Articles Posted in Government & Administrative Law

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In 2006-2008, plaintiffs each applied, unsuccessfully, for Social Security disability benefits, 42 U.S.C. 423(d)(2)(A), 1382c(a)(3)(B). Each plaintiff retained Kentucky attorney Conn to assist with a subsequent hearing. Each plaintiff’s application included medical records from one of four examining doctors. In each case, ALJ Daugherty relied exclusively on the doctor's opinion to conclude, without a hearing, that plaintiffs were disabled and entitled to benefits. Daugherty took bribes from Conn to assign Conn’s cases to himself and issue favorable rulings. Nearly 10 years after the agency learned of the scheme, it initiated “redeterminations” of plaintiffs’ eligibility for benefits and held new hearings, disregarding all medical evidence submitted by the four doctors participating in Conn’s scheme. Plaintiffs had no opportunity to rebut the assertion of fraud as to this evidence. Each plaintiff was deemed ineligible for benefits as of the date of their original applications; their benefits were terminated. Plaintiffs sued, alleging violations of the Due Process Clause and the Social Security Act. The Sixth Circuit held that the plaintiffs are entitled to summary judgment on their due-process claim and the agency is entitled to summary judgment on the Social Security Act claims. The agency must proffer some factual basis for believing that the plaintiffs’ evidence is fraudulent. Plaintiffs must have an opportunity to “rebut the Government’s factual assertions before a neutral decisionmaker.” Congress has already told the agency what to do when redetermination proceedings threaten criminal adjudications; the answer is not to deprive claimants of basic procedural safeguards. View "Griffith v. Commissioner of Social Security" on Justia Law

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The Tennessee Hospital Association and three hospitals sued, challenging efforts by the Centers for Medicare and Medicaid Services (CMS) to direct states to recoup certain reimbursements made under the Medicaid program. The hospitals serve a disproportionate share of Medicaid-eligible patients and are thereby entitled to supplemental payments under the Medicaid Act, (DSH payments), 42 U.S.C. 1396a(a)(13)(A)(iv); 1396r-4(b). The Act limits the amount of DSH payments each hospital can receive in a given year. CMS contends that the hospitals miscalculated their DSH payment-adjustments for fiscal year 2012 and received extra payments. Plaintiffs argued, and the district court agreed, that CMS’s approach to calculating DSH payment adjustments is inconsistent with the Act and the regulations that CMS implemented in 2008. The Sixth Circuit affirmed, agreeing that CMS’s policy is inconsistent with its 2008 rule and cannot be enforced unless it is promulgated pursuant to notice-and-comment rulemaking. The court disagreed with the district court’s conclusion that CMS’s policy exceeds the agency’s authority under the Medicaid Act. CMS’s payment-deduction policy is a reasonable interpretation of an ambiguous section of the Act but is not a valid interpretative rule. CMS attempted to exercise its delegated discretion to “determine[]” the “costs incurred” in serving Medicaid-eligible patients—precisely the sort of agency action that requires notice-and-comment rulemaking. View "Tennessee Hospital Association v. Azar" on Justia Law

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Losantiville Country Club hosted unprofitable nonmember events for many years, consistently using those losses to avoid paying tax on its investment income. Because the Internal Revenue Service determined that Losantiville did not hold nonmember events for the primary purpose of making a profit, the club could not offset its income from investments with losses from those nonmember activities. Invalidating those deductions resulted in Losantiville having underpaid tax on its unrelated business income between 2010 and 2012. Plus, the IRS imposed accuracy-related penalties. On appeal, the Tax Court upheld this determination, reasoning that Losantiville did not intend to profit from its nonmember events. Finding no reversible error in that decision, the Sixth Circuit affirmed. View "Losantiville Country Club v. Comm'r of Internal Revenue" on Justia Law

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Petitioners-appellants John Machacek, Jr. and Marianne Machacek were the sole shareholders of John J. Machacek, Jr., Inc. (Machacek, Inc.), a corporation organized under Subchapter S of the Internal Revenue Code. John was also an employee of Machacek, Inc. The Machaceks appealed the Tax Court’s ruling requiring them to treat as income the economic benefits resulting from Machacek, Inc.’s payment of a premium on John's life insurance policy under a compensatory split-dollar arrangement. Relying on the compensatory nature of the arrangement, the Tax Court rejected the Machaceks’ argument that the economic benefits should be treated as a shareholder distribution. The Sixth Circuit reversed, finding that the Tax Court did not consider the impact of a provision of the tax regulations specifically requiring that such economic benefits be treated as shareholder distributions. View "Machacek v. Comm'r of Internal Revenue" on Justia Law

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Mason, an African-American Ohio resident sued against all 88 Ohio county recorders for violating the Fair Housing Act’s prohibition against making, printing, or publishing “any . . . statement” indicating a racial preference, such as a racially restrictive covenant. Mason’s complaint included copies of land records, recorded in 1922-1957, that contain racially restrictive covenants. There is no allegation that such covenants have been enforced since the 1948 Supreme Court decision prohibiting enforcement of such covenants. Mason maintains that permitting documents with restrictive covenants in the chain of title to be recorded or maintained and making them available to the public violated the Act. Mason alleges that defendants “discouraged the Plaintiff and others from purchasing real estate ... by creating a feeling that they ... do not belong in certain neighborhoods” and that defendants’ actions “damage and cloud the title to property owned by property owners.” Mason’s counsel stated that Mason became aware of the covenants while looking to buy property, a fact not contained in the complaint. The Sixth Circuit affirmed that Mason lacked standing. A plaintiff must show that he suffered a palpable economic injury distinct to himself; any alleged injury was not caused by the county recorders, who are required by Ohio statute to furnish the documents to the public; county recorders cannot redress the alleged harm, as they have no statutory authority to edit the documents. View "Mason v. Adams County Recorder" on Justia Law

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Seven Counties, a nonprofit provider of mental health services, attempted to file for Bankruptcy Code Chapter 11 reorganization. For decades, Seven Counties has participated in Kentucky’s public pension plan (KERS). Because the rate set for employer contributions has drastically increased in recent years, Seven Counties sought to reject its relationship with KERS in bankruptcy. The bankruptcy court and the district court both held that Seven Counties is eligible to file under Chapter 11 and that the relationship between Seven Counties and KERS is based on an executory contract that can be rejected. The Sixth Circuit affirmed in part. Seven Counties is only eligible to be a Chapter 11 debtor if it is a “person” under 11 U.S.C. 109(a); a “governmental unit” is generally excluded from the category of “person.” Because the Commonwealth does not exercise the necessary forms of control over Seven Counties for it to be considered an instrumentality of the Commonwealth, Seven Counties is eligible to file. Seven Counties characterized its relationship with KERS as contractual, such that, to the extent it is executory, it may be rejected in bankruptcy, 11 U.S.C. 365. KERS argued the relationship is purely statutory, similar to an assessment, such that it cannot be rejected. The Sixth Circuit certified the question of the nature of the relationship to the Kentucky Supreme Court. View "Kentucky Employees. Retirement System v. Seven Counties.Services, Inc." on Justia Law

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DEA ordered Miami-Luken, a registered controlled substances pharmaceutical wholesaler, to show cause why its registration should not be revoked, for failing to maintain effective controls against the diversion of oxycodone and hydrocodone and failing to disclose suspicious orders. At the company’s request, an ALJ issued a subpoena requiring DEA to produce various investigative records. DEA filed a notice declaring that it would not comply. Miami-Luken filed an emergency motion and the district court adopted a magistrate’s recommendation to enforce the subpoena in part, eliminating one category of subpoenaed documents, narrowing another, and permitting DEA to provide “reasonably redacted versions.” DEA's Acting Administrator determined that the enforcement order, permitting the DEA to make reasonable redactions, also permitted DEA to review the validity of the subpoena itself, and found that the requested categories of documents were not “necessary to conduct” the hearing as would be required for disclosure under 21 C.F.R. 1316.52(d) and ordered the subpoena quashed. DEA obtained a stay of the order enforcing the subpoena pending further judicial review and moved for relief from judgment. Miami-Luken then petitioned the Sixth Circuit to review directly DEA’s order quashing the subpoena. Meanwhile, the district court denied DEA’s motion for relief from judgment, stating: Nothing in this Court’s Order permitted the DEA Administrator to set aside the subpoena. The Sixth Circuit denied Miami-Luken’s petition for lack of jurisdiction. The Administrator’s order was not a “final decision” under 21 U.S.C. 877. View "Miami-Luken, Inc. v. United States Drug Enforcement Administration" on Justia Law

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Detroit residents voted to allow the school district to increase property taxes “for operating expenses.“ In 2013, the Downtown Development Authority (DDA) announced its intent to capture some of that tax revenue to fund the construction of Little Caesars Arena for the Red Wings hockey team. In 2016, the DDA revised its plan to allow the Pistons basketball team to relocate to Arena. The Detroit Brownfield Redevelopment Authority (DBRA) agreed to contribute to the $56.5 million expenditure, including reimbursing construction costs that private developers had already advanced. The project is largely complete. Plaintiffs requested that the school board place on the November 2017 ballot a question asking voters to approve or disapprove of the agencies' use of tax revenue for the Pistons relocation. The board held a special meeting but did not put the question on the ballot. Plaintiffs filed suit. Count VIII sought a declaratory judgment that the board had authority to place the question on the ballot. Count IX sought a writ of mandamus ordering the board to place it on the ballot. The court dismissed Counts VIII and IX, noting that Plaintiffs could have filed suit in 2013. The Sixth Circuit affirmed. Plaintiffs lack Article III standing. Failure to place Plaintiffs’ question on the ballot affects all Detroit voters equally; they raised only a generally available grievance about government. Michigan statutes do not give Detroit residents the right to void a Tax Increment Financing plan by public referendum, so a referendum would not redress Plaintiffs’ injury. View "Davis v. Detroit Public School Community District" on Justia Law

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The Tennessee Department of Transportation hired Jones to repair a collapsed portion of a state highway. The company drilled and blasted a pit less than a mile from the highway, extracting thousands of tons of graded solid rock to fill the collapsed bed that previously supported the highway. The Mine Safety and Health Administration imposed $2,940 in civil penalties on Jones for failing to comply with the agency's safety requirements. An ALJ for the Federal Mine Safety and Health Review Commission, an independent agency responsible for reviewing the Administration’s actions, 30 U.S.C. 823, upheld the penalties, agreeing that the site was “a coal or other mine” under the Administration’s jurisdiction. The Commission affirmed. The Sixth Circuit vacated because the administrative law judge was an inferior officer of the United States, and was not appointed by the President, a court of law, or the head of a department, as the Appointments Clause of the Constitution (art. II, sect. 2, cl. 2) demands. The ALJ was appointed by the Chief Administrative Law Judge. The court excused Jones’s failure to pursue the argument below. View "Jones Brothers, Inc. v. Secretary of Labor" on Justia Law

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The DEA bars hospitals from hiring, as an employee with “access to controlled substances,” any doctor who “for cause” has surrendered his registration to handle those substances. The DEA enforced this regulation against Doctors McDonald and Woods, who had voluntarily surrendered their registrations while in addiction treatment. They later regained full registrations. The doctors sued to enjoin the DEA from enforcing the regulation against them in the future, arguing that it no longer applied to them once their registrations were restored. The parties settled. Their agreement provides that “[t]he DEA no longer interprets 21 C.F.R. 1301.76(a) as requiring . . . potential employers of doctors with unrestricted DEA registrations to seek waivers.” The Sixth Circuit denied the government’s motion to keep the agreement under seal, noting “a strong presumption in favor of openness as to court records.” The government did not identify information too sensitive to remain public. Public interest is particularly strong where the information pertains to an agency’s interpretation of a regulation. Other doctors would no doubt be interested. View "Woods v. United States Drug Enforcement Administration" on Justia Law