Woodruff, Randall L. v. Mason, Jo Ann ( 2008 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 07-2240
R ANDALL L. W OODRUFF, as Bankruptcy Trustee
for L EGACY H EALTHCARE, INC.,
Plaintiff-Appellant,
v.
JO A NN M ASON, G ERALD C OLEMAN, S UZANNE H ORNSTEIN ,
C LARA M C G EE, K AREN P OWERS, R OBERT S TARK , M ARGARET
E LLIS, A VONA C ONNELL and K AREN D AVIS,
Defendants-Appellees.
____________
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 00 C 306—Larry J. McKinney, Judge.
____________
A RGUED F EBRUARY 13, 2008—D ECIDED S EPTEMBER 5, 2008
____________
Before C UDAHY, P OSNER and E VANS, Circuit Judges.
C UDAHY, Circuit Judge. Legacy Healthcare, Inc. (Legacy)
and its predecessor, Community Care Centers, Inc. (Com-
munity), operated a number of long-term care facilities
in Indiana. On February 18, 2000, Legacy brought this
action under 42 U.S.C. § 1983, alleging that employees of
2 No. 07-2240
the Indiana Family and Social Services Administration
(FSSA) and the Indiana State Department of Health (ISDH)
violated its rights under the First Amendment and Four-
teenth Amendment.1 The FSSA administers Indiana’s
Medicaid program through its Office of Medicaid Policy
and Planning (OMPP); the ISDH is the state agency
authorized to inspect care facilities and determine their
compliance with federal Medicaid regulations. Legacy
believes that FSSA employees developed an antipathy
toward Legacy and Community after years of contentious
litigation between the parties. It claims that the FSSA
convinced the ISDH to use its regulatory authority to
launch a predatory enforcement campaign aimed at
driving Legacy out of business. According to Legacy, this
predatory enforcement constituted First Amendment
retaliation and violated the Equal Protection Clause. The
district court granted summary judgment in favor of
Defendants on all counts. We now affirm.
I.
The record in this case is voluminous. Any reader
interested in a complete exposition of the facts is referred
to the district court’s lengthy background discussion. See
Woodruff v. Wilson, 484 F. Supp. 2d 876, 880-925 (S.D. Ind.
2007). We recite only the facts that are necessary to our
decision, and we read these facts, wherever possible, in
the light most favorable to Legacy.
1
On August 12, 2003, Randall L. Woodruff, the trustee in
Legacy’s bankruptcy proceeding, was substituted as the
real party in interest.
No. 07-2240 3
Legacy and Community have been locked in litigation
with the FSSA for years. In 1988, Community brought a
challenge to state Medicaid reimbursement rules in
Indiana state court. Community convinced the Delaware
County Superior Court to issue an injunction requiring
the Indiana Department of Public Welfare (IDPW) 2 to pay
Community a higher reimbursement rate during the
pendency of the litigation. The case was then moved to
Blackford County Superior Court, which ruled in favor
of Community on the merits. The IDPW appealed, and
the case was consolidated with a large class action suit
that challenged the same reimbursement rules. See
Indiana State Bd. of Pub. Welfare v. Tioga Pines Living Center,
Inc., 622 N.E.2d 935 (Ind. 1993). The cases were trans-
ferred directly to the Indiana Supreme Court, which
reversed the lower courts and upheld the regulations. Id.
Karen Davis, an attorney for the FSSA who had been
involved in the litigation since 1990, went back to
Blackford County court to recoup the millions of dollars
paid to Community under the erroneous injunction. The
FSSA argued that Community had been unjustly enriched
by the injunction and had been misusing Medicaid funds.
Community argued that it had not been unjustly enriched
because it spent all of the money on patient care. In the
end, the FSSA’s recoupment attempts were unsuccessful.
Community also sued the IDPW in federal court over
Medicaid reimbursement for its Hamilton Heights facility
(later known as New Horizon). Hamilton Heights was a
2
The IDPW was the predecessor to the FSSA, which was
created in 1991.
4 No. 07-2240
skilled nursing facility (SNF) that was in the process of
being converted into an intermediate care facility for the
mentally retarded (ICF/MR). An ICF/MR is required to
provide a higher level of care than an SNF and is therefore
reimbursed at a higher rate. Community sued the IDPW,
arguing that it should be paid the higher ICF/MR reim-
bursement rate while it underwent its conversion. Com-
munity again obtained a preliminary injunction and the
IDPW again paid a substantial amount of additional
reimbursement ($1,783,480.20). The district court also ruled
for Community on the merits, but we reversed. See Lett v.
Magnant, 965 F.2d 251 (7th Cir. 1992). The FSSA attempted
to recoup some of excess reimbursement paid to Hamilton
Heights by withholding payment for current services.
Community was able to avoid the recoupment attempts, in
part by arguing that the recoupment would cause immi-
nent business failure. Family and Social Servs. Admin. v.
Cmty. Care Centers, Inc., 641 N.E.2d 1012 (Ind. Ct. App.
1994). The FSSA’s subsequent attempts to recoup the
money also failed. See Cmty. Care Centers, Inc. v. Sullivan,
701 N.E.2d 1234 (Ind. Ct. App. 1998).
Legacy also litigated with state agencies over whether
the FSSA was required to recognize Legacy as the owner
of Community facilities after Douglas Bradburn, Legacy’s
President, acquired all of his parents’ business assets in
October 1993. The FSSA eventually entered into a joint
stipulation with Legacy, settling the issue. Davis allegedly
became “visibly angry” when she learned of this
result, presumably because the transfer of the business
operations to Legacy prevented the ISDH from re-
couping funds by automatically deducting them from
payments for current services.
No. 07-2240 5
In 1996, ISDH initiated proceedings against Legacy’s
North Vernon facility for decertification. During adminis-
trative proceedings seeking the decertification of North
Vernon, Legacy discovered that on November 6, 1996,
Beverly Craig of the ISDH had called a meeting, which
included officials from the FSSA and the Attorney Gen-
eral’s office, regarding the state of health care at Legacy
facilities. The attendees included Davis, Jo Anne Mason,
Suzanne Hornstein, Gerald Coleman and others. 3 Craig
later testified that she called the meeting because she
was concerned that Legacy was failing to provide ade-
quate care at a number of different facilities.
Legacy claims that it had a perfect record of compliance
with state regulations over the first thirty-two years of
its operation, easily passing inspections and enjoying a
good reputation with the public. Following the November
6, 1996 meeting, however, there was a “deluge” of alleg-
edly predatory enforcement actions: 12 jeopardy charges,
14 licensure actions and 14 decertifications over the next
three years.4 Legacy believes that the subsequent enforce-
3
Suzanne Hornstein was the Division Director of Long Term
Care at the ISDH. Coleman was the Director of Risk Manage-
ment for the Regulatory Services of the ISDH, but assisted as
counsel on the 1996 licensure action against North Vernon.
Mason was employed as a Deputy Attorney General from
July 1995 to December 1997, when she became the Director of
Legal Affairs at the Indiana State Department of Health,
where she remained until December 2000.
4
From January 1, 1995 to March 8, 2004, ISDH cited 405
instances of substandard quality of care, 9 of which were at
(continued...)
6 No. 07-2240
ment campaign, which allegedly included the manipula-
tion of survey findings, was designed to drive Legacy out
of business. Legacy points to three specific examples:
(1) the withholding of North Vernon’s copy of its license;
(2) the manipulation of 180-day cycles; and (3) the de-
certification of New Horizon on the basis of a single
standard. We will explain these actions briefly.
The dispute over the decertification of North Vernon was
eventually completed in April 1997. ISDH conducted a
number of recertification surveys over the next few
months; Legacy was then recertified. But Legacy never
received the physical copy of its license. Despite numerous
calls to ISDH, Legacy was unable to obtain a copy of its
license. On March 17, 1998, Legacy received its annual
renewal application; the application was processed but,
again, no copy of the license was issued. Because Legacy
never received the license, the facility was never certified
for Medicare. At a meeting in 1998 between Legacy, the
ISDH and an official from the Health Care Financing
Administration (HCFA), Hornstein stated that the license
was not delivered because it was “in litigation.” Years
later, she testified that she was not aware that North
Vernon had not been given its license, explaining that
she assumed that it had been.
4
(...continued)
Legacy facilities. During the same period, ISDH found 36
instances of immediate jeopardy at ICR/MR facilities, two
of which were at New Horizon. From 1996 to March 2004, ISDH
filed 209 license revocation actions, sixteen of which were
against Legacy facilities. It also issued 449 citations, 17 to Legacy
facilities.
No. 07-2240 7
The ISDH is responsible for conducting surveys at long-
term care facilities. When a survey reveals a deficiency,
a 180-day cycle begins during which the facility must
correct the deficiency or face decertification: if the defi-
ciency is corrected, the cycle ends; if the deficiency is not
corrected, additional surveys are undertaken and the 180-
day cycle continues to run. Legacy claims that Hornstein
broadened the scope of surveys at Legacy facilities to
wrongfully keep it out of compliance. Specifically, Legacy
asserts that the 180-day cycle was improperly applied at
Legacy’s Portland East facility in 1997, 1998 and 1999, at
Columbus in 1998 and 1999, at New Castle in 1998, at
Portland West in 1998 and at North Vernon in 1998.
Legacy also alleges that Hornstein and Coleman improp-
erly decertified the New Horizon facility in 1998 for its
failure to comply with a single “standard of participation.”
In early 1998, Hornstein and Coleman issued a notice
of decertification to New Horizon; the decertification
notice was based upon a recently conducted survey of the
facility which had found three deficiencies involving
“standards of participation.” Two of these deficiencies
were apparently corrected, but the decertification action
proceeded nonetheless. Legacy believes that this was
improper. Legacy claims that its “comprehensive study” of
the fifteen ICF/MRs operating in Indiana revealed that
eight other facilities had been certified even though they
had standard-level deficiencies.
Legacy filed its complaint for injunctive relief and
damages on February 18, 2000. The district court denied its
motion for a preliminary injunction on March 6, 2000.
Legacy filed its First Amended Complaint on April 17,
8 No. 07-2240
2000. The defendants filed their motion for summary
judgment on August 16, 2004. On April 27, 2007, the
district court granted the defendants’ motion for sum-
mary judgment. This appeal follows.
II.
We review a grant of summary judgment de novo. See
Wyninger v. New Venture Gear, Inc., 361 F.3d 965, 974 (7th
Cir. 2004). Summary judgment is appropriate only if “there
is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.”
F ED. R. C IV. P. 56(c). We construe facts in the light most
favorable to the non-moving party but “we are not re-
quired to draw every conceivable inference from the
record.” Bell v. Duperrault, 367 F.3d 703, 707 (7th Cir. 2004)
(quoting McCoy v. Harrison, 341 F.3d 600, 604 (7th Cir.
2003)). Instead, we draw only reasonable inferences. See
McDonald v. Village of Winnetka, 371 F.3d 992, 1001 (7th
Cir. 2004).
On appeal, Legacy argues that it produced enough
evidence to create a material issue of fact as to both its
First Amendment retaliation claim and its equal pro-
tection claim.5 At oral argument, counsel for Legacy
conceded, wisely we think, that the “heart” of the First
5
Legacy does raise a third claim—that the Defendants entered
into a civil conspiracy to violate its constitutional rights. This
claim is predicated on the same facts as the other two claims,
and it rises and falls with them.
No. 07-2240 9
Amendment retaliation claim was the November 6, 1996
meeting. Legacy claims that it was at this “clandestine
summit meeting” that Davis and Mason, who worked
at the FSSA, persuaded Hornstein and Coleman of the
ISDH to launch a predatory enforcement campaign
against Legacy in retaliation for Legacy’s exercise of its
First Amendment right to petition the courts.6 Even if the
ISDH’s predatory enforcement campaign was not moti-
vated by a spirit of retaliation, Legacy claims that the
ISDH’s intentional manipulation of regulatory rules was
so arbitrary and irrational that it violated the Equal
Protection Clause.7
Ultimately, both of these arguments fail. Legacy’s First
Amendment claim fails because Legacy has not established
that the FSSA was actually aggravated by the reimburse-
ment litigation, or that the FSSA was the guiding hand
behind the ISDH’s enforcement actions. Legacy’s equal
protection claim fails because it has failed to indicate
similarly situated facilities to which it can be compared
and because it has failed to sufficiently state the factual
basis of its claims. We will first discuss the First Amend-
ment claim; we then discuss the equal protection claim,
6
In their brief on appeal, the Plaintiffs dropped any First
Amendment retaliation claims against anyone other than
Davis, Hornstein, Coleman and Mason.
7
The only defendants to the equal protection claim are
Hornstein, Coleman and McGee. Thus, it appears that Legacy
has abandoned all claims against Powers, Stark, Ellis and
Connell.
10 No. 07-2240
which we divide in three parts to reflect Legacy’s three
main arguments on appeal.8
III.
The First Amendment right to petition the govern-
ment for the redress of grievances extends to the courts in
general and applies to litigation in particular. See California
Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510,
92 S. Ct. 609, 30 L. Ed. 2d 642 (1972); NAACP v. Button, 371
U.S. 415, 429-30, 83 S. Ct. 328, 9 L. Ed. 2d 405 (1963). Leg-
acy’s numerous challenges to the state regulatory scheme
throughout the 1980s and 1990s would, therefore, appear
to be protected activities. See, e.g., Powell v. Alexander, 391
F.3d 1, 20 (1st Cir. 2004). Legacy believes that the FSSA
developed a growing hostility toward it as a result of the
reimbursement litigation. Not only was Legacy was “a
thorn” in the FSSA’s side, the FSSA was also unable to
recoup the millions of dollars paid to Legacy under
erroneous injunctions. According to Legacy, the FSSA
turned to the ISDH and persuaded it to drive Legacy out
of business.
8
We note that Legacy includes a lot of information in its
statement of facts that it fails to develop in the argument section
of its brief. It is not enough “merely to refer generally to these
actions in [the] statement of facts.” Ajayi v. Aramark Business
Services, Inc., 336 F.3d 520, 529 (7th Cir. 2003). Legacy must
“raise [the issue] in the argument section of [its] brief, and
support [its] argument with pertinent legal authority.” Id.
No. 07-2240 11
To establish a prima facie case of First Amendment
retaliation, Legacy must establish that (1) it engaged in
activity protected by the First Amendment, (2) it suffered
a deprivation that would likely deter First Amendment
activity in the future, and (3) the First Amendment
activity was a “at least a motivating factor” in the Defen-
dants’ decision to take the retaliatory action. Massey v.
Johnson, 457 F.3d 711, 716 (7th Cir. 2006). The defendants
concede that Legacy’s challenges to the state regulatory
scheme constituted protected activity under the First
Amendment. Neither the parties nor the district court
discuss the second element in detail. We need not dwell
on it here. Instead we focus, as the parties do, on the
third element.
The third element of a First Amendment retaliation
claim is the element of causation. Legacy must show “a
causal link between the protected act and the alleged
retaliation.” Roger Whitmore’s Automotive Servs., Inc. v. Lake
County, Illinois, 424 F.3d 659, 669 (7th Cir. 2005); accord
Spiegla v. Hull, 371 F.3d 928, 941 (7th Cir. 2004). Legacy
does not need to show that its litigation history was the
only factor that motivated the defendants but it must
show that it was “a motivating factor.” Spiegla, 371 F.3d at
942. The evidence used to establish this element may
be either direct or circumstantial. Id.
It becomes immediately clear that Legacy’s causation
theory will not be straightforward. The retaliatory action
allegedly suffered by Legacy was the predatory enforce-
ment campaign undertaken by the ISDH. The protected
litigation activity, however, involved Legacy and the
12 No. 07-2240
FSSA. To establish a retaliatory motive, therefore, Legacy
must show that the FSSA’s antagonism toward Legacy
was a motivating factor in the ISDH’s predatory enforce-
ment campaign. Legacy has no evidence that ISDH officials
were distressed in the slightest by Legacy’s challenges
to the reimbursement rates. Similarly, Legacy has almost
no evidence that FSSA officials participated in the
alleged predatory enforcement campaign. Thus, Legacy
must show that the FSSA convinced the ISDH to retaliate
against Legacy on its behalf. To do this, Legacy must first
establish the FSSA officials wanted to retaliate against
Legacy for the reimbursement litigation with Legacy.
Legacy must then show that the FSSA communicated
its hostility to the ISDH.
Legacy has a difficult time establishing that the FSSA
developed any hostility toward it at all. Legacy’s best
argument that the agency had become hostile toward it
is the fact that the FSSA failed to recoup millions of
dollars paid to Legacy under the injunctions. While this
fact provides important context for Legacy’s story, it is
not sufficient as a basis for the ascription of a retaliatory
motive to the state agency. It is not enough simply to
show that the state agency could have been frustrated
by the inability to recoup the money; there must be some
persuasive evidence that suggests that the agency was
actually hostile.
It bears repeating here that “[n]ursing homes are a
highly regulated industry, and some tension between
operators of homes and regulators is to be expected, as
are occasional adversarial proceedings.” Blue v. Koren,
No. 07-2240 13
72 F.3d 1075, 1084-85 (2d Cir. 1995). If the natural tensions
that result from adversarial proceedings and regulatory
enforcement actions sufficed to establish evidence of
retaliatory motive, then the regulatory scheme could very
well be undermined. State enforcement agencies have
every right to vigorously enforce the law. Legacy’s evi-
dence must suggest something beyond the typical “antag-
onism that arises between a regulator and a regulated (a
relationship easily inflamed by difficult personalities).”
Beechwood Restorative Care Center v. Leeds, 436 F.3d 147, 154
(2d Cir. 2006). It does not. The sole piece of concrete
evidence offered by Legacy is Bradburn’s observation
that Davis became “visibly angry” when she learned
that the ISDH had entered into a joint stipulation with
Legacy. Davis’ alleged outburst of anger, however, was
an isolated incident; it does not reflect any sustained
hostility on the part of the ISDH.
Even if Legacy has no direct evidence of hostility,
Legacy believes that the circumstances surrounding the
November 6, 1996 meeting of FSSA and ISDH officials
were so unusual that one could reasonably infer that
something malevolent was afoot. (We note here that
Legacy has no evidence that the officials who attended the
November 6, 1996 meeting actually discussed a predatory
enforcement campaign against Legacy; their argument is
entirely circumstantial.) First of all, Legacy argues that
there was no reason that FSSA officials should have been
at the meeting. More importantly, Legacy stressed that
the meeting provided Davis and Mason an opportunity
to convince the ISDH to launch a predatory enforcement
campaign and to discuss the details of that campaign.
14 No. 07-2240
Legacy also notes that a “deluge” of violations and en-
forcement actions immediately followed.
Legacy’s theory is severely undermined by the fact that
it was an ISDH official, Beverly Craig, who called the
meeting—not Davis. Craig testified that she called the
meeting because North Vernon was already in decerti-
fication proceedings and because she had serious con-
cerns about the health of patients in two Legacy facilities.
The district judge below found that there was
“uncontroverted evidence” that Legacy’s North Vernon
facility was having difficulties meeting government
standards of care.
Legacy seems to believe that the very fact that other
agencies were present at the meeting provides reason to
be suspicious. It points out that the FSSA has no role in
the ISHA’s enforcement of quality of care regulations
and the ISDH has no role in the FSSA’s administration
of the Medicaid reimbursement program. But there is
nothing wrong with state agencies working together to
solve problems, and it is clear that each of the agencies
present at the meeting had a legitimate interest in the case.
Specifically, Craig explained that FSSA officials were
present because there was a possibility that the facility was
being reimbursed for services it did not provide, which
would obviously be of interest to the FSSA. The FSSA was
also present because it would have to terminate pay-
ments in the event of any decertification. Craig explained
that Mason, who worked at the time in the Attorney
General’s office, was present because there would likely
be issues with enforcing any decertification actions.
Legacy does not address any of these points.
No. 07-2240 15
Instead, Legacy argues that the Defendants’ attempt to
suppress evidence of the meeting reveals that there was
something to hide. Legacy points to the Defendants’ initial
reluctance to answer questions about the meeting, the
Defendants’ inability to remember details of the meeting
and a false answer to an interrogatory filed by Coleman
that denied that the meeting took place. The Defendants’
reluctance to discuss the meeting is easily explained by
the fact that Legacy’s inquiries into the meeting were
made during its administrative appeal of the ISDH’s
decertification action at North Vernon. The parties were
in an adversarial relationship at the time and, when
Legacy pressed for deposition testimony, counsel for
ISDH raised an objection based on attorney-client privilege.
Craig and Hornstein did end up testifying about the
meeting. Legacy also finds it incredible that the partici-
pants later professed that they did not remember the
details of the meeting. Legacy is here referring to deposi-
tion testimony taken in 2006—ten years after the alleged
meeting. Lapses of memory are to be expected when
that much time passes.9
Legacy’s best evidence is that, during the administrative
proceedings regarding North Vernon’s decertification,
Coleman signed a false interrogatory that denied that
the meeting had taken place. Just ten days after the meet-
ing took place, Legacy asked whether the FSSA and ISDH
had contacted each other regarding North Vernon.
9
Legacy’s resort to the “adverse inference” rule, see, e.g., P.R.
Mallory & Co. v. NLRB, 400 F.2d 956 (7th Cir. 1968), is unavailing.
16 No. 07-2240
Coleman answered, “Not to our knowledge.” When
Hornstein was asked at her deposition whether this
was true, she conferred with Coleman, who admitted it
to be an “error.” This evidence is certainly not to be
scoffed at. But given the adversarial posture of the
inquiry, the subsequent correction and Legacy’s failure
to prove so many other aspects of its theory, we do not
believe that this mistake alone can establish a retaliatory
motive. Without a retaliatory motive, the First Amend-
ment claim fails.
IV.
Even if Legacy cannot show that the ISDH’s predatory
enforcement campaign was in retaliation for Legacy’s
exercise of its First Amendment rights, Legacy argues
that the campaign was so irrational and arbitrary that it
violated the Equal Protection Clause. This is, of course, the
well-known “class of one.” Village of Willowbrook v. Olech,
528 U.S. 562, 564 120 S. Ct. 1073, 145 L. Ed. 2d 1060 (2000)
(per curiam). The Equal Protection Clause “secure[s] every
person within the State’s jurisdiction against intentional
and arbitrary discrimination, whether occasioned by
express terms of a statute or by its improper execution
through duly constituted agents.” Id. “The paradigmatic
‘class of one’ case . . . is one in which a public official, with
no conceivable basis for his action other than spite or
some other improper motive (improper because unre-
lated to his public duties), comes down hard on a hapless
private citizen.” Lauth v. McCollum, 424 F.3d 631, 633 (7th
Cir. 2005). Because “endless vistas of federal liability,” id.,
No. 07-2240 17
are opened when the misapplication of local law becomes
a “federal case,” McDonald, 371 F.3d at 1001, we have
said that it is “difficult” to succeed on a “class of one”
theory. Id.
To establish its “class of one” claim, Legacy must show
that “(1) it has intentionally been treated differently from
other similarly situated facilities; and (2) there is no
rational basis for the difference in treatment or the cause
of the differential treatment is a ‘totally illegitimate ani-
mus’ ” towards it. Maulding Dev., LLC v. City of Springfield,
Illinois, 453 F.3d 967, 970 (7th Cir. 2006) (emphasis added).
In keeping with the “difficult” burden of proof in “class
of one” cases, we have said that similarly situated facilities
necessary to establish the first element must be “prima
facie identical in all relevant aspects.” Purze v. Village of
Winthrop Harbor, 286 F.3d 452, 455 (7th Cir. 2002). Because
the first element is dispositive in this case, we need not
pursue the second.
Legacy’s argues that the following three actions by the
Defendants violated the Equal Protection Clause:
(A) decertifying New Horizon because it violated a
single “standard of participation”; (B) misapplying an
informal cycle-breaking rule when inspecting Legacy
facilities; and (C) refusing to give Legacy’s North Vernon
facility a copy of its license. As we shall explain, the first
instance fails because Legacy has failed to establish that
similarly situated facilities were treated differently. The
second instance, which is essentially an argument that
the ISDH’s unevenly applied an unwritten rule, fails
because Legacy has failed to define the rule with the
18 No. 07-2240
requisite level of clarity. The third instance is insufficient
because Legacy does not adequately establish the
factual basis for its claim. These three examples of viola-
tions of the Equal Protection Clause will be discussed
in turn.
A.
Legacy first alleges that the ISDH wrongfully attempted
to decertify New Horizon based on its failure to comply
with a single “standard of participation.” This action
was improper, Legacy argues, because federal regula-
tions “provide for” certification of facilities with standard-
level deficiencies. Legacy also claims that this decertifica-
tion was unprecedented in Indiana, which proves that
Legacy facilities were being treated differently. We
find, however, that Legacy has failed to show similarly
situated comparators.
Some background is in order. Federal regulations
require facilities participating in Medicare and Medicaid
programs to comply with federal safety regulations. See
42 U.S.C. § 1396a(a)(9),(33). The ISDH has the responsi-
bility to inspect facilities and to enforce those regulations
in Indiana. See 42 C.F.R. § 442.109(a); IND. C ODE § 16-28-12-
1. Not all safety violations, however, are treated in the
same way. For example, a violation of a “condition of
participation” is a much more serious affair than a viola-
tion of a “standard of participation.” In most situations,
the ISDH cannot certify a facility that fails to comply with
a “condition of participation.” See 42 C.F.R. § 442.101(d).
In contrast, the ISDH “may certify” a facility with
No. 07-2240 19
standard-level deficiencies, if certain conditions are met.
See 42 C.F.R. § 442.105. The facility must first submit a
“written plan for correcting the deficiencies,” and the ISDH
must approve that plan. See 42 C.F.R. § 442.105(b). The
ISDH must then ensure that the deficiencies at the
facility do not “jeopardize . . . health or safety” or “seri-
ously limit the facility’s capacity to give adequate care.” See
42 C.F.R. § 442.105(a). If a facility has a history of deficien-
cies, the ISDH must determine whether the facility is
making good-faith efforts to comply, or whether it is
making the best use of its resources. See 42 C.F.R.
§§ 442.105(c), 442.105(d). If all those hurdles are
cleared, then the facility may be certified.
Legacy seems to believe that facilities with standard-
level deficiencies are certified as of right. As we have ex-
plained, this is not the case: facilities with such deficiencies
must satisfy additional criteria before being certified. In
fact, Legacy has not even established that it satisfied all
the necessary requirements. It does not mention whether
it submitted an acceptable plan of correction, whether
the ISDH made a determination about potential harm
to residents at New Horizon or Legacy’s ability to
provide services or whether its history of noncompliance
was a relevant factor. Similarly, Legacy has not presented
any details regarding the eight facilities that were
certified with standard-level deficiencies. These compara-
tors must be identical to Legacy “in all relevant aspects.”
See Purze, 286 F.3d at 455. Without information
regarding the facts that are material to the ISDH’s decision
to certify, we cannot determine that Legacy was treated
20 No. 07-2240
unfairly.10 The fact that the action at North Vernon was
unprecedented is insufficient. As Legacy itself notes, there
are only fifteen ICF/MR facilities in Indiana. It may well
be that the North Vernon facility was the first facility
with standard-level deficiencies to fail to satisfy the
additional requirements for certification. The decertifica-
tion on a single standard, then, does not provide sup-
port for Legacy’s equal protection claim.
B.
Legacy also claims that the ISDH manipulated its “cycle-
breaking methodology” in order to target Legacy
facilities for decertification. Legacy argues that the uneven
application of the cycle-breaking rules reveals the ISDH’s
intent to treat Legacy facilities differently. Unfortunately,
Legacy has provided us with precious little information
about these cycle-breaking rules. What we know of the
rules is gleaned from a fragment of Hornstein’s testimony
and from an email sent by an ISDH supervisor named
Mary Wassel. In the end, we find that Legacy has failed
10
Legacy also relies heavily on a decision from an administra-
tive law judge (ALJ), who found that a standard-level deficiency
was not grounds for terminating Legacy’s certification. It is
unclear whether the ALJ found that it was impermissible, in
principle, to decertify on a single standard-level deficiency
or whether the decertification action in question was not
supported by the record. This is irrelevant, however, because
this portion of the ALJ’s decision was overturned by the
Appeals Panel.
No. 07-2240 21
to explain with sufficient clarity exactly how these rules
are properly applied. In short, Legacy cannot show that
a rule has been unevenly applied when the rule itself
is shrouded in mystery.
Before getting into cycle-breaking, we must know
something about the 180-day decertification cycle. The
ISDH is responsible for determining whether long-term
care facilities “substantially comply” with federal
Medicaid requirements. See 42 C.F.R. § 442.109(a). To
make this determination, the ISDH must perform in-
spections (or “surveys”) and may perform them “as
frequently as necessary to . . . determine whether a facility
complies with the participation requirements.” See 42
C.F.R. § 488.308. When a survey reveals deficiencies
that preclude a finding of substantial compliance, a
facility has six months to rectify the deficiency or face
mandatory decertification. See 42 C.F.R. § 488.412. When a
deficiency is found, the ISDH schedules a post-review
survey to determine whether the deficiency has
been corrected. If the deficiency has been corrected, the
180-day cycle ends. If the deficiency has not been cor-
rected, the 180-day cycle continues to run and additional
surveys are conducted to monitor the facility’s progress
toward compliance. This is the “180-day decertification
cycle.”
Cycle-breaking deals with a narrower situation. It is, in
effect, a derivative of the 180-day decertification cycle. The
standard application of the 180-day cycle becomes com-
plicated when a facility that is in the process of correcting
a previous deficiency is cited with a new, unrelated
22 No. 07-2240
deficiency. The question then arises whether the
facility has 180 days to rectify the new deficiency (that is,
whether the new deficiency starts its own separate cycle)
or whether the facility must rectify both the old and new
deficiencies within the 180-day cycle started by the orig-
inal deficiency. This distinction is very important to the
facilities because if a separate cycle runs with each defi-
ciency, they have more time to bring the facility in ques-
tion into compliance.
Legacy argues that a separate cycle should begin when
the new deficiency has not been previously cited. Legacy
claims that Hornstein ordered surveyors at Legacy facilities
to improperly broaden the scope of follow-up surveys.
These surveys cited new deficiencies that were not cited
in the original surveys. Thus, even if Legacy had cor-
rected the previous deficiencies, the new deficiencies
would keep them out of compliance.
Legacy has not pointed to any federal, state or agency
regulation in which this cycle-breaking rule is codified,
nor has Legacy provided us with any authoritative state-
ment of the rule. Legacy also makes no attempt to derive
the cycle-breaking rule from federal regulations. Our
review of the federal regulations discloses no support
for this rule. The regulations state only that, as long as
the facility is not in “substantial compliance” for six
months straight, it must be decertified. See 42 C.F.R.
§ 488.412. It would not appear to matter, then, whether
it was an old deficiency or a new deficiency that was
keeping the facility out of compliance.
Federal regulations also suggest that there was nothing
“improper” about broadening the scope of the follow-up
No. 07-2240 23
surveys. The ISDH has the authority to conduct surveys
whenever that agency deems it necessary. See 42 C.F.R.
§ 488.308; 42 C.F.R. § 488.20(b)(1), (b)(4). Further, federal
regulations do not place any limitations on the scope
of post-review surveys; when such surveys are per-
formed, the ISDH must determine whether the previous
deficiencies have been corrected and whether the facility
is in “substantial compliance” with federal requirements.
See 42 C.F.R. § 488.30.
It is, of course, possible that the ISDH has an
informal rule regarding cycle-breaking. Legacy believes
that it does, and it points to a small portion of Hornstein’s
testimony, in which she explains her belief that if the
new deficiency is different from the old one, two separate
cycles should run.1 1 Legacy also points to an email sent
11
Hornstein’s testimony was as follows:
Q: I think I can get the cycle thing straight with one more
question. Here it is. A facility has a survey and they are
out of compliance and [a] 180 day cycle starts.
A: Correct.
Q: The surveyors come back for the [post-review survey]
but there’s a new complaint and they go to handle
both of them in the same survey and the [post-survey
review] puts the facility back in compliance. The new
complaint, however, takes them out. Now, has the 180
day cycle that began with that first survey stopped
or not?
A: Depends.
(continued...)
24 No. 07-2240
by an ISDH supervisor to a surveyor, in which the super-
visor explains that “[t]he only time surveys should be
split is when the [post-review survey] and the [complaint
survey] are done together.” But even if Hornstein and
Wassel accurately described the proper application of
the cycle-breaking rule, it would not have applied in
Legacy’s case. In the hypotheticals offered by Hornstein
and Wassel, complaint surveys (a specific type of survey)
were distinguished from certification and post-review
surveys. In fact, Wassel explained that cycles are broken
only when post-review surveys and complaint surveys
are done at the same time. The surveys at Portland East
in 1997 and 1998, at Portland East in 1999, at Columbus
in 1998 and at New Castle in 1998 did not involve com-
plaint surveys that needed to be separated from post-
review surveys. 12 While the Portland West survey did
involve a complaint investigation, the facility was found
11
(...continued)
Q: On what does it depend on?
A: On whether the deficiencies were cited in the second
survey are the same as the ones that are cited in the
[first] survey.
Q: What if they are different?
A: They should stop and start.
When Hornstein was pressed on the cycle-breaking issue, she
stated that she was not certain of the application of the rule
because she was not a surveyor.
12
The actions at Columbus in 1999 and North Vernon in 1998
do not bear upon cycle-breaking at all.
No. 07-2240 25
to be in substantial compliance and the cycle was broken.
Thus, Legacy has no evidence that the cycle-breaking
rule, as explained by Hornstein and Wassel, would have
applied in these cases.
The other evidence of dissimilar treatment presented
by Legacy is anecdotal and unpersuasive. Legacy discusses
two facilities at which it claims the 180-day cycle was
properly applied. The first example is Whispering
Pines, where the ISDH apparently let the cycle run out
because it forgot to do a follow-up survey in time. At
Arbors, Bradburn himself said that he could not deter-
mine whether the 180-day cycle was ever closed; it is
clear, however, that the ISDH initiated an action to
revoke Arbor’s license. This evidence does nothing to
further Legacy’s case.
Despite the fact that it does not appear in any state
or federal regulation, we are willing to assume that the
ISDH did have an informal cycle-breaking rule. But that
rule, as Hornstein and Wassel explained, applies only
when complaint surveys are conducted alongside post-
review surveys. The cycle-breaking rule does not apply
when the scope of a post-review survey is broadened (as
federal regulations clearly allow). Because the examples
cited by Legacy do not involve the situation to which
the rule was intended to apply, Legacy has not shown
that it has been treated unfairly.
C.
We turn now to Hornstein’s alleged failure to provide
26 No. 07-2240
Legacy with a copy of New Horizon’s license.1 3 Legacy
needed a copy of the license to complete its Medicare
reimbursement application. Legacy claims that Hornstein
“refused” to hand over a copy of the license in an
attempt to sabotage Legacy’s ability to obtain Medicare
reimbursement. Legacy claims that no other licensed
facility in Indiana had ever been denied a copy of its
license in such a manner.1 4 We find, however, that Legacy
has failed to establish the factual basis of this claim.
Legacy claims that Hornstein withheld copies of its
New Horizon licenses in 1996, 1997, 1998 and 1999. New
Horizon was re-certified for Medicaid services, effective
July 7, 1997, and a state license was issued for the facility.
Legacy intended to use the state license to complete
its application for Medicare reimbursement. A copy of the
license, however, was never sent to Legacy. Legacy
might not even have realized that it needed a copy of the
13
As the district court noted, there is no evidence that Coleman
withheld or participated in the withholding of the license—he
was merely aware of it, and Legacy has not explained how
an awareness of the withholding makes him liable for an
equal protection violation. It was Hornstein’s responsibility to
send the license to Legacy.
14
Legacy argues that a “comprehensive review of all licensed
facilities in the state indicates that no other similarly situated
(i.e., licensed) facility was ever denied its physical license,” and
it also points to the testimony of Hornstein. Despite Legacy’s
claims, Hornstein never said that no other facility had ever
been denied a copy of its license, only that she was not aware
of one.
No. 07-2240 27
license until October 16, 1997, when Administar Federal,
the Medicare fiscal intermediary, asked Legacy to submit
one. Legacy claims that it contacted “various ISDH and
HCFA employees” about the license but it never specifies
whom, nor does it provide any proof of these requests.
More importantly, Legacy has not explained when—or
indeed if—it ever actually requested a copy of the license
from Hornstein. Legacy claims that it raised the issue in
a November 20, 1997 letter to Robert Spain, the program
director for the Health Care Financing Administration
(HCFA), but a review of that letter reveals otherwise.1 5 The
record reveals that Spain, whom Legacy trusted and
with whom it often communicated, was unaware of the
problem until the parties met on July 23, 1998. Indeed,
Legacy drafted a list of topics to be discussed with Spain
at that meeting but never mentioned the problem with
the physical delivery of the license.
Legacy does note, correctly, that the issue was raised
in the meeting with Spain, a meeting that Hornstein
attended. When Spain asked why Hornstein had not
provided a copy to Legacy, Hornstein said that she did not
send it because Legacy was “in litigation” over certifica-
tion. It is unclear what happened next. In a follow-up
letter sent to Spain after the meeting, Legacy does not
mention the license and instead asks Spain to help ensure
that it receive fair inspections in the future.
15
On March 17, 1998, Legacy received a renewal application
from the ISDH. The application was processed but, again,
Legacy did not receive a copy of its license.
28 No. 07-2240
We are not sure what to make of this evidence. It is
true that Hornstein seemed to have equivocated in her
explanations of why she did not send the license.1 6 She
first claimed that the license had not been issued because
of litigation, and then she claimed that she assumed the
license had issued. Her explanations may be explained by
the fact that she was referring, in the first instance, to
the failure to send the 1996 license and, in the second
instance, to the 1999 licenses. The record is not clear
on this point.
In the end, we find that Legacy’s claim suffers from a
fatal lack of detail. Legacy has not established that
Hornstein was the only one who could have sent it a
copy of the license, nor has it produced any document to
show that it ever requested the license from Hornstein.
Hornstein may have made a mistake in not issuing the
license or may have mistakenly thought that she could
have withheld the license. But this evidence, alone, is not
enough to draw the grand inference that Hornstein vio-
lated Legacy’s rights under the Equal Protection Clause.
Its claim therefore fails.1 7
16
Hornstein also claims that she would have done anything
to revoke the license because the North Vernon facility “could
not maintain compliance and could not take care of its resi-
dents.”
17
Because there was no constitutional violation in this case, we
do not reach the issue of qualified immunity or absolute
immunity. See Hildebrandt v. Illinois Dep’t of Natural Resources,
347 F.3d 1014, 1036 (7th Cir. 2003).
No. 07-2240 29
VI.
For the foregoing reasons, the decision of the district
court is A FFIRMED.
P OSNER, Circuit Judge, concurring. In a series of cases
in the 1960s, the Supreme Court held that the First Amend-
ment, particularly the clauses creating a right to peti-
tion for redress of grievances and an (implied) right
to associate for the advancement of First Amendment
interests, forbids the government to impose unnecessary
restrictions on an association’s assisting its members to
litigate claims. NAACP v. Button, 371 U.S. 415 (1963);
Brotherhood of Railroad Trainmen v. Virginia ex rel. Virginia
State Bar, 377 U.S. 1 (1964); United Mine Workers, District 12
v. Illinois State Bar Association, 389 U.S. 217 (1967). From
those cases, coupled with the rule that government retalia-
tion for the exercise of First Amendment rights is itself
a violation of the First Amendment, e.g., Wilkie v. Robbins,
127 S. Ct. 2588, 2600-01 (2007); Abrams v. Walker, 307 F.3d
650, 654 (7th Cir. 2002), overruled on other grounds by
Spiegler v. Hall, 371 F.3d 928, 941-42 (7th Cir. 2004); Suarez
Corp. Industries v. McGraw, 202 F.3d 676, 685 (4th Cir.
2000), it might appear to follow that if government
officials retaliate against someone for bringing a lawsuit, as
charged in this case, they have violated the First Amend-
30 No. 07-2240
ment. And so the parties and the district judge have
assumed. I have my doubts, although I do not criticize
the majority opinion (which I join) for deciding the case
on the basis of the assumption.
The Button case was “cause” litigation—the NAACP
was using constitutional litigation as an alternative to
legislative reform of discriminatory practices; it thus
was petitioning for redress of grievances, rather than
suing to enforce a private right. The other cases that
I have cited involved challenges to state bar regulations
that restricted access to the courts, as by preventing a
union from providing a lawyer for a member of the union
who might not be able to afford to hire one; and so they
merge with cases like Bounds v. Smith, 430 U.S. 817 (1977),
that create a broad right, based on various constitutional
provisions, of access to the courts.
This case is different. The defendants did nothing to
obstruct Legacy Healthcare’s access to the Indiana courts
to litigate its Medicaid reimbursement claims against the
state. Of course, if a defendant puts up a fierce resistance
to a lawsuit, it makes plaintiffs’ recourse to the courts
less attractive. But a plaintiff has no more right to demand
that the defendant roll over and play dead than the defen-
dant has a right to demand this of the plaintiff. And I
don’t think that anyone has ever thought that merely
because a defendant goes overboard—by committing
perjury, tampering with witnesses, even bribing judges
or jurors—it has (if it is a government agency or official
rather than a private person) violated the plaintiff’s right
of access to the courts, or his right to petition for redress
of grievances. Why should it matter whether the defen-
No. 07-2240 31
dant’s over-the-top opposition comes before or after the
plaintiff’s suit ends?
There are plenty of remedies for overreacting to litiga-
tion or the threat of litigation, remedies that make it
unnecessary to drag in the heavy artillery of constitutional
tort litigation under 42 U.S.C. § 1983. There are for example
the numerous federal statutes that forbid retaliation
against a person who files a statutory claim. For example,
Title VII of the Civil Rights Act of 1964 forbids “an em-
ployer to discriminate against any of his employees or
applicants for employment . . . because he has opposed any
practice” that violates the statute or “has made a charge,
testified, assisted, or participated in any manner in an
investigation, proceeding, or hearing under” the statute.
42 U.S.C. § 2000e-3(a). If the parties to this case are cor-
rect, it would seem to imply that such statutory provisions,
and the case law they have accreted, are superfluous
when the alleged retaliation is by a government official
because such retaliation could be litigated directly under
section 1983 as a violation of the Constitution.
In fact this route is closed off by Middlesex County
Sewerage Authority v. National Sea Clammers Ass’n, 453 U.S.
1 (1981), which holds that “when the remedial devices
provided in a particular Act are sufficiently comprehen-
sive, they may suffice to demonstrate congressional
intent to preclude the remedy of suits under § 1983.” Id. at
20. As we explained the background of the Sea Clammers
doctrine in Delgado v. Stegall, 367 F.3d 668, 673 (7th
Cir. 2004) (citations omitted), “The plaintiffs in that case
sought relief from pollution against state officials under
32 No. 07-2240
federal statutes that provided comprehensive and fully
adequate remedies. The Supreme Court had recently
held, however, that section 1983, though typically used
to enforce federal constitutional rights, reaches infringe-
ments of federal statutory rights as well. This ruling
opened up the possibility that anyone who had a federal
statutory remedy for a harm inflicted under color of state
law could tack on a claim for relief under section 1983 as
well . . . . [T]he Court held that section 1983 was not an
available alternative because ‘it is hard to believe that
Congress intended to preserve the § 1983 right of action
when it created so many specific statutory remedies.’ The
completeness of those remedies showed that Congress
‘intended to supplant any remedy that otherwise would
be available under § 1983.’ ” See also Wright v. City of
Roanoke Redevelopment & Housing Authority, 479 U.S. 418,
423-29 (1987); Blessing v. Freestone, 520 U.S. 329, 346-48
(1997); Williams v. Wendler, 530 F.3d 584, 586 (7th Cir. 2008);
Williams ex rel. Hart v. Paint Valley Local School District,
400 F.3d 360, 363, n. 1 (6th Cir. 2005).
The Sea Clammers doctrine is not applicable to this
case because Legacy Healthcare’s suit—the suit that
provoked the alleged retaliation—was not a federal suit.
But the thinking behind the doctrine is. Legacy Health-
care accuses the defendant officials of conspiring to put
it out of business by making false charges (for example of
improper diversion of Medicaid funds), denying it
licenses without cause, and discriminating in favor of its
competitors. There are remedies under state law against
such official misconduct. No reason is given for thinking
that Legacy Healthcare needs to get into federal court
No. 07-2240 33
under federal law—let alone the First Amendment—in
order to protect itself. It is not as if the suit that called
down the wrath of the defendants had been a federal
suit, in which event there might be a concern that a
state court would not be sympathetic to protecting the
plaintiff against retaliation by state officials.
I am mindful of cases that hold that retaliation against
a prisoner’s filing a grievance can violate the prisoner’s
First Amendment rights, e.g., Hasan v. United States De-
partment of Labor, 400 F.3d 1001, 1005 (7th Cir. 2005), and
cases cited there; Gill v. Pidlypchak, 389 F.3d 379, 384 (2d
Cir. 2004), but I think those cases read “petition the Gov-
ernment for redress of grievances” (the language of the
First Amendment) too literally. Every grievance, charge,
or complaint filed against a government agency seeks
redress, but does this mean that the government cannot
limit the right to sue itself without shouldering the heavy
burden of justification that the First Amendment has been
interpreted to place on anyone who seeks to deny an
assertion of a First Amendment right? The answer cannot
be yes. Such limitations are legion and rarely challenged.
The Supreme Court said in Hudson v. Palmer, 468 U.S. 517,
523 (1984), that “like others, prisoners have the constitu-
tional right to petition the Government for redress of their
grievances, which includes a reasonable right of access to
the courts” (emphasis added). Legacy Healthcare had
reasonable access to the courts to litigate its claim against
the state for Medicaid reimbursement, and, as far as I
can tell, it has reasonable access to the courts to litigate
its opposition to the alleged harassment by the defend-
ants. I conclude that there has been no infringement of
34 No. 07-2240
its constitutional right of access to the courts to petition
for redress of grievances and hence no basis for a suit
premised on such an infringement.
And I add that the practical objections to the interpreta-
tion of constitutional tort law offered in this case are
compelling. For on that interpretation every success-
fully litigated claim (and many failed claims as well)
against a state or federal agency would set the stage for
a federal constitutional suit, should the subsequent rela-
tions between the plaintiff and the agency sour, as they are
quite likely to do in the wake of a successful suit against
the agency. Defendants are not kindly disposed to plain-
tiffs, especially plaintiffs who beat them. But if they
retaliate, at least in the manner charged in this case, they
hand plaintiffs additional legal weapons, with various
limitations that deeming the retaliation unconstitutional
might destroy. There is no need to take that further
step beyond Button, Trainmen, United Mine Workers, and
Bounds.
9-5-08