Amisub of South Carolina, Inc., d/b/a Piedmont Medical Center, d/b/a Fort Mill Medical Center, Respondent,
South Carolina Department of Health and Environmental Control and The Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Medical Center-Fort Mill, Respondents, Of whom The Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Medical Center-Fort Mill, is the Appellant. Appellate Case No. 2015-000056
REMAND FROM THE SUPREME COURT
Submitted May 14, 2018
From The Administrative Law Court S. Phillip Lenski,
Administrative Law Judge.
Douglas M. Muller, Trudy Hartzog Robertson, and E. Brandon
Gaskins, of Moore & Van Allen PLLC, of Charleston, for
M. Andrews, Jr. and Daniel J. Westbrook, of Nelson Mullins
Riley & Scarborough LLP, of Columbia, for Respondent
Amisub of South Carolina.
Caroline Biggers and Vito Michael Wicevic, of Columbia, for
Respondent South Carolina Department of Health and
Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas
Medical Center-Fort Mill (Carolinas), challenges a decision
of the South Carolina Administrative Law Court (ALC) ordering
Respondent South Carolina Department of Health and
Environmental Control (DHEC) to issue a Certificate of Need
(CON) to Respondent Amisub of South Carolina, Inc., d/b/a
Piedmont Medical Center, d/b/a Fort Mill Medical Center
(Piedmont). Carolinas argues the purpose and effect of the
ALC's application of the CON Act, the Project Review
Criteria, and the 2004-2005 State Health Plan is to protect
Piedmont from out-of-state competition, and, therefore, such
an application violates the Dormant Commerce
Clause. We affirm.
Medical Center in Rock Hill is the sole hospital in York
County. It provides standard community hospital services as
well as specialized services such as open heart surgery,
neurosurgery, neonatal intensive care, and behavioral health.
Amisub of South Carolina, Inc., which is a subsidiary of
Tenet Healthcare Corporation, operates Piedmont Medical
Center. Tenet Healthcare Corporation is headquartered in
Dallas, Texas, and owns forty-nine hospitals in ten states.
which is headquartered in Charlotte, North Carolina, owns
multiple hospitals in North Carolina with a large network of
employed physicians, the Carolinas Physician Network (CPN),
many of whom have practices in York County. As of the date of
the final contested case hearing, Carolinas employed between
seventy and ninety York County physicians. Additionally,
Carolinas owns and operates Roper Hospital in downtown
2005, Piedmont, Carolinas, Presbyterian Healthcare System
(Presbyterian), and Hospital Partners of America, Inc.
submitted applications to DHEC for a CON to build a
sixty-four-bed hospital near Fort Mill based on the 2004-2005
State Health Plan's identification of a need for
sixty-four additional acute care hospital beds in York
County. Subsequently, Piedmont withdrew its application and
submitted a new application for a one-hundred-bed hospital,
which would include thirty-six beds transferred from
Piedmont's Rock Hill facility to its proposed Fort Mill
facility. In 2006, DHEC approved Piedmont's new
application and denied the other three applications.
Carolinas and Presbyterian filed separate requests for a
contested case hearing before the ALC, which took place in
concluded DHEC misinterpreted the 2004-2005 State Health Plan
to allow only existing providers to obtain a CON. The ALC
remanded the case to DHEC for a determination of which
applicant most fully complied with the CON Act, the State
Health Plan, Project Review Criteria,  and applicable
DHEC regulations. By October 2010,  the three remaining
applicants submitted to DHEC additional information to
supplement their respective applications.
September 2011, DHEC granted Carolinas' application and
denied the applications of Piedmont and Presbyterian.
Piedmont and Presbyterian submitted their respective requests
for a contested case hearing before the ALC, and the ALC
consolidated the cases. Presbyterian later withdrew its
request, and the ALC dismissed Presbyterian as a party. The
ALC ultimately ordered DHEC to award the CON to Piedmont.
Carolinas filed a motion for reconsideration pursuant to Rule
59(e), SCRCP, and the ALC issued an Amended Final Order
denying the motion. This appeal followed.
Administrative Procedures Act governs the standard of review
on appeal from a decision of the ALC, allowing this court to
reverse or modify the decision if substantial rights of the
appellant have been prejudiced because the administrative
findings, inferences, conclusions, or decisions are: (a) in
violation of constitutional or statutory provisions; (b) in
excess of the statutory authority of the agency; (c) made
upon unlawful procedure; (d) affected by other error of law;
(e) clearly erroneous in view of the reliable, probative, and
substantial evidence on the whole record; or (f) arbitrary or
capricious or characterized by abuse of discretion or clearly
unwarranted exercise of discretion.
S.C. Code Ann. § 1-23-380(5) (Supp. 2017).
does not challenge the constitutionality of the CON Act
itself. Further, Carolinas does not challenge the
constitutionality of the 2004-2005 State Health Plan or the
Project Review Criteria. Rather, Carolinas argues the purpose
and effect of the ALC's application of the CON Act, the
2004-2005 State Health Plan, and the Project Review Criteria
is to protect Piedmont from out-of-state competition, and,
therefore, such an application violates the Dormant Commerce
Clause. Carolinas essentially challenges the ALC's
conclusions of law concerning adverse impact and
record,  we hold the ALC properly applied the
provisions of the CON Act, the 2004-2005 State Health Plan,
and the Project Review Criteria in considering the needs of
residents in all areas of York County and,
therefore, did not violate the Dormant Commerce Clause. The
ALC placed appropriate significance on adverse impact, as
required by the Project Review Criteria, and outmigration, as
we explain herein.
address each criterion Carolinas references in turn. But
first, we will provide a primer on the general principles
surrounding the Dormant Commerce Clause and the general
provisions of South Carolina's CON law.
Commerce Clause of the United States Constitution, U.S.
Const. art. I, § 8, cl. 3, grants Congress the power to
regulate commerce among the several states. "However,
'the Commerce Clause is more than an affirmative grant of
power; it has a negative sweep as well.'"
Travelscape, LLC v. S.C. Dep't of Revenue, 391
S.C. 89, 103-04, 705 S.E.2d 28, 36 (2011) (quoting Quill
Corp. v. North Dakota, 504 U.S. 298, 309 (1992)).
"Even in the absence of Congressional regulation, the
negative implications of the Commerce Clause, often referred
to as the Dormant Commerce Clause, prohibit state action that
unduly burdens interstate commerce." Id. at
104, 705 S.E.2d at 36 (citing Gen. Motors Corp. v.
Tracy, 519 U.S. 278, 287 (1997)). "The 'common
thread' among those cases in which the [United States
Supreme] Court has found a [D]ormant Commerce Clause
violation is that 'the State interfered with the natural
functioning of the interstate market either through
prohibition or through burdensome regulation.'"
McBurney v. Young, 569 U.S. 221, 235 (2013) (quoting
Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 806
(1976)). Nonetheless, the Commerce Clause
does not elevate free trade above all other values. As long
as a State does not needlessly obstruct interstate
trade or attempt to "place itself in a position of
economic isolation, " it retains broad regulatory
authority to protect the health and safety of its citizens
and the integrity of its natural resources.
Maine v. Taylor, 477 U.S. 131, 151 (1986) (emphasis
added) (citation omitted) (quoting Baldwin v. G.A.F.
Seelig, Inc., 294 U.S. 511, 527 (1935)).
We apply a two-tiered analysis to state actions allegedly
violating the [D]ormant Commerce Clause. The first tier,
"a virtually per se rule of invalidity, "
applies [when] a state law discriminates facially, in its
practical effect, or in its purpose. Wyoming v.
Oklahoma, 502 U.S. 437, 454- 55 . . . (1992) (quoting
Philadelphia [v. New Jersey], 437 U.S.
[617, ] 624 [(1978)]). In order for a law to survive such
scrutiny, the state must prove that the discriminatory law
"is demonstrably justified by a valid factor unrelated
to economic protectionism, " New Energy Co. of Ind.
v. Limbach, 486 U.S. 269, 274 . . . (1988), and that
there are no "nondiscriminatory alternatives adequate to
preserve the local interests at stake, " [Chem.
Waste Mgmt., Inc. v. Hunt, 504 U.S. 334, 342 (1992)]
(quoting Hunt v. Washington State Apple Advertising
Comm'n, 432 U.S. 333, 353 . . . (1977)). . . .
The second tier applies if a statute regulates evenhandedly
and only indirectly affects interstate commerce. In that
case, the law is valid unless the burdens on commerce are
"clearly excessive in relation to the putative local
benefits." Pike v. Bruce Church, Inc., 397 U.S.
137, 142 . . . (1970).
Envtl. Tech. Council v. Sierra Club, 98 F.3d 774,
785 (4th Cir. 1996).
first tier of analysis is also referred to as "strict
scrutiny analysis[.]" Colon Health Ctrs. of Am., LLC
v. Hazel, 733 F.3d 535, 543 (4th Cir. 2013) (quoting
Waste Mgmt. Holdings, Inc. v. Gilmore, 252 F.3d 316,
334 (4th Cir. 2001)). "[A] 'less strict
scrutiny' applies under the undue burden tier."
Id. at 545 (quoting Yamaha Motor Corp. v.
Jim's Motorcycle, Inc., 401 F.3d 560, 567 (4th Cir.
2005)). "The putative benefits of a challenged law are
evaluated under the rational basis test, . . . though
'speculative' benefits will not pass muster[.]"
Id. (quoting Medigen of Ky., Inc. v. Pub. Serv.
Comm'n, 985 F.2d 164, 167 (4th Cir. 1993)).
state or local law discriminates by restricting market
participation or curtailing the movement of articles of
interstate commerce based on whether a market participant or
article of commerce is in-state versus out-of-state, or local
versus non-local." Florida Transp. Servs., Inc. v.
Miami-Dade Cty., 703 F.3d 1230, 1244 (11th Cir. 2012).
Further, "[i]n conducting the discrimination inquiry, a
court should focus on discrimination against interstate
commerce-not merely discrimination against the specific
parties before it." Colon Health, 733 F.3d at
Focusing exclusively on discrimination against individual
firms . . . improperly narrows the scope of the judicial
inquiry and has the baneful effect of precluding certain
meritorious claims. For while the burden on a single firm may
have but a negligible impact on interstate commerce, the
effect of the law as a whole and in the aggregate may be
event, "[t]he Supreme Court has consistently held that a
state's power to regulate commerce is at its zenith in
areas traditionally of local concern." Kleenwell
Biohazard Waste & Gen. Ecology Consultants, Inc. v.
Nelson, 48 F.3d 391, 398 (9th Cir. 1995) (citing
Hunt, 432 U.S. at 350). "In addition,
regulations that touch on safety are those that the Court has
been most reluctant to invalidate." Id. (citing
Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429,
443 (1978)). While "a bald assertion that laws are
directed toward legitimate health and safety concerns is not
enough to withstand a [D]ormant Commerce Clause challenge, .
. . [courts] must give some deference to states'
decisions regarding health and safety." Nat'l
Ass'n of Optometrists & Opticians LensCrafters, Inc.
v. Brown, 567 F.3d 521, 526 (9th Cir. 2009) (citing
Gen. Motors Corp., 519 U.S. at 307). In fact, those
asserting a Dormant Commerce Clause violation
"'bear[ ] the burden of proving that the burdens
placed on interstate commerce outweigh' [a law's]
local benefits." Colon Health, 813 F.3d 145,
157 (4th Cir. 2016) (quoting LensCrafters, Inc. v.
Robinson, 403 F.3d 798, 805 (6th Cir. 2005)).