Opinion ID: 525561
Heading Depth: 2
Heading Rank: 2

Heading: Our Review of the Denial of Plaza's Motion

Text: 24 The ultimate question on appellate review of a district court's denial of a preliminary injunction is whether or not the court abused its discretion. See, e.g., Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 315 (2d Cir.1982); Gillespie & Co. v. Weyerhaeuser Co., 533 F.2d 51, 53 (2d Cir.1976) (per curiam); see also Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 2567-68, 45 L.Ed.2d 648 (1975) (same standard of review where preliminary injunction granted). In light of the record before us, we see no abuse of discretion in the court's refusal to preliminarily enjoin DSS's suspension of Plaza.
25 Plaza contends that its due process rights were violated because DSS did not give it adequate notice or a presuspension hearing. We conclude that the district court properly ruled that Plaza had not shown a likelihood of success on this claim because (1) it may well be that a person's interest in uninterrupted continuation as a Medicaid provider is not a property right that is protected by due process, and (2) even if it is such a right, any deficiency in the notice to Plaza did not warrant preliminary injunctive relief, and Plaza received an adequate opportunity to be heard. 26 The Due Process Clause extends its procedural guarantees only to deprivation of a protected interest in life, liberty, or property. Board of Regents of State Colleges v. Roth, 408 U.S. 564, 569-70, 92 S.Ct. 2701, 2705, 33 L.Ed.2d 548 (1972). In general, to have a property interest in a government benefit, a person clearly must have more than an abstract need ... for it.... He must, instead, have a legitimate claim of entitlement to it. Id. at 577, 92 S.Ct. at 2709; see S & D Maintenance Co. v. Goldin, 844 F.2d 962, 965-66 (2d Cir.1988). Such an entitlement is not created by the Constitution itself but rather  'by existing rules or understandings that stem from an independent source such as state law....'  Cleveland Board of Education v. Loudermill, 470 U.S. 532, 538, 105 S.Ct. 1487, 1491, 84 L.Ed.2d 494 (1985) (quoting Board of Regents of State Colleges v. Roth, 408 U.S. at 577, 92 S.Ct. at 2709); see Dwyer v. Regan, 777 F.2d 825, 829 (2d Cir.1985), modified, 793 F.2d 457 (2d Cir.1986). In considering state law, we focus initially on the relevant statute, regulation, or contract establishing eligibility for the government benefit at issue. See, e.g., Board of Regents of State Colleges v. Roth, 408 U.S. at 577-78, 92 S.Ct. at 2709-10; Goldberg v. Kelly, 397 U.S. 254, 261-62, 90 S.Ct. 1011, 1016-17, 25 L.Ed.2d 287 (1970). 27 Where the state provisions bestow a right that cannot properly be eliminated except for cause, that right constitutes property protected by procedural due process. See, e.g., Perry v. Sindermann, 408 U.S. 593, 600-01, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972); Arnett v. Kennedy, 416 U.S. 134, 166-67, 94 S.Ct. 1633, 1650-51, 40 L.Ed.2d 15 (1974) (Powell, J., concurring in part and concurring in the result in part); RR Village Ass'n v. Denver Sewer Corp., 826 F.2d 1197, 1201 (2d Cir.1987). On the other hand, the existence of provisions that retain for the state significant discretionary authority over the bestowal or continuation of a government benefit suggests that the recipients of such benefits have no entitlement to them. See id. at 1201-02; see also Bishop v. Wood, 426 U.S. 341, 345-47, 96 S.Ct. 2074, 2077-79, 48 L.Ed.2d 684 (1976) (insofar as city ordinance meant that policemen were employed at the will and pleasure of the city, they had no property interest). 28 In the Medicaid context, we have not had occasion to rule dispositively on the question of whether the provider of services had a property right, under the then-applicable state regulatory scheme, to continue to participate in the program. In Oberlander v. Perales, 740 F.2d 116, 120 (2d Cir.1984), we held that Medicaid providers had no property interest in the future rate of reimbursements, but there was no question of the plaintiffs' continued status as providers. In Patchogue Nursing Center v. Bowen, 797 F.2d 1137, 1144-45 (2d Cir.1986), cert. denied, 479 U.S. 1030, 107 S.Ct. 873, 93 L.Ed.2d 828 (1987), we stated that a nursing home facility ousted from Medicaid participation did have a property right protected by due process; but since we went on to conclude that the facility had received due process, our statement as to the existence of a property right was in the nature of dictum. See also Case v. Weinberger, 523 F.2d 602, 606, 609-10 (2d Cir.1975) (same). Nor have we received clear guidance from the state courts. Though the New York Court of Appeals has stated that a provider of Medicaid services has no vested right to continued participation, Schaubman v. Blum, 49 N.Y.2d 375, 380, 426 N.Y.S.2d 230, 233, 402 N.E.2d 1133, 1135 (1980), it also stated that such participation may be revoked only in proper circumstances, id., which may indicate that in 1980 some protectable property interest existed. See generally S & D Maintenance Co. v. Goldin, 844 F.2d at 967-68. 29 The present structure of the State's Medicaid laws suggests that a provider does not have a property interest in continued participation in the program. Thus, Sec. 504.7(a), which became effective January 5, 1987, provides that [a] provider's participation in the program may be terminated by either the provider or the department upon 30 days' written notice to the other without cause. N.Y.Comp.Codes R. & Regs. tit. 18, Sec. 504.7(a) (1988) (emphasis added). Though Sec. 504.7(b) states that [a] provider's participation in the program may be terminated [or] suspended ... if the department finds that the provider has engaged in an unacceptable practice as set forth in Part 515, id. Sec. 504.7(b), and that a provider thus sanctioned is entitled to notice and an opportunity to be heard in accordance with Part 515, id., that provision arguably may not result in a property right even where the State proceeds under Part 515 and asserts that there is cause for a sanction, since Sec. 515.7, which is in Part 515, provides that notwithstanding any other provision in the State Social Services regulations, DSS may take immediate action to suspend or terminate a provider under stated circumstances. Id. Sec. 515.7. Thus, the combination of rights reserved by the State with regard to Medicaid providers, allowing DSS to terminate without cause on 30 days' notice or to terminate or suspend immediately in certain circumstances, casts doubt on whether the provider's interest in continuing as a provider, either indefinitely or for any period without interruption, is a property right that is protected by due process. 30 We need not decide here, however, whether or not the provider's interest is such a right. It is significant, in connection with our review of the district court's decision to deny a preliminary injunction, that there is serious doubt as to the existence of a right. 31 Further, even if the provider has a property right in continued status as a Medicaid provider, we would be hard pressed to find here that the notice and opportunity to be heard given by DSS, if inadequate, were so inadequate in the circumstances of this case as to require reversal of the denial of a preliminary injunction. The notice stated that Plaza had been charged with a crime, and it cited Sec. 515.7(b)'s regulations authorizing immediate action. While the notice did not mention the New Jersey indictment in haec verba, Plaza does not claim to have been unaware that it had been indicted or that this was the criminal charge alluded to in the DSS notice. Further, though the notice did not specify what provision of New York law DSS had in mind, it would require little thought, in light of the indictment, to focus on the ECL, and indeed, Plaza inferred that ECL provisions were at issue. 32 The notice problem lies in DSS's failure to specify what ECL section or sections it believed applied. Arguably, since DSS has now pointed to a section other than the one focused on by Plaza, the lack of specificity may have constituted inadequate notice, and we do not intend to foreclose such a finding at trial (assuming the court determines that Plaza had a cognizable property interest). Nonetheless, for at least two reasons, the equities hardly required the district court to enjoin DSS from suspending Plaza. First, though ECL Sec. 71-2704(2), which Plaza assumed was what DSS had in mind, did not describe a felony prior to November 1, 1988, Plaza could not have believed its alleged acts would have been lawful in New York prior to that date, since under the predecessor to that section, those acts would have been misdemeanors in New York. See ECL Sec. 71-2703(2) (McKinney Supp.1988). DSS may be entitled to rely on Sec. 71-2704(2) notwithstanding that it made the alleged conduct felonious only on or after November 1, 1988, since Sec. 515.7(b) refers to acts that would be a felony (emphasis added), not merely to acts that would have been a felony when performed. Second, since the DSS notice, in light of the indictment of which Plaza was aware, plainly caused Plaza to focus on the ECL, Plaza arguably had no reason to ignore the potential applicability of the felony provisions of ECL Sec. 71-2713, since that section, which was in effect at the time of the alleged dumpings, refers to the release of wastes into surface waters and the indictment alleged dumping into the Hudson River. 33 In all the circumstances, even assuming a property right exists, we conclude that if the DSS notice was inadequate, it was not so inadequate as to require the district court to grant preliminary injunctive relief. 34 Finally, we see no merit in Plaza's argument that Sec. 515.7 is unconstitutional on its face because it allows a Medicaid provider to be suspended on the basis of an indictment without any hearing. Plaza was in fact afforded the right to submit written arguments within 30 days, challenging the suspension on a number of grounds. The Supreme Court has upheld similar regulatory schemes that provide for immediate suspensions with an opportunity to be heard later. See, e.g., Federal Deposit Insurance Corp. v. Mallen, 486 U.S. 230, 108 S.Ct. 1780, 1787-92, 100 L.Ed.2d 265 (1988) (suspension of indicted bank officer without prior hearing did not violate due process where there was a postsuspension opportunity to present argument); Barry v. Barchi, 443 U.S. 55, 63-66, 99 S.Ct. 2642, 2648-50, 61 L.Ed.2d 365 (1979) (suspension, without prior hearing, of trainer of race horses after horse tested positive for drugs did not violate due process so long as reasonably prompt postsuspension hearing was provided). The State's interest in promptly ceasing to deal with Medicaid providers indicted for dumping harmful medical wastes into public waters is surely no less than its interest in the integrity of horse racing.
35 Finally, we reject the contention that Plaza was entitled to a preliminary injunction against suspension on the ground that application of ECL Sec. 71-2704(2) to its alleged dumping would violate its rights under the Ex Post Facto Clause. The State did not seek to prosecute Plaza for its alleged dumpings. Thus, the test is whether the suspension was so punitive as to be a criminal sanction in either purpose or effect. See DeMartino v. Commissioner, 862 F.2d 400, 409 (2d Cir.1988). Plaza is unlikely to meet this test. The state-law provisions appear to constitute merely a valid regulatory scheme. For example, Plaza was given the right to contest the suspension immediately on the basis of, inter alia, the lack of a relationship between the New Jersey indictment and the provision of medical care, services, or supplies. Thus, even assuming that DSS had proceeded under Sec. 71-2704(2), we agree with the district court's view that Plaza failed to establish a likelihood of success on its ex post facto claim.