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Plaza Health Laboratories Inc. v. Perales

decided: June 21, 1989.

PLAZA HEALTH LABORATORIES, INC., PLAINTIFF-APPELLANT,
v.
CESAR A. PERALES, COMMISSIONER OF THE NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES, NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES, DEFENDANTS-APPELLEES



Appeal from an order of the United States District Court for the Southern District of New York, Peter K. Leisure, Judge, denying motion for preliminary injunction against suspension of plaintiff as Medicaid provider. See 702 F. Supp. 86 (1989). Affirmed.

Kearse, Cardamone, and Pierce, Circuit Judges.

Author: Kearse

KEARSE, Circuit Judge

Plaintiff Plaza Health Laboratories, Inc. ("Plaza"), a suspended provider of health-care services in the New York State Medical Assistance Program ("Medicaid"), appeals from an order of the United States District Court for the Southern District of New York, Peter K. Leisure, Judge, denying its motion for a preliminary injunction requiring defendants Cesar A. Perales and the New York State Department of Social Services (collectively "DSS") to refrain from suspending or terminating Plaza's participation as a Medicaid provider, following a New Jersey indictment of Plaza and one of its owners for dumping hazardous medical wastes into the Hudson River. Plaza, suing under 42 U.S.C. ยง 1983 (1982), contended that the suspension violated its rights to due process and to be free of ex post facto application of certain laws. The district court denied the motion on the ground that Plaza had not shown a likelihood of success on the merits of its claims. On appeal, Plaza contends principally that the district court did not apply the proper standard for decision of preliminary injunction motions and did not appropriately assess the likelihood of Plaza's success on the merits of its claims. For the reasons below, we find no abuse of discretion in the denial of the injunction.

I. BACKGROUND

The underlying facts, undisputed for present purposes, may be summarized as follows.

Plaza operates a clinical medical laboratory in Brooklyn, New York. DSS is the New York State ("State") agency charged with the administration of the Medicaid program in the State. In January 1988, Plaza became a DSS-approved Medicaid provider of laboratory services, authorized to perform services for eligible Medicaid patients and to bill the State for its fees. The competence of Plaza's laboratory performance has not been challenged.

On November 18, 1988, Plaza and one of its 50% owners, who was an employee of Plaza, were indicted in New Jersey on charges of, inter alia, knowingly causing the release of hazardous substances from the Plaza laboratory, including medical waste posing a threat to human health, into the Hudson River. The unlawful releases were alleged to have taken place between June 18 and September 26, 1988.

By letter dated November 23, 1988, DSS notified Plaza that, effective five days thereafter, Plaza was to be suspended from participation in the Medicaid program. The notice, entitled "NOTICE OF IMMEDIATE AGENCY ACTION," stated, in pertinent part, as follows:

THE NEW YORK STATE DEPARTMENT OF SOCIAL SERVICES HAS DETERMINED TO SUSPEND YOU FROM PARTICIPATION IN THE MEDICAL ASSISTANCE (MEDICAID) PROGRAM.

1. You have violated the provisions of the Department's regulations authorizing immediate action (18 NYCRR 515.7(b)), effective June 6, 1988.

2. We made this determination based upon the fact that you were charged with a crime relating to the furnishing or billing for medical care, services or supplies.

Section 515.7(b), referred to in the notice, provided, in pertinent part, as follows:

(b) Upon receiving notice of an indictment which charges a person with committing an act which would be a felony under the laws of New York and which relates to or results from: (1) furnishing or billing for medical care, services or supplies . . . the department may immediately suspend the person and any affiliates, and may continue the ...


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