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NEW JERSEY HOSP. ASS'N v. UNITED STATES

August 31, 1998

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.



The opinion of the court was delivered by: BROWN

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, 90 L. Ed. 939, 66 S. Ct. 773 (1946)), cert. denied, 501 U.S. 1222 (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, 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, 66 L. Ed. 2d 416, 101 S. Ct. 488 (1980)). Finality is to be determined in a pragmatic way. See Abbott Laboratories v. Gardner, 387 U.S. 136, 149, 18 L. Ed. 2d 681, 87 S. Ct. 1507 (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. 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. 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. 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 ...


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