The petitioner, Park Manor, a nursing home, asks us to reverse the denial by HHS’s Departmental Appeals Board of an award of attorneys’ fees under two provisions of the Equal Access to Justice Act, 5 U.S.C. §§ 504(a)(1) and (4). We have jurisdiction because, had Park Manor lost before the Board and sought judicial review, we would have had jurisdiction of that review proceeding. 42 U.S.C. § 1320a-7a(e).
The first subsection of section 504(a) provides that “an agency that conducts an adversary adjudication shall award, to a prevailing party other than the United States,” the party’s reasonable attorney’s fees unless the government’s position was “substantially justified.” An agency within the Department of Health and Human Services called CMS (Centers for Medicare & Medicaid Services) is responsible for making sure that nursing homes that receive reimbursement under the Medicare program comply with the various rules that HHS has issued for the protection of the residents of nursing homes.
Fairfax Nursing Home, Inc. v. HHS,
Inspections' of Park Manor conducted by the Wisconsin health agency in 2001 yielded a 123-page report to CMS. The agency had found 28 violations. CMS responded by imposing temporary sanctions but later suspended them because Park Manor was back in compliance. By the time the case came before the administrative law judge for a determination of the validity of the charges and the possible imposition of permanent sanctions, CMS had dropped all but seven of the charges. The administrative law judge dismissed two more on summary judgment. He then decided that if he sustained just one of the five remaining charges, this would support the sanctions that CMS was seeking and he wouldn’t have to consider the other four charges. So he picked one, sustained it, and disregarded the rest. The Departmental Appeals Board reversed the ruling sustaining the one charge, but declined to remand the case for the administrative law judge to rule on the other four charges because CMS had not made an issue before the Board of the administrative law judge’s declining to consider them.
That would have ended the proceeding had not Park Manor sought reimbursement under the Equal Access to Justice Act of $289,000 in attorneys’ fees. The
The Board ruled that it did not have to review the merits of the 21 charges that CMS had dropped before the hearing conducted by the administrative law judge. It ruled that way because it rejected Park Manor’s contention that “CMS may not reasonably rely on state survey findings in making its remedy decisions but must investigate—or look behind—those findings to verify their correctness before deciding to impose remedies.” The Board said that “this premise is inconsistent with the enforcement process.... Reliance by CMS on state survey findings is precisely what this process permits and encourages. Requiring CMS to investigate every facility before imposing remedies would frustrate the goals of protecting residents and encouraging facilities to correct quickly any deficiencies that jeopardize resident health and safety.” Id.
The Board found that all but one of the charges that CMS had ultimately pursued were' substantially justified by the information contained in the detailed report of Wisconsin’s health agency. That finding is supported by substantial evidence and thus binds us. But that leaves the other 21 charges, the ones CMS dropped before the hearing. If any of those charges were not substantially justified, Park Manor is entitled to be reimbursed for the portion of its attorney’s fees that is reasonably allocable to them.
EuroPlast, Ltd. v. NLRB,
HHS must show that CMS was substantially justified in taking the steps it took that led up to the formal proceeding before the administrative law judge, as well as in the steps it took in that proceeding. 5 U.S.C. § 504(b)(1)(E);
United States v. Hallmark Construction Co.,
Park Manor argues that the state agency’s reports are one-sided, non-adversary, and therefore unreliable. It might as well argue that the government cannot put a person to the expense of defending against' a criminal charge on the basis of a grand jury’s indictment, as proceedings before a grand jury are one-sided too; an indictment establishes probable cause to believe the defendant guilty of crime, and no more is required to justify instituting a criminal proceeding. The state agency’s report of violations establishes probable cause for CMS to impose interim sanctions and seek permanent ones, and no more is required to establish substantial justification under section 504(a)(1).
Park Manor Nursing Home v. Centers for Medicare & Medicaid Services, supra; Harmony Court v. Centers for Medicare & Medicaid Services,
DAB No. 1968,
Park Manor has another arrow in its quiver. Section 504(a)(4) provides that if “the demand [made of a party] by the agency is substantially in excess of the decision of the adjudicative officer and is unreasonable when compared with such decision, under the facts and circumstances of the case,” the party is entitled to the attorneys’ fees that it reasonably incurred in resisting the demand. Park Manor argues that since HHS awarded the government no relief at all, CMS’s demand for sanctions must have been “substantially in excess of the decision” and “unreasonable when compared with”- the decision.
Park Manor admits that this interpretation would undercut the “substantially justified” standard of subsection (1) by giving litigants a second bite at the same apple under a different (but seemingly not a more demanding) standard. The sensible interpretation, which avoids this anomaly, confines subsection (4) to the case in which the government prevails but the relief it obtains is meager in comparison to the relief it had sought.
American Wrecking Corp. v. Secretary of Labor, supra,
The petition for review is
Denied.