Opinion
07 Civ. 3908 (BMC) (RER).
September 11, 2008
MEMORANDUM DECISION AND ORDER
Defendants have moved for summary judgment on plaintiff's § 1983 equal protection "class of one" claim. For the following reasons, defendants' motion is granted, and the action is dismissed.
Plaintiff withdrew its action as to defendants Richard F. Daines, M.D. and Wendy E. Saunders pursuant to Stipulation of the parties, So Ordered by the Court on June 16, 2008.
BACKGROUND
The Court has taken the undisputed facts set forth herein from the parties' affidavits, exhibits, and Rule 56.1 statements, viewed in the light most favorable to plaintiff as the non-moving party. See Capobianco v. City of New York, 422 F.3d 47, 50 (2d Cir. 2005).
Plaintiff operates Analytical Diagnostic Labs ("ADL"), a privately-owned clinical testing laboratory serving nursing homes and similar facilities in the New York metropolitan area. In late 2003, plaintiff began receiving complaints from the New York State Department of Health ("DOH") that ADL was performing illegal forensic toxicology. Although ADL did conduct clinical non-forensic toxicology testing for one of its nursing home clients, its laboratory reports explicitly disavowed any forensic testing, stating that specimen analysis was performed without chain of custody handling, and thus that test results should not be used for legal or employment evaluation purposes.
This disclaimer was identical to that used by other laboratories in disavowing forensic toxicology testing, specifically Quest Diagnostics and LabCorp. Although DOH brought charges against plaintiff for improper forensic toxicology testing in early 2005, DOH eventually acknowledged that other laboratories used the same disclaiming language and agreed to a settlement whereby plaintiff admitted no wrongdoing but paid a $3,000 civil penalty.
As part of its inquiry into the forensic toxicology and other complaints against plaintiff, from 2004 through 2007, defendant Kusel — Director of Regulatory Affairs at the DOH's Wadsworth Center for Laboratories — scheduled numerous surveys and investigations of ADL. Kusel set at least two of these investigations to occur on Jewish holidays, when Kusel knew plaintiff's laboratory principals (observant Jews) would be away from the laboratory. Kusel opined to defendant Shulman — head of the DOH Certification Unit for Laboratories — that these employees' absences over Rosh Hashanah would provide an opportunity to search for specific paperwork pertaining to Coney Island Hospital.
During the investigation on August 2, 2006, the eve of the Jewish holiday Tisha B'Av, DOH employees arrived unannounced at plaintiff's laboratory and stationed an investigator at the side exit of the laboratory with a video camera. As DOH investigators noted in an email exchange, they planned to videotape the side exit "in the hopes of capturing any fleeing personnel." Also during this August 2006 investigation, DOH investigators questioned Pakistani-born laboratory employees about their citizenship and immigration status, and whether their families were legally in the United States.
In a June 14, 2006 email, defendant Dr. Jenny had directed defendant Astin to review ADL's personnel roster "for new hires and prevalence of Pakistani imports."
New York requires laboratory directors to have a Certificate of Qualification ("CQ") covering the areas of testing in which the director is certified; to maintain an operating permit, a laboratory must have a director who possesses a CQ in all areas of testing performed by the laboratory. In 2004, ADL also began experiencing issues stemming from DOH's decisions on whether to issue CQs to its laboratory directors, and consequently whether the laboratory would receive testing or operating permits.
First, in August 2004, Dr. Kumaranayagam Balakrishnan, plaintiff's longtime laboratory director, submitted a renewal application for his CQ. Kusel advised him at that time that the processing of his CQ application was delayed because of the ongoing forensic toxicology investigation. In March 2006, Kusel and defendant Dr. Jenny — director of the DOH Clinical Laboratory Evaluation Program ("CLEP") — threatened Dr. Balakrishnan with personal administrative charges based on the alleged forensic testing at ADL. Dr. Balakrishnan resigned as laboratory director in April 2006, although DOH continued to threaten charges against him and withhold his CQ.
On August 22, 2006, Kusel sent an email to Dr. Jenny and another DOH employee stating that Dr. Balakrishnan had two options with respect to the threatened charges: "admit to not fulfilling his duties as a director because he is incompetent or unwilling to comply . . . OR he can fall on our mercies that the owners of ADL did not allow him to fulfill his duties — at which point we may be able to show some leniency." On December 4, 2006, Kusel sent an email to Shulman stating she would be willing to "settle the old charges . . . and issue a CQ that would be very close to expiring . . . it would be more of a nice surprise when he's included in the ADL charges."
Next, Drs. George Abraham and Matthew Pincus began working as laboratory directors in May and June 2006, respectively. In an attempt to respond to deficiencies identified in a May 2006 survey of ADL, these doctors prepared and submitted to the DOH a plan of correction. Dr. Jenny, Kusel, and defendant Astin — Deputy Director of CLEP — discussed the laboratory's compliance problems and deficiencies in two off-the-record telephone conversations with Dr. Pincus, and Dr. Jenny threatened that any failure to correct the laboratory's deficiencies could negatively impact Dr. Pincus' own CQ. After these conversations, on August 14, 2006, Dr. Pincus resigned as laboratory director.
After Dr. Pincus' departure, plaintiff hired Dr. Ming Liu to serve as assistant laboratory director to Dr. Abraham. On August 31, 2006, Astin sent Dr. Liu a letter questioning his ability to devote the necessary time commitments to ADL, since he already served as a full-time pathologist at another medical center, a laboratory director at two other laboratories, and a per-diem pathologist at various other facilities. Astin's letter stated that DOH would condition approval of any director at ADL upon the director's ability to actively direct the laboratory and spend at least 50% of the operating hours of the laboratory on the premises in order to resolve the laboratory's "significant compliance issues." In an email from Kusel to Shulman and Dr. Jenny, she stated that she thought Dr. Liu "lack[ed] a command of basic English," and that she did not "trust [ADL's president] or the situation." On September 11, 2006, Dr. Jenny sent a letter to ADL's president, indicating that while DOH approved of Dr. Abraham as laboratory director, it did not approve of Dr. Liu because of his inability to meet the time requirements of the position. Furthermore, because Dr. Abraham lacked a CQ in various testing categories, DOH voided plaintiff's operating permit and directed plaintiff to cease testing in these categories.
Dr. Liu formally resigned as assistant laboratory director on September 28, 2006. On that same date, a DOH surveyor inspected ADL and found no significant problems. The surveyor reported that plaintiff had corrected all prior deficiencies. DOH did not forward the results of this positive inspection to plaintiff.
To replace Dr. Liu, plaintiff hired Dr. Lilia Mesia as its laboratory director and Dr. Henry Gang as assistant director in October 2006. Based on Dr. Mesia's CQs and the September 28, 2006 inspection, DOH granted provisional approval for plaintiff to resume testing in all previously voided areas except one, since Dr. Abraham had indicated during the survey that the laboratory was not yet ready to resume testing in this area. DOH issued plaintiff a letter under the State Administrative Procedure Act (a "SAPA Letter"), which functioned in lieu of an operating permit pending a final DOH determination on ADL's compliance and its qualifications in the approved areas of testing.
Plaintiff's problems in retaining a laboratory director satisfactory to DOH continued into 2007. In January, after Dr. Mesia moved out of state, plaintiff hired Dr. Joel Lincoln as director. In September, after DOH learned that Dr. Lincoln had decided to accept a position at another hospital's laboratory and work as a principal of a start-up laboratory, Kusel called Dr. Lincoln (again on Rosh Hashanah) to discuss his responsibilities and obligations as ADL's laboratory director. Dr. Lincoln implied that he wished to remain at ADL to ease the transition to a new director, but Kusel told Dr. Lincoln that his own CQ could then be in jeopardy if he remained and ADL failed to meet compliance standards. After two conversations with Kusel, Dr. Lincoln resigned as laboratory director on September 13, 2007. On September 14, 2007, DOH again voided plaintiff's operating permit in the areas in which Dr. Lincoln had been the only CQ holder, and directed plaintiff to cease testing in those areas. After plaintiff hired Dr. A. Baqui to serve as laboratory director in late September 2007, DOH granted plaintiff provisional approval to begin re-testing in the previously voided areas on October 3, 2007.
Rather than issue plaintiff an operating permit to reflect its approval to test in the designated areas, DOH has provided plaintiff with only SAPA Letters since the voiding of its permit. As a result, the DOH website does not show plaintiff as having a current operating permit. Furthermore, numerous of plaintiff's former laboratory directors — including Drs. Balakrishnan, Abraham, and Gang — still have not received approval for the renewal of their CQs, and have instead only been issued SAPA letters.
DISCUSSION
Plaintiff has claimed that defendants' conduct since 2003 has violated its constitutional equal protection rights on a "class of one" theory, because defendants have intentionally and maliciously treated it differently from other laboratories with no rational basis. Plaintiff has also claimed that defendants have violated New York law by maliciously interfering with its business.
Defendants argue that plaintiff has failed to overcome the presumption of rationality applicable to governmental actions in a class of one claim. Defendants have asserted that all of their actions were either undertaken for rational reasons (namely to ensure compliance with state laboratory regulations) or expressly mandated by statute or regulation. Defendants have further argued that regardless of plaintiff's allegations concerning defendants' malice, plaintiff has failed to identify any similarly situated laboratories that defendants ever treated differently.
I. Federal Equal Protection Claim
Traditionally, a plaintiff bringing an equal protection class of one claim had to demonstrate (1) that it was treated differently from an entity similarly situated in all relevant respects; and (2) that defendants treated it differently with no rational basis. See Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000); Clubside, Inc. v. Valentin, 468 F.3d 144, 159 (2d Cir. 2006). The Supreme Court recently set forth a third requirement: to prevail on an equal protection class of one claim, a plaintiff must also demonstrate that the differential treatment it received resulted from non-discretionary state action. Engquist v. Oregon Dep't of Agriculture, ___ U.S. ___, 128 S.Ct. 2146, 2154 (June 9, 2008). See Sloup v. Loeffler, No. 05-CV-1766, 2008 WL 3978208, * 15-16 (E.D.N.Y. Aug. 21, 2008) (noting that Engquist added an additional requirement and applying Engquist outside of the public employment context);Siao-Pao v. Connolly, No. 06 Civ. 10172, 2008 WL 2540815, *10 (S.D.N.Y. June 25, 2008) (applying Engquist outside of the public employment context and stating Engquist "clarified the Olech holding by limiting class of one claims in contexts characterized by individualized and subjective determinations where `allowing a challenge based on the arbitrary singling out of a particular [entity] would undermine the very discretion that such state officials are entrusted to exercise.'").
Plaintiff has established genuine issues of material fact on the first two requirements for a class of one equal protection claim. First, regarding differential treatment from similarly situated entities, plaintiff presented evidence that its non-forensic testing disclaimer was the same as that used by Quest Diagnostics and LabCorp. — other laboratories performing the same type of testing as ADL, and thus arguably identical in all relevant respects. See Clubside, Inc., 468 F.3d at 159 ("Generally, whether parties are similarly situated is a fact-intensive inquiry."); Sloup, 2008 WL 3978208 at *16 (noting a genuine issue of fact exists where a rational jury could find the entities prima facie identical). An issue of fact exists why DOH's investigation into ADL's non-forensic testing led to charges, a civil penalty, the delayed issuance of a CQ to one lab director, and a string of inspections, while identical laboratories performing the same tests were unaffected.
Second, regarding defendants' basis for the differential treatment, plaintiff has raised a serious factual issue as to whether defendants' rationale was to ensure compliance with state regulatory objectives, or whether defendants instead possessed a malicious desire to target plaintiff. Kusel's scheduling of inspections to coincide with Jewish Holidays, coupled with her question about Dr. Liu's "command of basic English" and Dr. Jenny's statements regarding the presence of "Pakistani imports" at ADL, raise questions about defendants' reasons for its treatment of ADL beginning in 2003. Furthermore, Kusel's statements that she wanted Dr. Balakrishnan to "fall on [DOH's] mercies" by threatening charges against him unless he spoke negatively about ADL, and that she wanted to give him the "nice surprise" of including him in charges against ADL after issuing him an almost-expired CQ, demonstrate a level of malice inconsistent with merely trying to ensure compliance with state regulations. Plaintiff has also presented numerous other factual questions relevant to defendants' bases for their actions, including whether Kusel threatened an investigation against ADL's president's wife, whether she brought baseless charges against ADL before analyzing whether the regulations supported the claims, and whether she and the other defendants intimidated any of ADL's directors into leaving their positions as part of a plan to drive plaintiff out of business.
Despite the numerous issues of material fact that exist on these first two requirements, plaintiff's failure to meet the third requirement is fatal to its class of one claim. The differential treatment plaintiff allegedly received resulted from defendants' investigation of complaints regarding ADL and the decisions of DOH employees on whether or not to issue CQs and permits to the laboratory and its employees. These are clearly discretionary state activities, as DOH is entrusted with making licensing decisions after subjectively reviewing each individual laboratory's qualifications, the qualifications of its directors and potential directors, and any complaints and investigation results regarding the laboratory. See N.Y. PUB. HEALTH L. §§ 570-76 (McKinney's 2001) (discussing the public health and safety concerns implicated in state licensing decisions for clinical laboratories and establishing the criteria considered by DOH officials when deciding whether to issue CQs and permits); 10 N.Y.C.R.R. 19.1 et seq, 58-1.1 et seq. (instructing DOH on factors to evaluate when issuing CQs and operating permits, including the qualifications of potential laboratory directors, the laboratory's inspection results, and correction of any deficiencies); Daxor Corp. v. State of NY Dep't of Health, 90 N.Y.2d 89, 98, 681 N.E.2d 356, 361-62, 659 N.Y.S. 2d 189, 194 (1997) ("[I]t is clear that the law vests [DOH] with considerable discretion in licensing medical sites like [plaintiff's]"). This is a matter requiring the exercise of discretion, not the performance of a duty required by law.
The evidence in the record demonstrates defendants' exercise of their discretion in evaluating ADL and its directors as part of their licensing decisions. During the time period in question, DOH had received complaints about ADL's alleged forensic testing, and inspections of the laboratory had revealed deficiencies in plaintiff's testing practices. DOH employees had discretion to take measures to investigate and address these issues. See N.Y. PUB. HEALTH L. § 576 (McKinney's 2001). For example, Astin's August 31, 2006 letter to Dr. Liu noted ADL's prior "significant compliance problems" and the "active investigation into its test practices, primarily in the area of Hematology." Astin indicated that because of these concerns, DOH would require any potential director of ADL to make a greater time commitment to overseeing the laboratory. She further indicated, based on her consideration of the factors listed in 10 N.Y.C.R.R. 58, that Dr. Liu's proposed position at ADL would mark his third directorship at a clinical laboratory and thus questioned his ability to meet these heightened requirements. Likewise, defendants' conversations with Drs. Pincus and Lincoln focused specifically on ADL's compliance issues and deficiencies; defendants reminded the doctors of their high responsibilities as laboratory directors to ensure ADL's remediation of these issues and the laboratory's compliance with rules and regulations.
Furthermore, defendants directed ADL to cease testing in certain areas only after the departure of a laboratory director who possessed the sole CQ in those areas, and granted provisional approval to ADL to reassume testing once a director with a suitable replacement CQ had been hired by ADL and approved by DOH. This is in accordance with the regulatory requirements governing DOH action, which grants DOH the discretion to evaluate laboratory directors and only issue a permit to a laboratory to test in the areas in which it finds the laboratory directors qualified. See 10 N.Y.C.R.R. 19.3, 58-1.1.
Regardless of the other serious factual issues raised by plaintiff as to different treatment and defendants' motivations, the undisputed fact remains that DOH officials possess discretion to subjectively evaluate laboratories and make licensing decisions, and any differential treatment of ADL stemmed from these discretionary activities. As the Engquist Court noted, a plaintiff cannot raise a federal constitutional challenge to a necessarily subjective and individualized decision made by state officials. See 128 S.Ct. at 2154. Plaintiff has failed to allege a federal equal protection violation based on defendants' exercise of discretion as DOH employees.
II. State Malicious Interference Claim
Having dismissed plaintiff's federal equal protection claim, the Court declines to exercise supplemental jurisdiction over plaintiff's state law malicious interference claim in the interests of comity, convenience, judicial economy, and fairness.See Kolari v. New York-Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (discussing a district court's discretion in declining to exercise supplemental jurisdiction over state law issues where all federal claims have been dismissed prior to trial); Volmar v. North Shore Hosp., 216 Fed. Appx. 136, 137 (2d Cir. 2007) (stating district courts should avoid state law decisions after dismissal of all federal claims as a matter of comity and to ensure fairness to the parties); Birch v. Pioneer Credit Recovery, Inc., No. 06-CV-6497T, 2007 WL 1703914, *5-6 (W.D.N.Y. June 8, 2007) (noting that "absent exceptional circumstances," the Second Circuit instructs courts to "abstain from exercising pendent jurisdiction" over state claims where federal claims have been dismissed on summary judgment) (quoting Walker v. Time Life Films. Inc., 784 F.2d 44, 53 (2d Cir. 1986)). The issues posed by this malicious interference claim have no relation to federal law, and at this stage in the litigation, there would be "no extraordinary inconvenience or inequity occasioned by permitting the claims to be refiled in state court where they will be afforded a `surer-footed reading of applicable law.'"Kolari, 455 F.3d at 123 (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966)).
CONCLUSION
For the foregoing reasons, the Court grants defendants' motion for summary judgment and dismisses plaintiff's federal equal protection claim with prejudice. The Court further dismisses plaintiff's state law malicious interference claim without prejudice.