14

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Tsirelman v. Daines



## In the



# United States Court of Appeals

**For the Second Circuit**

________

A UGUST T ERM

, 2014

A RGUED : A PRIL 16, 2015

D ECIDED : J ULY 24, 2015

No. 14

‐ 2154

‐ cv

G ARY T SIRELMAN

, M.D.,

Plaintiff

‐ Appellant

,

v.

R ICHARD F. D AINES

, M.D., Commissioner of Health, S TATE OF N EW

Y ORK D EPARTMENT OF H EALTH

, K ENDRICK A. S EARS

, M.D., Chairman

of the State Board for Professional Medical Conduct, S TATE OF N EW

Y ORK D EPARTMENT OF H EALTH

, and S TATE B OARD FOR P ROFESSIONAL

M EDICAL C ONDUCT and T HEIR E MPLOYEES and A GENTS

, Defendants

‐ Appellees. 

________

Appeal from the United States District Court for the Eastern District

of New York.

No. 1:10

‐ cv

‐ 903

– Jack B. Weinstein, Judge

.

________

 The clerk of the court is directed to amend the caption as set forth

above.2 No. 14

‐ 2154

‐ cv

Before: W INTER

, W ALKER

, and D RONEY

, Circuit Judges

.

________

Plaintiff Gary Tsirelman’s medical license was revoked in a

New York disciplinary proceeding. On appeal, he challenges New

York’s use of the preponderance

‐ of

‐ the

‐ evidence standard in such

proceedings as a violation of the Due Process Clause. Because we

hold that the Constitution does not require a higher standard of

proof in fraud

‐ based medical disciplinary proceedings, we AFFIRM

the district court’s order dismissing Tsirelman’s complaint.

________

A DAM F RANCOIS W ATKINS

, Watkins Bradley LLP,

New York, NY, for Plaintiff

‐ Appellant

.

K AREN W. L IN (Claude S. Platton, Barbara D.

Underwood, Solicitor General of New York, on

the brief ), for Eric T. Schneiderman, Attorney

General of the State of New York, New York, NY,

for Defendants

‐ Appellees.

________

J OHN M. W ALKER

, J R

., Circuit Judge :

Plaintiff Gary Tsirelman’s medical license was revoked in a

New York disciplinary proceeding. On appeal, he challenges New

York’s use of the preponderance

‐ of

‐ the

‐ evidence standard in such

proceedings as a violation of the Due Process Clause. Because we

hold that the Constitution does not require a higher standard of3 No. 14

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proof in fraud

‐ based medical disciplinary proceedings, we AFFIRM

the district court’s order dismissing Tsirelman’s complaint.

BACKGROUND

Gary Tsirelman became licensed to practice medicine in 1996.

In 2000, he acquired an ownership interest in LaMed medical clinic

(“LaMed”). While practicing at LaMed, Tsirelman performed

synaptic therapy, a non

‐ invasive, drug

‐ free treatment consisting of

electrical impulses administered to areas causing the patient pain.

Flatlands Management, the contractor who assembled LaMed’s bills,

however, billed insurance companies for a nerve destruction

procedure when Tsirelman performed synaptic therapy, for which

no billing codes existed. Synaptic therapy is not a form of nerve

destruction procedure.

In 2007, the State of New York Office of Professional Medical

Conduct (“OPMC“) charged Tsirelman with practicing medicine

fraudulently, willfully making or filing a false report, ordering

excessive tests or treatments not warranted by the patient’s

condition, and therefore engaging in conduct that evidenced moral

unfitness to practice medicine. OPMC based the charges on

Tsirelman’s bills for nerve destruction procedures that he never

performed. After a six

‐ day hearing, a Hearing Committee for the

State Board of Professional Medical Conduct (the “Hearing

Committee”), which consisted of two licensed physicians, one lay4 No. 14

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member, and a non

‐ voting administrative law judge as presider,

sustained 51 of 69 charges of professional misconduct. The Hearing

Committee found, by a preponderance of the evidence, that

Tsirelman knew that bills were being sent under his signature for

procedures that he did not perform and that he allowed such bills to

be sent for his own benefit. In re Tsirelman

, No. 07

‐ 269, at 43 (N.Y.

Bd. Prof. Med. Conduct Dec. 5, 2007), J.A. 234. The Hearing

Committee revoked Tsirelman’s medical license and fined him

$100,000. Id. at 52, J.A. 243.

Tsirelman filed an Article 78 proceeding in New York state

court seeking review of the Hearing Committee’s determination. 1 In

April 2009, the Appellate Division affirmed the Hearing

Committee’s principal findings and held that “the Committee could

infer [Tsirelman’s] knowledge that the bills were false, rather than

merely inaccurate, and that he had willfully intended to mislead and

deceive the insurer.” Tsirelman v. Daines

, 876 N.Y.S.2d 237, 239 (App.

1 An Article 78 proceeding “provide[s] an expeditious and essentially

uniform procedure for judicial review of

. . . action (or inaction) by

agencies and officers of state and local government.” Finley v. Giacobbe

, 79

F.3d 1285, 1291 (2d Cir. 1996) (omission in original) (internal quotation

marks omitted).5 No. 14

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Div. 3d Dep’t 2009). The Appellate Division affirmed both penalties.

Id. at 240. 2

On March 1, 2010, Tsirelman filed this action in federal district

court (Jack B. Weinstein, Judge ), alleging that defendants, the New

York commissioner of health, the chairman of the state board for

professional medical conduct, and their agencies, violated his due

process rights in the conduct of his disciplinary hearing. Defendants

moved to dismiss or, in the alternative, for abstention. On October

14, 2010, the district court granted defendants’ motion for abstention

to permit Tsirelman to petition the director of OPMC to reopen his

case in light of an intervening amendment to New York’s Public

Health Law. The district court stayed the action pending Tsirelman’s

petition.

Tsirelman filed a motion for reconsideration with the director

of OPMC. The director denied Tsirelman’s motion. Thereafter,

Tsirelman moved to reopen his federal action, and defendants

renewed their motion to dismiss for lack of subject matter

jurisdiction and failure to state a claim. On May 14, 2014, the district

court granted the motion to dismiss as to the New York Department

of Health and the State Board for Professional Medical Conduct

2 The Appellate Division annulled the Hearing Committee’s finding

that Tsirelman had ordered treatment not warranted by his patients’

conditions.6 No. 14

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under the Eleventh Amendment. In doing so, the district court

implicitly denied that portion of the motion concerning defendants

Daines and Sears, who were sued in their official capacities.

However, the district court also concluded that Tsirelman’s

complaint failed to state a claim under the Due Process Clause.

Accordingly, the district court granted defendants’ motion to

dismiss, and Tsirelman timely appealed.

DISCUSSION

Tsirelman argues that defendants denied him due process in

their conduct of his disciplinary hearing by employing a

preponderance

‐ of

‐ the

‐ evidence standard. Before turning to

Tsirelman’s merits arguments, however, we address defendants’

argument that Tsirelman’s complaint must be dismissed as against

the individual defendants because they are protected from suit by

the Eleventh Amendment.

We review de novo the district court’s dismissal for lack of

subject matter jurisdiction under Rule 12(b)(1) or failure to state a

claim under Rule 12(b)(6). Jaghory v. N.Y. State Dep ʹ t of Educ.

, 131

F.3d 326, 329 (2d Cir. 1997). Like the district court, we “accept all

factual allegations in the complaint as true and draw inferences from

those allegations in the light most favorable to the plaintiff.” Id.

I. Eleventh Amendment Immunity

The Eleventh Amendment provides:7 No. 14

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The Judicial power of the United States shall not be construed

to extend to any suit in law or equity, commenced or

prosecuted against one of the United States by Citizens of

another State, or by Citizens or Subjects of any Foreign State.

The Supreme Court has consistently interpreted the Eleventh

Amendment to bar suits brought against an unconsenting state in

federal courts “by her own citizens as well as by citizens of another

State.” Edelman v. Jordan

, 415 U.S. 651, 662

‐ 63 (1974). Because

Tsirelman is a citizen of New York who brought suit against New

York officials in their official capacities, defendants argue that his

suit is nonjusticiable under the Eleventh Amendment. We reject this

contention because Tsirelman’s suit seeks prospective relief against

state officials in their official capacities, which is permitted

notwithstanding the general proscription of suits against states by

the Eleventh Amendment.

In Ex parte Young

, the Supreme Court held that the Eleventh

Amendment did not bar an action in federal court to enjoin a state

official from taking official action claimed to violate federal law. 209

U.S. 123, 155

‐ 56 (1908); see also Edelman

, 415 U.S. at 664. Under this

doctrine, federal courts may hear claims for prospective injunctive

relief, see Edelman

, 415 U.S. at 677, but retroactive claims seeking

monetary damages from the state treasury are barred by the

Eleventh Amendment because, even if state officials are the nominal

defendants, the state is the real party in interest, id. at 663.8 No. 14

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Tsirelman’s complaint seeks an injunction restoring the status

quo unless and until the State conducts a new hearing and

establishes the charges based on a clear and convincing standard.

Defendants characterize this claim as seeking purely retrospective

relief because Tsirelman is trying to remedy a past violation of his

due process rights that occurred during his disciplinary hearing.

Contrary to defendants’ contentions, 3 Tsirelman’s complaint

seeks prospective relief because he requests a remedy to an alleged

ongoing violation of federal law. Tsirelman claims that New York’s

rule permitting proof of fraud

‐ based medical misconduct using a

preponderance

‐ of

‐ the

‐ evidence standard violates due process and

that, as a result, he is unconstitutionally being denied his medical

license. As a remedy, Tsirelman seeks an injunction requiring either

reinstatement of his license or a hearing that, in his view, comports

with due process. Either outcome would remedy Tsirelman’s alleged

injury and would be “prospective relief that is not barred by the

Eleventh Amendment.” Dwyer v. Regan

, 777 F.2d 825, 836 (2d Cir.

1985) (public employee’s request for reinstatement or a hearing

sought prospective injunctive relief). Therefore, we affirm the

3 Defendants also argue that Tsirelman lacks standing to seek the

requested injunction because, as he is no longer a doctor, there is no

reasonable prospect Tsirelman will again find himself subject to medical

disciplinary proceedings. This argument assumes an outcome in

defendants’ favor and is therefore without merit.9 No. 14

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district court’s denial of Daines’s and Sears’s motion to dismiss

pursuant to the Eleventh Amendment.

II. Tsirelman’s Due Process Challenges

We turn now to the merits of Tsirelman’s appeal. Tsirelman

makes two separate but related challenges to New York’s use of the

preponderance

‐ of

‐ the

‐ evidence standard: (a) a facial challenge to the

standard as used in all fraud

‐ based medical disciplinary

proceedings, and (b) an as

‐ applied challenge to use of the standard

in his own proceeding.

a. Facial Challenge

New York’s medical misconduct committees base their

conclusions on a statutorily

‐ prescribed preponderance

‐ of

‐ the

‐

evidence standard. N.Y. Pub. Health L. § 230(10)(f). Tsirelman

argues that New York’s use of the preponderance standard fails to

comport with the minimum requirements of due process in fraud

‐

based disciplinary proceedings because of the compelling private

and public interests in avoiding erroneous license revocations.

Tsirelman contends that only the higher clear and convincing

standard comports with due process.

The preponderance standard is constitutionally adequate.

“The function of a standard of proof

. . . is to instruct the factfinder

concerning the degree of confidence our society thinks he should

have in the correctness of factual conclusions for a particular type of10 No. 14

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adjudication.” Addington v. Texas

, 441 U.S. 418, 423 (1979) (internal

quotation marks omitted). “The standard serves to allocate the risk

of error between the litigants and to indicate the relative importance

attached to the ultimate decision.” Id

. To determine the standard of

proof required by the Constitution, we balance: (1) “the private

interests affected by the proceeding”; (2) “the risk of error created by

the State’s chosen procedure”; and (3) “the countervailing

governmental interest supporting use of the challenged procedure.”

Santosky v. Kramer

, 455 U.S. 745, 754 (1982) (citing Mathews v.

Eldridge

, 424 U.S. 319, 335 (1976)). The preponderance standard

strikes the proper balance between these competing interests.

First, physicians have an important, but not compelling,

property interest in their medical licenses and a liberty interest in

pursuing their chosen profession. See Donk v. Miller

, 365 F.3d 159,

163 (2d Cir. 2004); RRI Realty Corp. v. Inc. Vill. of Southhampton

, 870

F.2d 911, 917 n.4 (2d Cir. 1989). However, if a physician loses his

license, he remains free to pursue other employment and otherwise

participate in life’s activities. For this reason, we find a physician’s

interest in his license to be less compelling than those interests that

the Supreme Court has determined require clear and convincing

proof before the state can effect a deprivation. Compare Addington

,

441 U.S. at 433 (civil commitment proceedings must be conducted

under at least a clear and convincing standard), with Vance v.11 No. 14

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Terrazas

, 444 U.S. 252, 266 (1980) (abandonment of citizenship

proceedings may be conducted under a preponderance standard).

Tsirelman also argues that a physician’s interest in a fraud

‐

based medical disciplinary hearing is more substantial than in other

disciplinary proceedings because the resulting reputational harm

can extend beyond the medical field. This distinction is

unpersuasive. A license revocation based on medical incompetence,

sexual impropriety, or another serious charge would also tend to

taint a physician’s other future endeavors. In any event, even if we

accepted Tsirelman’s argument that physicians have a greater

interest in fraud

‐ based revocation proceedings, that interest still

does not rise to the fundamental level that requires the application

of a heightened standard of proof as a matter of federal due process.

See Herman & MacLean v. Huddleston

, 459 U.S. 375, 390 (1983)

(preponderance

‐ of

‐ the

‐ evidence standard applied in securities

‐ fraud

case despite “the risk of opprobrium that may result from a finding

of fraudulent conduct”).

Second, the preponderance standard “fairly distributes the

risk of error” between the state and the physician. Santosky

, 455 U.S.

at 765. The corresponding consequences of error to the physician

and the state in a fraud

‐ based license revocation are roughly

equivalent. If a doctor’s license is erroneously revoked, he should be,

but is not, allowed to practice medicine. If a doctor’s license is12 No. 14

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erroneously maintained, he should not be, but is, allowed to

continue to practice. Thus, the “social disutility” of each potential

outcome is about the same, and it is not in general more serious for a

license to be erroneously revoked than to be erroneously

maintained. See In re Winship

, 397 U.S. 358, 371 (1970) (Harlan, J.,

concurring).

Third, the countervailing governmental interest is strong. The

State, on behalf of the public, has a substantial interest in revoking

the licenses of doctors who engage in fraud or are otherwise found

to be unfit to practice medicine. See Doe v. Connecticut

, 75 F.3d 81, 85

(2d Cir. 1996) (per curiam). Although he recognizes this interest,

Tsirelman argues that fraud

‐ based revocations do not further it

because they do not target physicians providing substandard care.

But Tsirelman’s conception focuses on only one of the State’s many

healthcare interests. New York has an interest in ensuring that its

citizens receive adequate care and that they have access to that care.

Fraudulent insurance claims drive up the costs of health insurance

for everyone, making it difficult for some New Yorkers to afford

quality healthcare, and thus limiting their access to care. Moreover,

as a major consumer of healthcare through the insurance programs

operated by the State, New York has a direct interest in affordable

medical care.13 No. 14

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In sum, while we acknowledge a physician’s interest in

maintaining his license, the State has at least as substantial an

interest in protecting the public, and the cost of error is about the

same. Thus, we find no constitutional basis for exempting fraud

‐

based medical disciplinary proceedings from the traditional powers

of state legislatures to prescribe standards of proof in state

proceedings. 4 See Vance

, 444 U.S. at 265; s ee also In re Friedman

, 51

F.3d 20, 22 (2d Cir. 1995) (holding that a federal court may

constitutionally impose reciprocal attorney discipline based on an

underlying state disciplinary proceeding conducted under the

preponderance

‐ of

‐ the

‐ evidence standard). Accordingly, we affirm

the district court’s dismissal of Tsirelman’s facial challenge to the

State’s use of the preponderance standard in fraud

‐ based medical

disciplinary proceedings. 5

4 We recognize that this conclusion conflicts with the conclusions of the

supreme courts of Oklahoma, Washington, and Wyoming. See Johnson v.

Bd. of Governors of Registered Dentists, 913 P.2d 1339, 1347 (Okla. 1996);

Nguyen v. State

, 29 P.3d 689, 697 (Wash. 2001); Painter v. Abels

, 998 P.2d

931, 940

‐ 41 (Wyo. 2000). In so holding, the Oklahoma and Wyoming

Supreme Courts explicitly recognized that their state constitutions can

afford greater due process safeguards than the Federal Constitution.

Johnson

, 913 P.2d at 1346; Painter

, 998 P.2d at 941.

5 We have also considered Tsirelman’s facial and as

‐ applied challenges

to the absence of formal rules of evidence and find them to be without

merit. “[P]rocedural due process does not require rigid adherence to

technical evidentiary rules in administrative hearings, as long as the

evidence introduced is reliable.” United States v. Int ʹ l Bhd. of Teamsters

, 941

F.2d 1292, 1298 (2d Cir. 1991). There is no support for the inference,14 No. 14

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b. As

‐ Applied Challenge

Finally, we turn to Tsirelman’s claim that, even if use of the

preponderance

‐ of

‐ the

‐ evidence standard is not on its face

unconstitutional, its use in this case violated due process as applied

to him because of the limited evidence from which the Hearing

Committee could infer fraudulent intent.

Tsirelman’s as

‐ applied challenge requires us to consider the

particular facts of his case to determine whether the application of

the preponderance standard, although constitutional on its face,

deprived him of a protected right. See, e.g.

, Field Day, LLC v. Cty. of

Suffolk

, 463 F.3d 167, 174 (2d Cir. 2006).

Tsirelman’s hearing did not deviate from normal hearing

procedures in any material respect. In any event, the details of the

necessary to Tsirelman’s position, that evidence of fraud in medical

disciplinary hearings will necessarily be unreliable unless governed by

formal rules of evidence. See United States v. Salerno

, 481 U.S. 739, 745

(1987) (to sustain a facial challenge, “the challenger must establish that no

set of circumstances exists under which the Act would be valid.”).

Likewise, Tsirelman has failed to allege any facts suggesting the lack of

formal rules of evidence resulted in an as

‐ applied due process violation.

The Hearing Committee expressly acknowledged certain gaps in the

evidentiary record and afforded Tsirelman the benefit of the doubt on any

claims as to which “there was even a slight possibility” that additional

information might have bolstered his position. In re Tsirelman

, No. 07

‐ 269,

at 41, J.A. 232. And, as noted above, the Appellate Division annulled an

entire subset of charges for which it concluded that additional evidence

might have proven exculpatory.15 No. 14

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hearing show that application of the preponderance standard did

not deprive Tsirelman of due process because it did not

unacceptably increase the risk of error. As the Appellate Division

has already concluded, there was ample evidence from which the

Hearing Committee could infer Tsirelman’s fraudulent intent,

including discrepancies between patient medical records and the

bills LaMed submitted to insurers, as well as Tsirelman’s “complete

lack” of credible testimony. Tsirelman v. Daines

, 876 N.Y.S.2d at 239.

Tsirelman also availed himself of the robust procedures permitted in

New York’s disciplinary hearings, including representation by

counsel, presentation of evidence, witness testimony, and cross

‐

examination of the State’s witnesses. Finally, Tsirelman obtained

review of the Hearing Committee’s determination in an Article 78

proceeding.

In sum, there is nothing exceptional about Tsirelman’s hearing

that rendered the Hearing Committee’s use of the preponderance

standard unconstitutional as applied to Tsirelman. In essence,

Tsirelman asks us to reevaluate the Hearing Committee’s findings,

but due process guarantees only a fair hearing, which Tsirelman

received in full. See Conopco, Inc. v. Roll Int’l

, 231 F.3d 82, 88 (2d Cir.

2000). Accordingly, the district court’s dismissal of Tsirelman’s as

‐

applied challenge is affirmed.16 No. 14

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CONCLUSION

For the foregoing reasons, the judgment is AFFIRMED.