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Tri-Cities Holdings LLC v. Tennessee Administrative Procedures Division

United States District Court, E.D. Tennessee, Greeneville

May 18, 2017

TENNESSEE ADMINISTRATIVE PROCEDURES DIVISION, D. KIM SUMMERS, in her official capacity as Administrative Law Judge, Tennessee Administrative Procedures Division, TENNESSEE DEPARTMENT OF STATE, TRE HARGETT, in his official capacity as Tennessee Secretary of State, TENNESSEE DEPARTMENT OF MENTAL HEALTH AND SUBSTANCE ABUSE SERVICES, and E. DOUGLAS VARNEY, COMMISSIONER, in his official capacity as Commissioner of the Tennessee Department of Mental Health and Substance Abuse Services, Defendants.[1]



         This matter is before the Court on the motion of plaintiffs, Tri-Cities Holdings, LLC (“TCH”) and Jane Doe Nos. 1-2, and John Doe Nos. 1-6 (“individual plaintiffs”) (referred to collectively as “plaintiffs”) for summary judgment, [Doc. 67]. The defendants have responded, [Doc. 80], and no reply has been filed. Also pending is the motion of Tennessee Administrative Procedures Division (“TAPD”), D. Kim Summers (“ALJ Summers”), Tennessee Department of State (“TDOS”), Tre Hargett, Tennessee Secretary of State (“Hargett”), Tennessee Department of Mental Health and Substance Abuse Services (“TDMHSAS”), and E. Douglas Varney, Commissioner of TDMHSAS (“Varney”) (referred to collectively as “defendants”) for summary judgment, [Doc. 70]. Plaintiffs have responded, [Doc. 73], and defendants have replied, [Doc. 81]. These cross-motions for summary judgment are now ripe for disposition. For the reasons which follow, plaintiffs' motion will be DENIED, defendants' motion will be GRANTED, and the case DISMISSED WITH PREJUDICE.

         I. Standard of Review

         Summary judgment is proper where the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In ruling on a motion for summary judgment, the Court must view the facts contained in the record and all inferences that can be drawn from those facts in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Nat'l Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907 (6th Cir. 2001). The Court cannot weigh the evidence, judge the credibility of witnesses, or determine the truth of any matter in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

         The moving party bears the initial burden of demonstrating that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To refute such a showing, the non-moving party must present some significant, probative evidence indicating the necessity of a trial for resolving a material factual dispute. Id. at 322. A mere scintilla of evidence is not enough. Anderson, 477 U.S. at 252; McClain v. Ontario, Ltd., 244 F.3d 797, 800 (6th Cir. 2000). This Court's role is limited to determining whether the case contains sufficient evidence from which the finder of fact could reasonably find for the non-moving party. Anderson, 477 U.S. at 248-49; Nat'l Satellite Sports, 253 F.3d at 907. If the non-moving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323. If this Court concludes that a fair-minded jury could not return a verdict in favor of the non-moving party based on the evidence presented, it may enter a summary judgment. Anderson, 477 U.S. at 251-52; Lansing Dairy, Inc. v. Espy, 39 F.3d 1339, 1347 (6th Cir. 1994).

         The party opposing a Rule 56 motion may not simply rest on the mere allegations or denials contained in the party's pleadings. Anderson, 477 U.S. at 256. Instead, an opposing party must affirmatively present competent evidence sufficient to establish a genuine issue of material fact necessitating the trial of that issue. Id. Merely alleging that a factual dispute exists cannot defeat a properly supported motion for summary judgment. Id. A genuine issue for trial is not established by evidence that is merely colorable, or by factual disputes that are irrelevant or unnecessary. Id. at 248-52.

         II. Undisputed Facts

         This is the third of three lawsuits[2] filed by plaintiffs arising out of TCH's attempt to locate a methadone clinic in Johnson City, Tennessee, and obtain from the Tennessee Health Services and Development Agency (“THSDA”) a statutorily required Certificate of Need (“CON”). In their 63-page complaint, plaintiffs seek declaratory and injunctive relief and monetary damages for defendants' alleged violations of the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq. (“ADA”) and § 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 793.

         TCH is a Georgia limited liability company which proposed to establish an opioid treatment program (“OTP”) (methadone clinic) in Johnson City, Tennessee. The individual plaintiffs are opiate-addicted residents of the Johnson City area and prospective clients of TCH's Johnson City OTP. Tennessee state law requires a CON from the THSDA before an entity can establish certain health care services, including an OTP, in Tennessee, see generally Tenn. Code Ann. § 68-11-1601, et seq. (The Tennessee Health Services and Planning Act of 2002), consistent with the public policy of the state “that the establishment and modification of health care institutions, facilities and services shall be accomplished in a manner that is orderly, economical and consistent with the effective development of necessary and adequate means of providing for the health care of the people of Tennessee.” Tenn. Code Ann. § 68-11-1603. Tennessee law also requires the entity operating an OTP to obtain a license from the TDMHSAS. Tenn. Code Ann. § 33-2-403. As part of the CON process, TDMHSAS is required to conduct an independent review of information submitted to THSDA in the application to “ensure that such information is accurate, complete, comprehensive, timely, and relevant to the decision to be made by the THSDA.” Tenn. Code Ann. § 68-11-1614(a) and (b).

         TCH filed an application for a CON to establish a non-residential substitution-based treatment center for opiate addiction and the initiation of opiate-addiction treatment at 4 Wesley Court, Johnson City, Tennessee on March 8, 2013. [Doc. 15-2 at 1]. As required by Tennessee Code Annotated § 68-11-1607(c)(3)[3], TCH gave notice of its application to “state, county and local government officials, including State Senator Rusty Crowe, State Representative James (Micah) Van Huss, Washington County Mayor Dan Eldridge, and City of Johnson City, City Mayor, Jeff Banys.” [Doc. 15-2 at 15; see also letter of March 5, 2013, Doc. 15-2 at 122].

         While the CON application was pending, TCH filed, on April 1, 2013, the first of the three federal lawsuits related to its efforts to establish its proposed methadone clinic in Johnson City. See Tri-Cities Holdings, LLC, Jane Doe Nos. 1-2, and John Doe Nos. 1-6 v. The City of Johnson City, Tennessee, Johnson City Board of Commissioners, and the Johnson City Board of Zoning Appeals, No. 2:13-CV-108 (Tri-Cities I”). The plaintiffs sought, among other things, a declaration that Johnson City's zoning ordinance relating to methadone clinics was facially invalid and in violation of the ADA and Rehabilitation Act. [See Doc. 1, No. 2:13-CV-108]. Plaintiffs sought a preliminary injunction restraining Johnson City “from withholding the necessary permits and permission from the [sic] TCH for a methadone clinic to be located at 4 Wesley Court, Johnson City, Tennessee.” [See Doc. 2, No. 2:13-CV-108]. On May 24, 2013, the Court held an all-day evidentiary hearing on the motion for a preliminary injunction. [See Docs. 36, 40, 41, 42, No. 2:13-CV-108]. The Court dismissed plaintiffs' complaint without prejudice on June 12, 2013, holding that the matter was not ripe for disposition because TCH did not have, and might never have, a CON from the State of Tennessee. [See Doc. 45, No. 2:13-CV-108]. Plaintiffs did not appeal the Court's judgment.

         Meanwhile, TCH's application for a CON was proceeding. On June 8, 2013, Mr. Dunlap, TCH's attorney, sent a letter, a copy of which does not appear to be in the record, requesting what Mr. Dunlap characterizes as an “accommodation” under the ADA. On June 11, 2013, TDMHSAS issued its review and analysis as required by Tennessee Code Annotated § 68-11-1608, [Doc. 15-1]. TDMHSAS concluded that it could not “support approval of the application because the majority of the criteria and standards for the type of facility being proposed in the application have not been met.” [Id. at 4]. More specifically, TDMHSAS concluded, among other things, that need for the facility “has not been clearly established, ” and that the “project does not contribute to the overall and orderly development of healthcare” in the region. [Id. at 5, 6]. THSDA considered the TCH CON application at its monthly meeting on June 26, 2013. [Doc. 31-3].

         At the outset of the June 26 hearing, it was noted that the application was opposed by Senator Rusty Crowe, Congressman Phil Roe, the City of Johnson City, various healthcare providers, medical doctors, and private citizens. [Id. at 4-5]. An initial statement was made by Jim Christoffersen, THSDA's general counsel, who outlined the general legal and policy bases upon which the agency's decision was to be made, i.e., the statutory criteria of need, economic feasibility, and contribution to the orderly development of healthcare, and Tennessee's state health plan and its “Guidelines for Growth.” [Id. at 6]. He also noted this Court's holding in Tri-Cities I and urged that “the decision not be based on zoning” because the zoning issue had not “been definitely determined.” [Id. at 8]. Mr. Christoffersen also made the agency aware of a June 18 letter from Mr. Dunlap in which he requested that “the applicant be provided with all reasonable accommodations or modifications to any and all applicable requirements necessary to enable its application to be approved, as required by the ADA and RA, ” and noted the letter's threat to sue THSDA. [Id. at 8-9].

         Both opponents and supporters of the application were present for the hearing and were allowed to speak. The opponents included an attorney representing the City of Johnson City, Johnson City's mayor, himself an oral surgeon who treats addicts, and Steven Lloyd, a board-certified internal medicine physician, Associate Dean of Medicine at the Quillen College of Medicine at East Tennessee State University, Associate Chief of Staff at the Mountain Home VA Medical Center, and a practicing hospitalist. [Id. at 10-94]. After extensive questioning and statements by THSDA members, a motion was made to approve the CON application. The motion failed by a 3-6-1 vote. [Id. at 196-97].

         At the conclusion of the hearing on June 28, Mr. Dunlap addressed the chairman as follows: “On behalf of my individual clients, who, as I would submit to the panel, are disabled, under the Americans With Disabilities Act, I would ask, is there anything that the panel can identify with the application that would enable the CON to go forward and allow my individual clients to be able to receive reasonable access to treatment for their disabilities?” [Id. at 197]. Mr. Dunlap was directed to “talk to staff.” [Id. at 198]. Then, on June 28, 2013, Mr. Dunlap mailed a letter to Melanie M. Hill, Executive Director of THSDA, which he referred to as a follow[ ] up on my letter of June 17, 2013” and stated that he “understood the chairman, at the end of the hearing, to direct him to contact HSDA staff to pursue my request for a reasonable modification or accommodation.” [Doc. 15-5 at 1]. Mr. Dunlap stated that “[T]HSDA has not made a reasonable modification of its rules and regulations required under the ADA and RA to allow the CON to be granted, ” and requested that THSDA modify “one or all of the criteria related to need, economic feasibility, and orderly development . . . and allow the CON application to be approved.” The letter requested that this be done by July 5, 2013. [Id. at 2-3].

         On July 8, 2013, plaintiffs filed their second lawsuit, this time in the Middle District of Tennessee, against THSDA and the same Johnson City defendants as in Tri-Cities I, again alleging violations of the ADA and Rehabilitation Act. (See Tri-Cities Holdings, LLC, et al. v. THSDA, et al., No. 3:13-CV-669 (M.D. Tenn.), filed as Doc. 1 in No. 2:13-CV-305 in this Court) (Tri-Cities II). The case was transferred to this district from the Middle District of Tennessee on November 13, 2013, and has proceeded in this Court as case No. 2:13-CV-305. The complaint has been amended twice in this Court, first to add Melanie M. Hill in her official capacity as Executive Director of THSDA, as a party defendant, [see Doc. 113 in No. 2:13-CV-305], and second to add the individual members of THSDA in their official capacities as party defendants. [See Doc. 136 in 2:13-CV-305]. Tri-Cities II remains pending in this Court. TDMHSAS and its commissioner are not sued in No. 2:13-CV-305.

         On July 19, 2013, TCH filed an administrative appeal of THSDA's CON decision with the Secretary of State's Administrative Procedures Division (“APD”) pursuant to Tennessee Code Annotated § 68-11-610 and the Tennessee Uniform Administrative Procedures Act and the appeal was assigned to ALJ Summers. On July 25, 2013, Mr. Dunlap mailed a letter to “Department of State Administrative Procedures Division” in which he “ask[ed] your office directly to provide my clients with a reasonable modification of any and all applicable state and local rules and regulations as required under the Americans With Disabilities Act . . . to allow TCH to operate its Opiate Treatment Program at 4 Wesley Court, or elsewhere, in Johnson City, Tennessee.” [Doc. 15-6]. In the letter, Mr. Dunlap claims that THSDA and Johnson City have both violated the ADA and Rehabilitation Act and stated that he would “be asking the federal court to stay the above-captioned administrative appeal I have filed while the federal case is pending.” He states that ‘[t]he administrative appeal claims are included in counts 13 and 14 in the federal complaint.” [Id. at 3-4].

         According to the letter, “[T]HSDA's clearly illegal requirement to notify local politicians when we applied for the clinic provides the lever to engage the federal court to provide equitable relief enforcing issuance of the CON.” [Id. at 6]. On July 29, 2013, Mr. Dunlap sent a letter to ALJ Summers in which he moved to stay the ”administrative appeal process pending resolution of the federal court action.” (referring to No. 3:13-CV-669 in the United States District Court for the Middle District of Tennessee) [Doc. 15-7]. The letter concludes that “I am again respectfully asking you, [T]HSDA, and Johnson City to provide a reasonable modification under the ADA and the Rehabilitation Act to allow TCH to locate its OTP clinic in Johnson City.” The letter was copied to both the general counsel for THSDA and the city attorney for Johnson City. [Id.]. Conference calls between ALJ Summers and the attorneys for the parties in the administrative appeal were held on July 31 and September 5, 2013. During the September 5 conference call, Mr. Dunlap again asked that the proceedings be stayed pending a decision in the federal court which he claimed “would resolve the CON appeal” and “would be very shortly forthcoming.” After the September 5 conference call, the request for stay of the administrative proceeding was granted, over the objection of THSDA's counsel. [Doc. 71]. There was another conference call on November 5, 2013, and neither party had anything new to report. [Id.].

         Meanwhile, Tri-Cities II had been docketed as case No. 2:13-CV-305 upon its transfer to this Court from the Middle District of Tennessee. Within days of the transfer, the Johnson City defendants moved for a stay, [Docs. 98, 100, No. 2:13-CV-305], and THSDA filed a motion to dismiss, [Doc. 109, No. 2:13-CV-305]. On December 10, 2013, the parties appeared before Chief United States Magistrate Judge Dennis H. Inman for a hearing on the motions to stay, [Doc. 133, No. 2:13-CV-305]. Defendants sought the stay on the basis that Tri-Cities II had been filed by plaintiffs in the Middle District of Tennessee in defiance of this Court's prior ruling in Tri-Cities I that the matters were not ripe for disposition because the plaintiffs had not received a CON and license from the State of Tennessee. [Doc. 137 at 4-5, No. 2:13-CV-305]. Mr. Dunlap, representing plaintiffs, candidly indicated to the magistrate judge that plaintiffs disagreed with the earlier ripeness decision and suggested to the magistrate judge that the case should proceed because the CON application was on administrative appeal and had then been stayed for approximately 60-days “waiting for a direction from the Federal Court in this case.” [Id. at 11-13]. The magistrate judge expressed some consternation that the administrative appeal had been stayed at the request of Mr. Dunlap and ultimately entered an order finding plaintiffs' explanation for filing their suit in the Middle District of Tennessee to be “rather obvious judge-shopping” and “if not a sanctionable contempt, certainly manifested a contemptuous attitude toward this Court's earlier decision.”[Doc. 135, No. 2:13-CV-305 at 4]. The magistrate judge further found that “plaintiffs' counsel has been more than a bit loose with his interpretation of what occurred while this case was pending before the Middle District of Tennessee, ” and his arguments tread [ ] “perilously close to being offensive.” [Id.]. The magistrate judge held that the ruling of the Court in Tri-Cities I was binding on plaintiffs and that “it is the law of this case that the plaintiffs must procure, or at least attempt to procure, certain administrative approvals.” [Id. at 5]. The magistrate judge noted that it was “reasonable to conclude that the district judge will not change his opinion that plaintiffs must attempt to procure a Certificate of Need, and a license from the Tennessee Health Services Agency, before this Court can entertain their suit.” The magistrate judge further noted that:

Plaintiffs' application for a certificate of need has been denied, and an appeal of that denial is now pending before a state administrative law judge. During argument, the court was quite surprised to learn that an administrative law judge has delayed considering the appeal of that denial based upon plaintiffs' counsel's representation to her that he intended to ask this court to stay, i.e., enjoin, any action by her. That would seem to be contrary to plaintiffs' professed need for a quick resolution to this litigation.

[Id. at 6]. Plaintiffs' motion to stay was therefore denied. [Id.]. Plaintiffs did not appeal the magistrate judge's order pursuant to Federal Rule of Civil Procedure 72(a) and 28 U.S.C. § 636(b)(1)(A).

         Another conference call had been scheduled with the administrative law judge for January 10, 2014. On January 8, 2014, an e-mail inquiry was sent by the ALJ to counsel for the parties concerning any further developments in the federal litigation. Mr. Dunlap responded that there were no new developments, despite the above described developments before the Magistrate Judge just a month earlier, and that the motion for summary judgment and the motion to dismiss were still pending. On March 7, 2014, Mr. Christoffersen filed a motion on behalf of THSDA asking that a hearing be scheduled on the administrative appeal and attached to the motion was a copy of the December 10, 2013 order issued by Judge Inman. [See Doc. 31-5]. On March 10, 2014, Mr. Dunlap responded to THSDA's motion, once again objecting to any hearing on the administrative appeal prior to the resolution of the federal court litigation. Mr. Dunlap once again requested “a reasonable modification to allow the CON to be issued.” He further stated that “this tribunal's continuing failure to do this creates a cause of action that Petitioner may bring against [ALJ Summers], ” and indicated that if a hearing was scheduled on the administrative appeal, “petitioner respectfully indicates that it will have no choice but to join Your Honor, in an official capacity, and this tribunal, as defendants in the pending federal court action.” [Doc. 15-10 at 4] (underlining in original). Mr. Dunlap's 21-page filing in the administrative action made no mention of the developments in the federal litigation. On March 12, 2014, Mr. Dunlap sent another letter to ALJ Summers “to outline further [his] position regarding the previous requests” and to request “a conference . . . to specifically to address the reasonable request modification request-before a full-blown hearing is scheduled.” [Doc. 15-11] (emphasis in original).

         On March 14, 2014, ALJ Summers entered an order in the administrative appeal sua sponte revoking Mr. Dunlap's permission to appear pro hac vice in the administrative matter. In her order, ALJ Summers referenced Mr. Dunlap's lack of disclosure of matters related to the federal court action, noted his “threats” to join the administrative law judge and the THSDA in the federal court action should the stay of the administrative proceedings be lifted and the CON appeal set for hearing, noted his demands that THSDA “grant the requested modifications of [T]HSDA rules and the disputed CON even though the [T]HSDA's obligation to provide this relief is yet to be determined, either by this tribunal or in the federal courts, ” and found that Mr. Dunlap's actions in the administrative case violated various Tennessee Rules of Professional Conduct, had expressed his contempt for the administrative proceedings in the tribunal, and had “unnecessarily impeded a resolution of the CON appeal.” [Doc. 15-12]. On March 24, 2014, Mr. Dunlap sought reconsideration of the order revoking permission to appear pro hac vice and moved for ALJ Summers's recusal. On April 2, 2014, ALJ Summers denied both motions. [Doc. 15-14].

         On May 1, 2014, TCH appealed the order revoking permission to appear pro hac vice to the Chancery Court for Davidson County, Tennessee. On December 10, 2014, the Chancery Court upheld ALJ Summers's revocation of counsel's admission pro hac vice, concluding, among other things:

Without evidence and compelling legal authority, Mr. Dunlap stated that ALJ Summers retaliated against him for advising her (a) that she was subject to the ADA and (b) that she bore certain responsibilities under the ADA. . . His conduct, his lack of candor with ALJ Summers, and his misrepresentation of his duplicative federal court filings went beyond “forceful prose . . .”[4]
. . . .
. . . His [Mr. Dunlap's] description of his own conduct as a zealous assertion of his client's ADA rights is grossly inaccurate and is more aptly described as duplicitous and bullying.
. . . .
Mr. Dunlap's statements to ALJ Summers were untrue. Judge Greer had ruled that his client had to exhaust its administrative remedies. Mr. Dunlap did not like that ruling . . . . Mr. Dunlap provided no information about the status of the federal litigation. Rather, Mr. Dunlap chose not to reveal the federal court ruling and to intentionally assert a legal position directly contrary to that federal court decision.
. . . .
ALJ Summer's conclusion that Mr. Dunlap misrepresented the status of the federal litigation and used the misrepresentation to attempt to coerce a decision from her in his client's favor without an administrative hearing is supported by the record . . .
. . . .
Mr. Dunlap argued that he had the right to fairly comment on the legality of the administrative proceedings in reference to the ADA. His right to comment is not in dispute; rather, the dispute centers on his failure to be forthcoming and candid with ALJ Summers about the federal court proceedings . . . . Similarly, his posturing that his client has the right to make HSDA aware of imminent federal enforcement action serves only as a distraction, not an effective explanation for his misrepresentations or attempt to coerce . . .
. . . .
. . . Mr. Dunlap characterizes his conduct as an appropriate attempt to discuss the ADA. However, his written statements were not attempts to make ALJ Summers aware of the federal law and its implications. Instead, he declared that “if” ALJ Summers took action, he would have no choice but to sue her in federal court. This language is not a discussion of federal law, but a direct challenge to ALJ Summers' authority . . .
. . . .
Despite being advised by the federal judge and the federal magistrate that he needed to exhaust his administrative remedies, Mr. Dunlap repeatedly demanded that a CON issue without a hearing and asserted that ALJ Summers' failure to issue one forthwith constituted a violation of federal law. His actions ...

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