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).
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. 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 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.
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
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