NC Supreme Court rejects case that would clarify challenges to government rulings

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  • The N.C. Supreme Court has denied a request to take up a case involving legal challenges to government agency decisions.
  • Plaintiff Bio-Medical Applications of North Carolina had hoped the high court would overturn a unanimous decision from the N.C. Court of Appeals. Appellate judges ruled that denial of a state certificate of need did not give BMA a basis for legal action.
  • Durham's oldest hospital had attempted to file a friend-of-the-court brief urging the state Supreme Court to take the case. The court denied the hospital's request as moot.

The N.C. Supreme Court will not take up a case that aimed to clarify rules for North Carolinians challenging government agency decisions. A court order issued Wednesday denied a petition to hear the case. It involved a certificate-of-need dispute with state health regulators.

Justices offered no explanation for the decision. Their order arrived more than one year after plaintiffs urged the court to overrule a unanimous decision from the N.C. Court of Appeals.

In a May 2022 petition to the state Supreme Court, plaintiffs predicted the Appeals Court decision would present significant challenges for people fighting bad government rulings.

“The administrative state touches the lives of every North Carolinian,” according to the petition’s opening line. “Administrative agencies are how the state dispenses benefits like welfare and grants permissions like gun permits. When agencies make those kinds of decisions, they sometimes get it wrong.”

“This case is about who gets to hold agencies accountable for their decisions,” the brief continued. “Sometimes the answer to that question is tough. For example, if a neighboring landowner opposes an air-quality permit issued to a power plant, does the neighbor have enough at stake to seek judicial review of that permitting?”

“But the question here is far simpler than that. If the power plant itself had been denied the permit, everyone would agree that the power plant would have suffered the kind of harm allowing it to seek review of the permit.”

“Almost everyone. Basic administrative case law from both this [state Supreme] Court and the federal courts confirm that when an agency denies an applicant a license or permit, the applicant may challenge that denial,” according to the brief. “But … the Court of Appeals held that the denial alone is not enough; even an applicant must show some additional injury. What kind of extra injury and how much of it, the Court couldn’t say.”

The petition from Bio-Medical Applications of North Carolina involved a dispute over a certificate of need. A CON represents a state government permission slip. It allows health care providers to offer new medical services, purchase major medical equipment, add hospital beds, or build new medical facilities.

Through the CON process, the N.C. Department of Health and Human Services decreed in 2019 that Guilford County would get 20 new kidney dialysis stations, while Johnston County would add 12. BMA and a competitor, Total Renal Care, both applied for CONs to move dialysis stations into both counties, according to the Supreme Court petition.

State officials granted TRC’s applications “in full” but blocked BMA from moving four dialysis stations into the targeted counties. BMA appealed the decision and lost.

Details surrounding that loss prompted the petition to the state Supreme Court.

An administrative law judge agreed that BMA could challenge the decision under CON law. But the judge also decided that the company did not meet standards set by the state Administrative Procedure Act.

“Under the APA, any ‘person aggrieved’ may seek review of an agency decision,” according to the petition. “By definition, a person aggrieved must be ‘affected substantially’ in its person, property, or employment.” State law “reiterates that a person may seek review if he was ‘deprived … of property’ or ‘has otherwise [been] substantially prejudiced’ by agency error.”

“Even though BMA was denied the certificates it requested, the [judge] held, BMA was not ‘substantially prejudiced’ or deprived of any property interest, no matter how erroneous DHHS’s decision was.”

The judge also contradicted previous court precedents and the law itself by ruling “that the person aggrieved and substantial prejudice standards are not equivalent,” according to BMA’s petition.

The state Court of Appeals affirmed the administrative law judge’s opinion. “Interpreting the APA’s ‘substantial prejudice’ requirement, the court held that the denial of a certificate of need — that is, the denial of an application for a governmental permit — does not suffice for substantial prejudice.”

BMA urged the state’s highest court to overturn that appellate decision.

“When a person is denied permission or a benefit from the government, the person is harmed, and thus has standing to seek judicial review of that denial,” the petition argued. “That commonsense proposition has been BMA’s argument throughout this litigation, but the ALJ and the Court of Appeals rejected it.”

“Those courts, however, were unable and unwilling to say what other harm an applicant must show that would be sufficient. That silence only underscores BMA’s point: there is no reason to require more.”

“Under the Court of Appeals’ decision, it would appear that there are situations where no one has sufficient harm to challenge an agency decision, even the applicant itself,” BMA warned. “Of course, that means the applicant is shut out of court altogether, no matter how wrong or biased the agency’s decision is. In other words, those who apply for benefits or permissions from the government can be denied for any reason or no reason at all.”

On the same day Bio-Medical Applications filed its petition, North Carolina Specialty Hospital filed paperwork in the case. NCSH, billing itself as “the oldest hospital in Durham,” sought to file a friend-of-the-court brief supporting BMA. A separate state Supreme Court order Wednesday dismissed the hospital’s request as moot.

“As a participant in North Carolina’s CON process, NCSH has seen firsthand the importance of subjecting the Agency to judicial review of its decisions,” according to the court filing. “NCSH seeks to offer the Court the perspective of another CON Applicant who can claim, albeit metaphorically, to have lived and died by CON decision-making.”

“[I]f allowed to stand, the Court of Appeals’ decision creates a dangerous legal precedent that effectively bars challenges to Agency decisions on the very CON approvals which providers must secure to expand and develop health care capabilities to serve patients in our State.”

The three-judge Appeals Court panel’s April 5, 2022, decision against BMA was unanimous, so the state Supreme Court faced no obligation to take the case. BMA had asked the high court to grant “discretionary review.”