Truesdell v. Friedlander
| Decision Date | 31 August 2020 |
| Docket Number | Civil No. 3:19-cv-00066-GFVT |
| Parties | PHILLIP TRUESDELL, et al., Plaintiffs, v. ERIC FRIEDLANDER, in his official capacity as Secretary of the Kentucky Cabinet for Health and Family Services, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Kentucky |
This matter is pending for consideration of Defendants' Motions to Dismiss. Parties asks this Court to wade into the complex matter of state healthcare policy as it pertains to Kentucky's Certificate of Need program. Plaintiffs contend that they are entitled to pursue discovery on their claims that the protest, hearing, and need provisions of the Kentucky statutes applicable to ambulance companies, violate the Dormant Commerce Clause and Fourteenth Amendment of the United States Constitution. However, Defendants argue that Plaintiffs do not have standing to pursue their claims, and even if they did, they have failed to plausibly plead any claims for which relief may be granted. For the reasons set forth below, Defendants' motions will be GRANTED in part and DENIED in part.
Plaintiff, Legacy Medical Transport, LLC, is a ground ambulance service that currently operates in Ohio but wishes to operate in Kentucky, as well. [R. 17 at ¶ 2.] Legacy's main service includes transportation services by ambulance in non-emergency situations. Id. Plaintiffs can currently operate legally in Ohio, but they are unable to offer their services in Kentucky due to their lack of a Certificate of Need (CON) from the state. Id. at ¶ 3.
In Kentucky, individuals and companies involved in ambulance services are required by statute to obtain a CON from the Cabinet for Health and Family Services. Id. (citing KRS §§ 216B.061; 216B.015(13)). Any person who operates a ground ambulance company without a CON is subject to a fine of one percent of the capital expenditure involved, but not less than $500 for each violation. KRS § 216B.990. Plaintiffs wish to obtain a Class I Certificate so they can transport between Kentucky and Ohio, and intrastate trips within Kentucky, but they cannot do so without risking such fines. [R. 17 at ¶ 14.] The statutes and corresponding regulations establish a multi-step process to obtain a CON. In order to start the process, an entity or person must submit an application to the Cabinet for Health and Family Services and pay a $1,000 fee. 900 KAR 6:020. There are two levels of review for CON applications—formal review and non-substantive review. KRS 216B.040; KRS 216B.095. Applications subject to formal review are evaluated using five criteria: consistency with plans; need and accessibility; interrelationships and linkages; costs; economic feasibility and resources availability; and quality of services. KRS 216B.010.
After an applicant submits its completed application, the Cabinet puts the application on public notice via its CON newsletter. 900 KAR 6:065; 6.060. This allows "Affected Parties" to request a public hearing on the application. KRS 216B.085(1). The hearing is before an independent hearing officer from the Cabinet and any party has the right to be represented by counsel. KRS §§ 216B.085(2); 216B.0085(3). The applicant may provide witnesses and evidence to show consistency with the review criteria and opposing Affected Parties may present evidence and testimony to support the opposite conclusion. KRS § 216B.085(3). Plaintiffs statein practice, the Cabinet [R. 17 at ¶ 5.]
After the hearing, the hearing officer either approves or disapproves the application based upon the administrative record. KRS § 216B.085(4). If a hearing was not requested, the hearing officer's decision is based upon the application. Id. The hearing officer's final decision may be appealed to the Franklin Circuit Court. KRS § 216B.115. Defendants point out that obtaining a CON does not entitle a recipient to operate a Class I ground ambulance service in Kentucky—it is only a prerequisite to obtaining a required license from the Kentucky Board of Emergency Medical Services (KBEMS). [R. 36 at 5.] A CON recipient has 90 days from the date of issuance of its CON to obtain a license from KBEMS. 202 KAR 7:545, Section 1(3).
In 2018, Plaintiffs applied for a CON to operate as a Class I ambulance service. [R. 17 at ¶ 45.] CON-holding ambulance companies protested their application, requiring Plaintiffs to attend a hearing. Id. Plaintiffs explain that during the hearing, they "were asked questions related to whether allowing them to operate in Kentucky would 'harm' the existing businesses." Id. Plaintiffs were ultimately denied a CON, "in part, because the Cabinet determined they could not prove there was a 'need' for a new business." Id.
Plaintiffs state that the protest procedure and "need" requirement create a "Competitor's Veto." Id. at ¶ 6. They assert that "Certificate applications are rarely granted in the face of an existing business' opposition, and even where they are, they are only granted after the applicant expends significant resources proving they won't harm a protesting business. [R. 37 at 5.] Plaintiffs do not challenge the denial of their CON application or the entire CON program. [R.17 at ¶ 46.] Instead they claim that the protest and hearing process currently followed infringe on their constitutional right to pursue the occupation of providing ambulance services in Kentucky in violation of due process. Id. at ¶ 71. They also argue that such procedures violate the Commerce Clause by placing an undue burden on the interstate market for ground ambulance services. Id. at ¶ 59-68. Further, Plaintiffs argue that the protest and hearing procedures violate the equal protection clause because they arbitrarily favor existing CON holders over new applicants. Id. at ¶ 84. Finally, Plaintiffs assert that the statutes violate the privileges and immunities clause. Id. at ¶ 88.
Defendants first moved to dismiss the Original Complaint [R. 16] but Plaintiffs filed an Amended Complaint pursuant to Federal Rule of Civil Procedure 15(a)(1)(B). [R. 17.]1 Thereafter, Patient Transport Services, Inc. filed a Motion to Intervene [R.18], which the Court ultimately granted [R. 34]. The Kentucky Hospital Association also filed a Motion to Intervene [R. 38], but the Court denied their request based on unnecessary duplication and undue delay [R. 48]. However, the Court permitted the Kentucky Hospital Association to file a memorandum amicus curiae in support of their position, which they acted upon. [R. 51.] The Defendants, including Patient Transport Services now move to dismiss Plaintiffs' Amended Complaint based upon a lack of subject-matter jurisdiction and failure to state a claim. [R. 33; R. 36.]
Federal Rule of Civil Procedure 12(b)(1) provides that a defendant may assert lack of subject-matter jurisdiction as a defense. A motion to dismiss under Rule 12(b)(1) is different from a motion to dismiss under Rule 12(b)(6) because it challenges the Court's power to hear the case before it. When jurisdiction is challenged under this rule, the burden is on the plaintiff to prove jurisdiction exists. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996). In answering this question, the Court is "empowered to resolve factual disputes" and need not presume that either parties' factual allegations are true. Id.
A motion to dismiss pursuant to Rule 12(b)(6) tests the sufficiency of a plaintiff's complaint. In reviewing a Rule 12(b)(6) motion, the Court "construe[s] the complaint in the light most favorable to the plaintiff, accept[s] its allegations as true, and draw[s] all inferences in favor of the plaintiff." DirecTV, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citation omitted). The Court, however, "need not accept as true legal conclusions or unwarranted factual inferences." Id. (quoting Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000)). The Supreme Court explained that in order "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)); see also Courier v. Alcoa Wheel & Forged Products, 577 F.3d 625, 629 (6th Cir. 2009).
First, Defendants contend Plaintiffs lack standing to bring this suit. [R. 33-1 at 6.] Standing is a threshold inquiry in every federal case which may not be waived by the parties.See, e.g., Warth v. Seldin, 422 U.S. 490, 498 (1975); Planned Parenthood Ass'n of Cincinnati, Inc. v. Cincinnati, 822 F.2d 1390, 1394 (6th Cir. 1987). "To satisfy the 'case' or 'controversy requirement' of Article III, which is the 'irreducible constitutional minimum' of standing, a plaintiff must, generally speaking, demonstrate that he has suffered an 'injury in fact,' that the injury is 'fairly traceable' to the actions of the defendant, and that the injury will likely be redressed by a favorable decision." Bennett v. Spear, 520 U.S. 154, 162 (1997) (citations omitted). The elements of standing "are more than just pleading requirements." Airline Prof. Ass'n v. Airborne, Inc., 332 F.3d 983, 988 (6th Cir. 2003). Instead, "each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e. with the manner and degree of evidence required at the successive stages of the litigation." Id.
The Court concludes that Plaintiffs have standing to pursue their claims. Courts have found plaintiffs have standing...
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