St. Mary's Hospital, Inc. v. Califano

• Decision Date: 18 December 1978
• Docket Number: No. 78-8001-CIV-CF.,78-8001-CIV-CF.
• Citation: 462 F. Supp. 315
• Parties: ST. MARY'S HOSPITAL, INC., Plaintiff, v. Joseph A. CALIFANO, Jr., Secretary of Health, Education and Welfare, and Blue Cross of Florida, Defendants.
• Court: U.S. District Court — Southern District of Florida

462 F. Supp. 315

ST. MARY'S HOSPITAL, INC., Plaintiff, v. Joseph A. CALIFANO, Jr., Secretary of Health, Education and Welfare, and Blue Cross of Florida, Defendants.

No. 78-8001-CIV-CF.

United States District Court, S. D. Florida.

December 18, 1978.

Herbert C. Gibson, West Palm Beach, Fla., for plaintiff.

Jacob V. Eskenazi, U. S. Atty., Don R. Boswell, Asst. U. S. Atty., Miami, Fla., Carl H. Harper, Regional Atty., F. Richard Waitsman, Asst. Regional Atty., Dept. of HEW, Atlanta, Ga., for defendants.

ORDER

FULTON, Senior District Judge.

This cause came on before the Court on cross motions for summary judgment. Plaintiff, St. Mary's Hospital, is a provider of Medicare services pursuant to Title XVIII of the Social Security Act, 42 U.S.C. § 1395h. Defendants, the Secretary of HEW and Blue Cross of Florida, reimburse providers of Medicare services rendered, and maintain cost reports of these disbursements. Reimbursements to providers of Medicare services are carried out by either the Secretary, or more commonly, by private organizations such as Blue Cross of Florida acting under contract with the Secretary. This reimbursement process naturally requires a determination of the cost of services rendered by the participating hospital. To that end, providers are required by law to provide annual "cost reports" to the Secretary. 42 U.S.C. § 1395g. Plaintiff's cost report for fiscal year 1977 is the subject of this controversy.

The defendants have received requests from third parties for disclosure of plaintiff's 1977 cost reports. Defendants have notified plaintiff of these requests and that the cost reports in question will be furnished pursuant to 20 C.F.R. § 422.435. That regulation provides:

The following shall be made available to the public under the conditions specified.

. . . . .

. . . . . Upon request in writing, cost reports submitted by providers of services pursuant to section 1815 of the act 42 U.S.C. 1395g to enable the Secretary to determine amounts due such providers.

Plaintiff brought this action to permanently enjoin defendant from disclosure of the cost reports. Plaintiff argues that disclosure is prohibited by the Freedom of Information Act, 5 U.S.C. §§ 552(b)(3) and 552(b)(4); by the Trade Secrets Act, 18 U.S.C. § 1905 (a criminal statute); and that disclosure would be an abuse of discretion under the Administrative Procedure Act, 5 U.S.C. § 706(2)(A).¹ The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331. Sears, Roebuck & Co. v. General Services Administration, 180 U.S.App.D.C. 202, 553 F.2d 1378, 1380-1381 (1977). A stipulation of facts was entered into by counsel for the parties and is hereby incorporated by reference. The Court has also examined in camera plaintiff's 1977 cost report. For the reasons set forth below, the Court finds that there is no genuine issue as to any material fact and that defendant is entitled to judgment as a matter of law.

THE FREEDOM OF INFORMATION ACT

Section 552(a) of the Freedom of Information Act (FOIA) requires that Federal Agencies make certain information available to the public. Section 552(b)(4) contains specific exceptions for privileged or confidential records.² Plaintiff argues that this provision prohibits disclosure. Defendant asserts that the exceptions contained in § 552 do not prohibit disclosure, but merely leave the question of disclosure to the Secretary's discretion. Defendant notes that 20 C.F.R. § 422.435 reflects the Secretary's decision to make such information available to the public.

The defendant's interpretation of § 552(b)(4) has been adopted by the Fifth Circuit in Pennzoil v. Federal Power Commission, 534 F.2d 627 (5th Cir. 1976). It is also the law in the majority of Circuits. See Charles River Park "A", Inc. v. HUD, 171 U.S.App.D.C. 286, 519 F.2d 935 (1975), Chrysler Corp. v. Schlesinger, 565 F.2d 1172 (3rd Cir. 1977), General Dynamics Corp. v. Marshall, 572 F.2d 1211 (8th Cir. 1978). This result is clearly consistent with the purpose of the FOIA: to promote full disclosure of information to the public. See Charles River Park, supra at 941.

A recent case in the Middle District of Florida addressed the issue of whether § 552(b)(4) prohibits disclosure of Medicare cost reports. Doctors Hospital of Sarasota v. Califano, 455 F.Supp. 476 (D.C.Cir.1978). In that case, the Court held that § 552(b)(4) does not prohibit disclosure of Medicare cost reports. The facts in Doctors Hospital are virtually identical to the case at bar. This Court concludes that § 552(b)(4) of the FOIA is not a bar to release of Medicare reports. Even if those reports are "confidential" within the meaning of the (b)(4) exemption, the Secretary has the discretionary power to disclose the reports to the public.

Plaintiff also relies on § 552(b)(3) as a prohibition on disclosure. That provision merely exempts from mandatory disclosure "matters that are . . . specifically exempted from disclosure by statute (other than Section 552(b))." Presumably, plaintiff relies on 18 U.S.C. § 1905 as the exempting statute. That issue can be disposed of summarily. Section 1905, a criminal provision, is not one of the "specific exemptions" referred to in § 552(b)(3). See Charles River Park "A" supra, at 941 n. 7; See also United Technologies Corporation v. Marshall, 78-8253-Civ-JE (S.D.Fla., Sept. 25, 1978). Thus, the exemption in § 552(b)(3) is not a bar to the Secretary's disclosure.

THE TRADE SECRETS ACT

Plaintiff argues that 20 C.F.R. § 422.435 is invalid because it would violate 18 U.S.C. § 1905, the Trade Secrets Act. Section 1905 provides:

Whoever, being an officer or employee of the United States or of any department or agency thereof, publishes, divulges, discloses, or makes known in any manner or to any extent not authorized by law any information coming to him in the course of his employment or official duties or by reason of any examination or investigation made by, or return, report of record made to or filed with, such department or agency or officer or employee thereof, which information concerns or relates to the trade secrets, processes, operations, style of work, or apparatus, or to the identity, confidential statistical data, amount or source of any income, profits, losses, or expenditures of any person, firm, partnership, corporation, or association; or permits any income return or copy thereof or particulars thereof to be seen or examined by any person except as provided by law; shall be fined not more than $1,000, or imprisoned not more than one year, or both; and shall be removed from office or employment. (Emphasis supplied).

Defendant argues that § 422.435 is a valid regulation bringing disclosure within the "authorized by law exemption" in Section 1905.

An initial problem, not raised by the parties, is whether a private civil cause of action may be predicated on § 1905, a criminal statute. Of the four Circuit Courts that have squarely addressed that issue in the FOIA context, three have concluded that a civil cause of action should not be implied. Sears Roebuck & Co. v. Eckerd, 575 F.2d 1197 (7th Cir. 1978). General Dynamics Corp. v. Marshall, 572 F.2d 1211 (8th Cir. 1978), Chrysler Corp. v. Schlesinger, 565 F.2d 1172 (3rd Cir. 1977), contra Westinghouse Electric Corp. v. Schlesinger, 542 F.2d 1190 (4th Cir. 1976) cert. denied 431 U.S. 924, 97 S.Ct. 2199, 53 L.Ed.2d 239 (1977).

In the Sears Roebuck case the Seventh Circuit applied the four pronged test of Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975) and concluded "on balance Section 1905 should not be interpreted to imply a private cause of action." Sears Roebuck, supra at 1202. The determining factors were the second and third prongs of the Cort test: that nothing in the legislative history of § 1905 indicated a Congressional intent to create a civil remedy, and that an implied civil action would not be consistent with the purpose of the statute. This latter point is particularly persuasive. The Administrative Procedure Act provides for judicial review by agency decisions. 18 U.S.C. § 1905 is a criminal statute designed solely to prevent government employees from surreptitiously divulging privileged information. It was never intended as a vehicle for challenging an Administrative Agency regulation. This Court will not imply a civil cause of action when to do so would be both unnecessary and inconsistent with the Congressional purpose of the statute. Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 477, 97 S.Ct. 1292, 51 L.Ed.2d 480 (1976).

Assuming arguendo that a cause of action should be implied under § 1905, plaintiff's argument nevertheless fails. The Secretary's Regulation 422.435 was validly promulgated and has the force of law. Disclosure is therefore "authorized" by law within the meaning of § 1905. Sears Roebuck & Co. v. Eckerd, supra; General Dynamics Corp. v. Marshall, supra; Chrysler Corp. v. Schlesinger, supra, 565 F.2d at 1186-1187; Westinghouse Electric Corp. v. United States Nuclear Regulatory Commission, 555 F.2d 82, 94 (3rd Cir. 1977); and Doctor's Hospital of Sarasota v. Califano, supra. But See Westinghouse Electric Corp. v. Schlesinger, 542 F.2d 1190 (4th Cir. 1976). While there is no decision in this Circuit on the question, Judge Krentzman's decision in Doctors Hospital of Sarasota v. Califano, supra is in accord with this view.

ABUSE OF DISCRETION

Plaintiff argues that disclosure of its Medicare cost reports by the Secretary would be an abuse of discretion within the meaning of § 706(2)(A) of the Administrative Procedure Act, 5 U.S.C. § 706(2)(A). Plaintiff argues in support of the position that disclosure is contrary to 18 U.S.C. § 1905. This Court has already determined that § 1905 does not prohibit disclosure of Medicare cost reports. Rather, the appropriate inquiry is whether the Secretary considered all of the relevant factors in formulating 20 C.F.R. § 422.435. The Fifth Circuit, in Pennzoil v. Federal Power...