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United States v. Commonwealth of Pennsylvania

argued: February 24, 1976.

UNITED STATES OF AMERICA, (PLTF. IN D.C.)
v.
COMMONWEALTH OF PENNSYLVANIA; MILTON J. SHAPP, GOVERNOR OF THE COMMONWEALTH OF PENNSYLVANIA; HELENE WOHLGEMUTH, SECRETARY OF THE DEPARTMENT OF PUBLIC WELFARE OF THE COMMONWEALTH OF PENNSYLVANIA; PAUL SMITH, SECRETARY OF THE DEPARTMENT OF LABOR AND INDUSTRY OF THE COMMONWEALTH OF PENNSYLVANIA; DR. J. FINTON SPELLER, SECRETARY OF THE DEPARTMENT OF HEALTH OF THE COMMONWEALTH OF PENNSYLVANIA, (DEFTS. IN D.C.) MILTON J. SHAPP, GOVERNOR; HELENE WOHLGEMUTH, SECRETARY, DEPARTMENT OF PUBLIC WELFARE; PAUL SMITH, SECRETARY, DEPARTMENT OF LABOR AND INDUSTRY; J. FINTON SPELLER, SECRETARY OF THE DEPARTMENT OF HEALTH OF THE COMMONWEALTH OF PENNSYLVANIA, (PLTFS. TO COUNTERCLAIM IN D.C.) V. UNITED STATES OF AMERICA, CASPAR W. WEINBERGER, SECRETARY OF THE DEPARTMENT OF HEALTH, EDUCATION AND WELFARE; WILLIAM E. SIMON, SECRETARY, DEPARTMENT OF THE TREASURY; FRANK C. CARLUCCI, UNDERSECRETARY OF THE DEPARTMENT OF HEALTH, EDUCATION AND WELFARE; GORHAM L. BLACK, JR., REGIONAL DIRECTOR, REGION III, DEPARTMENT OF HEALTH, EDUCATION AND WELFARE; ALWYN L. CARTY, REGIONAL COMMISSIONER, REGION III, SOCIAL AND REHABILITATIVE SERVICES, (DEFTS. TO COUNTERCLAIM IN D.C.) COMMONWEALTH OF PENNSYLVANIA; MILTON J. SHAPP, GOVERNOR OF THE COMMONWEALTH OF PENNSYLVANIA; HELENE WOHLGEMUTH, SECRETARY OF THE DEPARTMENT OF PUBLIC WELFARE OF THE COMMONWEALTH OF PENNSYLVANIA; PAUL SMITH, SECRETARY OF THE DEPARTMENT OF LABOR AND INDUSTRY OF THE COMMONWEALTH OF PENNSYLVANIA; DR. J. FINTON SPELLER, SECRETARY OF THE DEPARTMENT OF HEALTH OF THE COMMONWEALTH OF PENNSYLVANIA, (DEFTS. IN D.C.) AND MILTON J. SHAPP, GOVERNOR; HELENE WOHLGEMUTH, SECRETARY, DEPARTMENT OF PUBLIC WELFARE; PAUL SMITH, SECRETARY, DEPARTMENT OF LABOR AND INDUSTRY; J. FINTON SPELLER, SECRETARY OF THE DEPARTMENT OF HEALTH OF THE COMMONWEALTH OF PENNSYLVANIA, (PLTFS. TO COUNTERCLAIM IN D.C.), APPELLANTS



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (D.C. Civil No. 74-860).

Adams, Hunter and Garth, Circuit Judges.

Author: Hunter

HUNTER, Circuit Judge:

We review on this appeal the district court's denial of a preliminary injunction sought by certain officials of the Commonwealth of Pennsylvania to enjoin and restrain the United States from withholding federal funds allegedly due the Commonwealth. Our review of a grant or denial of a preliminary injunction is limited to determining whether there has been an abuse of discretion, an error of law or a clear mistake in the consideration of the proof. National Land & Investment Co. v. Specter, 428 F.2d 91, 95 (3d Cir. 1970). We find no abuse, error or mistake, and, accordingly, affirm.

This action was originally commenced on October 11, 1974 by the United States against the Commonwealth of Pennsylvania and various of its officials, including the Governor, (the "Officials"). In its complaint, the United States alleged that the Commonwealth and the Officials had failed to carry out their supervisory obligations under federal Medicaid*fn1 and Medicare*fn2 programs with respect to surveying and certifying private skilled nursing facilities for compliance with federal fire-safety guidelines.*fn3 The complaint sought an order in the nature of a mandamus to compel the Commonwealth and the Officials to perform their obligations under the federal programs.

On November 1, 1974, the Commonwealth and the Officials filed an answer to the complaint, and the Officials, but not the Commonwealth, asserted a counterclaim seeking to compel the United States, the Secretary of the Department of Health, Education and Welfare ("HEW") and various other federal officials to cease withholding federal funds that the Officials alleged were due the Commonwealth under the Medicaid program. HEW had first deferred and later "disallowed" approximately $12 million in claims for federal financial participation in payments made by the Commonwealth to certain private skilled nursing facilities*fn4 because, according to HEW, at the time payments were made the facilities lacked valid current provider agreements due to their noncompliance with the Life Safety Code.*fn5 The Officials asserted that the withholding of these funds was improper because HEW had approved or acquiesced in "interim provider agreements" in which the Commonwealth sought to bring these facilities into compliance with the fire-safety requirements and, alternatively, because the funds had been withheld without prior notice and a "conformity hearing" as required by 42 U.S.C. ยง 1396c.*fn6

On June 5, 1975, the Officials filed a motion for a preliminary injunction seeking to enjoin the counterclaim defendants from withholding the Medicaid funds. On August 12, 1975, the district court denied the motion for preliminary injunctive relief. After reviewing the elements necessary for the issuance of a preliminary injunction, the court concluded that even accepting arguendo the testimony and evidence presented by the Officials, it was insufficient to establish a likelihood of success on the merits. In the court's opinion, the Officials failed "to submit any evidence or convincing legal argument that there exists a clear duty on the part of the counterclaim defendants to release the funds (or to have conducted a hearing prior to the withholding)." App. at 280a.

While we agree that the motion for a preliminary injunction was properly denied, and hence affirm, we do so for a reason other than that relied on by the district court.*fn7 In our opinion, the Officials failed to demonstrate irreparable injury pendente lite absent the injunction. We neither reach, nor express an opinion on, the question whether the Officials demonstrate a reasonable probability of succeeding on the merits of their claim that the counterclaim defendants wrongfully withheld Medicaid funds from the Commonwealth.*fn8

We have often emphasized that an essential prerequisite to the grant of a preliminary injunction is a showing by the movant of irreparable injury pendente lite if the relief is not granted. E.g., Ammond v. McGahn, 532 F.2d 325, slip op. at 8 (3d Cir. 1976); A. O. Smith Corp. v. FTC, 530 F.2d 515, slip op. at 23 (3d Cir. 1976); Oburn v. Shapp, 521 F.2d 142, 147, 150-51 (3d Cir. 1975); Delaware River Port Authority v. Transamerican Trailer Transport, Inc., 501 F.2d 917, 919-20 (3d Cir. 1974); Croskey Street Concerned Citizens v. Romney, 459 F.2d 109, 112 (3d Cir. 1972) (Aldisert, J., concurring). The key aspect of this prerequisite is proof that the feared injury is irreparable; mere injury, even if serious or substantial, is not sufficient. A. O. Smith Corp. v. FTC, supra.*fn9

Although the Officials have alleged injury resulting from the withholding, we are not satisfied that the alleged injury is irreparable.*fn10 Testimony at the hearing on the motion for the preliminary injunction established that the nursing facilities in question were fully reimbursed by the Commonwealth for the claims involved and that the Commonwealth continues to receive federal financial participation in payments made to eligible skilled nursing facilities. App. at 192a-93a. The Commonwealth was deprived of a certain amount of funds ($12,687,974 or $15,027,000) which it would have had but for the withholding. However, that loss of a discrete amount of funds in an earlier fiscal year does not rise to the level of irreparable injury.*fn11 If the Officials eventually succeed on their counterclaim, an order mandating the release of the withheld funds would result in the Commonwealth obtaining monies in an ascertainable amount.

The Officials contend that the withholding has made it impossible for the Commonwealth to consider an increase in the rate of payment to providers of nursing home care. There was testimony that the current rate of payment by the Commonwealth ($20 per diem) is inadequate to meet the actual costs of nursing home care and that the effect of this inadequate rate of payment is to limit the opportunity of persons eligible for medical assistance to receive such care in private facilities. App. at 190a, 191a. In addition, there was testimony that the release of the funds in question "could conceivably" result in an increase in the rate to as much as $26 per diem. Id. at 192a.

While we are not insensitive to the plight of private nursing facilities in Pennsylvania and of the Medicaid patients who seek nursing home care in these facilities, it is our view that any effect which the withholding in question has on the Commonwealth's ability to raise its reimbursement rates does not constitute irreparable injury. Under the Medicaid program a state is free to raise its rate of reimbursement to any level it desires; the federal government must then contribute matching funds on all valid expenditures. Id. at 218a. There was no evidence that the federal government would refuse to match an increase in reimbursement by the Commonwealth. Further, even if the counterclaim defendants did immediately release the monies in question it would only temporarily increase Pennsylvania's revenue while any meaningful and continuing increase in the reimbursement rate to nursing homes would require a longer term commitment of funds by the Commonwealth.*fn12

Thus, for the reasons set forth above, the order of the district court denying the motion of the counterclaim plaintiffs for a ...


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