Nightingale Home Healthcare v. United States, 861 F.3d 615

Background

Nightingale Home Healthcare provided Medicare home-health services and signed a Medicare provider agreement with HHS/CMS.
Indiana State Department of Health (ISDH) surveys in late 2015 found deficiencies amounting to "immediate jeopardy," leading CMS to notify Nightingale of termination of its Medicare provider agreement.
Nightingale filed a bankruptcy petition on the scheduled termination date and sought a preliminary injunction in bankruptcy court to preserve its provider agreement and reimbursements during reorganization and administrative appeals; the bankruptcy court granted the injunction in January 2016.
After post-petition ISDH surveys again found immediate jeopardy, the bankruptcy court dissolved the injunction in July 2016; CMS then terminated the provider agreement and pursued restitution for payments made during the injunction period.
Separately, Nightingale (and its owner) sued the HHS Secretary, Indiana officials, and state surveyors alleging constitutional violations related to the surveys; the district court dismissed those claims with prejudice for lack of jurisdiction.
On appeal, the Seventh Circuit held the bankruptcy-injunction issue was moot and vacated the district court’s reversal of the bankruptcy court; it also held Nightingale’s constitutional claims were jurisdictionally barred under 42 U.S.C. § 405(g) and remanded for dismissal without prejudice.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court could review the bankruptcy court's preliminary injunction after the injunction was dissolved	Cites mootness; injunction had been dissolved before district court review so appeal was moot	Government argued a live restitution claim kept controversy alive	Appeal was moot as the injunction had been dissolved; vacated district court judgment reversing bankruptcy court and remanded — district court lacked jurisdiction to decide injunction merits
Whether separate restitution action preserves appellate jurisdiction over the injunction issue	Nightingale: separate restitution action cannot revive moot appeal	Government: restitution claim created a live, redressable controversy related to injunction payments	Rejected; separate suit cannot revive jurisdiction over an otherwise moot injunction appeal (Camenisch controlling)
Whether Nightingale's constitutional claims against state surveyors can proceed in district court despite pending administrative process	Nightingale argued constitutional claims allowed direct suit and exhaustion should be waived	Defendants argued § 405(g) requires final agency decision and exhaustion before district court review	Claims are jurisdictionally barred under § 405(g) because Nightingale failed to exhaust; no waiver applicable; dismissal required (without prejudice)
Whether Nightingale’s constitutional allegations were "colorable" and "entirely collateral" to entitlement claim (warranting waiver of exhaustion)	Nightingale asserted class-of-one, racial discrimination, First, Due Process, and Fourth Amendment claims as collateral constitutional challenges	Defendants argued claims attacked the underlying survey/termination (not collateral) and were not colorable or sufficiently pleaded	Court held claims were not entirely collateral nor colorable; many claims inadequately pleaded; exhaustion not waived; dismissal without prejudice ordered

Key Cases Cited

University of Texas v. Camenisch, 451 U.S. 390 (Sup. Ct.) (preliminary injunctions that are fully executed can render appeals moot)
Arkadelphia Milling Co. v. St. Louis S.W. Ry. Co., 249 U.S. 134 (Sup. Ct.) (equitable principle allowing restoration where erroneous injunctions were carried into effect)
Liner v. Jafco, Inc., 375 U.S. 301 (Sup. Ct.) (injunction bonds can preserve appellate review despite dissolution of injunctive relief)
Mathews v. Eldridge, 424 U.S. 319 (Sup. Ct.) (final decision after a hearing is central to § 405(g) jurisdiction; distinguishes waivable and nonwaivable exhaustion elements)
Weinberger v. Salfi, 422 U.S. 749 (Sup. Ct.) (administrative exhaustion and finality principles for judicial review of benefits decisions)
Northlake Community Hosp. v. United States, 654 F.2d 1234 (7th Cir.) (scope of § 405(g) review for termination of Medicare provider agreements)
Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480 (7th Cir.) (cannot evade Medicare Act jurisdictional bar by recasting entitlement challenge as collateral tort/state claims)
Orion Sales, Inc. v. Emerson Radio Corp., 148 F.3d 840 (7th Cir.) (expired preliminary injunctions on appeal are non-justiciable)
Frederiksen v. City of Lockport, 384 F.3d 437 (7th Cir.) (jurisdictional dismissals are without prejudice on the merits)