Birchansky v. Clabaugh

• Decision Date: 12 February 2018
• Docket Number: No. 4:17-cv-00209-RGE-RAW,4:17-cv-00209-RGE-RAW
• Citation: 421 F.Supp.3d 658
• Parties: Lee BIRCHANSKY; Fox Eye Surgery, LLC; Korver Ear Nose and Throat, LLC ; Michael Jensen; and Michael Driesen, Plaintiffs, v. Gerd W. CLABAUGH; Rebecca Swift ; Roberta Chambers; Connie Schmett; Roger Thomas; Brenda Perrin; and Harold Miller, Defendants.
• Court: U.S. District Court — Southern District of Iowa

421 F.Supp.3d 658

Lee BIRCHANSKY; Fox Eye Surgery, LLC; Korver Ear Nose and Throat, LLC ; Michael Jensen; and Michael Driesen, Plaintiffs,

v.Gerd W. CLABAUGH; Rebecca Swift ; Roberta Chambers; Connie Schmett; Roger Thomas; Brenda Perrin; and Harold Miller, Defendants.

No. 4:17-cv-00209-RGE-RAW

United States District Court, S.D. Iowa, Central Division.

Signed February 12, 2018

Glen Stephen Downey, Law Offices of Glen S. Downey, Des Moines, IA, Joshua A. House, Pro Hac Vice, Robert James McNamara, Pro Hac Vice, Darpana Sheth, Pro Hac Vice, Arlington, VA, for Plaintiffs.

Jeffrey C. Peterzalek, Jordan Esbrook, Des Moines, IA, for Defendants.

ORDER RE: DEFENDANTS' MOTION TO DISMISS

Rebecca Goodgame Ebinger, United States District Judge

I. INTRODUCTION

Now before the Court is Defendants' Motion to Dismiss Plaintiffs' Amended Complaint for lack of jurisdiction and for failure to state a claim. Defs.' Mot. Dismiss First Am. Compl., ECF No. 35. The matter came before the Court for hearing on November 17, 2017. See Hr'g Mins. Defs.' Mot. Dismiss, ECF No. 48. Attorneys Jeffrey Peterzalek and Heather Adams appeared on behalf of Defendants Gerd Clabaugh, Rebecca Swift, Roberta Chambers, Connie Schmett, Roger Thomas, Brenda Perrin, and Harold Miller. Id. Attorneys Robert McNamara and Joshua House appeared on behalf of Plaintiffs Lee Birchansky, Fox Eye Surgery, LLC, Korver Ear Nose and Throat, LLC, Michael Jensen, and Michael Driesen. Id.¹

For the reasons set forth below, the Court grants Defendants' Motion to Dismiss Plaintiffs' Amended Complaint as to Count III for failure to state a claim, and denies it as to Counts I, II, and IV.

II. STATEMENT OF RELEVANT FACTS

The Court takes the following facts as true for the purposes of analyzing Defendants' Motion to Dismiss. See Brown v. Medtronic, Inc. , 628 F.3d 451, 459 (8th Cir. 2010).

Iowa regulates the administration of medical services by licensing health facilities through a certificate-of-need (CON) framework. Generally, Iowa law prohibits individuals from operating certain types of health facilities without first acquiring a CON from the Iowa Department of Public Health. At issue in this case is a feature of Iowa's CON framework that requires an individual to obtain a CON before opening a new health facility, but permits a CON-holder to expand its facilities without obtaining a new CON. Plaintiffs allege this component of the CON framework violates the Physician Plaintiffs' rights under the Equal Protection, Due Process, and Privileges & Immunities Clauses of the Fourteenth Amendment, and the Patient Plaintiffs' rights under the Due Process Clause of the Fourteenth Amendment.

In June 2017, Plaintiffs filed a six-count complaint seeking to enjoin enforcement of aspects of the CON framework, alleging four claims under the United States Constitution and two claims under the Iowa Constitution. Compl., ECF No. 1. Defendants filed a Motion to Dismiss the complaint. ECF No. 26. In response, Plaintiffs filed an amended complaint, dropping their claims under the Iowa Constitution and removing some of the defendants named in the original complaint. Pls.' First Am. Compl., ECF No. 32. In turn, Defendants filed a motion to dismiss the amended complaint. ECF No. 35. The Court addresses this motion now.

As of the amended complaint, this action has five plaintiffs. See ECF No. 32. Plaintiff Birchansky is an ophthalmologist. Id. ¶ 13. Birchansky is also the organizing member and CEO of Plaintiff Fox Eye Surgery, an Iowa limited liability company operating in Cedar Rapids, Iowa. Id. ¶¶ 15–16. Birchansky "intends to perform cataract and other outpatient eye surgeries in a fully equipped, custom-built surgery center [in Cedar Rapids] ... [b]ut Iowa's [CON] requirement has stymied his efforts to do so." Id. ¶17. Birchansky "would also like to open a new outpatient surgery

center [in the Quad Cities region of Iowa] ... [and] would need to apply for and obtain a [CON]." Id. ¶ 18. Birchansky has applied for a CON five times: the first four of Birchansky's applications were denied, and the fifth application is still pending final approval. Plaintiff Korver Ear Nose and Throat is an Iowa limited liability company operating in Orange City, Iowa. Id. ¶ 19. Korver "would like to convert the lower level of [its] facility into an outpatient surgery center ... [b]ut it cannot do so without applying for and obtaining a [CON]." Id. ¶ 21.

Plaintiff Michael Jensen is a patient of Birchansky who "wants to receive future cataract or other outpatient eye surgeries from Dr. Birchansky at Fox Eye Surgery's center." Id. ¶¶ 22–23. Plaintiff Michael Driesen is a patient of Korver who "wants to receive future ENT surgeries from Korver[ ] at its proposed surgery center." Id. ¶¶ 24–25.

There are seven defendants, each sued in his or her official capacity. Defendant Clabaugh is the Director of the Iowa Department of Public Health and oversees the State Board of Health. Id. ¶ 28. Defendant Rebecca Swift is the Iowa Department of Public Health Administrator for the Health Facilities Council. Id. ¶ 33. Defendants Roberta Chambers, Connie Schmett, Roger Thomas, Brenda Perrin, and Harold Miller are members of the Iowa Department of Public Health's Health Facilities Council. Id. ¶¶ 34–38. Defendants each play a role in administering Iowa's CON framework. See id. ¶¶ 28–38.

Plaintiffs' claims challenge a feature of the CON framework allowing existing "institutional health facilit[ies]" to expand existing facilities or open new facilities without a CON, while requiring "new institutional health service[s] or changed institutional health service[s]" to obtain a CON. Iowa Code §§ 135.61, 135.63. The specific mechanism for this feature of the CON framework is a capital expenditure exemption permitting an existing "institutional health facility" to expend up to "[$1,500,000] within a twelve-month period" in "capital expenditure[s], lease[s], or donation[s]" before being classified as a "[n]ew institutional health facility." Iowa Code § 135.61(18)(c). The process of obtaining a CON is cost-intensive and requires the applicant to satisfy numerous requirements. See Iowa Code § 135.63 ; see also ECF No. 32 ¶¶ 122–44 (describing the process); Defs.' Br. Supp. Mot. Dismiss 2–5, ECF No. 38.

Plaintiffs allege this disparate treatment of existing facilities and new facilities violates the rights of the Physician Plaintiffs under the Fourteenth Amendment's Due Process, Equal Protection, and Privileges & Immunities Clauses and the rights of the Patient Plaintiffs under the Fourteenth Amendment's Due Process Clause. ECF No. 32 ¶¶ 223–66. Plaintiffs seek "an entry of judgment declaring that Iowa's [CON] requirement for outpatient surgical facilities ... is unconstitutional on its face and as applied to the extent it violates the Equal Protection Clause[,] ... the Due Process Clause[,] ... [and] the Privileges or Immunities Clause." Id. at 41–42. Plaintiffs request "an entry of a permanent injunction against defendants prohibiting the enforcement of these statutory provisions, administrative rules and regulations, and practices and policies." Id. at 42. Defendants seek to dismiss all of Plaintiffs' claims under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). ECF No. 35.

III. LEGAL STANDARD

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); accord Braden v. Wal-Mart Stores, Inc. , 588 F.3d 585, 594 (8th Cir. 2009). At this stage, the Court "accept[s] as true the material allegations in the complaint and present[s] the facts in the light most favorable to [the Plaintiffs]." Kulkay v. Roy , 847 F.3d 637, 640 (8th Cir. 2017) ; see also Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (citing Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

A plausible claim for relief "allows the court to draw the reasonable inference that the defendant[s are] liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. Plaintiffs must "nudge[ ] their claims across the line from conceivable to plausible, [else] their complaint must be dismissed." Twombly , 550 U.S. at 570, 127 S.Ct. 1955. "Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility of "entitlement to relief." ’ " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 557, 127 S.Ct. 1955 ). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.

IV. DISCUSSION

Neither party contests the claims in Plaintiffs' amended complaint constitute a "civil action[ ] arising under the Constitution," over which a federal district court typically "shall have original jurisdiction." 28 U.S.C. § 1331 ; see also 28 U.S.C. § 1343 (granting federal district courts original jurisdiction over claims brought to enforce constitutional rights). However, Defendants raise two doctrines under which they contend the Court cannot and should not exercise jurisdiction. The first doctrine, the Rooker – Feldman doctrine, forecloses a federal district court's jurisdiction over a case where the federal district court is asked to resolve an issue already decided in a prior state court proceeding—that is, where the federal district court is essentially adjudicating an appeal from the state court judgment. See generally 18B Charles Alan Wright et al., Federal Practice and Procedure § 4469.1 (2d ed. 2008 & Supp. 2017). The second doctrine, Younger abstention, requires a federal district court to decline exercising its jurisdiction in the presence of a pending state prosecution. See generally id. §§ 4251–55. The Court first addresses the Rooker – Feldman doctrine and then...