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MONTASHAM ALI KASHIMIRI v. PERALES

November 23, 1984

MONTASHAM ALI KASHIMIRI, individually and doing business as SUNNYSIDE DRUGS, KZR PHARMACY INC., QAZI DRUGS INC., 288 GRAND STREET PHARMACY INC., SEIGEL STREET PHARMACY INC., AMPAK DRUGS INC., WEST SIDE PHARMACEUTICAL INC., SUPER STAR DRUG STORE LTD., SHAN PHARMACY INC., BOROAD PHARMACY INC. and 200 RICHMOND AVE. MK PHARMACY INC., Plaintiffs, against CESAR A. PERALES, individually and as Commissioner of the New York State Department of Social Services, Defendant.


The opinion of the court was delivered by: KRAM

MEMORANDUM OPINION AND ORDER

SHIRLEY WOHL KRAM, U.S.D.J.

 The above-captioned action is before this Court upon plaintiffs' motion for a preliminary injunction, pursuant to Rule 65 of the Federal Rules of Civil Procedure. For the reasons stated below, the motion is denied.

 BACKGROUND

 Plaintiff Montasham Ali Kashimiri is a resident of New York State who apparently owns and/or operates twelve pharmacies located in Kings, New York, Queens, and Richmond Counties. *fn1" The other ten plaintiffs *fn2" are domestic corporations that operate eleven of those pharmacies. *fn3" Each of the plaintiffs is enrolled in the New York State Medicaid Program as a provider of Medicaid services at its respective pharmacies. *fn4" Plaintiffs derive approximately 90% of their gross revenues from the provision of Medicaid services. Affidavit of Montasham Ali Kashimiri, P3 ("Kashimiri Aff.").

 Defendant Perales is the Commissioner of the New York State Department of Social Services ("the Department"). As such, he has the primary responsibility for overseeing the various functions and duties of the Department (N.Y. Soc. Serv. Law §§ 17, 34 (52A McKinney 1983)), including the New York State Medicaid Program (N.Y. Soc. Serv. Law § 363 et seq.).

 The Department conducted an audit of the records of the pharmacy operated by plaintiff KZR Pharmacy Inc. ("KZR") at 1374 Broadway in Kings County (Provider No. 00350252) for the period January, 1982, through March 31, 1984. *fn5" Affidavit of D. Steve Rahmas, P7 ("Rahmas Aff."). Based upon a preliminary review of the records of that pharmacy, the Department determined that that provider was making claims for payment for unfurnished, unnecessary, or inappropriate care, services, or supplies, and that the provider may have been making false statements relating to such claims. Id. The Department estimated, based upon the preliminary findings, that it is entitled to recover approximately $140,000 for overpayments to that provider for the period of the audit. Id.5

 Based upon those preliminary findings, the Department decided to audit that provider's records for the period subsequent to March 31, 1984. Rahmas Aff., P8. On or about August 20, 1984, the Department also decided to defer payments to that provider pending pre-audit, review, and verification. Rahmas Aff., PP12, 15.

 The Department further decided, based on Kashimiri's relationship to all the provider pharmacies, that the practices evidenced by KZR at 1374 Broadway were likely to be found pervasive for all twelve provider pharmacies. Rahmas Aff., PP10, 11. Consequently, on or about August 20, 1984, the Department decided to defer payments to the other eleven pharmacies pending pre-audit, review, and verification. Rahmas Aff., PP12, 15.

 No notice of the decision to pre-audit plaintiffs' claims was given at that time. Plaintiffs' inquired into the reason they had not received any payments on their claims. Kashimiri Aff., P5. They were advised of the apparent erroneous billing by KZR, and do not deny that the Department's preliminary findings are correct. *fn6" Id. Finally, on or about October 9, 11, and 16, 1984, the Department issued written Orders for Pre-Audit, pursuant to 18 N.Y.C.R.R. §§ 540.11 and 540.8(a)(1), the general provisions of 18 N.Y.C.R.R. § 540 and N.Y. Soc. Serv. Law §§ 20, 34, 363-a, and 367-b (Rahmas Aff., P13, Exh. I; Exh. A to Complaint), which confirmed the August 20 determination to pre-audit plaintiffs' claims of that determination. By their own terms, those Orders for Pre-Audit continue in effect for a period not to exceed ninety (90) days from August 20, 1984. Rahmas Aff., P14, Exh. I, Exh. A to Complaint.

 As of October 29, 1984, the Department had withheld approximately $55,806.95 in claims from KZR at 1374 Broadway (Rahmas Aff., P9) and approximately $7,015.24 in claims from plaintiffs Boroad Pharmacy Inc. (id., P28) in addition to sums not listed for the other plaintiff providers. *fn7" It appears that as of this date none of plaintiffs' claims have been pre-audited as yet. Therefore, none of plaintiffs' claims since August 20 have been either verified or rejected.

 Plaintiffs brought this action, pursuant to 42 U.S.C. § 1983 and 28 U.S.C. § 1343(3), seeking a declaration that 18 N.Y.C.R.R. § 540 is unconstitutional on its face and as applied and enjoining the enforcement of said provisions at least insofar as they authorize the suspension of payments to plaintiffs. Plaintiffs then moved by Order to Show Cause dated October 24, 1984, for a preliminary injunction staying the suspension of payments to plaintiffs pending the determination of this action. *fn8" That motion is currently before the Court.

 DISCUSSION

 The standards governing the issuance of a preliminary injunction are well established in this Circuit. A preliminary ...


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