South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
MRI at Belfair, LLC; Hilton Head Regional Medical Center, et al vs. SCDHEC, et al

AGENCY:
South Carolina Department of Health and Environmental Control

PARTIES:
Petitioners:
MRI at Belfair, LLC; Hilton Head Regional Medical Center; and Hilton Head Imaging, Inc.

Respondents:
South Carolina Department of Health and Environmental Control and Southern MRI
 
DOCKET NUMBER:
07-ALJ-07-0538-CC

APPEARANCES:
n/a
 

ORDERS:

ORDER ON MOTION TO LIFT STAY

STATEMENT OF THE CASE

This matter is before the Administrative Law Court (“ALC”) on the motion of Respondent Southern MRI to lift the automatic stay imposed by S.C. Code Ann. § 1-23-600(G)(2).[1] Petitioners MRI at Belfair, LLC (“MRI at Belfair”); Hilton Head Regional Medical Center (“Hilton Head Regional”); and Hilton Head Imaging, Inc. (“Hilton Head Imaging”) (collectively, “Petitioners”) oppose the lifting of the stay. Respondent Department of Health and Environmental Control (“Department”) does not object to the lifting of the stay. The court held an expedited hearing on this motion on May 12, 2008. Upon consideration of the parties’ written memoranda and oral argument at the motions hearing, the court grants the Petitioners’ motion.

On September 19, 2007, the Department granted Southern MRI’s request for a non-applicability determination (“N/A Determination”) regarding its proposal to purchase and operate a magnetic resonance imaging (“MRI”) unit and computer tomography (“CT”) unit in Beaufort County, South Carolina. Upon exhaustion of the administrative process with the Department, MRI at Belfair and Hilton Head Regional timely filed a request for a contested case hearing before the ALC challenging the Department’s determination. Hilton Head Imaging later intervened as a Petitioner. By way of the present motion, Southern MRI seeks to proceed with its planned operation of the MRI and CT units on Hilton Head Island.

Southern MRI has been providing imaging services on Hilton Head Island since the late 1990s. Most recently it was providing imaging services through a Siemens Impact Expert 1.0T MRI at its facility located at 460 William Hilton Parkway. This facility is down the road from the facility that will house the MRI and CT units that are the subject of this action. Further, an affiliated entity, Southern Open MRI located in Bluffton, South Carolina, provides imaging services to the Hilton Head area through a Hitachi Aris II .3T MRI.

After the Department granted Southern MRI’s N/A Determination, Southern MRI began construction of its new facility and installation of a GE 1.5T Signa HiSpeed MRI and a GE 4 Slice CT, the MRI and CT units that are at issue in this matter. In March 2008, Southern MRI decommissioned its Siemens unit intending to utilize its newly installed GE unit on Hilton Head Island. Patients in the Hilton Head and Bluffton areas may obtain imaging services from a variety of providers, including, for example, Hilton Head Regional, Hilton Head Imaging, MRI at Belfair, Southern Open MRI, and, until recently, Southern MRI.

DISCUSSION

a. Standard to Lift Stay

The Administrative Procedures Act provides for an automatic stay of an agency decision to issue a new license when a contested case hearing is requested. § 1-23-600(G)(2) (“A request for a contested case hearing for a decision to issue a new license stays all actions for which the license is a prerequisite.”). After a contested case hearing is initiated before the ALC, any party may move for the presiding administrative law judge to lift the automatic stay. § 1-23-600(G)(4). The parties agree that subsection (G)(4) does not provide a standard as to the circumstances under which the automatic stay should be lifted. Their positions diverge somewhat as to the standard they urge this court to apply.

Generally, the decision to grant or refuse a stay is discretionary and should be exercised with caution after balancing competing interests. Carolina Water Serv., Inc. v. Lexington County Joint Mun. Water & Serv. Comm’n, 367 S.C. 141, 153 n.2, 625 S.E.2d 227, 233 n.2 (Ct. App. 2006), rev’d on other grounds, 373 S.C. 96, 644 S.E.2d 681 (2007). Southern MRI and Petitioner MRI at Belfair agree that, in exercising its discretion as to whether to lift the stay, the court should employ a balancing test.[2] Merritt Bros., Inc. v. Marine Midlands Realty Credit Corp., 307 S.C. 213, 414 S.E.2d 167 (1992) (“An equitable stay may be invoked if justified by circumstances which outweigh any potential harm to the party against whom it is operative. In making this determination, the court ‘must weigh competing interests and maintain an even balance.’”) (quoting, in part, United States Central Building Supply, Inc. v. Wilke, 685 F. Supp. 936, 938 (D. Md. 1988)); see also Carolina Water Serv., 367 S.C. at 153 n.2, 625 S.E.2d at 233 n.2. By contrast, Petitioners Hilton Head Regional and Hilton Head Imaging argue that the balancing test typically employed by courts when considering whether to issue an equitable stay is not appropriate here. They contend that because the automatic stay of § 1-23-600(G)(2) is statutory rather than equitable, the court must consider the statute as a whole in light of its intended purpose. Such an examination, they contend, shows that the General Assembly intended that the automatic stay of (G)(2) be lifted only in extraordinary circumstances, which, they argue, Southern MRI has not demonstrated here. Cf. Talley v. John-Mansville Sales Corp., 285 S.C. 117, 119 n.2, 328 S.E.2d 621, 623 n.2 (1985) (noting that remanding the case for entry of a stay could delay its resolution for years, and stressing that such a stay is proper only under the most exceptional circumstances).

The court agrees to some extent with both of these positions. In determining whether the stay should be lifted, the court must certainly consider and balance the respective harm to the parties. However, the court finds that the ordinary, garden variety “harm” that all permit or license applicants will undeniably but commonly suffer is alone insufficient to warrant lifting of the automatic stay. Lifting the stay based upon the normal, foreseeable delay, expense, and lost profits associated with an applicant’s inability to continue with a project due to the operation of the automatic stay would contradict the legislative purpose of imposing one. Consequently, the court finds that a movant must show circumstances other than those generally suffered by prospective permittees or licensees to lift the stay. Moreover, the harm demonstrated by those circumstances must outweigh that which will be suffered by the other parties.

b. Application to Evidence Presented

Southern MRI asserts that it will suffer more harm from the stay than the Petitioners will suffer if it is lifted. In support of its motion, Southern MRI filed an affidavit of Chris Jenkins averring that “[t]he prohibition against operating the MRI and CT modalities are causing significant harm to Southern MRI.” (Jenkins Aff. ¶ 15.) Specifically, Southern MRI contends that if the stay is not lifted, “it will be forced to terminate its employees, as it will not be generating sufficient revenue to service its debt.” (Id.) Additionally, it contends that “its referral relationships with the established referring physicians that have been cultivated since 1999 will be jeopardized or terminated.” (Id. ¶ 16.) Moreover, “[i]t believes that there will be a significant detrimental impact on the patients that have been referred to Southern MRI in the past and will be referred to Southern MRI in the future.” (Id.) Finally, Jenkins avers that “[t]he impact to Southern MRI, the referring physicians and the patients are significant and potentially non repairable if Southern MRI is not allowed to operate during the appeal.” (Id. ¶ 17.) Attached to Jenkins’s affidavit are letters from ten local physicians essentially stating that the inability to refer patients to Southern MRI during the pendency of this contested case will negatively impact their patients. The physician letters further state that, if the stay is not lifted, they will be “forced to look elsewhere for imaging services” and express concern that they “will not be able to find the timely and quality services that [Southern MRI is] prepare[d] to offer.”

In further support of its motion, Southern MRI argues that, although it knowingly assumed the risk that the Department’s decision to grant the N/A Determination could ultimately be determined to be erroneous, thus necessitating full certificate of need review for its project, Southern MRI could not have anticipated that the court would interpret the automatic stay provision of § 1-23-600(G)(2) to apply to N/A Determinations until the court’s order of April 30, 2008. Because this novel issue had not yet been addressed by the ALC[3] when Southern MRI elected to proceed with implementing its project based upon the Department’s N/A Determination, it argues that equity demands that the stay be lifted. Finally, it argues that, because Southern MRI will be unable to provide any MRI or CT services if the stay is not lifted, it may not be in a financial position to proceed with the project even if it ultimately prevails in the underlying contested case.

In response, the Petitioners make several points. First, they point out that Southern MRI’s inability to provide MRI and CT services during the pendency of this matter is a result of its own actions. Southern MRI had an operable Siemens unit on Hilton Head Island, which it decommissioned in March 2008 during the pendency of this case. Hilton Head Regional and Hilton Head Imaging further point out that Jenkins stated in his deposition just a few days before his affidavit was filed in connection with this motion that Southern MRI decommissioned its Siemens unit at the same time the GE unit was being delivered for economic reasons, which created a lapse in service. Further, Jenkins stated in his deposition that the two technicians employed by Southern MRI are currently working forty hours per week, although not exclusively by performing imaging services.

The Petitioners also argue that lifting the stay will result in harm to the Petitioners. MRI at Belfair submitted an affidavit by its sole member, Dr. Albert Joseph Borelli, averring that lifting the stay would “cause substantial financial harm to MRI at Belfair.” (Pet’r MRI at Belfair’s Ex. 1 ¶ 10.) The basis for Dr. Borrelli’s position is that the referring physician that utilizes MRI at Belfair the most provided Southern MRI with a letter of support, and further, that Southern MRI’s advertising, which he contends is misleading, may also cause MRI at Belfair to lose patients. Dr. Borelli also asserts that Southern MRI’s potential patients could be served at the other existing providers, including MRI at Belfair.

Thus, the harm that will apparently be suffered by the Petitioners if the stay is lifted is largely the same as that alleged by Southern MRI if the stay is not lifted—competitive disadvantage. Southern MRI also alleges general economic harm by virtue of not being able to generate sufficient revenue to service the debt it has incurred on the project and meet its payroll. Moreover, although it attempts to establish additional harm to its referring physicians and their patients due to the interruption in Southern MRI’s service, the evidence shows that the local area has several MRI providers that can meet the needs of these physicians and patients; no evidence was presented that the other facilities do not currently have capacity to absorb that need during the pendency of this case.

The court finds that the economic harm alleged by Southern MRI alone would be insufficient to establish the unusual circumstances required to lift the automatic stay. Southern MRI has additionally established, however, that the entire contested case may become moot if it is not permitted to operate the services at issue during the pendency of this matter. The court notes that, while not applicable to this contested case, Rule 225(c)(2) of the South Carolina Appellate Court Rules provides two examples of when it may be appropriate to lift the automatic stay imposed by Rule 225(a), SCACR, which, like § 1-23-600(G)(2), generally stays orders of lower courts during the pendency of an appeal to the South Carolina Court of Appeals or Supreme Court. See ALC Rule 68 (allowing the ALC to apply the South Carolina Appellate Court Rules to resolve questions not addressed by the ALC Rules). Subsection (c)(2) provides, “In determining whether an order should issue pursuant to this Rule, the [court] should consider whether such an order is necessary to preserve jurisdiction of the appeal or to prevent a contested issue from becoming moot.Id. Thus, our appellate court rules indicate that potential mootness of a contested issue may be sufficient to establish special harm warranting the lifting of the automatic stay.

The court observes that this situation of potential mootness results from Southern MRI’s own decision to decommission its existing Siemens unit prior to the resolution of this controversy. However, it also notes that Southern MRI is not adding a new service to the marketplace; rather, it is replacing an existing service with better technology. The purpose of a stay is generally to preserve the status quo during the pendency of litigation. Melton v. Walker, 209 S.C. 330, 40 S.E.2d 161 (1946) (“The general rule is that the effect of a . . . stay is to suspend proceedings and preserve the status quo pending the determination of the appeal or proceeding in error.”) (citing 4 C.J.S., Appeal and Error, §§ 626, 662). In this case, the status quo before litigation began was that Southern MRI was providing imaging services in Bluffton and on Hilton Head Island. Indisputably, the 1.5 MRI unit is superior to the 1.0 unit it was utilizing on the Island prior to the Siemens unit being decommissioned. Nonetheless, the situation that comes closest to preserving the status quo is for Southern MRI to continue to provide MRI services on the Island during the pendency of this case. The alternative is an effective prohibition on Southern MRI’s providing such services on the Island, which does not reflect the status of the marketplace at the time of the filing of this contested case.

CONCLUSION

The court finds that due to the unique procedural posture of this case and because permitting Southern MRI to offer services during the pendency of this case more closely approximates the status quo ante, the stay should be lifted. The special harm demonstrated by Southern MRI of potentially being unable to go forward with its project if it is not permitted to operate during the pendency of this matter outweighs the potential competitive disadvantage to the Petitioners.[4] It is therefore

ORDERED that the Petitioners’ motion to lift the automatic stay of § 1-23-600(G)(2) is GRANTED.

IT IS SO ORDERED.

____________________________________

PAIGE J. GOSSETT

Administrative Law Judge

May 22, 2008

Columbia, South Carolina



[1] By order dated April 30, 2008, the court granted the Petitioners’ motion to enforce the automatic stay of § 1-23-600(G)(2). Pursuant to § 1-23-600(G)(4), Respondent Southern MRI promptly filed a motion to lift the automatic stay.

[2] Naturally, these opposing parties disagree as to how the court should apply that balancing test based on the evidence presented.

[3] The court notes that its April 30, 2008 decision has no precedential effect and is not binding on other administrative law judges. See Stephen P. Bates, The Contested Case Before the ALJD, in South Carolina Administrative Practice & Procedure 161, 211 (Randolph R. Lowell & Stephen P. Bates eds., 2004) (“The judges of the [ALC] are not bound by previous rulings of their peers.”).

[4] The court further notes that the contested case hearing in this matter is currently scheduled to take place in approximately nine weeks. The court urges the parties to make every effort to ensure that the hearing is not delayed, as a continuance will be granted only for extreme circumstances.


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