-RJJ Kabins v. Sebelius, No. 2:2011cv01742 - Document 33 (D. Nev. 2012)
Court Description: ORDER Granting 15 Plaintiff's Motion for Summary Judgment on all counts of his complaint challenging the Secretary's decision to exclude Mark B. Kabins, M.D. from all federal health care programs. IT IS FURTHER ORDERED that 16 Secreta ry's Cross Motion for Summary Judgment is DENIED. The Secretary's exclusion is REVERSED and that action in VACATED. The Secretary is DIRECTED, and in any event no later than 10 calendar days after this order, to take all steps necessary to reverse the effects of the exclusion as directed in this order. Signed by Judge James C. Mahan on 9/28/2012. (Copies have been distributed pursuant to the NEF - EDS)
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-RJJ Kabins v. Sebelius Doc. 33 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA Mark B. Kabins, Plaintiff, v. KATHLEEN SEBELIUS, in her Official Capacity as the Secretary of the United States Department of Health & Human Services, Defendant. ) ) ) ) ) Case No. ) 2:11-cv-01742-JCM-RJJ ) ) ) ) ) ) ) ORDER This matter involves the Plaintiff’s challenge to the Secretary of Health and Human Services’ (HHS) decision to exclude the Plaintiff, Mark Kabins, M.D., from continuing to participate as a physician or in any manner in various federal health care programs. This Court now vacates the Secretary’s exclusion action and directs the Secretary to take certain actions in furtherance of reinstating Dr. Kabins’ eligibility to participate in the relevant federal health care programs and to otherwise reverse the effects of the Secretary’s exclusion decision. In support of its Order, this court adopts the following findings and conclusions: PROCEDURAL 1. On November 23, 2009, Dr. Kabins pleaded guilty in the United States District Court for the District of Nevada to one count of misprision of felony in violation of 18 U.S.C. § 4. Rec. 303-309. 2. The guilty plea was entered pursuant to a plea agreement between Dr. Kabins and the United States, dated October 30, 2009. Rec. 777-788. The plea was in answer to criminal information filed November 23, 2009. Rec. 789-792. 3. During the plea colloquy, without objection from the government, the Court noted that “misprision [is] the failure to report an alleged crime committed by others.” Rec. 285 (emphasis added). Dockets.Justia.com 4. Both the Information and the Plea Agreement’s factual statement indicate that the felony of others that Dr. Kabins did not report was “the crime of mail or wire fraud committed by [Howard] Awand and [Noel] Gage.” Rec. 792, 786. 5. Noel Gage is an attorney who came to represent Ms. Simon with respect to possible legal claims against her medical providers. Rec. 790. 6. Both Noel Gage and Dr. Kabins had business relations with Howard Awand related to receiving work referrals, with Gage receiving referrals of possible personal injury clients and Dr. Kabins receiving potential patient referrals. Rec. 790-791. 7. As a result of the common relationship that Dr. Kabins and Noel Gage had with Howard Awand, Noel Gage had a potential legal conflict of interest in representing Ms. Simon with respect to whether to sue Dr. Kabins. Rec. 791. 8. In a “Letter of Complaint” that assisted Noel Gage in assessing a potential lawsuit on behalf of Ms. Simon, Dr. Kabins failed to revealGage’s legal conflict of interest and that Gage and Awand were thereby engaged in mail and wire fraud. Rec. 791-792. 9. At the time of sentencing, Melodie Simon stated that she “did not sue . . . Dr. Kabins because I did not think [he was] responsible for what had happened to me. I believe that Doctor Kabins saved my life.” Rec. 321. 10. An expert witness for the government, Dr. Alan Hamilton, has previously testified under oath (at the trial of Noel Gage) that Dr. Kabins did not cause harm to Melodie Simon. Rec. 384. 11. At Dr. Kabins’ sentencing, the District Court modified the normal conditions of probation to ensure that Dr. Kabins would be able to continue practicing medicine. Rec. 800-801. 12. Judgment in Dr. Kabins’ case was entered on January 22, 2010. Rec. 401-405. 13. Over the government’s objection, the Court subsequently granted Dr. Kabins’ motion to terminate early his probation, Rec. 264-265. In its Orders granting Dr. Kabins’ request, the District Court emphasized Dr. Kabins’ offense lacked any connection to health care violations and the minor role played by Dr. Kabins. Rec. 264, 268. 14. By letter dated January 31, 2011, the HHS Office of Inspector General (OIG) notified Dr. Kabins that he was excluded from Medicare, Medicaid, and all federal health care programs for five years. Rec. 775-776. 15. Dr. Kabins appealed this exclusion to an HHS Administrative Law Judge (“ALJ”). Rec. 29-30, 74-119. 16. The ALJ sustained the exclusion of Dr. Kabins. Rec. 1-10. 17. Dr. Kabins then appealed to the HHS Departmental Appeals Board (“DAB”). Rec. 165-208. 18. The DAB affirmed the exclusion. Rec. 11-23. 19. The DAB asserted it applied a “common sense” test to determine whether an offense was committed “in connection with” the delivery of a health care service. Rec. 18-20. 20. The DAB characterized Dr. Kabins’ argument by which Dr. Kabins noted that (a) the offense of Gage and Awand that he failed to report (mail and wire fraud designed to deprive the client of honest legal services) was no longer recognized as an offense in light of the Supreme Court’s decision in Skilling v. United States, 130 S. Ct. 2896 (2010), (b) Dr. Kabins’ own conviction could not thereby be described properly as a conviction meeting the exclusion statutes terms as an attack on the validity of the underlying conviction rather than a challenge to the nature of the conviction. Rec. 21. 21. Dr. Kabins filed a motion for reconsideration in which he argued that the record should be re-opened to consider the new decisions of the District Court where it terminated early Dr. Kabins’ probation. Rec. 250-268. 22. The Secretary “decline[d] to admit either order” of this District Court into the record. Rec. 26. 23. Dr. Kabins timely brought suit in this court, challenging the Secretary’s decision in a multi-count complaint. LEGAL 24. The statute and regulation under which Dr. Kabins was excluded are consistent and include four requirements to be satisfied for an exclusion to be warranted. The first two of those are not at issue (there must be a felony conviction and the felony must have occurred after August 21, 1996). 25. The second two are as follows: (a) the offense must have been a felony relating to “fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct” and (b) the offense of conviction must have occurred “in connection with the delivery of a health care item or service.” 26. Addressing the last element first, the felony offense at issue in the instant case, Dr. Kabins’ misprision of a felony, is not properly characterized by the Secretary as one that was “in connection with the delivery of a health care item or service.” The plea colloquy made clear that Dr. Kabins was, fundamentally and uncontrovertibly, admitting to the crime of not reporting the crime of two others, Messrs. Awand and Gage. Both that plea colloquy and the accompanying plea factual statement further make clear that the crime Messrs. Awand and Gage committed involved their failure to provide honest services to their client through their failures in the delivery of legal, not medical, services. 27. 28. 1 While the phrase “in connection with the delivery of a health care item or service” may be broad, it cannot reasonably be stretched to embrace the conviction here. The phrase “in connection with the delivery of health care” is a term of limitation on the Secretary – it establishes Congress’ intent that only a particularized set of felonies should subject a medical provider to exclusion. It also speaks in terms of the “delivery of health care” not in terms of “health care previously delivered.” These limiting terms are not to be reasonably read to permit exclusion premised on what is a remote relatedness to some health care service delivery. Such a reading would be inconsistent with the statute’s fundamental purposes which include providing the Secretary with exclusion authority, but exclusion authority that is carefully limited. While not concluding that any single one of the following factors are dispositive, the following points, among others, when taken together demonstrate that Dr. Kabins’ conviction for misprision of a felony was not a conviction for an offense that occurred in connection with the delivery of health care: (a) no element of the crime of misprision includes delivery of health care as a necessary requirement; (b) the crime that Dr. Kabins failed to report, and which formed the basis of his misprision offense, involved Messrs. Gage (an attorney) and Awand (a consultant) failing to provide proper legal services to their client and thus defrauding her of honest legal services; (c) that failure in the delivery of legal services occurred long after Dr. Kabins provided surgical services to that same person, Ms. Melodie Simon; (d) the crime Dr. Kabins failed to report thus could have had no conceivable bearing on the quality, type, or extent of medical services delivered to Ms. Simon, or even the manner in which Dr. Kabins billed for those services, or otherwise influenced “the delivery” of Dr. Kabins’ health care services no matter how broadly one may construe the term “delivery”; (e) there is no indication that Dr. Kabins improperly billed any federal health care program; and (f) there is no indication that the services he provided were deficient, indeed the Secretary had before her record evidence demonstrating that the government’s own expert has testified that the services were appropriate, as had the patient in question.1 The Secretary has emphasized that she is owed complete deference in her statutory interpretation, and, in particular, deference to her judgment that the excluding official need only find some “common sense” connection between the offense and the delivery of health care. The Court is not persuaded that announcing that the statute requires nothing more than application of a “common sense” test does anything to further illuminate the factors that properly go into whether this conviction meets the statutory requirement to exclude a person from participation in all federal health care programs. Indeed, given that what “common sense” dictates can vary so significantly from person to person, a “common sense” test is either likely meaningless as a decisional tool or so susceptible to inconsistent application as to be arbitrary and capricious. Dr. Kabins’ submissions in this case suggest apparent inconsistencies in the Secretary’s application of this mandatory exclusion authority, a fact consistent with the latter possibility. 29. While not essential to the Court’s decision, the Court also notes that giving such breadth to the mandatory exclusion statute increases considerably the risk of selective enforcement of the exclusion sanction, targeting those defendants where the prosecuting authority and investigating agency may feel the criminal penalty was insufficient or was prematurely terminated. In this case Dr. Kabins put forward many examples of convictions that appear to bear a much more direct connection to the delivery of health care than does his own conviction, and where, nonetheless, the convicted individual had not been excluded by the Secretary. This variable application of the exclusion sanction could be viewed as either arbitrary or, given the amorphous nature of the “common sense nexus” approach, lending itself to arbitrary and certainly selective enforcement. This Court does not believe Congress had such an approach in mind when it mandated exclusions for only certain convictions. 30. The misprision offense here, involving Dr. Kabins’ failure to report the misconduct of others, is not itself an offense relating to fraud, theft, embezzlement, breach of fiduciary responsibility or other financial misconduct.” No element of misprision requires fraud, theft, embezzlement, breach of fiduciary responsibility or financial misconduct and no aspect of Dr. Kabins particular conduct in the offense involved the listed offenses. 31. The Secretary, through the DAB, improperly mischaracterized Dr. Kabins’ Skilling-based argument. The statute of necessity requires each conviction relied upon to be characterized in order to determine whether it satisfies the statutory requirements. It was not responsive to Dr. Kabins’ argument to simply declare that his argument that Skilling now precludes describing or characterizing his conviction as related to fraud (and the other listed crimes) was, instead, an argument challenging the fact of having been convicted. The two are not the same and the Secretary failed to respond to the argument Dr. Kabins did make. That argument thereby stands unrebutted by the DAB acting for the Secretary and serves as an alternative basis for this decision. 32. The Court hereby incorporates as well, all statements and reasons provided by the Court in announcing its initial decision orally from the bench. See Ex. 1, attached. For the reasons set out above, it is hereby ORDERED AND DIRECTED that: 1. The Plaintiff’s motion for summary judgment is GRANTED on all counts of his complaint challenging the Secretary’s decision to exclude Mark B. Kabins, M.D., from all federal health care programs under 42 U.S.C. § 1320a-7(a); 2. The Secretary’s cross motion for summary judgment is DENIED; 3. The Secretary’s exclusion of Dr. Kabins is hereby REVERSED and that action VACATED; 4. The Secretary is DIRECTED forthwith, and in any event no later than TEN CALENDAR DAYS after this ORDER, to take all steps necessary to make this ORDER effective and to reverse the effects of the Secretary’s exclusion of Dr. Kabins, including but not limited to: a. making appropriate notifications that Dr. Kabins’ exclusion was reversed and vacated and that he was reinstated retroactive back to the effective date of the exclusion (February 20, 2011) in accordance with 42 C.F.R. §§ 1001.3003 and 1001.3005(c), including but not limited to notifications to any agency or party known to rely upon, or to have previously been given notice by the Secretary of, the exclusion; b. removing Dr. Kabins from those lists, including the Office of Inspector General’s List of Excluded Individuals and Entities, through which the Secretary identifies excluded persons, and c. such other steps as reasonably are necessary to render the exclusion null and void. SO ORDERED. September 28, 2012. __________________________________ JAMES C. MAHAN UNITED STATES DISTRICT JUDGE Submitted by: /s. David Z. Chesnoff David Z. Chesnoff Ex. 1 Kabins v. Sebelius 2:11-CV- 1742- JCM-RJJ Transcript of September 25, 2012 Hearing Ex. 1 1 UNITED STATES DISTRICT COURT 1 2 DISTRICT OF NEVADA 3 THE HONORABLE JAMES C. MAHAN, JUDGE PRESIDING 4 5 6 MARK B. KABINS, 7 Plaintiff, NO. 2:11-CV-1742-JCM-RJJ 8 vs. 9 KATHLEEN SEBELIUS, 10 Defendant. 11 MOTION HEARING / 12 13 REPORTER'S TRANSCRIPT OF PROCEEDINGS 14 TUESDAY, SEPTEMBER 25, 2012 15 10:00 A.M. 16 17 18 APPEARANCES: 19 For the Plaintiff: DAVID CHESNOFF, ESQ. RICHARD SCHONFELD, ESQ. SARALIENE DURRETT, ESQ. For the Defendant: ROGER WENTHE, ESQ. JILL WRIGHT, ESQ. 20 21 22 23 24 25 Reported by: Joy Garner, CCR 275 Official Federal Court Reporter JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 2 1 LAS VEGAS, NEVADA, TUESDAY, SEPTEMBER 25, 2012 2 10:00 A.M. * 3 * * P R O C E E D I N G S 4 5 6 THE CLERK: Mark Kabins versus Kathleen 7 Sebelius, 2:11-CV-1742-JCM-RJJ. 8 set for a motion hearing. 9 10 This is the time Counsel, please note your appearances. 11 THE COURT: 12 MR. CHESNOFF: Mr. Chesnoff. Good morning, your 13 Honor, David Chesnoff appearing with my client, 14 Dr. Kabins, along with Richard Schonfeld and 15 Saraliene Durrett of my office. 16 THE COURT: 17 MR. WENTHE: All right, thank you. Your Honor, Roger Wenthe 18 on behalf of the United States, and with me is 19 Jill Wright who is an attorney with the 20 Department of Health and Human Services Office 21 and counsel for the Inspector General. 22 23 THE COURT: All right, thank you. All right, I've reviewed this 24 with my brain trust. 25 inclined to do and then I'll give everyone a Let me tell you what I'm JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 3 1 chance to argue as you see fit. 2 the saying, hard cases make bad law, and this is 3 a hard case. 4 twenty-four hours, I've been I'm going to rule 5 this way, and then I'll look at the case, look at 6 this again, the facts here, I'm going to rule the 7 other way. 8 with my brain trust. 9 case, but it's certainly not clear-cut in my 10 At various times over the last So I've gone back and forth on this This is an interesting mind. 11 12 We've all heard You pronounce your last name Kay-bins (phonetic), right, Doctor? 13 THE PLAINTIFF: 14 THE COURT: Correct. I didn't want to 15 mispronounce your name. 16 irritating than have somebody mispronounce your 17 name continually. 18 been convicted of a crime, you know, and so let's 19 put that on the table and that's a terrible thing 20 and you can say whatever you want to about that, 21 but put that on the shelf. 22 He's been excluded here by the Secretary Sebelius 23 under the exclusion statute. 24 25 There's nothing more First of all, Dr. Kabins had That's just a given. It seems to me the purpose of the exclusion statute is to protect the JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 4 1 government from people who have cheated the 2 government program, and you see if you look at 3 the -- I've had the brain trust look at some of 4 the people who have been excluded, and if 5 somebody committed an actual fraud or 6 embezzlement or some sort of thing like that, 7 cheating a government program, it's a -- 8 9 And let me have a fictional Dr. Mahan who sets up his practice and, you know, 10 rips off Medicare and embezzles or overcharges, 11 or whatever, and so he pleads guilty to some 12 crime and serves a couple of years in jail, and 13 then he's out again. 14 the Chairman of the State Medical Board, or 15 whatever, so he gets re-licensed and he says, 16 okay, Secretary Sebelius, you have to deal with 17 me again. 18 And so Dr. Mahan's uncle is Do we really? Do we really have 19 to? 20 fool me twice, shame on me. 21 has to deal with this guy? 22 statute I think is designed to prevent that if 23 somebody -- you're just an embezzler, or cheater, 24 or whatever, and the government can exclude, but 25 that's the way the statute is. It's almost like fool me once, shame on you; The government still And that's what the JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 5 1 Let me give you another example 2 again with Dr. Mahan. 3 sells the house and commits a fraud in selling 4 the house, misrepresents something. 5 excluded under the statute? 6 statute is drawn so that it's got to be in 7 connection with health care services. 8 into that in just a minute more, but so Dr. Mahan 9 commits a fraud selling his house. 10 He sells his house, and he Can he be No, because the I'll get That doesn't give the grounds to the Secretary to exclude him. 11 Now, here Dr. Kabins was 12 convicted of misprision and failure to report a 13 felony. 14 of all, look at the statute, the exclusion 15 statute and the regulations that the Secretary 16 has promulgated, the statute didn't say is a 17 little bit unwieldy which is so unusual to think 18 that the congress people would draft an unwieldy 19 statute, but if you look at the regulations, I 20 think they pretty clearly follow the statute. 21 If you look at the -- the -- well, first We've got four requirements and 22 so everybody understands I'm speaking now from 42 23 CFR, Section 1001.101(c). 24 The individual must have been convicted of a 25 felony, and that's true of Dr. Kabins here; the Four requirements: JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 6 1 felonious conduct must have occurred after August 2 21, 1996, that's true here. 3 focusing on the third and fourth elements. 4 felony offense must have been related to fraud, 5 theft, embezzlement, breach of fiduciary 6 responsibility, or other financial misconduct, 7 and the felony offense -- number four, the felony 8 offense must have been in connection with the 9 delivery of a health care item or service. 10 So we're really The And if you look at what happened 11 here, at Dr. Kabins's conduct here, the 12 misprision was committed in connection with legal 13 services, not medical services. 14 well after the medical services were rendered and 15 all indications are that there's no complaint 16 about the medical services. 17 somewhat advisedly because after the fact, you 18 know, people's memories is better -- and I 19 shouldn't say is better -- may have been altered 20 by subsequent events. This occurred And I say that 21 For example, if Dr. Kabins, and 22 I don't know this, but if he settled on the side 23 with Ms. Simon, and I don't know whether that 24 happened or not, but suddenly she says, oh, that 25 terrible Dr. Kabins. And then, oh, yes, he was JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 7 1 wonderful and, yes, all his services were 2 wonderful and blah, blah, blah. 3 I mean so put that aside. I 4 mean I understand the credibility of witnesses is 5 questionable in something like this, but it 6 appears that the medical services were fine. 7 There's no question about the quality of the 8 medical services. 9 with legal services, not medical services. So the misprision occurred 10 Now, the -- you can go with the 11 regulations rather than the statute, but it just 12 is clearer. 13 related to fraud, theft, embezzlement, breach of 14 fiduciary responsibility, or financial 15 misconduct. 16 services. 17 to characterize it, fraud, and certainly fraud, I 18 don't know, maybe. 19 breach of fiduciary responsibility, it may be, or 20 other financial misconduct. 21 maybe. 22 The felony offense must have been This was, like I say, it was legal I don't know that -- however you want No theft, embezzlement, So number three is a Number four, the felony offense 23 must have been in connection with the delivery of 24 a health care item or service, and here it's just 25 not. I mean there's a medical service underlying JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 8 1 everything, of course, because he's a doctor and 2 that's what we're dealing with, but I just don't 3 see that the exclusion statute applies here. 4 concerned a little bit, too, about selective 5 prosecution. 6 I'm If we had a case where every 7 doctor who's convicted of a felony is subject to 8 exclusion, then, you know, here we go. 9 sorry, Doctor, but that's the way it works, or I'm 10 whatever, you deal with that and you have 11 different arguments I'm sure, but I'm concerned, 12 too, about selective prosecution that a 13 bureaucrat somewhere decides here's what we're 14 going to do, we're going to do this, we're going 15 to do that. 16 doctor, not that doctor, and that's always 17 troubling to the Court if there's no uniformity 18 with the decision to prosecute. 19 We're going to prosecute this Let's see, that's the memo in 20 support of your motion for summary judgment, the 21 plaintiff, and then at page 20 you list some 22 doctors that plead guilty to -- here's one the 23 misprision, the various felonies, and they were 24 not -- they were not excluded. 25 rational basis for excluding Dr. Kabins? And what's the JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 I just 9 1 don't see it anywhere. 2 close question in my mind. 3 forth on it, but I just -- I come back to I think 4 it's the misprision was in connection with 5 rendering of legal services or providing legal 6 services and not the medical services. 7 So honestly this is a I've gone back and There was no question -- I 8 haven't seen any question at all about the 9 medical services. They apparently were 10 appropriate and certainly Ms. Simon is not 11 complaining about that, although that doesn't 12 carry the day. 13 matter of credibility and we can say, well, I 14 don't believe her, but I had the brain trust 15 quickly try to identify doctors who had been 16 excluded and they had been doctors who, like I 17 said at the very beginning, like our fictional 18 Dr. Mahan who committed overcharging or 19 embezzlement or theft of some sort from the 20 Medicare program, but it seems to me that Dr. 21 Kabins's conduct here, his conviction here, was 22 not related to fraud or other misconduct in 23 connection with revision of a medical service. 24 So what I'm inclined to do is to grant summary 25 judgment to the plaintiff. As I've said, you know, it's a JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 10 1 2 Now, I'll give you -- do you want to talk me out of that, Mr. Chesnoff? 3 MR. CHESNOFF: I was just going to say, 4 your Honor, I don't want to talk -- we worked 5 very hard, my colleagues, on the pleadings and 6 obviously you've studied them along with your 7 staff, so I don't want to talk myself out. 8 think the only thing that I would add is this, 9 your Honor. I I think that one of the things that 10 really pushes it to our direction is that this 11 court through Judge Quackenbush, who I consider 12 one of the finest jurists I've ever appeared in 13 front of in all my years, has specifically said 14 on several occasions pointedly that what Dr. 15 Kabins was convicted of had nothing to do with a 16 health care violation, and he was the finder of 17 fact as to the plea and as to the companion 18 cases. 19 And why that's so important, 20 your Honor, is he went out of his way to say that 21 he wanted Dr. Kabins to continue to provide 22 medical services to the people of the state of 23 Nevada and to allow an uncontrolled federal 24 bureaucrat to basically disregard the clear 25 statutory elemental requirements and you, as a JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 11 1 sitting federal judge, and me who practices an 2 area of the law where the elements are crucial, 3 then unless those elements are met, your decision 4 is righteous and clear and it is completely 5 consistent with what Dr. Kabins pled to. 6 And as you said, the legislative 7 intent here was not to punish a doctor who 8 committed an -- did an operation well before the 9 honest service fraud occurred and involved legal, 10 not medical and, therefore, this kind of knee 11 jerk reaction that Dr. Kabins received and 12 basically kicking sand in the face of Judge 13 Quackenbush who pointedly, pointedly, wanted Dr. 14 Kabins to do what he does which is to serve 15 people. 16 The effect of what the Secretary 17 did here doesn't just mean that Dr. Kabins 18 doesn't get paid from Medicare and Medicaid. 19 has a real affect on his entire practice, 20 including his right to practice in certain 21 hospitals. 22 direction of two branches of government, the 23 legislative in enacting the law, and your brother 24 judge in his interpretation of what this 25 conviction meant. It So the Court would be following the JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 12 1 So with that said, your Honor, I 2 don't believe under any standard proffered by the 3 Secretary they meet the elemental requirement to 4 have banned him, and I ask that you put your 5 imprimatur on what you've indicated is your 6 intention, your Honor. 7 THE COURT: 8 MR. CHESNOFF: 9 THE COURT: All right. Thank you. And I'll just say if Judge 10 Quackenbush had found to the contrary, he didn't 11 look at this as closely as I did. 12 glad that we agree with each other, but I looked 13 at it independently and closely. 14 15 I mean I'm Mr. Wenthe, I'll be glad to hear anything you have to say, sir. 16 MR. WENTHE: 17 THE COURT: 18 MR. WENTHE: Thank you, your Honor. Yes, sir. I think that what's 19 necessary here is to return to the first 20 principle of why this statute exists. 21 enacted this exclusion statute because Congress 22 can decide who the federal government will do 23 business with and who it will not do business 24 with, and this provision that we're dealing with 25 today was added in 1996 because the existing JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 Congress 13 1 provisions were considered not broad enough to 2 cover the types of people who the government does 3 not want to do business with. 4 Before 1996, it already had a 5 provision separate from this one that says 6 anybody who defrauds the Medicare program or 7 overcharges the Medicare program will be 8 excluded, must be excluded. 9 added because that wasn't broad enough so that This provision was 10 what you maybe have had your brain trust look at 11 is cases under that previously existing, and 12 still existing, provision. 13 This provision was added so that 14 anyone who commits any kind of -- and not just 15 fraud -- but, as you said -- 16 THE COURT: -- theft, or embezzlement, 17 or other financial misconduct, or breach of 18 fiduciary duty. 19 20 MR. WENTHE: There we go -- and breach of fiduciary duty. 21 THE COURT: 22 MR. WENTHE: Yeah. That's a very broad range 23 of things, and we have to ask ourselves how can 24 those things occur in connection with the 25 delivery of a health care item or service because JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 14 1 that's the other thing you have to have. 2 think if you're going to read this statute to say 3 the health care item or service has to come after 4 the fraud, or embezzlement, or theft, or 5 whatever, which is what I think you're saying. 6 THE COURT: And I But, no, no, no, it's got 7 to come in connection with that. 8 the statute, Mr. Wenthe, is the fraud, or theft, 9 or embezzlement has to come in connection with 10 the provision of a medical service. 11 MR. WENTHE: 12 THE COURT: 13 The way I read In connection with -Here it occurred well after the provision of the medical service. 14 MR. WENTHE: And Congress was 15 deliberately broad by using the words "in 16 connection with." 17 you're -- 18 What you were saying is that THE COURT: And I agree. I mean that's 19 very broad language and we look at the statute 20 "in connection with" as very broad, but it's got 21 to be in connection with the provision of the 22 medical service. 23 occurred well after, did it not, well after the 24 medical service was provided? 25 This occurred -- here it MR. WENTHE: But, see, when you're JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 15 1 saying well after, then you're saying in 2 connection with only means before the medical 3 service is provided. 4 THE COURT: No, no, to me it means 5 contemporaneously generally, and I can't say -- I 6 mean it's possible that it would arise -- some 7 fraud would arise later. 8 with billing. 9 we'll go back to Dr. Mahan. I mean, for example, For example, let's say that -Dr. Mahan performs a 10 service and then he doesn't bill for it for three 11 months, but there's some -- some -- he 12 overcharges, he triple bills or something three 13 months later, is that -- but it's in connection 14 with the provision of the medical service. 15 mean the temporal aspect of the time aspect of it 16 is not necessarily controlling. 17 So I There's got to be a connection 18 with the provision of the medical service not 19 something related to a medical service because 20 that way everything a doctor did would be open to 21 question. 22 house and committing a fraud there, you know, 23 overcharging somebody or hiding a defect on a 24 house or something of that nature. 25 you not, that Dr. Mahan selling his house and For example, Dr. Mahan selling his You agree, do JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 16 1 committing a fraud the Secretary can't be 2 excluded -- 3 4 MR. WENTHE: service anywhere in that scenario, your Honor. 5 6 Because there's no medical THE COURT: That's right. He's a doctor, but there's no medical service there. 7 MR. WENTHE: Now, the very question we 8 are discussing right now is one that the Court is 9 foreclosed from getting into. The Court cannot 10 substitute its judgment for that of the agency on 11 this question. 12 interpretation, and your Honor wants to construe 13 "in connection with" to mean very closely related 14 in time. 15 16 17 18 19 This is a question of statutory THE COURT: No, no, that's not necessarily true, Mr. Wenthe. MR. WENTHE: That's just what you said to me, your Honor, and the agency has said -THE COURT: Well, wait, wait, wait, 20 don't mischaracterize what I'm saying or doing. 21 I didn't say that it had to be very closely 22 related in time, did I? 23 MR. WENTHE: 24 and tell me what -- what you -- 25 THE COURT: Yes, you did, but go ahead No, I did not. JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 I most 17 1 certainly did not and don't mischaracterize what 2 I say. 3 4 MR. WENTHE: Tell me what you think the statute means, your Honor. 5 THE COURT: Well, I've told you that 6 already, Mr. Wenthe, and I'm not going to have 7 you mischaracterize what I said. 8 could be three months later, didn't I? 9 listening? 10 Were you Don't smirk at me, Mr. Wenthe. 11 12 Don't smirk at me. We said that it MR. WENTHE: I'm smiling at you, your Honor. 13 THE COURT: 14 at me. 15 What? What? Don't smirk We're in recess. You're going to be in trouble, sir. 16 (Recess taken from 17 10:20 a.m. to 10:25 a.m.) 18 19 THE COURT: Thank you. You may be seated. 20 21 22 23 24 25 We are back in session. All right, resume your argument, Mr. Wenthe. MR. WENTHE: I apologize to the Court. I meant no disrespect. THE COURT: disrespectful. Well, it certainly appeared Contentious, that's the way it JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 18 1 appeared, Mr. Wenthe. 2 Now go ahead and let me hear the rest of your 3 argument and smirk all you want. 4 5 Smirk away all you want. MR. WENTHE: I mean no disrespect to the Court. 6 THE COURT: Yes, you do. 7 certainly do. 8 mischaracterized what I said. 9 You most Continue your argument. 10 You were smirking at me. MR. WENTHE: You That's fine. The agency has construed 11 the words "in connection with" over the course of 12 many years and they have applied that 13 construction over and over and over, and they are 14 permitted by Congress and by case law to do so. 15 Their construction of those words "in connection 16 with" means a common sense connection. 17 found in this case that the health care service 18 provided by Dr. Kabins which was a service 19 performed on Melodie Simon for which he admitted 20 in his plea agreement that he could be held to 21 have committed malpractice by a viable lawsuit by 22 her. 23 They He admitted that. THE COURT: Well, he disagrees. He 24 disagrees with what you're saying, but that's 25 fine. Go ahead. It's your argument. JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 19 1 MR. WENTHE: It is my argument, and it 2 is his admission and your Honor will find his 3 admissions in his plea agreement which begins at 4 page 777 of the record and in particular the 5 facts admitted under oath by him which begin at 6 784 of the record and in Subparagraph (d) of 7 those facts appears this statement: 8 Dr. Kabins believed that Ms. Simon could bring a 9 viable lawsuit against him arising out of Accordingly, 10 provision of a health care item or service to 11 her. 12 by covering up the fraud committed by Howard 13 Awand and Noel Gage to which he also pled that he 14 acknowledged that those men had committed the 15 crime of fraud and that he concealed it. And he escaped being sued for malpractice 16 So there is in the agency's view 17 a common sense connection between his provision 18 of that health care service for which he could 19 have been sued for malpractice and his 20 concealment and his conviction for concealment of 21 the fact of fraud that got him out of being sued 22 for malpractice for that health care item for 23 service. 24 25 The agency decided in its -both its administrative law judge decided and its JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 20 1 DAB, Department Appeals Board, that construing 2 its statute as it had for many, many years "in 3 connection with" was satisfied in this case. 4 Court wishes to adopt a different interpretation 5 of the words "in connection with" than what the 6 agency has adopted. 7 to do so by the doctrine of Chevron deference. 8 9 The The Court is not permitted When the agency has an ambiguous statute to apply, the agency is afforded the 10 discretion to choose within that range of 11 reasonable constructions of that statute which 12 one it will apply and it has done so. 13 apparently is saying that the construction by the 14 agency here is completely outside that reasonable 15 range of reasonable interpretations of the words 16 "in connection with." 17 The Court That seems highly unlikely since 18 we have cited to you the Supreme Court's case of 19 Morales in which the Supreme Court construed the 20 words "in connection with" and relating to the 21 statute and gave them the exact same meaning that 22 the agency gives them and has given those words 23 for many years. 24 with the Supreme Court's Morales decision and 25 wishes to overrule it -- And so if the Court disagrees JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 21 1 THE COURT: Okay, cut it again, cut the 2 crap, cut the contentious attitude, all right? 3 I'm not going to overrule the Supreme Court. 4 you really think I'm going to overrule the 5 Supreme Court, Mr. Wenthe? 6 7 MR. WENTHE: 10 THE COURT: Of course not, of course What are you arguing -- nothing -- your whole attitude today has been nothing but contentious. 11 12 I can't hear you. not, of course not. 8 9 Do MR. WENTHE: That's incorrect, your Honor. 13 THE COURT: No, that's not incorrect, 14 sir. 15 going to overrule the Supreme Court. 16 stupid. Nothing but contentious. 17 MR. WENTHE: 18 THE COURT: You mean I'm Don't be And that's the point. Try to make an argument 19 that's coherent and not -- you sound like a 20 little kid on the playground. 21 might not rule in your favor and so you give a 22 boo-hoo-hoo and try to -- yeah, go ahead and 23 smirk some more. 24 ahead, let me hear some more of your argument. 25 That's funny. MR. WENTHE: I've indicated I Go ahead, go I think that I've stated JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 22 1 it as clearly as I can. 2 3 THE COURT: very clearly. 4 5 The agency -- But you say your contempt That's what you did. MR. WENTHE: Go ahead. The agency has decided what these words mean. 6 THE COURT: 7 agency. 8 and rubber stamp it. 9 position. I have to just bow down to the agency That's Mr. Wenthe's Anything else? 10 told me. 11 that at all. 12 So I can't question the That's what you just I'm bound by that. I can't question Now what's your next argument? MR. WENTHE: I think, your Honor, that 13 if anyone reads the record here, they will never 14 see the words bow down coming out of my mouth. 15 They came only out of yours. 16 point that has to be dealt with here that 17 apparently has already -- well, it was not 18 addressed by anybody yet today -- and that's 19 relating to, this conviction has to be relating 20 to fraud. 21 questioned here. 22 concealment of a fraud. 23 Now, the other I don't see how that could be The conviction was for So the only argument really that 24 Dr. Kabins has to oppose that is to say that we 25 have to read the statute so that fraud only JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 23 1 involves financial misconduct fraud and, 2 therefore, because this is not a financial 3 misconduct case, this is not a conviction 4 relating to fraud. 5 that -- and particularly not when we have the 6 Friedman versus Sebelius case which was just 7 decided by the DC Circuit Court of Appeals this 8 year, and we offered that to you in our 9 supplemental authorities. I don't see that. I think 10 It went through a very lengthy 11 discussion of the purpose, history, and text of 12 the statute and said, no, Congress did not mean 13 to restrict this statute to just financial 14 misconduct fraud. 15 so it would be improper to read the statute that 16 way as Dr. Kabins wants to and so we think that 17 part of it is satisfied. 18 only two issues that there are here having the in 19 connection with health care item or service and 20 had to be relating to fraud. 21 It's any kind of fraud. And And really that's the Those were the two contested 22 issues before the agency, and they are the only 23 two issues here and for the reasons we've stated 24 we feel they are both satisfied very amply here 25 when the statute is read in accordance with JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 24 1 Chevron deference which applies to agency 2 interpretations of their own statutes when they 3 are ambiguous. 4 questions, that's all I have. 5 THE COURT: 6 7 So if the Court has no other All right. Thank you. Ma'am, did you have anything or any argument you wanted to make? 8 MR. WENTHE: Are you asking counsel? 9 MS. WRIGHT: No, sir, I don't. 10 THE COURT: 11 12 No? All right, I'll give you a chance to reply. 13 MR. CHESNOFF: Just briefly, your 14 Honor. 15 to distinguish the argument that they made about 16 Morales. 17 Chevron goes, your Honor, the Supreme Court has 18 said you are allowed to decide whether it's 19 reasonable, and that's what I believe the Court 20 was attempting to do. 21 In review of our pleadings, we were able Morales doesn't apply. As far as I would also point out as the 22 Court did when the Secretary stands up and says 23 that they've been applying this uniformly 24 regularly, one only has to look at the list of 25 doctors who we put in our pleadings who actually JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 25 1 were engaged in conduct involving medical 2 services. 3 long before and that's why the temporal argument 4 is so important, and he would have performed the 5 surgery regardless of any scheme -- excuse me, 6 I'm a little excited myself actually -- any 7 scheme that Gage and the other gentleman engaged 8 in. 9 Dr. Kabins has performed this surgery He did the surgery. It had nothing to do with their 10 scheme to commit item or service fraud which is 11 not a medical fraud and the statute also talks 12 about, and especially the Ninth Circuit, your 13 Honor, in the context of the fraud having a 14 financial component. 15 we've stated in our brief and the arguments today 16 and the fact that the Secretary has relied on law 17 that's not appropriate, including the supplements 18 they filed, the Fourth Circuit case and the DC 19 Circuit case, those cases involve people who 20 actually engaged in the actual fraud themselves. 21 So for all the reasons that And we're aware one of the 22 elements that the Court has been focusing on was 23 consciously met by the people involved. 24 case if you analyze the elements the Court 25 correctly stated that one and two exist, three is JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 In our 26 1 questionable. 2 doesn't apply or hasn't been met, but most 3 importantly element number four has never been 4 established as a basis for the really draconian 5 and isolated punishment that Dr. Kabins has 6 suffered totally inconsistent with the 7 Secretary's decisions in other doctors' cases. 8 And, of course, we've argued it Thank you. 9 THE COURT: 10 All right. Thank you. As I said at the beginning, it's 11 a close case. 12 Wenthe? 13 Did you want to add something, Mr. Go ahead. MR. WENTHE: You know, I didn't get a 14 chance to talk about the other doctors. 15 your Honor permit me? 16 THE COURT: 17 MR. WENTHE: Would Of course. Because your Honor did 18 raise that in your opening remarks and I wanted 19 to -- 20 MR. CHESNOFF: Actually the Secretary's 21 lawyer raised it by saying that they do this 22 fairly in all cases. 23 THE COURT: 24 MR. WENTHE: 25 Go ahead. Fair enough, but this whole question of other doctors who are getting JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 27 1 excluded, I do want to address that. 2 address that in our briefs obviously, but I think 3 your Honor is looking at that as though there's 4 some unfairness going on. 5 mandatory. 6 find a doctor, and the doctor comes to our 7 attention and a hearing is held and all these 8 statutory elements are satisfied, that doctor 9 must be excluded. 10 We did The statute is The statute is mandatory. When we The agency has no discretion not to exclude him. 11 Now, the fact that other people 12 may be out there who haven't been caught yet, we 13 don't have an explanation for that. 14 does not give us an explanation because the 15 agency excluded all of that evidence as being 16 irrelevant. 17 needs some more exploration by the agency that 18 they should take that into account that that is 19 relevant to their decision, then the thing to do 20 is to remand this to the agency for further 21 factual findings because they didn't make any 22 findings of fact on this. 23 The record If your Honor feels that that issue They excluded it all as being 24 irrelevant, and I think they were right to 25 exclude it as irrelevant, but if you disagree JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 28 1 with that and feel that they should consider it, 2 it really is a matter for the agency to consider 3 on remand. 4 So I just wanted to make that one -THE COURT: 5 All right. Thank you. As I said at the outset, this is 6 to me a close question. 7 question, but I think on balance the plaintiff is 8 entitled to summary judgment. 9 Mr. Chesnoff, prepare an appropriate order. 10 MR. CHESNOFF: 11 THE COURT: 12 So, if you would, Yes, sir, your Honor. Do it forthwith and let's file it, and then you all can appeal my decision. 13 14 It's a very close MR. CHESNOFF: I know I won't be filing, your Honor. 15 THE COURT: Well, I know the government 16 will be, so that's fine. 17 San Francisco. 18 19 MR. CHESNOFF: Have a nice afternoon, your Honor. 20 21 That's why God created THE COURT: Yes, sir. Thank you. too. 22 23 (Whereupon, the proceedings concluded.) 24 25 JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188 You, 29 1 2 3 I hereby certify that pursuant to Section 753, Title 28, United States Code, the foregoing is a true and correct transcript of the stenographically reported proceedings held in the above-entitled matter. 4 5 6 Date: August 26, 2012 /s/ Joy Garner JOY GARNER, CCR 275 U.S. Court Reporter 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 JOY GARNER, CCR 275 LAS VEGAS, NEVADA (702)384-3188
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