north carolina society of healthcare attorneys

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NORTH CAROLINA SOCIETY OF HEALTHCARE ATTORNEYS ANNUAL MEETING
2014 HEALTH LAW CASE UPDATE
Presented by:
S. TODD HEMPHILL
[email protected]
919.783.2958
MATTHEW A. FISHER
[email protected]
919.783.2924
DAVID R. BROYLES
[email protected]
919.783.2923
301 FAYETTEVILLE STREET, SUITE 1900
RALEIGH, NORTH CAROLINA 27601
WWW.POYNERSPRUILL.COM
CONTENTS
MEDICAL MALPRACTICE & PROFESSIONAL LIABILITY .................................... 4
Anne B. Goodman, Administrator of the Estate of Richard Clyde Bost, Deceased
v. Living Centers-Southeast, Inc., d/b/a Brian Center of Salisbury and/or
Brian Center Health & Rehabilitation/Salisbury, ___ N.C. App. ___, 759
S.E.2d 676, No. COA13-1336 (17 June 2014) ................................................................ 4
Terri Dew Bookman, Administratrix of the Estate of Carthina Roberson Dew v.
Britthaven, Inc., d/b/a Britthaven of Wilson, DaVita Rx, LLC, Wilson
Medical Center, Morgan Jones, and Courtney Lassitger, ___ N.C. App. ___,
756 S.E.2d 890, No. COA13-948 (15 Apr. 2014)........................................................... 5
Leslie Webb, Administratrix of the Estate of Robert B. Webb, III v. Wake Forest
University Baptist Medical Center, University Dental Associates, North
Carolina Baptist Hospital, Wake Forest University, Wake Forest
University Physicians, Shilpa S. Buss, DDS, and Reena Patel, DDS, ___ N.C.
App. ___, 756 S.E.2d 741, No. COA13-221 (18 Feb. 2014), appeal dismissed, ___
N.C. ___, 758 S.E.2d 741, 2013 N.C. Lexis 475 (17 June 2014) ................................. 6
Lakisha Wiggins and G. Elvin Small, as Guardian Ad Litem for Roy Lee
Brothers, a Minor v. East Carolina Health-Chowan, Inc. d/b/a Chowan
Hospital and Michael David Gavigan, M.D., ___ N.C. App. ___, 760 S.E.2d 323,
No. COA13-1428 (1 July 2014) ............................................................................................ 8
CERTIFICATE OF NEED .............................................................................................. 10
CaroMont Health, Inc., Gaston Memorial Hospital, Inc. and CaroMont
Ambulatory Services, LLC d/b/a CaroMont Endoscopy Center v. N.C.
DHHS, DHSR, CON Section and Greater Gaston Center, LLC, ___ N.C. App.
___, 751 S.E.2d 244, No. COA12-1044 (3 Dec. 2013) ............................................... 10
Holly Springs Hospital II, LLC, et. al. v. N.C. DHHS, DHSR, CON Section, ___ N.C.
App. ___, 753 S.E.2d 743, No. COA13-367 (17 Dec. 2013) (unpublished) ......... 12
– PAGE 1 OF 40 –
Surgical Care Affiliates, LLC and Blue Ridge Day Surgery Center, L.P. v. N.C.
DHHS, DHSR, CON Section and WakeMed, ___ N.C. App. ___, ___ S.E.2d ___, No.
COA13-1322, 2014 NCBC LEXIS 31 (19 Aug. 2014) ................................................ 13
PRE-TRIAL PROCEDURE: EXPERT WITNESSES & DISCOVERY ..................... 16
Keen Lassiter, as Guardian Ad Litem for Jakari Baize, a minor, v. North
Carolina Baptist Hospitals, Incorporated a/k/a North Carolina Baptist
Hospital, Wake Forest University Health Sciences, Terry Daniel, M.D.
and Dayspring Family Medicine Associates, PLLC, ___ N.C. App. ___, 761
S.E.2d 720, No. COA14-165 (5 Aug. 2014) ................................................................... 16
Clifford Roberts Wheeless, III, M.D. v. Maria Parham Medical Center, Inc., ___
N.C. App. ___, ___ S.E.2d ___, 2014 N.C. App. LEXIS 686, No. COA13-1063 (1 July
2014) (unpublished) ............................................................................................................. 17
Jerry M. Medlin v. North Carolina Specialty Hospital, LLC, Timothy N. Young,
and North Carolina Eye, Ear, Nose & Throat, P.A., ___ N.C. App. ___, 756
S.E.2d 812, No. COA13-818 (1 Apr. 2014) ................................................................... 18
Jerome Brewer, Sabrina Brewer, and Matthew J. Brewer, by and through his
Guardian Ad Litem, Timothy T. Leach v. William D. Hunter, M.D.,
Neuroscience & Spine Center of the Carolinas, P.A., and Neuroscience &
Spine Center of the Carolinas, L.L.P., ___ N.C. App. ___, ___ S.E.2d ___, 2014
N.C. App. LEXIS 974, No. COA14-7 (2 Sept. 2014) .................................................... 19
VOLUNTARY & INVOLUNTARY COMMITMENT ................................................. 21
In the Matter of: Gilbert Moore, Jr., ___ N.C. App. ___, ___ S.E.2d ___, 2014 N.C. LEXIS
609, No. COA13-1397 (20 May 2014) ........................................................................... 21
In the Matter of: A.N.B, ___ N.C. App. ___, 754 S.E.2d 442, No. COA13-554 (18 Feb.
2014) .......................................................................................................................................... 23
In the Matter of: C.W.F., ___ N.C. App. ___, 753 S.E.2d 736, No. COA13-444 (4 Feb.
2014), review allowed by, ___ N.C. ___, 758 S.E.2d 868 (11 June 2014) ............ 25
In the Matter of: James Spencer, ___ N.C. App. ___, ___ S.E.2d ___, 2014 N.C. App.
LEXIS 965, No. COA14-143 (2 Sept. 2014) .................................................................. 26
AGENCY & LICENSING BOARDS ............................................................................... 27
Nanny’s Korner Care Center By Bernice M. Cromartie, CEO v. N.C. Department
of Health and Human Services, Division of Child Development, ___ N.C.
App. ___, 758 S.E.2d 423, No. COA13-602 (20 May 2014) ...................................... 27
MEDICARE & MEDICAID ............................................................................................ 29
In Re: The Bankruptcy Estate of AGS, Inc., 565 Fed. Appx. 172, 2014 U.S.App. Lexis
6324, No. 14-1296 (4th Cir. April 4, 2014) (unpublished) ...................................... 29
AFFORDABLE CARE ACT ........................................................................................... 30
Halbig v. Burwell, __ F3d ___, 2014 U.S. App. LEXIS 17099, No. 14-5018 (D.C. Cir.
July 22, 2014) .......................................................................................................................... 30
– PAGE 2 OF 40 –
King v. Burwell, ___ F3d. ___, 2014 U.S. App. LEXIS 13902, 2014-2 U.S. Tax Cas.
(CCH) P50,367, No. 14-1158 (4th Cir. July 22, 2014) ............................................... 32
Burwell v. Hobby Lobby, ___ U.S. ___, 134 S.Ct. 2751, 189 L.Ed. 675 (2014) .............. 34
OTHER STATE & FEDERAL CASES .......................................................................... 38
Propst v. N.C. Department of Health and Human Services, ___ N.C. App. ___, 758
S.E.2d 892, No. COA13-1072 (3 June 2014) ................................................................ 38
Bostic v. Schaefer, ___ F3d ___, 2014 U.S. App. LEXIS 14298, No. 14-1167, 14-1169,
14-1173 (4th Cir. July 28, 2014) ....................................................................................... 39
The authors would like to thank ELIZABETH RUNYON who is a
member of the Health Care Practice Group at WYRICK ROBBINS, and
KATE STELMACH who is Assistant General Counsel at NEW HANOVER
REGIONAL MEDICAL CENTER for their significant contributions to this
manuscript through their work on the Society’s “Prognosis”
newsletter.
– PAGE 3 OF 40 –
MEDICAL MALPRACTICE & PROFESSIONAL LIABILITY
Anne B. Goodman, Administrator of the Estate of Richard Clyde Bost, Deceased v.
Living Centers-Southeast, Inc., d/b/a Brian Center of Salisbury and/or Brian
Center Health & Rehabilitation/Salisbury, ___ N.C. App. ___, 759 S.E.2d 676, No.
COA13-1336 (17 June 2014)

Facts:
The decedent was a permanent resident of the Brian Center, a long-term nursing
and rehabilitation center in Salisbury, N.C. It was alleged that in September, 2008, the
Defendant (through its agents) improperly placed a piece of medical equipment used to
deliver I.V. fluids next to decedent’s bed, and the equipment later fell and caused serious
upper body injuries to the decedent. After admission to the hospital and treatment for the
injuries, the decedent was discharged to a different nursing home facility and where he
later died in October, 2008. The decedent never returned to the Brian Center after the
incident that caused the hospitalization.
Plaintiff filed the lawsuit against Defendant in October, 2010 alleging three causes of
action for damages1, voluntarily dismissed the lawsuit in January, 2012, and refiled the
lawsuit alleging the same three causes of action exactly one year later in January, 2013.
The Defendant filed a motion to dismiss, which the trial court awarded in July, 2013 and
dismissed Plaintiff’s complaint, based on the grounds that the claims therein were barred
by the statute of repose for medical malpractice actions under N.C. Gen. Stat. §1-15(c).
Plaintiff timely appealed the dismissal.

Holding:
The actions of agents of a long-term care facility in placing medical equipment
improperly close to a patient’s bed were mainly physical or manual in nature, therefore an
action for ordinary negligence was proper, timely, and not barred by the statute of repose.

Analysis:
Plaintiff contended that the trial court erred in dismissing the action for failure to
file under the statute of repose when, quoting the Court, “the gravamen of the complaint is
ordinary negligence.” See Opinion at p. 3. The Court agreed with Plaintiff, and focused on
the issue of whether Plaintiff’s claims stemmed from an incident that constituted a medical
malpractice action or an action of ordinary negligence. The Court noted that Plaintiff
neither referenced “medical malpractice” in the complaint nor obtained an expert
certification pursuant to N.C. Gen. Stat. §1A-1, Rule 9(j) The Court found that the actions
Defendant’s agents involved mainly physical or manual activity rather than an activity
requiring specialized medical knowledge, skill or science, and determined the claim for
ordinary negligence was proper. Therefore, the Court found that Plaintiff’s filings were all
The Complaint filed by Plaintiff alleged causes of action for damages based on allegations of negligence,
wrongful death and breach of contract.
1
– PAGE 4 OF 40 –
timely, not governed by the statute of repose, and reversed the trial court’s dismissal and
remanded the case for further proceedings.
Terri Dew Bookman, Administratrix of the Estate of Carthina Roberson Dew v.
Britthaven, Inc., d/b/a Britthaven of Wilson, DaVita Rx, LLC, Wilson Medical
Center, Morgan Jones, and Courtney Lassitger, ___ N.C. App. ___, 756 S.E.2d 890,
No. COA13-948 (15 Apr. 2014)

Facts:
The decedent was discharged to defendant Britthaven’s (“Britthaven”) nursing
facility in Wilson, N.C. after surgery, and was awake and responsive upon arrival at
Britthaven. The decedent, however, did not sign any admission paperwork upon arrival;
rather her husband and daughter signed all of the admission documents.2 The decedent’s
daughter primarily signed her respective documents as “Fred Dew,” which was the same
name that the decedent’s husband, Frederick Dew, used when he signed his respective
documents. Approximately two months after her discharge, the decedent passed away as a
result of complications with large pressure ulcers. The decedent’s daughter subsequently
filed a wrongful death lawsuit against the Defendants, and Britthaven moved to compel
arbitration pursuant to one of the documents signed at admission.
The trial court issued a first order denying Britthaven’s motion based on its finding
that neither the husband nor the daughter had actual authority to sign on behalf of the
decedent. However, the trial court’s first order did not include any findings to determine
whether apparent authority existed for the husband or daughter to sign on the decedent’s
behalf. On appeal to the Court from the trial court’s first order, the Court remanded the
case by unpublished opinion3 for the trial court to issue findings and conclusions related to
the issue of apparent authority.
On remand, the trial court basically ignored Britthaven’s request to present further
evidence on the apparent authority issue. Rather, the trial court simply issued a second
order without review any further evidence or any hearing, and concluded neither the
husband nor the daughter had, “legal authority, expressed authority, actual authority,
implied authority, or apparent authority” (quoting the Court at p. 5) to sign on behalf of the
decedent. Britthaven timely appealed the trial court’s second order.4

Holding:
A trial court must review the evidence and make specific findings of fact and
conclusions of law related to the logical inference the court had about the potential
authority, its scope and any limitations that the parties were aware of at the time when
determining whether apparent authority existed to bind parties to an arbitration
agreement.
The decedent’s daughter, Terri Dew Bookman, the above named administratrix of the decedent’s estate
and party that filed the lawsuit on behalf of the decedent’s estate.
3
See Bookman v. Britthaven, Inc., No. COA12-663, 2013 WL 1314965 (N.C. Ct. App. April 2, 2013).
4
Britthaven was the only defendant that was a party to the appeal in this case.
2
– PAGE 5 OF 40 –

Analysis5:
Britthaven argued on appeal that apparent authority existed to bind the principal to
the arbitration agreement, and therefore the trail court’s second order erred by ruling that
the arbitration agreement was unenforceable. In its review, the Court focused on the
evidence of reasonable inferences and the conduct of the parties involved, and how that
determines the extent of an agent’s authority. The Court showed how those issues often
come down to the unique facts of each case, which is for the trier of fact to determine
unless the logical inference is clear in a case.6 Particular to this case, the Court showed how
after remand, the trial court made no further findings related to evidence of any awareness
of potential authority or limitations between the decedent and her husband and daughter
related to executing the arbitration agreement. The trial court merely accepted the facts as
proposed by the Plaintiff in a proposed order, and issued its second order based on that.
Without further evidentiary findings, the trial court failed to fulfill its required duty to
determine the logical inference related to apparent authority and as a result, the Court
reversed the trial court’s order and remanded with specific instruction to the trial court to
conduct an evidentiary hearing to resolve the outstanding issues.
Leslie Webb, Administratrix of the Estate of Robert B. Webb, III v. Wake Forest
University Baptist Medical Center, University Dental Associates, North
Carolina Baptist Hospital, Wake Forest University, Wake Forest University
Physicians, Shilpa S. Buss, DDS, and Reena Patel, DDS, ___ N.C. App. ___, 756 S.E.2d
741, No. COA13-221 (18 Feb. 2014), appeal dismissed, ___ N.C. ___, 758 S.E.2d 741,
2013 N.C. Lexis 475 (17 June 2014)

Facts:
Robert Webb, III (the decedent) had oral surgery for which he was under general
anesthesia to have four of his teeth extracted and get his teeth cleaned. Following his
discharge the same day of the surgery, the decedent became unresponsive one day later
and died the follow day after he became unresponsive. Plaintiff filed suit on behalf of the
estate of the decedent alleging Defendants were negligent in the treatment of the decedent
and that their treatment was the proximate cause his death. The Defendants filed motions
for summary judgment and the trial court granted the motions for summary judgment
related to all matters7 except the motions related to anesthesia care. Plaintiff appealed.
As a preliminary matter, the Court noted that while Britthaven’s appeal was interlocutory, in U.S. Trust
Co., N.A. v. Stanford Grp. Co., 199 N.C. App. 287, 681 S.E.2d. 512 (2009) the Court previously held that the
right to arbitrate is a substantial right that may be lost if delayed, which justified making the matter
immediately appealable.
6
See Foote & Davies, Inc. v. Arnold Craven, Inc., 72 N.C. App. 591, 324 S.E.2d 889 (1985).
7
The matters on which summary judgment was granted included, any and all allegations, claims and
causes of action involving the dental care provided and any and all allegations, claims and causes that relate
to the dental care provided to the decedent involving the alleged negligence of defendants Wake Forest
University Baptist Medical Center, North Carolina Baptist Hospital, Wake Forest University and Wake Forest
University Physicians.
5
– PAGE 6 OF 40 –

Holding:
When the issue of whether the Plaintiff forecasted sufficient evidence to show a
genuine issue of material fact existed as to causation for negligence in a medical
malpractice claim, the qualifications of the Plaintiff’s expert witness that offered opinion
testimony must be viewed in particular, as opposed to the general qualifications of the
licensed medical professional in a given practice area.

Analysis:
Plaintiff’s appeal was limited to the claim that the trial court erred in granting
summary judgment on the matter related to the decedent’s dental care. After it outlined
the well known standard of review for summary judgment8 and emphasized that, especially
in negligence cases, summary judgment is a drastic measure to be approached with
caution9, the Court determined that a review of the Plaintiff’s complaint and Defendants’
answers showed there were genuine issues of material fact related to the standard of care
given and whether the decedent’s bronchopneumonia was the cause of his death.
On appeal, the Defendants raised the issue of the admissibility of expert testimony
under N.C. Gen. Stat. § 8C-1, Rule 702(b). Further, the Court noted that the trial court
stated that the Plaintiff had an issue with the case because of the same rule. However, the
Court stated that the record contained no motion to exclude the Plaintiff’s expert witness.10
The Court’s analysis focused on whether the Plaintiff forecasted sufficient evidence
showing an issue of fact related to the negligence claim. Plaintiff’s expert witness was a
Doctor of Dental Medicine, and Defendants argued that the opinions of the Plaintiff’s expert
failed to establish proximate cause because the expert testimony did not satisfy Rule 702.
After a lengthy discussion of the facts, the Court found that, when it focused on the
qualifications of the Defendant’s expert in particular,11 as opposed to the qualifications of
licensed dentists in general, the Defendant’s expert was better qualified than the jury to
form an opinion. Therefore, the evidence forecasted by the Plaintiff created genuine issues
of material fact that were appropriate for a jury to determine, and the trial court’s order
granting summary judgment was in error and reversed.12
See N.C. Gen. Stat. §1A-1, Rule 56(c) and Lord v. Beerman, 191 N.C. App. 290, 664 S.E.2d 331 (2008).
See Williams v. Power & Light Co., 296 N.C. 400, 250 S.E.2d 255 (1979).
10
Although this point was made by the Court, it went on to address the admissibility of expert witness
testimony and followed the N.C. Supreme Court’s approach in Crocker v. Roethling, 363 N.C. 140, 675 S.E.2d
625 (2009) to decide the preliminary question of the admissibility of the expert testimony. Because the Court
cautioned against merging the two issues and noted that the trial court’s ruling can often result in the
misapplication of N.C. Gen. Stat. §8C-1, Rule 702, it analyzed this issue as the main focus of its opinion.
11
The Court looked at the knowledge, skill, expertise, training and education and whether those were
related to the condition that the expert gave opinion testimony about.
12
Judge Dillon dissented with a separate opinion. As noted, the Plaintiff’s appeal to the N.C. Supreme Court
was dismissed on June 17, 2014.
8
9
– PAGE 7 OF 40 –
Lakisha Wiggins and G. Elvin Small, as Guardian Ad Litem for Roy Lee Brothers, a
Minor v. East Carolina Health-Chowan, Inc. d/b/a Chowan Hospital and
Michael David Gavigan, M.D., ___ N.C. App. ___, 760 S.E.2d 323, No. COA13-1428 (1
July 2014)

Facts:
Plaintiffs appealed a judgment in favor of defendant East Carolina Health-Chowan,
Inc. d/b/a Chowan Hospital (“Chowan”) on Plaintiffs’ medical negligence claim relating to
the labor and delivery of plaintiff Wiggins’ (“Wiggins”) son, plaintiff Brothers (“Roy”).13
Wiggins was admitted to Chowan for labor and delivery of Roy on a Friday night, with no
indication of any issues related Roy prior to admission. Wiggins was induced Friday night,
but after a period of time where the induction was paused, it was resumed Saturday
morning at approximately 8:00 a.m. No vaginal exam was performed on Wiggins until
approximately 1:00 p.m. Saturday, even though hospital protocol was to perform the exam
at the time the patient was induced (or given medicine to start the process, as Wiggins was
in this case). When the exam was done, the nurse discovered an umbilical cord prolapse. 14
Once the prolapse was discovered, the attending physician was immediately called and an
emergency cesarean section was performed.
During the trial, several expert witnesses testified that an umbilical cord prolapse is
not common and qualified as an emergency. Further, all of the medical providers that
testified at trial testified that Wiggins showed no risk factors for an umbilical cord prolapse.
During the charge conference at trial, pursuant to Chowan’s request, the trial court agreed
to give an instruction to the jury regarding the sudden emergency doctrine.15 Plaintiffs
preserved objections to the jury instruction regarding the sudden emergency doctrine and
after the jury found in favor of Chowan, Plaintiffs appealed.

Holding:
The trial court erred when instructing the jury on the sudden emergency doctrine in
a medical negligence action because the sudden emergency doctrine is not applicable in
medical negligence cases.

Analysis:
On appeal, Plaintiffs argued that the trial court erred by instructing the jury on the
sudden emergency doctrine and by failing to instruct the jury on Chowan’s liability for
unsuccessful or harmful subsequent medical treatment necessitated by Chowan’s
negligence. The Court agreed that the sudden emergency doctrine is not applicable in
medical negligence actions16, and therefore was misleading to the jury. The issue of the
Defendant Dr. Michael Gavigan was named in the lawsuit, but was no longer a party to the suit and was
not a party to the appeal.
14
This condition, where the umbilical cord protrudes from the vagina, can cause the baby’s blood and
oxygen supply to become compromised if the umbilical cord is compressed.
15
An instruction on the sudden emergency doctrine lessens the standard of care for a defendant in certain
emergency situations.
16
See Hunt v. Bradshaw, 242 N.C. 517, 88 S.E.2d 762 (1955), later codified into N.C. Gen. Stat. §90-21.12,
which was recently amended to address this precise issue in §90-21.12(b).
13
– PAGE 8 OF 40 –
sudden emergency doctrine’s applicability in medical negligence cases was an issue of first
impression in North Carolina.
Plaintiffs argument was based on the premise that the Doctrine does not apply in
medical negligence actions because emergencies in the medical context are already
contemplated and should be built in to the standard of care when medical professionals are
involved. Chowan argued that the Doctrine is equally applicable in all negligence cases
(medical vs. ordinary) and that the Doctrine was not misleading when considered in the
context of the entire jury charge. The Court looked to the application of the health care
professional standard of care and its applicability to a wide range of scenarios. In its
review of the various scenarios, the Court focused on the fact that the design of that
standard (from common law as enunciated in N.C. Gen. Stat. §90-21.12) is to
accommodate the facts of any case, including those situations characterized as medical
emergencies. Following that logic, the Court held that the application of the Doctrine is
unnecessary and inapplicable in such cases, like the current one. Therefore, the Court
found that the trial court erred by instructing the jury on the sudden emergency doctrine
and remanded for a new trial.
– PAGE 9 OF 40 –
CERTIFICATE OF NEED
CaroMont Health, Inc., Gaston Memorial Hospital, Inc. and CaroMont Ambulatory
Services, LLC d/b/a CaroMont Endoscopy Center v. N.C. DHHS, DHSR, CON
Section and Greater Gaston Center, LLC, ___ N.C. App. ___, 751 S.E.2d 244, No.
COA12-1044 (3 Dec. 2013)

Facts:
Petitioners, CaroMont, et. al. (collectively “CaroMont”) appealed from a Final Agency
Decision (“FAD”) entered in March, 2012 which adopted the ruling of an Administrative
Law Judge (“ALJ”) dismissing their Petition for Contested Case Hearing under N.C. Gen.
Stat. §1A-1, Rule 41(b). The CaroMont Petition sought to prove that the N.C. DHHS, DHSR,
Certificate of Need Section (“the Agency”) erred in granting a Certificate of Need (“CON”)
for the development of two gastrointestinal (“GI”) endoscopy rooms to RespondentIntervenor Greater Gaston Center, LLC (“GGC”) and that CaroMont suffered substantial
prejudice from the granting of the CON to GGC, LLC.
In 2007, applied to move two licensed GI endoscopy rooms from Gaston Memorial
Hospital and create a freestanding GI clinic called CaroMont Endoscopy Center. That CON
was granted in December, 2008. In October, 2010, GGC filed a CON application to develop a
freestanding ambulatory surgery center with two GI endoscopy procedure rooms in Gaston
County. The Agency conditionally approved the GGC CON application in March, 2011.17
CaroMont filed its Petition for Contested Case Hearing, challenging the approval of
GGC’s CON application and GGC intervened by consent in May, 2011. Administrative Law
Judge (“ALJ”) Joe L. Webster then held a three-day contested case hearing. At the close of
CaroMont’s evidence, the Agency and GGC moved for dismissal of CaroMont’s Petition. ALJ
Webster then issued a Recommended Decision in January, 2012, dismissing CaroMont’s
petition for (1) failure to demonstrate that its rights were substantially prejudiced by the
Agency’s decision; and (2) failure to demonstrate that the Agency committed error in
making its decision. The Agency’s Final Agency Decision (“FAD”) adopting ALJ Webster’s
Recommended Decision. CaroMont timely appealed to the North Carolina Court of Appeals
in April, 2012.

Holdings:
The North Carolina Court of Appeals affirmed the FAD which adopted the ruling of
ALJ Webster dismissing the case for CaroMont’s failure to show substantial prejudice by
the FAD and CaroMont’s failure to show Agency Error.
As of April, 2011 when the GGC CON application was approved and CaroMont filed its Petition, CaroMont
subsidiary Gaston Memorial Hospital, located in Gastonia, was the only licensed provider of GI endoscopy
rooms in Gaston County, North Carolina. Gaston Memorial Hospital had eight licensed GI endoscopy rooms at
the time of their application to move two to the freestanding clinic in 2008. The freestanding clinic was still
in development and not yet operational by 2011 when the GGC CON application was approved.
17
– PAGE 10 OF 40 –

Analysis:
The Court based its decision on the its prior opinion in Parkway Urology, P.A. v.
N.C. DHHS, 205 N.C. App. 529, 696 S.E. 2d 187 (2010), which held that an ALJ must
determine whether a non-applicant Petitioner (such as CaroMont) met both the burden of
showing that the Agency action substantially prejudiced the Petitioner’s rights and that the
Agency acted erroneously in making its decision.18 The Court found Parkway Urology to
be controlling, and thus required CaroMont to prove that it was substantially prejudiced by
the FAD granting GGC a CON. In its analysis of the adequacy of relevant evidence offered to
show the reasonableness of the finding that CaroMont failed to prove substantial prejudice,
the Court applied the whole record test.
Despite acknowledging that CaroMont did offer evidence of specific harm the Court
concluded that all of the harms that CaroMont claimed were little more than the product of
normal competition introduced by the CON. This conclusion rejected the contention by
CaroMont that the economic harms acknowledged in Parkway Urology could serve as the
basis for a showing of substantial prejudice if those harms were quantified. The Court in
Parkway Urology had found that the petitioner failed to quantify the economic harms
claimed in that case, but rather relied solely on its status as an affected person. In addition,
the Court found that the harms claimed by CaroMont were not caused by the approval of
the GGC CON application, but rather were due to changes in patient referrals and the
introduction of a new competitor into the market.
On the issue of Agency error, the Court found that the Agency made a reasonable
health planning judgment in deciding that there was sufficient volume for a total of ten
endoscopy rooms in Gaston County. This finding essentially adopted the findings related to
Agency error in the FAD, which found CaroMont’s expert testimony too unreliable and
insufficient to establish error on the part of the CON Section. While CaroMont pointed out
that its expert witness’ testimony relied upon historical data and was not contradicted by
the Agency, the Court found that the Agency was entitled to determine whether it was
credible. The Court adopted a deferential stance with respect to Agency determinations
regarding the credibility and weight given evidence offered for purpose of proving Agency
error. Nonetheless, the Court found that the Agency’s analytical approach to evaluating the
projections found in the GGC Application was both rational, and supported by substantial
evidence, thus satisfying the whole record test.
The language used by the Court from the Parkway Urology case specifically quotes the two-prong test
for a petitioner’s burden found in Britthaven, Inc. v. N.C. Dep’t of Human Res., 118 N.C. App. 379, 382, 455
S.E. 2d 455, 459 (1995).
18
– PAGE 11 OF 40 –
Holly Springs Hospital II, LLC, et. al. v. N.C. DHHS, DHSR, CON Section, ___ N.C. App. ___,
753 S.E.2d 743, No. COA13-367 (17 Dec. 2013) (unpublished)19

Facts:
The 2010 State Facilities Medical Plan (“SMFP”) identified a need for 101 additional
acute care beds in Wake County. Six CON applications were filed, with each applicant
seeking a portion of the additional beds identified in the SMFP. The CON Section’s decision
was to conditionally approve WakeMed Raleigh’s CON application for 29 beds,
conditionally approve WakeMed Cary’s CON application for 22 beds and conditionally
approve Rex Holly Springs’ CON application for 50 beds. Petitioner Holly Springs Hospital
II, LLC’s (“HSH”) CON application was denied by the CON Section. HSH appealed the
decision of the CON Section and in March, 2012 HSH moved for summary judgment in its
case.
Following HSH’s motion for summary judgment, the Recommended Decision of an
ALJ found that the Agency erred in finding the HSH CON application to be nonconforming
with certain statutory review criteria found in N.C. Gen. Stat. §131E-183(a).20 However,
the CON Section, together with the other parties above, appealed the Recommended
Decision of the ALJ. Subsequently, the Final Agency Decision (“FAD”) entered in
September, 2012 rejected the ALJ’s Recommended Decision and affirmed the CON Section’s
decision. HSH then appealed the FAD to the Court.

Holding:
The Court affirmed the FAD, which rejected the ALJ’s Recommended Decision and
upheld the CON Section’s denial of HSH’s CON application.

Analysis:
The Court first noted that the findings of fact from the FAD were binding on the
Court, since HSH did not challenge them as being unsupported by substantial evidence, and
the Court applied the whole record test in its review. See Good Hope Health Sys., LLC v.
N.C. Dep’t of Health & Human Servs., 188 N.C. App. 68, 658 S.E.2d 665 (2008). The FAD
relied heavily on the lack of letters of support from physicians in HSH’s CON application in
finding that HSH failed to project the necessary utilization to conform with Criterion 3
under N.C. Gen. Stat. §131E-183(a). HSH asserted that this reliance on the level of
physician support is “akin to relying on an unpromulgated rule.” The Court rejected this
contention, concluding that letters of support are some evidence of the existence or nonexistence of the need as required by CON Statutory Review Criterion 3. As a result, the
An unpublished decision of the North Carolina Court of Appeals does not constitute controlling legal
authority. For the standard of review regarding when it may be cited as precedential value. See N.C.R. App. P.
30(e)(3).
20
This contested case was filed before the January 1, 2014 effective date for the amendments that were
made to portions of the Administrative Procedure Act (“APA”) and the CON Law that changed certain
contested case procedures and made the ALJ’s decision the FAD. This is believed to be the last (or, at a
minimum, one of the last) cases before the Court of Appeals falling under the older procedure whereby the
Agency Final Agency Decision-maker was tasked with accepting or rejecting the Recommended Decision of
the ALJ.
19
– PAGE 12 OF 40 –
Court found it entirely reasonable that the FAD considered physician support letters when
addressing whether HSH sufficiently showed that it could meet utilization and market
share projections.
In addition to the finding that the Agency’s consideration of the lack of physician
support letters was reasonable, the Court further noted that the FAD also included separate
findings pointing to HSH’s failure to provide adequate documentation of its ability to
provide the services proposed in its CON application. More specifically, the FAD addressed
the lack of a recruitment plan for physicians in the HSH application. The FAD concluded
that this lack of physician support documentation further justified the CON Section’s
decision. The Court found substantial evidence to support the FAD and affirmed the FAD as
to HSH’s failure to satisfy Criterion 3. The Court did not address the remaining issues on
appeal.
Surgical Care Affiliates, LLC and Blue Ridge Day Surgery Center, L.P. v. N.C. DHHS,
DHSR, CON Section and WakeMed, ___ N.C. App. ___, ___ S.E.2d ___, No. COA13-1322,
2014 NCBC LEXIS 31 (19 Aug. 2014)

Facts:
On April 16, 2012, WakeMed filed a Certificate of Need (“CON”) application with the
North Carolina Department of Health and Human Services, Division of Health Service
Regulation, Certificate of Need Section (“CON Section”) that proposed the relocation of two
specialty ambulatory operating rooms, already in operation and listed in the State Facilities
Medical Plan’s inventory, from Southern Eye Ophthalmic Surgery Center (“Southern Eye”)
to the WakeMed Raleigh Campus, where the operating rooms would be used as shared
operating rooms for inpatients and outpatients.21 Petitioners Surgical Care Affiliates, LLC
(“SCA”) and Blue Ridge Day Surgery Center, L.P. (“Blue Ridge”) operate a multispecialty
ambulatory surgical facility in Raleigh and are direct competitors with WakeMed.22
The CON Section conditionally approved WakeMed’s CON application in September
of 2012, and Petitioners subsequently filed a petition for a contested case hearing with the
Office of Administrative Hearings (“OAH”) challenging the Agency’s decision and requesting
that an Administrative Law Judge (“ALJ”) overrule the Agency’s decision. After the ALJ
heard the matter and issued a final decision in July of 2013 that upheld the Agency’s
decision, Petitioners appealed the ALJ’s final decision to the North Carolina Court of
Appeals (“the Court”).
See N.C. Gen. Stat. 131E-176(1b), (24f), which defines a specialty ambulatory operating room as a
surgical facility that is used for single-day, outpatient surgical procedures limited to one specialty area.
WakeMed purchased Southern Eye in May of 2012 with the intention of relocating its operating rooms to the
WakeMed Raleigh Campus.
22
See N.C. Gen. Stat. 131E-176(15a) which defines a multispecialty surgical facility as a surgical facility
that is used for same-day surgical procedures occurring over at least three defined specialty areas, including
general surgery. SCA is the managing partner of Blue Ridge and has an ownership interest in Blue Ridge.
21
– PAGE 13 OF 40 –

Holding:
The Court determined that Petitioners’ rights were not substantially prejudiced by
the Agency’s decision, and therefore affirmed the ALJ’s final decision and upheld the CON
Section’s approval of WakeMed’s CON application.

Analysis:
The Court followed the standard of review for appeals from OAH outlined in the N.C.
Supreme Court’s opinion, Diaz v. Div. of Soc. Servs., 360 N.C. 384, 628 S.E.2d 1 (2006), and
reviewed questions of law de novo and questions of fact under the whole record test.
Because the CON Section’s decision involved the issuance of a CON that related to surgical
services similar to the services provided by WakeMed, the Court required Petitioners, as an
affected person/party, to have met the burdens of showing that the Agency action
substantially prejudiced the Petitioners’ rights and that the Agency acted erroneously in
making its decision.23 In its review of the substantial prejudice issue, the Court addressed
Petitioners’ alternate arguments as presented; first whether Petitioners were substantially
prejudiced as a matter of law and second, whether Petitioners were substantially
prejudiced because the Agency’s decision gave WakeMed an unfair competitive advantage.
Substantial Prejudice as a Matter of Law
Petitioners contended they were substantially prejudiced by the Agency’s decision
because, (1) the ALJ determined that substantial prejudice existed in a previous order
denying summary judgment and (2) the Agency’s alleged failure to follow its own rules
constitutes substantial prejudice. The Court disagreed with both arguments.
As a finding of fact during the hearing on WakeMed’s motion for summary judgment
in the contested case, the ALJ commented that, “…there is enough evidence on the record
that there is substantial prejudice by not applying this rule and consequently deny the
motion for summary judgment.” (quoting the Court at p. 10). The Court stated that
Petitioners took the ALJ’s comment out of context and included further language where the
ALJ stated that he wasn’t deciding on the merits. Therefore, the Court held the statement
was not a final determination by the ALJ that controlled or otherwise undermined his
ultimate decision at the close of all evidence, that Petitioners failed to show substantial
prejudice.
Petitioners’ argument that the Agency’s alleged failure to apply its own rules
amounted to substantial prejudice cited a number of cases as authority for the argument.
The Court either disagreed with each case’s applicability to the facts or governing law in
this case, or distinguished circumstances in the cited cases from the Petitioners’.
Petitioners’ use of a State Personnel Commission case24 as authority for the current
procedure in N.C. Gen. Stat. §150B-23 was determined as not applicable by the Court
because at the time of the case used, N.C. Gen. Stat., Article 3, Chapter 150 contained no
See N.C. Gen. Stat. §150B-23 as applied in. Parkway Urology, P.A. v. N.C. Dep’t of Health & Human
Servs.,, 205 N.C. App. 529, 696 S.E. 2d 187 (2010) and also as applied in, CaroMont Health, Inc. v. N.C. Dep’t
of Health & Human Servs., __ N.C. App. __, 751 S.E.2d 244 (2013).
24
N.C. Dep’t of Justice v. Eaker, 90 N.C. App. 30, 367 S.E.2d 392 (1988).
23
– PAGE 14 OF 40 –
requirement that a petitioner show that it met both prongs of the current two pronged
test.25 Petitioners’ use of Hospice at Greensboro, Inc. v. N.C. Dep’t of Health & Human
Servs., 185 N.C. App. 1, 647 S.E.2d 651, disc. review denied, 361, N.C. 692, 654 S.E.2d 477478 (2007) was distinguished by the Court because the Agency did not conduct a full
review of a CON application in Hospice at Greensboro like it did here, and as a result
Petitioners had the ability to challenge the CON application at the Agency level. Petitioners’
use of HCA Crossroads Residential Ctrs., Inc. v. N.C. Dep’t of Health & Human Servs.,
327 N.C. 573, 398 S.E.2d 466 (1990) was determined as not applicable by the Court
because the Court in HCA Crossroads only addressed the timeliness of the Agency’s action
to deny CON applications and never addressed the statute at issue here, nor the issue of
substantial prejudice. Responding to Petitioners’ claim as it related to the Agency’s failure
to apply the conversion rules, the Court reiterated the two pronged requirement discussed
earlier and held the Agency’s action under part two of the test might result in substantial
prejudice alone, that did not absolve Petitioners of their duty to establish, separately, the
existence of prejudice (emphasis added).
Substantial Prejudice by Competitive Disadvantage
Petitioners argued that because the operating rooms in question were underutilized
at their former location, but would no longer be considered underutilized at the WakeMed
Raleigh Campus, that such a change constituted substantial prejudice. Their argument was
based on the calculus used by the Agency to determine need, and the fact that underutilized
operating rooms were not considered in the calculus when the Agency looked at future
need in a given area. Therefore, Petitioners argued that consideration of these beds by the
Agency once they were relocated amounted to substantial prejudice because future need
for more operating rooms was less likely with these operating rooms in the Agency’s
calculus.
The Court went back its opinion in Parkway Urology and showed that substantial
prejudice requires specific evidence of concrete, actual and particularized harm. The Court
found Petitioners’ argument based on sheer speculation because they alleged nothing that
showed how the relocation would cause Petitioners actual harm. In fact, Petitioners did
not even state if they would definitely decide to apply if a future need determination were
made. Petitioners alleged that they would like to expand their business, but they did not
assert that they will necessarily do so in the event of future need.
Based on the two-part analysis above, the Court affirmed the decision of the ALJ on
the issue of substantial prejudice and concluded that as a result it did not reach the issue of
the application of the conversion rules.
See Britthaven, Inc. v. N.C. Dep’t of Health & Human Servs., 118 N.C. App. 379, 455 S.E.2d 455, disc.
review denied 341 N.C. 418, 461 S.E.2d 754 (1995); also see Parkway Urology, 205 N.C. App. 529, 696 S.E.
2d 187 (2010).
25
– PAGE 15 OF 40 –
PRE-TRIAL PROCEDURE: EXPERT WITNESSES & DISCOVERY
Keen Lassiter, as Guardian Ad Litem for Jakari Baize, a minor, v. North Carolina
Baptist Hospitals, Incorporated a/k/a North Carolina Baptist Hospital, Wake
Forest University Health Sciences, Terry Daniel, M.D. and Dayspring Family
Medicine Associates, PLLC, ___ N.C. App. ___, 761 S.E.2d 720, No. COA14-165 (5 Aug.
2014)

Facts:
Plaintiff filed an action against defendants North Carolina Baptist Hospitals,
Incorporated a/k/a North Carolina Baptist Hospital, Wake Forest University Health
Sciences (collectively “Baptist”), Terry Daniel, M.D., and Dayspring Family Medicine
Associates, PLLC (collectively “Daniel/Dayspring”) for medical malpractice. Following a
hearing held January 13, 2012, the trial court entered a Discovery Scheduling Order
(“DSO”). In the DSO, Plaintiff was ordered to designate all expert witnesses intended to be
called at trial by May 1, 2012 and make his expert witnesses available for deposition on or
before November 15, 2012. Four witnesses were deposed by Baptist and Daniel/Dayspring
between July, 2012 and September, 2012.
On December 20, 2012, Plaintiff filed a motion to amend the DSO seeking an
extension of the deadline to depose his expert witnesses. Baptist and Daniel/Dayspring
filed a motion to strike and exclude, claiming that Plaintiff failed to comply with the DSO.
Following a hearing on the DSO amendment, the trial court ordered certain witnesses
available for deposition, but no later than March 1, 2013. On July 22, 2013 Plaintiff filed a
dismissal, without prejudice, of all claims against Baptist and Daniel/Dayspring. Baptist
and Daniel/Dayspring subsequently filed motions to tax costs against the Plaintiff, and
claimed they had incurred reasonable and necessary expenses related to the depositions.26
The trial court entered partial awards to Baptist and Daniel/Dayspring to be taxed as costs
against the Plaintiff. Plaintiff appealed the order of partial awards.

Holding:
Where the statutory authority to have expert witness costs taxed to Plaintiff
includes a requirement that the expert witness testify under subpoena, the subpoena
requirement must be explicitly waived by the parties or be waived in the DSO issued by the
trial court. Otherwise, costs for experts may not be awarded.

Analysis:
On appeal, the Court used the abuse of discretion standard to review the
reasonableness and necessity of the costs. The only issue on appeal was whether the trial
court erred by granting the expert witness fees as costs to Baptist and Daniel/Dayspring.
Plaintiff argued the trial court erred in its award because none of the expert witnesses
were subpoenaed, the DSO did not modify or waive the subpoena requirement, and the
The motions to tax costs against the Plaintiff were filed pursuant to N.C. Gen. Stat. §§ 1A-1, Rule 41, 7A305 and 6-20.
26
– PAGE 16 OF 40 –
parties did not waive the subpoena requirement. The Court found the Plaintiff’s argument
to be persuasive, and pointed out that since there was no mention by the parties that the
expert witnesses at issue did not need to be issued subpoenas, the DSO language in this
case could not be interpreted to include that intent or waiver.27 Therefore, the Court
reversed the trial court’s orders to the extent it awarded costs for expert witnesses when
the witnesses were not testifying under subpoena and remanded to the trial court for an
order on costs consistent with its opinion.
Clifford Roberts Wheeless, III, M.D. v. Maria Parham Medical Center, Inc., ___ N.C. App.
___, ___ S.E.2d ___, 2014 N.C. App. LEXIS 686, No. COA13-1063 (1 July 2014)28
(unpublished)29

Facts:
After a settlement between Plaintiff and Defendant over peer review and privilege
matters, Plaintiff was investigated by the North Carolina Medical Board and subsequently
filed suit against Defendant, on grounds of breach of the settlement agreement and various
tort claims. The main issue in this case related specifically to the trial court’s orders from
motions to compel filed by Plaintiff, to which Defendant objected. One trial court entered
two orders upholding the Defendant’s objection, a second judge entered a third order
granting Plaintiff’s motion to compel certain discovery and disclosure of previously
privileged information.30 Defendant appealed from the trial court’s order granting
Plaintiff’s motion to compel.

Holding:
One trial court was without authority to grant an order modifying or correcting a
previous trial court’s order without a showing of adequate findings specifying the nature of
the change in circumstances justifying the different order.

Analysis:31
The Court focused first on the existence of the three trial court orders in place, and
explained the long-standing premise that no appeal lies from one trial court judge to
another without a substantial change in circumstances that justify a correction of an earlier
decision. Here, the trial court order that granted the Plaintiff’s motion to compel neither
The Court distinguished its holding in Jarrell v. The Charlotte-Mecklenburg Hospital Authority, 206
N.C. App. 559, 698 S.E.2d 190 (2010) from the facts of this case, ultimately finding that the language of the
DSO in Jarrell explicitly contemplated a waiver of the subpoena requirement, which was not the case here.
28 Plaintiff-Appellant’s Motion for Temporary State of the Court of Appeals’ decision was granted by Order of
the N.C. Supreme Court on August 5, 2014.
29
An unpublished decision of the North Carolina Court of Appeals does not constitute controlling legal
authority. For the standard of review regarding when it may be cited as precedential value. See N.C.R. App. P.
30(e)(3).
30
Each of the requests, objections and motions to compel at issue in this case relate to N.C. Gen. Stat.
§131E-95 and whether certain peer review related materials are discoverable, or whether they are
privileged under the statute.
31
As a preliminary matter, the Court noted that the appeal was interlocutory, but because the appeal
related to the discovery of purportedly protected/privileged information under the above statutes, it was
immediately reviewable.
27
– PAGE 17 OF 40 –
referenced the two prior orders on the subject of the Defendant’s asserted privilege, nor
did it contain adequate findings that specified the nature of the change in circumstances
that justified the deviation from the prior judge’s orders. Therefore, the trial court was
without authority to grant the motion to compel and override the prior orders, and the
Court reversed the trial court’s order.
Jerry M. Medlin v. North Carolina Specialty Hospital, LLC, Timothy N. Young, and
North Carolina Eye, Ear, Nose & Throat, P.A., ___ N.C. App. ___, 756 S.E.2d 812, No.
COA13-818 (1 Apr. 2014)

Facts:
In an action for medical malpractice filed by Plaintiff against Defendants in January,
2011, the trial court issued three orders in March, 2013 from (one of which was an oral
order from the bench during a March 11, 2013 hearing) pretrial motions related to
discovery, shortened time to give notice of Plaintiff’s motion to compel discovery and the
awarded fees costs to Plaintiff. Defendant North Carolina Specialty Hospital, LLC (“NCSH”)
appealed all three trial court orders.

Holding:
The Court affirmed the trial court’s order directing NCSH to answer certain nonprivileged questions raised by plaintiff, and its order imposing discovery sanctions on
NCSH. In addition, the Court concluded that NCSH’s appeal was frivolous and taxed it with
the costs and attorneys fees related to the appeal.

Analysis:
The Court cited Dafford v. JP Steakhouse, LLC, 210 N.C. App. 678, 709 S.E.2d 402
(2011) in its answer to the issue of whether the trial court’s oral order on the motion to
shorten the time for notice of the hearing was proper. Following Dafford, the Court
determined that because no written order was ever entered by the trial court, the parties
could not appeal because…“no formal judgment or question of law was present from which
an appeal could be taken.” The Court only considered the issues in NCSH’s appeal related
to the production of privileged materials and testimony under the exception to the general
rule that orders related to discovery matters are considered interlocutory.
In its finding related to the privileged nature of the materials requested, the Court
found that the trial court did not err in ordering the non-privileged questions to be
answered. The Court considered the information at issue within the scope of an exception
to the peer review privilege and discoverable because the materials and information were
from sources other than the medical review committee, or merely “prepared for” or
“presented to” the peer review committee, rather than generated by the committee.32
NCSH’s argument that the in camera review of the documents was improper was dismissed
by the Court because NCSH cited no authority for its position, and there was wellestablished authority which stated that the determination of privilege is clearly viewed as
See Shelton v. Morehead Memorial Hospital, 318 N.C. 76, 347 S.E.2d 824 (1986) where the N.C.
Supreme Court explained the kinds of materials that fall outside the purpose of the intent to protect in N.C.
Gen. Stat. §131E-95.
32
– PAGE 18 OF 40 –
question of law for the trial court to decide in camera and make an independent
determination on the matter. HCMH’s claim that the trial court erred in having ex parte
hearings without affording it adequate notice and opportunity to be heard was dismissed
by the Court in the same manner. The Court showed the specific notice and responses
which indicated not only did NCSH’s counsel have notice of the hearing at issue, but they
chose not to attend and informed the trial court of that intention.
Finally, the Court not only upheld the order for sanctions against NCSH pursuant to
N.C.R. Civ. P. 31, but it also determined that HCMH’s appeal was frivolous and taxed NCSH
with the costs and attorney fees incurred in the appeal, under N.C.R. App. P. 34. The Court
affirmed and remanded in part.
Jerome Brewer, Sabrina Brewer, and Matthew J. Brewer, by and through his
Guardian Ad Litem, Timothy T. Leach v. William D. Hunter, M.D., Neuroscience
& Spine Center of the Carolinas, P.A., and Neuroscience & Spine Center of the
Carolinas, L.L.P., ___ N.C. App. ___, ___ S.E.2d ___, 2014 N.C. App. LEXIS 974, No.
COA14-7 (2 Sept. 2014)

Facts:
In a medical malpractice action, Plaintiffs filed discovery requests for all documents
showing complications and complication rates of physician defendant for the procedure
that was at issue in the case (thoracic laminectomies) during 2005, 2006, 2007 and 2008.
Plaintiffs also requested all documents showing physician’s case volume for the same time
frame for the same procedure. Documentation was produced by the hospital where
physician performed some of the procedures at issue, showing the volume as requested.
Further, the physician was deposed, and subsequently produced a list of all of the
procedures performed, as requested. After the physician produced that list, the Plaintiffs
filed a second set of discovery requests that asked for the operative notes and discharge
summaries for all of the surgeries identified by the physician during his deposition and in
the subsequent list he produced. Defendants objected to that request and Plaintiffs
subsequently filed a motion to compel. The trial court ordered Defendants to produce the
requested documentation within 45 days, subject to certain abilities to redact protected
health information and/or apply with the court for in camera review of highly sensitive
documentation other than protected health information. Defendants appealed the order.

Holding:
Trial court’s order requiring production of various medical records regarding
former patients of physician defendant who were not a party to the lawsuit was not an
abuse of discretion by the trial court.

Analysis33:
In its review, the Court focused on the provision in N.C. Gen. Stat. §8-53 that allows
a court to determine any or all patient records discoverable if the court, it its discretion,
An as initial matter, the Court analyzed whether it had jurisdiction over the appeal under the same
review standard of whether the appeal was interlocutory and affected a substantial right that is detailed in
the summaries above. The Court determined that it had jurisdiction over the appeal.
33
– PAGE 19 OF 40 –
determines that disclosure of the records at issue is necessary to a proper administration of
justice. (Emphasis added). Roadway Exp., Inc. v. Hayes, 178 N.C. App. 165, 631 S.E.2d 41
(2006) was relied on by the Court to show the privilege asserted by Defendants is not an
absolute privilege under the plain reading of the statute above. Because the trial court in
this case entered an order that carefully balanced the interests of all of the parties involved
by limiting the disclosure of the number of records and certain specific information within
the records, as well as left open the clear opportunity for judicial review of future issues,
the Court found that it did not abuse its discretion and affirmed the order compelling
production by Defendants.
– PAGE 20 OF 40 –
VOLUNTARY & INVOLUNTARY COMMITMENT
In the Matter of: Gilbert Moore, Jr., ___ N.C. App. ___, ___ S.E.2d ___, 2014 N.C. LEXIS 609,
No. COA13-1397 (20 May 2014)

Facts:
Respondent Gilbert Moore, Jr. (“Moore”) appeals from an August 5, 2013
involuntary commitment order of the Granville County District Court recommitting Moore
for 90 days of inpatient commitment. Moore was first taken in for examination
involuntarily on September 25, 2012 pursuant to an affidavit and petition and custody
order issued by a Guilford County magistrate. Moore was then taken to Central Regional
Hospital following two examinations by different physicians, each of whom recommended
that Moore be involuntarily committed to inpatient treatment. Following Moore’s initial
hearing on the matter and an October 2, 2012 order committing Moore to inpatient
treatment for a period not to exceed 30 days, several additional involuntary commitment
orders were issued by the district court that resulted in Moore being committed to
inpatient treatment for approximately ten months.34
Prior to issuing the recommitment order, the district court heard testimony from
Moore’s attending physician and a social worker who both testified that Moore historically
would stop taking his medication after his discharge from inpatient care, which would lead
to his becoming violent towards others. Further, testimony showed specific facts related
to, among other things, a long history of Moore’s commitments, his being treated under
alert or high maintenance status because of his history of aggressive behavior and Moore’s
acknowledging his mental illness. Based on the findings of fact, the district court found that
there was clear, cogent and convincing evidence to support the recommitment of Moore as
an inpatient for 90 days. Moore appealed.

Holdings:35
The Court concluded first that although Moore’s 90 day recommitment period had
expired, the appeal was not moot.36 Next, the Court showed that because Moore did not
raise the issue of the sufficiency of the affidavit during the first hearing (or any of the other
recommitment hearings), Moore waived any right to challenge it further in this appeal.
The additional involuntary commitment orders for inpatient treatment were issued by the district court
on January 31, 2013, April 4, 2013, June 13, 2013 and August 5, 2013. The August 5, 2013 is the
recommitment order at issue in this case.
35
As a preliminary matter, the Court addressed whether it should issue a writ of certiorari under the
circumstances of this appeal because when he filed his appeal, Moore did not make the required designation
of the court to which the appeal should be taken. See N.C.R. App. P. 3. However, the Court cited its discretion
allowed under certain appropriate circumstances in N.C.R. App. P. 21(a)(1) and exercised that discretion in
granting certiorari to address the merits of Moore’s appeal.
36
In making the determination about whether Moore’s appeal was moot, the Court cited In re Hatley, 291
N.C. 693, 695, 231 S.E.2d 633, 634 (1977) and pointed to the likelihood that the commitment in this case
could form the basis for future commitment and/or have obvious collateral consequences against Moore. As
the Court found in In re Hatley, those future consequences gave the Court enough reason to review the
substantive arguments in Moore’s appeal.
34
– PAGE 21 OF 40 –
Last, the Court held that the trial court properly found that Moore was a danger to himself
because of the reasonable possibility he will suffer future debilitation. The findings of the
trial court were affirmed.

Analysis:
In its finding that the trial court had subject-matter jurisdiction to recommit Moore in
August of 2013, based on Moore’s argument that the September 25, 2012 affidavit and
petition were fatally deficient, the Court concluded that Moore’s actual contention was that
the magistrate did not have sufficient grounds to issue the custody order, rather than
challenging the trial court’s subject-matter jurisdiction. The Court focused on previous
cases finding that the review of the reasonable grounds for a magistrate to issue a custody
order under N.C. Gen. Stat. §122C-261 is treated as synonymous with the review for
probable cause in a criminal case. In addition to that point, the Court further explained that
in a criminal case, when a warrant has a problem, the defendant can waive objection to the
sufficiency of the warrant if the objection is not raised prior to the defendant entering a
plea of not guilty. While the involuntary commitment case law had not directly addressed
Moore’s argument, the Court’s finding that a respondent must raise issues with the
affidavit, petition, or custody order in the first involuntary commitment hearing has been
established in other cases.37 Because Moore did not raise the issue of the sufficiency of the
affidavit during the first hearing (or any of the other recommitment hearings), the Court
found that Moore waived any right to challenge it further in this appeal.
Moore’s next challenge related to two findings of fact in the August, 2013
recommitment order, once of which was the ultimate finding that Moore was a danger to
himself as well as a danger to others. The Court noted that its standard of review for a
recommitment order is the same as the standard used for a commitment order. See In re
Hayes, 151 N.C. App. 27, 564 S.E.2d 305 (2002). Moore challenged one finding of fact
based on the theory that the trial court merely recited certain evidence that was presented
by the physician, and made a conclusion based upon that. The Court dismissed this
position and held that the trial court’s recitation of evidentiary findings as a portion of its
ultimate findings was acceptable. Because the evidentiary finding was used by the trial
court to support its ultimate findings of fact, the use of the evidentiary finding to show
Moore was mentally ill and a danger to himself and others was not improper.
Moore’s second challenge to the trial court’s findings of fact relied on the recent,
unpublished case, In re Whatley __ N.C. App. __, 736, S.E.2d 527 (2012), appeal after
remand, __ N.C. App. __, 754 S.E.2d 258 (2014) (unpublished), focusing on the argument
that a relapse alone cannot satisfy the requirement of future conduct or debilitation.
However, the Court pointed out that in Whatley, the findings of fact were all focused on the
past conduct, whereas in this case, the trial court made findings about Moore’s likely future
conduct in addition to using his past conduct. Therefore, the Court held that the trial court
properly found that Moore was a danger to himself because of the reasonable possibility he
will suffer future debilitation. The Court did not consider whether the determination that
37
See In the Matter of Reed, 39 N.C. App. 227, 249 S.E.2d 864 (1978).
– PAGE 22 OF 40 –
Moore was a danger to others was proper, since the relevant statutes only require a
showing of danger to self or danger to others, not both.
In the Matter of: A.N.B, ___ N.C. App. ___, 754 S.E.2d 442, No. COA13-554 (18 Feb. 2014)

Facts:
A.N.B. (“Respondent”), a minor, was voluntarily admitted by his guardian to a 24hour inpatient psychiatric treatment facility on October 2, 2012. Respondent was
appointed counsel and moved for funds to hire an expert on October 8, 2012. At the initial
hearing approximately a week later, the trial court continued the matter to October 29,
2012 to allow time for expert witnesses to be interviewed. The trial court agreed with the
admission of Respondent at the hearing and entered an order for continued inpatient
treatment for the statutory maximum of 90 days. Respondent appealed from that order.

Holding:
The Court held that the trial court did not abuse its discretion in, (1) denying the
Respondent’s motion for funds to hire an expert, (2) qualifying two witnesses as experts,
and (3) allowing certain expert opinion testimony. The Court also held that no examination
of Respondent was required within 24 hours because the facility where respondent was
admitted did not have medical care as an integral part of the treatment provided. Finally,
the Court held that the trial court’s order lacked necessary findings and conclusions, which
justified a reversal of the order for continued treatment even though the order was no
longer in effect.

Analysis:38:
The Court analyzed five issues in this appeal, as outlined below.
1. Whether the trial court erred by denying Respondent’s motion for funds
to hire an expert.
The Court went into great detail about how voluntary admissions are encouraged as
a general policy in this State, how the Respondent was provided counsel as required by
law, and how the law starts with the presumption that a parent or guardian acts in with the
best interests of the child as the primary goal. Although the Court recognized the
Respondent’s general due process rights and outlined the benefits that an expert witness
can have when they provide material assistance for a fair hearing, the Court concluded that
the Respondent failed to meet the requisite burden to show that an expert would provide
that material assistance. As a result, the Court found that the trial court did not abuse its
discretion by refusing fees for an expert to Respondent.
As a preliminary matter, the Court noted that this appeal would normally be moot because the order
admitting Respondent to inpatient treatment had expired. However, the Court indicated that the issues and
potential ramifications in this case were within the “capable of repetition, yet evading review” and “public
interest” exceptions to that general rule, which justified the Court’s review of the issues before it. See
Thomas v. N.C. Dept. of Human Resources, 124 N.C. App. 698, 478 S.E.2d 816 (1996).
38
– PAGE 23 OF 40 –
2. Whether the trial court abused its discretion by qualifying two witnesses
as experts.
There was extensive testimony and evidence presented on voir dire that showed the
high level of knowledge, training and experience of two witnesses that offered opinion
testimony in the field related to the subject of their testimony. The evidence presented
showed that the two witnesses were better qualified than a jury to form an opinion on the
particular subject, which the Court showed supported a determination by the trial court
that the two individuals that the trial court qualified as experts. Therefore, the Court
disagreed with Respondent that such a finding was an abuse of the trial court’s discretion.
3. Whether the trial court erred by allowing certain expert opinion
testimony.
Respondent objected to certain testimony at trial from one of the expert witnesses
and claimed that the expert’s opinion testimony should be barred because the expert relied
on conclusions made by clinical staff in forming the opinion. The Court detailed the
number of times that the particular witness examined and interviewed the Respondent
before the hearing, and concluded that the use of other clinical information and discussion
is proper so long as it is used in conjunction with the independent knowledge and
assessment information held by the expert. Since the Court determined that the particular
expert had not provided unreasonable, surrogate testimony from another source, it was
proper for the trial court to allow the testimony.
4. Whether Respondent’s continued admission to the inpatient psychiatric
facility was contrary to law because a medical examination should have
been performed on Respondent within twenty-four (24) hours of
admission.
The Court followed a plain reading of N.C. Gen. Stat. §122C-211 and concluded that
the medical examination requirement above is only required when a person is admitted to
a facility where medical care is an integral part of the treatment provided. Even though
Respondent argued that the receipt of medication at the particular facility should be
enough for that determination, the Court was not convinced that the use of medication is
sufficient to define the facility as such a facility. Without record evidence that medical care
is an integral part of treatment at a particular facility, the Court found that no statutory
requirement was created for the examination, and the Respondent’s argument on this issue
was without merit.
5. Whether the trial court’s findings of fact were insufficient to support its
conclusions and order.
The trial court’s order in this case stated that Respondent was mentally ill and that no less
restrictive measures would be sufficient. The trial court went on to authorize the
continued admission of the Respondent, but the trial court did not specifically find that
– PAGE 24 OF 40 –
Respondent was in need of further treatment.39 Even though the Court pointed out that the
reasonable inference from the findings and conclusions made was that further treatment
was needed, because the trial court’s order did not explicitly state that the Respondent was
in need of further treatment, the order and ultimate findings of fact from the trial court
were fatally deficient. Therefore, the trial court’s order was reversed by the Court.
In the Matter of: C.W.F., ___ N.C. App. ___, 753 S.E.2d 736, No. COA13-444 (4 Feb. 2014),
review allowed by, ___ N.C. ___, 758 S.E.2d 868 (11 June 2014)

Facts:
C.W.F. (“Respondent”), a juvenile, was voluntarily admitted by his mother to a
twenty four (24) hour inpatient psychiatric treatment facility on August 7, 2012. A hearing
was held in district court on August 22, 2012. At the hearing, multiple reports of findings,
assessments and evaluations, along with the facility’s clinical director’s testimony, were
offered in support of continued admission. Over the objection of the Respondent, the trial
court accepted all of the reports and testimony and found that the Respondent was
mentally ill and in need of continued treatment and admission at the facility for 90 days.
Respondent appealed.

Holding:
The trial court’s order was improper because it relied on evaluations admitted as
evidence at the hearing when the sources that took and drafted the evaluations were not
present at the hearing. Because the sources were not available at the hearing to be crossexamined by the Respondent, his right to confrontation was violated.

Analysis:
On appeal, Respondent argued that his right of confrontation was violated when the
trial court admitted and relied on three reports prepared by non-testifying witnesses. The
Court relied on the plain language of N.C. Gen. Stat. §122C-224.3(c) and agreed with
Respondent that his right of confrontation was violated. While the statutory language
clearly allowed the same types of reports, findings and medical records that were used in
this case, the language also clearly ensured the Respondent’s right to confront and crossexamine witnesses. The trial court’s order found all matters contained in one particular
evaluation as facts for its order, and made no additional findings of fact. Because the trial
court relied only on the report of the single evaluation and the source of the evaluation was
not available to testify, the Court found error in the trial court’s order and vacated it, and
remanded the case for further findings.
Going into further detail, the Court showed that the trial court merely failed to check off on the
appropriate boxes next to the pre-populated form answers that were used for this case, See Form AOC-SP913, Order Voluntary Admission of Minor. The trial court’s failure to check the box next to whether the
Respondent was or was not in need of continued treatment at the particular facility was enough to make the
order deficient.
39
– PAGE 25 OF 40 –
In the Matter of: James Spencer, ___ N.C. App. ___, ___ S.E.2d ___, 2014 N.C. App. LEXIS 965,
No. COA14-143 (2 Sept. 2014)

Facts:
James Spencer (“Respondent”) was admitted to Holly Hill Hospital on July 22, 2013
after a physician at WakeMed Hospital filed an affidavit and petition for involuntary
commitment and examination and recommendation to determine the necessity for
involuntary commitment. At the hearing in district court, which was held on July 25, 2014,
a psychiatrist at Holly Hill Hospital testified that he had examined the Respondent on July
23, 2014. The psychiatrist provided specific findings at the hearing to describe the
Respondent’s condition and illness at the time of the examination. The Respondent also
testified at the hearing, and agreed that he suffered from schizophrenia, but did not think
he should be involuntarily committed for further inpatient treatment. The trial court
entered an involuntary commitment order and concluded that the Respondent was
mentally ill and dangerous to himself, and ordered inpatient treatment for up to 60 days.
The Respondent appealed the trial court’s order.

Holding:
Where the Respondent failed to show he was prejudiced by the absence of a written
record of a physician’s findings and lack of notice of his commitment proceeding, the Court
upheld the trial court’s order for involuntary commitment to inpatient treatment.

Analysis:40
The Court addressed two substantive issues raised by the Respondent on appeal.
First, the Respondent argued that the involuntary commitment order was contrary to law
because he was not examined by a second physician within 24 hours of admission to Holly
Hill, as required by N.C. Gen. Stat. §122C-266. The Court started by clearly recognizing
that the plain language of the statute mandates that the findings of the physician and facts
on which they are based shall be in writing in all cases (emphasis added). However, the
Court explained that a review of the record from the testimony at the hearing did not show
that the Respondent was prejudiced by the absence of a written record of the psychiatrist’s
findings. Because of that lack of prejudice, the Court rejected the argument that the trial
court’s order should be vacated. Second, the Respondent argued that because he was not
given notice of the commitment proceeding, as required by N.C. Gen. Stat. §122C-264, the
trial court erred by later involuntarily committing him. While the Court noted there was
concern at the trial court hearing that the Respondent’s power of attorney was not given
notice, the transcript revealed that both the Respondent and his attorney were at the
hearing and no testimony or argument was offered as to how the failure to receive notice
prejudiced the Respondent. Since the Respondent failed to show any prejudice with either
issue raised, the Court upheld the order of the trial court.
As with the prior cases discussed above, the Court analyzed whether it should consider the appeal when
it is technically moot because the Respondent’s order for inpatient commitment had expired. For similar
reasons, the Court reached the same conclusion that it could hear the case under one of the recognized
exceptions to mootness.
40
– PAGE 26 OF 40 –
AGENCY & LICENSING BOARDS
Nanny’s Korner Care Center By Bernice M. Cromartie, CEO v. N.C. Department of
Health and Human Services, Division of Child Development, ___ N.C. App. ___, 758
S.E.2d 423, No. COA13-602 (20 May 2014)

Facts:
Following a report that an eight year-old girl enrolled at Nanny’s Korner Care Center
(“Nanny’s Korner”) had complained that a staff member at Nanny’s Korner had touched her
inappropriately, the N.C. Department of Health and Human Services (“DHHS”) and the
Robeson County Department of Social Services (“DSS”) investigated the incident with
various individuals. After the investigation was completed and two internal review panels
met, Nanny’s Korner was ultimately issued a written warning by DHHS based, based upon a
substantiation by DSS of sexual abuse. Further, as part of the corrective action by DHHS
against Nanny’s Korner, the husband of the CEO was prohibited from being present on the
premises of Nanny’s Korner while children were present.
The written warning and prohibition were appealed by petition from Nanny’s
Korner with the Office of Administrative Hearings, and an Administrative Law Judge (“ALJ”)
affirmed the decision of DHHS. After the DHHS adopted the ALJ’s order as the Final Agency
Decision (“FAD”), Nanny’s Korner filed a petition in superior court requesting judicial
review of the FAD. The superior court entered an order affirming the FAD, and Nanny’s
Korner appealed.

Holding:
A plain reading of the pertinent statutes and administrative rules placed an
affirmative duty on DHHS to conduct its own investigation and independently substantiate
abuse before it could issue a warning to the facility and mandate corrective action pursuant
to DHHS’s statutory authority.

Analysis:
Nanny’s Korner argued that DHHS was required to conduct its own investigation
and independently substantiate whether a child had been abused at Nanny’s Korner before
issuing a warning letter to it. This argument encompassed the corrective action, which
mandated the prohibition of the husband of the CEO from being on the premises at the
aforementioned times. The Court agreed that under N.C. Gen. Stat. §110-105.2, DHHS had
an affirmative duty to independently substantiate abuse before it could issue a warning and
mandate corrective action.
The Court went further here, and elaborated that the requirement of an
independent investigation and substantiation does not undermine the collaboration
encouraged in other statutes and rules. However, DHHS could not treat the local DSS
substantiation as dispositive for purposes of discipline imposed or authorized by statute or
rule. When the FAD indicated that the administrative action originally proposed was
reduced based on compliance with a corrective action plan put in place by DHHS, the
– PAGE 27 OF 40 –
continued prohibition of the CEO’s from the premises based on substantiation of child
sexual abuse by the local DSS (emphasis added) was not proper. Administrative action must
be based on an independent substantiation by DHHS, not on the local DSS substantiation, as
was the case here.
The Court found a clear statutory directive that DHHS independently substantiate
abuse before taking administrative action, and as a result, it found the conclusions of the
ALJ and district court to be errors of law. Therefore, the Court vacated the superior court’s
order and remanded the matter to the trial court for further remand to DHSS with
instructions to conduct an independent investigation to determine whether substantial
evidence of abuse existed and for any needed administrative action consistent with the
statute.
– PAGE 28 OF 40 –
MEDICARE & MEDICAID
In Re: The Bankruptcy Estate of AGS, Inc., 565 Fed. Appx. 172, 2014 U.S.App. Lexis 6324,
No. 14-1296 (4th Cir. April 4, 2014) (unpublished)41

Facts:
Petitioner AGS, Inc., a dermatology practice used by criminal defendant Allen G.
Saoud, M.D. as an instrument in his scheme to illegally obtain Medicare and Medicaid funds,
sought to qualify as a victim for purposes of the Mandatory Victims’ Restitution Act (the
“MRVA”), 18 USC § 3663A, to recover restitution of more than $1,000,000 from Dr. Saoud
following his conviction for health care fraud, to cover bankruptcy claims filed against the
practice by West Virginia’s Tax Department and Highmark West Virginia, Inc.
(“Highmark”), a private health insurance company. The district court denied restitution to
the bankruptcy estate.

Holding:
AGS was not a victim within the meaning of the MRVA, and therefore was not
entitled to restitution.

Analysis:
Petitioner’s action was in the nature of mandamus, which has a stringent standard
of review, requiring that “a petitioner must show that he has a clear and indisputable right
to the relief sought and there are no other adequate means to attain the relief he desires
(citations omitted)." The Court found that Petitioner AGS had not met this burden, because
it did not meet the definition of a “victim” within the meaning of the MRVA. The MRVA
defines a “victim” as "a person directly and proximately harmed as a result of the
commission of an offense for which restitution may be ordered including . . . any person
directly harmed by the defendant's criminal conduct in the course of [a] scheme,
conspiracy, or pattern." 18 USC § 3663A(a)(2). Dr. Saoud was convicted of Medicare and
Medicaid fraud. While AGS was the means through which Dr. Saoud committed the fraud,
the Court found that it was not a victim of that fraud. Further, the court found that the
harms suffered by Hallmark and the West Virginia Tax Department were not adequately
related to the defendant's health care fraud of the Medicare and Medicaid programs to
qualify under the MVRA. Finally, the Court found that (1) the vast majority of the loss
claimed by these creditors predated the fraud charged in the case against Dr. Saoud, and
(2) Dr. Saoud’s fraud of the Medicare and Medicaid programs may actually have provided
Petitioner with more assets with which to pay its bills.
For the standard of review regarding when and how unpublished federal opinions may be cited as. See
U.S.C.S. Fed. Rules App. Proc. R. 32.1.
41
– PAGE 29 OF 40 –
AFFORDABLE CARE ACT
Halbig v. Burwell, __ F3d ___, 2014 U.S. App. LEXIS 17099, No. 14-5018 (D.C. Cir. July 22,
2014)

Facts:
The Affordable Care Act (the “ACA” or the “Act”) makes tax credits available as a
form of subsidy to individuals who purchase health insurance through marketplaces—
known as “American Health Benefit Exchanges,” or “Exchanges” for short—that are
“established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i).
Section 1321 of the Act also authorizes the federal government to establish exchanges in
states who do not elect to establish their own Exchanges. To date, 14 states and the District
of Columbia have established Exchanges, and the federal government has established
Exchanges in the 36 remaining states, in some cases with state assistance. While the ACA
provides subsidies in the form of tax credits for individuals who choose to purchase health
insurance through the Exchanges, it also requires individuals to maintain “minimum
essential coverage”, and in general enforces that requirement with a penalty.
The IRS has interpreted Section 36B of the Act broadly to authorize tax credits for
insurance purchased on both (1) an Exchange established by a state under Section 1311 of
the Act and (2) an Exchange established by the federal government under Section 1321 of
the Act. Appellants, a group of individuals and employers residing in states which did not
establish Exchanges, appealed the IRS’ interpretation of Section 36B of the ACA making
them subject to the subsidies and penalties of the Act. On cross-motions for summary
judgment, the district court rejected that challenge and granted the government’s motion.
Appellants’ appealed.

Holding:
By a 2-1 majority, the D.C. Circuit panel held that (A) the unambiguous language of
the ACA shows that a federal Exchange is not an Exchange under Section 36B of the Act,
and therefore the IRS is not authorized to provide tax credits for insurance purchased on
federal Exchanges; (B) the Appellants’ reading of the Section 36B would not render other
parts of the ACA absurd; (C) legislative history does not clearly support the government’s
position.

Analysis:
The Court first addressed the government’s contention that plaintiffs lacked
standing, and even if they did that, the ACA does not provide them with a cause of action to
challenge the ACA rule. The Court rejected both arguments. The Court found that plaintiff
Klemencic suffered harm, because the availability of credits on West Virginia’s federal
Exchange confronts him with a choice he’d rather avoid: purchase health insurance at a
subsidized cost of less than $21 per year or pay a somewhat greater tax penalty. The Court
considered this harm to be a “quantifiable economic consequence particular to” Mr.
Klemencic, and therefore constitutes an injury in fact. The court also rejected the
government’s argument that Mr. Klemencic could pay the penalty and bring his claim in tax
– PAGE 30 OF 40 –
court, finding that this would not be an adequate remedy, because he would have to repeat
the same cycle every year. The Court was also concerned that a declaration that the IRS
Rule is invalid and an injunction barring its implementation may not even be available in
tax court.
On the merits of plaintiffs’ claim, the Court focused on the language of Section 1311
of the ACA [42 USC §18031(b)(1)], which requires the states to establish exchanges.
Conversely, where a state elects to or is unable to establish an Exchange, Section 1321 of
the Act authorizes the federal government to establish and operate “such Exchange within
the State (emphasis added).” 42 USC §18041(c)(1). The Court found that this language
appeared to create equivalence between state and federal Exchanges in terms of what they
are and the statutory authority under which they are established.
However, the Court nevertheless found that the language of Section 36B of the Act
by its own terms limited subsidies to those Exchanges created under Section 1311 of the
Act, i.e., only state-created Exchanges, because Section 36B limits subsidies to an “Exchange
established by the State under section 1311.” 26 USC §36B(c)(2)(A)(i). The Court
particularly relied on the fact that the ACA provides that a federal territory that establishes
an Exchange “shall be treated as a State,” so Congress knew how to deem a non-state entity
to be a “State” for purposes of this analysis, but did not include federally established
exchanges.
The Court also rejected the government’s argument that the plaintiffs’
interpretation would render other parts of the ACA absurd. Those government arguments
included:
1. The Exchanges must report information about coverage, to enable the IRS to
reconcile credits given at the end of the tax year; and the government argued that
most of these reporting requirements would be meaningless for federally-created
Exchanges, if no tax subsidies were available for them.
2. The Act’s definition of “qualified individuals” entitled to access Exchanges, which
include both federal and state Exchanges; the government contended “qualified
individuals” applicants to federal Exchanges could be under plaintiffs’ interpretation of
the Act.
3. Provisions of the ACA limit States’ ability to tighten Medicaid eligibility standards until
the Secretary determines that an Exchange established by the State under Section 1311
is fully operational; and the government argued that if this provision did not apply to
federal Exchanges, states would never be permitted to tighten Medicaid eligibility
standards.
In each instance, the Court accepted plaintiffs’ alternative arguments positing
reasons why Congress may have intended to incorporate these seemingly-irreconcilable
conflicts.
– PAGE 31 OF 40 –
Finally, the Court concluded that the ACA’s legislative history was not sufficiently
clear for the Court to conclude that Congress clearly intended a different result.
Interestingly, at the end of the decision, the majority expressed reluctance in
reaching the result it did, stating that “our ruling will likely have significant consequences
both for the millions of individuals receiving tax credits through federal Exchanges and for
health insurance markets more broadly.” Slip. Op. at 41. The majority nevertheless
concluded that the Court’s role was limited, and that Congress’ will (as they interpreted it)
was supreme in matters of policy. The court consequently reversed the district court’s
ruling and ordered the case remanded with instructions to grant summary judgment for
the plaintiffs and vacate the IRS rule.
The dissent essentially took the opposite tack on all points. The dissent focused
primarily on the familiar framework of Chevron U.S.A. Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984). Under Chevron, if “the statute is silent or ambiguous
with respect to the specific issue,” we defer to the agency’s construction of the statute, so
long as it is “permissible.” Id. at 843. The dissent concluded that the government’s
permissible interpretation of the statute easily survived review under Chevron. The entire
analysis of the dissent can be distilled in the following quote:
Simply put, § 36B(b) interpreted as Appellants urge would
function as a poison pill to the insurance markets in the States
that did not elect to create their own Exchanges. This surely is
not what Congress intended.
Dissent, Slip. Op. at 2.
The government filed a petition with the D.C. Circuit for a rehearing en banc, which
petition was granted on September 4, 2014. In the Order granting rehearing, the judgment
filed by the panel on July 22, 2104 was vacated, and scheduled oral argument before the en
banc court for Wednesday, December 17, 2014 at 9:30 a.m.
King v. Burwell, ___ F3d. ___, 2014 U.S. App. LEXIS 13902, 2014-2 U.S. Tax Cas. (CCH)
P50,367, No. 14-1158 (4th Cir. July 22, 2014)

Facts:
The facts of this case are essentially identical to those in Halbig v. Burwell. The
plaintiffs in King are Virginia residents who do not want to purchase comprehensive health
insurance. The plaintiffs’ action challenges the validity of the IRS final rule implementing
the premium tax credit provision of the ACA. The U.S. District Court for the Eastern District
of Virginia granted the defendants’ motion to dismiss the action, and the plaintiffs timely
appealed to the 4th Circuit Court of Appeals.

Holding:
A unanimous panel of the Court found that the applicable statutory language was
ambiguous and subject to multiple interpretations. Applying deference to the IRS’s
– PAGE 32 OF 40 –
determination, however, they upheld the rule as a permissible exercise of the agency’s
discretion, and affirmed the judgment of the district court.

Analysis:
For reasons essentially the same as the majority’s decision in Halbig, the Court
concluded that the plaintiffs’ had standing to challenge the ACA rule.
The Court’s substantive analysis was similar to the dissent’s analysis in Halbig.
However the Court more specifically focused on the two-step step analysis of a challenge to
an agency’s construction of a statute, outlined in Chevron U.S.A. Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984). Under that two-step analysis:
1. A court first looks to the “plain meaning” of the statute to determine if the regulation
responds to it. If it does, that is the end of the inquiry and the regulation stands.
2. If the statute is susceptible to multiple reasonable interpretations, however, the court then
moves to Chevron’s second step and defers to the agency’s interpretation so long as it is
based on a permissible construction of the statute.
Analyzing essentially the same arguments presented in Halbig, the Court concluded
that while the government’s arguments “made the better of the two cases,” neither
presented arguments which could be accepted as dispositive of Congress’ intent to either
grant or deny tax credit subsidies to participants in the federal Exchanges. The Court also
found that the Act’s legislative history was not sufficiently illuminating on this issue.
For this reason, the Court moved to the second step in Chevron, asking whether the
IRS rule’s conclusion that Congress intended tax credit subsidies to apply to participants in
both the state-created and federally-created Exchanges was based on a permissible
construction of the statute. The Court found that based on the evidence in the record,
including the legislative history, it was
… clear that widely available tax credits are essential to fulfilling
the Act’s primary goals and that Congress was aware of their
importance when drafting the bill. The IRS Rule advances this
understanding by ensuring that this essential component exists
on a sufficiently large scale. The IRS Rule became all the more
important once a significant number of states indicated their
intent to forgo establishing Exchanges. With only sixteen staterun Exchanges currently in place, the economic framework
supporting the Act would crumble if the credits were unavailable
on federal Exchanges. Furthermore, without an exception to the
individual mandate, millions more Americans unable to purchase
insurance without the credits would be forced to pay a penalty
that Congress never envisioned imposing on them. The IRS Rule
avoids both these unforeseen and undesirable consequences and
thereby advances the true purpose and means of the Act.
– PAGE 33 OF 40 –
It is thus entirely sensible that the IRS would enact the
regulations it did, making Chevron deference appropriate.
Slip. Op. at 33-34.
There was a concurring opinion joining in the majority’s opinion, but also
concluding that the IRS’ interpretation of the Act was the correct interpretation of the Act,
making the second step in Chevron unnecessary.
Plaintiffs filed a Petition for Writ of Certiorari with the U.S. Supreme Court on July
31, 2014, seeking review of the 4th Circuit’s decision. To date, the Supreme Court has not
advised whether it will take the case.
Burwell v. Hobby Lobby, ___ U.S. ___, 134 S.Ct. 2751, 189 L.Ed. 675 (2014)

Facts:
Plaintiff owners of closely held corporations asserting religious beliefs about
contraception sued arguing that regulations enacted by the Department of Health and
Human Services (“HHS”) pursuant to the Affordable Care Act (the “ACA” or the “Act”)
requiring them to provide health insurance coverage for certain contraception42 violated
the Religious Freedom Restoration Act of 1993 ("RFRA"), 42 U.S.C.S. § 2000bb et seq.,
which prohibits the federal government from taking any action that substantially burdens
the exercise of religion unless it constitutes the least restrictive means of serving a
compelling government interest. The U.S. Court of Appeals for the Third and Tenth Circuits
rendered opposite rulings regarding these claims. The U.S. Supreme Court granted
certiorari.

Holding
The Supreme Court majority opinion, written by Justice Alito, held that (1) RFRA
applies to regulations that govern activities of closely held corporations like the plaintiffs;
(2) HHS’ contraceptive regulations substantially burdened the exercise of religion; and (3)
the Government failed to show that the contraceptive mandate was the least restrictive
means of furthering the government interest in guaranteeing cost-free access to
contraception under the ACA.

Analysis:
With regard to the status of the plaintiff's, the Court found that nothing in RFRA
suggested Congress intended to depart from the standard definition of "person" to include
corporations. The Court further rejected HHS' argument that closely-held corporations
cannot exercise religion. In essence, the majority opinion determined that there should no
distinguishing between corporations and the people who run them." Corporations,
Nonexempt employers are generally required to provide coverage for the 20 contraceptive methods
approved by the Food and Drug Administration, including the three that may have the effect of preventing an
already fertilized egg from developing any further by inhibiting its attachment to the uterus. The owners of
the three plaintiffs have asserted religious beliefs that life begins at conception and that it would violate their
religion to facilitate access to contraceptive drugs or devices that operate after that point.
42
– PAGE 34 OF 40 –
"separate and apart from" the human beings who own, run, and are employed by them,
cannot do anything at all." Slip. Op. at 14.
The Court particularly relied on its prior decision in Braunfeld v. Brown, 366 U.S.
599, 81 S. Ct. 1144, 6 L. Ed. 2d 563 (1961) (plurality opinion), to support this contention. In
that case, five Orthodox Jewish merchants who ran small retail businesses in Philadelphia
challenged a Pennsylvania Sunday closing law as a violation of the Free Exercise Clause of
the First Amendment. Because of their faith, these merchants closed their shops on
Saturday, and argued that requiring them to remain shut on Sunday threatened them with
financial ruin. The Court entertained their claim (although it ruled against them on the
merits), and the majority in this case concluded that if a similar claim were raised today
under RFRA against a jurisdiction still subject to the Act, the merchants would be entitled
to be heard. Slip. Op. at 17.
The Court further concluded that RFRA expands religious rights beyond the Free
Exercise Clause, because Congress amended RFRA to adopt the term "exercise of religion"
as used in the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA).
In RLUIPA, Congress deleted the reference to the First Amendment and defined the
"exercise of religion" to include "any exercise of religion, whether or not compelled by, or
central to, a system of religious belief." §2000cc-5(7)(A). And Congress mandated that this
concept "be construed in favor of a broad protection of religious exercise, to the maximum
extent permitted by the terms of this chapter and the Constitution." §2000cc-3(g). The
majority concluded that this change in the law was "obvious effort to effect a complete
separation from First Amendment case law." Slip. Op. at 9-10
On the second point, HHS argued that the contraceptive mandate does not impose a
substantial burden on the exercise of religion, because the connection between what the
objecting parties must do (provide health-insurance coverage for four methods of
contraception that may operate after the fertilization of an egg) and the end that they find
to be morally wrong (destruction of an embryo) is too attenuated. They argued that
providing the coverage would not itself result in the destruction of an embryo; that would
occur only if an employee chose to take advantage of the coverage and to use one of the
four methods at issue. The Court characterized this argument as a challenge to the
reasonableness of the plaintiffs' religious beliefs, as to whether providing this kind of
coverage would violate those beliefs. The Court held that based on its prior precedent, it
was inappropriate for the Courts to attempt to draw a line under RFRA. See Thomas v.
Review Bd. of Indiana Employment Security Div., 450 U.S. 707, 101 S. Ct. 1425, 67 L. Ed.
2d 624 (1981).
In finding that HHS had not used the least restrictive means available to achieve its
purpose, the Court pointed to the fact that HHS has already established an accommodation
for nonprofit organizations with religious objections. Under that accommodation, the
organization can self-certify that it opposes providing coverage for particular contraceptive
services. If the organization makes such a certification, the organization's insurance issuer
or third-party administrator must "[e]xpressly exclude contraceptive coverage from the
group health insurance coverage provided in connection with the group health plan" and
– PAGE 35 OF 40 –
"[p]rovide separate payments for any contraceptive services required to be covered"
without imposing "any cost-sharing requirements . . . on the eligible organization, the group
health plan, or plan participants or beneficiaries." Slip. Op. at 24; citations omitted.
Justice Ginzberg's dissent (joined by Justice Sotomayor) characterized the majority
opinion as "a decision of startling breadth," concluding that the majority's ruling holds that
commercial enterprises, including corporations, along with partnerships and sole
proprietorships, can opt out of any law (other than tax laws) they judge incompatible with
their sincerely held religious beliefs. The dissent further concluded that under the
majority's definition, there will always be a "less restrictive alternative," in lieu of tolling an
enterprise claiming a religion-based exemption, so long as the government can pay for it.
Slip Op. at 28.
Justice Ginzberg also argued that the exemption sought by the plaintiffs overrides
significant interests of the corporations' employees and covered dependents, denying
coverage to women who do not hold their employers' beliefs access to contraceptive
coverage that the ACA would otherwise secure. Slip. Op. at 30.
Justice Ginzberg also rejected the majority's reliance on the definitional change in
"exercise of religion," as reflected in RLUIPA, finding that
RLUIPA's alteration clarifies that courts should not question the
centrality of a particular religious exercise. But the amendment
in no way suggests that Congress meant to expand the class of
entities qualified to mount religious accommodation claims, nor
does it relieve courts of the obligation to inquire whether a
government action substantially burdens a religious exercise.
Slip. Op. at 30.
Justice Ginzberg did not question whether the plaintiffs' religious beliefs were
sincerely held, but concluded that they were not "substantially burdened" by the
contraception coverage mandate at issue. The dissent found the fact that any decision to
actually use the contraception coverage at issue is the employee's, not the government's, to
be key here.
On the less restrictive alternative issue, Justice Ginzberg found that while the
government could set up and pay for a separate program to offer this type of coverage
where the employer objects to coverage due to religious concerns, would impede the point
of the ACA to ensure that employees "face minimal logistical and administrative obstacles."
78 Fed. Reg. 39888. Impeding women's receipt of benefits by requiring them to take steps
to learn about, and to sign up for, a new [government funded and administered] health
benefit was not what Congress contemplated, and would not even be available to recipients
of safety net family planning services under Title X of the Public Health Service Act, 42
U.S.C. §300 et seq. The dissent also pointed out that Congress declined to write into law
the preferential treatment plaintiffs describe as a less restrictive alternative.
– PAGE 36 OF 40 –
Justice Ginzberg's dissent concluded that she would confine religious exemptions
under that Act to organizations formed "for a religious purpose," "engage[d] primarily in
carrying out that religious purpose," and not "engaged . . . substantially in the exchange of
goods or services for money beyond nominal amounts." (Citations omitted).
Justices Breyer and Kagan filed a separate dissent, joining Justices Ginzberg and
Sotomeyor with the exception of the final argument, concluding the Court did not need to
decide whether either for-profit corporations or their owners may bring claims under
RFRA.
– PAGE 37 OF 40 –
OTHER STATE & FEDERAL CASES
Propst v. N.C. Department of Health and Human Services, ___ N.C. App. ___, 758 S.E.2d
892, No. COA13-1072 (3 June 2014)

Facts:
In September, 2008, Propst filed a claim with the North Carolina Industrial
Commission (“IC”) against the N.C. Department of Health and Human Services (“NCDHHS”)
for damages under the N.C. Tort Claims Act. In her claim, Propst alleged that the then
Gaston County Medical Examiner (“ME”) negligently failed to perform his duties when he
signed a Medical Examiner’s Report (“ME Report”) that included several inaccurate
statements about Propst’s son. Propst claimed damages in the amount of $200,000 for the
severe emotional distress that the alleged failures of the ME caused when he signed the ME
Report.
NCDHHS filed a motion for summary judgment claiming Propst’s claim was barred
by collateral estoppel because Propst had previously filed a negligence action against the
ME in superior court in his individual and official capacities for the same incident on
grounds of immunity and the public duty doctrine. Propst did not appeal the superior
court’s order granting the ME summary judgment in that action. Further, NCDHHS claimed
in its motion for summary judgment that even if the prior decision in superior court did not
preclude this case from moving forward, NCDHHS owed Propst no individual duty under
the public duty doctrine. After NCDHHS’s motion for summary judgment was denied by a
deputy commissioner, it appealed to the full commission, which granted NCDHHS’s motion
on both of its claims. Propst appealed.

Holding:
A superior court order granting summary judgment for the ME (a NCDHHS
employee) on the issues of immunity and the public duty doctrine collaterally estopped
Propst from later contesting the issue of the public duty doctrine before the IC. Further,
because Propst could not prove the key element that a duty was owed by NCDHHS, Propst’s
negligence claim against NCDHHS must fail. Therefore, the IC’s order for summary
judgment in favor of NCDHHS on both issues was proper.

Analysis:
The Court reviewed the appeal of any errors of law in the IC’s decision under the
same terms and conditions as ordinary civil actions and followed the same de novo
standard of review for summary judgment governed by N.C. R. Civ. P. 56(c). In its review
of the collateral estoppel portion of the summary judgment order, the Court went into great
detail about Propst’s argument that since the superior court also granted summary
judgment on the grounds of both immunity and the public duty doctrine, the determination
as to the issue of the duty was not necessary to the superior court’s judgment. 43 A finding
This position followed the Restatement (Second) of Judgments to support a finding that if a court of
first instance issued a judgment based on determinations of two issues, when either of the issues standing
43
– PAGE 38 OF 40 –
that the duty was not necessary to the earlier final judgment would have made summary
judgment improper. Ultimately, the Court determined that it was unable to find any
authority (nor was any cited by Propst) that justified the Court’s departure from the
general rule followed in North Carolina that issues actually litigated and determined in a
prior action preclude relitigation later.44 The Court consistently focused its opinion on the
interests of judicial economy and the prevention of relitigation of certain issues simply
because two issues could be determined each lead to a result that either, standing alone,
could independently have achieved. Because the Court found that all of the elements of
collateral estoppel were present, it agreed that Propst was collaterally estopped from
contesting the issue of the public duty doctrine. Without the duty in place, Propst could not
prove the necessary elements to support a negligence claim against NCDHHS. Therefore,
the Court affirmed the IC’s order granting summary judgment in favor of NCDHHS.
Bostic v. Schaefer, ___ F3d ___, 2014 U.S. App. LEXIS 14298, No. 14-1167, 14-1169, 14-1173
(4th Cir. July 28, 2014)

Facts:
Two same-sex couples filed suit challenging the constitutionality of Virginia laws
preventing same-sex couples from marrying and refusing to recognize same-sex marriages
performed elsewhere, alleging that these laws violate the Due Process and Equal Protection
Clauses of the Fourteenth Amendment. The district court granted the couples' motion for
summary judgment and enjoined Virginia from enforcing the laws. The State appealed.

Holding(s):
By a 2-1 margin, the Court’s panel conclude that Virginia's laws impermissibly
infringe on its citizens' fundamental right to marry, and affirmed the district court ruling.

Analysis45:
The Court found that there were health care consequences to the fact that plaintiffs
could not marry, which gave them standing to assert their claims.
Specifically, the Court found that plaintiffs Schall and Townley possessed standing to
bring their claims against defendant Rainey46 in two ways. First, in equal protection cases-such as this case--"[w]hen the government erects a barrier that makes it more difficult for
members of one group to obtain a benefit than it is for members of another group, . . . .
[t]he 'injury in fact' . . . is the denial of equal treatment resulting from the imposition of the
barrier[.]" Slip. Op at 13; citation omitted. It reasoned that the Virginia Marriage Laws
alone would have been sufficient to support the decision, the judgment is not conclusive with respect to
either issue alone.
44
This showed the Court’s continued reliance on the view of the term “actually litigated” as defined in the
First Restatement of Judgments, finding that issues properly raised in the pleadings or otherwise submitted
for determination and in fact determined are “actually litigated.” See City of Asheville v. State, 192 N.C. App.
1, 665 S.E.2d 103 (2008).
45
The analysis of this case is limited to a discussion of how the health care needs of the plaintiffs impacted
the Court’s ruling, in terms of their standing to sue.
46
Defendant Rainey is the Registrar of Vital Records, who is charged with promulgating Virginia’s marriage
license application form, which does not allow same-sex couples to obtain marriage licenses.
– PAGE 39 OF 40 –
erect such a barrier, which prevents same-sex couples from obtaining the emotional, social,
and financial benefits that opposite-sex couples realize upon marriage.
Second, Schall and Townley alleged that they have suffered stigmatic injuries due to
their inability to get married in Virginia and Virginia's refusal to recognize their California
marriage. Stigmatic injury stemming from discriminatory treatment is sufficient to satisfy
standing's injury requirement if the plaintiff identifies "some concrete interest with respect
to which [he or she] [is] personally subject to discriminatory treatment" and "[t]hat
interest . . . independently satisf[ies] the causation requirement of standing doctrine.";
citations omitted. Schall and Townley pointed to several concrete ways in which the
Virginia Marriage Laws resulted in discriminatory treatment. For example, they alleged
that their marital status has hindered Schall from visiting Townley in the hospital,
prevented Schall from adopting Townley’s child and subjected Schall and Townley to tax
burdens from which married opposite-sex couples are exempt. The court found these
specific, concrete instances of discrimination rather than abstract allegations, making their
stigmatic injuries legally cognizable.
Because these injuries are traceable to defendant Raney’s enforcement of the
Virginia Marriage Laws, and because declaring those laws unconstitutional would redress
those injuries, the Court found that they satisfied the standing doctrine’s requirements
with regard to defendant Rainey.47
On August 20, 2014, the Supreme Court of the United States Ordered the Application for State presented
to The Chief Justice and by him referred to the Court granted, and issuance of the mandate of the U.S. Court of
Appeals for the Fourth Circuit in this case stayed pending the timely filing and disposition of a petition for
writ of certiorari. See McQuigg v. Bostic, et. al., 2014 U.S. LEXIS 4827, 83 U.S.L.W 3105 (20 Aug. 2014).
47
– PAGE 40 OF 40 –

north carolina society of healthcare attorneys

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