John Locke Update / Research Brief

More Twists and Turns in the CON Law Case

posted on in Health Care, Health Care & Human Services, Law & Regulation, Legal Update
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Forsyth County surgeon Dr. Gajendra Singh discussed his lawsuit at a news conference held in July 2018. He was joined by two attorneys who are assisting with the case.

As regular readers probably know, in July of 2018, a Winston-Salem surgeon named Gajendra Singh filed a lawsuit challenging the constitutionality of North Carolina’s Certificate of Need (CON) law. In October of that year, the State of North Carolina filed a motion to dismiss the suit, and in 2019 the John Locke Foundation filed an amicus brief in support of Dr. Singh and in opposition to the State’s motion. As we explained in our brief, we decided to intervene in the case, not just because the CON law violates the constitutional rights of North Carolinians like Dr. Singh, but also because the law directly harms patients and taxpayers by making health care more expensive and less accessible

Just before Thanksgiving, Wake County Superior Court Judge Gregory P. McGuire issued an initial decision on the state’s motion. At the time, I regarded it as a good decision, and, indeed, I included it among the many things I gave thanks for on November 28th. It turned out, however, that I was wrong. I had assumed that Judge McGuire’s decision would clear the way for Dr. Singh’s complaint to move forward to a trial on the merits. Because of a new and poorly understood rule of civil procedure, Rule 42(b)(4), the decision actually opened the door for another round of pretrial motions practice that further delayed the case.

In today’s Update, I’ll review how that happened, discuss the latest developments, and speculate about what will happen next.

As noted above, Singh v. DHHS began like any other piece of civil litigation. Dr. Singh filed a complaint in Superior Court, alleging that the certificate of need (CON) law violates the state constitution. As with most constitutional challenges, Dr. Singh’s complaint claims that the CON law is unconstitutional, both as it applies to his own circumstances, and also on its face. The latter is important because, unlike a successful as-applied challenge, a successful facial challenge has the effect of striking down the law altogether.

The State of North Carolina responded by filing a motion to dismiss. According to the motion, under Rule 12(b)(1) of the North Carolina Rules of Civil Procedure, Dr. Sing lacked standing to bring the lawsuit, and, under Rule 12(b)(6), Dr. Singh failed to state a claim for which relief may be granted. (For more information about the State’s motion to dismiss, see Note 1 below.)

In the absence of 42(b)(4), the case would have continued like any other piece of civil litigation at that point. The Superior Court judge who initially heard the case, Gregory McGuire, would have ruled on the State’s motion to dismiss in its entirety, i.e., for both the 12(b)(1) and the 12(b)(6) elements of the State’s motion as they applied to both Dr. Singh’s as-applied and facial challenges. If he had denied both parts of the State’s motion as they applied to both parts of Dr. Singh’s complaint, the case would have gone to trial. If he had granted either part of the State’s motion with regard to either part of Dr. Singh’s complaint, Dr. Singh would have appealed. Eventually, the case would have made its way through the courts until one side gave up or the North Carolina Supreme Court decided the issue once and for all.

That didn’t happen, however, because the first part of Rule 42(b)(4) states that facial challenges “shall be heard by a three-judge panel in the Superior Court of Wake County.” In spite of that part of the rule, the as-applied part of the case could have proceeded as described above. If it had, then, assuming the facial part of Dr. Singh’s complaint remained unresolved, there would have been an entirely new proceeding before a three-judge panel of Superior Court Judges to resolve that part of the case. That proceeding would have made its way through the courts until it was resolved.

That procedural bifurcation would have caused the case to take longer and cost more, but at least both parts would have proceeded in an orderly fashion. That didn’t happen, however, because Judge McGuire interpreted and applied the second part of Rule 42(b)(4) in a way that diverted the case down a procedural rabbit hole. The second part of 42(b)(4) includes this provision:

The court in which the action originated shall maintain jurisdiction over all matters other than the challenge to the act’s facial validity. For a motion filed under Rule 11 or Rule 12(b)(1) through (7), the original court shall rule on the motion, however, it may decline to rule on a motion that is based solely upon Rule 12(b)(6).

Judge McGuire clearly had this provision in mind when he initially ruled on the State’s motion to dismiss in October. He handled the State’s 12(b)(1) claim exactly as we would have wished, i.e., he denied that part of the State’s motion. Regarding the other part of the State’s motion, however, Judge McGuire elected to dodge the issue by saying, “Pursuant to Rule 42(b)(4), the Court, in its discretion, DECLINES to rule on the Motion to Dismiss under Rule 12(b)(6).”

Now it’s far from clear that judges may decline to rule on a 12(b)(6) motion when, as in Dr. Singh’s case, the motion pertains, not just to a facial challenge, but to an as-applied challenge as well. The quoted passage itself is internally inconsistent on the question. On the one hand, it states that the trial court “shall maintain jurisdiction over all matters other than the challenge to the act’s facial validity.” (Emphasis added.) On the other, it says the trial court “may decline to rule on a motion based solely on 12(b)(6).” (Emphasis added.) But what happens if there’s a 12(b)(6) motion to dismiss an as-applied constitutional challenge? A court can’t maintain jurisdiction over that motion while simultaneously declining to rule on it. Moreover, even if a judge could, somehow, do both, it wouldn’t follow that that Judge McGuire was right to think he could decline to rule on the State’s 12(b)(6) claim in this particular case because the State’s motion to dismiss wasn’t “based solely on Rule 12(b)(6).” It was based on Rule 12(b)(1) as well.

None of these concerns stopped the State from attempting to use Judge McGuire’s ruling to send the case off the rails. On December 10, 2019, it filed a motion to stay in which it cited the rest of the second part of 42(b)(4) which states:

If the original court declines to rule on a Rule 12(b)(6) motion, the motion shall be decided by the three-judge panel. The original court shall stay all matters that are contingent upon the outcome of the challenge to the act’s facial validity pending a ruling on that challenge and until all appeal rights are exhausted. Once the three-judge panel has ruled and all appeal rights have been exhausted, the matter shall be transferred or remanded to the three-judge panel or the trial court in which the action originated for resolution of any outstanding matters, as appropriate.

This actually seems pretty clear. If Judge McGuire’s original decision not to rule on the State’s 12(b)(6) claim had been permitted to stand, he would probably have had to grant the motion to stay, which would have put the case in limbo. Fortunately, however, after listening to the arguments presented by both sides, Judge McGuire decided to reconsider his previous decision. While he did not attempt to determine whether he was obliged to do so under 42(b)(4), he took the unusual step of setting aside his previous order and handed down a ruling on the State’s 12(b)(6) claim as it pertains to Dr. Singh’s as-applied constitutional challenge.

The fact that Judge McGuire reconsidered his previous decision and handed down a ruling about the as-applied element of the State’s 12(b)(6) claim is good news in itself because it means the case won’t be placed on hold for months or years while a three-judge panel is convened to rule on the 12(b)(6) claim before sending the case back to the trial court. It would have been even better news if, having decided to rule on that part of the State’s motion, Judge McGuire, had denied the motion, but, unfortunately, that’s not what he did. Instead, he granted that part of the motion in its entirety.
Given the weakness of the State’s argument in support of its motion to dismiss and given the strength of the arguments that the other interested parties and we raised in opposition to the motion, Judge McGuire’s decision to grant the motion seems inexplicable to me. Nevertheless, compared to what the State had requested, it’s not a terrible outcome.

Dr. Singh can now appeal McGuire’s decision, and I’m sure he will. This means we’re now in the position I described above, i.e., Dr. Singh’s as-applied constitutional challenge can work its way through the courts in an orderly fashion until it is resolved. And, if, “after all other matters in the action have been resolved, a determination as to the [CON law’s] facial validity … must be made in order to completely resolve any matters in the case”— which is what I would expect—then the case will, at that point, be referred to a three-judge panel and the second part of the process specified by 42(b)(4) can begin.


Note 1: The State’s brief in support of the motion to dismiss, which was filed in 2019, is a bit of a mess, but the argument for the part of the motion that is based on 12(b)(1) appears to be that Dr. Singh lacked standing because he failed to apply for a CON when one became available in 2019 (a year after he filed his complaint). The argument for the part that is based on 12(b)(6) appears to be that all four of Dr. Singh’s constitutional claims are invalid under precedents established in previous cases. See our amicus brief for a summary of why those arguments are specious!

Note 2: Rule 42(b)(4) of the North Carolina Rules of Civil Procedure consists of two parts:

[A]ny facial challenge to the validity of an act of the General Assembly, other than a challenge to plans apportioning or redistricting State legislative or congressional districts, shall be heard by a three-judge panel in the Superior Court of Wake County if a claimant raises such a challenge in the claimant’s complaint or amended complaint in any court in this State, or if such a challenge is raised by the defendant in the defendant’s answer, responsive pleading, or within 30 days of filing the defendant’s answer or responsive pleading. In that event, the court shall, on its own motion, transfer that portion of the action challenging the validity of the act of the General Assembly to the Superior Court of Wake County for resolution by a three-judge panel if, after all other matters in the action have been resolved, a determination as to the facial validity of an act of the General Assembly must be made in order to completely resolve any matters in the case.

The court in which the action originated shall maintain jurisdiction over all matters other than the challenge to the act’s facial validity. For a motion filed under Rule 11 or Rule 12(b)(1) through (7), the original court shall rule on the motion, however, it may decline to rule on a motion that is based solely upon Rule 12(b)(6). If the original court declines to rule on a Rule 12(b)(6) motion, the motion shall be decided by the three-judge panel. The original court shall stay all matters that are contingent upon the outcome of the challenge to the act’s facial validity pending a ruling on that challenge and until all appeal rights are exhausted. Once the three-judge panel has ruled and all appeal rights have been exhausted, the matter shall be transferred or remanded to the three-judge panel or the trial court in which the action originated for resolution of any outstanding matters, as appropriate.

The ostensible purpose of the first part of Rule 42(b)(4) is to prevent “rogue” judges from overturning perfectly good statutes for political or ideological reasons. A more cynical view is that the rule was introduced to make it harder to overturn statutes on constitutional grounds regardless of what any particular judge might be inclined to do, and, whatever the true motivation may have been, that has certainly been the effect. When a statute is challenged on constitutional grounds, it is customary to allege that the challenged statute is unconstitutional both as it applies to the plaintiff’s specific situation and on its face, i.e., in any and all situations. The latter part of the challenge is important because, unlike the as-applied part, a successful facial challenge has the effect of striking down the statute altogether. By requiring a separate process of judicial review for facial challenges, the rule has the direct effect of making constitutional challenges more time consuming and more expensive simply because it means there have to be more filings, more hearings, and more legal work of every kind.

However, those direct effects are not the only reason bifurcating the process makes it harder to overturn unconstitutional statutes. Even after five years, it’s still unclear how the new rule is supposed to work in practice, and all that uncertainty and confusion leads to yet more filings, hearings, and legal work of every kind. It’s not even clear how courts are supposed to distinguish between as-applied and facial challenges, and that lack of clarity may yet create problems in Singh v. DHHS. However, the immediate source of confusion in the case was the second part of the rule, specifically, passages that pertain to 12(b)(6) motions.

Jon Guze is Director of Legal Studies at the John Locke Foundation. Before joining the John Locke Foundation, Jon practiced law in Durham, North Carolina for over 20 years. He received a J.D., with honors, from Duke Law School in… ...

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