Nguyen v. United States Department of Health and Human Services et al

Filing 22

ORDER & REASONS: ORDERED that 9 Motion to Dismiss for Lack of Jurisdiction is DENIED. FURTHER ORDERED that good cause exists to extend the temporary restraining order for 14 days to allow DHH-CMS to apply for an appeal to this order and reasons pursuant to 28 U.S.C. 1292(b). FURTHER ORDERED that the injunctive proceedings in this Court are stayed pending DHH-CMSs decision to appeal. Signed by Judge Martin L.C. Feldman. (cml)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
HAI NAM NGUYEN

CIVIL ACTION

V.

NO. 16-2455

UNITED STATES DEPARTMENT OF HEALTH
& HUMAN SERVICES AND CENTERS FOR
MEDICARE & MEDICAID SERVICES

SECTION "F"

ORDER AND REASONS
Before the Court is the defendants’ motion to dismiss for
lack of subject matter jurisdiction. For the reasons that follow,
the

motion

is

DENIED.

However,

because

of

the

serious

jurisdictional question, the DHH-CMS is granted leave to apply for
an interlocutory appeal pursuant to 28 U.S.C. § 1292(b).
Background
This is an action for injunctive relief. On March 24, 2016,
the Court granted Dr. Nguyen’s motion for a temporary restraining
order prohibiting the United States Department of Health and Human
Services

and

Centers

for

Medicaid

and

Medicare

Services

(collectively, DHH-CMS) from imposing sanctions that restricted
Dr. Nguyen’s medical practice. In this motion DHH-CMS challenges
the Court’s subject matter jurisdiction to issue the temporary
restraining order and to grant injunctive relief.
Dr. Nguyen operates a medical clinic and urgent care facility
in Jefferson Parish, Louisiana. His clinic is equipped with a
laboratory where he is able to test patients for conditions such

1

as pregnancy, influenza, diabetes, and strep throat. To operate
the laboratory, Dr. Nguyen is required to obtain a certificate
under

the

federal

Clinical

Laboratory

Improvement

Amendments

(CLIA). At the heart of this dispute is the DHH-CMS’s charge that
Dr.

Nguyen

has

failed

to

comply

with

federal

regulations

to

maintain his CLIA certificate.
The CLIA is a federal regulatory scheme designed to ensure
that laboratories that perform tests on human specimens comply
with federal safety and quality standards. 1 Compliance is overseen
by the Secretary of the Department of Health and Human Services.
To verify compliance, the Secretary is permitted to inspect the
laboratories of certificate holders. If the inspectors find that
the laboratory is not in compliance with federal standards, the
Secretary may impose sanctions.
On September 24, 2015, the Louisiana Department of Health and
Hospitals

(LDHH) 2

conducted

an

inspection

of

Dr.

Nguyen’s

laboratory. The inspectors found that the lab was not in compliance
with

CLIA

standards.

The

LDHH

provided

Dr.

Nguyen

with

an

opportunity to submit a plan of correction to remedy the compliance
issues. Dr. Nguyen submitted a plan, but the LDHH rejected it. The
lab then submitted a revised plan of correction, which the LDHH

1

The regulatory scheme is codified in 42 U.S.C. § 263a.
Apparently, the state agency was acting on behalf of the federal
agency to ensure compliance with the CLIA. The state agency is not
a party to this suit.
2

2

accepted. Dr. Nguyen asserts that the revised plan was fully
implemented by January 6, 2016.
On January 13, 2016, the LDHH conducted another, unannounced,
inspection of Dr. Nguyen’s laboratory to assess whether the revised
plan had been implemented. No laboratory personnel were present
that day. 3 Dr. Nguyen’s office manager gave the inspectors the
telephone number of Harold Smith, the lab’s technical supervisor.
Smith was in Kentucky at the time. The inspectors phoned Smith,
who advised them that he had visited the lab on January 6, 2016 to
confirm that the compliance issues had been remedied. He told the
inspectors that everything required to satisfy the deficiencies
was in the revised corrective action plan which could be found in
labeled binders in a cabinet in the lab.
The inspectors remained alone in the 16 feet by 14 feet
laboratory for an hour and a half. They never contacted Dr. Nguyen,
who was on the premises at the clinic, nor did they attempt to
contact Mr. Smith after he told them where the binders were
located. Instead, the inspectors left the laboratory after telling
the office manager that “everything looked good.”
Two months later, on March 11, 2016, Dr. Nguyen received a
letter from the Survey Branch Manager of DHH-CMS, Diane Murphy.
The letter stated that the January 13 inspection revealed that the

3

One of the lab technicians had called in sick, and the lab’s
technical supervisor was out of town.
3

laboratory

demonstrated

continued

noncompliance

due

to

Dr.

Nguyen’s “failure to provide documents to demonstrate correction
of deficiencies.” The letter also stated that “new deficiencies
were

cited.”

Importantly,

the

letter

claimed

that

these

deficiencies “have caused, or could cause, serious harm to the
patients served by the laboratory.” Based on this finding, the
DHH-CMS

concluded

that

the

deficiencies

posed

“immediate

jeopardy,” a designation that exposes the lab to the harshest
sanctions under the CLIA.
Based on the “serious nature” of the survey findings (and the
designation

of

“immediate

jeopardy”),

DHH-CMS

imposed

the

following sanctions:
1)

Cancellation of the laboratory’s approval to receive

Medicare and Medicaid payments for lab services, effective
March 16, 2016.
2)

Suspension

of

the

laboratory’s

CLIA

certificate,

effective March 16, 2016.
3)

Revocation of the laboratory’s CLIA certificate pending

a hearing by an Administrative Law Judge.
Importantly, the cancellation and suspension were to take
effect on March 16, 2016, five days after Dr. Nguyen received the
letter. The agency’s finding of “immediate jeopardy” authorized it
to suspend Dr. Nguyen’s certificate in the interim between March
16 and the date of his hearing before an Administrative Law Judge
4

to revoke the certificate. Effectively, these sanctions would
close the lab five days after Dr. Nguyen received the letter. 4 The
letter advised that no plan of correction would be accepted, but
Dr. Nguyen could submit documentation and evidence as to why the
sanctions should not be imposed. His submission deadline was March
15, 2016.
On

Saturday,

March

12,

2016,

Dr.

Nguyen

met

with

his

laboratory business consultant, Jeffrey Mendler, and two technical
supervisors, Gustavo de Leon and Staci de Leon (both former DHHCMS inspectors), to review the findings in the letter. At the lab,
they found the documents showing implementation of the revised
correction plan. Dr. Nguyen claims that the documents were labeled
in binders located in the same cabinet Harold Smith communicated
to the inspectors on January 13. Much of the relevant information
was in a binder labeled “Post Survey Corrective Action Material.”
On Sunday, March 13, 2016, Dr. Nguyen drafted a letter to
Diane Murphy, the DHH-CMS Branch Manager, requesting immediate
review and reconsideration of the proposed sanctions. The letter
addressed each alleged deficiency cited by the DHH-CMS in the March
11 letter and offered evidence to show that each deficiency was

4

Dr. Nguyen received the letter on March 11, a Friday. The
sanctions were to take effect on the following Wednesday. Dr.
Nguyen contends that the timing of the notice appears intentional
to give him only three business days to respond.
5

corrected at the time of the January 13 inspection. Attached to
the letter were over 300 pages of supporting documentation.
On Monday, March 14, 2016, Gustavo de Leon, Dr. Nguyen’s
technical supervisor, flew from New Orleans to the DHH-CMS Survey
Branch Manager’s office in Dallas to hand-deliver Dr. Nguyen’s
letter and documentation to Diane Murphy. Mr. de Leon gave the
documents to Lt. Commander Lane Vause, who promised to review them
before the close of business on the following day. Despite repeated
attempts to contact several people in the DHH-CMS office, de Leon
did not hear back from them until March 16, the day the suspension
of his certificate was to take effect. At 3:47 p.m. on March 16,
DHH-CMS representative, Sandra Pearson, sent an email to de Leon
stating:
I have sent the documents to the [State Agency] for
review. As soon as a review has been done by the [State
Agency] and [Regional Office], we will notify you.
The suspension will be put on hold until our review is
complete.
Dr. Nguyen and his associates had no further contact with
DHH-CMS until March 23, 2016 at 3:37 p.m. when Sandra Pearson
emailed Mr. de Leon stating, “The documents submitted did not
ensure the immediate jeopardy was addressed and did not provide
assurances as to why the sanctions should not be imposed.” Attached
to the email was a document explaining that, on January 13, the
inspectors “checked all four upper and lower cabinets in the

6

laboratory area and informed Harold Smith that the binder could
not be located.” Dr. Nguyen asserts that this claim is “quite
frankly, impossible.” 5
Also attached to the March 23 letter was an email from Diane
Murphy,

the

DHH-CMS

Branch

Manager,

stating

that

all

of

the

sanctions would be imposed on March 24, 2016, the following day.
On

March

24,

however,

this

Court

entered

a

temporary

restraining order preventing DHH-CMS from imposing the sanctions.
In its Order and Reasons, the Court found that Dr. Nguyen had shown
“a substantial likelihood of success on the merits of his claim
that the defendants have violated his Constitutional right to due
process by failing to give him adequate warning before imposing
sanctions to restrict his medical practice.” The Court found
further

that

“the

sanctions

imposed

by

the

defendants

substantially threaten to cause irreparable injury to Dr. Nguyen’s
medical practice and reputation.” A hearing date for injunctive
relief is set for April 15, 2016.
DHH-CMS

belatedly

challenges

the

Court’s

jurisdiction

to

grant injunctive relief in favor of Dr. Nguyen. DHH-CMS contends
that Dr. Nguyen is attempting to circumvent the administrative
process

by

having

this

Court

adjudicate

5

the

merits

of

the

Dr. Nguyen submits photographs of the laboratory’s open cabinets.
The binders are clearly visible. The photographs, however, are not
dated.
7

compliance dispute. According to DHH-CMS, Dr. Nguyen is entitled
to

a

hearing

dissatisfied

before
with

the

an

Administrative

result,

he

may

Law
seek

Judge.
review

If

he

from

is
the

Department Appeals Board. DHH-CMS urges that only after exhausting
these administrative remedies may Dr. Nguyen seek judicial review.
And that the proper reviewing court is the Fifth Circuit, not this
Court.
Dr. Nguyen denies that he is seeking judicial review of his
administrative claims. Rather, he asks this Court to maintain the
status quo pending the administrative process, not instead of it.
Dr. Nguyen contends that the sanctions imposed by DHH-CMS are an
unconstitutional deprivation of his property and liberty without
due process of the law. He submits that this Court is the proper
venue to protect his constitutional rights.
I.
In support of his constitutional claims, Dr. Nguyen submits
that DHH-CMS failed to comply with its own protocols in finding
that his lab posed “immediate jeopardy.” According to the LDHH 6
operations manual, 7 the surveyors must conduct an exit conference

6

The LDHH is the state agency that conducted the inspection on
behalf of DHH-CMS. The LDHH refers to its inspectors as
“surveyors.”
7 Dr. Nguyen submitted excerpts from Chapter 6 of the “State
Operations
Manual.”
The
manual
can
be
found
at:
https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/downloads/som107c06.pdf.
8

with the lab’s administrator or director to informally explain
their findings after the inspection. If immediate jeopardy status
is identified, the surveyors must inform the lab of the seriousness
of

the

problems.

inspection,

the

No

later

surveyor

than

must

two

working

telephone

the

days

after

DHH-CMS

the

regional

office to advise that that immediate jeopardy deficiencies exist.
No later than three working days after the inspection, the surveyor
must send written notice to the lab explaining the deficiencies
and proposing sanctions. Absolutely none of these protocols were
followed.
According to Dr. Nguyen, the surveyors did not conduct an
exit conference after the January 13 inspection. Indeed, none of
the laboratory administrators or directors were contacted after
the inspection, even though they were on the premises. Dr. Nguyen
claims that the inspectors told his office manager that “everything
looked good” before exiting the clinic. Moreover, the inspectors
took

no

immediate

action.

Curiously,

seemingly

neglectfully,

certainly ineptly, they waited for eight weeks before sending Dr.
Nguyen

written

notification

that

his

lab

posed

“immediate

jeopardy.” DHH-CMS does not dispute these facts, nor does it offer
any explanation for its arguably abusive behavior. The elapsed
time between the inspection and the notification shows either that
the finding of immediate jeopardy was disingenuous or that the
agency was irresponsible.
9

In light of these facts, the Court reiterates that Dr. Nguyen
has a high chance of success on the merits of his claim for due
process violations.
II.
It is undisputed that this Court has no authority to review
the

merits

of

Dr.

Nguyen’s

administrative

claims.

The

CLIA

designates the authority for judicial review to the appropriate
Circuit Court of Appeals:
Any laboratory which has had . . . its certificate
suspended, revoked, or limited . . . may, at any time
within 60 days after the date the action of Secretary .
. . becomes final, file a petition with the United States
court of appeals for the circuit wherein the laboratory
has its principal place of business for judicial review
of such action.
42 U.S.C. § 263a(k)(1).
This Court recognizes its lack of jurisdiction to resolve the
merits

of

remaining

Dr.

Nguyen’s

question,

underlying

however,

administrative

is

whether

this

claims.

The

Court

has

jurisdiction to determine whether DHH-CMS has deprived Dr. Nguyen
of Due Process under the Constitution.
A.
In

his

complaint,

Dr.

Nguyen

invokes

this

Court’s

jurisdiction under 28 U.S.C. § 1346: “The district courts shall
have original jurisdiction, concurrent with the United States
Court of Federal Claims, of . . . [a]ny other civil action against
the United States, not exceeding $10,000 in amount, founded either
10

upon the Constitution, or any Act of Congress, or any regulation
of an executive department . . . .” Dr. Nguyen also invokes the
Administrative

Procedure

Act

as

a

basis

for

this

Court’s

jurisdiction:
When an agency finds that justice so requires, it may
postpone the effective date of action taken by it,
pending judicial review. On such conditions as may be
required and to the extent necessary to prevent
irreparable injury, the reviewing court, including the
court to which a case may be taken on appeal from or on
application for certiorari or other writ to a reviewing
court, may issue all necessary and appropriate process
to postpone the effective date of an agency action or to
preserve status or right pending conclusion of the
review proceedings.
5 U.S.C. § 705.
Dr. Nguyen contends that Section 705 allows the district court
to halt agency action to preserve the status quo pending the
conclusion of administrative proceedings. DHH-CMS responds that
the APA does not apply to the CLIA statute, and if it does, the
proper reviewing court is the Fifth Circuit. The Court considers
other applications of Section 705 for guidance.
In Gardner v. Alabama, 385 F.2d 804 (5th Cir. 1967), the state
of Alabama sought injunctive relief in the district court to
restrain the Secretary of Health, Education and Welfare from
enforcing an order that would terminate payment of approximately
$100 million in federal funds to the Alabama Department of Pensions
and Security. At issue was Alabama’s compliance with the Civil
Rights Act of 1964. The Secretary found that Alabama had not
11

eradicated

certain

discrimination

practices

and

thus

was

not

entitled to federal funds.
The Civil Rights Act specifically granted jurisdiction to the
Circuit Court for judicial review of agency action. The district
court granted a preliminary injunction but expressly refrained
from passing on the merits of the case. The Fifth Circuit vacated
the district court’s injunction, holding that it had exclusive
jurisdiction to review the validity of the Secretary’s order. The
Court reasoned that because the Civil Rights Act granted the
Circuit Court reviewing authority, its jurisdiction to review the
Secretary’s order was “sole and exclusive.” Id. at 810. The Court
instructed,
specifically

“It

is

well

designates

settled
a

that

forum

for

if

Congress,
judicial

as

here,

review

of

administrative action, the forum is exclusive.” Id.
The facts on this record are distinguishable. Unlike the
plaintiff in Gardner who sought review of the Secretary’s order,
Dr. Nguyen does not seek review of DHH-CMS’s determination that he
is out of compliance with the CLIA. Rather, he seeks preservation
of the status quo until he is granted a revocation hearing before
an Administrative Law Judge. Dr. Nguyen’s action for injunctive
relief

requires

the

Court

to

12

assess

the

merits

of

his

constitutional

claims,

not

the

merits

of

his

administrative

claims. 8
Additionally, DHH-CMS wholly failed to comply with its own
protocols in implementing its harshest sanctions. Moreover, the
tenuous

basis

for

which

the

sanctions

were

imposed

–

the

inspectors’ inability to find a clearly labeled binder in a small
laboratory – are cause for this Court’s serious concern. DHH-CMS
is adamant that its determination of “immediate jeopardy” status
is not subject to any review whatsoever. But certainly, federal
agencies are not exempt from the United States Constitution. Dr.
Nguyen is entitled to due process under the law.
The Court looks for further guidance from other Circuit
Courts.
B.
In Telecommunications Research and Action Center v. F.C.C.,
750 F.2d 70, 71 (D.C. Cir. 1984), the District of Columbia Circuit
held, “[W]here a statute commits final agency action to review by
the

Court

of

Appeals,

the

appellate

court

has

exclusive

jurisdiction to hear suits seeking relief that might affect its

8

DHH-CMS argues that Dr. Nguyen’s constitutional claims are
“inextricably intertwined” with his CLIA claims. The Court
disagrees. The due process question is whether DHH-CMS’s dubious
process in suspending Dr. Nguyen’s certificate violated Dr.
Nguyen’s constitutional due process rights. The administrative
question is whether Dr. Nguyen’s lab was in compliance with the
CLIA statute. The two are distinct.
13

future statutory power of review.” There, a group of nonprofit
corporations petitioned the District of Columbia Circuit for a
writ of mandamus to compel the Federal Communications Commission
to decide certain unresolved matters pending before the agency. As
a threshold issue, the Circuit Court addressed whether it had
jurisdiction to issue the writ, or if jurisdiction lied with the
district court. The Court reasoned that “even where Congress has
not expressly stated that statutory jurisdiction is ‘exclusive,’
. . . a statute which vests jurisdiction in a particular court
cuts off original jurisdiction in other courts in all cases covered
by the statue.” Id. at 77.
Similarly,

in

Public

Utility

Commissioner

of

Oregon

v.

Bonneville Power Administration, 767 F.2d 622 (9th Cir. 1985), the
Ninth Circuit held that it had exclusive jurisdiction over suits
that

challenge

ongoing

agency

proceedings

on

constitutional

grounds. There, several utilities companies sought an injunction
preventing the Bonneville Power Administrator from participating
in proceedings to revise certain rate formulas because they urged
that his bias violated their right to due process under the
Constitution. The Pacific Northwest Electric Power Planning and
Conservation Act provided:
Suits to challenge the constitutionality of this
chapter, or any action thereunder, final actions and
decisions taken pursuant to this chapter by the
Administrator or the [Northwest Power Planning] Council,
or the implementation of such final actions . . . shall
14

be filed in the United States court of appeals for the
region.
Id. at 625-26. The district court dismissed the suit for lack of
subject matter jurisdiction. The Ninth Circuit found that that the
district court properly dismissed the suit for injunctive relief.
Relying on the D.C. Circuit’s reasoning in TRAC v. FCC, the Ninth
Circuit held that “where a statute commits review of final agency
action to the court of appeals, any suit seeking relief that might
affect the court’s future jurisdiction is subject to exclusive
review.” Id. at 626.
Again, the facts on this record diverge from both cases. The
relief sought in TRAC was a writ of mandamus; here, the relief
sought is an injunction. Moreover, in both cases, the Circuit
Courts qualified their “exclusive jurisdiction.” In TRAC, the D.C.
Circuit found that the grant of statutory jurisdiction “cuts off
original jurisdiction in other courts in all cases covered by the
statute. 750 F.2d at 77 (emphasis added). Here, Dr. Nguyen’s suit
for injunctive relief arises under the Fifth Amendment of the
Constitution, not the CLIA. Likewise, in Bonneville, the Ninth
Circuit limited its exclusive jurisdiction to “any suit seeking
relief

that

might

affect

the

court’s

future

jurisdiction.”

Bonneville Power Administration, 767 F.2d at 626 (emphasis added).
Here,

DHH-CMS

has

not

persuaded

the

Court

that

granting

an

injunction to protect Dr. Nguyen’s constitutional rights will

15

affect the Fifth Circuit’s jurisdiction to review the underlying
administrative claims. At issue presently is quite a simple and
direct question: did the disregard of mandatory administrative
protocols violate due process?
This Court has serious concerns that Dr. Nguyen may suffer
irreparable harm due to a violation of his constitutional right to
due process on the present record. However, the Court also has
serious questions as to its jurisdiction to grant injunctive
relief. The parties have not directed the Court’s attention to any
binding

precedent

that

squarely

addresses

the

jurisdictional

issues presented here.
Accordingly, pursuant to 28 U.S.C. § 1292(b), the Court finds
that the issues presented in this motion involve a controlling
question of law as to which there is substantial ground for
difference of opinion, and an immediate appeal from this order may
materially advance the ultimate termination of the litigation.
IT IS ORDERED that the defendants’ motion to dismiss is
DENIED.
IT IS FURTHER ORDERED that good cause exists to extend the
temporary restraining order for 14 days to allow DHH-CMS to apply
for an appeal to this order and reasons pursuant to 28 U.S.C. §
1292(b).

16

IT IS FURTHER ORDERED that the injunctive proceedings in this
Court are stayed pending DHH-CMS’s decision to appeal. 9
New Orleans, Louisiana, April 12, 2016

______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

9

If DHH-CMS chooses not to appeal, the Court will reschedule a
hearing for injunctive relief at the appropriate time.
17