Plaza Health Laboratories, Inc. v. Perales

878 F.2d 577, 1989 U.S. App. LEXIS 9122, 1989 WL 67927
Court of Appeals for the Second Circuit·Decided June 21, 1989·No. No. 1102, Docket 89-7146·Published·Cited by 46 cases

Opinion

KEARSE, Circuit Judge:

Plaintiff Plaza Health Laboratories, Inc. (“Plaza”), a suspended provider of healthcare services in the New York State Medical Assistance Program (“Medicaid”), appeals from an order of the United States District Court for the Southern District of New York, Peter K. Leisure, Judge, denying its motion for a preliminary injunction requiring defendants Cesar A. Perales and the New York State Department of Social Services (collectively “DSS”) to refrain from suspending or terminating Plaza’s participation as a Medicaid provider, following a New Jersey indictment of Plaza and one of its owners for dumping hazardous medical wastes into the Hudson River. Plaza, suing under 42 U.S.C. § 1983 (1982), contended that the suspension violated its rights to due process and to be free of ex post facto application of certain laws. The district court denied the motion on the ground that Plaza had not shown a likelihood of success on the merits of its claims. On appeal, Plaza contends principally that the district court did not apply the proper standard for decision of preliminary injunction motions and did not appropriately assess the likelihood of Plaza’s success on the merits of its claims. For the reasons below, we find no abuse of discretion in the denial of the injunction.

I. BACKGROUND

The underlying facts, undisputed for present purposes, may be summarized as follows.

Plaza operates a clinical medical laboratory in Brooklyn, New York. DSS is the New York State (“State”) agency charged with the administration of the Medicaid program in the State. In January 1988, Plaza became a DSS-approved Medicaid provider of laboratory services, authorized to perform services for eligible Medicaid patients and to bill the State for its fees. The competence of Plaza’s laboratory performance has not been challenged.

On November 18, 1988, Plaza and one of its 50% owners, who was an employee of Plaza, were indicted in New Jersey on charges of, inter alia, knowingly causing the release of hazardous substances from the Plaza laboratory, including medical waste posing a threat to human health, into the Hudson River. The unlawful releases [579]*579were alleged to have taken place between June 18 and September 26, 1988.

By letter dated November 23, 1988, DSS notified Plaza that, effective five days thereafter, Plaza was to be suspended from participation in the Medicaid program. The notice, entitled “NOTICE OF IMMEDIATE AGENCY ACTION,” stated, in pertinent part, as follows:

THE NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES HAS DETERMINED TO SUSPEND YOU FROM PARTICIPATION IN THE MEDICAL ASSISTANCE (MEDICAID) PROGRAM.
1. You have violated the provisions of the Department’s regulations authorizing immediate action (18 NYCRR 515.7(b)), effective June 6, 1988.
2. We made this determination based upon the fact that you were charged with a crime relating to the furnishing or billing for medical care, services or supplies.

Section 515.7(b), referred to in the notice, provided, in pertinent part, as follows:

(b) Upon receiving notice of an indictment which charges a person with committing an act which would be a felony under the laws of New York and which relates to or results from: (1) furnishing or billing for medical care, services or supplies ... the department may immediately suspend the person and any affiliates, and may continue the suspension for 90 days following receipt of notice of the disposition of the indictment.

N.Y. Comp. Codes R. & Regs. tit. 18, § 515.7(b) (1988). The DSS notice to Plaza stated that within 30 days of receipt of the notice Plaza could submit to DSS written arguments or documentation challenging the suspension on the basis of (a) mistake of fact, (b) lack of relationship between the indictment and the provision of medical care, services, or supplies, or (c) inappropriateness of suspension as a sanction. It also stated that Plaza could, upon a favorable disposition of the indictment, request reinstatement as a Medicaid provider.

Pursuing its administrative remedy, Plaza sent DSS a letter on December 22, 1988, challenging the suspension on several grounds and attempting to persuade DSS to rescind the suspension. Referring to the New York Environmental Conservation Law (“ECL”), Plaza argued that the suspension was not authorized by § 515.7(b) because the ECL provisions that were “similar” to the pertinent New Jersey provisions had not made Plaza’s acts a felony in New York until November 1, 1988, i.e., after Plaza’s dumpings allegedly occurred. Plaza also disputed DSS’s contention that the New Jersey indictment related to the furnishing of medical services.

In the meantime, on December 16, 1988, Plaza commenced the present action for monetary and injunctive relief. The complaint alleges principally (a) that DSS gave Plaza no meaningful notice or opportunity to be heard and thus violated Plaza’s due process rights, and (b) that suspension on the ground that Plaza had been charged with a felony violated Plaza’s rights under the Ex Post Facto Clause of the Constitution, U.S. Const. art. I, § 9, cl. 3, since the ECL section on which Plaza assumed its suspension was predicated, ECL § 71-2704(2)(c) (McKinney Supp.1989) (making it a felony to “knowingly and/or recklessly engage[ ] in conduct which causes the release to the environment of infectious waste” where such release creates “substantial risk of physical injury”), did not make such conduct a felony in New York at the time the unlawful dumpings allegedly occurred.

Plaza promptly moved for a preliminary injunction prohibiting DSS from suspending or terminating Plaza’s participation as a Medicaid provider, arguing that its due process and ex post facto rights had been violated as alleged in the complaint. In support of its contention that in the absence of such an injunction it would suffer irreparable harm, Plaza stated that 25% of its business had been Medicaid business; that it had employed some 20 persons prior to the suspension and had been forced to lay off 10 of them in the wake of the suspension; and that Plaza could not remain in business without Medicaid payments as a source of income.

[580]*580In an Opinion and Order dated January 3, 1989, published at 702 F.Supp. 86, the district court denied Plaza’s motion for a preliminary injunction, concluding that, although Plaza’s continuation in business was in doubt, Plaza had not demonstrated a likelihood of success on the merits of any of its claims. The court concluded that Plaza’s ex post facto claim was without merit, evaluating that claim as follows:

The present case does not fall into that category of cases where essentially criminal laws violate the ex post facto clause, despite their denomination as “civil” actions. The “sanction” imposed by the Department here is clearly not intended as punishment, ... nor does it in any way constitute a quasi-criminal proceeding ....

Id. at 89. The court found no likelihood of success with respect to the due process claim because it concluded that a healthcare provider’s “interest does not

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Plaza Health Laboratories, Inc. v. Perales, 878 F.2d 577, 1989 U.S. App. LEXIS 9122, 1989 WL 67927 (2d Cir. 1989).

878 F.2d 577 (Plaza Health Laboratories, Inc. v. Perales) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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