Huron Valley Hosp., Inc. v. City of Pontiac

• Decision Date: 13 October 1989
• Docket Number: No. 88-1702,88-1702
• Citation: 887 F.2d 710
• Parties: HURON VALLEY HOSPITAL, INC. and Martin L. Trepel, D.O., Plaintiffs-Appellants, v. CITY OF PONTIAC, Defendant, Bailus Walker, Jr.; Maurice S. Reizen, M.D.; Herman A. Ziel, M.D.; Richard Reihmer, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 710

887 F.2d 710

HURON VALLEY HOSPITAL, INC. and Martin L. Trepel, D.O. Plaintiffs-Appellants, v. CITY OF PONTIAC, Defendant Bailus Walker, Jr.; Maurice S. Reizen, M.D.; Herman A Ziel, M.D.; Richard Reihmer, Defendants-Appellees.

No. 88-1702.

United States Court of Appeals Sixth Circuit.

Argued April 17, 1989.

Decided Oct. 13, 1989.

Dennis J. Dlugokinski, Berkley, Mich., Ann C. Yahner, Jerry S. Cohen, Cohen, Milstein & Hausfeld, Washington, D.C., and John P. Morris (argued), Coronado, Cal., for plaintiffs-appellants.

Barbara H. Erard, Kenneth J. McIntyre (argued), Claudia Rast, Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, Mich., for defendants-appellees.

Before WELLFORD and GUY, Circuit Judges, and PECK, Senior Circuit Judge.

WELLFORD, Circuit Judge.

This longstanding controversy began in 1975 when Huron Valley Hospital, Inc. (Huron) was organized as a non-profit Michigan corporation for the purpose of constructing, owning, and operating a hospital in Oakland County, Michigan. ¹ The district court has stated in its most recent decision, Huron Valley Hospital, Inc. v. City of Pontiac, 686 F.Supp. 608, 609 (E.D.Mich.1988), "[w]ith this opinion, the saga of the Huron Valley Hospital comes to an end". ²

In 1976, Huron filed an application for a State certificate of need (CON) under M.C.L. Secs. 331.451 et seq., now repealed and replaced by Secs. 333.22101 et seq., effective September 30, 1978. Huron also filed, as it was required to do, for federal capital expenditure approval under Sec. 1122 of the Social Security Amendments of 1972, 42 U.S.C. Sec. 1320(a)(1), with the Michigan Department of Public Health and the federally designated regional health systems agency. A Department of Public Health official had been designated by the Governor of Michigan to administer the federal Sec. 1122 program under an agreement between Michigan and the Secretary of the United States Department of Health and Human Services. ³ Both applications sought permission to proceed with the construction of a 153-bed acute care hospital in Oakland County costing nearly $15 million. The applications were completed in February 1977.

The Michigan Department of Public Health denied Huron's CON application. Huron then requested and received a hearing before the Michigan State Health Facilities Commission seeking a reversal and approval of the CON. The Commission, however, affirmed the denial. In the meantime, Pontiac General Hospital (PGH), an existing facility, filed a notice of intent to request a CON to upgrade its existing facility in Oakland County. This application of PGH was approved on August 25, 1978.

Having unsuccessfully exhausted all the Michigan administrative avenues, Huron filed suit in a Michigan state court which reversed the Commission in 1981, ordering the Health Department to issue a CON to Huron. The Michigan Court of Appeals affirmed the state trial court's findings, holding that the Department of Public Health had based its decision upon unpublished criteria that favored the application of Pontiac General, in violation of the statutory limitations on the Department's discretion. ⁴ Huron was held to be deprived of an impartial review of its application in violation of its due process rights. The Michigan court ordered the issuance of the CON because the Department's decision was "unsupported by competent, material, and substantial evidence." ⁵

Following the Michigan Supreme Court's denial of the Commission's application for leave to appeal, ⁶ the Department of Public Health issued a CON to Huron limiting its authorized capital expenditure to $14,789,000.00, the amount requested in the 1976 application. Huron next filed a petition for clarification in state court, which ordered the Department to issue a CON in a reasonable amount which would allow construction of the planned facility. ⁷ The Department finally issued a CON to Huron in 1982 for over $44 million.

During 1981 and 1982 Huron discussed the federal Sec. 1122 approval, and in 1983 the regional health administrator issued a Sec. 1122 approval after the Michigan Department of Public Health finally recommended approval. Shortly thereafter, however, an Assistant United States Surgeon General vacated the Sec. 1122 approval. More litigation followed in the United States District Court, which ordered that the Sec. 1122 approval be reinstated. Construction finally began on the hospital in 1984.

In addition to the litigation regarding the CON, Huron instituted this action in 1978 in the federal court claiming that numerous defendants conspired to violate the anti-trust laws by preventing Huron from entering the Oakland County health care market. In 1979, Huron sought to amend its original complaint to add 42 U.S.C. Sec. 1983 violations and to add the state defendants now before us. The district court refused to allow the amendment and subsequently granted summary judgment in favor of the various defendants. On appeal, a panel of this court vacated the district court's judgment and remanded the case for entry of a stay pending the completion of the state administrative and judicial proceedings. ⁸ State proceedings were completed in 1982, affirming that a CON be issued to Huron.

Huron filed an amended complaint in 1983, adding as defendants Bailus Walker, Jr., Maurice S. Reizen, Herman A. Ziel, and Richard Reihmer. Huron claims that beginning in 1976, these defendants engaged in a general conspiracy to restrain trade in violation of Sec. 1 of the Sherman Act and that certain defendants conspired to deprive Huron of its fourteenth amendment due process rights in violation of 42 U.S.C. Sec. 1983.

The defendants sought dismissal or, in the alternative, summary judgment on various grounds. The district court decided that defendants could claim neither qualified immunity nor a state action anti-trust exemption. ⁹ On appeal, another panel of this court affirmed that the defendants could not claim qualified immunity because they should have known that rules and regulations of a state agency needed to be subjected to advance notice and comment. ¹⁰ That panel held, moreover, that there was no jurisdiction to review the appeal of the state action anti-trust exemption.

On a subsequent motion for summary judgment by defendants, the district court dismissed all of the conspiracy claims on the basis that a jury could not reasonably find a conspiracy between the private defendant and the state officials to deprive plaintiff of a property interest without due process of law. ¹¹ Still another panel of this court affirmed. ¹² (By this time eight different judges of this court had participated in decisions involving plaintiffs' claims).

The remaining procedural due process violation claim under Sec. 1983 against the four former Health Department officials was remanded for disposition. Defendant Reizen was director from 1970 to 1981; Walker from 1981 to 1983. Defendant Ziel was chief of the bureau of health care facilities from 1966 to 1984 within the Health Department. Defendant Reihmer, a lower level official, was chief of health facilities planning and construction from 1969 to 1978. Huron's application for a CON was first reviewed and analyzed by Reihmer, then worked its way up through Ziel's bureau, and finally was reviewed by the director in respect to issuance of a CON.

This present appeal (before the ninth and tenth judges of this court to consider this controversy) involves the district court's grant of defendants' motion for summary judgment dismissing the Sec. 1983 claims. The district court held that plaintiffs were required to show that the state post-deprivation proceedings did not provide an adequate remedy to them. Because the plaintiffs failed to plead and prove the inadequacy of state remedies to redress plaintiffs' injuries caused by defendants' alleged failure to afford plaintiffs due process of law, and because state remedies were adequate and available in the case, Judge Gilmore held that plaintiffs' remaining claim or claims were not actionable under Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981). Plaintiffs, once again, have appealed and we begin by setting out the underlying statute:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or another person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress. For the purposes of this section, any Act of Congress applicable exclusively to the District of Columbia shall be considered to be a statute of the District of Columbia.

42 U.S.C. Sec. 1983.

Section 1983 authorizes the courts to redress violations of "rights, privileges, or immunities secured by the Constitution and [federal] laws" that occur under color of state law. The statute is thus limited to deprivations of federal statutory and constitutional rights. It does not cover official conduct that allegedly violates state law. See Baker v. McCollan, 443 U.S. 137, 146, 99 S.Ct. 2689, 2695, 61 L.Ed.2d 433 (1979) (dealing with state tort law). Section 1983 also does not cover state constitutional violations that are not also federal constitutional deprivations.

Plaintiffs present a somewhat novel Sec. 1983 claim. They contend that because the defendant state officials failed to abide by the Michigan statutory requirements for evaluating an application for a CON, they were deprived of property in violation of due process under federal constitutional standards and requirements. The complaint is ambiguous as to whether the plaintiffs claim they were deprived of their right to issuance of the CON, their right to the evaluation of their application for the CON...