Laurels of Bon Air v. Medical Facilities, Record No. 1085-07-2.

• Decision Date: 22 April 2008
• Docket Number: Record No. 1085-07-2.
• Citation: 659 S.E.2d 561,51 Va. App. 583
• Parties: The LAURELS OF BON AIR, LLC, d/b/a the Laurels of Bon Air, Oak Healthcare Investors of Richmond, Virginia, Inc., d/b/a the Laurels of Willow Creek, Forest Hill Convalescent Center, L.P., d/b/a Ruxton Health and Rehabilitation Center of Westover Hills, Ruxton Health Care V, LLC, d/b/a Ruxton Health Care of Stratford Hills, and Westport Operations, LLC, d/b/a Westport Health Care Center v. MEDICAL FACILITIES OF AMERICA LIV LIMITED Partnership, d/b/a Beaufont Healthcare Center, Maple Leaf of Hanover County Health Care, Inc., d/b/a Hanover Healthcare Center, and Virginia Department of health.
• Court: Virginia Court of Appeals

659 S.E.2d 561

51 Va. App. 583

The LAURELS OF BON AIR, LLC, d/b/a the Laurels of Bon Air, Oak Healthcare Investors of Richmond, Virginia, Inc., d/b/a the Laurels of Willow Creek, Forest Hill Convalescent Center, L.P., d/b/a Ruxton Health and Rehabilitation Center of Westover Hills, Ruxton Health Care V, LLC, d/b/a Ruxton Health Care of Stratford Hills, and Westport Operations, LLC, d/b/a Westport Health Care Center v. MEDICAL FACILITIES OF AMERICA LIV LIMITED Partnership, d/b/a Beaufont Healthcare Center, Maple Leaf of Hanover County Health Care, Inc., d/b/a Hanover Healthcare Center, and Virginia Department of health.

Record No. 1085-07-2.

Court of Appeals of Virginia, Richmond.

April 22, 2008.

W. Benjamin Pace (Martin A. Donlan, Jr.; Samuel T. Towell; Williams Mullen, on briefs), for appellants.

D. Patrick Lacy, Jr. (H. Lane Kneedler; Kevin R. McNally; Reed Smith LLP, on

brief), for appellees Medical Facilities of America LIV Limited Partnership and Maple Leaf of Hanover County Health Care, Inc.

Matthew M. Cobb, Assistant Attorney General (Robert F. McDonnell, Attorney General; David E. Johnson, Deputy Attorney General; Jane D. Hickey, Senior Assistant Attorney General, on brief), for appellee Virginia Department of Health.

Present: FRANK and KELSEY, JJ., and COLEMAN, S.J.

KELSEY, Judge.

The appellants in this case, five nursing homes, claim the Virginia Department of Health should not have granted a request by a competitor to relocate hospital beds from one of its facilities to two others pursuant to 2005 Va. Acts ch. 99 (House Bill 2316), the uncodified predecessor of Code § 32.1-102.3:5.¹ The appellants argue the Department unlawfully refused to recognize their "good cause" standing to participate in the administrative process. The Department denied that request on the ground that 2005 Va. Acts ch. 99 (which we will refer to simply as the "2005 Relocation Act") exempted qualifying relocation requests from the plenary administrative process and, by doing so, precluded nonparties from obtaining standing to participate in the Act's more abbreviated and simplified process.

The appellants filed petitions for appeal to the circuit court pursuant to the Virginia Administrative Process Act (VAPA), Code § 2.2-4000 et seq. The circuit court agreed with the Department's interpretation of the 2005 Relocation Act and dismissed the VAPA appeal because the appellants had no standing to pursue it. We too find this reasoning persuasive and, thus, affirm the circuit court's dismissal order.

The appellants argue that this interpretation of the Act converts it into an unconstitutional "special" law in violation of Article IV, §§ 14-15, of the Virginia Constitution. Though we question whether the appellants have standing in this case to challenge the constitutionality of the 2005 Relocation Act, we assume arguendo they do and nonetheless find the Act cannot be judicially vacated as an unconstitutional special law.

I.

Through various affiliates, Medical Facilities of America, Inc. (MFA) operates a nursing home, the Warsaw Healthcare Center, located in Warsaw, Virginia. MFA also operates two other nursing homes, Hanover Healthcare Center, located in Hanover County, and Beaufont Healthcare Center, located in the City of Richmond. Regulated by the Virginia Department of Health, MFA obtained certificates of public need to operate these nursing homes and others throughout the Commonwealth in various planning districts maintained by the Department. In 2005, MFA sought permission from the Department to relocate 120 beds from Warsaw Healthcare Center (located in one planning district) to Hanover Healthcare Center and Beaufont Healthcare Center (both located in another planning district).

Two of the appellant nursing homes wrote letters to the Department requesting an informal fact-finding conference pursuant to Code § 32.1-102.6. The Department refused to conduct a conference, asserting that the 2005 Relocation Act exempts the relocation request from the normal process governing certificates of public need. All of the appellants responded by filing petitions with the Department seeking "good cause" standing to participate in administrative hearings. The Department rejected the petitions and again explained that the 2005 Relocation Act removed MFA's relocation request from the normal hearing process.

The Department later approved MFA's request and issued certificates of public need (COPNs) authorizing the bed transfers. Claiming to be "aggrieved parties" from an agency "case decision," the appellants filed VAPA petitions for appeal in the Circuit Courts of Chesterfield County and the City of Richmond. In their petitions for appeal the appellants asserted that the Department erroneously interpreted the 2005 Relocation Act. Properly construed, the appellants claimed, the Act did not exempt MFA's relocation request from the normal administrative process. And whether it did or not, they added, the Department's decision to approve the request without granting them a hearing should be judicially set aside as arbitrary and capricious.

In their VAPA petitions for appeal, the appellants also alleged that the 2005 Relocation Act violated the prohibition against "special, private, or local law" found in Article IV, §§ 14-15, of the Virginia Constitution. None of the appellants, however, filed any non-VAPA declaratory judgment claims or asserted any separate counts requesting either circuit court to exercise its general jurisdiction. Each of the petitions for appeal limited their claims and their jurisdictional allegations to the judicial review provisions of VAPA and the underlying basic law governing the administrative regulation of nursing homes.

Both VAPA appeals were consolidated in the Chesterfield County Circuit Court. The appellees moved to dismiss the appeals on various grounds, including that the 2005 Relocation Act deprived appellants from obtaining standing as parties in the administrative proceeding and thus precluded their status as aggrieved parties for purposes of VAPA's judicial review procedures. The circuit court agreed and dismissed the VAPA case. The appellants appeal to us, claiming the circuit court erred in dismissing their VAPA appeals and in not addressing the merits of their claims.

II.

A. THE VAPA, THE BASIC LAW & STANDING PRINCIPLES

Under VAPA, the circuit court reviews the agency's action in a manner "equivalent to an appellate court's role in an appeal from a trial court." J.P. v. Carter, 24 Va. App. 707 721, 485 S.E.2d 162, 169 (1997) (quoting Sch. Bd. v. Nicely, 12 Va.App. 1051, 1061-62, 408 S.E.2d 545, 551 (1991)) (internal quotation marks omitted). "In this sense, the General Assembly has provided that a circuit court acts as an appellate tribunal." Gordon v. Allen, 24 Va.App. 272, 277, 482 S.E.2d 66, 68 (1997) (citation omitted); Pence Holdings, Inc. v. Auto Ctr., Inc., 19 Va.App. 703, 708, 454 S.E.2d 732, 734-35 (1995).

VAPA, however, "does not vest circuit courts with appellate authority over all agency decisions." Giannoukos v. Va. Bd. of Med., 44 Va.App. 694, 699, 607 S.E.2d 136, 138 (2005). "Only those within the definition of a `case decision' fall within the scope of the VAPA's judicial review provisions." Id. (citing Code § 2.2-4026). A "case decision" results from an agency proceeding involving a "named party." Code § 2.2-4001. A "named party" who loses an agency case decision ordinarily can seek judicial review under VAPA. A party who is not "named," but a party nonetheless, can appeal to circuit court if he is genuinely "aggrieved" by the case decision, see Code § 2.2-4026, or qualifies as a "necessary party" essential to the resolution of the appeal, Browning-Ferris Ind. v. Residents Involved, 254 Va. 278, 282, 492 S.E.2d 431, 434 (1997), or is otherwise deemed a party under Rule 2A:1.

Nonparties, however, cannot appeal a case decision to the circuit court under VAPA. They can appeal, however, the agency's decision to exclude them from participating in the administrative process — which, in this context, involves the question whether the agency properly refused to recognize the appellants' "standing" to intervene and thereby acquire party status. See Tidewater Psychiatric Inst., Inc. v. Buttery, 8 Va.App. 380, 383-84, 382 S.E.2d 288, 290 (1989); see also Chippenham & Johnston-Willis v. Peterson, 36 Va.App. 469, 474 n. 1, 553 S.E.2d 133, 136 n. 1 (2001).

Whether an agency correctly refused to recognize the standing of a putative intervenor depends on the criteria for standing, if any, adopted by the underlying administrative statute, the "basic law" as Code § 2.2-4001 calls it. The basic law may provide broader standing, see, e.g., Harrison v. Ocean View Fishing Pier, LLC, 50 Va. App. 556, 568, 651 S.E.2d 421, 427 (2007), or narrower standing, EDF v. State Water Control Bd., 12 Va.App. 456, 462, 404 S.E.2d 728, 731 (1991), than the default standard adopted by VAPA.

When the basic law refuses to recognize any standing for nonparties seeking to participate in the administrative process, VAPA respects that refusal. While VAPA seeks to "standardize court review" of agency action, it does so "save as laws hereafter enacted may otherwise expressly provide." Code § 2.2-4000 (emphasis added); see also Health Sys. Agency v. Stroube, 47 Va.App. 299, 308, 623 S.E.2d 444, 449 (2005) (recognizing that the VAPA "governs the appeals process for administrative decisions, unless the agency's basic law provides otherwise").

B. THE RELOCATION ACT & "GOOD CAUSE" STANDING

In this case, the circuit court reasoned that the 2005 Relocation Act so completely exempted the relocation request from the normal administrative process that no "good cause" standing for nonparties could be recognized. The court also found no other statutory basis, either in the basic law or VAPA, granting the appellants standing to seek judicial review of the relocation approval. For this reason, the court held the VAPA...