ANAYSIS OF MAY 19, 2022 SUPREME COURT OPINIONS
(Posted May 19, 2022) The Supreme Court of Virginia issues two published opinions this morning. Both cases come to us from the March session’s argument docket.
An interesting procedural issue is at the heart of LaRock v. City of Norfolk. This is an employee grievance after the City terminated an employee. A grievance panel reversed the firing and ordered the employee reinstated with back pay.
Three days before the panel issued its decision, the City learned that, after the termination date, the former employee had accessed confidential computer files in a City system, using her employee ID. The City Manager decided that this new information would be enough to impose serious discipline, including termination, so he refused to reinstate her.
Can he do that? The employee decided to ask the local circuit court. She petitioned the court to compel her reinstatement. At a hearing there, she acknowledged the computer access, but argued that this information was immaterial to the grievance process. She urged the court to reinstate her and allow a future grievance panel to address the later conduct, if necessary.
The circuit judge was having none of it. The court refused the petition, holding that the reinstatement would be against public policy, and noted that reinstatement would be improper because the City was likely to go ahead and re-fire her.
The employee got a writ, and today a divided Supreme Court sides with her. Senior Justice Millette, writing for the chief justice and Justices Powell and McCullough, concludes that this judicial action short-circuited the employee’s right to a second grievance process. In such cases, the Code charges courts to implement the grievance panel’s decision; not second-guess it. The court accordingly orders reinstatement with back pay to the original firing date, now 3½ years in the rear-view mirror.
Two justices can’t stomach this relief. Justice Kelsey, writing on behalf of Justice Chafin, argues that these circumstances show that the employee sought equitable judicial relief despite her patently having unclean hands. The dissenters perceive that circuit courts in these proceedings have the power and duty to observe principles like this, just as in other legal contexts. They conclude that the circuit court was right in refusing to order relief that runs counter to equity.
This is one appeal in which only six justices participated. If the vote had been 3-3 instead of 4-2, the circuit court’s ruling would have been affirmed without an opinion.
The court takes up the question of harmless-error analysis in Chesapeake Hospital Authority v. State Health Comm’r, involving a certificate of public need for a new open-heart surgery and cardiac-catheterization unit in Virginia’s second most populous city.
The Authority operates what’s now called Chesapeake Regional Medical Center. That hospital is about 800 yards through the forest from the house where I grew up; I can recall selling tee-shirts back around 1970 to help raise money to build it. The facility has grown enormously since then, and it contains many state-of-the-art units and new buildings.
What it doesn’t have is an open-heart cath and surgery unit. People in that city, and in northeastern North Carolina (also part of the hospital’s service area), who need the procedure must travel past the Chesapeake hospital to get to other, more distant facilities in Norfolk or Virginia Beach. As I understand it, the Chesapeake facility is the largest holdout in Tidewater from the Sentara near-monopoly on hospital care. (Riverside has facilities across the James, but being an old-time Tidewater resident, I call that the Peninsula.)
To build the new unit, the Authority had to seek and obtain a certificate of public need from the State Health Commissioner. You can’t just build healthcare facilities like this, despite what you might think about the free-enterprise system; state law protects existing providers from the competition because of the enormous startup costs involved in hospital construction and operation.
When the Authority applied for the certificate, a hearing officer initially indicated that it should be granted. But Sentara got wind of that and obtained leave to intervene as an interested party. After receiving Sentara’s input and arguments, the officer recommended denial of the certificate. The Commissioner agreed and refused to issue one.
The Authority went to circuit court and pointed out that the Commissioner’s report included a legal error that it felt significantly affected the legal analysis. The court agreed that this was a mistake by the Commissioner, but ruled that the error was harmless, so it affirmed the no-certificate decision. The Court of Appeals agreed.
Today, in the final step of legal review, the Authority finally finds succor. The Supreme Court today unanimously reverses and remands to the Commissioner for reconsideration of the application. The key holding is one that will interest admin-law practitioners and those of us in the appellate guild.
By statute, a court reviewing an administrative agency’s case decision must abide by these principles:
The burden shall be upon the party complaining of agency action to designate and demonstrate an error of law subject to review by the court. Such issues of law include: (i) accordance with constitutional right, power, privilege, or immunity, (ii) compliance with statutory authority, jurisdiction limitations, or right as provided in the basic laws as to subject matter, the stated objectives for which regulations may be made, and the factual showing respecting violations or entitlement in connection with case decisions, (iii) observance of required procedure where any failure therein is not mere harmless error, and (iv) the substantiality of the evidentiary support for findings of fact.
I’ve italicized the key provision there. The Authority argued that the general statutory requirement for harmless-error analysis doesn’t apply in admin-law proceedings, because this more specific provision limits that doctrine to “observance of required procedure,” not errors of substance. The justices agree and hold that the courts must reverse in the event of a substantial error.
One justice offers an aside, in the form of a short concurrence. Justice McCullough notes that this is indeed the statutory framework, and the courts aren’t free to override the process that the General Assembly established. He senses, though, that perhaps the legislature should modify the statute to provide for the broader harmless-error review that Code §8.01-678 otherwise requires. He observes that Virginia is apparently alone in requiring remand for all but procedural errors.
The legislature may or may not accept this invitation. But for these parties, it’s back to the administrative hearing stage. In the meantime, the legal landscape has improved somewhat for the Authority, as a recent change to the COPN statute makes it somewhat easier for an applicant in this position. The people in Chesapeake will now get a new chance to persuade the Commissioner that they aren’t second-class patients.