Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-04219/USCOURTS-azd-2_05-cv-04219-0/pdf.json

Nature of Suit Code: 861
Nature of Suit: Social Security - HIA (1395 ff)
Cause of Action: 42:1395 HHS: Adverse Reimbursement Review

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Eleanor Webber, et. al., 

Plaintiffs, 

vs.

Mark B. McClellan, Administrator,

Centers for Medicare & Medicaid

Services; Michael O. Leavitt, Secretary of

the Department of Health and Human

Services, 

Defendants. 

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No. CV 05-4219-PHX-NVW

ORDER

The court has considered Defendants’ motion to dismiss (doc. # 25), Plaintiffs’

response (doc. # 29), Defendants’ reply (doc. # 39), and the parties’ supplemental

submissions.

Plaintiffs Eleanor Webber (through her conservators), Judith Schneider, and the Gray

Panthers Project Fund (the “Gray Panthers”) brought this action against Mark McClellan, the

Administrator of Centers for Medicare & Medicaid Services, and Michael Leavitt, the

Secretary of the Department of Health & Human Services (the “Secretary”), challenging

certain new practices and policies used in the Medicare coverage appeals process as violative

of the Constitution and various federal statutes. Plaintiffs’ action takes issue with the entire

set of new regulations governing ALJ hearings in Medicare coverage appeals, 42 C.F.R. §§

405.1000-.1064, but more specifically with those regulations (1) that provide for

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videoteleconference hearings instead of in-person hearings under most circumstances, even

where the beneficiary desires an in-person hearing, (2) that establish only four locations in

the United States for in-person hearings, and (3) that waive, for cases in which a beneficiary

obtains an in-person hearing, the deadline requiring that appeals decisions on coverage be

made within 90 days. Plaintiffs also seek to certify a class consisting of all Medicare

beneficiaries whose coverage claims have been or will be denied and who sought or will seek

ALJ review subject to the new regulations. 

Defendants now move to dismiss Plaintiffs’ Complaint on jurisdictional and

procedural grounds. In response to Defendants’ motion to dismiss, Plaintiffs have filed an

Amended Complaint naming Anna Frank, William Prescott, Carol Upton, and Marshall

Chazen as additional plaintiffs. As requested by Defendants, the court evaluates the motion

to dismiss in light of and as applied to the Amended Complaint. (See doc. # 39 at 1, n. 1.)

I. The Amended Complaint’s Challenges Within the Regulatory Scheme

Medicare beneficiaries who have been denied services or payment for services are

entitled to several levels of administrative review of the denial. See 70 Fed. Reg. 11420,

11426 (March 8, 2005). First, the beneficiary may seek “redetermination” of the decision

by the original Medicare contractor. 42 U.S.C. § 1395ff(a)(3). If still dissatisfied, the

beneficiary may request “reconsideration” of the decision by a qualified independent

contractor. 42 U.S.C. § 1395ff(c). Further review is then available in the form of a hearing

with an ALJ. 42 U.S.C. § 405(b)(1). Finally, the beneficiary may appeal the ALJ’s

determination to the Departmental Appeals Board. 42 U.S.C. § 1395ff(d)(2). Subsequent

judicial review of the decision by the Departmental Appeals Board may then be available,

but only if the beneficiary has timely and appropriately attempted to obtain relief at each of

the foregoing administrative levels. Heckler v. Ringer, 466 U.S. 602, 606 (1984); 42 U.S.C.

§ 1395ff(b)(1)(A) (incorporating judicial review under 42 U.S.C. § 405(g)).

Plaintiffs’ Amended Complaint challenges three of the Secretary’s practices related

to the ALJ hearings at the third stage of administrative review, namely (A) hearings by

videoteleconference; (B) the small number of locations established for in-person hearings;

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and (C) waiver of the 90-day decision deadline where an in-person hearing is given. The

court briefly presents the statutory and regulatory provisions pertinent to each of these

challenges.

A. Videoteleconferencing

In 2003, Congress passed legislation which has led to the use of videoteleconferencing

by ALJs as opposed to in-person hearings. See Medicare Prescription Drug, Improvement,

and Modernization Act of 2003, Pub. L. No. 108-173, sec. 931, 117 Stat. 2066, 2396 (the

“2003 Act”). The 2003 Act ordered the Commissioner of Social Security and the Secretary

to create and later implement a plan for shifting responsibility over Medicare appeals from

the Social Security Administration to the Department of Health and Human Services. Id. at

sec. 931(a) and (b), 117 Stat. at 2396-98. Congress specifically described the plan to be

created, in relevant part providing:

(2) Contents.– The plan shall include information on the

following:

. . . (G) Access to administrative law judges.– The feasibility

of–

(i) filing appeals with administrative law judges

electronically; and

(ii) conducting hearings using tele- or videoconference technologies.

Id. at sec. 931(a), 117 Stat. at 2396-97. The Secretary recently promulgated regulations

making videoteleconferencing the preferred method for conducting ALJ hearings:

Time and place for a hearing before an ALJ.

. . . 

(b) Determining how appearances are made. The ALJ will

direct that the appearance of an individual be conducted by

videoteleconferencing (VTC) if the ALJ finds that VTC

technology is available to conduct the appearance. The ALJ

may also offer to conduct a hearing by telephone if the request

for hearing or administrative record suggests that a telephone

hearing may be more convenient for one or more of the parties.

The ALJ, with the concurrence of the Managing Field Office

ALJ, may determine that an in-person hearing should be

conducted if— 

(1) VTC technology is not available; or

(2) Special or extraordinary circumstances exist.

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42 C.F.R. § 405.1020. The regulation’s effect is to deny in-person ALJ hearings to

beneficiaries who desire an in-person hearing except in “special or extraordinary

circumstances” or where technology for videoteleconferencing cannot be provided.

B. Number of Locations for In-Person Hearings

The 2003 Act also required the Secretary to provide an “appropriate geographic

distribution of administrative law judges . . . throughout the United States to ensure timely

access to such judges.” Pub. L. No. 108-173, sec. 931(b)(3), 117 Stat. 2066, 2398. Plaintiffs

allege that the Secretary has located ALJs at only four sites in the United States: Arlington,

Virginia; Cleveland, Ohio; Irvine, California; and Miami, Florida. (Amended Complaint at

¶ 19.)

C. Waiver of the 90-Day Rule

Section 1395ff(d) of Title 42, U.S.C., provides that hearings and decisions by ALJs

must be rendered within a certain time and that an ALJ’s failure to render a timely decision

will allow the beneficiary to automatically advance to the next level of administrative review:

(d) Deadlines for hearings by the Secretary; notice

(1) Hearing by administrative law judge

(A) In general

Except as provided in subparagraph (B),

an administrative law judge shall conduct

and conclude a hearing on a decision of a

qualified independent contractor under

subsection (c) and render a decision on

such a hearing by not later than the end of

the 90-day period beginning on the date a

request for hearing has been timely filed.

(B) Waiver of deadline by party seeking hearing.

The 90-day period under subparagraph (A)

shall not apply in the case of a motion or

stipulation by the party requesting the

hearing to waive such period. . . . (3) Consequences of failure to meet deadlines

(A) Hearing by administrative law judge

In the case of a failure by an

administrative law judge to render a

decision by the end of the period described

in paragraph (1), the party requesting the

hearing may request a review by the

Departmental Appeals Board of the

Department of Health and Human

Services, notwithstanding any

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requirements for a hearing for purposes of

the party’s right to such a review.

Under the new regulations, however, this 90-day decision deadline is deemed waived in cases

where a beneficiary asks for and receives an in-person hearing. 42 C.F.R. § 405.1020(i)(4).

II. Venue

Defendants challenge venue in this district for all plaintiffs except Eleanor Webber,

who is an Arizona resident. The other individual Plaintiffs are residents of other states. Gray

Panthers is a Pennsylvania corporation with its principal place of business in the District of

Columbia. For venue purposes, a corporation resides in its state of incorporation. Denver

& Rio Grande W. R.R. v. Hd. of R.R. Trainmen, 387 U.S. 556, 559-60 (1967). 

The venue statutes applicable to Plaintiffs’ claims depend on the statute alleged to

give rise to jurisdiction. Section 405(h) of Title 42, U.S.C., as incorporated by 42 U.S.C.

§ 1395ff, bars Plaintiffs’ challenges to the actions of the Secretary to the extent they are

brought under 28 U.S.C. § 1331. See, e.g., Shalala v. Ill. Council on Long Term Care, 529

U.S. 1, 1092 (2000). However, Defendants concede, though reserving for challenge on

appeal, that in this Circuit mandamus jurisdiction under 28 U.S.C. § 1361 is not ousted by

41 U.S.C. §§ 1395i and 405(h). (Doc. # 25 at 15, n.15 (citing Kildare v. Saenz, 325 F.3d

1078, 1084 (9th Cir. 2003).) The court must therefore determine whether venue is

appropriate under either 28 U.S.C. § 1361 or under 42 U.S.C. §§ 1395ff and 405(g). 

The venue of judicial review of Medicare decisions under 42 U.S.C. § 1395ff,

incorporating 42 U.S.C. § 405(g), is “in the district court of the United States for the judicial

district in which the plaintiff resides, or has his principal place of business . . . .” Plaintiffs

assert, “Since venue under 42 U.S.C. § 405(g) is proper for at least one named plaintiff,

venue lies in this District. See Def. Mem. at 8-9.” (Doc. # 29 at 8.) However, Plaintiffs cite

no legal authority for this interpretation of § 405(g). Neither do Defendants cite any legal

authority for their contrary interpretation. The text of § 405(g) does not purport to allow

plaintiffs in diverse states each asserting their own claim against the Commissioner to join

in one action in any state in which any one of them has proper venue. Though the general

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Plaintiffs do not assert venue under the general statute, 28 U.S.C. § 1391(b), no doubt

because no “substantial part of the events or omissions giving rise to the claim occurred” in

Arizona, none of the Defendants resides in Arizona, and there is at least one other district in

which the action may be brought.

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venue statute for actions against federal officers in their official capacity, 28 U.S.C. §

1391(e), and similar statutes have been so construed, see A. J. Taft Coal Co. v. Barnhart, 291

F. Supp. 2d 1290, 1301-1302 (N.D. Ala. 2003) (citing cases), there is good reason to think

§ 405(g), authorizing review of “any final decision,” at most authorizes joint plaintiffs to

bring an action in a single venue for the same final decision. In the absence of citation to any

different authority, this court so construes § 405(g). There being no single decision under

review in this action common to all Plaintiffs, whether final or exempt from exhaustion, the

attempts by the non-resident Plaintiffs to bring their individual and distinct claims in this

District cross over the venue boundary of § 405(g). Therefore, only Plaintiff Webber may

maintain any claims in this action under that jurisdictional grant and authorization for judicial

review.

Plaintiffs alternatively assert venue under the mandamus statute, 28 U.S.C. § 1361,

for which the Mandamus and Venue Act, 28 U.S.C. § 1391(e)(3), allows venue where “the

plaintiff resides if no real property is involved in the action.” As noted above, proper venue

for one plaintiff is good for all under this statute.1

 Hence, venue is proper in this district for

all Plaintiffs’ mandamus claims and only Plaintiff Webber’s claims under 42 U.S.C. §

405(g). The court now addresses the jurisdictional and justiciability challenges to those

claims.

III. Standing

Defendants next argue that none of the Plaintiffs alleges sufficient injury to satisfy

Article III’s standing requirement. This requirement is separate from the question of

“statutory standing” or exhaustion, although the doctrines may overlap. See Hall v. Norton,

266 F.3d 969, 975 n.5 (9th Cir. 2001) (analyzing separately Article III standing and statutory

“standing” under the Administrative Procedures Act, which itself includes a requirement of

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“final agency action” similar to that of the Medicare Act); Churchill County v. Babbitt, 150

F.3d 1072, 1077-1078 (9th Cir. 1998), as amended, 158 F.3d 491 (1998) (same). The Article

III standing determination is made with a view to the circumstances as they exist at the

initiation of the suit, Didrickson v. U.S. Dep’t of Interior, 982 F.2d 1332, 1339 (9th Cir.

1992), and pertains individually to each form of relief sought. Friends of the Earth, Inc. v.

Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 185 (2000).

“A plaintiff suing in a federal court must show in his pleading, affirmatively and

distinctly, the existence of whatever is essential to federal jurisdiction . . . .” Tosco Corp. v.

Cmtys. for a Better Env’t, 236 F.3d 495, 499 (9th Cir. 2001) (citations and internal quotations

omitted). However, “[f]or purposes of ruling on a motion to dismiss for want of standing,

both the trial and reviewing courts must accept as true all material allegations of the

complaint, and must construe the complaint in favor of the complaining party.” Warth v.

Seldin, 422 U.S. 490, 501 (1975) (citations omitted). The court, moreover, will “presume

that general allegations embrace those specific facts that are necessary to support the claim.”

Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (alterations and internal quotations

omitted). The court also may properly consider extrinsic evidence and resolve factual

disputes relevant to jurisdiction. Ass’n of Am. Med. Colleges v. United States, 217 F.3d 770,

778 (9th Cir. 2000).

As a general matter, 

[T]he irreducible constitutional minimum of standing contains

three elements. First, the plaintiff must have suffered an “injury

in fact”–an invasion of a legally protected interest which is (a)

concrete and particularized, and (b) “actual or imminent, not

conjectural or hypothetical.” Second, there must be a causal

connection between the injury and the conduct complained

of–the injury has to be “fairly traceable to the challenged action

of the defendant, and not the result of the independent action of

some third party not before the court.” Third, it must be

“likely,” as opposed to merely “speculative,” that the injury will

be “redressed by a favorable decision.”

Lujan, 504 U.S. at 560-61 (citations, internal quotations and alterations omitted). 

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Plaintiff Webber’s favorable decision was reversed on higher appeal and remanded

for further administrative proceedings. This moots Defendants’ argument that she won her

hearing.

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A. Standing of the Individual Plaintiffs

The parties entertain fundamentally different ideas about the nature of the injury

alleged by these individual plaintiffs. Plaintiffs understand that injury as procedural in

nature, in that the Secretary violated their statutory and constitutional right to an in-person

hearing. Defendants, however, acknowledge these plaintiffs’ allegations of harm only

insofar as the use of videoteleconferencing has resulted in reduction of their benefits.

Defendants argue that no Plaintiff has standing unless a videoteleconference hearing would

result in a substantive decision less favorable than an in-person hearing. (Doc. # 39 at 2:7-

16.) Implicitly, if the plaintiffs were awarded full benefits after a videoteleconference

hearing, there was no “harm.” For example, Defendants argue that the use of

videoteleconference technology in the hearings recently provided to Webber and Schneider

did not affect the outcomes; according to Defendants, Webber “won” her hearing,2

 and

Schneider’s unfavorable result was based on purely legal grounds that could not have been

affected by use of videoteleconference technology. (Doc. # 25 at 9:10-23, 10:21-11:2.) 

To the contrary, the individual Plaintiffs need not demonstrate a reduction in benefits

to have standing to challenge the Secretary’s actions. “Procedural standing is standing based

on a plaintiff’s procedural injury.” Babbitt, 150 F.3d at 1077. By asserting procedural

standing the plaintiffs may seek:

to enforce a procedural requirement the disregard of which

could impair a separate concrete interest of theirs (e.g., the

procedural requirement for a hearing prior to denial of their

license application, or the procedural requirement for an

environmental impact statement before a federal facility is

constructed next door to them.)

Lujan, 504 U.S. at 572 (emphasis added). The Ninth Circuit has recognized procedural

standing predominantly in the area of environmental law, but it may apply whenever a

plaintiff alleges a violation of statutorily mandated procedures that, if disregarded, might

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impair the plaintiff’s “separate concrete interest.” Hall, 266 F.3d at 975 (citing Lujan, 504

U.S. at 572 & n.7); see, e.g., Beeman v. TDI Managed Care Servs., Inc., 449 F.3d 1035, 1039

(9th Cir. 2006) (holding that pharmacy managers’ failure to conduct statutorily-mandated

statistical studies of retail drug pricing and to provide the results to clients was an actionable

“procedural injury” to the plaintiff pharmacies, where the pharmacies sought to enforce the

requirement because providing accurate information about market pricing to those involved

in pharmaceutical transactions could lead to more favorable reimbursement rates to the

pharmacies); Paulsen v. Daniels, 413 F.3d 999, 1005 (9th Cir. 2005) (holding that Bureau

of Prison’s violation of the APA in passing early release regulations was an actionable

“procedural injury” to the plaintiff inmates denied release under the regulations issued, even

though there was no suggestion that regulations passed properly would have accorded the

plaintiff inmates early release); Kootenai Tribe of Idaho v. Veneman, 313 F.3d 1094, 1112

(9th Cir. 2002) (holding that plaintiffs met standing requirement by asserting a “procedural

injury” based on the Forest Service’s violation of statutory requirement that agencies create

and publicize an environmental impact statement before taking action, given the plaintiffs’

interest in nearby land affected by the agency action); Idaho Conservation League v.

Mumma, 956 F.2d 1508, 1514 n.11 (9th Cir. 1992) (holding that plaintiffs had alleged an

actionable “procedural injury” by challenging the defendant’s “failure to analyze or disclose

fully the environmental effects of the Forest Plan Implementation Schedule, a failure which

amounted to a violation of the NFMA, NEPA and the APA,” where the plaintiffs had a

concrete interest in continuing to use of the land affected) (citations and quotations omitted).

Here, like the license applicants postulated in Lujan seeking to enforce a hearing requirement

prior to denial of their license applications, Webber and Schneider are asserting “procedural

standing” to enforce a hearing requirement arguably imposed for their benefit and

disregarded by the Secretary.

“To establish procedural standing, the plaintiff must show: (1) that it has been

accorded a procedural right to protect its concrete interests, and (2) that it has a threatened

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concrete interest that is the ultimate basis of its standing.” Babbitt, 150 F.3d at 1077

(citations omitted); accord Beeman, 449 F.3d at 1038; Paulsen, 413 F.3d at 1005.

It is implicit in the Amended Complaint that statutes underlying the individual

Plaintiffs’ claims accord procedural rights to the individual Plaintiffs. Whether the statutes

have that effect is the ultimate merits issue in this case, but Plaintiffs sufficiently show

arguable basis to meet the first branch of procedural standing. Congress established

procedures that arguably appear to be for the benefit of Medicare beneficiaries: Congress

statutorily instructed the Secretary to provide hearings to Medicare beneficiaries, 42 U.S.C.

§ 1395ff(b)(1)(A), to provide an “appropriate geographic distribution of administrative law

judges . . . throughout the United States,” Pub. L. No. 108-173, sec. 931(b)(3), 117 Stat.

2066, 2398, and to have ALJ decisions rendered within 90 days after a beneficiary’s hearing

request. 42 U.S.C. § 1395ff(d)(1)(A).

It is also implicit in the Amended Complaint and explicit in Plaintiffs’ briefs that those

alleged procedural rights are said to be, at in least in general and to the minimal extent

necessary for procedural standing, in furtherance of their concrete interests in incrementally

more accurate and more user- comforting decision-making and processes. This sufficiently

alleges a concrete interest in Plaintiffs’ Medicare benefits to serve as the “ultimate basis” of

their standing. Lujan, 504 U.S. at 573 n.8. Economic benefit is generally sufficient to

provide the “identifiable trifle” of interest required to satisfy standing. United States v.

Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 690 n.14; see also Hall,

266 F.3d at 976 & n.6 (listing concrete injuries such as “traffic, pollution, and noise”

(citations and internal quotations omitted)). Plaintiffs may have economically derived

interests in receiving a timely decision after their hearing and in attending a hearing within

a reasonable distance of their residence. (E.g., Amended Compl. at ¶ 30.) 

Plaintiffs must show that the Secretary’s actions threaten their concrete interests in

order to satisfy the causation element of standing, although the causation requirement in

cases of procedural standing is relaxed. See Babbitt, 150 F.3d at 1077; Public Citizen v.

Dep’t of Transp., 316 F.3d 1002, 1016 (9th Cir.), overruled on other grounds, 541 U.S. 752

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Prescott lacks standing for the additional reason that his January 1, 2005 appeal

predates the July 1, 2005 effective date of the challenged regulations.

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(2004). A plaintiff asserting procedural standing “need not establish causation with the

degree of certainty that would be required for him to succeed on the merits, say, of a tort

claim. Rather, [the plaintiff] need only establish the reasonable probability of the challenged

action’s threat to his concrete interest.” Hall, 266 F.3d at 977 (citations, alterations and

quotations omitted); accord Beeman, 449 F.3d at 1038. Loss of the alleged incrementally

better ability to perceive and evaluate witnesses and the greater comfort to applicants in

personal presentation and presence at the hearing are sufficient threats to Plaintiff’s concrete

interests for the minimal requirements of standing.

In general, the relief Plaintiffs seek would give some redress for their claimed rights.

“In cases of procedural injury . . . plaintiffs need not demonstrate that the ultimate outcome

following proper procedures will benefit them.” Kootenai Tribe, 313 F.3d at 1113 (citations

and internal quotations omitted); accord Mumma, 956 F.2d at 1518. Rather, it is sufficient

to show that the use of proper procedures “could” result in a different outcome. Hall, 266

F.3d at 977; see also Kootenai Tribe, 313 F.3d at 1113 (“It is enough that [use of proper

procedures] may redress plaintiffs’ alleged injuries.” (emphasis added)). The direct benefit

of the improved hearing procedures that Plaintiffs demand is redress in itself. They need not

show that their individual claims would be decided differently to meet this requirement. 

Several of the individual Plaintiffs, however, do not allege that the Secretary has

denied them the procedures they desire, or that they even have requested those procedures.

Plaintiff Anna Frank alleges only that she “intends to appeal the denial” of her $140 claim

but does not allege that she will ask for an in-person hearing. Plaintiff William Prescott does

not allege that he even asked for an in-person hearing.3

 Though Plaintiff Carol Upton asked

for an in-person hearing, she retreated from that request when she later asked for a “hearing

either by phone or in person.” (Doc. # 39, Exh. F.) Plaintiff Marshall Chazen does not

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Chazen also has not alleged that he has any stake in the appeals taken by Aoki

Diabetes Research Institute, which apparently provided care to him.

5

Of course, Defendants may defend the appropriateness of the number and location

of hearing locations in part on the validity of the restrictive videoteleconference hearing rule,

which reduces the justification for more widely dispersed hearing locations. Thus, the

validity of the videoteleconference hearing rule may be adjudicated in due course even

though Plaintiff Webber lacks direct standing to challenge it. The court does not prejudge

whether this issue arises or how it would be decided.

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allege that he demanded an in-person hearing.4

 These Plaintiffs cannot complain that they

did not get what they did not ask for, so the injury they complain of cannot be said to be other

than speculative.

Plaintiff Webber lacks standing to challenge the videoteleconference rule as such

because she was offered an in-person hearing. She declined the in-person hearing due to the

inconvenient location of the hearing. That leaves her with standing to challenge only the

location of in-person hearings but not the rule restricting in-person hearings.5

 

Any challenge to the narrowing to four in-person hearing sites is necessarily

predicated upon getting an in-person hearing or having standing to challenge the denial of

an in-person hearing, for only such persons could be harmed by, and could question the

appropriateness of, only four hearing locations, or even only one. 

Thus, on the Amended Complaint and undisputed evidence submitted on this motion,

only Plaintiffs Webber and Schneider have standing to challenge locations of in-person

hearings, and only Plaintiff Schneider has standing to challenge the videoteleconference rule.

No Plaintiff alleges or could allege sufficient standing for a pre-hearing challenge to

the regulation’s attempted extinguishment, for persons given an in-person hearing, of the

statutory requirement to rule in 90 days. No one could be harmed by that rule unless they

get such a hearing and do not receive a ruling within 90 days. Thus, pre-decision

adjudication of the validity of that rule would be speculative, hypothetical, and quite possibly

unnecessary. Plaintiffs would lack standing until and unless the ALJ does not rule within 90

days. But at that point the applicant would have a ready administrative remedy by claiming

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the statutory right to immediate review at the next administrative level, thus precipitating a

decision, subject to 42 U.S.C. § 405(g) judicial review, of the validity of that rule.

B. The Standing of Plaintiff Gray Panthers

An organization may assert “representational standing,” which “is contingent upon

the standing of its members,” or “organizational standing,” which exists where the

“organization itself has suffered an injury in fact.” Smith v. Pac. Props. & Dev. Corp., 358

F.3d 1097, 1101 (9th Cir. 2004) (citations omitted). The Gray Panthers asserts both varieties

of standing in this case.

1. Representational Standing

The requirements for representational standing were set out in Hunt v. Washington

State Apple Advertising Commission, 432 U.S. 333, 343 (1977): 

[A]n association has standing to bring suit on behalf of its

members when: (a) its members would otherwise have standing

to sue in their own right; (b) the interests it seeks to protect are

germane to the organization’s purpose; and (c) neither the claim

asserted nor the relief requested requires the participation of

individual members in the lawsuit.

The Gray Panthers has not satisfied the first requirement, in that it has not adequately

alleged that its members have standing to sue in their own right. To satisfy this requirement,

an organization must show that at least “one of the members it represents . . . has suffered

injury in fact that is likely to be redressed by a favorable decision.” United States v. City &

County of San Francisco, 979 F.2d 169, 171 (9th Cir. 1992). The Gray Panthers has alleged

that its members, many of whom depend on Medicare, “will not be comfortable with VTC

technology” and have “grave concerns” about the “changes to the administrative process

effected by the regulations.” (Amended Compl. at ¶¶ 103-05.) The Gray Panthers has not

alleged, however, that any of its members has been denied an in-person hearing or otherwise

has engaged even the first stage of the Medicare administrative appeals framework.

Although the court will “presume that general allegations embrace those specific facts that

are necessary to support the claim,” Lujan, 504 U.S. at 561 (alterations and internal

quotations omitted), none of the general allegations in the Amended Complaint suggests that

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any member of the Gray Panthers currently has a concrete, personalized dispute with regard

to these regulations. 

Neither of the parties has presented dispositive authority on whether an organization

challenging the Secretary’s regulations in a representational capacity must affirmatively

plead exhaustion by a member in order to survive a motion to dismiss. For example, Shalala

v. Illinois Council on Long Term Care, Inc., 529 U.S. 1 (1999), which is cited by Defendants

in this regard, held only that an organization could not bring an action on behalf of its

members under 28 U.S.C. § 1331, even though the organization was unable to exhaust

administrative remedies under the appropriate jurisdictional provision and therefore could

not bring an action. Id. at 24. The Court in Illinois Council did not address whether an

organization bringing an action under the appropriate jurisdictional provision would have to

plead its members’ exhaustion of administrative remedies. Given that Plaintiffs’ Amended

Complaint fails to allege that any member of the Gray Panthers has more than speculative

injury arising from these regulations, the court need not reach this question on this motion.

2. Organizational Standing

In support of the Gray Panthers’ asserted organizational standing, the Amended

Complaint alleges that “the Gray Panthers has had to devote and will continue to have to

devote scarce time, effort, staff, and other resources to analyzing the new procedures and

educating and providing effective assistance to its members.” (Amended Compl. at ¶ 108.)

Additionally, the Amended Complaint alleges, the Secretary’s regulations have “interfered

with and impeded the Gray Panthers’ mandate, and have reduced the overall effectiveness

of its program and efforts.” (Id.) These allegations fail to establish an injury in fact to an

interest of the Gray Panthers within the zone of interests protected by the Medicare Act.

To establish injury in fact, the Gray Panthers relies on cases involving challenges

under the Fair Housing Act. In that area of law, “an organization may satisfy the Article III

requirement of injury in fact if it can demonstrate: (1) frustration of its organizational

mission; and (2) diversion of its resources to combat the particular housing discrimination

in question.” Smith v. Pac. Props. & Dev. Corp., 358 F.3d 1097, 1105 (9th Cir. 2004)

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(citations omitted). Even if this test is applicable here, however, the Gray Panthers’ alleged

diversion of resources stems not from combating the illegal activity of a private party but

from compliance with the issued regulations.

In any event, the Gray Panthers has not alleged that its injury is to an interest within

the zone of interests protected by the Medicare Act. “The question of standing . . . .

concerns, apart from the ‘case’ or ‘controversy’ test, the question whether the interest sought

to be protected by the complainant is arguably within the zone of interests to be protected or

regulated by the statute or constitutional guarantee in question.” Ass’n of Data Processing

Serv. Org., Inc. v. Camp, 397 U.S. 150, 153 (1970). “[W]hether a plaintiff’s interest is

within the zone of interests protected by a statute is to be determined not by reference to the

overall purpose of the Act in question . . . but by reference to the particular provision of law

upon which the plaintiff relies.” Ashley Creek Phosphate Co. v. Norton, 420 F.3d 934, 940

(9th Cir. 2005) (citations omitted). Here, nothing in the relevant provisions of the Medicare

Act or Constitution suggests that the procedures followed by the Secretary were designed to

protect the interests of advocacy organizations like the Gray Panthers. “Nowhere does the

Act make mention of advocacy organizations’ interests.” Ctr. for Law & Educ. v. Dep’t of

Educ., 396 F.3d 1152, 1157 (D.C. Cir. 2005). The statute references only “individuals,” e.g.,

42 U.S.C. § 1395ff(b)(1)(A), and its protections “were not designed to protect some

threatened concrete interest of [advocacy] organizations.” Id. at 1157 (citations and

quotations omitted; emphasis in original); cf. also Ashley Creek Phosphate, 420 F.3d at 942

(holding that NEPA zone of interests did not extend to purely economic interests of third

party otherwise unaffected by agency’s actions). 

IV. Exhaustion

Defendants also argue that Plaintiffs have not exhausted their administrative appeals

and therefore cannot seek review in district court. The exhaustion requirement for Medicare

appeals has its origin in the “final decision” requirement of 42 U.S.C. § 405(g), which states:

(g) Judicial review. Any individual, after any final decision of

the Commissioner of Social Security made after a hearing to

which he was a party, irrespective of the amount in controversy,

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may obtain a review of such decision by a civil action

commenced within sixty days after the mailing to him of notice

of such decision or within such further time as the

Commissioner of Social Security may allow. . . . 

(Emphasis added). Although directly governing only Social Security appeals, this provision

is made applicable to Medicare appeals in 42 U.S.C. 1395ff(b)(1)(A).

“Pursuant to her rulemaking authority, the Secretary has provided that a ‘final

decision’ is rendered on a Medicare claim only after the individual claimant has pressed his

claim through all designated levels of administrative review.” Heckler v. Ringer, 466 U.S.

602, 606 (1984) (citations omitted). Such exhaustion of administrative remedies is required

for all claims, including benefits claims, declaratory or injunctive actions, and constitutional

or statutory challenges. Illinois Council, 529 U.S. at 13-14; see also Weinberger v. Salfi, 422

U.S. 749, 765-67 (1975). However, “deference to the Secretary’s conclusion as to the utility

of pursuing the claim through administrative channels is not always appropriate.” Heckler,

466 U.S. at 618. Rather, “cases may arise where a claimant’s interest in having a particular

issue resolved promptly is so great that deference to the agency’s judgment is inappropriate.”

Mathews v. Eldridge, 424 U.S. 319, 330 (1976). 

The Supreme Court has suggested, and [the Ninth Circuit has]

applied, a three-part test to determine whether a particular case

merits judicial waiver of the exhaustion requirement. The claim

must be (1) collateral to a substantive claim of entitlement

(collaterality), (2) colorable in its showing that denial of relief

will cause irreparable harm (irreparability), and (3) one whose

resolution would not serve the purposes of exhaustion (futility).

Johnson v. Shalala, 2 F.3d 918, 921 (9th Cir. 1993) (citations and internal quotations

omitted); accord Briggs v. Sullivan, 886 F.2d 1132, 1139 (9th Cir. 1989). The Supreme

Court has cautioned against “mechanical application” of the first two of these three factors,

suggesting instead that the waiver inquiry should be “intensely practical.” Bowen v. City of

New York, 476 U.S. 467, 484 (1986); see also Illinois Council, 529 U.S. at 15; New York v.

Sullivan, 906 F.2d 910, 918 (2d Cir. 1990) (“No one element is critical to the resolution of

the issue; rather, a more general approach, balancing the competing considerations to arrive

at a just result, is in order.” (citations omitted)).

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The only plaintiff with both standing and venue under 405(g) is Plaintiff Webber. The

court therefore addresses waiver of the exhaustion requirement specifically with respect to

Plaintiff Webber’s claim.

A. Collaterality

Plaintiff Webber’s challenge is collateral to any substantive claim of entitlement. “A

plaintiff’s claim is collateral if it is not essentially a claim for benefits.” Johnson, 2 F.3d at

921(citations omitted). Here, Plaintiff Webber has expressly disavowed making any

individual challenge on the merits of her claims for benefits. (Doc. # 29 at 5:10-16.) As

such, her “attack is essentially to the policy itself, not to its application to [her] . . . . [Her]

challenge to the policy rises and falls on its own, separate from the merits of [her] claim for

benefits.” Kildare v. Saenz, 325 F.3d 1078, 1082-83 (9th Cir. 2003) (citations omitted).

Such attacks on procedures utilized by the Secretary, when disassociated from individual

claims for benefits, are customarily understood to be collateral. E.g., Bowen, 476 U.S. at 483

(holding that challenge to Secretary’s unpublished policy, whereby the Secretary presumed

that claimants with certain mental deficiencies were able to perform unskilled work, was

collateral to any claim for benefits); Mathews, 424 U.S. at 330-331 (holding that procedural

due process claim challenging the Secretary’s failure to provide a predeprivation hearing

before terminating social security benefits was collateral to any claim for benefits); Cassim,

824 F.2d at 795 (holding that procedural due process claim challenging the Secretary’s

failure to provide a pre- or post-deprivation hearing before suspending plaintiff from

Medicare program was collateral). 

B. Irreparability

To meet the “irreparability” requirement, “plaintiffs must raise at least a colorable

claim that exhaustion will cause them irreparable injury.” Johnson, 2 F.3d at 922 (citations

omitted). “A colorable claim of irreparable harm is one that is not wholly insubstantial,

immaterial, or frivolous.” Kildare, 325 F.3d at 1083 (citations omitted). Economic hardship,

if appropriately pleaded, will satisfy the “irreparability” requirement. Johnson, 2 F.3d at 922;

see also Briggs, 886 F.2d at 1140.

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The Amended Complaint contains no allegation, let alone a “colorable claim,” that

requiring Webber to exhaust her administrative appeals would cause her injury irremediable

by later payments. Plaintiffs argue that temporary loss of money should satisfy this

requirement. (Doc. # 29 at 11:11.) However, in neither the Amended Complaint nor in their

briefs have Plaintiffs clarified how such temporary loss harms Webber “in a way not

recompensable through retroactive payments.” Mathews, 424 U.S. at 331 (footnote omitted).

Mere delay in payment does not constitute economic hardship so as to satisfy this

requirement. To plead economic hardship the complaint must allege not solely a temporarily

unsatisfied claim but harm accruing to the plaintiff because of the delay in payment. E.g.,

Bowen, 476 U.S. at 484 (holding that severe medical setbacks arising from the trauma of

having disability benefits cut off satisfied the irreparable injury requirement); Kildare, 325

F.3d at 1083 (holding that complaint “adequately allege[d] economic hardship, such as

subsistence on General Assistance and food stamps, lack of medical insurance, and

homelessness”); Briggs, 886 F.2d at 1140 (holding that evidence of “several months without

food, shelter or other necessities” constituted a colorable showing of economic hardship so

as to satisfy irreparability requirement); see also Johnson, 2 F.3d at 922 (relying on Briggs’

reference to “several months without food, shelter or other necessities” in holding that

economic hardship suffered by SSI beneficiaries constituted irreparable injury). To read

“economic hardship” so broadly as to include all delays in payment to Medicare beneficiaries

would effectively nullify the “irreparability” requirement, given that beneficiaries

challenging denials of their claims are invariably without payment while exhausting their

administrative remedies. 

In these circumstances there appears, however, to be some degree of irreparability.

That irreparable harm is the distress and burden of having to go through appeal procedures

that are, by hypothesis, unlawful and will have to be repeated. Most Medicare claimants are

elderly and many are infirm. The claims are often small in relation to the economic and noneconomic transaction costs for such people in going through government hearings and

proceedings. Those burdens themselves can sometimes deter appeals, and burdens imposed

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unlawfully are irreparable by appeal and remand. Though the irreparability in this case is

attenuated, its is minimally sufficient when weighed with the substantial collaterality and the

patent futility of making Plaintiff Webber submit to a procedure in one place that she claims

a legal right to have in another place in order to determine whether she is entitled to have

it in the other place.

C. Futility

The ultimate decision of whether to waive administrative exhaustion “should also be

guided by the policies underlying the exhaustion requirement.” Bowen, 476 U.S. at 484.

“The purpose of exhaustion is to allow the agency, in the first instance, to develop a detailed

factual record and utilize its expertise in applying its own regulations to those facts.”

McBride Cotton & Cattle Corp. v. Veneman, 290 F.3d 973, 982 (9th Cir. 2002) (citations

omitted). Exhaustion is futile where “nothing is gained from permitting the compilation of

a detailed factual record, or from agency expertise.” Johnson, 2 F.3d at 922 (citations and

internal quotations omitted).

Compilation of a detailed factual record for Webber here would serve little purpose.

When assessing “straightforward” statutory or constitutional challenges to systemwide

policies of the Secretary, such detailed factual records are generally not useful. See Johnson,

2 F.3d at 922 (holding where plaintiffs had alleged that the Secretary’s systemwide policy

of treating all in-kind loans as income violated the Social Security Act that the court did not

“need a detailed factual record for each claimant to decide such a ‘straightforward statutory’

challenge” (citations omitted)); Briggs, 886 F.2d at 1140 (holding where plaintiffs challenged

the Secretary’s policy of suspending the benefits of substance abusing beneficiaries if they

lacked a personal representative that “it is difficult to see . . . what sort of detailed record

might assist a court in determining the merits of appellants’ straightforward statutory and

constitutional challenge”); compare Kildare, 325 F.3d. at 1084 (holding where plaintiffs

alleged a “host of individual errors” that “the errors must be determined in the context of

individual disability proceedings and require development of individual factual records”).

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Nor is this a case where agency expertise, as that idea is properly understood, would

be particularly helpful. The relevant agency expertise lays in proper application of

regulations. See Bowen, 476 U.S. at 485 (“Because of the agency’s expertise in

administering its own regulations, the agency ordinarily should be given the opportunity to

review application of those regulations to a particular factual context.”); Kildare, 325 F.3d

at 1084 (noting that “the State and Federal Defendants could apply their agency expertise in

determining whether and what regulations were disregarded in each case”); Johnson, 2 F.3d

at 922 (“[T]he exhaustion requirement allows the agency to . . . apply agency expertise in

administering its own regulations.”). By contrast, issues of statutory construction or

constitutional interpretation are beyond the scope of that expertise. Johnson, 2 F.3d at 922

(“Nor do we require the benefit of agency expertise because the issue posed by the class

members is one purely of statutory construction.” (citations and internal quotations omitted)).

Finally, the challenged policy here is “binding on the Secretary’s adjudicators.”

Johnson, 2 F.3d at 922 (internal quotations omitted). Where policies are “mandated by the

highest level of the Department’s hierarchy,” it is “extraordinarily unlikely that an individual

claimant could succeed” by bringing his claim to “one of the lower echelons of the

Secretary’s administrative adjudication machine.” Briggs, 886 F.2d at 1141. For this reason

as well, exhaustion “would result in a considerable waste of . . . resources.” Johnson, 2 F.3d

at 923. 

In summary, excuse from exhaustion is appropriate for Webber’s claim for which she

has standing. That is the challenge to the narrowing of places of in-person hearings.

V. Mandamus

Defendants also challenge the sufficiency of Plaintiffs’ claims for mandamus under

28 U.S.C. § 1361. Because Plaintiff Schneider has venue in this district only for her

mandamus claims, whether she has pleaded a sufficient claim for mandamus relief

determines her continued participation in this action. 

“Mandamus is an extraordinary remedy and is available to compel a federal officer

to perform a duty only if: (1) the individual’s claim is clear and certain; (2) the official’s duty

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is nondiscretionary, ministerial, and so plainly prescribed as to be free of doubt, and (3) no

other adequate remedy is available.” Kildare v. Saenz, 325 F.3d 1078, 1084 (9th Cir. 2003)

(citations and internal quotations omitted). Plaintiffs’ claims regarding the

videoteleconferencing rule and the appropriate geographical distribution of hearing officers

do not satisfy this stringent requirement. The 2003 Act ordered the Commissioner of Social

Security and the Secretary to consider video-conference technologies and to implement a

plan potentially including the use of such technology. Like the mandate to provide for

“appropriate geographic distribution of administrative law judges,” any duty created by these

statutes cannot be considered “so plainly prescribed as to be free of doubt.” Kildare, 325

F.3d at 1084; see also Johnson v. Shalala, 2 F.3d 918, 924 (9th Cir. 1993) (“[M]andamus

would be appropriate only when a party demonstrated that the Secretary owed him a clear

nondiscretionary duty.” (citations and internal quotations omitted)).

With the dismissal of the mandamus claims of the only Plaintiffs who thus far have

sustained standing and venue, only Plaintiff Webber’s pre-hearing challenge to the

appropriateness of hearing locations survives dismissal.

VI. Leave to Amend

“Often a plaintiff will be able to amend its complaint to cure standing deficiencies.”

United Union of Roofers, Waterproofers, & Allied Trades v. Ins. Corp. of Am., 919 F.2d

1398, 1402 (9th Cir. 1990). In determining whether leave to amend for such deficiencies

should be granted, Fed.R.Civ.P. 15(a) applies. See id. Under Fed.R.Civ.P. 15(a), leave to

amend “shall be freely given when justice so requires.” Because Plaintiffs Anna Frank,

Carol Upton, William Prescott, and Marshall Chazen can have no standing for their prehearing challenges to the forced waiver of the requirement to decide in 90 days, do not have

venue for their 42 U.S.C. § 405(g) challenges, and can plead no mandamus challenge on their

on other two claims (even if they could amend to plead standing), they will be denied leave

to amend. Because Plaintiff Schneider’s only claims for which she has standing are

improperly svenued here as 42 U.S.C. § 405(g) challenges and cannot adequately be pleaded

as mandamus claims, she will be denied leave to amend. Because Plaintiff Webber’s only

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claims for which she lacks standing (general challenge to the videoteleconference rule and

challenge to the 90-day decision rule) are not curable, she will not be granted leave to amend.

IT IS THEREFORE ORDERED that Defendants’ motion to dismiss (doc. # 25) is

granted as to all claims of all Plaintiffs except Plaintiff Webber’s claim that her granted inperson hearing should be located more conveniently to her.

DATED this 6th day of September 2006.

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