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STEPHENS v. COOPER

September 27, 1990

GERALD J. STEPHENS, D.C., ET AL., PLAINTIFFS,
v.
WENDY E. COOPER, ACTING SUPERINTENDENT OF INSURANCE OF THE STATE OF NEW YORK, DEFENDANT.



The opinion of the court was delivered by: Wexler, District Judge.

MEMORANDUM AND ORDER

Plaintiffs, a group of chiropractors and medical doctors, including neurologists, licensed to practice in the State of New York, and PTS Thermal Imaging, a center which performs thermographic examinations,*fn1 bring this action for declaratory and injunctive relief against the Superintendent of the New York State Department of Insurance ("Superintendent")*fn2 challenging that portion of a regulation promulgated by the Superintendent which established a fee schedule for thermography services under New York's no-fault automobile insurance law, the Motor Vehicle Insurance Reparations Law, N.Y.Ins.Law §§ 5101-5108 (McKinney 1985 & Supp. 1990). Plaintiffs allege that the fee schedule was promulgated in violation of the New York Administrative Procedure Act and their rights to due process under the U.S. and New York State Constitutions, and that the fee schedule violates §§ 1 and 2 of the Sherman Act as well as their rights to equal protection under the federal and state constitutions. Upon commencing the action, plaintiffs moved for a preliminary injunction to enjoin the Superintendent from enforcing that portion of the regulation pertaining to the thermographic fee schedule and from adopting the same as a final rule, and staying the time period within which plaintiffs are required to challenge the enactment of the regulation under state law. At a hearing on the preliminary injunction motion on December 22, 1989, the Court denied the motion on the ground that plaintiffs failed to demonstrate irreparable harm. Plaintiffs' subsequent motion for reargument was denied. Presently before the Court is the Superintendent's motion to dismiss for failure to state a claim under the Sherman Act and for abstention. For the reasons below, the motion is granted on the grounds of abstention.

I. BACKGROUND

The facts as alleged in the complaint and as adduced from the parties papers and from oral argument on the motion can be summarized as follows. New York Insurance Law § 5108 authorizes the Superintendent to establish fee schedules for health service charges under the no-fault automobile insurance law. N YIns.Law § 5108 (McKinney 1985). Section 5108(b) provides:

  The superintendent, after consulting with the
  chairman of the workers' compensation board and
  the commissioner of health, shall promulgate rules
  and regulations implementing and coordinating the
  provisions of this article and the workers'
  compensation law with respect to charges for the
  professional health services specified in [§
  5102(a)(1)], including the establishment of
  schedules for all such services for which schedules
  have not been prepared and established by the
  chairman of the workers' compensation board.

Id. § 5108(b). It is undisputed that thermography services fall within the professional health services specified in § 5102(a)(1). See id. § 5102(a)(1) (such services include "(i) medical, hospital, surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; . . . and (iv) any other professional health services").

The Workers' Compensation Board ("WCB") promulgated a new fee schedule for medical and chiropractic services effective September 1, 1989. To conform the no-fault insurance fee schedules to the new workers' compensation schedules, as well as to revise no-fault insurance fee schedules for which no similar workers' compensation schedules exist, the Superintendent issued Amendment Fifteen to Regulation No. 83 ("Amendment Fifteen"), N.Y.Comp. Codes R. & Regs. tit. 11, pt. 68, as an emergency measure on or about September 27, 1989. The reasons for promulgating the amendment on an emergency basis were declared by the Superintendent in a "Statement of Emergency Measure" as follows:

  There is insufficient time to promulgate these
  increases by September 1, 1989. The Fifteenth
  Amendment to Regulation No. 83 must be adopted as
  an emergency measure, in order to conform no-fault
  with the Workers' Compensation schedules which are
  being revised effective September 1, 1989.

Pursuant to § 202 of the New York Administrative Procedure Act, Amendment Fifteen was also a proposed permanent regulation, which ultimately became effective December 27, 1989.

Because the WCB had not promulgated a fee schedule for thermography services, the Superintendent chose to promulgate a fee schedule for no-fault providers performing thermography services, and incorporated the fee schedule as Part M of Amendment Fifteen. Part M provides, however, that "[s]hould thermography be incorporated into the Workers' Compensation Fee Schedule at a future time, any provision which is inconsistent with this schedule shall be resolved in favor of the Worker's Compensation Fee Schedule."

Plaintiffs challenge the procedure employed by the Superintendent in promulgating Amendment Fifteen and the substantive determinations made and incorporated in the thermographic fee schedule. However, subsequent to filing this motion, on June 20, 1990, the Superintendent issued the Sixteenth Amendment to Regulation No. 83 which modified the challenged thermographic fee schedule. As explained in the "Statement of Emergency Measure":

  Subsequent to the promulgation of a new fee
  schedule applicable to thermographic services
  effective September 1, 1989, it has come to the
  attention of the Insurance Department that certain
  qualified practitioners may be unable to receive
  reimbursement for providing thermographic services
  when medically necessary. It was not the intent of
  the Insurance Department in adopting the fee
  schedule to exclude qualified practitioners from
  reimbursement. For the preservation of the general
  welfare and to correct this situation as quickly
  as possible, this Sixteenth Amendment to
  Regulation No. 83 must be adopted as as Emergency
  measure.

Essentially, the amended fee schedule eliminates certain "thermographic protocol" which had been imposed in the earlier fee schedule and which formed the basis of much of plaintiffs' challenge to the fee schedule. Notwithstanding Amendment Sixteen, plaintiffs still challenge the fee schedule.

As noted above, the Superintendent moves to dismiss the Sherman Act claims for failure to state a claim upon which relief can be granted and to dismiss the complaint based on Burford abstention. As for the Sherman Act claims, the Superintendent argues that the Sherman Act does not confer jurisdiction upon the Court because the Superintendent's actions are entitled to immunity from federal antitrust liability under the "state action" defense originating from Parker v. Brown, 317 U.S. 341, 351, 63 S.Ct. 307, 313, 87 L.Ed. 315 (1943). As for abstention, the Superintendent contends that abstention is appropriate under Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943). In this respect, the Superintendent argues that New York has created a comprehensive insurance regulatory scheme and that the regulation of insurance represents a significant state interest such that the Court should decline to exercise its ju ...


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