Jennifer Matthew Nursing v. U.S. Dep't of Health and Human Services, No. 08-5052 (2d Cir. 2010)
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08-5052-ag Jennifer Matthew Nursing v. U.S. Dep't of Health and Human Services 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2009 4 5 6 (Argued: October 1, 2009 Supplemental Briefing Received: October 30, 2009 Decided: June 18, 2010) 7 Docket No. 08-5052-ag 8 ------------------------------------- 9 JENNIFER MATTHEW NURSING AND REHABILITATION CENTER, 10 Petitioner, 11 - v. - 12 UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, 13 Respondent.* 14 ------------------------------------- 15 Before: 16 SACK, LIVINGSTON, and LYNCH, Circuit Judges. Petition for review of a ruling by the Appeals Board of 17 the United States Department of Health and Human Services 18 affirming the decision of an Administrative Law Judge that upheld 19 the assessment of an $80,000 civil monetary penalty for 20 regulatory violations imposed by the Centers for Medicare and 21 Medicaid Services against a certified nursing facility formerly 22 owned and operated by the petitioner. 23 administrative proceedings, the facility was sold by the 24 petitioner to a new owner-operator. * During the pendency of the Subsequent to the filing of The Clerk is directed to amend the caption accordingly. 1 this petition, the new owner-operator satisfied the civil 2 monetary penalty assessed against the facility. 3 petition for review as moot. 4 Petition dismissed. 5 6 7 JOSEPH L. BIANCULLI, Health Care Lawyers, PLC, Arlington, VA, for Petitioner. 8 9 10 11 12 13 14 We dismiss the ABBY C. WRIGHT, Appellate Staff Attorney, Civil Division, Department of Justice, for Tony West, Assistant Attorney General (Mark B. Stern, on the brief), for Respondent. SACK, Circuit Judge: Petitioner Jennifer Matthew Nursing and Rehabilitation 15 Center ("Jennifer Matthew"), the former owner and operator of a 16 nursing facility of the same name in Rochester, New York, 17 petitions for review of a ruling by the Appeals Board (the 18 "Board") of the United States Department of Health and Human 19 Services ("HHS" or the "Agency"), affirming the decision of an 20 Administrative Law Judge ("ALJ") that upheld the assessment of an 21 $80,000 civil monetary penalty by the Centers for Medicare and 22 Medicaid Services ("CMS") against the facility for regulatory 23 violations. 24 proceedings, the facility was sold by the petitioner. 25 to the filing of this petition for review, the new owner-operator 26 made a payment to CMS in satisfaction of the penalty assessed 27 against the facility. During the pendency of the administrative Subsequent 28 The parties dispute whether the petitioner had standing 29 under Article III of the United States Constitution to bring this 2 1 petition at the time it was filed in light of the prior sale of 2 the facility to another owner-operator. 3 merits of the penalty imposed against the facility by CMS. 4 need not reach either of these questions, however, because we 5 conclude that the satisfaction of the penalty by the facility's 6 current owner-operator, from which CMS sought payment, has 7 rendered this petition moot. 8 the petition and dismiss it on that basis. We We therefore lack jurisdiction over BACKGROUND 9 10 They also dispute the "Jennifer Matthew Nursing and Rehabilitation Center" 11 was, until July 2006, the name of a skilled nursing facility 12 located in Rochester, New York. 13 "d/b/a" of the original owner-operator of that facility, a 14 closely-held corporation by the name of NRNH, Inc. 15 2006, the original owner-operator sold the facility and ceased 16 using the Jennifer Matthew name. 17 record and the proceedings before this Court, however, the 18 original owner-operator, who is the petitioner here, is often 19 referred to as "Jennifer Matthew Nursing and Rehabilitation 20 Center" or "Jennifer Matthew," even though it no longer owns the 21 facility and is in fact a separate entity incorporated under a 22 different name. 23 operator hereinafter as "Jennifer Matthew" or "NRNH," and to the 24 rehabilitation center as the "Jennifer Matthew facility." It was also the trade name or In February Throughout the administrative We accordingly refer to the original owner- 3 1 The Jennifer Matthew facility participated in the 2 Medicare program. In order to participate, it entered into a 3 provider agreement with the administrator of that program, the 4 Centers for Medicare and Medicaid Services ("CMS"), one of eleven 5 operating divisions of HHS. 6 Health & Human Services Homepage, http://www.hhs.gov/about (last 7 visited June 7, 2010). 8 required to remain in "substantial compliance" with various 9 statutes and agency regulations. Compliance is "substantial" to See United States Department of Participants in the Medicare program are 10 the extent that any failure to meet the participation 11 requirements gives rise to no more than a risk of "minimal harm" 12 to the health or safety of a provider's residents. 13 § 488.301. 14 of harm, CMS has the authority to, among other things, impose a 15 civil monetary penalty against the provider. 16 488.404, 488.406, 488.408. 17 See 42 C.F.R. If a provider's non-compliance causes a greater risk See 42 C.F.R. §§ In June 2005, the New York State Department of Health 18 investigated the Jennifer Matthew facility following an anonymous 19 complaint from within the facility that one of its residents had 20 choked to death without receiving appropriate aid from the staff. 21 On July 21, 2005, CMS issued a determination, based mostly on the 22 investigation by the Department of Health, that for eight days in 23 July 2005, the Jennifer Matthew facility had failed to remain in 24 substantial compliance with various regulations, including 25 regulations governing conduct relating to the choking death. 4 It 1 also cited sub-par care that the facility had provided to its 2 residents during a heat wave that had prevailed for those eight 3 days.1 4 the facility, $10,000 for each day. 5 CMS imposed a civil monetary penalty of $80,000 against The facility protested the penalty and requested an 6 administrative hearing. 7 the case was remanded to CMS on the consent of the parties for 8 reasons not relevant here. 9 Proceedings before the ALJ ensued, but On July 18, 2006, CMS issued a revised determination 10 that cited additional regulatory violations by the Jennifer 11 Matthew facility and retained the $80,000 penalty. 12 returned to the ALJ who, in rulings dated February 15 and 13 December 27, 2007, upheld the CMS findings in relevant part, and 14 the $80,000 penalty. 15 21, 2008, affirming the rulings of the ALJ. 16 The case was The Board issued a Final Decision on August Meanwhile, in February 2006, while the administrative 17 proceedings were ongoing, NRNH agreed to sell the Jennifer 18 Matthew facility to an unrelated entity, Blossom North, LLC 19 ("Blossom North"), pursuant to a purchase and sale agreement 20 entered into by the parties that month (the "Purchase and Sale 21 Agreement"). 22 property acquired by Blossom North in the transaction included The sale closed in July 2006. 1 The intangible Although the choking incident occurred in June, CMS seems to have been of the view that for at least those eight days in July, the systemic flaws that made the choking incident possible went unremedied. 5 1 the name "Jennifer Matthew Nursing and Rehabilitation Center." 2 The facility was nonetheless renamed "Blossom North Nursing & 3 Rehabilitation Center" (the "Blossom North facility") by its new 4 owner. 5 The Purchase and Sale Agreement provided in relevant 6 part that "any health facility assessment liabilities, relating 7 to services rendered by, or the operation of, the Facility [under 8 Jennifer Matthew's ownership and operation]," "shall be retained 9 and satisfied by Seller, shall not be assumed by Buyer, and are 10 expressly excluded from the Assumed Liabilities." 11 Br., Ex. A § 1.04(b). 12 seller "shall be solely responsible for the satisfaction of all 13 Retained Liabilities." 14 and Indemnification" clause reading: 15 indemnify . . . Buyer . . . from and against all . . . 16 liabilities . . . suffered by Buyer . . . on account of . . . the 17 ownership and operation of the Facility [under Jennifer Matthew] 18 (except with respect to . . . liabilities of Seller expressly 19 assumed under this Agreement) . . . ." 20 Resp't Supp. The agreement also provided that the Id. § 6.01. And it contained a "Survival "Seller hereby agrees to Id. § 10.01. Thus, after the acquisition, there was no longer a 21 "Jennifer Matthew Nursing and Rehabilitation Center" in 22 existence. 23 pursuant to the terms of the Purchase and Sale Agreement, and 24 appears to have stopped using that name altogether. 25 nevertheless permitted NRNH, continuing to appear as "Jennifer NRNH was no longer entitled to the use of that name, 6 The Agency 1 Matthew Nursing and Rehabilitation Center," to pursue its appeal 2 of CMS's determination to the ALJ and the Board. 3 administrative rulings following the acquisition make no mention 4 of the renaming of the facility as "Blossom North Nursing & 5 Rehabilitation Center," continuing to speak in terms of upholding 6 a monetary penalty against "Jennifer Matthew Nursing and 7 Rehabilitation Center." 8 9 And the This petition for review was filed with the Clerk of this Court on October 14, 2008, by "Jennifer Matthew Nursing and 10 Rehabilitation Center." 11 itself there and in its initial brief to this Court as the 12 Jennifer Matthew facility, see Pet'r Br. 1 ("Petitioner is a . . 13 . certified nursing facility"), neither the actual facility nor 14 the corporation that, by then, owned and operated it, Blossom 15 North, petitioned for review. 16 petitioner to be the former owner-operator of the facility, NRNH, 17 despite its continued use of the Jennifer Matthew name. 18 accordingly refer to the petitioner as "Jennifer Matthew" or 19 "NRNH." 20 Although the petitioner referred to We therefore understand the We In its initial brief, filed on March 17, 2009, Jennifer 21 Matthew discussed only the merits of its challenge to the civil 22 monetary penalty. 23 statement included in its brief, Jennifer Matthew asserted that 24 the facility "is currently owned and operated under a different 25 name by an unrelated third party, . . . which is [not] affected 26 by this appeal." In the mandatory corporate disclosure Pet'r Br., Corporate Disclosure Stmt. 7 1 On April 14, 2009, six months after this petition was 2 filed, CMS sent a letter to the administrator at Blossom North 3 Nursing & Rehabilitation Center -- previously the Jennifer 4 Matthew facility. 5 only to the "Jennifer Matthew" facility during the administrative 6 proceedings, this letter referred to the civil monetary penalty 7 "imposed on Blossom North Nursing & Rehabilitation Center 8 (formerly known as Jennifer Matthew Nursing & Rehabilitation 9 Center)," and "inform[ed] [the administrator] that the [penalty Despite the fact that the Agency had referred 10 was] due and payable on May 9, 2009." 11 1. 12 to a hearing . . . . 13 subsequently a review of the [ALJ's] decision to uphold the 14 imposition of the [penalty]. 15 affirms the ALJ's decision to uphold the imposition of the 16 [penalty]." 17 facility petitioning for review of the Board's ruling. 18 the Blossom North facility nor Blossom North challenged the 19 Board's ruling. 20 Resp't Supp. Br., Ex. C at The letter advised: "[Y]our facility did not waive its right Id. Your facility requested a hearing and The final decision of the [Board] The letter made no mention of the Blossom North Neither Two weeks after the date of the letter, CMS sent a 21 follow-up letter to the administrator of the Blossom North 22 facility amending the amount due on the penalty to reflect a 23 thirty-five percent reduction, from $85,700 to $55,705 - even 24 though the previous letter had indicated no such reduction was 8 1 available.2 2 the owner-operator of the Blossom North facility -- issued a 3 check to CMS in satisfaction of the penalty, as reduced. 4 E. 5 Id. Ex. D at 1. On May 7, 2009, Blossom North -- Id. Ex. Thereafter, on June 30, 2009, the Agency filed its 6 answering brief in this Court. It argued, among other things, 7 that Jennifer Matthew lacked standing to bring this petition at 8 the time it was filed because, under the administrative 9 regulations, "[c]ivil monetary penalties for noncompliance are 10 imposed on the facility, and these monetary penalties follow the 11 provider agreement when it is transferred to a new owner and 12 operator." Resp't Br. 12 (internal citation omitted, emphasis in 13 original). Thus, according to the Agency, under those 14 administrative regulations, the facility, owned and operated by 15 and under the name of Blossom North, was solely liable for the 16 penalty. 17 injury to the Jennifer Matthew facility, nor to its former owner- 18 operator, for Article III standing purposes. 19 Agency failed to mention that Blossom North had already paid the 20 penalty, upon CMS's request for payment from the Blossom North 21 facility. The penalty therefore did not represent a cognizable Curiously, the 22 We ordered supplemental briefing from the parties on 23 the issue of standing, including information as to whether and 24 under what conditions the civil monetary penalty had been paid. 2 The record does not contain an explanation of the reason the reduction was granted. 9 1 The briefs recounted the essentially undisputed sequence of 2 events described above relating to the sale of the Jennifer 3 Matthew facility and the satisfaction of the civil monetary 4 penalty by Blossom North. 5 In its supplemental brief, Jennifer Matthew argues that 6 it has standing to bring this petition notwithstanding the sale 7 of the facility and the satisfaction of the penalty because 8 Blossom North could seek indemnification from it under the 9 Purchase and Sale Agreement. It also argues that CMS's 10 regulations are "immaterial" and that CMS should not be permitted 11 to "divest this Court of jurisdiction" by "reserving to itself 12 the right to collect a penalty imposed against a provider from 13 someone else, even the provider's successor." 14 11-12. 15 Pet'r Supp. Br. The Agency, in its supplemental brief, maintains that 16 Jennifer Matthew "never had standing to proceed in federal court" 17 because the sale of the facility from Jennifer Matthew to Blossom 18 North, which preceded the filing of this petition for review, 19 "removed liability from petitioner and placed it on the new 20 provider." Resp't Supp. Br. 7 n.1. DISCUSSION 21 22 I. Subject Matter Jurisdiction 23 "[W]e have an independent obligation to consider the 24 presence or absence of subject matter jurisdiction sua sponte." 25 Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006), cert. denied, 10 1 549 U.S. 1282 (2007). 2 subject matter jurisdiction ordinarily precedes our analysis of 3 the merits. 4 U.S. 83, 94 (1998). 5 determine whether a plaintiff has standing under Article III to 6 pursue its claim, see, e.g., Bennett v. Spear, 520 U.S. 154, 162 7 (1997), an issue that the parties addressed in their supplemental 8 briefing. 9 Our inquiry to ascertain whether we have See Steel Co. v Citizens for a Better Env't, 523 Part of this inquiry requires us to We must also ensure, however, that there remains a live 10 controversy for us to decide. "Accordingly, when, during the 11 pendency of an appeal, events occur that would prevent the 12 appellate court from fashioning effective relief, the appeal 13 should be dismissed as moot." 14 322, 325 (2d Cir. 1993). 15 there remains a live case or controversy . . . without first 16 determining [the issue of] standing to appeal because the former 17 question, like the latter, goes to the Article III jurisdiction 18 of this Court . . . , not to the merits of the case." 19 for Official English v. Ariz., 520 U.S. 43, 66-67 (1997). In re Chateaugay Corp., 988 F.2d "We may resolve the question whether Arizonans 20 II. The Petition for Review is Moot 21 In this case, events that occurred subsequent to the 22 filing of the petition for review have rendered the petition 23 moot. 11 1 As of the date on which the petition for review was 2 filed, CMS had imposed, and the ALJ and the Board had upheld, a 3 civil monetary penalty on the Jennifer Matthew facility. 4 facility had, by that time, ceased to exist as the Jennifer 5 Matthew Nursing and Rehabilitation Center, having been sold and 6 renamed, but the administrative decisions at issue omitted any 7 mention of the sale and persisted in referring to the infractions 8 by and punishment of the "Jennifer Matthew Nursing and 9 Rehabilitation Center." The Thus the owner-operator of the facility 10 during the time period it had been known as the "Jennifer 11 Matthew" facility may well have thought that it was expected to 12 pay the outstanding penalty.3 13 rendered that belief incorrect as a matter of law under the 14 Agency regulations, as the Agency argues, and whether that would 15 strip Jennifer Matthew of any cognizable injury for purposes of 16 Article III standing, are questions that we need not address in 17 light of the events that followed. 18 Whether the sale of the facility After the petition for review was filed, CMS sent two 19 letters to the Blossom North facility asserting that it 20 considered the penalty at issue to have been "imposed on [the] 21 Blossom North [facility] (formerly known as [the] Jennifer 22 Matthew [facility])," and requesting payment from the Blossom 3 Although civil monetary penalties, as the Agency points out, are assessed directly against a provider facility, rather than its owner-operator, the check issued to CMS by Blossom North, rather than the Blossom North facility, makes plain that the owner-operator of a facility may be the party that actually pays the penalty. 12 1 North facility. 2 The penalty that Jennifer Matthew contested before the ALJ and 3 the Board, and that it seeks to contest on this petition for 4 review, has therefore been satisfied, albeit not by the 5 petitioner. 6 penalty.4 7 Blossom North then made the requested payment. CMS no longer seeks to collect the paid-in-full "An appeal becomes moot when the issues presented are 8 no longer live or the parties lack a legally cognizable interest 9 in the outcome." Dennin v. Conn. Interscholastic Athletic 10 Conference, Inc., 94 F.3d 96, 100 (2d Cir. 1996) (internal 11 quotation marks omitted). 12 between Jennifer Matthew and the Agency. 13 petitions for review of a penalty that it is not being asked to 14 pay, that has since at least April 14, 2009 -- the date of the 15 first letter from CMS to the Administrator of the Blossom North 16 facility -- been assessed against a different entity, and that 17 has been paid by that entity. 18 petitioner Jennifer Matthew by the Agency and the Agency is no 19 longer asking anything of Jennifer Matthew. 20 There is no longer a live controversy Jennifer Matthew Nothing has been taken from the Jennifer Matthew (NRNH) seeks to pursue this petition 21 on the merits nonetheless, apparently in fear of a possible 22 indemnification suit against it by Blossom North. 4 But no such There is no suggestion in the briefs or the record that because CMS imposed upon Blossom North, and collected, a reduced payment amount, it could seek an additional amount from Jennifer Matthew. 13 1 suit is pending before us on appeal, and there is no indication 2 that such a suit has even been filed, or that it will be filed. 3 We understand Jennifer Matthew's desire for a judgment 4 in its favor here to head off a future suit by Blossom North. 5 Cf. HSBC Bank USA v. Bond, Schoeneck & King, PLLC, 55 A.D.3d 6 1426, 1428, 866 N.Y.S.2d 469, 471 (4th Dep't 2008) ("Where a 7 party voluntarily settles a claim, he must demonstrate that he 8 was legally liable to the party whom he paid . . . in order to 9 recover against an indemnitor." (internal quotation marks and 10 citation omitted)). And such a judgment might, alternatively, 11 prompt Blossom North to seek recovery of the penalty from CMS, 12 assuming such an action were permissible after payment has 13 already been made without being challenged by the paying entity. 14 But whether Jennifer Matthew might thus benefit from an advisory 15 opinion is irrelevant. 16 render advisory opinions." 17 Agents of Am., 508 U.S. 439, 446 (1993) (internal quotation marks 18 omitted, alteration incorporated). 19 issue on the merits of the civil monetary penalty would be 20 strictly advisory, because the penalty has already been paid and 21 Blossom North, the entity that paid the penalty, has not 22 challenged it. 23 & n.2 (7th Cir. 2000) (concluding that challenge by non-paying 24 defendants to restitution penalty already satisfied by co- 25 defendant was moot, despite possibility of contribution action 26 against them by paying co-defendant: "[A] federal court lacks the power to U.S. Nat'l Bank of Or. v. Indep. Ins. And any decision we were to See United States v. Balint, 201 F.3d 928, 936-37 14 "[T]he defendants' 1 vulnerability to a future civil suit for contribution by a third 2 party not before us does not preserve this appeal" (emphasis in 3 original)). 4 Jennifer Matthew argues in its supplemental brief that 5 Blossom North lacked an incentive to challenge the penalty in 6 federal court because it could, instead, bring suit against 7 Jennifer Matthew for indemnification. 8 (lamenting that Blossom North "thr[ew] in the towel"). 9 it can use that argument in future litigation, if any, against it See Pet'r Supp. Br. 12 Perhaps 10 by Blossom North, or perhaps it could have bargained for the 11 inclusion of protection against that eventuality in the Purchase 12 and Sale Agreement. 13 not, however, serve as a basis for our exercising jurisdiction 14 here. 15 Jennifer Matthew's possible predicament does We have considered the remainder of Jennifer Matthew's 16 arguments, which appear to center on the contention that it is 17 unfair for the Agency, under its regulations, to collect the 18 civil monetary penalty from Blossom North and thus deprive 19 Jennifer Matthew of recourse to this Court, but conclude that 20 they offer no basis upon which we can exercise jurisdiction over 21 this petition.5 22 CONCLUSION 23 For the foregoing reasons, we dismiss Jennifer 24 Matthew's petition for review as moot. 5 Jennifer Matthew does not contest that the Agency was entitled, under the regulations, to collect the penalty from Blossom North. 15
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