injunction was necessary because his suspension would irreparably harm his patients, his practice, and his reputation.⁵ Although a California statute authorizes such suspension, Cal. Welf. & Inst.Code § 14043.36(a), Guzman argued that the statute was preempted by federal law, and that he was entitled to a presuspension hearing either by federal Medicaid statutes and regulations or, in the alternative, the Due Process Clause of the Fourteenth Amendment.

DHCS agreed to delay enforcement of the suspension for one month, allowing the district court sufficient time to rule on Guzman's expedited motion for a preliminary injunction. On March 4, 2008, the district court denied the motion, concluding that Guzman would not likely be able to show that California Welfare and Institutions Code section 14043.36(a) was preempted by federal law, or that he had a statutory or constitutional right to a presuspension hearing. Nevertheless, the district court granted a limited stay allowing Guzman to file an emergency motion in this court to enjoin the suspension pending appeal. On March 5, 2008, a motions panel of this court denied the motion, but expedited the briefing schedule and the date of oral argument. This timely appeal followed.

II

"Our review of the denial of a preliminary injunction is limited and deferential." Wildwest Inst. v. Bull, 472 F.3d 587, 589 (9th Cir.2006) (internal quotation marks omitted). "We ask only whether the district court has abused its discretion." Id. In such cases, the scope of our review is "generally limited to whether the district court [1] employed the proper preliminary injunction standard and [2] whether the court correctly apprehended the underlying legal issues in the case." Earth Island Inst. v. U.S. Forest Serv., 351 F.3d 1291, 1298 (9th Cir.2003). In other words, "[a]s long as the district court got the law right, it will not be reversed simply because the appellate court would have arrived at a different result if it had applied the law to the facts of the case." Wildwest Inst., 472 F.3d at 590.

A district court may grant a preliminary injunction under two sets of circumstances. In the first case, "`a plaintiff must show (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases).'" Natural Res. Def. Council, Inc. v. Winter, 518 F.3d 658, 677 (9th Cir.2008) (quoting Freecycle Network, Inc. v. Oey, 505 F.3d 898, 902 (9th Cir.2007)). In the second case, "a court may grant the injunction if the plaintiff demonstrates either a combination of probable success on the merits and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in his favor." Id. (emphasis added) (quoting Freecycle, 505 F.3d at 902).

The district court articulated this standard and, in applying it, held that Guzman had failed to show a likelihood of success on the merits. Thus, the court declined to consider the possibility that Guzman would suffer irreparable injury. Such action was a valid exercise of the court's discretion. As we have held previously, before a preliminary injunction is granted, at "`an irreducible minimum, the moving party must demonstrate a fair chance of success on the merits, or questions serious enough to require litigation.'" Dep't of Parks & Recreation v. Bazaar Del Mundo Inc., 448 F.3d 1118, 1124 (9th Cir. 2006) (quoting Arcamuzi v. Cont'l Air Lines, Inc., 819 F.2d 935, 937 (9th Cir. 1987)). Thus, we must decide whether the district court correctly apprehended the law underlying Guzman's claims in concluding that he was unlikely to prevail. We now consider each of those claims in turn.

III

A

We begin with Guzman's claim that California Welfare and Institutions Code section 14043.36(a) is preempted by federal law. "Under the Supremacy Clause, U.S. Const., art. VI, cl. 2, state laws that interfere with, or are contrary to the laws of congress, made in pursuance of the constitution are invalid." Wis. Pub. Intervenor v. Mortier, 501 U.S. 597, 604, 111 S.Ct. 2476, 115 L.Ed.2d 532 (1991) (internal quotation marks and citation omitted). Guzman argues that California Welfare and Institutions Code section 14043.36(a) runs afoul of this provision because it conflicts with, and is therefore preempted by, federal Medicaid law. In preemption cases, we begin with the presumption that the "historic police powers of the States" are not superseded by federal law unless such result was the "clear and manifest purpose of Congress." Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (internal quotation marks and...