Lead Opinion
OPINION
Plaintiff-Appellant MSI Regency (“Regency”) was granted a Certificate of Need from the Ohio Department of Health (“ODH”) to rebuild its nursing home facilities. However, when ODH revoked that Certificate due to changes in Regency’s planned activities, Regency lost substantial revenues on the stalled project. Regency brought suit under 42 U.S.C. § 1983 against several current and former ODH employees, in their personal capacities, alleging, inter alia, due process and equal protection violations. The Defendants filed a motion to dismiss, based on qualified immunity and failure to state a claim. The district court denied the motion, concluding that it could not determine whether the complaint alleged a constitutional violation. For the following reasons, we REVERSE the district court’s judgment and hold that the defendants are entitled to qualified immunity.
I.
Plaintiff-Appellant Regency owns a nursing home and assisted living facility. On July 20, 2005, Regency applied for a Certificate of Need from ODH, in order to rebuild its outdated facilities. A Certificate of Need (“CON”) is a required approval from the state to conduct a “reviewable activity.” Ohio Revised Code Section 3702 defines a “reviewable activity” to include any “establishment, development, or construction of a new long-term care facility,” “replacement of an existing long-term care facility,” or “renovation of a long-term care facility____” Ohio Rev. Code § 3702.51(R)(l)-(3). Also defined as a “reviewable activity” is “[a]ny change in the health services, bed capacity, or site, or any other failure to conduct the reviewable activity in substantial accordance with the approved application for which a certificate of need concerning long-term care beds was granted, if the change is made within five years after the implementation of the reviewable activity for which the certificate was granted.” Id. at § 3702.51(R)(5).
Regency planned to tear down one building on its property (which was currently used for assisted living facilities) and build a new nursing home facility in its
On November 1, 2005, ODH granted Regency a CON. However, before receiving the certificate, Regency had also applied to the Ohio Department of Housing and Urban Development (“HUD”) for construction financing for this intended two-phase project. After receiving the CON, Regency was informed that HUD would not provide financing for the plan as currently laid out, but would finance the project if the nursing and assisted living facilities were built as one project — i.e., at the same time. Therefore, Regency changed its plan. Without discussing this change with ODH, Regency informed its long-term care residents in a letter dated December 15, 2005, that the existing facility would be closing no later than March 2006, and that they would have to relocate during construction. The letter offered assistance with relocation. The same day, Regency sent Defendant-Appellant, J. Nick Baird, then-Director of ODH, a letter entitled “90 Day Advance Notice of Intent to Close.”
On January 6, 2006, ODH responded to the December 15th letter. In its response, written by Defendant Christine Kenney, Section Chief of Health Care Services at ODH, the Department noted that the Certificate of Need’s approval was conditioned on Regency’s representation in its application that the renovation would “progress without any impact on the ongoing care and services to the residents who will remain where they are until the renovation is completed.” ODH’s letter warned Regency that “[failure to comply with this aspect of the approved project may initiate procedures to withdraw the certificate of need.”
Regency alleges, and Defendants deny, that Regency (through its representative, Managing Member Akiva Wagschal) discussed ODH’s January 6 letter with another ODH representative, John Hoffman, and with the ODH Assistant Counsel, Defendant Carol Ray, who stated that the concerns in Kenney’s January 6 letter were “unprecedented,” and suggested how to respond.
Regency responded to ODH with a letter dated January 10, 2006. Regency initially disputed Kenney’s statement that the Certificate of Need contained a condition regarding the residents’ location. Regency went on to explain the changed financial circumstances and thus the change in its plan, and then acknowledged that “[t]his turn of events necessitated making a minor change in the original documented” plan. Regency’s letter to ODH also noted that some residents were displeased with the plan requiring them to move, and so, “[w]ith a heavy heart, deep regret and great reluctance, on December 27, 2005, we [Regency] issued them 30 day advance notices of our intent to transfer them.” This letter to residents was in fact entitled “Eviction Notice,” and stated that the residents would be “transferred] and discharge[d]” in January because “the facility is closing.”
Importantly, Regency’s letter then went on to say “I respectfully request that if a ‘determination of non-reviewability’ is required,” because of the modification to the
Despite their receipt of the January 6 letter from ODH, expressing concerns about Regency’s closing of the facility, Regency continued with its plan to close. It informed ODH on January 25 that all residents had moved or been relocated, and that the nursing facility was officially closed. On February 2, Defendant Kaiser (on behalf of Defendant Kenney and ODH) sent Regency a form document, which did not refer to the January 10 letter or the relocation, but simply was a routine form that requested copies of design drawings.
However, on February 28, Defendant Baird, then-Director of ODH, responded to Regency’s January 10 letter. Presumably responding to Regency’s request, he treated Regency’s letter as a request for a reviewability determination on the changes in the CON conditions. ODH explained that “as approved, the existing facility was to remain open and operational and residents were to remain in the existing building until the new building was constructed and they could be relocated.” The letter further stated that “[a]fter being made aware that the relocation of residents prior to completion of the new building was an issue with the Certifícate of Need, you proceeded with the relocation of residents and closure of the existing facility.” ODH concluded that Regency’s decision to relocate the residents was a “reviewable activity.”
Shortly thereafter, ODH informed Regency that “[b]y relocating residents and closing the existing Regency Village facility, contrary to the approved CON application,” Regency had “failed to conduct the reviewable activity in substantial accordance with the approved application.” Because Regency’s actions were a “substantial” change from the conditions upon which the Certificate of Need was granted, ODH found Regency in violation of Ohio Revised Code § 3702.53(C). ODH considered the fact that “[t]he Department learned of the deviation from the approved CON from the managing Long-Term Care Ombudsman for Cincinnati and not from the holder of the CON. In addition, the holder of the CON continued with implementation of the deviation after receiving notice from the Department that the approved CON requires the long-term care residents to be permitted to remain.” The Director of Health therefore revoked the project’s CON, levied a statutory penalty, and assessed a period of three years during which no subsequent applications for CON’s would be granted to Regency. ODH formally withdrew the CON on May 15, 2006.
Regency appealed all of ODH’s rulings to the Ohio Court of Appeals, pursuant to the procedures in Ohio Revised Code § 3702.60. The Court of Appeals affirmed the Director’s determination that the relocation of residents was a “reviewable activity.” In re MSI Regency Village, Ltd,.,
The state court found that “in this case, the closing of the facility and the relocation of the residents were precisely the opposite of what [Regency] had represented in the CON application for its plan of care for
An appeal to the Ohio Supreme Court was timely filed, but it was not until after the present proceedings were initiated— and the first motion to dismiss at issue in this case was denied — that the Ohio Supreme Court refused the appeal for review, making the Ohio Court of Appeals’ decision the final state court decision. In re MSI Regency Village, Ltd.,
Plaintiff filed this civil suit on October 26, 2007, alleging that the Defendants — all ODH employees but all sued only in their individual capacities — knowingly and recklessly abused their positions and conspired with each other to deprive Regency of its planned project by “misapplying and misinterpreting” the CON regulations. Count I was brought under 42 U.S.C. § 1983, alleging that the Defendants are personally liable for violating Regency’s due process, equal protection, and just compensation rights.
The Defendants moved on August 29, 2008 to dismiss the complaint. They argued that as public officers being sued in their personal capacity, they are entitled to qualified immunity. The district court applied the analysis required by Saucier v. Katz,
In addressing whether Regency’s rights were violated, the district court considered each alleged theory in turn. It held that Regency failed to adequately allege a procedural due process claim, as notice and an opportunity to be heard were clearly received. On Regency’s equal protection theory, the court noted that plaintiff did not allege any class-based disparate treatment and must proceed as a “class of one”; it must therefore show it was treated differently from others in Regency’s situation, and that there is no rational basis for the state actor’s differential treatment. The court concluded that plaintiffs “own pleadings strongly suggest a rational basis for ODH’s actions, as the statute defines a ‘reviewable activity
Lastly, the district court addressed the substantive due process theory. The eom
Addressing the Defendants’ claim of qualified immunity, the court concluded that it “[could not] determine from the pleadings whether Plaintiffs constitutional due process or equal protection rights were violated by the Defendants’ alleged conduct. The Court must therefore deny the motion to dismiss based on qualified immunity.” The court specified, however, that the motion for qualified immunity was denied “without prejudice to renewal at the appropriate juncture.” The Defendants did not appeal from this September 2008 decision.
Thereafter, the United States Supreme Court issued two new decisions, Pearson v. Callahan,
II.
Before proceeding to the merits, we must consider our jurisdiction to hear this appeal. A district court’s denial of a
Here, two motions were involved. The Defendants filed their first motion to dismiss on the basis of qualified immunity and failure to state a claim on August 29, 2008. At that time, the state court appeal was pending regarding the interpretation of the CON regulations and the actions of the ODH employees. The district court ruled that it could not determine whether the facts as alleged by plaintiff demonstrated a violation of Regency’s substantive due process or equal protection rights, and therefore denied qualified immunity, with leave to renew at the appropriate time. Because Saucier was the current governing authority, and required judges to first answer the question whether a constitutional violation has occurred before addressing whether the Defendants’ conduct was a violation of clearly established rights, the court did not go on to address the second Saucier prong.
However, after that decision, much changed. First, the decision of the Ohio Court of Appeals became final when the Ohio Supreme Court denied review. This constituted a final state court interpretation of state law and regulations. The Ohio Court of Appeals upheld ODH’s interpretation of the CON regulations as valid, deciding that Regency’s relocation of residents was a “reviewable activity,” finding that Regency’s actions were “precisely the opposite” of what their application had said, agreeing with ODH that Regency failed to conduct its activity in “substantial accordance” with the application, and upholding ODH’s decision to withdraw the CON, impose a moratorium, and levy penalties.
Second, the United States Supreme Court decided Pearson and Iqbal. Pearson involved a qualified immunity claim, and reversed Saucier’s requirement that courts follow a “rigid order of battle” in assessing the qualified immunity prongs. Iqbal further clarified the standard for assessing the sufficiency of a complaint, originally announced in Bell Atlantic Corp. v. Twombly,
However, the district court denied this supplemental motion, and it is from that order that the Defendants now appeal. Regency argues that because Defendants did not appeal the first order, this Court is without jurisdiction to hear an appeal from the second. We disagree. Comstock v. McCrary,
All three defendants then filed a renewed motion for summary judgment arguing for qualified immunity in light of this court’s decision in Williams v. Mehra,186 F.3d 685 (6th Cir.1999) (en banc), handed down after the district court’s first order. Thereafter, the district court held a hearing on the applicability of Williams to the case before it, and again denied the defendants’ motion for summary judgment.... Defendants’ timely interlocutory appeal followed.
Comstock,
III.
The Qualified Immunity Standard
We review the district court’s denial of qualified immunity de novo. Moldowan v. City of Warren,
But in Pearson, the Supreme Court made an important change to the law which governs the qualified immunity analysis. Recognizing broad criticism of Saucier’s “rigid order of battle,” the Court concluded that the sequence “should no longer be regarded as mandatory.”
The district court could not reach the second Saucier prong, assessing whether the Defendants had violated a right that is “clearly established,” when ruling on the Defendants’ first motion to dismiss. But Pearson now allows us to reach and analyze the second Saucier prong first, if it serves the purposes of qualified immunity. We find the second prong dispositive in this case.
Government officials are entitled to qualified immunity, and thus are shielded from actions for damages, “as long as their actions could reasonably have been thought consistent with the rights they are alleged to have violated.” Anderson v. Creighton,
Here, it is not enough that Regency has clearly-established property rights, and rights of due process and equal protection; instead, it must have been “sufficiently clear” at the time that the Defendants’ actions surrounding Regency’s CON would violate Regency’s substantive due process and equal protection rights. Anderson,
Substantive due process “protects specific fundamental rights of individual freedom and liberty from deprivation at the hands of arbitrary and capricious government action.” Sutton v. Cleveland Bd. of Educ.,
Moreover, “[w]here a substantive due process attack is made on state administrative action, the scope of review by the federal courts is extremely narrow. To prevail, a plaintiff must show that the state administrative agency has been guilty of ‘arbitrary and capricious action’ in the strict sense, meaning ‘that there is no rational basis for the ... [administrative] decision.’ ” Pearson v. City of Grand Blanc,
As to equal protection, Regency does not allege a class-based disparate treatment, and so proceeds as a “class of one” under Village of Willowbrook v. Olech,
In this case, Regency claims that the Defendants’ decisions — declaring their movement of residents to be a “reviewable activity,” objecting to the change in their plans, removing of their CON, etc. — violated their substantive due process and equal protection rights. The district court held that it “could not determine” whether Regency’s rights had been violated by the decisions and actions of the Defendants. However, the intervening finality of the
Collateral Estoppel
“A fundamental precept of common-law adjudication ... is that a ‘right, question, or fact distinctly put in issue and directly determined by a court of competent jurisdiction ... cannot be disputed in a subsequent suit between the same parties or their privies ...’” Montana v. United States,
28 U.S.C. § 1738 requires federal courts to give state court judgments the same res judicata effect
Under Ohio law, issue preclusion “holds that a fact or a point that was actually and directly at issue in a previous action, and was passed upon and determined by a court of competent jurisdiction, may not be drawn into question in a subsequent action between the same parties or their privies, whether the cause of action in the two actions be identical or different.” Fort Frye Teachers Ass’n, OEA/NEA v. State Employment Relations Bd.,
Collateral estoppel “thus precludes our review of the issues raised in this action.” Hutcherson,
Regency’s counsel does not successfully dispute that the Ohio court’s decision forecloses success on its claims. At oral argument, the Court asked, “Assume that you’re stuck with the [Ohio] Court of Appeals’ decision — which, as of today, you are — how do you win?” Counsel did not respond. The Court continued, “You can’t, can you?” Counsel could only reply, “I don’t know.” Later, when asked, “What constitutional right ... is violated when [a state official] acts in accordance with state law and regulations?,” Regency’s counsel plainly responded, “None.”
Because a final decision in the state court upheld the actions and decisions of the ODH employees, it is very clear that “a reasonable official in the [Defendants’] position could have believed his conduct to be lawful.” Poe v. Haydon,
It is obvious at this stage that qualified immunity applies to protect the Defendants from damages because not only did they not violate a “clearly established law” — they violated no law at all. The decision of the Ohio Court of Appeals defeats Regency’s contention that the Defendants “misapplied and misinterpreted” the
IV.
We therefore REVERSE the decision of the district court and grant the Defendants qualified immunity on all claims. As the complaint only seeks damages against the Defendants in their personal capacities, all remaining claims are resolved by the qualified immunity issue, and we need not reach the second issue on appeal. Regency’s claims against the Defendants are DISMISSED.
Notes
. Count II alleged that the withdrawal of the CON was premature because Regency had appealed the determination about whether the relocation was a “reviewable activity,” and therefore by revoking the CON prior to that review, the Defendants perpetrated an "administrative taking” of Regency's property. Count III sought a preliminary injunction against the CON withdrawal. However, the district court dismissed Count II without prejudice, for failure to exhaust available state remedies, and that determination has not been appealed. Count III was not pursued by Regency at the district court level. Therefore, only Count I is at issue in this appeal.
. This is especially trae because the intervening law not only changed the legal standards, but also changed the Defendants’ ability to appeal. The district court's first order dealt exclusively with the first Saucier prong of qualified immunity analysis; it did not render a conclusion regarding whether the rights allegedly violated were "clearly established.” Further, the district court denied qualified immunity because it “could not determine” from the pleadings whether a violation had occurred — essentially, factual determinations would need to be made. As a "question of fact” was the basis for the district court’s decision, this Court would not have jurisdiction to hear an appeal on that issue, Johnson,
. Pearson had good reason for this change. It noted that where, as here, "a constitutional decision rest[s] on an uncertain interpretation of state law,” it is of little value. Id. at 819. It also noted that the Saucier order is "uncomfortable” when "whether there was a violation may depend on a kaleidoscope of facts not yet fully developed.” Id. (internal citation omitted). And most importantly, the Court noted that "Saucier's two-step protocol 'dis-serve[s] the purpose of qualified immunity’ when it 'forces the parties to endure additional burdens of suit ... when the suit otherwise could be disposed of more readily.’ ” Id. at 818 (internal citations omitted) (alteration in original). Therefore, the Court instructed judges that they can now reach the second Saucier prong first, if it "will best facilitate the fair and efficient disposition of each case.” Id. at 821.
. A minority of cases state that a plaintiff may demonstrate a lack of rational basis either by "negativing every conceivable basis which might support” the government action or by demonstrating that the challenged government action was motivated by animus or ill-will. See Warren v. City of Athens,
. Res judicata — the preclusive effect of a judgment — encompasses two distinct doctrines: claim preclusion and issue preclusion. Taylor v. Sturgell,
. The parties have not raised issue preclusion explicitly. Nevertheless, this court "ha[sj not failed to exercise our jurisdiction to reach an issue that the parties have not briefed where it involves a ‘pure question of law that cries out for resolution.' " Hutcherson v. Lauder-dale Cnty.,
. Additionally, “for purposes of res judicata, privity between defendants is established where a plaintiff brings two lawsuits against the same public officials for acts performed in their official roles, even though the defendants are sued in their official capacities in one lawsuit and in their individual capacities in the other.” Kirkhart v. Keiper,
Concurrence Opinion
concurring in the judgment.
I believe that we have jurisdiction to hear this appeal and that the defendants in this case are entitled to qualified immunity because their actions did not violate clearly established federal law. Therefore, I concur in the judgment. Pearson v. Callahan, 555 U.S. 223,