Affordable Care v. STATE BD. OF DENTAL EX.

• Decision Date: 05 November 2002
• Docket Number: No. COA01-1526.,COA01-1526.
• Citation: 153 NC App. 527,571 S.E.2d 52
• Court: North Carolina Court of Appeals
• Parties: AFFORDABLE CARE, INC., American Dental Partners, Inc., American Dental Partners of North Carolina, Inc., Dental Care Partners, Inc., and Dental Health Management, Inc., plaintiff's, v. NORTH CAROLINA STATE BOARD OF DENTAL EXAMINERS; the North Carolina Rules Review Commission, and Julian Mann, III, in his official capacity as the Codifier of Rules, Defendants.

571 S.E.2d 52

153 NC App. 527

AFFORDABLE CARE, INC., American Dental Partners, Inc., American Dental Partners of North Carolina, Inc., Dental Care Partners, Inc., and Dental Health Management, Inc., plaintiff's, v. NORTH CAROLINA STATE BOARD OF DENTAL EXAMINERS; the North Carolina Rules Review Commission, and Julian Mann, III, in his official capacity as the Codifier of Rules, Defendants.

No. COA01-1526.

Court of Appeals of North Carolina.

November 5, 2002.

Kilpatrick Stockton LLP, by Noah H. Huffstetler, III, Sharon L. McConnell, and Emily A. Moseley, Raleigh, for plaintiff-appellants.

Attorney General Roy A. Cooper, III, by Assistant Attorney General Grady L. Balentine, Jr., for defendant-appellee North Carolina Rules Review Commission.

Ellis & Winters, LLP, by Richard W. Ellis and Paul K. Sun, Jr., Raleigh, for defendant-appellee North Carolina State Board of Dental Examiners.

MARTIN, Judge.

Affordable Care, Inc., American Dental Partners, Inc., American Dental Partners of North Carolina, Inc., Dental Care Partners, Inc., and Dental Health Management, Inc. ("plaintiff's") filed this action in the superior court challenging the validity of administrative Rule 21 NCAC 16X.0101, entitled "Management Arrangements Rule" (hereinafter "the Rule") proposed by the North Carolina State Board of Dental Examiners ("the Board") and adopted into law by the North Carolina Rules Review Commission ("the Commission") (collectively, "defendants"). plaintiff's are companies which provide non-clinical business services to dental practices; they allege their businesses have been negatively impacted by the Rule, and that the Rule is both unconstitutional and was adopted in violation of administrative law.

The Board, an administrative agency, has authority pursuant to the Dental Practice Act to regulate the practice of dentistry for the protection of public health, and to make regulations to enforce that objective. See N.C. Gen.Stat. § 90-22, et seq. (2001). The Commission reviews and, when appropriate, adopts rules and regulations proposed by administrative agencies such as the Board. On 1 June 2000, the Board published in the North Carolina Register notice of a rule-making proceeding involving the types of management arrangements into which dentists may enter. The text of the proposed Rule was published on 15 August 2000, along with notice of a public hearing. Some of plaintiff's submitted written comments on the Rule. Following a public hearing on 30 September 2000, the Board amended the Rule to narrow its scope, and thereafter submitted it to the Commission.

The Commission met to review the Rule on 16 November 2000. plaintiff's attended the meeting and objected to the Rule, arguing that it would have a substantial economic impact. Accordingly, the Commission referred the Rule to the Office of State Budget, Planning and Management ("OSBPM") for a determination of the Rule's economic impact. plaintiff's submitted affidavits to the OSBPM, attesting, among other things, to the fact that the Rule would cause them to lose their business. The OSBPM considered plaintiff's' materials and concluded the Rule would not have a substantial economic impact and, therefore, no fiscal note was required for the Rule pursuant to G.S. § 150B-21.4(b1).

The Commission conducted a hearing with respect to the Rule on 21 December 2000. plaintiff's were represented at the hearing and argued, among other things, that a particular section of the Rule, section (f), was ambiguous. The Commission agreed with plaintiff's, and voted to approve the Rule as it appeared before them with section (f) deleted. Following the meeting, the Board deleted section (f) from the Rule. The Commission approved the Rule, and it was published in the North Carolina Register on 15 February 2001 and became effective 1 April 2001.

The Rule provides:

No dentist or professional entity shall enter into a management arrangement, contractual agreement, stipulation, or other legal binding instrument with a business entity, corporation, proprietorship, or other business entity, for the provision of defined business services, bundled business services, or other business services, the effect of which may provide control of business activities or clinical/professional services of that dentist or professional entity.

21 NCAC 16X.0101(a) (2002). The Rule exempts agreements "for the provision of legal, financial, or other services not related to the provision of management services for a fee or to employment arrangements between an employee and the dentist or professional entity." 21 NCAC 16X.0101(a) (2002). The Rule sets forth the types of agreement provisions which would provide improper control of a practice's business and which are prohibited. The Rule also provides that the Board will review management arrangements. 21 NCAC 16X.0101(b)(2) (2002).

plaintiff's filed their complaint in this action on 3 April 2001 seeking to invalidate the Rule, alleging its substance and manner of adoption violated their due process and equal protection rights, and that defendants exceeded their statutory authority in proposing and adopting the Rule. The Commission, along with co-defendant Julian Mann, III, moved to dismiss the complaint under Rule 12(b)(6) of the Rules of Civil Procedure on 7 May 2001. The Board filed a motion for judgment on the pleadings pursuant to Rule 12(c) of the Rules of Civil Procedure on 4 June 2001. Both motions were heard on 22 August 2001, after which the trial court entered an order dismissing Mann from the case, without objection from plaintiff's. On 24 August 2001, the trial court entered an order granting the Board's motion for judgment on the pleadings after finding plaintiff's had failed to exhaust all administrative remedies available to them with respect to their non-constitutional claims, and that no genuine issue of material fact existed as to plaintiff's' constitutional claims. The trial court entered a separate order on 4 September 2001 granting the Commission's motion to dismiss after finding plaintiff's had failed to state a claim for relief because the Commission had not violated its controlling statutes. plaintiff's appeal from both orders. Plaintiff Dental Health Management Inc.'s "Motion to Withdraw from Further Participation in Appeal" was allowed on 21 May 2002.

plaintiff's bring forward four assignments of error on appeal within the following arguments: (1) the trial court erred in finding plaintiff's failed to exhaust administrative remedies with respect to the non-constitutional claims and in granting the Board's motion on these claims; (2) the trial court erred in determining the Board was entitled to judgment as a matter of law on the constitutional claims and in granting the Board's motion on these claims; and (3) the trial court erred in determining plaintiff's failed to state a claim for relief against the Commission and in granting the Commission's motion to dismiss. We address the arguments serially.

As a preliminary matter, plaintiff's maintain the trial court employed an incorrect standard of review in ruling upon both motions. plaintiff's correctly note that in ruling upon motions under Rule 12(b)(6) and 12(c), the trial court must take the factual allegations of the complaint as true. The standard of review for a Rule 12(b)(6) motion is "`whether, as a matter of law, the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory.'" Block v. County of Person, 141 N.C.App. 273, 277, 540 S.E.2d 415, 419 (2000) (citation omitted). The standard of review for a Rule 12(c) motion is whether the moving party has shown that no material issue of fact exists upon the pleadings and that he is clearly entitled to judgment. Garrett v. Winfree, 120 N.C.App. 689, 463 S.E.2d 411 (1995). In reviewing this motion, the trial court must take the allegations in the complaint as true and consider them in the light most favorable to the non-movant. Id.

plaintiff's argue the trial court failed to follow these standards here because, if the court had taken all allegations as true, it would have agreed with plaintiff's that defendants exceeded their statutory authority and violated plaintiff's' rights. The argument, essentially that the trial court's failure to agree with plaintiff's' legal conclusions is conclusive evidence that the trial court did not take the allegations in the complaint as true, is illogical and we reject it. Though the trial court is obligated to take all of the allegations of the complaint as true in ruling upon the motion, it is elementary that the trial court must draw its own legal conclusions from those facts, and that it may draw conclusions which may differ from those advocated by plaintiff's.

I.

plaintiff's first argue the trial court erred in granting the Board's motion for judgment on the pleadings with respect to the non-constitutional claims for plaintiff's' failure to first exhaust all available administrative remedies. We disagree. "`[W]here the legislature has provided by statute an effective administrative remedy, that remedy is exclusive and its relief must be exhausted before recourse may be had to the courts.'" Shell Island Homeowners Ass'n, Inc. v. Tomlinson, 134 N.C.App. 217, 220-21, 517 S.E.2d 406, 410 (1999) (citation omitted). In order to seek judicial review of an adverse administrative action, the party must establish that "(1) the party is an aggrieved party; (2) there is a contested case; (3) there has been a final agency decision; (4) all administrative remedies have been exhausted; and (5) no other adequate procedure for judicial review is provided by another statute." Id. at 221, 517 S.E.2d at 410.

Defendants contend plaintiff's failed to exhaust all possible remedies under the Administrative Procedure Act ("APA"), G.S. § 150B-1 et seq., because plaintiff's failed to seek relief under G.S. § 150B-4 and G.S. § 150B-20...