Good Hope Hosp. v. Dept. of Health

Decision Date01 November 2005
Docket NumberNo. COA04-1008.,COA04-1008.
Citation620 S.E.2d 873
CourtNorth Carolina Supreme Court
PartiesGOOD HOPE HOSPITAL, INC., Good Hope Health System, LLC, and Triad Hospitals, Inc., Plaintiffs, and Town of Lillington, Plaintiff-Intervenor, v. NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, Division of Facility Services, and Robert J. Fitzgerald, Lee B. Hoffman, Phyllis Thorne Daw, William Warren in their official capacities, and Betsy Johnson Regional Hospital, Inc. and Amisub of North Carolina, Inc. d/b/a Central Carolina Hospital, Defendants.

Smith Moore LLP, by Maureen Demarest Murray, Susan M. Fradenburg, and William W. Stewart, Jr., Greensboro, for plaintiffs-appellants.

Morgan, Reeves and Gilchrist, by C. Winston Gilchrist, Lillington, for plaintiff-intervenor-appellant.

Attorney General Roy Cooper, by Special Deputy Attorney General Melissa L. Trippe and Special Deputy Attorney General R. Marcus Lodge, for State defendants-appellees.

Wyrick Robbins Yates & Ponton LLP, by K. Edward Greene and Kathleen A. Naggs, and Nelson Mullins Riley & Scarborough, L.L.P., by Noah H. Huffstetler, III, Denise M. Gunter and Lisa R. Gordon, Raleigh, for defendant-appellee Betsy Johnson Regional Hospital, Inc.

Bode, Call & Stroupe, L.L.P., by S. Todd Hemphill and Robert V. Bode, Raleigh, for defendant-appellee Amisub of North Carolina, Inc., d/b/a/ Central Carolina Hospital.

STEELMAN, Judge.

Plaintiffs appeal the dismissal of their claims by the trial court. Because the trial court dismissed the claims under Rule 12(b) of the Rules of Civil Procedure, our recitation of the relevant factual background is based upon the allegations contained in plaintiffs' complaint.

Plaintiff Good Hope Hospital (Good Hope) is currently located in Erwin, Harnett County. Its facility was originally constructed in 1921, and is licensed for a total of 72 beds, consisting of 43 acute care beds and 29 psychiatric beds. The current facility contains two operating rooms. On 15 April 2001, Good Hope filed an application for a certificate of need (CON) with the North Carolina Department of Health and Human Services (Department) proposing to develop a partial replacement facility, located about three miles from the existing facility. The application proposed to develop 34 acute care beds, 12 psychiatric beds, and 3 operating rooms at the new facility, and to continue the use of the existing facility for outpatient therapy, medical records, plant operations and maintenance, training, and storage. A CON was issued to Good Hope by Department on 14 December 2001 for this proposed project.

Good Hope proposed to finance the new facility through a loan approved by the United States Department of Housing and Urban Development (HUD). This proposal was submitted to the Medical Care Commission for approval. Betsy Johnson Regional Hospital, Inc. (Betsy Johnson) operates a hospital located in Dunn, Harnett County. There were unsuccessful merger talks between Good Hope and Betsy Johnson. Betsy Johnson commented against Good Hope's financing proposal before the Medical Care Commission. The Medical Care Commission denied approval of Good Hope's financing proposal and directed it to seek private financing. It subsequently approved a $26,000,000.00, 68 bed expansion of Betsy Johnson, with HUD financing.

Good Hope subsequently entered into an agreement with Triad Hospitals, Inc. to form a joint venture, Good Hope Health System, LLC. (these three entities are hereinafter referred to collectively as "plaintiffs"). The purpose of the joint venture was to erect and operate a hospital in Harnett County. Triad was not willing to proceed with construction of the new facility based upon the 14 December 2001 CON, but wanted to construct a larger facility at a different location. On 13 April 2003 plaintiffs filed a new CON application with Department to develop a larger replacement hospital to be located in Lillington. The application proposed 34 acute care beds, 12 psychiatric beds and 3 operating rooms. Department denied this application on 26 September 2003. Plaintiffs appealed this denial to the Office of Administrative Hearings, to the Superior Court of Wake County, and to this Court. Betsy Johnson and Amisub were allowed to intervene in this appeal, opposing the issuance of the CON.

On 22 August 2003, plaintiffs notified Department of their intent to develop a replacement hospital facility under the provisions of N.C. Gen.Stat. § 131E-184(a). This statute exempts projects from CON review under certain specific circumstances. The stated basis of this notice was that the condition of Good Hope had deteriorated and that there existed imminent safety hazards as defined by federal and state codes. By letters dated 11 December 2003 and 15 January 2004, Department advised plaintiffs that their proposed project was not exempt from CON review under the provisions of N.C. Gen.Stat. § 131E-184(a). This decision was based upon the correction of "the deficiencies that constituted `an immediate and serious threat' to the health and safety of patients." We take judicial notice that plaintiffs appealed this decision to the Office of Administrative Hearings, to the Superior Court of Wake County, and to this Court.

On 29 January 2004, plaintiffs filed this action in the Superior Court of Harnett County. Their complaint alleged the following claims: (1) for declaratory judgment that plaintiffs are entitled to construct a new hospital in Harnett County under the exemption provisions of N.C. Gen.Stat. § 131E-184, without any restrictions as to "size or capital expenditure."; (2) for a mandatory injunction compelling Department to exempt a 72 bed, 3 operating room facility from the CON requirements; (3) that the denial of plaintiffs' exemption requests violated their rights of equal protection, due process and § 42 U.S.C.1983; (4) that Betsy Johnson's opposition to plaintiffs' proposed projects constituted tortious interference with contract, tortious interference with prospective economic advantage, a conspiracy in restraint of trade in violation of N.C. Gen.Stat. § 75-1, and unfair and deceptive trade practice in violation of N.C. Gen.Stat. § 75-1.1, and common law unfair competition, (5) an injunction prohibiting Betsy Johnson from further interfering with or opposing plaintiffs' proposed projects. Plaintiffs joined Amisub as a defendant, alleging that under N.C. Gen.Stat. § 1-260 it may have an interest that may be affected by the litigation, but made no further allegations as to Amisub. Defendant, Betsy Johnson, filed a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6) on 10 February 2004. Defendant Department filed a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), to dismiss for failure to state a claim under Rule 12(b)(6) and to strike plaintiffs' request for a jury trial under Rule 12(f) on 13 February 2004. Plaintiffs filed a motion for partial summary judgment as to certain of their claims for declaratory relief on 17 February 2004. Defendant, Betsy Johnson filed a supplemental motion to dismiss on 26 February 2004, asserting as an additional basis of its motion to dismiss lack of subject matter jurisdiction under Rule 12(b)(1). On 20 February 2004, the Town of Lillington (Intervenor) moved to intervene as a party plaintiff in the case. This motion was granted on 1 March 2004.

On 1 March 2004, these motions came on for hearing before Judge Floyd. On 1 April 2004, Judge Floyd entered two orders encompassing the following rulings: (1) Betsy Johnson's motion to dismiss was granted; (2) plaintiffs' claims for declaratory judgment and injunctive relief against Betsy Johnson were denied; (3) Department's motion to dismiss was granted, except as to the claim under the Public Records Act; (4) Department's motion to strike plaintiffs' request for a jury trial was denied; (5) plaintiffs' motions for preliminary and permanent injunctions were denied. On 3 May 2004, plaintiffs dismissed their claims under the Public Records Act, with prejudice. Plaintiffs and Intervenor appeal the two orders entered on 1 April 2004.

In their first argument, plaintiffs contend that the trial court erred in dismissing the claims against Department. We disagree.

The trial court dismissed plaintiffs' claims against Department pursuant to Rule 12(b)(1) based upon a lack of subject matter jurisdiction. "An action is properly dismissed under Rule 12(b)(1) for lack of subject matter jurisdiction where the plaintiff has failed to exhaust administrative remedies." Shell Island Homeowners Ass'n v. Tomlinson, 134 N.C.App. 217, 220, 517 S.E.2d 406, 410 (1999). Before any hospital may service the public, it must first obtain a license from the Department of Health and Human Services. N.C. Gen.Stat. § 131E-77. Pursuant to N.C. Gen.Stat. § 131E-78(a), the Department of Health and Human Services has the sole "authority to deny, suspend, revoke, annul, withdraw, recall, cancel, or amend a license in any case when it finds a substantial failure to comply with the provisions of this Part or any rule promulgated under this Part." Any applicant who has been denied a license has a right to a hearing pursuant to Chapter 150B to review that decision. N.C. Gen.Stat. § 131E-78(b)(1). "Any applicant or operator who is dissatisfied with the decision of the Department as a result of the hearing provided in this section and after a written copy of the decision is served, may request a judicial review under Chapter 150B of the General Statutes, the Administrative Procedure Act." N.C. Gen.Stat. § 131E-78(c).

In the instant case, plaintiffs requested a hearing pursuant to N.C. Gen.Stat. § 131E-78(b)(1), but...

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