14‐3715 Fishman v. Paolucci UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 15th day of October, two thousand fifteen.

PRESENT: DENNY CHIN, CHRISTOPHER F. DRONEY, Circuit Judges, KATHERINE B. FORREST, District Judge.* ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

NEIL FISHMAN, by his legal guardian, Selma Fishman, SURUJ SIRIKESHUN, individually and on behalf of all others similarly situated, Plaintiffs‐Appellants,

v. 14‐3715

JOHN PAOLUCCI, as Deputy Commissioner of the Office of Temporary and Disability Assistance of the New York State Department of Family Assistance, RICHARD F. DAINES, as Commissioner of the New York State Department of Health, Defendants‐Appellees.

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* The Honorable Katherine B. Forrest, of the United States District Court for the Southern District of New York, sitting by designation. FOR PLAINTIFFS‐APPELLANTS: PETER VOLLMER, Law Office of Peter Vollmer, P.C., Sea Cliff, New York.

FOR DEFENDANTS‐APPELLEES: VALERIE FIGUEREDO, Assistant Solicitor General, Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, for Eric T. Schneiderman, Attorney General of the State of New York, New York, New York.

FOR AMICUS CURIAE: Marc Cohan, National Center for Law and Economic Justice, New York, New York.

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

New York (Bianco, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the memorandum and order of the district court is

VACATED and the case is REMANDED for further proceedings.

Plaintiffs‐appellants Neil Fishman and Suruj Sirikeshun, individually and

on behalf of others similarly situated, appeal from a September 16, 2014 memorandum

and order of the United States District Court for the Eastern District of New York,

denying their motion to preliminarily enjoin defendants‐appellees, certain officials in

the New York State Department of Health (ʺDOHʺ) and Office of Temporary Family and

Disability Assistance (ʺOTDAʺ), from terminating without notice their Medicaid

benefits for failure to appear at a hearing. Plaintiffs allege that termination without

such a post‐default notice violates both the Due Process Clause of the Fourteenth

Amendment and the Medicaid Actʹs fair hearing provision, 42 U.S.C. § 1396a(a)(3). We

‐ 2 ‐ assume the partiesʹ familiarity with the underlying facts, the procedural history of the

case, and the issues on appeal.

BACKGROUND

Medicaid is a federal‐state program that helps indigent persons meet the

cost of necessary medical services. See 42 U.S.C. § 1396‐1. States, such as New York,

that participate in Medicaid receive federal funds in exchange for complying with ʺthe

requirements of the Medicaid Act and its implementing regulations.ʺ Rabin v. Wilson‐

Coker,

(2d Cir. 2004) (citation omitted); see Armstrong v. Exceptional

Child Ctr., Inc.,

(2015) (ʺLike other Spending Clause legislation,

Medicaid offers the States a bargain . . . .ʺ). One such requirement is that states must

grant ʺan opportunity for a fair hearing before the State agency to any individual whose

claim for medical assistance under the plan is denied or is not acted upon with

reasonable promptness.ʺ 42 U.S.C. § 1396a(a)(3).

DOH ensures that New Yorkʹs fair hearing process complies with federal

law, while OTDA conducts those fair hearings. See N.Y. Comp. Codes R. & Regs. tit. 18,

§§ 358‐1.1 to ‐6.6. Under that process, once the state determines that a beneficiary is no

longer eligible for certain aid, it informs the beneficiary of her right to appeal and to a

fair hearing on appeal. Id. § 358‐3.5. Once she appeals, the state sends an

acknowledgement of the appeal and follows up with a scheduling notice advising the

beneficiary of the date, time, and place of the fair hearing. Id. § 358‐5.1. A beneficiaryʹs

‐ 3 ‐ aid generally continues until the state issues a fair hearing decision (ʺaid‐continuingʺ).

Id. § 358‐3.6. If, however, the beneficiary defaults by failing to appear, New York

immediately dismisses the appeal and terminates aid‐continuing. Id. §§ 358‐3.6(b)(2),

358‐5.5(c).

Plaintiffs are a class of persons who requested a fair hearing but failed to

appear. On December 1, 2009, plaintiffs brought suit below against certain officials in

DOH and OTDA, claiming that New York violated their due process rights and

§ 1396a(a)(3) by immediately dismissing their appeal and terminating their Medicaid

benefits and aid‐continuing when they failed to appear at a hearing. Plaintiffs argued

that federal law requires more: that, before taking such actions, the state first send a

post‐default notice permitting ten days for beneficiaries to reschedule the hearing. On

December 13, 2013, plaintiffs filed a motion for a preliminary injunction to mandate the

state to provide a post‐default notice.

The district court denied that relief. In its September 16, 2014

memorandum and order, the district court found that plaintiffs would be irreparably

harmed without a post‐default notice but concluded that they would be unlikely to

succeed on the merits. In considering plaintiffsʹ likelihood of success on the merits, the

district court assumed that the analysis under both the Due Process Clause and

§ 1396a(a)(3) ʺis the same, since the statutory fair‐hearing requirement ʹmust meet the

due process standards set forth in Goldberg [v. Kelly,

(1970)].ʹʺ App. at 439

‐ 4 ‐ n.5 (quoting

(d)). After conducting a due process analysis, the

district court denied plaintiffsʹ motion for a preliminary injunction.

DISCUSSION

ʺWe review the denial of a preliminary injunction for abuse of discretion.ʺ

MyWebGrocer, LLC v. Hometown Info, Inc.,

(2d Cir. 2004). A district

court abuses its discretion when it ʺapplies legal standards incorrectly or relies upon

clearly erroneous findings of fact.ʺ SEC v. Cavanagh,

, 132 (2d Cir. 1998)

(alterations omitted) (quoting Bristol‐Myers Squibb Co. v. McNeil‐P.P.C., Inc.,

(2d Cir. 1992)). ʺA party seeking a preliminary injunction in this Circuit must

show: (1) irreparable harm in the absence of the injunction and (2) either (a) a likelihood

of success on the merits or (b) sufficiently serious questions going to the merits to make

them a fair ground for litigation and a balance of hardships tipping decidedly in the

movantʹs favor.ʺ Random House, Inc. v. Rosetta Books LLC,

(2d Cir.

2002). A mandatory preliminary injunction ʺthat alters the status quo by commanding

some positive actʺ by the state, as is requested here, ʺshould issue only upon a clear

showing that the moving party is entitled to the relief requested, or where extreme or very

serious damage will result from a denial of preliminary relief.ʺ Cacchillo v. Insmed, Inc.,

(2d Cir. 2011) (emphases added) (quoting Citigroup Global Mkts., Inc. v.

VCG Special Opportunities Master Fund Ltd.,

, 35 n.4 (2d Cir. 2010)).

‐ 5 ‐ The district court did not abuse its discretion in finding irreparable harm.

The district court concluded that ʺthe wrongful denial of Medicaid benefits . . . is the

type of non‐monetary, imminent harm that is properly characterized as irreparable.ʺ

App. at 438. Indeed, if the state wrongfully terminates Medicaid benefits because a

beneficiary fails to appear, ʺhis situation becomes immediately desperate.ʺ Goldberg v.

Kelly,

(1970); see also Blum v. Caldwell,

(1980)

(Marshall, J.) (order denying stay of mandate) (ʺ[T]he very survival of these individuals

and those class members . . . is threatened by a denial of medical assistance benefits

. . . .ʺ). A lack of medical services is exactly the sort of irreparable harm that preliminary

injunctions are designed to address.

But the district court applied the incorrect legal standard in considering

plaintiffsʹ likelihood of success on the merits. The district court concluded that the due

process and § 1396a(a)(3) standards are ʺthe same,ʺ assuming that it was sufficient for

New York to comply with due process standards. App. at 439 n.5. This is not so.

The district court should have considered plaintiffsʹ § 1396a(a)(3) claim

under a different standard than their due process claim. Both parties agree on this

point. When a federal statute creates a right enforceable through

,

federal regulations ʺmay be relevant in determining the scope of the right conferred by

Congress.ʺ Shakhnes v. Berlin,

(2d Cir. 2012) (quoting Save Our Valley v.

‐ 6 ‐ Sound Transit,

(9th Cir. 2003)).1 A district court must inquire, then,

whether there is a relevant regulation that ʺmerely further defines or fleshes out the

content of that right.ʺ Id. at 251, 254‐56 (quoting Harris v. James,

(11th

Cir. 1997)) (finding that federal regulation mandating the state to issue a fair hearing

decision ʺ[o]rdinarily, within 90 daysʺ of the fair hearing request,

(f),

ʺmerely defines the scopeʺ of the § 1396a(a)(3) right); see also D.D. ex rel. V.D. v. N.Y.C.

Bd. of Educ.,

, 512‐13 (2d Cir. 2006) (finding that regulation ordering

implementation of special education program ʺas soon as possibleʺ merely defines the

scope of the right to a free appropriate public education (quoting

(b)(1)(ii))). Indeed, the federal regulation quoted by the district court goes on

to mention other regulations that may be relevant as to the scope of the fair hearing

right: ʺThe hearing system must meet the due process standards set forth in Goldberg v.

Kelly,

(1970), and any additional standards specified in this subpart.ʺ

(d) (emphasis added).

The question here is whether the federal § 1396a(a)(3) right is broader than

the due process right with respect to immediate dismissal of appeals and termination of

1 Appellees also contend that the Supreme Courtʹs decision in Armstrong v. Exceptional Child Center, Inc. precludes us from enforcing the Medicaid Act through § 1983.

. Armstrong, however, addressed neither the private enforceability of federal rights under § 1983 nor the § 1396a(a)(3) fair hearing right. We have held that § 1396a(a)(3) is enforceable through § 1983, see Shakhnes,

, and that precedent still controls, see Briggs v. Bremby,

(2d Cir. 2015) (approving of § 1983 enforceability of § 1396a(a)(3) post‐Armstrong).

‐ 7 ‐ benefits following default. For example, plaintiffs highlight

, which

provides that the state ʺmay deny or dismiss a request for a hearing if . . . [t]he applicant

or beneficiary fails to appear at a scheduled hearing without good cause.ʺ Plaintiffs

read this regulation as requiring the state to ascertain before immediately acting

whether the beneficiary lacked good cause for failing to appear and contend that the

regulatory history and agency interpretations (through the State Medicaid Manual2) of

the regulation support this reading. Section 1396a(a)(3), as informed by relevant

regulations, may thus require what due process does not.

Because the district court did not separately conduct an analysis of

§ 1396a(a)(3), we remand to provide it the opportunity to do so in the first instance. On

remand, the district court should ask whether plaintiffs are likely to succeed on their

claim that New York violates their § 1396a(a)(3) fair hearing right as defined further by

any relevant federal regulations, including

. See

.200‐

.250. If the district court finds that the plaintiffs are likely to succeed, it should exercise

2 We note also that the district courtʹs reading of the State Medicaid Manual was flawed. Section 2902.3 of the Manual provides that the state ʺmay dismiss a request for a hearing when . . . [t]he claimant abandons his right to a hearing,ʺ and ʺ[t]he hearing request may be considered abandoned when neither the claimant nor his representative appears at scheduled hearing, and if within a reasonable time (of not less than 10 days) after the mailing of an inquiry as to whether he wishes any further action on his request for a hearing no reply is received.ʺ App. at 38. The district court interpreted this section as ʺpermissive rather than mandatory.ʺ

at 434 n.1. It is exactly the opposite. The Manual makes clear that only when a hearing is abandoned by failing to respond to a post‐default notice may the state dismiss an appeal. While the state may decide not to dismiss an appeal if the post‐default notice receives no response, if it chooses to dismiss it must wait at least ten days. See generally Sai Kwan Wong v. Doar,

, 258‐62 (2d Cir. 2009) (giving the Manual deference under Skidmore v. Swift & Co.,

(1944)).

‐ 8 ‐ its discretion to decide whether to issue an injunction. See Shakhnes, 689 F.3d at 257‐60

(considering statute, regulations, and agency interpretations of those regulations,

including the State Medicaid Manual, in fashioning injunction).

CONCLUSION

The district court, in ruling on plaintiffsʹ motion for a preliminary

injunction, erroneously held that the due process and § 1396a(a)(3) standards are the

same. We remand for the district court to conduct a separate analysis and to determine

whether the scope of § 1396a(a)(3), as fleshed out by federal regulations, is broader than

what is guaranteed by the Due Process Clause with respect to immediate dismissal of

appeals and termination of benefits when a beneficiary defaults. Accordingly, we

VACATE the district courtʹs memorandum and order, and we REMAND the case for

further proceedings consistent with this order.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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