The opinion of the court was delivered by: Urbina, District Judge.
Denying the Plaintiff's Motion for a Temporary Restraining Order
and Denying the Defendant's Request for a Transfer of Venue
This matter comes before the court on an application by the
plaintiff Vencor Nursing Centers, L.P. ("Vencor") for an order
temporarily restraining the defendant, Secretary of the United
States Department of Health and Human Services Donna E. Shalala
("HHS") from terminating one of Vencor's California facilities
from the Medicare and Medicaid programs, and seeking other
declaratory and injunctive relief. In opposition, HHS contends
that this court lacks subject matter jurisdiction, that venue
does not lie in this District or that the action should be
transferred to California, and that Vencor has not met the
criteria for preliminary injunctive relief. For the reasons which
follow, the court finds that it has jurisdiction and that a
transfer of venue is not warranted. The court also finds that
Vencor has not met the criteria for issuance of a TRO and denies
Vencor owns and operates Village Square Nursing and
Rehabilitation Center, a 120-bed skilled nursing facility in San
Marcos, San Diego County, California ("Village Square"). During
the relevant period, Village Square had between 92 and 104
residents, including about fifty Medicare and Medicaid
beneficiaries. Id. ¶ 2.
The defendant, HHS, is the federal agency responsible for
administering the Medicare Act, 42 U.S.C. § 1395 et seq., and
the Medicaid Act, 42 U.S.C. § 1396 et seq. The California
Department of Human Services ("the survey agency" or "SA") is the
state agency that inspected Village Square on behalf of HHS. From
November 1998 through May 1999, HHS authorized the SA to carry
out three on-site surveys of Village Square.
The SA conducted the first survey on November 25, 1998 and
issued a Statement of Deficiencies on November 28, 1998. Village
Square filed a Plan of Correction (POC) on December 18, 1998 and
notified the SA that it had regained substantial compliance as of
January 9, 1999. See Compl. ¶ 30; Mot. to Dis., Ex. A at 1. The
SA conducted a follow-up survey on April 1, 1999 and issued a
Statement of Deficiencies, and Village Square submitted a POC.
See Mot. to Dis., Ex. B; Compl. ¶ 31. On May 12, 1999, HCFA
notified Village Square that it concurred with the SA's findings
and terminated Village Square effective May 29, 1999 for failure
to maintain substantial compliance for six months. See Mot. to
Dis., Ex. D. In response to Village Square's representation that
it was in substantial compliance, the SA conducted a third survey
on May 28, 1999 and issued a Statement of Deficiencies on June 8,
HCFA exercised its discretion to continue payments until June
28, 1999, thirty days from the effective date of termination.
See Mot. to Dis., Ex. D. Village Square relocated 18 Medicare
and Medicaid residents by July 2, 1999 and it planned to relocate
the others by July 5, 1999.*fn2
A. Subject-Matter Jurisdiction
Vencor appealed Village Square's termination and requested
expedited administrative review to challenge the findings of
non-compliance. HHS contends that 42 U.S.C. § 405(g), (h) deprive
this court of subject-matter jurisdiction during the pendency of
that review. For the reasons which follow, the court disagrees
and finds that it does have subject-matter jurisdiction.
1. The Statutory Administrative-Exhaustion Requirement
A claimant challenging the denial of a claim for Medicare
benefits must pursue its administrative remedies before seeking
Any individual, after any final decision by the
Commissioner of Social Security made after a hearing
to which he was a party, irrespective of the amount
in controversy, may obtain a review of such decision
by a civil action commenced within sixty days after
the mailing to him of notice of such decision or
within such further time as the Commissioner of
Social Security may allow.
42 U.S.C. § 405(g). A parallel provision, § 405(h), imposes an
exhaustion requirement on Medicaid benefit claims. HHS contends
that these provisions bar this court from exercising jurisdiction
until Vencor receives a final decision on its administrative
appeal. In Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45
L.Ed.2d 522 (1975), the Supreme Court explained, "Exhaustion is
generally required . . . so that the agency may function
effectively and so that it may have an opportunity to correct its
own errors, to afford the parties and the courts the benefit of
its experience and expertise, and to compile a record which is
adequate for judicial review." Id. at 765, 95 S.Ct. 2457.
2. Exception to Exhaustion Requirement for Colorable Claims
Which are "Collateral" to Any Claim for Benefits
The next year, however, Mathews v. Eldridge, 424 U.S. 319, 96
S.Ct. 893, 47
L.Ed.2d 18 (1976), clarified that the Social Security Act's
administrative-exhaustion requirement is not an absolute,
unwaivable prerequisite to judicial review. Eldridge involved a
due process challenge to the termination of Social Security
disability payments without a prior evidentiary hearing. The
Court held that the district court had authority to relieve a
claimant from the exhaustion requirement even when HHS did not
consider the challenged decision to be final. See Eldridge, 424
U.S. at 330-32, 96 S.Ct. 893. The decision whether or not to
waive the exhaustion requirement depends on "the nature of the
claim being asserted and the consequences of deferment of
judicial review." Id. at 331 n. 11, 96 S.Ct. 893. Waiver was
appropriate because (1) "the claimant's interest in having his
constitutional challenge resolved promptly [was] so great that
deference to the agency's judgment [that exhaustion was required
was] inappropriate"; and (2) the constitutional challenge was
"collateral" to any claim for benefits. Id. at 329-31, 96 S.Ct.
893; accord Bowen v. City of New York, 476 U.S. 467, 106 S.Ct.
2022, 90 L.Ed.2d 462 (1986).
3. What Constitutes A Colorable Claim. A claimant cannot
circumvent an exhaustion requirement by asserting specious
"constitutional" claims to "dress up" what is essentially a claim
for benefits. See Bartlett v. Bowen, 816 F.2d 695, 702
(D.C.Cir. 1987) ("This holding will not afford much opportunity
for frivolous claims since aggrieved claimants must find a way to
connect their claims for benefits to a constitutional infirmity.
. . ."). Rather, the constitutional claim must be "colorable,"
i.e., it must not be "wholly insubstantial, immaterial or
frivolous." Boettcher v. HHS, 759 F.2d 719, 722 (9th Cir.
1985); see, e.g., Thorbus v. Bowen, 848 F.2d 901, 903 (8th Cir.
1988) ("Although we deem the facts marginal to support a
colorable claim, we assume without deciding that Dr. Thorbus has
stated a constitutional claim sufficiently colorable for the
purposes of jurisdiction in federal court."). Whether or not
Vencor's claims are meritorious remains to be seen, but they are
not "wholly insubstantial, immaterial or frivolous."
4. Claims which are Collateral to any Claim for Payment of
The next inquiry is whether Vencor's claims are "collateral to
[its] substantive claim of entitlement. . . ." Mathews, 424
U.S. at 329-331, 96 S.Ct. 893. The Court of Appeals has not
addressed this issue. Three consecutive decisions of this court,
however, have held that a claim challenging HHS's constitutional
authority to terminate or asserting that HHS failed to adhere to
the requirements of the Medicare Act in terminating benefits is
"entirely collateral" to a claim for benefits. Therefore, these
decisions concluded, the challenges to termination were not
subject to the requirement of exhaustion of administrative
remedies in section 405. See Mediplex v. Shalala, No.
98-CV-2440 (D.D.C. Nov. 11, 1998); Libbie Rehab. Ctr. v.
Shalala, 26 F. Supp.2d 128, 130-31 (D.D.C. 1998); International
Long Term Care v. Shalala, 947 F. Supp. 15, 17-19 (D.D.C. 1996).
No decision in this Circuit has held to the contrary.
Accordingly, it does not appear likely that the court will depart
from the "strong presumption that Congress intends judicial
review of administrative action. . . ." Bowen v. Michigan
Academy of Family Physicians, 476 U.S. 667, 670, 106 S.Ct. 2133,
90 L.Ed.2d 623 (1986). Vencor was not required to exhaust
administrative remedies,*fn3 and this court has general
federal-question jurisdiction pursuant to 28 U.S.C. § 1331.
HHS also argues that 42 U.S.C. § 405(g) provides only one
appropriate venue for this action — the United States District
Court for the Southern District of California. In the
alternative, HHS moves for transfer of venue pursuant to
28 U.S.C. § 1404(a). For the reasons which follow, the court denies
HHS's request to transfer.
1. 42 U.S.C. § 405(g) does not apply.
Under § 405(g), a lawsuit challenging an administrative denial
of benefits "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. . . ."
42 U.S.C. § 405(g). In this case, however, § 405(g) and (h) do not apply,
because this action is collateral to any claim for benefits.
Accordingly, venue will be determined in accordance with the
A civil action wherein jurisdiction is not founded
solely on diversity of citizenship may, except as
otherwise provided by law, be brought only in . . .
(2) a judicial district in which a substantial part
of the events or omissions giving rise to the claim
occurred, or a substantial part of property that is
the subject of the action is situated. . . .
28 U.S.C. § 1391(b). Under § 1391(b), venue is proper in this
District, as the Secretary is deemed to reside here when she is
sued in her official capacity. See Archuleta v. Sullivan,
725 F. Supp. 602, 605 (D.D.C. 1989). Venue would also lie, however, in
California, where ...