Fairview General Hospital v. Fletcher

• Decision Date: 11 March 1992
• Docket Number: No. 91-315,91-315
• Citation: 586 N.E.2d 80,63 Ohio St.3d 146
• Parties: FAIRVIEW GENERAL HOSPITAL, Appellant, v. FLETCHER, Dir., Appellee.
• Court: Ohio Supreme Court

Page 146

63 Ohio St.3d 146

586 N.E.2d 80

FAIRVIEW GENERAL HOSPITAL, Appellant, v. FLETCHER, Dir., Appellee.

No. 91-315.

Supreme Court of Ohio.

Submitted Jan. 22, 1992.

Decided March 11, 1992.

Walter, Haverfield, Buescher & Chockley, James E. Betts, Marcia E. Hurt and Amy Berman Hogan, Cleveland, for appellant.

Lee I. Fisher, Atty. Gen., and Dennis G. Nealon, for appellee.

Roth & Rolf Co., L.P.A., and Sheila P. Cooley, Cleveland, urging affirmance for amicus curiae, University Hospitals of Cleveland.

Vorys, Sater, Seymour & Pease and James P. Friedt, Columbus, urging affirmance for amicus curiae, Association of Ohio Children's Hospitals.

The cause is affirmed on authority of the court of appeals' opinion below, rendered December 20, 1990 and attached as an appendix to this opinion.

MOYER, C.J., and SWEENEY, HOLMES, DOUGLAS and RESNICK, JJ., concur.

WRIGHT and HERBERT R. BROWN, JJ., concur separately.

APPENDIX

McCORMAC, Judge.

Defendant-appellant, Robert Fletcher, the Director of the Ohio Department of Health ("ODH"), appeals the judgment of the Franklin County Court of Common Pleas which overruled his motion for summary judgment and granted summary judgment in favor of plaintiff-appellee, Fairview General Hospital ("Fairview"). The trial court declared that Ohio's certificate of need ("CON") law was inapplicable to appellee's request to ODH for a redesignation of the level of its neonatal intensive care unit ("NICU") from Level II to Level III and that the director exceeded his statutory authority when he applied Ohio's CON law to deny appellee's request.

This case began on February 4, 1987, when Fairview submitted a letter to ODH requesting a redesignation of the Level II status of its NICU issued by ODH in 1980 to a Level III status. ODH replied on March 5, 1987 that Fairview was required to submit a CON application to change the level of its perinatal service, and stated that ODH would review the hospital's entire perinatal service when it considered Fairview's application because CON law did not permit the redesignation of a NICU.

Fairview did not consider the director's request for a CON application a determination by ODH under R.C. 3702.53(A)(1) and (2) that the redesignation of its NICU was a "reviewable activity" to which the CON statutes apply, and thus did not immediately appeal the matter to the Certificate of Need Review Board ("CONRB"). ¹ Instead, Fairview submitted its CON application in August 1987. Nevertheless, appellant advised Fairview by a letter dated April 6, 1988 that its application had been denied based on need. On May 4, 1988, Fairview filed an administrative appeal with the CONRB in which it assigned as error appellant's application on CON law to its original request; however, Fairview voluntarily dismissed this appeal on February 24, 1989 before a judgment was issued by the CONRB.

On August 15, 1988, during the interim between the filing and voluntary dismissal of its administrative appeal, Fairview filed a complaint seeking a declaratory judgment and a writ of mandamus in the Franklin County Court of Common Pleas. Specifically, Fairview sought a declaration that Ohio's CON laws were inapplicable to Fairview's request for a redesignation of its NICU and an order compelling appellant to redesignate Fairview's NICU a Level III facility.

In response to Fairview's request for declaratory relief, cross-motions for summary judgment were filed by Fairview and ODH. On September 28, 1989, the trial court granted summary judgment for Fairview, ruling that Ohio's CON law was inapplicable to Fairview's request to ODH for a redesignation of its NICU, and that the director exceeded his statutory authority when he applied Ohio's CON law to deny the request. The court overruled ODH's motion for summary judgment, rejecting its affirmative defenses of exhaustion of remedies and res judicata. Subsequently, Fairview dismissed its mandamus action.

ODH appeals the declaratory judgment asserting the following assignments of error:

"I. The trial court erred in failing to dismiss the action below where the issue before the court was res judicata.

"II. The trial court erred in failing to dismiss the action below where Appellee failed to exhaust its administrative remedies.

"III. The Trial court erred in finding that Appellee's change from a Level II to a Level III NICU does not require a certificate of need."

The summary judgment which granted declaratory relief for appellee was proper pursuant to Civ.R. 56(C) if the evidence, viewed most strongly in favor of appellant, showed that there was no genuine issue as to any material fact and that appellee was entitled to judgment as a matter of law. In this case, the facts which indicated the chronology of events were undisputed at the trial court. The merit issues presented to the trial court were whether appellant exceeded his statutory authority when he applied Ohio's CON law to deny Fairview's request for a redesignation of its NICU and, more particularly, whether a CON was required before such a redesignation could take place. In other words, the trial court's summary judgment for appellee declared the change in the status of a NICU from Level II to Level III a non-reviewable activity under R.C. 3702.53(A) for which a CON was not required as a matter of law.

Before the merits of the declaratory judgment can be considered, we must address appellant's first and second assignments of error, which assert that a declaratory judgment action was inappropriate because the question of whether Ohio's CON statutes applied in this case should have been answered first by the CONRB. Specifically, appellant contends that the trial court abused the discretion granted it by Ohio's Declaratory Judgments Act, R.C. 2721.02 et seq., when it entertained the declaratory judgment action since appellee had failed to exhaust all of its existing administrative remedies, including adjudication by the CONRB, before it invoked the subject matter jurisdiction of the common pleas court. Additionally, appellant asserts that appellee's failure to pursue administrative appeals of the director's action rendered those determinations final and binding.

It is settled in Ohio that the three elements necessary to obtain a declaratory judgment as an alternative to other remedies are: (1) that a real controversy between adverse parties exists; (2) which is justiciable in character; (3) and that speedy relief is necessary to the preservation of rights which may be otherwise impaired or lost. Herrick v. Kosydar (1975), 44 Ohio St.2d 128, 130, 73 O.O.2d 442, 443, 339 N.E.2d 626, 627; Buckeye Quality Care Centers, Inc. v. Fletcher (1988), 48 Ohio App.3d 150, 154, 548 N.E.2d 973, 976. Application of the aforementioned three criteria to the circumstances in this case leads to the conclusion that the trial court's declaratory judgment was inappropriate and an abuse of discretion. Although there was a justiciable controversy between adverse parties at the time appellee filed its declaratory judgment action, declaratory relief was unnecessary to the preservation of appellant's rights because Ohio's CON statutes provided appellant with an adequate legal remedy.

Exhaustion of administrative remedies is not required where the only claim presented in a declaratory judgment action is the validity or constitutionality of a statute. Herrick, supra, 44 Ohio St.2d at 130, 73 O.O.2d at 443, 339 N.E.2d at 628; Buckeye Quality Care Centers, Inc., supra, 48 Ohio App.3d at 154, 548 N.E.2d at 977.

In Arbor Health Care Co. v. Jackson (1987), 39 Ohio App.3d 183, 530 N.E.2d 928, we determined the propriety of declaratory relief when a plaintiff seeks a declaration of its constitutional rights in addition to a declaration of its statutory rights. In Arbor, the plaintiff health care organization applied to ODH for a CON to build nursing homes. Before ODH either granted or denied the application, plaintiff filed an action in common pleas court against ODH which sought a declaratory judgment that ODH improperly interpreted the Ohio Administrative Code provisions which prescribed rules for the batching of CON applications, as well as for the calculation of annual bed need. The trial court sustained ODH's motion for dismissal under Civ.R. 12(B)(6) because it found plaintiff's declaratory judgment action to be moot and barred by plaintiff's failure to exhaust the administrative remedies afforded CON applicants under R.C. Chapter 3702.

The plaintiff appealed to this court, and we held that, despite the presence of a constitutional claim, it was preferable for plaintiff to have exhausted its administrative remedies prior to seeking declaratory relief in the common pleas court in order to avoid unnecessarily deciding the constitutional issue. Therefore, we held that the trial court did not abuse its discretion under the Declaratory Judgment Act when it dismissed plaintiff's complaint for having failed to demonstrate, in light of the adequate legal remedies provided by Ohio's CON statutes, the need for speedy relief. We specifically declined, however, to address whether it would have been an abuse of discretion for the trial court to retain the declaratory judgment action.

The Arbor case is not dispositive of the instant case. Unlike the appellant in Arbor, Fairview presented no constitutional issues in its request for declaratory relief. Furthermore, the instant case comes closer to presenting the precise issue this court declined to answer in Arbor, in that the trial court herein retained and granted appellee's declaratory judgment action.

Therefore, the issue in this case is whether exhaustion of administrative remedies was a necessary prerequisite to a declaratory judgment action which requested a declaration of purely statutory rights. The Ohio Supreme Court specifically held in Schomaeker v. First Natl. Bank (1981), 66 Ohio St.2d 304, 20 O.O.3d 285, 421 N.E.2d 530, paragraph one of the...