New Jersey Hosp. Ass'n v. U.S., Reno

• Decision Date: 31 August 1998
• Docket Number: Civ. No. 98-1421(GEB).
• Citation: 23 F.Supp.2d 497
• Parties: NEW JERSEY HOSPITAL ASSOCIATION, Plaintiff, v. The UNITED STATES of America, and in their official capacities, Janet Reno, Attorney General, Donna E. Shalala, Secretary of Health and Human Services, and June Gibbs Brown, Inspector General of the Department of Health and Human Services, Defendants.
• Court: U.S. District Court — District of New Jersey

23 F.Supp.2d 497

NEW JERSEY HOSPITAL ASSOCIATION, Plaintiff, v. The UNITED STATES of America, and in their official capacities, Janet Reno, Attorney General, Donna E. Shalala, Secretary of Health and Human Services, and June Gibbs Brown, Inspector General of the Department of Health and Human Services, Defendants.

Civ. No. 98-1421(GEB).

United States District Court, D. New Jersey.

August 31, 1998.

COPYRIGHT MATERIAL OMITTED

James V. Hetzel, Kalison & McBride, P.A., Liberty Corner, NJ, for plaintiff.

Henry A. Azar, Jr., U.S. Department of Justice, Washington, DC, for defendants.

MEMORANDUM OPINION

BROWN, District Judge.

This matter comes before the Court upon the motion of defendants the United States of America, Janet Reno, Donna E. Shalala, and June Gibbs Brown, to dismiss plaintiff's complaint for lack of subject matter jurisdiction pursuant to FED.R.CIV.P. 12(b)(1). For the reasons set forth in this Memorandum Opinion, the Court will grant defendants' motion to dismiss.

I. BACKGROUND

This matter arises from the filing of a complaint by plaintiff, the New Jersey Hospital Association, against defendants, the United States, Janet Reno (as Attorney General), Donna E. Shalala (as Secretary of Health and Human Services), and June Gibbs Brown (as Inspector General of the Department of Health and Human Services). Plaintiff alleges that defendants, specifically the Department of Justice ("DOJ"), on behalf of the Attorney General, are using threats of suit under the False Claims Act and proposed offers of settlement in a coercive manner to resolve disputes between plaintiff's member hospitals and the DOJ regarding overpayment of benefits to the hospitals in violation of the Window Rule of the Medicare Act. Plaintiff asserts violations by the defendants of the Administrative Procedure Act, the Fifth Amendment, and the False Claims Act, and seeks a declaratory judgment from this Court that defendants have in fact violated all of the aforementioned. Defendants, in response, filed the instant motion to dismiss, arguing that the DOJ's actions do not constitute final agency action, and thus are unreviewable by this Court, and that plaintiff's claims are nonjusticiable in that they are not yet ripe for judicial review.

II. DISCUSSION

A. STANDARD FOR A MOTION TO DISMISS PURSUANT TO RULE 12(b)(1)

A district court may grant a motion to dismiss for lack of subject matter jurisdiction pursuant to FED.R.CIV.P. 12(b)(1) based on the legal insufficiency of a claim. Dismissal pursuant to FED.R.CIV.P. 12(b)(1) is only proper, however, when the claim "`clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or ... is wholly insubstantial and frivolous.'" Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408-09 (3d Cir.1991) (quoting Bell v. Hood, 327 U.S. 678, 683, 66 S.Ct. 773, 90 L.Ed. 939 (1946)), cert. denied, 501 U.S. 1222, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991). On a FED.R.CIV.P. 12(b)(1) motion, plaintiff bears the burden of persuading the Court that subject matter jurisdiction exists. See id. at 1409. The factual allegations of plaintiff's complaint must be accepted as true. See Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).

The threshold issue in the matter before the Court is whether, pursuant to the Administrative Procedures Act ("APA"), this Court has jurisdiction to adjudicate plaintiff's claims. The APA provides that agency action may be reviewed by a district court only in those situations where: (1) the agency action is final, see 5 U.S.C. § 704; (2) the plaintiff has "no other adequate remedy in a court," id.; or (3) the action is not "committed to agency discretion by law," 5 U.S.C. § 701(a)(2).

The question then becomes whether the actions of the DOJ in providing settlement letters to plaintiff's member hospitals constitute final agency action, for which there is no other adequate remedy in a court and for which the action has not been committed to agency discretion by law, for purposes of judicial review. This Court finds that the DOJ's actions are not final, that plaintiff has available to it other adequate remedies in a court, and that the agency's actions have been committed by law to agency discretion. Therefore, this Court lacks jurisdiction to address the merits of plaintiff's claims.

The Third Circuit, in Solar Turbines Incorporated v. Seif, set forth five considerations to be addressed in assessing the finality of an agency action: (1) does the agency action represent the definitive position of the agency; (2) does the agency pronouncement have the status of law, so as to expect immediate compliance; (3) does the agency action have an immediate impact on plaintiff's daily operations; (4) is the dispute regarding a pure question of law, without the need for factual development; and (5) will a pre-enforcement challenge speed up enforcement of the relevant act. See Solar Turbines, Inc. v. Seif, 879 F.2d 1073, 1080 (3d Cir.1989) (citing Federal Trade Comm'n v. Standard Oil Co. of Cal., 449 U.S. 232, 239-40, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980)). Finality is to be determined in a pragmatic way. See Abbott Laboratories v. Gardner, 387 U.S. 136, 149, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967).

In Standard Oil, the Supreme Court held that the Federal Trade Commission's issuance of a complaint averring there was "reason to believe" that a party was in violation of the Federal Trade Commission Act was insufficient to satisfy the finality requirement. See Standard Oil, 449 U.S. at 239, 243, 101 S.Ct. 488. The Supreme Court explained that "reason to believe" was merely a determination that adjudicatory proceedings would commence, and the actual issuance of the complaint was sufficient only to initiate the proceedings. See id. at 242, 101 S.Ct. 488. The complaint issued in that case had no effect on the daily operations of defendant's business, nor did it have any legal force compelling a party to do something or refrain from doing something. See id.

In considering the case at bar, the DOJ's actions clearly do not represent the definitive position of the DOJ on this matter. These settlement letters merely indicate a belief by the DOJ that plaintiff's member hospitals may have violated the Medicare Act. Mere "reason to believe" that a party has violated some statutory framework is not a definitive statement of position, but rather "a threshold determination that further inquiry is warranted and that a complaint should initiate proceedings." See Standard Oil, 449 U.S. at 241, 101 S.Ct. 488. Thus, the first step of the analysis is not satisfied.

Second, the DOJ's actions and assertions in dealing with the alleged overpayments do not rise to the status of law, such that immediate compliance is expected. These settlement letters are not a regulation or administrative order that, if not complied with, will subject plaintiff's member hospitals to future civil or criminal liability. They are merely efforts to resolve the overpayment disputes that have been determined to exist by the DOJ. It is not yet even certain that suits pursuant to the False Claims Act ("FCA") will be filed against plaintiff's members. Furthermore, these settlement letters also serve the purpose of allowing the member hospitals to contest the alleged overpayments, and bring any errors by the DOJ to the agency's attention, so that a correct determination of overpayment, if any, can be made.

Third, the DOJ's actions do not have an immediate impact on the daily operations of plaintiff's member hospitals. These institutions are still able to carry out their medical services and provide care to patients. These settlement letters are an effort to correct alleged overpayments in the past, and would require the hospitals to implement certain measures to ensure that overpayments do not occur in the future. This effort by the DOJ in no way affects the daily operations of plaintiff's member hospitals, and thus this step of the analysis is not satisfied either.

Fourth, the dispute in the instant action is not over a pure question of law. The issues in the instant action require extensive factual development beyond that already performed by the DOJ in determining that overpayments occurred. As plaintiff emphasizes, a necessary element of a violation of the FCA is scienter. The DOJ's efforts have merely uncovered overpayments, and have not examined whether each member hospital acted with the necessary state of mind to be liable under the FCA. This factual determination will require significantly more time and effort by the DOJ, and this Court cannot say that the issues in the case at bar are pure questions of law. Therefore, this step of the analysis is not satisfied.

The fifth step of the analysis asks whether a pre-enforcement challenge will speed enforcement of the relevant act. This question must also be answered in the negative. Intervention by the Court at this stage of the proceedings between plaintiff and the DOJ will serve only to frustrate any efforts that might be made between the parties to settle their disputes as to alleged overpayments. Additionally, the overpayments at issue in the instant action are alleged to have occurred in the past. Any challenge addressed by the Court at this time will not speed up enforcement of the act; the act is currently in effect, and the issues at bar deal with alleged past violations of the act.

Inasmuch as plaintiff is unable to satisfy the five steps of the final agency action determination, this Court lacks jurisdiction, pursuant to the terms of the APA, to review plaintiff's claims. Therefore, the Court will grant defendants' motion to dismiss.

Assuming, arguendo, that the actions of the DOJ constituted final agency action for the purposes of this action, these actions would be reviewable only if no other adequate remedy was available to plaintiff in a court. This clearly is not the case in the matter before this Court. Plaint...