Locke defends eye surgeon’s challenge of NC’s CON law

The John Locke Foundation is defending a New Bern eye surgeon’s ongoing challenge against North Carolina’s certificate-of-need health care restrictions. Locke filed a friend-of-the-court brief Wednesday urging trial judges to reject state government’s efforts to dismiss the case.

The case’s plaintiff, Dr. Jay Singleton, filed a separate brief also opposing the state’s motion to dismiss his suit.

Meanwhile, the North Carolina Department of Health and Human Services filed a competing brief arguing against Singleton’s motion for summary judgment in the case. A group of hospital systems and health organizations supports DHHS.

A three-judge panel is scheduled to hear arguments in the case on Nov. 18 in Raleigh.

“The John Locke Foundation has opposed North Carolina’s Certificate of Need (CON) law for many years, not only because it violates fundamental rights protected by the North Carolina Constitution, but also because it directly harms patients and taxpayers by making health care more expensive and less accessible,” wrote Jon Guze, Locke’s senior fellow in legal studies, in Wednesday’s brief.

“The research we will present concerns, among other things, the origin, meaning, and application of the relevant constitutional provisions, as well as the deleterious effects of the CON law on the economy and public health,” Guze added.

“In their brief, Defendants argue that this case should be dismissed because ‘a careful review of the facts and well-settled case law shows Plaintiffs’ claims are without merit,’” Guze explained. “This court should reject that argument for three reasons. First, it addresses a question that is not before the court at this stage in the proceedings and fails to address the one that is, namely, whether Plaintiffs have stated a claim upon which relief may be granted.”

“Second, it fails to do what it claims to do, i.e., it fails to show that Plaintiffs’ claims are without merit,” the Locke brief continued. “Finally and above all, it proves too much. If this case can be dismissed on the basis of Defendants’ own review of its own selection the facts and case law, judicial review is effectively gone, and so are the separation of powers and the right to a fair trial.”

Guze challenges the state’s argument that a 15-year-old decision in a case known as Hope calls for the Singleton case to be thrown out.

“Also requiring judicial notice and consideration is an abundance of new evidence showing the deleterious economic and public health effects of CON laws, much of which has only become available since the Hope decision in 2010,” he wrote. “These studies thoroughly rebut the legislative findings that the Court of Appeals relied on in Hope and make a mockery of the suggestion that the CON law is rationally related to a legitimate public purpose. Indeed, they show beyond a reasonable doubt that the CON law not only makes medical care more expensive and less accessible for North Carolinians, but it also puts North Carolinians’ health in jeopardy and has almost certainly cost many North Carolinians their lives.”

Singleton’s latest legal brief also challenged the state’s dismissal motion.

“Unlike a professional or facility license, a CON does not regulate health or safety,” Singleton’s lawyers wrote. “Instead, whether a provider can obtain a CON turns entirely on whether a state agency projects a ‘need’ for more services — a decision that depends, at root, on whether there are already providers serving that region.”

“Put differently: Whether a new provider can enter the market depends on whether old providers got there first,” the brief continued. “Plaintiff Dr. Singleton is a case in point. He wants to perform surgeries in his own operating room at far better prices than those offered at the only other nearby option: CarolinaEast hospital. But the CON law bans Dr. Singleton from doing that — precisely because CarolinaEast got there first and the state has never declared a ‘need’ for new services.”

The state’s motion “fails on every front,” Singleton’s lawyers argued.

Singleton argues that the state’s CON requirements violate his state constitutional rights by limiting his ability to perform most eye surgeries at his New Bern vision center. DHHS defends the CON law against Singleton’s complaint. The case involves a “facial” constitutional challenge.

“First, in order to successfully mount a facial challenge, Plaintiffs must prove that the CON Law is unconstitutional in all of its applications,” DHHS’ lawyers wrote. “If the law is found to be constitutional in any instance, then Plaintiffs claims fail. Second, it is within the General Assembly’s province alone to determine the policy of the State and the courts have determined that enactment of the CON Law falls squarely within the General Assembly’s ordinary police powers to regulate public health. Finally, Defendants will show that Plaintiffs’ claims are erroneous and it is Defendants – and not Plaintiffs – who are entitled to judgment as a matter of law.”

Atrium Health, Cape Fear Valley Health System, the North Carolina Healthcare Association, the North Carolina Health Care Facilities Association, the Association for Home and Hospice Care of North Carolina, the North Carolina Senior Living Association, and Bio-Medical Applications of North Carolina filed a joint brief supporting state regulators.

“The Legislature found that the CON Law is necessary to improve healthcare quality and access while decreasing costs,” lawyers representing the health care groups wrote. “Plaintiffs seek to have the entire CON Law declared unconstitutional based on unsupported (and very as-applied) assumptions that they could not obtain a CON for a single service — an ambulatory surgical facility — in a single county — Craven. Plaintiffs do not even attempt to address the numerous other CON-regulated services and 99 other counties in their ‘facial’ constitutional challenge. Their arguments fail as a matter of law.”

A unanimous state Supreme Court ruled in October 2024 that Singleton could move forward with his lawsuit. That decision reversed lower courts that had ruled against Singleton.

“Art. I, §§ 32 and 34 of the North Carolina Constitution forbid ‘exclusive privileges’ and ‘monopolies,’” Singleton’s lawyers wrote. “This motion presents a pure legal question: Does the CON law grant these forbidden things? The law’s predecessor did, and that’s why it was struck down [in 1973]. Today’s CON law works the same way and it thus deserves the same fate. In the end, whatever one thinks of the CON law as a policy matter, there are simply some lines the legislature can’t cross.”

“The CON law crosses lines drawn by the plain text of Art. I, §§ 32 and 34. Both provisions forbid the state from granting exclusive rights to provide private services,” the court filing continued.

“Courts have a duty to eliminate threats to state constitutional rights,” Singleton’s lawyers added. “There is only one way to eliminate the threat here: Declare the CON law facially unconstitutional and enjoin its enforcement.”

North Carolina is one of 35 states with a CON law, responded lawyers from the NC Department of Justice. They represent DHHS, which oversees the CON program.

“Contrary to Plaintiffs’ claims that the CON Law is a relic of the past that has no relevance today, the General Assembly has consistently revisited the law’s provisions and has routinely amended the law since its enactment,” according to the state’s brief.

State courts upheld the current CON law as constitutional in a 2010 case, Hope—A Women’s Cancer Center v State. “Here, Plaintiffs repeat the same arguments that Hope rejected, but Plaintiffs confront an even higher bar by alleging the CON Law is unconstitutional on its face,” DHHS’ lawyers wrote. “In Hope, the North Carolina Court of Appeals held that the CON Law rests squarely within the ordinary police powers of the General Assembly. The Court upheld the constitutionality of the law, explaining how it furthers the government’s interest in protecting public health.”

“Couched in speculative assumptions, all of Plaintiffs’ claims challenge the CON Law as a matter of policy,” the brief continued. “Because Hope still controls, and because Plaintiffs have not shown that the CON Law is facially unconstitutional in any event, Plaintiffs’ claims fail as a matter of law and should be dismissed.”

Atrium Health, Cape Fear Valley Health System, North Carolina Healthcare Association, North Carolina Health Care Facilities Association, Association for Home and Hospice Care of North Carolina, North Carolina Senior Living Association, and Bio-Medical Applications of North Carolina Inc. all backed a friend-of-the-court brief supporting the CON law.

“The General Assembly found that the CON Law is necessary to improve health care quality and access while decreasing costs,” the health care providers’ lawyers wrote. “Plaintiffs seek to have the entire CON Law declared unconstitutional based on speculative and unsupported assumptions that they could not obtain a CON for an ambulatory surgical facility in Craven County.”

“Plaintiffs’ claims are doomed,” the brief continued. “Binding precedent has already upheld the CON law’s constitutionality. … The CON law serves a legitimate government interest and is consistent with the North Carolina Constitution.”

Judges Jeffery Foster of Pitt County, Jacqueline Grant of Buncombe County, and Troy Stafford of Iredell County will hear oral arguments in Singleton’s case this month. Foster and Stafford are Republicans. Grant is a Democrat. Supreme Court Chief Justice Paul Newby, a Republican, appointed the panel.

Singleton filed a motion on Aug. 25 for partial summary judgment in the case. The court filing reserved Singleton’s right to argue at a future date that the CON law is unconstitutional “as applied” to the particular facts of his case. An as-applied challenge would proceed before a single trial judge.

The state Supreme Court’s October 2024 decision revived Singleton’s complaint that state government violates his constitutional rights by blocking him from performing most eye surgeries at his own facility.

In an unsigned unanimous four-page opinion, the court directed the case back to a trial court.

At the trial level, justices said the court must take into account two recent unanimous state Supreme Court decisions. One dealt with claims that Kinston engaged in racial discrimination when choosing which city properties to condemn. The other involved Ace Speedway’s claim that state officials violated the Alamance County racetrack owners’ rights when targeting the track for a shutdown during the COVID-19 pandemic.

Health care providers must secure a CON from state government before building or expanding facilities or purchasing more expensive medical equipment.

Singleton argues that North Carolina’s CON regime forces him to direct his patients to a nearby hospital, CarolinaEast, for most surgeries. The hospital holds the region’s only CON. Singleton says that arrangement proves more expensive and less convenient for patients.

“Plaintiffs brought claims alleging that the Certificate of Need law violates their rights under the Monopolies Clause, Exclusive Emoluments Clause, and Law of the Land Clause of the North Carolina Constitution,” according to the state Supreme Court opinion. “Plaintiffs described their constitutional claims as ‘as-applied’ challenges in the complaint. Both the trial court and the Court of Appeals accepted plaintiffs’ characterization of these claims and evaluated the claims as as-applied challenges.”

“[W]e conclude that plaintiffs’ complaint asserts both facial and as-applied challenges,” Supreme Court justices wrote.

A facial constitutional challenge targets a law in its entirety. The plaintiff asserts that there is no circumstance in which a court could uphold the law as constitutional. An as-applied challenge asserts only that the targeted law is unconstitutional when considering the facts of a particular plaintiff’s complaint.

“Here, plaintiffs’ complaint alleges facts that could undermine the Certificate of Need law’s constitutionality far beyond the particular circumstances of these plaintiffs,” according to the Supreme Court opinion. “Indeed, in their supplemental briefing, plaintiffs acknowledge that, should they prevail, the ‘need for relief that extends beyond [plaintiffs] will likely arise here’ and ‘will likely entail facial relief.’”

“We agree. The complaint contains allegations that, if proven, could render the Certificate of Need law unconstitutional in all its applications,” Supreme Court justices wrote.

Labeling the case both a facial and as-applied challenge is a “crucial determination,” justices wrote. State law requires facial challenges to go before a three-judge Superior Court panel. Singleton had argued his case initially before a single trial judge.

“Because the trial court and the Court of Appeals mistakenly treated plaintiffs’ claims exclusively as as-applied challenges, we vacate the decision of the Court of Appeals and remand this matter to the Court of Appeals with instructions to vacate the trial court’s judgment and remand for further proceedings,” Supreme Court justices ordered.

“Because we vacate the decision of the Court of Appeals on this basis, we need not address plaintiffs’ challenges to that decision asserted in the briefing before this Court,” Supreme Court justices added. “However, for the benefit of the trial court on remand, we disavow the Court of Appeals’ jurisdictional analysis concerning the exhaustion of administrative remedies and direct the trial court to this Court’s recent decisions in Askew v. City of Kinston … and Kinsley v. Ace Speedway Racing, Ltd.”

Singleton cited the Ace Speedway ruling in a September 2024 filing with the state Supreme Court. His lawyers wrote that the Ace Speedway ruling served as an “additional authority” supporting the surgeon’s legal arguments.

“The court’s decision in Kinsley reaffirms that in North Carolina, economic liberty matters,” Joshua Windham of the Institute for Justice told CJ Windham helps represent Singleton. “The court held that when the state restricts our right to earn a living, we can use evidence, under the fruits of their labor clause, to show the restriction is not ‘reasonably necessary’ to protect the public. That’s exactly the same test the court applied in 1973 when it struck down the state’s first certificate of need law under the law of the land clause.”

“Why does that matter? It means that courts can’t dismiss challenges to economic laws just because government lawyers utter the words ‘public health,’” Windham said. “It means that the state’s supposed reasons for destroying your business aren’t gospel; you can challenge them with facts and show that — in the real world — the law isn’t meaningfully serving the public.”

The John Locke Foundation, which oversees Carolina Journal, supports Singleton’s legal fight against state CON regulations. Locke and constitutional law scholar John Orth filed a joint friend-of-the court brief in the case in November 2023.