Case Title: Grace at Twin Falls, LLC v. Jeppesen

Citation: 

Docket Number: 49067

State: idaho

Court: Idaho Supreme Court (civil)

Date: 2022-11-03T00:00:00Z

Document:
1 
 
IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket No. 49067 
 
GRACE AT TWIN FALLS, LLC, an   
 
) 
Idaho limited liability company, 
  
 
) 
 
 
 
 
 
 
 
) 
 
     
 
  
Petitioner-Appellant, 
)  
 
 
 
 
 
 
 
 
) 
Boise, August 2022 Term 
v. 
 
 
 
 
 
 
) 
 
 
 
 
 
 
 
) 
Opinion Filed: November 3, 2022 
DAVE JEPPESEN, in his official capacity 
 
) 
as Director of the Idaho Department of  
 
)  
Melanie Gagnepain, Clerk 
Health and Welfare, and the IDAHO  
 
) 
DEPARTMENT OF HEALTH AND  
 
) 
WELFARE, an executive department of   
) 
the state government, 
 
 
 
) 
 
      
 
 
 
 
 
) 
 
 
 
Respondents.  
 
) 
__________________________________________) 
 
 
 
 
 
 
 
 
Appeal from the District Court of the Fourth Judicial District of the State  
of Idaho, Ada County. Jason D. Scott, District Judge. 
 
The decision of the district court is affirmed. 
 
 
Davison, Copple, Copple & Copple, LLP, Boise, for Appellant. 
 
 
 
Lawrence G. Wasden, Idaho Attorney General, Boise, for Respondent.  
 
_________________________________ 
 
BEVAN, Chief Justice. 
This appeal arises from a district court decision affirming a declaratory ruling issued by 
Respondent Dave Jeppesen (the Director) in his capacity as Director of the Idaho Department of 
Health and Welfare (the Department). Appellant Grace at Twin Falls, LLC (Grace), a residential 
assisted living and memory care facility, partnered with a preferred pharmacy to offset costs 
associated with a software system that coordinated the tracking and delivery of residents’ 
prescription medications. Because residents who failed to choose the preferred pharmacy did not 
2 
 
receive the offset, Grace sought to charge1 those residents an additional $10.00 each month to 
cover the difference. Grace brought a petition for declaratory ruling to the Department, asking the 
Director to declare that Idaho Code section 39-3316(12)(b) and IDAPA 16.03.22.550.12.b do not 
prohibit Grace from charging the $10.00 fee to those residents who did not choose the preferred 
pharmacy. The Director denied the petition, declaring that Grace would not “be permitted to assess 
a non-preferred-pharmacy fee as such fee violates residents’ right to choose their pharmacy or 
pharmacist . . . .” Grace sought judicial review before the district court, which affirmed the 
Director’s declaratory ruling. Grace now appeals to this Court. We affirm. 
I. FACTUAL AND PROCEDURAL BACKGROUND 
Residential assisted living facilities (RALFs) in Idaho are subject to the Idaho Residential 
Care or Assisted Living Act (RALF Act), set forth in Idaho Code sections 39-3301 to -3358. The 
RALF Act includes what could be called the residents’ “Bill of Rights,” which requires RALFs to 
“protect and promote [nineteen numbered rights – not including subparts] of each resident. . . .” 
I.C. § 39-3316. One of those enumerated rights is that each resident control her or his “receipt of 
health-related services, including . . . [t]he right to select the pharmacy or pharmacist of their 
choice. . . .”  Id. (12)(b). This is known as the “Pharmacy Choice Rule.” 
Grace is a RALF in Twin Falls, Idaho. According to Grace, its industry is “highly price 
sensitive and competitive, and thus there is constant pressure to provide better services for 
residents at a lower cost to ensure the safety and happiness of the residents” at its facilities. To 
increase efficiency and provide additional safety for residents, Grace uses an integrated 
management software system called BlueStep, which manages all aspects of its facility’s 
operations, including the tracking and delivery of residents’ prescription medications. The license 
fee for use of the system is $11.00 per resident, per month.  
Pharmacies compete in terms of price and service to be Grace’s preferred pharmacy. After 
requesting proposals from various pharmacies, Grace found Red Rock Pharmacy (Red Rock) most 
competitive because it was willing to bubble pack medicine and deliver it directly to Grace for 
free. It was also willing to pay one-half of the $11.00 monthly fee charged by BlueStep if the 
majority of Grace’s residents elected to use Red Rock.  
 
1 Whether Grace actually charged the additional $10.00 each month is a point of uncertainty in this appeal, but that 
uncertainty does not change the analysis or outcome of this decision.   
3 
 
Based on Red Rock’s offer, Grace met with and surveyed its residents and their families in 
January 2018 to discuss what it called the two most practical options for dealing with the BlueStep 
licensing fee: 
Option 1: Raise the residential rate for all residents to cover the net cost of the 
BlueStep System. 
Option 2: Charge only those residents who opted out of Red Rock’s services an 
additional $10.00 per month to cover their unsubsidized portion of the BlueStep 
System and the extra effort expended by Grace to coordinate resident medications 
without Red Rock’s services. 
Grace stated in its petition to the Director that its residents “overwhelmingly chose Option 2,” even 
though a majority of Grace’s residents were not using Red Rock as their pharmacy. As a result, 
Red Rock only agreed to absorb half of Grace’s BlueStep license fee for the residents who chose 
to use Red Rock as their pharmacy. Grace then, ostensibly based on the vote of its residents, 
increased the monthly rent by $10.00 for those who elected to use a pharmacy other than Red 
Rock.  
There is a question in the record about what happened next. Grace maintains in its briefing 
that in July 2019, the Department assessed a core violation2 against Grace, having determined that 
the $10.00 increase in rent violated the Pharmacy Choice Rule. Grace further asserts that this 
violation was based, in part, on the Department’s answers to Frequently Asked Questions (FAQ) 
for 
Residential 
Assisted 
Living 
Facilities, 
located 
at 
https://healthandwelfare.idaho.gov/providers/residential-assisted-living/resources. 
The information provided in the record states3:
 
 
2 The RALF Rules define a deficiency as a determination by the Department that a facility is not operating in 
compliance with the rules. IDAPA 16.03.22.010.22. The most serious deficiencies are known as “core issues”: abuse, 
neglect, exploitation, inadequate care, etc. IDAPA 16.03.22.010.20. If a core deficiency is found, a facility is required 
to submit and implement a plan of correction. IDAPA 16.03.22.130.08. If another deficiency is found during a follow-
up survey, “the Department may initiate or extend enforcement actions as described in Sections 900 through 940 of 
these rules.” Id. Sections 900 through 940 in turn describe various enforcement actions including license suspension, 
issuance of a provisional license (i.e., a ban on admission of new residents), and license revocation. IDAPA 
16.03.22.935 expressly states that a provisional license may be issued when a facility has “repeat deficiencies.” A 
provisional license is subject to total revocation under IDAPA 16.03.22.940.02.e. 
3 This quote is taken from the Director’s declaratory ruling citing an exhibit that was not in the record on appeal. That 
said, it reflects the Department’s position on appeal and its accuracy has not been disputed by Grace. 
2 
 
 
Can a RALF charge a 
resident for choosing a 
pharmacy other than the 
facility’s preferred 
pharmacy? 
 
 
No. Residents have a right to choose their 
pharmacy. Facilities can charge for bubble-
packing, but they cannot charge for using a 
different pharmacy.  
See IDAPA 16.03.22.216.13, 320.07 and 55.12b 
 
 
The Department counters that there is no evidence it assessed a core violation in the record, 
and that Grace’s petition to the Director sought a declaratory ruling only, seeking a finding: “that 
the Department’s Residential Assisted Living Facility (RALF) Rule, IDAPA 16.03.22.550.12.b – 
regarding residents’ right to select the pharmacy of their choice – is inapplicable to Grace’s $10.00 
fee for residents who do not choose Grace’s preferred pharmacy, Red Rock Pharmacy.” Grace 
never sought affirmative relief through vacating a core violation or any associated penalties. The 
Director issued what it called a “Declaratory Ruling,” affirming the Department’s position that 
Grace’s “Fee violates residents’ right to choose their pharmacy or pharmacist, as expressed in 
publicly available Department interpretations.” Given Grace’s admission that “the majority of [its] 
residents . . . have selected other pharmacies than Red Rock[,]” the Director concluded “the heart 
of Grace’s proposed fee is that it will influence residents to choose Red Rock—Grace’s preferred 
pharmacy—so that Grace may enjoy the full benefit of Red Rock’s competitive offer, which 
unduly impacts residents’ right of choice.” (Emphasis in original.)  The Director did not reference 
a core violation in his decision, nor does it appear that it played any part in the analysis contained 
in his Declaratory Ruling. As a result, we do not need to resolve whether the Department issued a 
core violation in this appeal.   
 The Director also held that Grace failed to show any impairment in its ability to use and 
afford BlueStep through alternative means, such as charging all residents a $10.00 fee (Option 1 
above) while upholding residents’ rights. The Director characterized Grace’s proposal as a 
business “want” rather than a “need,” and stated it was one that did not appear to serve residents 
who did not choose Red Rock. The Director also held Grace failed to show the Department’s 
interpretation impaired a legal right, interest, or privilege.   
Grace appealed the Director’s decision by filing a verified petition for judicial review with 
the district court. Grace again argued its proposed fee would not inhibit residents from selecting 
the pharmacy of their choice. But Grace also asserted for the first time that the Department had 
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issued a core violation against it, requiring it to “raise its rates as to all of its residents to cover the 
excess costs incurred as a result of residents not participating with Red Rock.” Grace argued the 
Department’s interpretation materially impaired or threatened to impair Grace’s legal rights and 
privileges, by: (1) subjecting Grace’s licensure to restriction of revocation; (2) subjecting Grace to 
the threat of monetary fines; (3) impairing Grace’s ability to compete; and (4) impairing Grace’s 
right to contract with its residents. Finally, Grace argued that Idaho Code section 39-3357(3) 
prohibits the Department from restraining Grace from enacting the proposed fee because the fee is 
not expressly prohibited by statute or the Department’s rules as currently written.  
The district court affirmed the Director’s decision. Deferring to the Department’s 
interpretation of the Pharmacy Choice Rule, the district court found that interpretation, as set forth 
in the FAQ above, was reasonable and not contrary to statutory language. The court further 
interpreted the statutory language directly, finding  
[t]he statute at issue grants RALF residents a nearly unqualified right to choose 
their pharmacy, I.C. § 39-3316(12)(b), and requires RALFs to “protect and 
promote” that right, I.C. §39-3316. A choice-of-pharmacy surcharge borders on the 
antithesis of protecting and promoting the right of pharmacy choice. Hence, the 
statute doesn’t unambiguously allow Grace to surcharge residents for not choosing 
its preferred pharmacy.  
Grace appeals the district court’s conclusion to this Court.  
II. ISSUES ON APPEAL 
1. 
Whether the RALF Act precludes Grace from surcharging residents $10.00 per month for 
not choosing its preferred pharmacy?  
2. 
Whether either party is entitled to an award of attorney fees on appeal. 
III. STANDARD OF REVIEW 
In an appeal from a district court where the court was acting in its appellate capacity 
under the Idaho Administrative Procedure Act (“IDAPA”), we review the decision 
of the district court to determine whether it correctly decided the issues presented 
to it. . . .  However, we review the agency record independently of the district 
court’s decision. . . . A reviewing court defers to the agency’s findings of fact unless 
they are clearly erroneous, and the agency’s factual determinations are binding on 
the reviewing court, even when there is conflicting evidence before the agency, so 
long as the determinations are supported by substantial competent evidence in the 
record. . . .  This Court freely reviews questions of law.  
Rangen, Inc. v. Idaho Dep’t of Water Res., 160 Idaho 251, 255, 371 P.3d 305, 309 (2016) (cleaned 
up).  
4 
 
The district court must affirm the agency action unless it finds that the agency’s 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) not supported by substantial evidence on the record as a whole; or 
(e) arbitrary, capricious, or an abuse of discretion. 
Id. (quoting I.C. § 67-5279(3)). See also Clear Springs Foods, v. Spackman, 150 Idaho 790, 796, 
252 P.3d 71, 77 (2011). Even if one of these conditions is met, an “agency action shall be affirmed 
unless substantial rights of the appellant have been prejudiced.” I.C. § 67-5279(4). 
“Administrative rules are interpreted the same way as statutes.” Idaho Power Co. v. 
Tidwell, 164 Idaho 571, 574, 434 P.3d 175, 178 (2018) (quoting Rangen, 160 Idaho at 256, 371 
P.3d at 310). Therefore, when considering an administrative rule,  
interpretation begins with the literal language of the [rule]. Provisions should not 
be read in isolation, but must be interpreted in the context of the entire document. 
The [rule] should be considered as a whole, and words should be given their plain, 
usual, and ordinary meanings. It should be noted that the Court must give effect to 
all the words and provisions of the [rule] so that none will be void, superfluous, or 
redundant. When the [rule’s] language is unambiguous . . . the Court need not 
consider rules of statutory construction. 
Id. (quoting Est. of Stahl v. Idaho State Tax Comm’n, 162 Idaho 558, 562, 401 P.3d 136, 140 
(2017)). “The determination of the meaning of [an administrative rule] and its application is a 
matter of law over which this [C]ourt exercises free review.” Id. (quoting Woodburn v. Manco 
Prods., Inc., 137 Idaho 502, 504, 50 P.3d 997, 999 (2002)).  
IV. ANALYSIS 
Facilities such as Grace are subject to the RALF Act, codified in Idaho Code sections 39-
3301 to 3358. As noted above, the RALF Act contains what might be called a resident’s Bill of 
Rights. See I.C. § 39-3316. Under this statute, RALF residents have, among other rights, “the right 
to control [their] receipt of health-related services, including . . . [t]he right to select the pharmacy 
or pharmacist of their choice so long as it meets the statute and rules governing residential care or 
assisted living and the [RALF’s] policies and procedures.” I.C. § 39-3316(12)(b); see also IDAPA 
16.03.22.550.12.b.1. RALFs are obligated to “protect and promote” this right. I.C. § 39-3316. 
A. 
The Pharmacy Choice Rule prohibits Grace from imposing a surcharge on a resident 
who does not choose Grace’s preferred pharmacy.  
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The question presented in this appeal is straightforward: May a RALF make a business 
decision to impose a surcharge on its residents who do not choose the facility’s preferred 
pharmacy? The answer is no.  
Grace asserts that the Director’s Declaratory Ruling should be set aside because the 
Department violated Idaho Code section 67-5279(3) by acting: (a) “in violation of constitutional 
or statutory provisions;” and (b) “in excess of the statutory authority of the agency.” Grace stresses 
that the RALF Act does not expressly prohibit cost apportionment based on pharmacy choice. 
Moreover, Grace submits that, contrary to Idaho Code section 39-3357(3), no statute or regulation 
“expressly requires” a facility to charge residents the same regardless of whether their respective 
care choices cause the facility to incur higher costs.   
This matter is ultimately resolved by looking to the residents’ Bill of Rights. “[T]he courts 
have the ultimate authority to construe statutory language.” Kaseburg v. State, Bd. of Land 
Comm’rs, 154 Idaho 570, 577, 300 P.3d 1058, 1065 (2013) (quoting Kuna Boxing Club, Inc. v. 
Idaho Lottery Comm’n, 149 Idaho 94, 97, 233 P.3d 25, 28 (2009)).  
The interpretation of a statute must begin with the literal words of the statute; those 
words must be given their plain, usual, and ordinary meaning; and the statute must 
be construed as a whole. If the statute is not ambiguous, this Court does not construe 
it, but simply follows the law as written. We have consistently held that where 
statutory language is unambiguous, legislative history and other extrinsic evidence 
should not be consulted for the purpose of altering the clearly expressed intent of 
the legislature.  
Breckenridge Prop. Fund 2016, LLC v. Wally Enterprises, Inc., ___, Idaho ___, 516 P.3d 73, 81 
(2022) (quoting Verska v. Saint Alphonsus Reg’l Med. Ctr., 151 Idaho 889, 893, 265 P.3d 502, 506 
(2011)). “Ambiguity is not established merely because the parties present differing interpretations 
to the court.” Nelsen v. Nelsen, 170 Idaho 102, 508 P.3d 301, 334 (2022) (quoting Hayden Lake 
Fire Prot. Dist. v. Alcorn, 141 Idaho 307, 312, 109 P.3d 161, 166 (2005)); see also Ada Cnty. 
Prosecuting Att’y v. 2007 Legendary Motorcycle, 154 Idaho 351, 354, 298 P.3d 245, 248 (2013) 
(“[A] statute is not ambiguous merely because an astute mind can devise more than one 
interpretation of it.”). 
Idaho Code section 39-3316(12)(b) and IDAPA 16.03.22.550.12.b (collectively, the 
Pharmacy Choice Rule) are plain and unambiguous4. A RALF is required to “protect and promote 
 
4 The Department argues that we should give its interpretation of the statute deference. The district court supported its 
decision with such an analysis; however, judicial deference, as first set forth in J.R. Simplot Co. v. Idaho State Tax 
6 
 
the rights of each resident.” I.C. § 39-3316. One of those rights is embodied in the Pharmacy 
Choice Rule, which provides: 
Each resident shall have the right to control his receipt of health-related services, 
including . . . [t]he right to select the pharmacy or pharmacist of their choice so long 
as it meets the statute and rules governing residential care or assisted living and the 
policies and procedures of the residential care or assisted living facility. 
I.C. § 39-3316(12)(b) (emphasis added). See also IDAPA 16.03.22.550.12.b (mirroring this 
language).  
The Pharmacy Choice Rule unambiguously protects the right to both control one’s health 
care services, and to select the pharmacist or pharmacy of one’s choice, so long as the pharmacy 
meets statutory norms. Grace’s attempt to impose a $10.00 surcharge on residents who do not use 
the Red Rock pharmacy violates both of these rights. Requiring residents to pay this fee implicitly 
impels residents to choose Red Rock pharmacy; otherwise, those residents subsidize the computer 
licensing fees for the facility in an amount greater than residents who choose Red Rock. This 
policy would place undue financial pressure on those residents to switch to Red Rock. While the 
amount is minimal month-by-month, for individuals living in these facilities, typically on fixed 
incomes, such pressure could make a difference. This tension limits residents’ capacity to control 
and select pharmaceutical providers free from any outside influence. Thus, the policy violates the 
clear requirements of the Pharmacy Choice Rule. As the Director recognized:  
[T]he heart of Grace’s proposed fee is that it will influence residents to choose Red 
Rock—Grace’s preferred pharmacy—so that Grace may enjoy the full benefit of 
Red Rock’s competitive offer, which unduly impacts residents’ right of choice.”  
. . . . 
Grace’s proposal is thus a business “want” rather than a “need,” and one that does 
not appear to serve residents except for those who would choose Red Rock. 
Facilities make enumerable decisions in their business operations; the Department 
is obliged to restrict facilities from decisions that impede resident rights for the sake 
of business.  
(Emphasis in original.)  
 
Comm’n, 120 Idaho 849, 862, 820 P.2d 1206, 1219 (1991), “allows courts to establish the appropriate level 
of deference to give to an agency’s construction of a statute [only] if the statute is ambiguous.” Idaho State Tax 
Comm’n v. James, 169 Idaho 884, 890, 505 P.3d 670, 676 (2022) (emphasis added). Having concluded that the 
Pharmacy Choice Rule is unambiguous, we need not apply this principle of statutory construction. 
 
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Grace’s characterization that it was simply passing the $10.00 savings Red Rock absorbed 
for BlueStep to the residents who selected Red Rock as their pharmacy is misleading. BlueStep 
charges $11.00 per month, per resident. Rather than increase the rent for all residents to cover the 
cost of the BlueStep software, Grace tried to find a pharmacy willing to absorb the fee. When Red 
Rock only offered to pay for half of the fee for residents who chose to use its pharmacy, Grace 
sought to increase the rent of residents who did not choose Red Rock by $10.00: $5.50 for the 
amount Red Rock would have absorbed, and an additional $4.50 per month to cover the 
administrative costs Grace would incur in interfacing with multiple pharmacies instead of just Red 
Rock. Thus, at least a portion of the fee was for the purpose of recouping administrative costs that 
Grace incurred, which were separate from the costs that Red Rock absorbed for a resident who 
opted to use the Red Rock pharmacy.  
In conclusion, we hold that Grace’s practice violates the Pharmacy Choice Rule. Having 
determined that no violation of Idaho Code section 67-5279(3) (a) or (b) occurred, there is no need 
to analyze whether Grace’s substantial rights have been prejudiced. I.C. § 67-5279(4). The 
decision of the district court is affirmed.  
B. 
Neither party is awarded attorney fees on appeal.  
Both parties argue they are entitled to an award of attorney fees and costs under Idaho 
Appellate Rule 41 and Idaho Code section 12-117. Grace is not the prevailing party and thus has 
no claim to an award of attorney fees. 
Idaho Code section 12-117(1) mandates an award of reasonable attorney fees to the 
prevailing party “in any proceeding involving as adverse parties a state agency or a political 
subdivision and a person,” where “it finds that the nonprevailing party acted without a reasonable 
basis in fact or law.” I.C. § 12-117(1). When parties to appeals before this Court have advanced 
arguments based on a disregard for plain language, we have found them to have acted without a 
reasonable basis in law. Jayo Dev., Inc. v. Ada Cnty. Bd. of Equalization, 158 Idaho 148, 154, 345 
P.3d 207, 213 (2015); Idaho Wool Growers Ass’n, Inc. v. State, 154 Idaho 716, 724, 302 P.3d 341, 
349 (2012). “[T]he purpose of [section] 12-117 is to serve as a deterrent to groundless or arbitrary 
action and to provide a remedy for persons who have borne unfair and unjustified financial burdens 
defending against groundless charges.” Ada Cnty. v. Browning, 168 Idaho 856, 861, 489 P.2d 443, 
448 (2021) (quoting Arnold v. City of Stanley, 158 Idaho 218, 224, 345 P.3d 1008, 1014 (2015)). 
8 
 
The Department cites Rangen, Inc. v. Idaho Dep’t of Water Res., 159 Idaho 798, 367 P.3d 
193 (2016) (quoting Castrigno v. McQuade, 141 Idaho 93, 98, 106 P.3d 419, 424 (2005)), to argue 
that because Grace relied on the same arguments raised to the district court, without adding new 
or persuasive authority, the Department is entitled to fees under section 12-117. The Department 
asserts Grace  
continued to rely on the same arguments used in front of the district court, without 
providing any additional persuasive law or bringing into doubt the existing law on 
which the district court based its decision. Although [Grace] may have had a good 
faith basis to bring the original suit based on their interpretation of Idaho law, [they] 
were very clearly aware of the statutory procedures, failed to appeal separate 
appraisals when they had a right to appeal, and were clearly advised on the 
applicable law in an articulate and well-reasoned written decision from the district 
court. Nevertheless, [they] chose to further appeal that decision to this Court, even 
though they failed to add any new analysis or authority to the issues raised below. 
Accordingly, it was frivolous and unreasonable to make a continued argument, and 
[the prevailing party] is awarded its reasonable attorney fees. 
After the Department filed its brief in this matter, this Court abrogated this legal standard in 3G 
AG LLC v. Idaho Dep’t of Water Res., 170 Idaho 251, 509 P.3d 1180, 1195 (2022): 
When it comes to questions of law, like the one presented in this case, an argument 
is not ‘unreasonable’ under section 12-117(1) simply because it was repeated on 
appeal after being rejected by the agency and district court below. Moreover, even 
if the nonprevailing party does not provide new authority in support of its repeated 
legal argument—this has no connection to whether the argument has a ‘reasonable’ 
basis in law. 
 
Thus, Grace’s reiteration of the arguments it made below, where reasonable, are sufficient 
to avoid the strictures of Idaho Code section 12-117. We hold that Grace’s arguments, though not 
accepted by this Court, were reasonable. The issues before the Court were complex and both 
parties submitted reasonable arguments in support of their position. Although the Department has 
prevailed on appeal, Grace did not act “without a reasonable basis in fact or law.” I.C. § 12-117(1).  
V. CONCLUSION 
The district court decision is affirmed. Costs, but not attorney fees, are awarded to the 
Department under Idaho Appellate Rule 40. 
Justices BRODY, STEGNER, MOELLER, and ZAHN CONCUR.