# Petition — Unihealth Services Corp. v. Harris

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0991%3A1

## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 444 U.S. 1031

## Text

ee

IN THE a

Supreme Court of the United States
OCTOBER TERM, 1979

No.

79-505

UNIHEALTH SERVICES CORPORATION,
Petitioner,

versus
Masts,

JOSEPH-P-CALHANO, SECRETARY OF HEALTH,
EDUCATION AND WELFARE, MELVIN
BLUMENTHAL, MARION J. SEABROOKS,
MIKE HOBAN, JOSEPH BREWSTER,
RAYMOND WOERNER, I. COHEN, BLUE CROSS

ASSOCIATION OF AMERICA, INC. AND JAMES SLEEP,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

DONNA D. FRAICHE

Suite 206

3715 Prytania Street

New Orleans, Louisiana 70115
Telephone: (504) 895-8673

Attorney for Petitioner

SCOFIELDS' QUALITY PRINTERS. P. O. BOX 53096, N. O.. LA. 70153 - 504/822-1611

INDEX
Page
ccc eeceseecas 2
IE 2
ca ceccoceccccocs 2
Constitutional, Statutory and Regulatory
Ne ccc ccapeccsccees 4
ei cc necesecesccesces 7
Jurisdictional Posture of the Case .............4: Q
Jurisdiction of Federal Courts ..............000: 14
Ne. cs tess vesccecces 14
B. Court of Claims Is Not the Answer ....... 16
C. Federal Coercion Cannot Be Shielded
Sess cdecceccces 19
D. Actions Against the Government ......... 20
Jurisdiction Over Constitutional
a 22
Reasons for Granting the Writ ...............06. 24
SIE OT 30
eae cccesccccsccess 31
Appendix A — Order of the United States
Court of Appeals for the Fifth Circuit ........ la

Appendix B — Judgment of the United States
District Court for the Eastern District of
EE 2a

il

INDEX (Continued)

Page
Appendix C — Memorandum and Order of
the United States District Court for the
Eastern Uhlstrict OF LOMISISAS .060 060i ve coves 4a
Appendix D — Memorandum and Order of
the United States District Court for the
Eastern District of Louisiana originally dis-
missing Motion to Dismiss, 448 F.Supp.
EE EE ee, Pere ee ee 22a
Appendix E — Constitutional provisions,
statutes and rules of the court involved ...... 59a
AUTHORITIES
Cases:
American Association of Council of Medical Staffs v.
Califano, 575 F.2d 1367 (5th Cir. 1978) ..... 14,19,
21,22,24,29
Pecnep 0. Sebi, 1614 UB. WO ioc ixcevanadowvesace 18

Bivens v. Six Unknown Named Agents of the FBI, 403
U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 ...15,16

Califano v. Sanders, 403 U.S. 99, 97 S.Ct. 980

PEOTOE - otha kbs leave bewecser tee cuene 11,27
Carey v. Piphus, U.S. ___, 98 S.Ct. 1042,
SS 1. Cae Be CAO 6 vin wha ows bvvskevke cesses 19

Caulfield v. U.S. Department of Agriculture, 293
F.2d 217 (Sth Cir. 1961) (en banc) ........... 23

at te

ill

AUTHORITIES (Continued)

Page

Cervoni v. Secretary of H.E.W., 581 F.2d 1010 (1st
th aha ic's an Sia CNS 6 OKRA a ReiKiens 21,29

Continental Casualty Company v. Department of

Highways of the State of Louisiana, 379 F.2d 673
ES eh, Deas sere PET Ter rye peer rte ee ee 11

Cotovsky-Kaplan Phys. Th. Assoc., Ltd. v. United
States, S07 F.2d 1363 (7th Cir. 1975) ..... 10,11,25

Drummond v. United States, 324 U.S. 316,655S.Ct.
ee og | Be reer 20

Elliot v. Weinberger, 564 F.2d 1219 (9th Cir.

1977), cert. granted, ip io bt.
7S, SB LB ee TOO TIGTE) viv vies dcxdecece 21,24,
25,29

Feres v. U.S., 340 U.S. 139, 71 S.Ct. 153, 95
Re NE ee Oa, ood ed ea ae a oe arah a hina 18

Humana of South Carolina v. Matthews, 419
F.Supp. 253 (D.D.C. 1976) .........000e ee 17,24,
26,29

John T. MacDonald Foundation v. Califano, 571 F.2d

328 (Sth Cir. 1977) (en banc), writ denied,

WOM: dana KN deh k te eras ok ek OO 13,19,
24,28,29

John T. MacDonald Foundation, Inc. v. Mathews, 534
er Oe Ce ED hin i nse Saiy's Sa WAS Oe ss 12

Johnson v. Robison, 415 U.S. 361, 94 S.Ct. 1160,
DO Ee Be ee I Oe adc kn vecctv cans es 22,27,28

iv
AUTHORITIES (Continued)

Page
Kechijian v. Califano, 453 F.Supp. 159 (D.R.I.
BOTS) oo accesacvccestse5eueee eee ee 29
Kiefer and Kiefer v. Reconstruction Finance Corpora-
tien, 306 US. DORs occccicesacs cee 18
land v. Dollar, 330 U.S. 731, 67 S.Ct. 1009, 91
L.Ed. 1209 (2969) ....0sesscsacssuupuemes eos 18,21
Larson v. Domestic and Foreign Corporation, 337 U.S.
CY ee Pr Dr ne 30

Marbury v. Madison, 1 Cranch. 137, 2L.Ed.60 .... 20
Matthews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893,

47 L.Ed.28 216 (2006) .énc5eneewdeee eee 26
Ng Fung Ho v. White, 259 U.S. 276, 41S.Ct. 148,

65 L.Ed. 466 (29828) iccecskccsaueeeee 20
Nixon v. Condon, 286 U.S. 73 (1932) .............. 16
Plekowski v. Ralston-Purina Co., 557 F.2d 1218

(Sth Cir. 1999). ocacis tcc¥ degen eee a ae 24
Pushkin v. Califano, F.2d 6722 (August 8,

1979, Slip Opinion, ef errs 19,20,

21,28,29

Rastetter _v. Weinberger, 379 F.Supp. 170, (D.
Ariz. 1974), aff'd., 419 U.S. 1098, 95 S.Ct.
767, 482 L.Ed.ad 70S (2909) <icasnceueee uae 28

Ryan v. Shea, 525 F.2d 268 (10th Cir. 1975) .... 26,29

Schwatzberg v. Califano, 453 F.Supp. 1042 (S.D.
N.Y. 1976) ..0:000c0c0 uence een eee 29

<—~——€s

Vv
AUTHORITIES (Continued)

Page
Smith v. Bourbon County, 127 U.S. 105 (1888) ...... 21
South Windsor Convalescent Home, Inc. v. Matthew,
Oe FO FiO COE Cie. B97) oo ive ecccce veces 11
"St. Louis University v. Blue Cross Hospital, 537 F.2d
eS | Rae e ne eee 12,24,29
Trinity Memorial Hospital v. Associated Hospital Ser-
vices, 570 F.2d 660 (6th Cir. 1977) ............ 29
Unihealth Services Corporation v. Califano, 448
F.Supp. 1059 (E.D. La. 1978) ........00. ceeee. 9
United States v. Alire, 73 U.S. (6 Wall.) 573, 18
I a ek 18,27
United States v. Candelaria, 271 U.S. 432, 44, 46
pan, ool, 70 L.Ed) 1023 (1926) ... 6.606. cee ee 20
United States v. Jones, 131 U.S. 1, 9 S.Ct. 669, 33
IE co eink nb cx bheeadandecc tas 18,27
United States v. King, 395 U.S. 1, 89 S.Ct. 1501,
a er nn ny a 18-19,27
United States v. Lee, 106 U.S. 196, 1S.Ct. 240, 27
Meee ik ge kwh ig bed ag ae wees 16,18
White v. Matthews, 559 F.2d 852 (2d Cir. 1977),
cert. denied, 435 U.S. 908, 98 S.Ct. 1458, 55
NE OD CUE oo ics ees cde vb cede sess 21
Weinberger v. Salfi, 422 U.S. 762,95 S.Ct. 2454,
BS Ee a} i eh a ee a
13,20,40,27

vi
AUTHORITIES (Continued)

Vii

AUTHORITIES (Continued)

Page
Page
Whitecliffe, Inc. v. United States, 536 F.2d 347, 210 28 U.S.C. §1346(a)(2) ....eccccccceceee 6,16,24
Ct. Cl. 53 (1976), cert. denied, 430 U.S. 969, 97
S.Ct. 1652, 52 L.Ed.2d 361 (1977) .......... 20,24 2B UGA... GUDG) ass cennesceecsesans 3,6,27
Wong Wing v. United States, 163 U.S. 228, 16 BB A5.ee be Swine 8h oc cease Aa 3,6,21,25
Ae OFT ae GEE cine aweic kad bisear wasas 20 PRU DC BOE oo cocks dddkivieneee 6,24
Constitutional Provisions: UGK. GOR oo. pieee et See 3,6,27
United States Constitution: SUSE. GOD ....556.n 3,6,11,13,
Actirie GE Sections 1 ae ac cccuseksiakéian 4 23,25,27,29
pe ER a rae Ce emer e ye 3,4,26,27 Or TR Bo cas ntenenevan 6,12,13,20,25
Sie at eo 0) i a 3,5,16 OP EIR DAO £6 wi vowcandedseaseeuelee 3,6
Amendment V, Section 1 LE PR LGR ay ARO 4 42 3... §1395(ii) SeCC CHSC HESECHOHEHSSC CLEVES 3,6
I ri ie a vere tnen cae 3,5,6 42 U.S. GIZIHAMN) 2.0. ccsrvcsanecevads 6,7
Amendment IX ere el ET es ee ee 3,5 42 U.S.C. §1985 CRCEHOHSD COT SOCE CECE SHO OH ES 3,6
P| ne me amen ett ee eye 3,6 Rules:
PN CE ee he Suet 2 ee eee 3,5 Rule 19(b) of the Supreme Court ............ 2,6
Statutes: Provider Reimbursement Manual, §2133 ..... 6,7
Federal Statutes: Provider Reimbursement Manual HIM 15 ...... 7
eR BOND ooo 5 oo eas ca kena 2,6 Miscellaneous:
A Ue cds es ee a passim Davis, “Mandatory Relief from Ad-
28 USC ministrative Actions in Federal Courts,”
SC. $1332 2. see eeeeeeeeeeeeeens 3,6,14 22 U. Chic. L. Rev. 585 (1955) ........ 0005. 22
ee ae es MR is eho ive oe ee eee ee 3,6

Regi ns

Viil

AUTHORITIES (Continued)

Davis, Administrative Law in the Seventies (1976) ....

“The Dollar Litigation, A Study in
Sovereign Immunity,” 65 Harv. L. Rev.

466 (1952) ..cccccccccvcccerccceceses socee

Hill, “Constitutional Remedies,” 69 Colum.

OP . , eeeeerree er

Jaffe, Judicial Control of Advinistrative Action

(1965) .cccccccccccccccccccccsscsces soeee

Katz, “TheJurispruderce of Remedies,” 117

U. Pa. L. Rev. 1 (1968) ..... eee cece eee eeeee

“Mandatory Injunction as Substitutes for
Writs of Mandamus in the Federal Dis-
trict Courts: A Study in Procedural
Manipulation,” 38 Colum. L. Rev. 903

(1938) ..cccccccccccvccccvccvcnsceces cones

P. Bator, P. Mishkin, D. Shaprio and H.
Wechsler, The Federal Courts and the Federal
System, Note on the Power of Congress to Limit the
Jurisdiction of Federal Courts (2d. ed. 1973)

IN THE
SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1979

No.

UNIHEALTH SERVICES CORPORATION,
Petitioner,

versus

JOSEPH P. CALIFANO, SECRETARY OF HEALTH,
EDUCATION AND WELFARE, MELVIN
BLUMENTHAL, MARION J. SEABROOKS, MIKE
HOBAN, JOSEPH BREWSTER, RAYMOND
WOERNER, I. COHEN, BLUE CROSS ASSOCI-
ATION OF AMERICA, INC. AND JAMES SLEEP,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

The petitioner, UNIHEALTH SERVICES COR-
PORATION, prays that a writ of certiorari issue to

2

review the order of the Court of Appeals for the Fifth
Circuit rendered in these proceedings on June 27, 1979.

OPINIONS BELOW

The Court of Appeals for the Fifth Circuit summar-
ily affirmed the District Court for the Eastern District
of Louisiana on June 27, 1979. The Affirmance is re-
ported at F.2d . The opinion in the form of a
Memorandum and Order of the District Court for the
Eastern District of Louisiana was rendered on
February 12, 1979, with the Judgment rendered on
February 14, 1979, and reported at F.Supp.
This judgment dismissed for lack of jurisdiction.

JURISDICTION

The summary affirmance of the Fifth Circuit Court
of Appeals was entered on June 27, 1979. See Appendix
A, p. la, infra. This petition for certiorari was filed
less than ninety (90) days from the date aforesaid. The
jurisdiction of this Court is invoked under Title 28,
United States Code, Section 1254(1) and Supreme
Court Rule 19(b), in that the Circuits are in conflict

with each other, with this Court and the intent of Con-
gress.

QUESTIONS PRESENTED

Petitioner brought suit under the Constitution of
the United States and Title 28 U.S.C., Sections 1331,

ee a ee

3

1333, 1332, 1346(b), 1361, 2201; Title 42 U.S.C.
§405(g), 1395, et seq, 1395(ii); Title 42 U.S.C. §1985;
The United States Constitution, and the First, Fourth,
Sixth, Ninth, Eleventh, and Fourteenth Amend-
ments; and federal and state common law to challenge
actions of federal officials who caused ruination of peti-
tioner’s private business enterprise as a professional
management company of certified Medicare home
health agency providers. The remedies sought ex-
pressly included injunction, declaratory judgment rel-
ative to the unconstitutionality of the actions and a
monetary award for costs, interest and attorney’s
fee. for the resulting damages to the business. The
remedy impliedly sought was mandamus.

The case being summarily dismissed for lack of sub-
ject matter jurisdiction, the questions presented are as
follows:

1. Whether the conflict in Circuits is sufficient to
justify resolution of the underlying unanswered issue
of whether private citizens can be totally deprived of
access, review or remedy to challenge governmental
harassment.

2. Whether Congress can close the federal courts
entirely to constitutional challenges directed against
federal statutes or actions.

3. Whether a private corporation, diverse in citi-
zenship, can challenge the tortious actions of federal
agency individuals under the Federal Tort Claims Act
and applicable state law.

4

CONSTITUTION, STATUTORY AND
REGULATORY PROVISIONS INVOLVED

1. Constitution of the United States, Article III,
Section 1:

The judicial Power of the United States shall
be vested in one supreme court, and in such in-
ferior Courts as the Congress may from time
to time ordain and establish... .

Section 2:

The judicial power shall extend to all Cases,
in Law and Equity, arising under this Consti-
tution, the Laws of the United States, and
Treaties made, or which shall be made under
their Authority; . . . tocontroversies to which
the United States shall be a Party; . . . between
citizens of different States; . . . (Emphasis add-
ed).

2. Constitution of the United States, Amendment
V, §1:

.. nor be deprived of life, liberty, or prop-
erty, without due process of law....

3. Constitution of the United States, Amendment
1 (1791):

Congress shall make no law . . . abridging
the freedom of speech . . . or the right of the
people. . . to petition the Government for re-
dress of grievances. (Emphasis added).

5

4. Constitution of the United States, Amendment
IX (1791):

The enumeration in the Constitution, of
certain rights, shall not be construed to deny
or disparage others retained by the people.

5. Constitution of the United States, Amendment
XIV (1868):

All persons. . . in the United States are citi-
zens of the United States and the State where-
in they reside . . . nor deny to any person...
the equal protection of the laws.

6. Constitution of the United States, Amendment
IV (1791):

The right of the people to be secure in their
persons, houses, papers, and effects, against
unreasonable searches and seizures, shall not
be violated, and no Warrants shall issue, but
upon probable cause, supported by Oath or af-
firmation, and particularly describing the
place to be searched, and the persons or things
to be seized.

7. Constitution of the United States, Amendment
VI (1791):

In all criminal prosecutions, the accused
shall enjoy the right to a speedy and public
trial, by an impartial jury of the State and dis-

6

trict wherein the crime shall have been com-
mitted, which. district shall have been pre-
viously ascertained by law, and to be inform-
ed of the nature and cause of the accusation; to
be confronted with the witnesses against him;
to have compulsory process for obtaining wit-
nesses in his favor, and to have the Assis-
tance of Counsel for his defence.

8. Constitution of the United States, Amendment
XI (1795):

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 an-

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

o 28. Gs... §§1254(1), 1331, 1332, 1333,
1346(a)(2), 1346(b), 1361, 1491 and 2201. (Attached in
Appendix).

10. 42 U.S.C. §§405(g) and (h), 1395, et seq.,
1395(ii), 1395(x)(n) and 1985. (Attached in Appendix).

11. Rule 19(b) of the Supreme Court of the United
States. (Attached in Appendix).

12. Provider Reimbursement Manual, §2133. (At-
tached in Appendix).

DAs seta hte thebeats

7

13. Provider Reimbursement Manual, HIM 15
(Too voluminous to copy).

STATEMENT OF THE FACTS

A private, corporate management company known
as Unihealth Services Corporation began to suffer
governmental harassment in and during the year 1976.
This petitioner had home health agency clients as so de-
fined under the Medicare Act, Title 42 U.S.C. §1395(x)
(n). Unihealth provided pursuant to contractual
arrangements certain professional consultation, orien-
tation programs, data processing services, guidance in
financial matters, assistance in audit procedures con-
ducted by fiscal intermediaries who are agents of the
Department of Health, Education and Welfare, to these
client agencies. (Memorandum and Order, p. 1, United
States District Court, Eastern District of Louisiana,
Civil Action No. 77-3001, February 12, 1979, Appendix
C).

In 1969 through 1976 Medicare officials recognized
the private corporate entity as a “management com-
pany” under policy considerations set out in the Pro-
vider Reimbursement Manual, HIM 15. The respond-
ents communicated adverse reactions to the cost of the
Uninealth charges and the manner in which the same
were charged on a percentage basis. Unihealth was
retroactively deemed a “franchise” and Section 2133 of
the Provider Reimbursement Manual was said to apply
thusly requiring the Unihealth clients to submit more

8
documentation in support of their costs on a break-
down, rather than a percentage-based method. The
negative presumption was created and Unihealth was
provided absolutely no forum to contest the challenge
to its change in status.

In short, the complaint alleged treatment of the
status of Unihealth as unconstitutional. The govern-
ment officials acting under the color of federal law
communicated adverse, unfair and often erroneous in-
formation about Unihealth to its clients, potential
users and its competitors. This was alleged to have con-
stituted a serious invasion of contractual rights and re-
lationships. Unihealth’s right to do business became
thwarted and substantial revenues were lost. Uni-
health sought declaration relative to the overly broad,
inconsistent and at times nonexistent Medicare regu-
lations applicable to management companies in the
Federal District Court.

Because Unihealth is not a provider, there was no
statutory right to the administrative hearing provided
to providers.

Unihealth irreparably lost money and reputation as
clients withheld payments. Unihealth became crippled
and unable to service existing clients who relied on its
management expertise in order to service Medicare
patients. Unihealth lost monies in excess of $10,000.00
and therefore had no access to the Court of Claims for
tortious invasion of contractual rights.

9

The respondents were furthermore challenged for
violating Unihealth’s trade secrets as well as attemp-
ting to conspire to price fix it out of the industry.
Respondents discriminated against Unihealth because
Unihealth established private, not-for-profit, home
health agencies contrary to the style of community or
government type institutions. The respondents felt
that Unihealth should not make a profit. Unihealth
alleged losses in the amount of approximately $1,000,-
000.00 plus incurred expenses, including legal fees,
costs, and the waste of valuable services while it was
forced to constantly attempt to justify its existence ina
setting which provided no forum to redress these
grievances.

JURISDICTIONAL POSTURE OF THE CASE

On October 4, 1977, Unihealth having no other
resort or recourse, filed suit against respondents here-
in requesting immediate injunction, declaratory relief
and money damages. After extensions of time were
granted, the defendant therein filed a motion for dis-
missal for lack of standing and subject matter jurisdic-
tion under the Medicare Act.

On March 21, 1978, the District Court rendered a
decision and order granting jurisdiction and finding
that Unihealth very much had standing to challenge
the actions of the defendants. Unihealth Services Corpora-
tion v. Califano, 448 F.Supp. 1059 (E.D. La. 1978). The
Court concluded the following regarding the relief
sought:

10

* * *

The Court agrees with Unihealth that it has
raised more than a request for a review of its
charges to providers. Just as plaintiff has char-
acterized its claims, Unihealth is demanding
both that it be allowed access to the review
procedures provided by the Medicare Act and
that it be regulated within due process para-
meters since the alleged regulations have pur-
portedly interfered with both contractual and
occupational relationships of plaintiff.

. * *

First, it is evident that the alleged chal-
lenged actions, i.e., no access to adminis-
trative and judicial review under the Medi-
care Act and the constitutionality of the reg-
ulations imposed on plaintiff, have caused the
plaintiff economic harm and otherwise in
affecting its relationships with the providers
such that providers are withholding certain
sums purportedly owed Unihealth.

Second, as stated in Cotovsky, supra, the Court
is toassume that plaintiff arguably falls within
the zone of interest protected by its Fifth
Amendment rights when it challenges
governmental action on Fifth Amendment
grounds.

Whether or not Unihealth arguably falls
within the zone of interest regulated by the

nd P Baa SOR hs Ae

11

Medicare Act turns ona determination of the
nature and extent of alleged regulating activi-
ties. Cotovsky, supra. Since a factual issue re-
mains regarding the nature and extent that
Unihealth has been regulated, the Court must
resolve this issue on the merits before it can
render a decision on standing under the Medi-
care Act. Courts have recognized that they
may postpone a decision on a jurisdictional
issue if that issue is intertwined with a deci-
sion on the merits of the case. Continental Cas-
ualty Company v. Department of Highways, State of
Louisiana, 379 F.2d 673 (Sth Cir. 1967). There-
fore, while the Court has already concluded
that this plaintiff has standing under the Fifth
Amendment to bring the claims, ... .

On the issue of federal question jurisdiction, the
Court distinguished Califano v. Sanders, 403 U.S. 99, 97
S.Ct. 980 (1976), because Sanders did have a forum for

judicial review as provided for under Section 405(g) of
the Social Security Act.

The Court expressed grave concern as to the reper-
cussions if federal courts were entirely closed to con-
stitutional challenges. The District Court quoted from
the post-Salfi decision in South Windsor Convalescent Home,
Inc. v. Matthew, 541 F.2d 910 (2d Cir. (1976):

However, when Salfi’s conclusions apply to a
case where no alternative jurisdictional basis

12

exists, its restrictive interpretation of §1331
might lead to a constitutional question of the
first order, one that has arisen but rarely and
tangentially in our constitutional history, i.e.,
whether the Congress can close the federal
courts entirely to constitutional challenges
directed against federal statutes or actions.
We doubt that the Supreme Court intended
its reading of §405(h) in Salfi to have the effect
of precluding federal jurisdiction over consti-
tutional questions, since the result would be at
odds with the well-established principle that a
court will not construe a statute to restrict
access to judicial review unless Congress
manifests its intent to do so by “clear and con-
vincing evidence.”

The Court also found authority pursuant to St. Louis
University v. Blue Cross Hospital, 537 F.2d 283 (8th Cir.
1976); John T. MacDonald Foundation, Inc. v. Mathews, 534
F.2d 633 (Sth Cir. 1977); and concluded that the
Medicare Act cannot be interpreted as closing these
doors:

Regardless of how each court has applied
§405(h) of the Medicare Act, they have all
emphasized one caveat — the Medicare Act
cannot be interpreted as closing the federal
courts to the presentation of a constitutional
challenge to the Act itself. Additionally, these
courts have agreed that the constitutional

ee en ee

;
;

sar

13

challenge to the Act must be brought under the
Medicare Act before §405(g) and (h) can be
applied to such a claim. Salfi, supra.

* ® *

Accordingly, on the basis of the foregoing
reasons, this Court first concludes that Uni-
health Services Corporation has standing un-
der the Fifth Amendment to the United States
Constitution to assert its constitutional chal-
lenges... . Second, this Court also concludes
that Unihealth has subject-matter jurisdic-
tion pursuant to 28 U.S.C. 1331 to have the
constitutional challenges to the Medicare Act
reviewed by this Court. The motion of the
United States to dismiss the claim brought by
Unihealth Services Corporation is hereby
DENIED. (Emphasis in original).

The trial of the matter was heard on the merits on
June 19, 1978. Just prior to the trial, the Fifth Circuit’s
reversal decision en banc in John T. MacDonald Foundation,
was rendered at 571 F.2d 328 (Sth Cir. 1977), writ
denied, U.S. ___. The District Court took the
matter under submission until rendering its memoran-
dum and order of dismissal on February 12, 1979, and
held on page 5 thereof:

Consideration of the Fifth Circuit en banc
decision in MacDonald Foundation, Inc., supra, and
its more recent decision in The American Asso-

14

ciation of Councils of Medical Staffs of Private Hospi-
tals, Inc. (CMS) v. Califano, 575 F.2d 1367 (Sth
Cir. 1978) leads to the inescapable conclusion
that this Court has no federal question juris-
diction pursuant to 28 U.S.C. 1331 over the
present action.

The Notice of Appeal to the Fifth Circuit was filed on
February 20, 1979. On May 21, 1979, a Motion for an
Injunction Pending Appeal and/or Preferential Hear-
ing pursuant to Rule 8 of the Federal Rules of Appellate
Procedure was filed with supporting affidavits. In
response, appellee filed a Motion for Summary Affirm-
ance in response to appellant’s Motion for Injunction
Pending Appeal and/or Preferential Hearing (June 8,
1979). The Court of Appeals received the appellant's
Opposition to said motion on June 18, 1979, and the
decision of the Court of Appeals granting summary
affirmance and denying the motion for injunction
pending appeal was filed on June 27, 1979. No written
decision accompanied the same.

JURISDICTION OF FEDERAL COURTS

A. 280U.S.C. §1332.

Unlike the authorities used to dismiss the case in the
District Court, jurisdiction was originally invoked on
the basis of diversity of the parties, 28 U.S.C. §1332.
The pendent state tort claims asserted against the in-
dividual defendants impliedly arose under the counts,
facts and allegations complained of including invasion

15

of private contractual rights and conspiracy com-
mitted by agents of the federal government who acted
beyond and outside the scope of their authority under
color of law. These individuals were named as defend-
ants and included Joseph Califano, Melvin Blumen-
thal, Marion J. Seabrooks, Mike Hoban, Joseph Brews-
ter, Raymond Woerner, Irvin Cohen, Blue Cross Asso-
ciation of America, Inc. and James Sleep. None of these
individuals reside in Louisiana or Delaware which is the
State in which Unihealth is a citizen. Pendent state
claims do derive jurisdiction from 28 U.S.C. §1331. See,
Bivens v. Six Unknown Named Agents of the FBI, 403 U.S. 388
(1971).

Unihealth alleged and proved at trial an invasion of
its right to privacy. Under Louisiana state law, La. C.C.
Art. 2315, and Federal common law, Bivens, supra, the
right is recognized and its invasion is actionable. Bivens,
supra, 403 U.S. at 394 (1971). The business in which
Unihealth was engaged is not regulated by the Medi-
care Act because Unihealth is not a provider.

At the trial in the District Court, exhibits were intro-
duced which proved that the Medicare Bureau or Blue
Cross representatives recognized Unihealth’s right to
privacy. Yet, their cautions were blown to the wind as
Unihealth became exposed and exploited without a
hearing relative to the truth of its business. See, Bivens,
supra, 403 U.S. at p. 394-395, quoting United States v. Lee:

... “In such cases there is no safety for the
citizen, except in the protection of the judicial

16

tribunals, for rights which have been invaded
by the officers of the government, professing
to act in its name. There remains to him but
the alternative of resistance, which may
amount to crime.” United States v. Lee, 106 U.S.

196, 219 (1882)....

These intentional, negligent, or conspiratorial actions
on the part of the respondents allegedly violated the
Fourth Amendment. This Court has held in Bivens,

supra, at p. 395:

_.. That damages may be obtained for in-
juries consequent upon a violation of the
Fourth Amendment by federal officials should
hardly seem a surprising proposition. His-
torically, damages have been regarded as the
ordinary remedy for an invasion of person
interests in liberty. See Nixon v. Condon, 286

U.S. 73 (1932)....

B. Court of Claims is not the answer.

The Court of Claims does not have jurisdiction over
the federal tort claims. Federal district courts do have
such jurisdiction as was implied in this case. 28 U.S.C.
§1346 sets out that district courts shall have original
jurisdiction concurrent with the Court of Claims, of es
(2) any other civil action or claim against the United
States not exceeding $10,000 in amount, founded either
upon the Constitution, or any Act of Congress . . . or
for liquidated damages not sounding in tort.” (Emphasis

added).

ho AR eee BE,

ae IN Eo Nach foe. NEI

17

In the case at bar, Unihealth has nocontract with the
federal government. Therefore, Unihealth has no
Court of Claims relief. Furthermore, the claim ex-
ceeds $10,000 and does sound in tort. Unihealth tried
to file this case in tort in the Court of Claims and had
the same kicked back. The tort claims could not be
heard by the Court of Claims. Instead, the tort claims,
particularly as they exceed $10,000, should have been
heard in the district court. This is not a case for reim-
bursement as in the case of Humana of South Carolina v.

Matthews, 419 F.Supp. 253 (D. D.C. 1976).

At the same time, state and common law govern and
constitute as illegal the actions of the individually nam-
ed and diverse defendants. Hereinbelow, as a reason
for granting this writ, it is submitted that the federal
law does govern the scope of authority of the individ-
uals so sued. Furthermore, they should not be given
blanket sovereign immunity by the way of aclosed fed-
eral door to review their actions. The remedy is one of
injunctive relief and/or money damages. See, Hill,
“Constitutional Remedies,” 69 Col. L. Rev. 1109, 1143-
46 (1969); Katz, “The Jurisprudence of Remedies,” 117
U. Pa. L. Rev. 1, 51-58 (1968).

The individuals sued had a major responsibility to
carry out the dictates of the Medicare Act pursuant to
delegations of legislative authority. In exceeding the
scope of authority, they committed actionable and
remedial malpractice of their respective professions.
However, the Court of Claims does not have jurisdic-

ae pee eT Weer

18

tion over malpractice actions, nor can it award costs,
interest or attorney’s fees for the harm that was com-
mitted.

The defendants in question do not deserve the
endowment of governmental immunity. Immunity is
not readily implied. Kiefer and Kiefer v. Reconstruction Finance
Corporation, 306 U.S. 381, 388-89. In short, the Federal
Tort Claims Act should have been applied here or
“should have been construed to fit, so far as would
comport with its words, into the entire statutory
system of remedies against the government to make a
workable, consistent and equitable whole.” feres v. U.S.,
340 U.S. 139, 71 S.Ct. 153, 95 L.Ed. 152.

The respondents exerted and exceeded their govern-
mental authority in such a way and design as to dele-
teriously affect the affairs of the corporate citizen. Toa
business, this kind of damage causes great suffering.
Public officials may become tortfeasors by exceeding
the limits of their authority. Land v. Dollar, 330 U.S. 731,
67 S.Ct. 1009, 91 L.Ed. 1209 (1947); Belknap v. Schild, 161
U.S. 10, 18-20; United States v. Lee, 106 U.S. 196, 1 S.Ct.
240, 27 L.Ed. 171.

The Court of Claims cannot entertain this particu-
lar kind of suit. Its powers do not include providing
remedies under the equitable or declaratory relief
sought. United States v. Alire, 73 U.S. (6 Wall.) 573, 18
L.Ed. 947 (1868); United States v. Jones, 131 U.S. 1,9 S.Ct.
669, 33 L.Ed. 90 (1886); United States v. King, 395 U.S. 1,

ee Sed

19

89 S.Ct. 1501, 23 L.Ed.2d 52 (1969). Nominal damages
such as those recognized in The American Association of
Council of Medical Staffs v. Califano, 575 F.2d 1367 (Sth Cir.
1978) (hereinafter called “CMS”), stated that the
Medicare Act withdraws jurisdiction from district
courts over actions like CMS and Dr. John T. MacDonald
Foundation, Inc. v. Califano, supra. But, nominal damages
for contesting actions pursuant to the Medicare Act are
not enough. Carey v. Piphus, U.S. , 98 S.Ct.
1042, 55 L.Ed.2d 252 (1978), and Pushkin v. Califano,
F.2d 6722 (August 8, 1979, Slip Opinion, No. 77-2401).

The relief sought runs to the very basis of consti-
tutional protections. Jurisdiction is asserted herein in
order to assure constitutional protection, including
whether or not the court itself affords a constitutional
protection in being an available forum with sufficient
remedy. Without the remedy, the right to review is a
farce.

The Fifth Circuit could not decide that Congress
could cut off jurisdiction of these issues while provid-
ing another court. CMS, supra, but this Court can decide
the issue and should decide that Congress cannot cut
off jurisdiction of these issues.

C. Federal Coercion Cannot Be Shielded from At-
tack

Furthermore, Unihealth sought the federal court in
complaining of extrajudicial governmental coercion.
Traditionally, relief can be obtained under general

20

jurisdiction. 28 U.S.C. §1331. Wong Wing v. U.S., 163
U.S. 228, 16 S.Ct. 977, 41 L.Ed. 140 (1896); Ng Fung Hoo.
White, 259 U.S. 276, 41 S.Ct. 148, 65 L.Ed. 446 (1922);
Marbury v. Madison, 1 Cranch. 137, 2 L.Ed. 60.

Can Congress by enactment of the Medicare Act
close the doors of federal courts from injured persons
who have no other voice? The theory of sovereign im-
munity has been reiterated and recreated in the un-
resolved issues stated in Pushkin v. Califano, supra. It is all
because the Court of Claims in Whitecliffe, Inc. v. United
States, 536 F.2d 347, 210Ct. Cl. 53 (1976), cert. denied, 430
U.S. 969, 97 S.Ct. 1652, 52 L.Ed. 2d 361 (1977), con-
flicted with the interpretation of the Social Security
Act, Section 405(h), in affording an available forum for
jurisdictional challenges than the Fifth Circuit. The
conflicts in Circuits and conflict in the Court of Claims
need clarification as will be explained below in the
reasons for granting writ.

D. Actions Against the Government.

The action was clearly not a “Medicare case.” Ob-
viously, the Fifth Circuit treated it as another Pushkin v.
Califano, supra. Instead, the Unihealth case included a per-
sonal action against officers and/or agents of the Unit-
ed States who failed to act properly under color of legal
authority. See, United States v. Candelaria, 271 U.S. 432, 44,
46 S.Ct. 561, 70 L.Ed. 1023 (1926); Drummond v. ULS.,
324 U.S. 316, 318, 65 S.Ct. 659, 89 L.Ed. 969 (1945).
The entire defense of this action was conducted by the
government lawyers; however, courts have still held

UES OTT en TT Ee Se

ae AR ae a

ait? A Mime

21

the jurisdictional doors are open to these kinds of per-
sonal attractions. Land v. Dollar, supra. See note, “The
Dollar Litigation, a Study in Sovereign Immunity.” 65
Harv. L. Rev. 466-478-78 (1952).

One method by which federal courts have recog-
nized the obligation to hear cases of federal injustice
such as this is by means of mandamus and Venue Act.
28 U.S.C. §1361. This was also addressed in the Pushkin
v. Califano, supra, case, wherein the Fifth Circuit recog-
nized more conflicts in circuits relative to the interpre-
tation of mandamus under 28 U.S.C. §1361 for chal-
lenging the legal acts of the Secretary of H.E.W. in
promulgating allegedly invalid regulations. American
Association of Council of Medical Staffs v. Califano, 575 F.2d
1367 (5th Cir. 1978). That case conflicts with Cervoni v.
Secretary of H.E.W., 581 F.2d 1010 (1st Cir. 1978). In
CMS, supra, the Court opined in dicta that mandamus
may be a form of independent jurisdiction. This con-
flicts with Cervoni, supra, as well as Elliot v. Weinberger,
564 F.2d 1219 (9th Cir. 1977), cert. granted, ____ US.
, 99 S.Ct. 75, 58 L.Ed.2d 106 (1978); White v.
Matthews, 559 F.2d 852 (2d Cir. 1977), cert. denied, 435
U.S. 908, 98 S.Ct. 1458, 55 L.Ed.2d 500 (1978).

A mandamus and injunction as sought in the case at
bar can be arguably different. Smith v. Bourbon County,
127 U.S. 105 (1888). The common law writ of man-
damus in a federal jurisdiction could be the equivalent
of a mandatory injunction. The courts and particularly
the Circuits argued to be in conflict herein are unclear.

22

See, note, “Mandatory Injunctions as Substitutes for
Writs of Mandamus in the Federal District Courts: A
Study in Procedure Manipulation,” 38 Colum. L. Rev.
903 (1938); Davis, “Mandatory Relief from Adminis-
trative Actions in Federal Courts,” 22 U. Chic. L. Rev.
585 (1955).

JURISDICTION OVER
CONSTITUTIONAL QUESTIONS

The Supreme Court has recently expressed doubts
about the constitutionality of foreclosing all avenues of
review and remedy of constitutional issues. Johnson v.
Robison, 415 U.S. 361, 94 S.Ct. 1160, 39 L.Ed.2d 389
(1974). As was footnoted in CMS, supra:

4. The Court has recently expressed doubts
about the constitutionality of foreclosing all
review of constitutional issues:

“There is another reason why Johnson v.
Robison is inapposite. It was expressly bas-
ed, at least in part, on the fact that if
§211(a) reached constitutional chal-
lenges tostatutory limitations, then abso-
lutely no judicial consideration of the
issue would be available. Not only would
such a restriction have been extra-
ordinary, such that ‘clear and convincing
evidence would be required before we
would ascribe such intent to Congress,

Mad Gk The Ae pale mT Oo ne

23
[citations omitted] but it would have
raised a serious constitutional question of
the validity of the statute as so con-
strued.”

Weinberger v. Salfi, 422 U.S. at 762, 95 S.Ct. at
2465.

A thorough discussion of this whole area is
found in P. Bator, P. Mishkin, D. Shapiro, and
H. Wechsler, The Federal Courts and the Fed-
eral System, Note on the Power of Congress
to Limit the Jurisdiction of Federal Courts,
313-375 (2d ed 1973). See also Caulfield v. U.S.
Dept. of Agriculture, 5 Cir. 1961, 293 F.2d 217 (en
banc); K. Davis, Administrative Law in the Seven-
ties, §2809 (1976); L. Jaffe, Judicial Control of
Administrative Action, 376-94 (1965).

Happily, the Fifth Circuit has done its best to enun-
ciate that the issues need not be decided. As will be
shown in the reasons for granting the writ herein-
below, the issue does need to be decided since man-
damus is insufficient, Court of Claims jurisdiction is in-
sufficient, and the Circuits are in extreme conflict in
the interpretation of Section 405(g) of the Social
Security Act entirely precluding any review. In its sum-
mary affirmance, the Fifth Circuit did not even give
Unihealth the benefit of this kind of statement.
Perhaps the Fifth Circuit could not have happily done
so: however, the issue is more applicable than ever. See,
Reason No. 1, for granting certiorari, below.

24

REASONS FOR GRANTING THE WRIT,
OR CONSOLIDATING THIS CASE
WITH ELLIOT v. WEINBERGER
564 F.2d 1219 (9th Cir. 1977),
cert. granted, ___ U.S. ___, 99 S.Ct. 76 (1978)

1. The Decision Of The Fifth Circuit
Directly Conflicts With Other Circuit
Decisions, The Decisions Of The United
States Supreme Court And Deprives
Petitioner Herein Of Any Remedy,
Review Or Court.

MacDonald Foundation, supra, (Sth Cir.), directly con-
flicts with St. Louis University, supra, (8th Cir.). The
application of general jurisdiction grants of 28 U.S.C.
§§1331(a) and 1346(a)(2) have been differently ap-
plied. Particularly, certain Circuits have found that the
Court of Claims possesses a greater jurisdictional basis
under 28 U.S.C. §1491 than federal district courts un-
der 28 U.S.C. §1331. District courts have been found to
lack §1331 jurisdiction to review Medicare disputes
while the Court of Claims is allowed to hear the claims.
Humana of South Carolina v. Matthews, supra; Whitecliffe, Inc.
v. U.S., supra, CMS, supra (Sth Cir.).

This court should clarify the matter once and for all.
A regulation itself can be reviewed by the Court of
Claims; however, the actions of the individuals and the
harm that was created thereby is not a matter of re-
view by the Court of Claims. Instead, that would argu-
ably be a matter for resolution by mandamus. Plekowski
v. Ralston-Purina Company, 557 F.2d 1218 (Sth Cir. 1977).

ea A ae le la in wm AER ac arr at ce ee Ee ln Cty canal ell aninn i SaSrabiaihee wat itil Ain. snias dg lem

25

The issue of whether mandamus will lie pursuant to
28 U.S.C. §1361 to grant district courts jurisdiction
over constitutional challenges to the Medicare Act is
presently before this Court. Elliot v. Weinberger, 564 F.2d
1219 (9th Cir. 1977), cert. granted, __. U.S. ___, 99
S.Ct. 76 (1978).

The case is significant because of the due process
challenge to the recoupment procedures. In the case at
bar, the due process challenge is also significant be-
cause there were no hearing proceedings available to
the non-regulated, non-provider Unihealth. There
could be no exhaustion of administrative remedies
where there was never a remedy originally available
despite petitioner’s being well within the zone of inter-
est regulated by the Medicare statute. Cotovsky-Kaplan
Phys. Th. Assoc., Ltd. v. United States, 507 F.2d 1363 (7th
Cir. 1975). Unihealth does not seek reimbursement for
the cost of its services. Unihealth charges for the serv-
ice pursuant to agreements which were challenged by
the Medicare Bureau without a proper hearing. Uni-
health was not evena party tothose hearings. In Elliot v.
Weinberger, supra, at p. 1226, the court considered this
fact significant:

Nor are the present suits precluded by 42
U.S.C. §405(h) which controls judicial actions
to recover benefits. Weinberger v. Salfi, 422 U.S.
749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975)
interprets §405(g). The instant suits are quite
different. They assert aconstitutional right to

26

due process notice and hearing when alleged
overpayments are recouped. They are not claims
for benefits. Nor would granting the relief
sought result in an entitlement to benefits.
The distinction between due process questions divorced
from a claim for benefits and questions related to the
merits of a benefits claim is a significant one, requiring
considerably different treatment by the courts. See El-
dridge, supra, 424 U.S. at 329-332, 96 S.Ct. 893.
(Emphasis added).

Nevertheless, the Circuits are still at odds. See Ryan v.
Shea, 525 F.2d 268, 272 (10th Cir. 1975); Humana of South
Carolina, Inc. v. Matthews, supra.

Furthermore, mandamus cannot be used to enforce
money damages. Therefore, the conflict in circuits en-
courages piecemeal litigation on the issue. For example,
Unihealth would have to begin its case in the Court of
Claims for less than the $10,000 jurisdictional amount
and seek clarification relative to the contested regula-
tion on “reasonable cost” and “franchise” under the
Medicare Act. Unihealth would then have to file a
separate claim asking for a mandamus to enforce the
federal officials acting under color of Medicare law to
stop and desist from committing illegal acts pursuant to
the Medicare Act in federal district court. Thirdly, Uni-
health would have to file a suit in state court asking for
money damages over and above the $10,000 for the il-
legal pendent state claims which include violations of
the competitive rights and first amendment rights,
since the Court of Claims cannot entertain jurisdic-

- aw ntl fet lng NE <item.

Wt PPG oh

fds dD tia) ta tiere wth hts (tie) at Ate dS

27

tion over First Amendment claims. United States v. Alire.
73 U.S. (6 Wall.) 573, 18 L.Ed. 947, United States v. Jones,
supra, United States v. King, supra. The Federal Tort Claims
Act does not provide injunctive nor declaratory relief.
Therefore jurisdiction will not lie under 28 U.S.C.

§1346(b).

Declaratory and injunctive relief is procedurally rec-
ognized in Title 28 U.S.C. §2201. However, it has long
since been decided that district courts do not have an
independent grant of jurisdiction over the declaratory
judgment act, 28 U.S.C. §2201. Weinberger v. Salfi, supra;
Califano v. Sanders, supra.

The reason for granting the writ is simple. This case
has the earmarkings of a major jurisdictional challenge.
There are extreme conflicts in the Circuits and a con-
flict with the United States Supreme Court in Johnson v.
Robison, supra. To deprive this citizen of an adequate
forum to address these same factual claims is itself un-
constitutional.

If this Court denies writ, private enterprise will suf-
fer a death blow. The constitutional challenge to the
Medicare Act presented herein includes whether fed-
eral officials acting under Medicare Act “immunity”
can validly destroy private business. The further con-
stitutional challenge is to the Medicare Act itself, Sec-
tion 405(g). This Act has been interpreted in a conflict-
ing manner and in such a way as to completely pre-
clude review of the illegal and unconstitutional actions

of H.E.W. officials.

28

MacDonald Foundation, supra, does not control this re-

quest, although it was found to be applicable by the dis- .

trict court. The conflicts in Circuits arise out of each
circuit’s looking for some kind of out in order to avoid
this very important issue. This has forced aconflict vis-
a-vis mandamus jurisdiction and opting to the Court of
Claims. The federal questions herein have not hereto-
fore been specifically determined by this Court. The
Circuits only paid lip service to the mandate in Johnson v.
Robison, supra. Just as in Johnson, supra, this is not a case
where certain construction of the Medicare Act is “fair-
ly possible” and as such constitutional doubt may be
avoided. Constitutional rights and doubts may not be
avoided in this situation since Unihealth was never
governed nor regulated by Section 405(h) of the Social
Security Act. Unihealth was singled out for attack for
the very reason that it could not challenge these ac-
tions. (Transcript, Testimony, I. Cohen). No proper
hearing, either by right, equity or statute, was ever

afforded Unihealth.

In Pushkin v. Califano, supra, the issue relative to Equal
Protection was heard by this Court. See, Pushkin, supra,
where it was held that plaintiffs could raise a substan-
tial constitutional claim if they could show that Con-
gress “in distinguishing between the diagnostic serv-
ices provided by optometrists and doctors of medicine,
for purposes of Medicare reimbursement, acted ir-
rationally.” Rastetter v. Weinberger, 379 F.Supp. 170, 173
(D. Ariz. 1974), aff'd., 419 U.S. 1098, 95 S.Ct. 767, 482
L.Ed.2d 795 (1975).

Ente Lond nr ie ee

i Ares ean i ee Pk bie tara Be = SG

Se Net i aS LN

ri AS Salt tin tg OH

29

Unihealth was singled out and the complaint which
addressed the issue of singling out Unihealth, is an Equal
Protection claim which raises a substantial consti-
tutional question not preempted by Section 405(g) of the
Medicare Act. Pushkin, supra. This Court should decide
and resolve the conflicts of whether in the presence of a
substantial constitutional claim, jurisdiction will lie un-
der Section 1331. Cervoni v. Secretary of H.E.W., supra;
Kechijian v. Califano, 453 F.Supp. 159 (D.R.I. 1978). The
Circuits are straining for guidance and continually in
conflict.

The question can no longer be skirted by Circuit
courts. If this Court does not act in aid of its own juris-
dictional powers to protect citizens from the arbitrary,
unfair and illegal practices of the agents of govern-
ment, the very spirit of the federal court system will be
thwarted. This case goes the farthest in describing a
petitioner with absolutely no other forum.

Lastly, this is not a reimbursement case such as Mac-
Donald, supra. This is not a “physician services case” as
CMS, supra. This is a case of unequal classification and
unequal protection. This is a case where the due process
challenge to the procedures employed by the agency
are only collateral to reimbursement disputes. This is
not areimbursement dispute and therefore should not
have been barred from review. Humana, supra; Trinity
Memorial Hospital v. Associated Hospital Services, 570 F.2d
660 (6th Cir. 1977); Elliot v. Weinberger, supra; St. Louis Uni-
versity v. Blue Cross Hospital Service, supra; Ryan v. Shea
supra; Schwatzberg v. Califano, 453 F.Supp. 1042 (S.D.N.Y.
1978). This Court has been finally presented with the

OT eee ee ar ane (pram ma men re

30
precise issue of due process and equal protection under
the Constitution.

Finally, the defendants themselves were sued under
color of their offices, but the Fifth Circuit did not take
heed of the Federal Torts Claim action prompted by the
wrongful, tortious and conspiratorial actions of the
respondents. The last and final reason for granting cer-
tiorari is that these individuals should not be given
further blankets of sovereign immunity. Larson v.
Domestic and Foreign Corporation, 337 U.S. 682 ( ). The
longer federal courts persist in skirting the issue and
finding ways not to challenge these kinds of actions,
the greater the authority Medicare officials will feel
they have to abrogate the constitutional rights of indi-
viduals collaterally acting to it.

CONCLUSION

For the foregcing reasons, this Petition for Writ of
Certiorari should be granted, or in the alternative, join-
ed with the granted writ in Elliot v. Weinberger now
before this Court.

Respectfully submitted,

DONNA D. FRAICHE

Suite 206, 3715 Prytania Street
New Orleans, Louisiana 70115
Telephone: (504) 895-8673
Attorney for Petitioner

31

CERTIFICATE OF SERVICE

I certify that this day of September, 1979 that I
have served three copies of the foregoing Petition fora
Writ of Certiorari to the United States Court of
Appeals for the Fifth Circuit upon Henry R. Goldberg,
Office of the General Counsel, Department of Health,
Education and Welfare, 6201 Security Blvd., Balti-
more, Maryland 21235 and Wade H. McCree, Jr.,
Solicitor General of the United States, Department of
Justice, Washington, D.C. 20530 and one copy upon
John P. Volz, United States Attorney, 500 Camp Street,
New Orleans, Louisiana 70130, Attorneys for
Respondents, by mailing same, postage prepaid,
addressed to their respective offices.

DONNA D. FRAICHE

OC ET

CHE oe rere SOE te aa ee

Redline cx.” ates

Bait O21 tee hp sede

la
APPENDIX “A”

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 79-1558

UNIHEALTH SERVICES CORPORATION,
Plaintiff-Appellant,

versus

JOSEPH P. CALIFANO, Sec. of H.E.W., ET AL..,
Defendants-Appellees.

Appeal from the United States District Court for the
Eastern District of Louisiana

Before AINSWORTH, GODBOLD and VANCE, Cir-

cuit Judges.
BY THE COURT:

IT IS ORDERED that the motion of appellees for
summary affirmance is GRANTED.

IT IS ORDERED that appellant’s motion for injunc-
tion pending appeal is DENIED.
ls} JUDGE ROBERT A.
AINSWORTH, JR.
ls) JUDGE JOHN C. GODBOLD
is) JUDGE ROBERT S. VANCE

2a

APPENDIX “B’

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF LOUISIANA

UNIHEALTH SERVICES CORPORATION,

versus CA No. 77-3001

JOSEPH P. CALIFANO, SECRETARY Of HEALTH,
EDUCATION AND WELFARE, MELVIN
BLUMENTHAL, MARION J. SEABROOKS,
MIKE HOBAN, JOSEPH BREWSTER,
RAYMOND WOERNER, I. COHEN, BLUE CROSS
ASSOCIATION OF AMERICA, INC.
and JAMES SLEEP

Filed: Feb. 14, 1979
JUDGMENT

This matter came on for hearing before the Court on
a previous day.

After hearing the evidence, the Court took the
matter under submission.

NOW, THEREFORE, for the written reasons of the
Court on file herein, and considering the direction of
the Court as to the entry of judgment; accordingly,

tae neat Bein aie Ie vale na jk ae a

ES a ms eR wei ea EEA on aR

hashes

3a

IT IS ORDERED, ADJUDGED AND DECREED
that there be judgment in favor of defendants, Joseph
P. Califano, Secretary of Health, Education and
Welfare, Melvin Blumenthal, Marion J. Seabrooks
Mike Hoban, Joseph Brewster, Raymond Woerner, I.
Cohen, Blue Cross Association of America, Inc., and
James Sleep, and against plaintiff, Unihealth Services
Corporation, dismissing said plaintiff’s suit, with costs.

Dated at New Orleans, Louisiana, this 14th day of
February, 1979.

ls/ NELSON B. JONES
NELSON B. JONES, CLERK

/s} ILLEGIBLE
Deputy Clerk,
United States District Court
Eastern District of Louisiana
New Orleans, La.
APPROVED AS TO FORM:
Is) JACK M. GORDON
UNITED STATES DISTRICT JUDGE

4a

APPENDIX “C”

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF LOUISIANA

UNIHEALTH SERVICES CORPORATION

versus CA No. 77-3001(I)

JOSEPH P. CALIFANO, IN HIS OFFICIAL
CAPACITY AS SECRETARY OF HEALTH,
EDUCATION & WELFARE OF THE
UNITED STATES, ET AL

Filed: Feb. 12, 1979

Mrs. Donna D. Fraiche, Suite 542, First National Bank
of Commerce Building, New Orleans, Louisiana

70112

Mrs. Edith S. Marchall, Department of Health, Educa-
tion & Welfare, General Counsel’s Office, 330 C
Street, S.W., Washington, D.C. 20201

Henry R. Goldberg, Esq., Department of Health,
Education & Welfare, Office of General Counsel,
6201 Security Boulevard, Baltimore, Maryland

21235

GORDON, J.

ite a ea Leb hh tS Ale ADA oe a oe co

5a
MEMORANDUM AND ORDER

Plaintiff, Unihealth Services Corporation, is a
private professional management and consulting firm
specializing in the rendering of service to nonprofit
home health agencies (as providers) as those entitled
are so defined in the Medicare Act. 42 U.S.C. 1395(x)
(m). Unihealth has serviced 25 provider clients pur-
suant to a contract with each individual home health
agency wherein a unified charge is billed for various
services rendered based on the percentage of gross bill-
ings of the respective agencies as set out in the agree-
ment. Among the services provided by Unihealth are
professional consultation and orientation programs,
data processing services, guidance in financial matters,
and assistance in audit procedures conducted by fiscal
intermediaries as agents of the Department of Health,
Education and Welfare. The Department of Health
Education and Welfare has responsibility for adminis-
tering the Medicare program, and in fulfilling those
duties, promulgates regulations and establishes policy
relating to the administration of the Medicare
program. Unihealth is presently attacking certain ad-
ministrative practices and policies of the Department
of Health, Education and Welfare.

From 1969 through 1976 Medicare officials recog-
nized Unihealth as a management company under
policy considerations set out in the Provider Reim-
bursement Manual. Medicare officials, in making their
determination as to the reasonableness of cost regard-
ing Unihealth’s services to the providers scrutinized

6a

those costs under guidelines found appropriate to man-
agement companies. From 1970 until November, 1976,
the fees Unihealth charged its clients were found to be
within the principles of reimbursement and thus allow-

ed.

In 1977, Medicare officials made a policy determina-
tion that Unihealth should be regarded as a franchisor
under the Provider Reimbursement Manual rather
than as a management company. Plaintiff has now at-
tacked on constitutional grounds the legality of such a
policy of determination, of the method of promulgat-
ing that determination, and of the manner in which the
policy decision was applied.

As alleged by plaintiff, in 1968 officials of Medicare
began toreview the status of the plaintiff in an effort to
make a policy determination as to whether Unihealth
should be regarded as a management company or as a
franchisor under the Provider Reimbursement Man-
ual. Plaintiff claims that such a review was made
without the knowledge of its representatives. Pur-
portedly without giving plaintiff legal notice of any
meetings, officials of Medicare met and reached a policy
decision that Unihealth should be treated as a fran-
chisor when Medicare officials make a determination
on reimbursement. Under §2133 of the Provider Re-
imbursement Manual, franchise fees are allowable only
to the extent that they are not out of line with costs of
similar services provided by nonfranchise organiza-
tions. This section requires that providers establish the

en a emir nena entices i lll

ee ee oe ee

ee athe Mee hae es rT

7a

cost of each of the specific services provided by the
franchisor. It requires exclusion of any additional fees
relating to the franchisor’s trademark or reputation
which are purportedly not related to patient care.

As a result of this policy determination recognizing
Unihealth as franchisor, the plaintiff contends that
those standards applicable to franchisor in determin-
ing reasonable costs, were applied retroactively to
those years when plaintiff was operating as a manage-
ment corporation as designated by the Medicare Act
(also referred to as “Act”). Retroactive application of
standards relating to franchisors purportedly altered
the condition under which plaintiff was operating in
the following manner:

(1) That Medicare officials retroactively
conducted a more rigorous scrutiny of
Unihealth’s cost report than was re-
quired when Unihealth was accorded
management status;

(2) That Unihealth was required to provide
itemized cost statements of each indi-
vidual service rendered to a provider
whereas in the past under standards
applicable to management corporations,
it did not have to itemize costs as to indi-
vidual services;

(3) That under the franchisor standards, and
as referred to above, Unihealth was
forced to retroactively utilize more
onerous accounting procedures in set-

8a
ting out the costs of the services
rendered;

(4) That the presumption that all costs and
services stated by a management cor-
poration are reasonable was substituted
for the franchisor presumption that all
costs and services rendered are not
reasonable and must be proven by de-
tailed documentation.

Plaintiff contends that as a result of this rectoactive-
ly applied policy determination recognizing it as a fran-
chisor, Unihealth’s provider clients have withheld
almost all payments outstanding to Unihealth in the
full amount of $800,000.

In summarizing its contentions, Unihealth alleges, in
the main, that the defendant has infringed its due
process rights under the Fifth Amendment of the Unit-
ed States Constitution: (1) by singling out the plaintiff
in an attempt to regulate it under the Medicare Act
without allowing plaintiff any administrative review or
judicial review as provided by the Medicare Act; (2) by
failing to give plaintiff guidelines further defining
“reasonable cost” pursuant to Title 20, Code of Federal
Regulations, §405.501, et seq.; (3) by failing to give the
plaintiff proper or legal notice that its charges for serv-
ices would be disallowed based on retroactively applied
policy decisions affecting cost reports for the years
1976, 1975 and 1974; (4) by retroactively applying the
policies, practices, actions, and determinations of
defendant so as to force plaintiff out of its professional

9a

practice thereby proscribing its ability to engage in its
profession; (5) by denying plaintiff the right to a hear-
ing relative to the issue of its status as a franchisor,
though defendant’s precedential policy determination
had the adverse effect of depriving Unihealth of its pre-
sumption of having submitted reasonable costs on a
unified basis.

On a motion to dismiss brought pursuant to FRCP
12(b)(1), the Department of Health, Education and
Welfare of the United States, sought to dismiss the ac-
tion on grounds that (1) the plaintiff lacks standing in
this action so as tomake it a case or controversy subject
to the federal court’s Article III jurisdiction under the
United States Constitution; and (2) that the Court does
not have subject matter jurisdiction of the case in that
Section 405(h) of the Social Security Act, incorporated
into the Medicare provisions at 42 U.S.C. 1395(ii), pre-
vents this Court from exercising any judicial review
over the particular claims presented by plaintiff. Sec-
tion 405(h) reads as follows:

The findings and decisions of the Secretary
after a hearing shall be binding upon all indi-
viduals who were parties to such hearing. No
findings of fact or decision of the Secretary
shall be reviewed by any person, tribunal, or
governmental agency except as herein pro-
vided. No action against the United States, the
Secretary, or any officer or employee thereof
shall be brought under Section 41 of Title 28
to recover on any claim arising under this sub-
chapter.

*

10a

After oral argument on the issues, and post argu-
ment briefing, this Court took the matter under sub-
mission. In a written memorandum the Court denied
the motion to dismiss concluding that plaintiff had
standing and that the Court had federal question juris-
diction to entertain constitutional claims against the
Medicare Act and regulations promulgated pursuant to
the Act relying heavily on the decisions in Dr. John T.
MacDonald Foundation, Inc. v. Mathews, 554 F.2d 714 (Sth
Cir. 1977) and St. Louis University v. Blue Cross Hospital Serv-
ice, 537 F.2d 283 (8th Cir. 1976).

In preparation for trial, the parties formulated a de-
tailed pretrial order. In paragraph 5 of the pretrial
order, defendant stated that it would ask the Court to
reconsider the motion to dismiss.

The trial of this matter commenced on June 19, 1978.
At the completion of the trial, the defendant orally re-
quested that the Court reconsider its earlier ruling on
the motion to dismiss, since the Fifth Circuit in an en
banc decision had reversed its position in Dr. John T.
MacDonald Foundation, Inc. v. Mathews, supra. Dr. John T.
MacDonald Foundation, Inc. v. Califano, 571 F.2d 328 (Sth
Cir. 1978). After allowing additional oral argument on
the motion to reconsider and inviting the parties to file
post-trial memoranda should they desire, this Court
took the motion to reconsider and the issues raised at
trial under submission.

lla

Consideration of the Fifth Circuit en banc decision in
MacDonald Foundation, Inc., supra, and its more recent de-
cision in The American Association of Councils of Medical Staffs
of Private Hospitals, Inc. (CMS) v. Califano, 575 F.2d 1367
(Sth Cir. 1978) leads to the inescapable conclusion that
this Court has no federal question jurisdiction pursu-
ant to 28 U.S.C. 1331 over the present action.

In its original memorandum and order, this Court
found the reasoning in St. Louis University, supra, highly
persuasive, where that Court concluded that the
Medicare Act [§405(h) of the Social Security Act] could
not be read to preclude all judicial review of consti-
tutional claims against the Act. In that case, St. Louis
University as a representative of a provider brought an
action pursuant to 28 U.S.C. 1331 challenging the con-
stitutionality under the due process clause of certain
regulatory procedures used. Allegedly, the Depart-
ment of Health, Education and Welfare utilized a pro-
vider appeals committee with the majority of its
membership composed of officers or employees of the
very agency whose initial decision was being appealed.
Undoubtedly these members had an institutional inter-
est in the outcome.

The Department of Health, Education and Welfare
took the position that judicial review of the due process
claim was barred by §405(h) and administrative review
was precluded by an agreement between Health,
Education and Welfare and Blue Cross which estab-
lished the provider appeals committee. Health, Educa-

12a

tion and Welfare stated that it would not review the
appeal committee’s decision even when a provider
asserted that the committee had blatantly ignored
governing statutes, regulations, and constitutional re-
quirements. The Eighth Circuit agreed with the district
court’s conclusion that St. Louis University could bring
a due process claim challenging certain procedures of
the Medicare Act under federal-question jurisdiction.
In doing so, the Eighth Circuit stated three reasons for
concluding that jurisdiction existed under 28 U.S.C.
1331. First, the Court decided that the due process
claim arose primarily under the Constitution rather
than under the Medicare Act so that the last sentence
in Section 405(h) did not apply to such claims. St. Louis
University was primarily seeking a constitutionally
adequate hearing and not a declaration of entitlement
to reimbursement. Second, the Court recognized that
the Medicare Act failed to provide an adequate alter-
native means of obtaining judicial review of St. Louis
University’s due process claim. The Court found that
this ground alone distinguished the case from
Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457 (1975)
where the Supreme Court held that a federal court had
no federal question jurisdiction over a constitutional
claim attacking a Medicare Act regulation. Third, the
Court merely reasserted the caveat raised by other
courts considering similar issues involving jurisdiction
under Medicare; reading Section 405(h) to wholly pre-
clude the adjudication of a party’s due process claim
would raise serious constitutional problems concern-
ing the Medicare Act.

be iene kn Bien lin Sets 2 ok

13a

It was then clear to this Court that the reasoning of
the Court in St. Louis University, supra, was applicable to
the present matter since Unihealth was primarily seek-
ing to obtain due process rights rather than the right to
reimbursable fees, and was being denied any judicial
review procedure under the Medicare Act. A reading of
Section 405(h) to preclude any judicial review of these
constitutional claims appeared to raise particularly
grave constitutional questions concerning the
Medicare Act since Unihealth had previously been
denied all access to administrative as well as judicial
review under the Act.

The Fifth Circuit in the second panel consideration of
MacDonald Foundation, Inc., 554 F.2d 714 (Sth Cir. 1977)
sought to determine whether any jurisdictional
grounds existed for entertaining a provider’s claim
against Health, Education and Welfare to compel the
Secretary to pay over disallowed reimbursements. The
Supreme Court had previously overturned the first
MacDonald Foundation, Inc. panel decision that jurisdic-
tion existed under the Administrative Procedure Act.
Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980 (1977). In
concluding that Congress did not intend Section 405(h)
to preclude federal-question jurisdiction over such
claims as brought by MacDonald Foundation, Inc., the
Fifth Circuit recognized the propriety of the St. Louis
University Court’s reasoning as it applied to con-
stitutional claims against the Medicare Act of the type
brought by St. Louis University. The Court stated:

l4a

And the Eighth Circuit, in St. Louis University
v. Blue Cross Hospital Service, 537 F.2d 283 (8 Cir.
1976), a post-Salfi Medicare case, refused to
find complete preclusion of federal question
jurisdiction by §405(h), reasoning that con-
stitutional claims must be reviewable despite
§405(h) language to the contrary. With
respect, we think the reasoning of our
Brothers’ careful opinion supports a more ex-
pansive result than they reached: (citing St.
Louis University reasoning verbatim.) (554
F.2d at 717)

In an en banc decision, the Fifth Circuit in MacDonald
Foundation, Inc. v. Joseph A. Califano, 571 F.2d 328 (1978)
reversed the second panel’s decision by concluding that
§405(h) precluded federal-question jurisdiction to
review decisions by the Secretary of Health, Education
and Welfare awarding reimbursement under Medicare.
In arriving at this end, the Court analyzed the pre-
clusion of review issue while recognizing that the
appellant was seeking to bring a constitutional claim as
well as a claim for reimbursement. Though the pro-
vider was alleging a constitutional claim and had no
procedure for judicial review under the Medicare Act,
the Court still reached this conclusion:

Assuming that when Congress incorporates
sections specifically they intend to eschew the
remainder, the conclusion is inescapable that
Sec. 405(h) was intended to preclude all

SS Lane it a nee a SIS PAI BBN

15a

review. We therefore hold that §405(h), in-
corporated into Section 1395 (ii) of the
Medicare Act, precludes all review of the
Secretary’s decisions by federal district courts
brought under Section 1331. (571 F.2d at 331)

Not only did the Fifth Circuit reverse its second panel
decision, but it appears to have rejected the reasoning
in St. Louis University, supra. The Court summarized the
Eighth Circuit’s position as follows:

The Eighth Circuit has held that although
Section 405(h) precludes review of agency
findings of fact and law, Section 405(h) does
not preclude jurisdiction to entertain con-
stitutional claims. St. Louis University v. Blue Cross
Hospital Service, 537 F.2d 283 (8th Cir. 1976),
cert. denied, 429 U.S. 977, 97 S.Ct. 484, 50
L.Ed.2d 584 (1977). (MacDonald Foundation, Inc.
v. Califano, 571 F.2d at 331.)

As reflected in its own decision on the issue, the Fifth
Circuit disagreed with the Eighth Circuit’s position and
presumably that Court’s reasoning. While the Fifth
Circuit's interpretation of Section 405(h) required that
it then address MacDonald Foundation, Inc.’s claim
that Section 405(h) unconstitutionally denies due
process to claimants precluded from seeking review of
constitutional claims, a caveat that the Court in St. Louis
University, supra, had raised, the Court avoided this
showdown by concluding that judicial review was

16a
available elsewhere. The Court found that the Court of
Claims had determined that it has jurisdiction to
review claims arising under the Medicare Act. White
Cliff, Inc. v. United States, 536 F.2d 347 (Ct.Cl. 1976), cert.
denied, 430 U.S. 969, 97 S.Ct. 1652. While apparently
recognizing that such jurisdiction was established on
treacherous grounds, the Fifth Circuit stated that it
was powerless to overturn such a determination by the
Court of Claims. The Court then transferred the case
to the Court of Claims, pursuant to 28 U.S.C. 1406(c).

Certainly, persistent arguments could have been
made in an attempt to distinguish the factual circum-
stances of St. Louis University, supra, and MacDonald
Foundations, Inc., supra, and even stronger arguments
could have been made to distinguish the Unihealth
matter from MacDonald Foundation, Inc., supra. The pro-
vider in St. Louis University, supra, was making aconstitu-
tional claim against the denial of a hearing and not pri-
marily against a decision denying reimbursement.
Since MacDonald Foundation, Inc.’s claim was direct-
ed to the reimbursement decision, that party was notin
a strong position to argue that the claim did not arise
under the Medicare Act.

Unihealth can present several factors arguably dis-
tinguishing its position from that of MacDonald
Foundation, Inc. First, Unihealth is a non-provider and
not a provider under the Medicare Act. Second, Uni-
health has been adversely affected by a Medicare regu-
lation and by other related administrative action
without having access to any administrative remedies,

Aiwa ee wee

A:

17a

including a hearing, under the Medicare Act. Third,
Unihealth has brought a claim primarily attacking the
constitutionality of certain policy decisions, including
the method of promulgation and application of these
decisions. Though ultimate success in this lawsuit
might result in Unihealth obtaining certain reim-
bursement funds withheld from providers serviced by
Unihealth, this is not the primary thrust of plaintiff's
claim.

The relevance of these distinctions is no longer open
to question, however, since the Fifth Circuit has re-
cently held, under factual circumstances similar to Uni-
health, that the en banc decision in MacDonald Founda-
tion, Inc., supra, and the decision in Salfi, supra, are con-
trolling, and that Section 405(h) precludes federal-
question jurisdiction over claims like those of Uni-
health. The American Association of Councils of Medical Staffs
of Private Hospitals, Inc. (CMS), supra.

In CMS, supra, an action was brought by an associa-
tion of medical councils of private hospitals for declar-
atory and injunctive relief on behalf of its physician
members who were challenging the constitutionality
of certain federal regulations promulgated under the
Medicare Act. These regulations required that larger
provider hospitals establish utilization review com-
mittees, comprised of doctors on the staff of the
hospital being reviewed. In the district court, the
Department of Health, Education and Welfare moved
for dismissal on grounds of lack of subject matter juris-
diction, based on the preclusion language of Section
405(h). CMS moved for summary judgment as to the

18a

merits of the case. The trial court agreed with Health,
Education and Welfare that Section 405(h) precluded
federal-question jurisdiction but concluded that juris-
diction existed under the Administrative Procedure
Act. The American Association of Councils of Medical Staffs of
Private Hospitals, Inc. v. Mathews, 421 F.Supp. 848 (E.D. La.
1976). The Court then found in favor of Health, Educa-
tion and Welfare on the merits.

On appeal, the Fifth Circuit first held that no juris-
diction existed under the Administrative Procedure
Act, in the aftermath of Califano v. Sanders, supra. It then
focused on whether federal-question jurisdiction was
precluded by Section 405(h), as held by the district
court.

At the outset, the Court acknowledged that condi-
tions existed in the CMS matter that set it apart fact-
ually from other prior decisions considering Section
405(h) preclusion argument:

The question of review of decisions ap-
parently precluded by Section 1395(ii) [Sec-
tion 405(h)] has been considered by several
courts. The cases, however, have always been
slightly different from this case. They have in-
volved actions by providers complaining of re-
imbursement decisions and procedures. (575
F.2d at 1370)

A OS APTS Sy PLN NES EOS

19a

Had the Court chosen to elaborate further on these dis-
tinctions, it would have acknowledged these particular
differences between CMS, supra, and related juris-
prudence: (1) as a nonprovider, CMS had been affect-
ed by a regulation specifically directed at providers; (2)
CMS had no access to administrative or judicial pro-
cedures under the Medicare Act to challenge the con-
stitutionality of the regulation. The Court found CMS’
constitutional claim against a regulation having no
effect on reimbursement to be the major distinction
between CMS, supra, and MacDonald Foundation, Inc. (en
banc), supra.

In spite of these fact differences, the Court held that
Salfi, supra, and MacDonald Foundation, Inc. (en banc), supra,
were controlling. The Court concluded:

This court has decided that the Medicare Act
withdraws jurisdiction from the district
courts over actions like this one. (575 F.2d at
1372)

The Court saw no significance in the fact that CMS
was a nonprovider, with no access to the adminis-
trative or judicial review procedures provided under
the Medicare Act, who was bringing a constitutional
claim against a Medicare regulation affecting it. Even
after the Court recognized that the only available juris-
diction avenue with the Court of Claims was foreclosed
since that Court cannot provide equitable or
declaratory relief as sought in the suit, it did not alter
its decision, nor did it adequately resolve the looming

20a

constitutional questions directed at the Medicare Act.
The Court did state that Congress has the power to
deny all litigants against the United States any reme-
dies and to restrict parties seeking to litigate certain
constitutional claims to specified courts. After the con-
sideration, the Court left it to the ingenuity of counsel
for CMS either to bring the claims within the jurisdic-
tion of the Court of Claims or to seek the guidance of a
higher court.

This Court sees no means by which Unihealth can
extricate itself from the broad holding in CMS, supra.
The apparent aggregate effect of Salfi, supra; MacDonald
Foundation, Inc. (en banc), supra; and CMS, supra, is total
preclusion of federal-question jurisdiction for statu-
tory and constitutional claims against the Medicare
Act. Since this Court is bound by those decisions, it
must conclude that Section 405(h), incorporated in the
Medicare Act at 42 U.S.C. 1395(ii), prevents this Court
from exercising federal-question jurisdiction over the
claims of Unihealth.

In a final argument, Unihealth contends that juris-
diction is established under 28 U.S.C. 1343, since it has
brought a claim pursuant to 42 U.S.C. 1985(3) urging
that the Department of Health, Education and Welfare
and others have entered a conspiracy to deprive the
plaintiff of the equal protection of the law. This con-
tention is short lived since plaintiff has not alleged and
has failed to prove that there existed any racial or
otherwise class-based discriminatory animus behind
the alleged conspirators’ actions. The Supreme Court

21a

in Griffin v. Breckenridge, 403 U.S. 88, 91 S.Ct. 1799
(1971) has held that no relief can be obtained under 42
U.S.C. 1985(3) unless it is shown that racial or class-
based discriminatory animus was an element of the
conspiracy. Failing to state a viable claim under 42
U.S.C. 1985(3), Unihealth cannot utilize the statute’s
independent jurisdictional force to maintain the law-
suit in this Court.

While the preclusion reasoning in CMS, supra, applies
to Unihealth, the results need not be so harsh as in
CMS, supra. Though plaintiff seeks declaratory and in-
junctive relief in its complaint, it has also stated aclaim
for damages. A claim for damages can be entertained by
the Court of Claims. While the total relief sought can-
not be obtained, Unihealth can litigate its con-
stitutional claims and obtain monetary damages should
it prevail.

Accordingly, this Court reverses its earlier decision
and DISMISSES the complaint of UniHealth Services
Corporation pursuant to Federal Rule of Civil Pro-
cedure 12(b)(1).

New Orleans, Louisiana, this 7th day of February,
1979.

ls) JACK M. GORDON
UNITED STATES DISTRICT
JUDGE

22a
APPENDIX “D”
UNIHEALTH SERVICES CORPORATION
versus CA No. 77-3001
JOSEPH P. CALIFANO, in his official capacity
as Secretary of Health, Education & Welfare

of the United States, et al.

United States District Court
E.D. Louisiana

March 21, 1978

Plaintiff, a private professional management and
consulting firm rendering service to nonprofit home
health agency medicare providers, brought action
against Secretary of Health, Education and Welfare on
claim that standards applicable to franchisors, in deter-
mining reasonable rates, were improperly applied
retroactively, in violation of its due process rights, to
years when plaintiff operated as a management cor-
poration as designated by Medicare. Defendant filed
motion to dismiss. The District Court, Jack M. Gordon,
]., held that: (1) because alleged regulations purport-
edly interfered with both contractual and occupational
relationship of plaintiffs, plaintiff had standing to de-

23a

mand that such regulation be conducted within due
process parameters, and (2) court had federal question
subject-matter jurisdiction over plaintiff's con-
stitutional challenge to Medicare Act.

Motion to dismiss denied.

* * *

Donna D. Fraiche, Baton Rouge, La., for plaintiff.

Suzanne Cochran, Asst. Regional Atty., Dept. of
Health, Education & Welfare, Dallas, Tex., for defend-
ant.

MEMORANDUM AND ORDER
JACK M. GORDON, District Judge.

This matter is before the Court on the motion to dis-
miss of Joseph P. Califano, in his official capacity as Sec-
retary of Health, Education & Welfare of the United
States, et al (referred toas “the United States”) brought
pursuant to Federal Rules of Civil Procedure 12(b)(1) as
a challenge to this Court having jurisdiction over the
claims presented. The defendant's jurisdictional argu-
ment is grounded on two basic contentions:

(1) that the plaintiff lacks standing in this action so
as to make it a case or controversy subject to a federal
court’s Article III jurisdiction under the United States
Constitution; and

24a

(2) that this Court does not have subject matter
jurisdiction of the case in that §205(h) of the Social
Security Act, incorporated into the Medicare pro-
visions of the Act as 42 U.S.C. §1395 et seq., prevents
this Court from exercising any judicial review over the
particular claims presented by the plaintiff.

As best the Court can determine on the basis of the
factual scenario presented in the record, Unihealth and
the United States, through its appropriate agency
which administers the Medicare program, agree onthe
following fact rendition. Plaintiff, Unihealth Services
Corporation, established in 1969, is a private pro-
fessional management and consulting firm specializ-
ing in the rendering of service to nonprofit home
health agencies as those entitled are so defined in 42
U.S.C. §1395x(m). These agency clients are “pro-
viders” under Title 18 of the Medicare Act (referred to
also as “Act”), 42 U.S.C. §1395 et seq. Plaintiff has con-
tracted to provide services to certain providers but is
not a Medicare provider itself.

Unihealth services 25 provider clients in a 17-state
area and the District of Columbia pursuant to a con-
tract with each client agency wherein a unified charge
is billed for the services rendered based on the per-
centage of gross billings of the respective agencies as
set out in the agreement. The cost, although not billed
by means of a breakdown, purportedly included initial
startup fees; professional consultation and orientation
program; continued management services; manuals;

25a

forms; brochures; other teaching tools; as well as guid-
ance and aid in all financial matters; data processing;
billing services and preparation of cost and periodic in-
terim payment reports; and assistance in audit pro-
cedures conducted by fiscal intermediaries. In each con-
tract with a provider, plaintiff has agreed that it will re-
fund to the provider any charges for its services that
are disallowed by Medicare. Plaintiff’s clients receive
monthly payments from Medicare which the client and
the United States estimate will amount to the pro-
vider’s proper reimbursement when costs are audited
at the end of the fiscal year. Such interim payments in-
clude payments for the cost of the types of services pro-
vided by plaintiff.

From 1969 through 1976 Medicare officials recog-
nized Unihealth as a management company under
policy considerations set out under the provider reim-
bursement manual. Medicare in making its determina-
tion as to the reasonableness of cost regarding Uni-
health’s services to the providers scrutinized those
costs under guidelines found appropriate to manage-
ment companies. From 1970 until November, 1976, the
fees Unihealth charged its clients were found to be
within the principles of reimbursement and thus
allowed.

As alleged by plaintiff, in 1968 [sic] officials of Medi-
care began to review the status of the plaintiff in an ef-
fort to make a policy determination as to whether Uni-
health should be regarded as a management company

26a

or as a franchisor under the provider reimbursement
manual. Plaintiff claims that such a review was made
without the knowledge of Unihealth. Purportedly
without receiving legal notice of any meetings, offi-
cials of Medicare met and reached a policy decision that
Unihealth should be treated as a franchisor when
Medicare makes a determination on reimbursement.
Under §2133 of the Provider Reimbursement Manual,
franchise fees are allowable only to the extent that they
are not out of line with costs of similar services pro-
vided by nonfranchise organizations. This section re-
quires that providers establish the cost of each of the
specific services provided by the franchisor. It requires
exclusion of any additional fees relating to the fran-
chisor’s trademark or reputation which are purported-
ly not related to patient care.

As a result of this policy determination recognizing
Unihealth as a franchisor, the plaintiff contends that
those standards applicable to franchisors in determin-
ing reasonable costs, were applied retroactively to
those years when plaintiff was operating as a manage-
ment corporation as designated by Medicare. Retro-
active application of standards relating to franchisors
purportedly altered the condition under which plaintiff
was operating in the following manner:

(1) That Medicare officials retroactively
conducted a more rigorous scrutiny of
Unihealth’s cost report than was re-
quired when Unihealth was accorded
management status;

27a

(2) That Unihealth was required to provide
itemized cost statements of each indi-
vidual service rendered to a provider
whereas in the past under standards
applicable to management corporations,
it did not have to itemize costs as to in-
dividual services;

(3) That under the franchisor standards, and
as referred to above, Unihealth was
forced to retroactively utilize more oner-
ous accounting procedures in setting out
the costs of the services rendered;

(4) That the presumption that all costs and
services stated by a management cor-
poration are reasonable was substituted
for the franchisor presumption that all
costs and services rendered are not
reasonable and must be proven by de-
tailed documentation.

Plaintiff contends that as a result of this retroactive-
ly applied policy determination recognizing it as a fran-
chisor, Unihealth’s provider clients have withheld
almost all payments outstanding to Unihealth in the
full amount of $800,000.

In an effort to challenge the legality of the policy
determination, the method of promulgating that deter-
mination, and the manner in which the policy decision
and its attendant requirements were applied, Uni-
health filed the lawsuit temporarily allotted to Section
“I” after its transfer from Section “C.” The following is

a
a summary of the numerous claims for relief Set out in

plaintiff's complaint.

(1)

That defendant has infringed its due
process rights as set out in the Fifth
Amendment of the United States Con-
stitution: (a) by singling out the plaintiff
in an attempt to regulate it under the
Medicare Act without allowing plaintiff
any administrative review or judicial re-
view as provided by the Medicare Act; (b)
by failing to give plaintiff guidelines
further defining “reasonable cost” pur-
suant to Title 20, Code of Federal Regu-
lations, §405.501, et seq.; (c) by failing to
give the plaintiff proper or legal notice
that its charges for services would be dis-
allowed based on retroactively applied
policy decisions affecting cost reports for
the years 1976, 1975 and 1974; (d) by
retroactively applying the policies, prac-
tices, actions, and determinations of
defendant soas to force plaintiff out of its
professional practice thereby proscrib-
ing its ability to engage in its profession;
(e) by denying plaintiff the right to a
hearing relative to the issue of its status
as a franchisor, though defendant's pre-
cedential policy determination had the
adverse effect of depriving Unihealth of
its presumption of having submitted
reasonable costs on a unified basis;

29a

(2) That defendant has failed to grant equal
protection under the law to plaintiff as
required by the Fifth Amendment of the
United States Constitution when it
singled out plaintiff on the basis of its
unique status in the Medicare field to
demonstrate that disallowances of cer-
tain charges submitted to Medicare could
be made on a retroactive basis.

The parties are in substantial disagreement as to
what is the nature of the relief sought. The United
States suggests that the only relief that plaintiff is truly
seeking is to have judicial review of an administrative
determination under the Medicare Act that the costs of
services charged to providers by Unihealth were un-
reasonable. On the basis of this characterization of the
relief Unihealth allegedly is seeking, the United States
suggests that this Court should adopt the reasoning set
forth in New Jersey Chapter, Incorporated, of the Americar
Physical Therapy Association, Inc. v. The Prudential Life Insur-
ance Company of America, 164 U.S.App.D.C. 40, 502 F.2d
500 (1974), wherein the Court discussed both the
standing and judicial review issues. In that case, the
Association of Physical Therapists as a contractor of
services to providers brought an action against its fiscal
intermediary (private company chosen by United
States to make initial determination of reasonableness
of costs that providers have sustained) under the Med-
icare program challenging guidelines adopted by the
intermediary for reimbursement to providers for cost
of physical therapists’ services. Medicare officials made

30a

a policy determination clarifying what intermediaries
should determine to be reasonable costs for physical
therapy services. In adopting these new policy con-
siderations the officials stated that it would be
necessary that accurate records of the therapists’
activities be maintained and made available to the inter-
mediary. Then, the officials prospectively applied these
new record-keeping requirements to providers in the
program.

In entertaining the nonconstitutional challenge to
the guidelines adopted by the intermediaries, the Court
applied the following analysis to the issues:

On this appeal the government argues (1)
plaintiff’s complaint does not state a meritor-
ious claim for relief; (2) the District Court cor-
rectly held that plaintiff did not have stand-
ing to sue; and (3) determination of the
amounts payable to providers of services is
not subject to judicial review. We turn first to
the government’s second and third argu-
ments.

The government says correctly that the Act
was expressly designed for the protection of
elderly citizens who require medical care, and
those persons of course have standing to vin-
dicate their rights under the Act. Further-
more, since the Act assures a provider of re-
imbursement for the reasonable costs in-
curred by him, a provider would seem to have
an interest within the zone protected by the

3la

statute. Plaintiff's members on the other hand
are not subject to regulation under the Act
and their rights are derived from their con-
tractual arrangements with providers. There
is nothing in the Medicare Act or its legisla-
tive history, says the government, which indi-
cates any concern by Congress to protect the
interests of persons such as _ plaintiff's
members who are only indirectly affected by
the operation of the Medicare program. From
all this the government concludes that the
plaintiff and its members have no standing to
sue.

In support of its argument the plaintiff's
claims are not subject to judicial review the
government directs our attention to the pro-
visions of the Medicare Act, 42 U.S.C.
§1395ff, which provide for judicial review of
(1) a determination of whether an individual is
entitled to benefits, and (2) a determination
that an institution is not a provider of serv-
ices or that its agreement to provide services
should be terminated. The government finds
it significant that no provision is made for
judicial review of the award of compensation
to providers of services; and the government
reasons that since decisions on this matter are
not subject to judicial review it follows a fortiori
that decisions on the amounts due to con-
tractors, who are indirectly affected by the
Medicare program, are also not subject to judi-
cial review.

32a
There is much force in the

government's arguments. As this court
has said however recent decisions of the
Supreme Court “have made the standing
obstacle to judicial review a shadow of its
former self, and have for all practical pur-
poses deprived it of meaningful vitality.”
National Automatic Laundry & Cleaning Coun-
cil v. Shultz, 143 U.S. App. D.C. 274, 278,
443 F.2d 689, 693 (1971). Standing need
not be founded ona rock; a pebble or even
a cobweb may do. Moreover, only ashow-
ing of clear and convincing evidence of
legislative intent will justify a court in
precluding access to judicial review. Abbott
Laboratories v. Gardner, 387 U.S. 136, 87
S.Ct. 1507, 18 L.Ed.2d 681 (1967); Barlow
v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25
L.Ed.2d. 192 (1970). Here, we think plain-
tiff’s standing and the reviewability of
plaintiff's claims at least present close and
difficult questions; but we shall not pause
to wrestle with these problems, since we
conclude that in any event the defend-
ants must prevail on the merits. (164 U.S.
App. D.C. at 44, 502 F.2d at 504).

Unihealth denies that it has brought this actioninan
attempt to obtain judicial review of an administrative
determination that Unihealth’s charges to a provider
were unreasonable. Rather, Unihealth suggests that it
is raising constitutional challenges stemming from the
Government's stringent regulation of the plaintiff's

33a

contractual relationship with the providers. In partic-
ular, Unihealth avers that its due process rights have
been violated in that Medicare officials denied it access
to the administrative and judicial review established in
the Medicare Act while at the same time stringently
regulating the plaintiff through enactment of policy
determinations made pursuant to the Medicare Act. In
a second constitutionally based allegation, Unihealth
contends that its due process rights have been denied in
that the policy determinations effecting strict regula-
tion of the plaintiff are unconstitutional on their face,
in the manner of application, and in their method of
promulgation.

Unihealth urges that it has a right to bring these con-
stitutional challenges stemming from indirect regula-
tion by the Medicare Act, citing Cotovsky-Kaplan Physical
Therapists Association, Ltd. v. United States, 507 F.2d 1363
(7th Cir. 1975). In Cotovsky, supra, the issue before the
Court was whether a supplier of services, whose own
interests were not directly regulated by statute or ad-
ministrative action under the Medicare Act, had stand-
ing to challenge a regulation which required its regu-
lated customers to take their patronage elsewhere. The
regulation in question provided that providers could
contract out the provision of physical therapy services
only to nonprofit therapy agencies and not to pro-
prietary corporations such as the plaintiffs. Plaintiffs
brought suit alleging that such a regulation deprived
them of property without due process of law. The Dis-
trict Court concluded that plaintiffs lacked standing to
challenge the constitutionality of the regulation.

34a

The Appellate Court, in reversing the decision of the
District Court, concluded that the interests sought to
be protected by the physical therapists were arguably
within the zone of interest to be protected or regu-
lated by the Medicare statute or by the constitutional
guarantee of the Fifth Amendment. The Court reason-
ed as follows:

Defendants respond and the district court
concluded, however, that the regulation pur-
ports to regulate only home health agencies
and that it does not regulate plaintiffs or their
contracts. To focus on whether the plaintiffs
are directly regulated themselves is to read the
Data Processing test too narrowly. The test is
not whether these plaintiffs are regulated by
the statute but whether the _ interests
asserted by them arguably fall within the zone
of interests so regulated.

Nearly three decades before its Data
Processing decision, the Supreme Court held
that indirect regulation, like that involved in
this case, was adequate to confer standing to
challenge administrative action. In Columbia
Broadcasting System, Inc. v. United States, 316 U.S.
407, 62 S.Ct. 1194, 86 L.Ed. 1563, the Court
held that CBS had standing to challenge
F.C.C. regulations conditioning the grant of

broadcast licenses to local stations on the
nature of their contracts with radio net-
works. Neither CBS nor its contractual rela-

35a
tionship with any local station was directly

regulated. Nevertheless, in response to a
standing argument similar to that made here,

the Court held:

Appellant’s standing to maintain the
present suit in equity is unaffected by the
fact that the regulations ere not directed
to appellant and do not in terms compel
action by it or impose penalties upon it
because of its action or failure to act. It is
enough that, by setting the controlling
standards for the Commission’s action,
the regulations purport to operate to alter and affect
adversely appellant's contractual rights and busi-
ness relations with station owners whose appli-
cations for licenses the regulations will
cause to be rejected and whose licenses
the regulations may cause to be revoked.
316 U.S. at 422, 62 S.Ct. at 1202-1203
(emphasis added.)

Even more directly in point is the holding in
Air Reduction Co., Inc. v. Hickel, 137 U.S. App.
D.C. 24, 420 F.2d 592 (1969). In that case
private producers and distributors of helium
challenged regulations of the Secretary of the
Interior providing that government contrac-
tors must purchase all of their helium re-
quirements for those contracts from the
government. The regulations, of course, did
not directly regulate the plaintiffs or their
contracts with government contractors.
Nevertheless, the court of appeals held that
they had standing.

36a
We therefore conclude that if, pursuant to

what it perceives to be its statutory author-
ity, a government agency regulates the con-
tractual relationships between a regulated
party and an unregulated party, the latter as
well as the former may have interests that are
arguably within the regulated zone for pur-
poses of testing standing, and for this pur-
pose a total prohibition is a form of regula-
tion.

As the interests of these plaintiffs arguably
fall within the zone regulated by the Medi-
care statutes, we hold that they have stand-
ing to obtain judicial review of 20 C.F.R.
§405.1221(a). (507 F.2d at 1366-1367).

The Court also recognized that it was not necessary
to decide whether plaintiffs had standing on consti-
tutional grounds because their interests arguably fell
within the zone of interest protected by the Fifth
Amendment. The Court so opined:

_.. “when the plaintiff is challenging govern-
mental action on constitutional grounds, he

necessarily is asserting that his interest is pro-
tected by the constitutional guarantee upon
which he is relying.” . . . (507 P.2d at 1368, n.

12)

The Court agrees with Unihealth that it has raised
more than a request for-a review of its charges to pro-
viders. Just as plaintiff has characterized its claims,
Unihealth is demanding both that it be allowed access
to the review procedures provided by the Medicare Act

37a

and that it be regulated within due process parameters
since the alleged regulations have purportedly inter-
fered with both contractual and occupational relation-
ships of plaintiff.

In Association of Data Processing Service Organizations, Inc. v.
Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970)
the Court held that a party possesses standing to seek
nonstatutory judicial review of administrative action if
it “alleges that the challenged action has caused it in-
jury in fact, economic or otherwise,” and if “the inter-
est sought to be protected by the complainant is argu-
ably within the zone of interest to be protected or reg-
ulated by the statute or constitutional guarantee in
question.”

First, it is evident that the alleged challenged actions,
i.e., no access to administrative and judicial review
under the Medicare Act and the unconstitutionality of
the regulations imposed on plaintiff, have caused the
plaintiff economic harm and otherwise in affecting its
relationships with the providers such that providers
are withholding certain sums purportedly owed Uni-

health.

Second, as stated in Cotovsky, supra, the Court is to
assume that plaintiff arguably falls within the zone of
interest protected by its Fifth Amendment rights when
it challenges governmental action on Fifth Amend-
ment grounds.

38a

Whether or not Unihealth arguably falls within the
zone of interest regulated by the Medicare Act turnson
a determination of the nature and extent of alleged reg-
ulating activities. Cotovsky, supra. Since a factual issue re-
mains regarding the nature and extent that Uni-
health has been regulated, the Court must resolve this
issue on the merits before it-can render a decision on
standing under the Medicare Act. Courts have recog-
nized that they may postpone a decision on a jurisdic-
tional issue if that issue is intertwined with a decision
on the merits of the case. Continental Casualty Company v.
Department of Highways, State of Louisiana, 379 F.2d 673 (Sth
Cir. 1967). Therefore, while the Court has already con-
cluded that this plaintiff has standing under the Fifth
Amendment to bring the claims, it will await adecision
on the merits before deciding whether Unihealth also
has standing under the Medicare Act.

Having concluded that standing does exist, at least
under the constitutional grounds for plaintiff to bring
this action, the Court turns its inquiry to the issue of
whether it has subject matter jurisdiction to review

such claims.

Basically, plaintiff is asserting that the Court has fed-
eral question jurisdiction pursuant to 28 U.S.C. §1331.
The defendant’s challenge to this jurisdictional ap-
proach is grounded on statutory language in the
Medicare Act. In 42 U.S.C. §405(g), Congress has set
forth the administrative and judicial review pro-
visions for entertaining official administrative deter-
minations. The statute provides:

39a

(g) Any individual, after any final decision
of the Secretary made after a hearing to which
he was a party, irrespective of the amount in
controversy, may obtain a review of such de-
cision by acivil action commenced within sixty
days after the mailing to him of notice of such
decision or within such further time as the
Secretary may allow. Such action shall be
brought in the district court of the United
States for the judicial district in which the
plaintiff resides or has his principal place of
business, or, if he does not reside or have his
principal place of business within any such
judicial district, in the United States District
Court for the District of Columbia. As part of
his answer the Secretary shall file a certified
copy of the transcript of the record including
the evidence upon which the findings and de-
cision complained of are based. The court shall
have power to enter, upon the pleadings and
transcript of the record, a judgment affirm-
ing, modifying, or reversing the decision of
the Secretary, with or without remanding the
cause for a rehearing. The findings of the Sec-
retary as to any fact, if supported by substan-
tial evidence, shall be conclusive, and where a
claim has been denied by the Secretary or a de-
cision is rendered under subsection (b) of this
section which is adverse to an individual who
was a party to the hearing before the Secre-
tary, because of failure of theclaimant or such
individual to submit proof in conformity with

40a

any regulation prescribed under subsection (a)
of this section, the court shall review only the
question of conformity with such regulations
and the validity of such regulations. The court
shall, on motion of the Secretary made before
he files his answer, remand the case to the
Secretary for further action by the Secretary,
and may, at any time, on good cause shown,
order additional evidence to be taken before
the Secretary, and the Secretary shall, after
the case is remanded, and after hearing such
additional evidence if so ordered, modify or af-
firm his findings of fact or its decision, or both,
and shall file with the court any such addi-
tional and modified findings of fact and de-
cision, and a transcript of the additional rec-
ord and testimony upon which his action in
modifying or affirming was based. Such addi-
tional or modified findings of fact and de-
cision shall be reviewable only to the extent
provided for review of the original findings of
fact and decision. The judgment of the court
shall be final except that it shall be subject to
review in the same manner as a judgment in
other civil actions. Any action instituted in ac-
cordance with this subsection shall survive
notwithstanding any change in the person
occupying the office of Secretary or any
vacancy in such office.

The pertinent section of the Medicare Act pertain-
ing to the restriction of judicial review under federal-

4la

question jurisdiction is found in 42 U.S.C. §405(h)
which provides as follows:

The findings and decisions of the Secretary
after a hearing shall be binding upon all indi-
viduals who were parties to such hearing. No
findings of fact or decision of the Secretary
shall be reviewed by any person, tribunal, or
governmental agency except as herein pro-
vided. No action against the United States, the
Secretary, or any officer or employee thereof
shall be brought under §24 of the Judicial
Code of the United States (28 U.S.C. §1331) to
recover on any claim arising under this title.

Until the United States Supreme Court’s decision in
Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45
L.Ed.2d 522 (1975), the lower courts had read §405(h)
as merely codifying the principle of exhaustion of ad-
ministrative remedies. The Supreme Court consider-
ed this reading of the section to be entirely too narrow.
In Salfi, supra, a class action was filed by a widow and a
stepchild seeking social security benefits after the
death of the widow’s wage-earning spouse. The Ad-
ministration denied payment of any benefits on the
basis of a regulation that requires the wife or child to
have had such a relationship with the deceased wage-
earner for at least nine months prior to the wage-earn-
er’s death before benefits can be paid. Without seeking
administrative review of the decision, the wife filed suit
in federal district court attacking the constitutionality
of the above regulation.

42a

The Supreme Court concluded that §405(h) of the
Medicare Act prevented the plaintiff in that case from
seeking judicial review of the administrative determi-
nation pursuant to 28 U.S.C. §1331. The Court con-
cluded that she had an alternate judicial remedy as pro-
vided in §405(g) to appeal the Secretary’s finding to the
federal district court. There were several crucial deter-
minations made by the Court in reaching its decision
that the plaintiff could not pursue her claim under fed-
eral question jurisdiction. First, the Court recognized
that plaintiff as an alleged beneficiary under the Social
Security Act did indeed come within the scope of the
Act. Second, the Court concluded that the plaintiff's
claim for social security benefits, consistent with the
design of §405(h) arose under the Social Security Act.
Though the plaintiff had characterized her claim as a
constitutional attack on a regulation promulgated
under the Act, the Court concluded that she was suing
under the Act since she sought benefits provided by the
Act, had standing under the Act, and a substantive
basis for the presentation of her constitutional claims
arose from the Act. Though the Court foreclosed fed-
eral question jurisdiction as a means of obtaining judi-
cial review of her constitutional challenge, the Court
was mindful of the grave constitutional problems
created when legislation is so interpreted as to totally
preclude judicial consideration of constitutional issues.
The impact of such preclusion was not addressed since
the Court recognized that §405(g) provided an alter-
native for judicial review of constitutional challenges to
regulations promulgated under the Act. The Court so
stated:

43a

The Social Security Act itself provides juris-
diction for constitutional challenges to its pro-
visions. Thus the plain words of the third sen-
tence of §405(h) do not preclude con-
stitutional challenges. They simply require
that they be brought under jurisdictional
grounds contained in the Act, and thus in con-
formity with the same standards which are
applicable to nonconstitutional claims arising
under the Act. The result is not only of un-
questionable constitutionality, but is also
manifestly reasonable, since it assures the
Secretary the opportunity prior to the con-
Stitutional litigation to ascertain, for ex-
ample, that the particular claims involved are
neither invalid for other reasons nor allow-
able under other provisions of the Social
Security Act. (95 S.Ct. at 2465)

In the aftermath of the Salfi decision, while attempt-
ing to apply the preclusion rule of §405(h), the lower
courts have struggled to clarify certain puzzling ques-
tions raised by Salfi, supra. Those frequently asked ques-
tions are: (1) when should a claim be deemed as being
brought pursuant to the Medicare Act; (2) does §405(h)
preclude judicial review under federal question juris-
diction of nonconstitutional claims where no alterna-
tive judicial review is provided by the Medicare Act; and
(3) does §405(h) preclude judicial review of con-
stitutional challenges to the Act where no review pro-
cedure for such challenges is provided in the Act?

44a

In Hazelwood Chronic and Convalescent Hospital, Inc. v.
Weinberger, 543 F.2d 703 (9th Cir. 1976) the Court con-
cluded that the directive in Salfi, supra, prevented resort
to federal-question jurisdiction on a constitutional
challenge to denial of benefits under the Social Security
Act. However, aware that aconstitutional challenge re-
quires a forum where it may be redressed, the Court
held that the Administrative Procedure Act provided
an implicit but independent basis for jurisdiction. 5
U.S.C. §702, et seq.

Shortly after the Hazelwood decision, the Supreme
Court in Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51
L.Ed.2d 192 (1976) concluded that the Administrative
Procedure Act did not afford an independent grant of
such jurisdiction to a party seeking to have judicial re-
view of an administrative decision disallowing social
security claims. The Court did emphasize that the
caveat raised in Salfi, supra, and Mathews v. Eldridge, 424
U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976) regarding
the need to provide judicial review for constitutional
challenges was stiil of vital significance. The Court con-
cluded that the respondent Sanders did have a forum
for judicial review as provided under §405(g) of the
Social Security Act.

In South Windsor Convalescent Home, Inc. v. Mathews, 541
F.2d 910 (2d Cir. 1976), the Second Circuit in a post-
Salfi decision concluded that §405(h) prevented the
plaintiff from seeking jurisdictional review under 28
U.S.C. §1331 of his claim that a regulation under
Medicare retroactively disallowed certain payments

45a

owed him as a provider, thereby violating his Fifth
Amendment rights. The Court did find that an alter-
native jurisdictional basis existed under 28 U.S.C.
§1491 when a claim against the United States exceeds
the sum of $10,000. As stated in 28 U.S.C. §1491:

The Court of Claims shall have jurisdiction to
render judgment upon any claim against the
United States founded either upon the Con-
stitution, or any act of Congress, or any regu-
lation of an executive department... .

As done by other courts considering these Medicare
issues, the South Windsor court considered what the
repercussions would be should Congress through its
legislation close the federal courts entirely to con-
stitutional challenges directed against federal statutes
or actions. The Court opined:

However, when Salvi’s conclusion is applly] to
a case where noalternative jurisdictional basis
exists, its restrictive interpretation of §1331
might lead to a constitutional question of the
first order, one that has arisen but rarely and
tangentially in our constitutional history, i.e.,
whether the Congress can close the federal
courts entirely to constitutional challenges
directed against federal statutes or actions.
We doubt that the Supreme Court intended
its reading of §405(is) in Salfi to have the effect
of precluding federal jurisdiction over con-

46a

stitutional questions, since the result would
be at odds with the well-established principle
that a court will not construe a statute to
restrict access to judicial review unless Con-
gress manifests its intent to doso by “clear and
convincing evidence.”

The Fifth Circuit in Dr. John T. MacDonald Foundation,
Inc. v. Mathews, 554 F.2d 714 (Sth Cir. 1977) disagreed
with the Second Circuit’s conclusion that §405(h) did
not preclude jurisdiction under 28 U.S.C. §1491. The
Fifth Circuit stated:

... In South Windsor Convalescent Home, Inc. 0.
Mathews, 541 F.2d 910 (2d Cir. 1976), the Sec-
ond Circuit concluded that Salfi precluded fed-
eral-question jurisdiction in Medicare cases
like this one but found jurisdiction to review
existed in the Court of Claims. This it did on
reasoning that although the last sentence of
§405(h) forbade review under “section 41 of
Title 28,” it did not speak to 28 U.S.C. §1491,
the Court of Claims provision. This analysis
fails, however, to deal with what seems to us
the equally preclusive language of the second
sentence of §405(h): “No findings of fact or
decision of the Secretary shall be reviewed by
any person, tribunal or governmental agency
except as herein provided.” (554 F.2d at 716-
717)

47a

In proscribing the alternate jurisdictional bases to
§405() under 28 U.S.C. §1331, 28 U.S.C. §1491, and 5
U.S.C. §702, the courts have quickly approached that
situation that they found necessary to avoid in their
interpretation of §405(h), that being the conclusion
that Congress by enactment of this section had closed
the federal courts entirely to constitutional challenges
directed against the Medicare Act.

In Gallo v. Mathews, 538 F.2d 1148 (Sth Cir. 1976), the
Fifth Circuit came disturbingly close under the factual
circumstances before it to interpreting §405(h) of the
Medicare Act so as to preclude all judicial review to a
party. At the time of the decision, the Supreme Court
had not yet closed the door on an alternative jurisdic-
tion basis under the Administrative Procedure Act. In
the Gallo matter, Dr. Gallo as a provider was seeking to
have the federal district court compel the Secretary of
Health, Education and Welfare to pay certain reim-
bursements that the Secretary had earlier disallowed.

Gallo was challenging reimbursement decisions made
on services rendered in the years 1966 through 1971.
Prior to 1973, the Medicare Act had not adopted
§405(g) of the Social Security Act, so that the Medicare
Act precluded any judicial review of those reimburse-
ment decisions complained of by plaintiff. After con-
cluding that the Medicare Act afforded plaintiff no
judicial review procedures, the Court also agreed that
the Salfi court had interpreted §405(h) so as to prevent
Gallo from seeking judicial review of the adminis-
trative decisions under 28 U.S.C. §1331. In discussing

48a

why Salfi, supra, was applicable in a situation where the

plaintiff had no forum for review under §405(g), the
Court stated:

The determination in that case (Salfi] did not
rest on the availability of judicial review
through 405(g), but rather was based on the
clear language of 405(h). That same language
applies to the present case, and we find it con-

trolling so as to preclude jurisdiction under
1331. (538 F.2d at 1150)

The Court did not have to consider the caveat raised
in Salfi, supra, concerning preclusion of all constitutional
challenges to statutory limitations though it did
emphasize the gravity of that caveat. The Court stated:

As noted in Salfi, any interpretation of §405(h)
which precludes all constitutional challenges
to statutory limitations would raise a serious
constitutional question of the validity of the
statute as so construed, 422 U.S. at 762, 95
S.Ct. 2457. Gallo points out that this con-
sideration should lead us to the conclusion
that Salfi does not apply. But this is an issue we
need not reach, for we agree with Gallo that
jurisdiction exists under the provisions of the

Administrative Procedure Act. (538 F.2d at
1150)

It is clear that in reaching this decision, the Fifth Cir-
cuit concluded, adhering to Salfi, supra, and Califano,

49a

supra, that plaintiff provider had access to any adminis-
trative remedies available under the Act and that the
provider was bringing his claim under the Act.

The Eighth Circuit in St. Louis Univ. v. Blue Cross Hosp.,
537 F.2d 283 (8th Cir. 1976) has carefully scrutinized
those ambiguous areas left by Salfi, supra. St. Louis Uni-
versity as a representative of a provider brought an ac-
tion pursuant to 28 U.S.C. §1331 challenging the con-
stitutionality under the due process clause of certain
regulatory procedures used. Allegedly, the Secretary of
Health, Education and Welfare used a provider appeals
committee, a majority of the members of which were
officers or employees of the very agency whose initial
decision was being appealed, and who had an institu-
tional interest in the outcome.

Health, Education and Welfare took the position that
judicial review of the due process claim was barred by
§405(h) and administrative review was precluded by an
agreement between Health, Education and Welfare and
Blue Cross which established the provider appeals
committee. Health, Education and Welfare stated that
it would not review the appeal committee's decision
even when a provider asserted that the committee had
blatantly ignored governing statutes, regulations, and
constitutional requirements. The Eighth Circuit
agreed with the district court’s conclusion that St.
Louis University could bring a due process claim chal-
lenging certain procedures of the Medicare Act under

50a

federal-question jurisdiction. In doing so, the Court
provided an in-depth analysis of why the Salfi decision
was not controlling in situations where a party has no
other jurisdictional basis for bringing a due process
claim than under 28 U.S.C. §1331.

The Supreme Court has recognized that
totally precluding judicial consideration of
constitutional issues raises serious con-
stitutional problems. Weinberger v. Salfi, supra,
422 U.S. at 762, 95 S.Ct. at 2465, 45 L.Ed.2d at
537; Johnson v. Robinson, 415 U.S. 361, 366 & n.
8, 94 S.Ct. 1160, 1165, 39 L.Ed.2d 389, 397
(1974). Those constitutional problems are
greatly intensified when an agency purports
to subdelegate its immunity from judicial
review to a nongovernmental entity. It is a
“cardinal principle” that we are to ascertain
whether a construction of the statute in-
volved is “fairly possible” by which such con-
stitutional doubts may be avoided. Johnson v.
Robinson, supra, 415 U.S. at 366-67, 94 S.Ct. at
1165-1166, 39 L.Ed.2d at 397-398. We are to
proceed in what Justice Stewart termed “the
candid service of avoiding a serious con-
stitutional doubt.” United States v. Vuitch, 402
U.S. 62, 97, 91 S.Ct. 1294, 1312, 28 L.Ed.2d
601, 624 (1971) (Stewart, J., dissenting in
part).

Thus, we must now return to §405(h) to
determine if it precludes our jurisdiction to
entertain a due process challenge to the pro-

5la
cedures adopted by the Secretary to deter-

mine Medicare reimbursements. Section
405(h) forbids any action under §1331 “to
recover on any claim arising under this sub-
chapter.” Appellees in Salfi argued that this did
not bar their constitutional claims since they
“arose under” the Constitution and not under
the Social Security Act. The Supreme Court
recognized that this argument had sub-
stance. 422 U.S. at 760, 95 S.Ct. at 2464, 45
L.Ed.2d at 536. However, it rejected the argu-
ment because not only is it Social Security
benefits which appellees seek to recover, but it
is the Social Security Act which provides both
the standing and the substantive basis for the
presentation of their constitutional conten-
tions. [Id. at 760-61, S.Ct. at 2464, 45 L.Ed.2d
at 536.|

The Court also indicated that its decision was
influenced by the availability of fully adequate
judicial review under §405(g). The Court said:

In the present case * * * the Social Securi-
ty Act itself provides jurisdiction for con-
stitutional challenge. to its provisions.
Thus the plain word: of the third sen-
tence of §405(h) do not preclude consti-
tutional challenges. [Id. at 762,95S.Ct. at
2465, 45 L.Ed.2d at 537 (emphasis add-
ed).|

S2a
In the present case, the due process claim

has as its primary goal obtaining a consti-
tutionally adequate hearing. Allowing such a
hearing will not necessarily affect the Uni-
versity’s entitlement to reimbursement or the
amount allowed. Secondly, and more impor-
tantly, the Medicare Act does not provide the
University an adequate alternative means of
obtaining judicial review of its due process
claim.

We believe that on these two gr

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_0991%3A1. Public record. Not legal advice.