The opinion of the court was delivered by: David G. Larimer United States District Judge
This is another chapter in the contentious relationship between a nursing home and the governmental agencies charged with monitoring its care of patients. This action is brought by the nursing home. Beechwood Restorative Care Center ("Beechwood"), seeks review of a final decision of the Departmental Appeals Board ("DAB")*fn1 of the Department of Health and Human Services ("HHS"), upholding penalties imposed on Beechwood, including the termination of Beechwood's participation in the Medicare and Medicaid programs, as a result of federally-mandated surveys conducted by the New York State Department of Health ("State DOH"), which found various deficiencies at Beechwood. Plaintiff has moved for summary judgment on five of its twelve claims. Defendants, the Secretary of the Department of Health and Human Services ("HHS") and the Administrator of the Centers for Medicare and Medicaid Services ("CMS"), a federal agency and a part of HHS, have cross-moved for judgment on the pleadings as to the entire complaint, and to strike evidence outside the administrative record that plaintiff has submitted in support of its summary judgment motion.
Much of the relevant factual background is set forth in prior decisions of this Court and of the Court of Appeals for the Second Circuit in a related action, in which Beechwood sued various state and federal officials pursuant to 42 U.S.C. § 1983 and (with respect to the federal defendants) Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971), alleging a number of constitutional violations in connection with the investigation and eventual shutting down of Beechwood. See Beechwood Restorative Care Center v. Leeds, 317 F.Supp.2d 248 (W.D.N.Y. 2004), aff'd in part, and vacated and remanded in part, 436 F.3d 147 (2d Cir. 2006). The gist of Beechwood's allegations in that action was that the defendants had targeted Beechwood not because of any actual deficiencies at Beechwood, but to retaliate against Beechwood's owners, Brook Chambery ("Chambery") and his mother Olive Chambery, and to ruin their business, as punishment for Chambery's exercise of his First Amendment rights by challenging defendants in administrative proceedings, and criticizing their requirements and procedures. Familiarity with those decisions is assumed, and only a brief summary will be provided here, with additional facts set forth as necessary to resolve the parties' pending motions.
During its years of operation, Beechwood was a skilled nursing facility operated by a partnership between Olive and Brook Chambery. As a requirement of its operating certificate issued by New York State, Beechwood was certified as a participant in the Medicare and Medicaid programs. As such, Beechwood was regulated jointly by the State DOH and the Federal CMS, and was subject to inspections by the State DOH to monitor its compliance with federal and state regulations.*fn2
In 1994, Chambery and the State DOH began clashing over certain regulatory matters, the details of which are unimportant here. In 1995, following an inspection, the State DOH identified two deficiencies at Beechwood.*fn3 Although Chambery successfully challenged those deficiencies in an informal dispute resolution process afforded by federal regulation, this was the start of what Chambery alleged was an escalating pattern of deficiency findings by DOH, allegedly motivated by retaliation, which culminated in CMS's termination of Beechwood's Medicare and Medicaid provider status, and the State DOH's revocation of Beechwood's operating certificate, which effectively put Beechwood out of business. The facility closed on July 16, 1999. The Beechwood property eventually entered foreclosure proceedings and was sold at public auction in March 2002.
Beechwood filed the complaint in this action on July 15, 2004, in the United States District Court for the District of Columbia. By order entered April 20, 2005, that court granted defendants' unopposed motion to transfer the case to this district.
The gist of plaintiff's claims is that, contrary to the State DOH's findings, there were no deficiencies at Beechwood serious enough to justify CMS's termination of Beechwood's Medicare/Medicaid status in June 1999, or the other sanctions and remedies imposed by CMS, such as denial of payment for new admissions ("DPNA") and a directed plan of correction, see 42 U.S.C. § 1395i-3(h)(2). Plaintiff also alleges that although some of the alleged deficiencies were eventually overturned on appeal to the HHS's Departmental Appeals Board ("DAB"), the DAB wrongfully sustained Beechwood's termination. Plaintiff alleges that CMS's actions were arbitrary and capricious and were not in accordance with law, and that CMS thereby denied Beechwood due process and equal protection.
Based on these allegations, plaintiff has pleaded twelve causes of action, based on the following allegations: (1) CMS improperly imposed certain remedies on Beechwood based on the State DOH's findings, without making its own independent determinations as to Beechwood's compliance with the relevant regulations, and without requiring proper certifications from the State DOH, Complaint ¶¶ 153-60; (2) CMS, and its "agent" the State DOH, failed to follow HHS protocols and procedures in conducting the survey and enforcement process with respect to Beechwood in a number of respects, Complaint ¶¶ 161-95; (3) CMS's termination of Beechwood did not follow federally-mandated notice requirements; (4) CMS's termination of Beechwood violated Beechwood's right to equal protection because CMS has imposed only civil money penalties ("CMPs"), or other remedies short of termination, against similarly-situated facilities elsewhere; (5) there were due process and other violations in connection with the imposition of CMPs by the State DOH;*fn4 (6) CMS imposed a DPNA in May 1999 without the fifteen-day notice period required by 42 C.F.R. § 488.408(f); (7) the hearing procedures and adjudication standards used by the administrative law judge ("ALJ") during Beechwood's federal administrative proceedings were deficient in a number of respects, such as the ALJ's reliance on the testimony of an uncertified surveyor and unpublished or unrecognized professional standards of care, and his failure to adjudicate the scope and severity of each alleged deficiency; (8) the directed plan of correction and termination were improper because they were based on an April 1999 statement of deficiencies ("SOD") prepared by the State DOH, which alleged only past noncompliance, not existing noncompliance;*fn5 (9)-(11) the DAB's final determinations sustaining certain deficiency findings contained in the May, June and April 1999 SODs, respectively, were not supported by substantial evidence; and (12) even if CMS properly sustained those deficiencies, the remedies imposed on Beechwood by CMS were not justified by the underlying factual findings.
Based on these claims and allegations, Beechwood requests that the Court declare unlawful and set aside CMS's actions which sustained the various deficiency findings, and which upheld or imposed penalties and remedies against Beechwood, including the termination of Beechwood's Medicare/Medicaid provider status. Plaintiff also seeks attorney's fees pursuant to 28 U.S.C. § 2412.
III. The Parties' Motions
Beechwood moves for summary judgment on its first, fourth, fifth, sixth and eighth claims. Specifically, Beechwood seeks an order: (1) on its first and sixth claims, declaring that CMS's actions in imposing a DPNA and other remedies against Beechwood in 1999 were unlawful, and ordering CMS to reimburse Beechwood for services that Beechwood provided to Medicare- and Medicaid-eligible residents admitted on or after May 21, 1999; (2) on its fourth claim, declaring that CMS's termination of Beechwood without first imposing less severe penalties, such as civil money penalties, was unlawful; (3) on its fifth claim, declaring that CMS's actions in permitting the State DOH to impose civil money penalties was unlawful; and (4) on its eighth claim, declaring that CMS's termination of Beechwood following the April 1999 SOD was unlawful, because Beechwood was in compliance with federal requirements on the date of the April 1999 State DOH survey.
Defendants move for judgment on the pleadings dismissing the entire complaint pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. Defendants also move to strike an affidavit of Brook Chambery, and the exhibits attached to it, that plaintiff has submitted in support of its summary judgment motion. Defendants contend that the Court's review should be limited to the administrative record, and that these documents improperly seek to supplement that record.
The first matter that should be addressed before dealing with the merits of plaintiff's claims is the issue of mootness. Defendants contend that Beechwood's contentions with respect to its terminations from Medicare and Medicaid programs are moot because even if the Court were to find that Beechwood had been improperly terminated, the Court could order no effective relief, since: Beechwood no longer has an operating license from New York State; it could not currently participate in the Medicare and Medicaid programs in any event; it ceased operations eight years ago, in 1999; and its building was sold in a foreclosure action.
In response, Beechwood advances several reasons why, in its view, this case is not moot. First, Beechwood states that if the Court rules in Beechwood's favor, the remedies imposed against Beechwood by CMS will be "overturned," Beechwood's Opposition Brief (Dkt. #29-1) at 40. Second, Beechwood states that such a ruling would compel CMS to alter the way that it conducts future hearings with others with respect to Medicare and Medicaid program participants, and that the ruling would have a "name clearing" effect for Beechwood and the Chamberys.
Beechwood also contends that it has a financial stake in the outcome of this case because two of its claims, if resolved in Beechwood's favor, would allow it to obtain monetary relief. In support of that contention, Beechwood relies on its fifth and sixth causes of action, which respectively concern the State DOH's imposition of CMPs, and CMS's May 1999 imposition of a DPNA. Beechwood contends that a ruling in its favor on those claims would entitle it to recovery for the wrongfully-imposed CMPs, and for services that it rendered to Medicare- or Medicaid-eligible patients following the DPNA.
In addition, Beechwood states that if it obtains a favorable ruling in this action, it will seek to use that ruling in connection with other litigation. For instance, Beechwood states that a declaration by this Court that the State DOH improperly imposed CMPs on Beechwood could be used in an action in the New York Court of Claims to recover the amounts of those CMPs from the state.
Similarly, Beechwood contends that the declaratory relief that it seeks in this action could have important "collateral consequences" in Beechwood's pending § 1983 action mentioned above, Beechwood Restorative Care Center v. Leeds, which is currently pending in this Court. Beechwood argues that declaratory relief in the instant action would "confirm" the truth of some of plaintiffs' allegations in the Leeds action, and would provide circumstantial evidence of the retaliatory nature of the actions taken against Beechwood. Dkt. #29-1 at 43.
"It has long been settled that a federal court has no authority 'to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it.'" Church of Scientology of California v. United States, 506 U.S. 9, 12 (1992) (quoting Mills v. Green, 159 U.S. 651, 653 (1895)); accord Calderon v. Moore, 518 U.S. 149, 150 (1996). A case "should therefore be dismissed as moot when, by virtue of an intervening event, a court ... cannot grant 'any effectual relief whatever' in favor of the [plaintiff]." Calderon, 518 U.S. at 150 (quoting Mills, 159 U.S. at 653). "'[A] case is moot when the issues presented are no longer "live" or the parties lack a legally cognizable interest in the outcome.'" County of Los Angeles v. Davis, 440 U.S. 625, (1979) (quoting Powell v. McCormack, 395 U.S. 486, 496 (1969)). See also White River Amusement Pub, Inc. v. Town of Hartford, 481 F.3d 163, 167 (2d Cir. 2007) (case is not moot if plaintiff's injury is "likely to be redressed by a favorable judicial decision") (quoting Catanzano v. Wing, 277 F.3d 99, 107 (2d Cir. 2001)).
Applying these principles here, I find that to a great extent, Beechwood's claims in this action are moot. Beechwood is closed, its state operating license has been revoked by the State DOH, and the building where the nursing facility was operated has been sold. There is also no indication in the record that the Chamberys intend or desire to reopen Beechwood or a similar facility if they obtain relief in this action. Even if the Chamberys sought to open a new facility, any relief concerning Beechwood would not benefit that new facility. In sum, it is impossible for this Court to grant any effective relief to plaintiff. Church of Scientology, 506 U.S. at 12 ("if an event occurs while a case is pending on appeal that makes it impossible for the court to grant any effectual relief whatever to a prevailing party, the appeal must be dismissed" as moot) (internal quote omitted); In re DSC, Ltd., 486 F.3d 940, 945 (6th Cir. 2007) ("A claim becomes moot ... 'when the plaintiff receives the relief sought or when it is factually, not legally, impossible to receive such relief'") (quoting Liberles v. Cook County, 709 F.2d 1122, 1127 (7th Cir. 1983)); Cook v. Colgate Univ., 992 F.2d 17, 19 (2d Cir. 1993) (a case becomes moot "when it becomes impossible for the courts, through the exercise of their remedial powers, to do anything to redress the injury").
The fact that a plaintiff business has ceased operation, standing alone, will not necessarily moot a claim by the business against a governmental entity. In City of Erie v. Pap's A.M., 529 U.S. 277 (2000), for example, in which a corporation ("Pap's") that operated an establishment featuring nude erotic dancing brought an action challenging the constitutionality of a city ordinance proscribing nudity in public places, the Supreme Court held that the case was not mooted by the fact that Pap's had ceased operating its establishment, since Pap's "[wa]s still incorporated under Pennsylvania law, and it could again decide to operate a nude dancing establishment in Erie." Id. at 287.
The following year, in City News and Novelty, Inc. v. City of Waukesha, 531 U.S. 278 (2001), the Supreme Court again addressed the issue of whether a plaintiff's cessation of business operations moots its claims, but reached a different result. In City News, a store selling sexually explicit materials challenged a city's decision to refuse to renew the store's adult business license. After the denial withstood judicial review in the state courts, the Supreme Court granted certiorari to review the store's claims, but two months after petitioning for review before the Court, the store "gave notice that it would withdraw its renewal application and close its business upon the City's grant of a license to another corporation." Id. at 282-83. Thereafter, the store neither "pursue[d] nor currently expresse[d] an intent to pursue a license." Id. at 283.
Based on those facts, the Supreme Court rejected the store's contention that the case remained fit for adjudication because "it ha[d] never promised not to apply for a license in the future." Id. (quotation marks omitted). In doing so, the Court distinguished Pap's, stating that although the Court in Pap's had reached the conclusion that the controversy persisted, even though the adult business had shut down, in part because the business "could again decide to operate," id. (quoting Pap's, 529 U.S. at 287), "[t]hat speculation standing alone, however, did not shield the case from a mootness determination." Id. The City News Court explained that "[a]nother factor figured prominently" in Pap's, specifically that in Pap's, it was the plaintiff business that sought to have the case declared moot after the business had obtained a state-court judgment invalidating Erie's ordinance. Had the Court in Pap's found the case to be moot, "the defendant municipality would have been saddled with an 'ongoing injury,' i.e., the judgment striking its law[, a]nd the plaintiff arguably would have prevailed in an 'attemp[t] to manipulate the Court's jurisdiction to insulate a favorable decision from review.'" City News, 531 U.S. at 284 (quoting Pap's, 529 U.S. at 288).
In City News, in contrast, there was "no parallel circumstance," since the plaintiff business "left the fray as a loser, not a winner," so that the Court's dismissal of the writ of certiorari "d[id] not keep Waukesha under the weight of an adverse judgment, or deprive Waukesha of its victory in state court." Id. In addition, the Court stated, "a live controversy is not maintained by speculation that City News might be temporarily disabled from reentering a business that City News has left and currently asserts no plan to re-enter." Id. at 285.
Applying these principles, other courts have held that mootness in the context of a defunct or moribund business depends in part on whether the business owner has indicated an intention or desire to resume operations if the governmental action at issue is successfully challenged. Compare White River Amusement Pub, 481 F.3d at 168 (although nude-dancing establishment was destroyed by fire, its operator's challenge to ordinance prohibiting public nudity was not moot, since operator "expressed a clear intent to reopen" the establishment in the future and had a renewable lease on the premises, which it did not intend to terminate); Southern Oregon Barter Fair v. Jackson County, Oregon, 372 F.3d 1128, 1134 (9th Cir. 2004) (claim by event organizer that state permit requirement violated First Amendment was not moot, even though plaintiff had not actually held a major event for several years because it lacked funding and an appropriate site, since plaintiff had "attempt[ed] to raise funds ... and ... ha[d] continued to seek a site" for its event; noting that "[t]his proceeding would be moot if the Fair had entirely ceased to operate, left the business, and no longer sought or intended to seek a license"), cert. denied, ___ U.S. ___, 126 S.Ct. 367 (2005); Skysign Int'l, Inc. v. City and County of Honolulu, 276 F.3d 1109, 1114 (9th Cir. 2002) (action challenging ordinance was not moot where plaintiff's "complaint fairly c[ould] be read to allege that the challenged ordinance itself is what caused it to cease operations, and that the removal of that obstacle would put it back in business"); Clark v. City of Lakewood, 259 F.3d 996, 1012 (9th Cir. 2001) (owner of closed adult businesses still had a legally cognizable interest in the outcome of his lawsuit sufficient to allow him to seek injunctive relief, since his stated intention was to return to business); Dolls, Inc. v. City of Coralville, Iowa, 425 F.Supp.2d958, 986 (S.D.Iowa 2006) (action by adult-oriented business challenging constitutionality of licensing and zoning ordinances regulating such businesses, even though business owned no land zoned for adult-oriented businesses, and had neither applied for, nor been denied, a permit, since it was still incorporated and possessed a liquor license, and its owner expressed a "firm, conclusive, and unwavering" desire to continue operating as an adult dance establishment); with Board of License Commissioners of the Town of Tiverton v. Pastore, 469 U.S. 238, 239 (1985) (dismissing writ of certiorari as moot where establishment that had sought to challenge revocation of its liquor license had gone out of business, so that "no decision on the merits by this Court can now have an effect on the [establishment's] liquor license"); Bumpus v. Clark, 702 F.2d 826, 827 (9th Cir. 1983) (action by residents of nursing home challenging closure of home was moot where residents had all been removed prior to closure and transferred to other facilities, since "the subject matter of the action [was] inextricably tied to the existence and continued operation of" the home, "[n]o decree by the district court granting injunctive or declaratory relief c[ould] undo the closure, specify procedures for closing, or prevent the transfer of plaintiffs," and "[p]laintiffs did not request reopening of the home").
In the case at bar, there is no indication that Beechwood could or would be reopened in the event that it prevails in this lawsuit. Chambery has submitted two affidavits in connection with the pending motions, Dkt. #19(2), #27, and nowhere in either of them does he suggest that he plans to reopen Beechwood or a similar facility at any time in the future.
Most of Beechwood's other arguments why this case is not moot are equally unavailing. As for the alleged "name clearing" effect of a favorable ruling, "'reputational harm' does not rise to the level of the kinds of concrete disadvantages or disabilities that the Supreme Court has found constitute sufficiently adverse collateral consequences to render a case justiciable ... ." Kundrat v. Halloran, 206 F.Supp.2d 864, 869 (E.D.Mich. 2002) (citing Spencer v. Kernna, 523 U.S. 1, 8 (1998)). That is particularly so in light of the fact that Beechwood is no longer in business; any name-clearing effect would have no practical impact whatsoever. See Spencer, 523 U.S. at 18 ("We are not in the business of pronouncing that past actions which have no demonstrable continuing effect were right or wrong"); North Dakota Rural Dev. Corp. v. United States Dep't of Labor, 819 F.2d 199, 200 (8th Cir. 1987) (holding that action seeking review of denial of federal grant under Job Training Partnership Act was rendered moot by imminent expiration of grant year, despite plaintiff's argument that vindication of its reputation prevented dismissal on mootness grounds, since decision in plaintiff's favor "could not address [plaintiff's] fundamental injury in this case--its bar from participation in the 1985-87 grant competition"); see also Campbell v. Greisberger, 80 F.3d 703, 706 (2d Cir. 1996) (district court would have been justified in declining to exercise jurisdiction over claim for declaratory judgment where "no practical consequences [would have] followed" from declaratory relief).
I am equally unpersuaded by Beechwood's assertion that the case is not moot based on possible "collateral consequences" of this litigation, specifically Beechwood's stated intention to use any declaratory relief issued by this Court as "additional circumstantial evidence" in its pending § 1983 action, or as a basis for bringing an action against DOH in the New York Court of Claims, see Beechwood's Opposition Brief at 42-43. Beechwood has cited no authority, nor has the Court found any, standing for the proposition that a party may pursue an action simply for the purpose of gaining a potential advantage in some other litigation. In any event, if the issues that plaintiff seeks to litigate in the instant case are truly relevant and important to Beechwood's § 1983 action, the plaintiffs in that action could presumably fully explore those issues in the context of that action.
There is one respect, however, in which plaintiff's claims are not moot: plaintiff's claims for monetary relief. See, e.g., Fulton Corp. v. Faulkner, 516 U.S. 325, 327 n. 1 (1996) (tax refund issue survived repeal of relevant statute); Havens Realty Corp. v. Coleman, 455 U.S. 363, 370-71 (1982) (action for damages for alleged violation of Fair Housing Act survived mooted injunctive relief claim; "Given respondents' continued active pursuit of monetary relief, this case remains 'definite and concrete, touching the legal relations of parties having adverse legal interests'") (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-241 (1937); Loyal Tire & Auto Center, Inc. v. Town of Woodbury, 445 F.3d 136, 150-51 (2d Cir. 2006) ("We have acknowledged that 'a viable claim for damages generally avoids mootness of the action'") (quoting Cook v. Colgate Univ., 992 F.2d 17, 19, 21 (2d Cir. 1993)); Robert Pennza, Inc. v. City of Columbus, Georgia, 196 F.Supp.2d 1273, 1275 n. 3 (M.D.Ga. 2002) (although adult entertainment establishment had gone out of business, lawsuit challenging local adult entertainment code was not moot, "particularly given the fact that Plaintiffs seek damages pursuant to their § 1983 claim for being forced out of business by Defendants' alleged unconstitutional conduct").*fn6 While the bulk of plaintiff's claims simply seek an order declaring that certain of defendants' actions were unlawful, plaintiff has also advanced claims, specifically those relating to the imposition of CMPs and the DPNA, that could provide a basis for monetary relief if Beechwood were to prevail. Insofar as plaintiff's claims could support its claims for such monetary relief, then, they are not moot, and the Court will consider them.
Concerning the merits, a threshold question is what standard of review the Court should apply to its review of the challenged CMS actions. A related issue concerns the ...