City of Cleveland v. Health Servs. & Dev. Agency

• Decision Date: 27 January 2022
• Docket Number: M2021-00396-COA-R3-CV
• Citation: 646 S.W.3d 475
• Parties: The CITY OF CLEVELAND v. The HEALTH SERVICES AND DEVELOPMENT AGENCY, State of Tennessee, et al.
• Court: Tennessee Court of Appeals

646 S.W.3d 475

The CITY OF CLEVELAND

v.The HEALTH SERVICES AND DEVELOPMENT AGENCY, State of Tennessee, et al.

No. M2021-00396-COA-R3-CV

Court of Appeals of Tennessee, Middle Section, AT NASHVILLE.

December 2, 2021 Session

FILED January 27, 2022

Douglas S. Johnston, Nashville, Tennessee, for the appellant, the City of Cleveland.

William N. Helou, Nashville, Tennessee, for the appellee, Middle Tennessee Treatment Centers, LLC, d/b/a Cleveland Comprehensive Treatment Center.

Herbert H. Slatery, III, Attorney General and Reporter; Andrée Sophia Blumstein, Solicitor General; and Sue A. Sheldon, Senior Assistant Attorney General, for the appellee, the Tennessee Health Services and Development Agency.

D. Michael Swiney, C.J., delivered the opinion of the court, in which John W. McClarty and Thomas R. Frierson, II, JJ., joined.

D. Michael Swiney, C.J.

This appeal concerns opposition by the City of Cleveland, Tennessee ("the City") to an application by Middle Tennessee Treatment Centers, LLC, d/b/a Cleveland Comprehensive Treatment Center ("CCTC") to operate a nonresidential, substitution-based treatment center for opiate addiction within the City. The City filed a petition for declaratory judgment in the Chancery Court for Davidson County ("the Trial Court") against the Tennessee Health Services and Development Agency ("the Agency") seeking to have the certificate of need granted for CCTC revoked on grounds that CCTC failed to provide proof of service upon the City by certified mail, return receipt requested, in contravention of Tenn. Code Ann. § 68-11-1607(c)(9)(A). CCTC intervened in the case. CCTC and the Agency ("Defendants," collectively) filed motions to dismiss. After a hearing, the Trial Court granted Defendants’ motions to dismiss for failure to state a claim. The City appeals. We hold, inter alia , that the purpose of the notice provision in Tenn. Code Ann. § 68-11-1607(c)(9)(A) is to afford the relevant officials an opportunity to participate in an Agency hearing on whether a certificate of need is granted; proof of receipt is required. We, therefore, reverse the judgment of the Trial Court and remand for further proceedings consistent with this Opinion.

Background

On November 20, 2020, the City filed its Petition for Declaratory Judgment in the Trial Court against the Agency. As this case was disposed of on Defendants’ motions to dismiss, we set out the facts as alleged in the City's petition. In its petition, the City alleged as follows, in part:

5.) Pursuant to TCA 68-11-1602(2) a "Certificate of Need" is a permit granted by the Agency to any person for the establishment or modification of a health care institution, facility, or covered health service, at a designated location.

6.) Some time prior to May 10, 2020 Acadia Healthcare and Middle Tennessee Treatment Centers, LLC combined to own and operate an Opioid Treatment Program which they called the Cleveland Comprehensive Treatment Center (CCTC).

7.) CCTC is described as "a nonresidential substitution-based treatment center for opiate addiction" and is to be located at 3575 Keith St. NW within the municipal boundaries of Cleveland, TN.

8.) On or about May 10, 2020 the CCTC made its application for a Certificate of Need (CON) to the Agency.

9.) TCA 68-11-1607(c)(9)(A) requires a special form of notice to be sent to certain specified elected officials whenever a nonresidential substitution-based treatment center for opiate addiction applies for a CON. In particular, the statute requires notice to be sent to several enumerated elected officials, including the mayor of the municipality within which the center is to be located, within ten days of its application. The notice must be mailed by certified mail, return receipt requested.

10.) TCA 68-11-1607(C)(9)(C) states, "An application subject to the notification requirement of this subdivision (c)(9) shall not be deemed complete if the applicant has not provided proof of compliance with this subdivision (C)(9) to the agency."

11.) The purpose of the requirements both for the mailing of a notice of the CON application by certified mail, return receipt requested and for the submission to the Agency of proof of compliance is to ensure not only that the notices have been sent but that the specified and enumerated elected officials have actually received such notice, and, therefore, that those elected officials can participate, should they choose to do so, at an Agency hearing on the application.

12.) During the period of May and June, 2020, the City of Cleveland closed its offices to the public due to concerns regarding COVID-19.

13.) On or about May 19, 2020 CCTC purportedly sent letters to various elected officials by certified mail, return receipt requested, including one addressed to Mayor Kevin Brooks, Mayor of the City of Cleveland, at his office address.

14.) Neither Mayor Brooks nor any authorized agent for Mayor Brooks ever received or signed for the letter notice purportedly mailed by CCTC.

15.) The documents submitted by CCTC to the Agency as its proof of compliance include at least three return receipts which are blank; that is, there is no signature either of the proposed recipient or of any authorized agent. One of those blank return receipts is for the letter supposedly sent to Mayor Brooks.

16.) Although Mayor Brooks was generally aware of the proposal and had participated in some early discussions about the idea, the Mayor was not aware that CCTC had submitted an application for a CON because he never received the required letter providing notice and, thus, was not aware that the Agency had scheduled a hearing on the application for its August 2020 meeting.

17.) Had Mayor Brooks received the statutorily required notice, he would have appeared before the Agency to oppose the granting of a CON. The Mayor was denied that opportunity because of CCTC's failure and, therefore, the Mayor, acting in his official capacity by and on behalf of the City of Cleveland, was prejudiced by CCTC's failure.

18.) In late June of 2020 Mayor Brooks was scheduled to meet with CCTC representatives but was unable to participate because he was feeling unwell. Mayor Brooks was subsequently hospitalized for approximately ten days with COVID-19.

19.) On August 26, 2020, the Agency approved CCTC's application for a CON.

20.) Prior to September 10, 2020, Mayor Brooks became aware that the CCTC had been approved for a CON.

21.) On or about October 2, 2020 the City submitted its Petition for a Declaratory Order to the Agency and provided a copy by electronic means to counsel for the CCTC on that date.

22.) TCA 68-11-1619(3) provides the Agency the power to revoke a CON "whenever ... [t]he decision to issue a certificate of need was based, in whole or in part, on information or data in the application which was false, incorrect, or misleading, whether intentional or not ..."

23.) The information submitted by CCTC to the Agency was, in part, false, incorrect, or misleading in that the submissions implied that all the statutorily enumerated elected officials had been notified of CCTC's application, when, in fact, they had not.

24.) The statutory language of TCA 16-11-1607 (c)(9)(A) contains nothing that would excuse CCTC from providing proof of actual receipt of required notices, as, for example, is contained in TN. R. Civ. Proc. 5 ("service by mail is complete upon mailing") or in TCA 29-26-121(a)(4) which also requires notice by certified mail, return receipt requested but also states, "it is not necessary that the addressee of the notice sign or return the return receipt card that accompanies a letter sent by certified mail for service to be effective".

25.) On October 28, 2020, the Agency took up the City's Petition for a Declaratory Order but refused to issue any declaratory order.

Wherefore, premises considered, petitioner prays:

1.) For a declaration that the statutory language of TCA 68-11-1607(c)(9)(A) means what it says, that the submission by CCTC to the Agency was not complete because it lacked the required proof of compliance; and, that therefore, the certificate of need to CCTC was improvidently granted and must be revoked;

2.) For all costs and for reasonable attorneys’ fees, if applicable;

3.) For such other and further relief as appropriate.

In January 2021, CCTC filed a motion to intervene, which the Trial Court granted. Defendants filed motions to dismiss for failure to state a claim; the Agency also moved to dismiss for lack of subject matter jurisdiction. The Trial Court heard Defendants’ motions to dismiss.

In March 2021, the Trial Court entered its final order. The Trial Court denied the Agency's motion to dismiss for lack of subject matter jurisdiction. However, the Trial Court granted Defendants’ motions to dismiss for failure to state a claim. The Trial Court held as follows, in relevant part:

The City's declaratory judgment action against the Agency is brought under the UAPA, Tenn. Code Ann. § 4-5-225. Prior to bringing an action in chancery court for declaratory judgment relating to action taken by a state agency, a party must first petition the agency "for a declaratory order as to the validity or applicability of a statute, rule or order within the primary jurisdiction of the agency." Tenn. Code Ann. § 4-5-223(a). If the agency refuses to issue a declaratory order, the petitioner may apply for a declaratory judgment under § 4-5-225. Id. , § 4-5-223(a)(2).

Section 4-5-233(d) directs each agency to "prescribe by rule the form of such petitions [for declaratory orders] and the procedure for their submission, consideration and disposition." Id. , § 4-5-223(d). The Agency has promulgated the following administrative rule establishing a thirty-day deadline for filing a petition for declaratory order involving Agency action on a specific project or issue:

(1) Any affected person may petition The Agency for a declaratory order, as provided in T.C.A. § 4-5-223, as to the interpretation, validity, or applicability of a statute or rule within

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