IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA23-1070

Filed 17 September 2024

Office of Administrative Hearings, No. 23 DHR 01604

DUKE UNIVERSITY HEALTH SYSTEM, INC., Petitioner,

 v. 

N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF 

HEALTH SERVICE REGULATION, HEALTHCARE PLANNING AND 

CERTIFICATE OF NEED SECTION, Respondent,

and

UNIVERSITY OF NORTH CAROLINA HOSPITALS AT CHAPEL HILL AND 

UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM, RespondentIntervenors.

Appeal by Petitioner from final decision entered on 21 July 2023 by 

Administrative Law Judge Melissa Owens Lassiter in the Office of Administrative 

Hearings. Heard in the Court of Appeals 14 August 2024.

Baker, Donelson, Bearman, Caldwell & Berkowitz, a Professional Corporation,

by Iain M. Stauffer and William F. Maddrey, for petitioner-appellee.

Attorney General Joshua H. Stein, by Special Deputy Attorney General Derek 

L. Hunter, for respondent-appellant.

Nelson Mullins Riley & Scarborough LLP, by Lorin J. Lapidus, Noah H. 

Huffstetler, III, Candace S. Friel, and Nathaniel J. Pencook, for respondentsintervenors-appellants.

MURPHY, Judge.

The failure of the North Carolina Department of Health and Human Services, 

Division of Health Service Regulation, Healthcare Planning and Certificate of Need 
DUKE UNIV. HEALTH SYS., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

Opinion of the Court

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Section (“the Agency”) to conduct a public hearing pursuant to N.C.G.S. § 131E185(a1)(2) does not automatically constitute substantial prejudice to a petitioner in a 

contested case before the Office of Administrative Hearings. Here, where the Office 

of Administrative Hearings reasoned in its final decision that the Agency’s failure to 

conduct a public hearing constituted per se substantial prejudice to the petitioner 

before it, we must vacate that final decision.

BACKGROUND

Respondents University of North Carolina Hospitals at Chapel Hill, University 

of North Carolina Health Care System (collectively “UNC”), and the Agency appeal 

from a final decision of the Office of Administrative Hearings filed 21 July 2023. The 

decision pertained to a contested case between Petitioner Duke University Health 

System, Inc., and UNC to obtain a certificate of need to develop 68 acute care beds in 

the Durham/Caswell County service area pursuant to the 2022 State Medical 

Facilities Plan. The final decision, in relevant part, granted summary judgment in 

favor of Duke and vacated the underlying decision of the Agency conditionally 

approving UNC’s certificate of need application, reasoning that (1) the Agency erred 

in failing to conduct a public hearing in accordance with N.C.G.S. § 131E-185(a1)(2),

1

1 N.C.G.S. § 131E-185(a1)(2) provides that, “[n]o more than 20 days from the conclusion of the written 

comment period [provided in N.C.G.S. § 131E-185(a1)(1)], the [Agency] shall ensure that a public 

hearing is conducted at a place within the appropriate service area if . . . the proponent proposes to 

spend five million dollars ($5,000,000[.00]) or more[.]” N.C.G.S. § 131E-185(a1)(2) (2023). There is no 

dispute in this case that the proposed project met the $5,000,000.00 threshold at which N.C.G.S. § 

131E-185(a1)(2) requires a public hearing.
DUKE UNIV. HEALTH SYS., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

Opinion of the Court

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notwithstanding any ongoing concerns relating to the COVID-19 pandemic at the 

time; and (2) the omission of a public hearing caused per se substantial prejudice to 

Duke within the meaning of N.C.G.S. § 150B-23(a).

ANALYSIS

N.C.G.S. § 150B-23(a) provides, in relevant part, that “[a] contested case shall 

be commenced . . . by filing a petition with the Office of Administrative Hearings and[] 

. . . shall be conducted by that Office.” N.C.G.S. § 150B-23(a) (2023). 

A petition shall . . . state facts tending to establish that the 

agency named as the respondent has deprived the 

petitioner of property, has ordered the petitioner to pay a 

fine or civil penalty, or has otherwise substantially 

prejudiced the petitioner’s rights and that the agency did 

any of the following:

(1) Exceeded its authority or jurisdiction.

(2) Acted erroneously.

(3) Failed to use proper procedure.

(4) Acted arbitrarily or capriciously.

(5) Failed to act as required by law or rule.

Id. When reviewing alleged legal errors by the Office of Administrative Hearings on 

appeal, we employ de novo review. N.C.G.S. § 150B-51(b)-(c) (2023). 

Here, where Duke argued before the Office of Administrative Hearings that 

the Agency failed to use proper procedure, it was also required to show that the 

Agency “deprived [it] of property, [] ordered [it] to pay a fine or civil penalty, or []

otherwise substantially prejudiced [its] rights” to establish to the Office of 

Administrative Hearings that reversible error occurred before the Agency. N.C.G.S. 
DUKE UNIV. HEALTH SYS., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

Opinion of the Court

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§ 150B-23(a)(3) (2023). For the reasons discussed in two of our recent opinions, 

Fletcher Hosp. Inc. v. N.C. Dep’t of Health & Hum. Servs., Div. of Health Serv. Regul., 

Health Care Plan. & Certificate of Need Section, 902 S.E.2d 1 (N.C. Ct. App. 2024) 

and Henderson Cnty. Hosp. Corp. v. N.C. Dep’t of Health & Hum. Servs., No. COA23-

1037 (N.C. Ct. App. Aug. 6, 2024), although the Office of Administrative Hearings 

correctly held that the Agency failed to use proper procedure in omitting a public 

hearing despite any pandemic-related concerns, such an omission does not constitute 

substantial prejudice per se under N.C.G.S. § 150B-23(a). 

Respondents also argue that waiver and estoppel prevented Duke from arguing 

before the ALJ that the Agency’s failure to hold a hearing was improper, as Duke had 

itself utilized Agency proceedings without public hearings during the pandemic. 

However, our jurisdiction has long held that statutory rights in place for the benefit 

of the public—as opposed to for the personal benefit of the party—cannot be waived. 

See, e.g., Sisk v. Perkins, 264 N.C. 43, 46 (1965) (“Statutory provisions enacted for the 

benefit of a party litigant, as distinguished from those for the protection of the public, 

may be waived, expressly or by implication.”); Calaway v. Harris, 229 N.C. 117, 119 

(1948) (“Statutory provisions enacted for the benefit of a party litigant, as 

distinguished from those for the protection of the public, may be waived, expressly or 

by implication.”); Holloman v. Holloman, 127 N.C. 15, 16 (1900) (“[T]he [c]ourts 

cannot dispense with the requirement to file the affidavit. That requirement is for 

the good of the public at large, and not for the convenience or benefit of the parties to 
DUKE UNIV. HEALTH SYS., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

Opinion of the Court

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the action.”). Jurists and academics alike have critiqued agency proceedings on the 

basis that they suffer from problems of democratic legitimacy, and the public hearing 

requirement of N.C.G.S. § 131E-185(a1)(2) exists, at least in significant part, to 

legitimize aspects of the agency review process that might otherwise be 

democratically suspect. Cf. Dep’t of Homeland Sec. v. Regents of the Univ. of 

California, 140 S. Ct. 1891, 1929 n.13 (2020) (Thomas, J., concurring) (“[T]he notice 

and comment process at least attempts to provide a ‘surrogate political process’ that 

takes some of the sting out of the inherently undemocratic and unaccountable 

rulemaking process.”). Public hearings under N.C.G.S. § 131E-185(a1)(2) are not, 

therefore, private benefits to their participants, but critical aspects of the agency 

review process that exist for public and systemic benefits.2 Waiver therefore does not 

apply—and, for equivalent reasons, estoppel does not, either.

We therefore vacate the final decision and remand for further proceedings. 

Fletcher, 902 S.E.2d at 7. Our holding does not preclude a subsequent ruling that 

Duke was substantially prejudiced in the event more specific findings supporting 

such a ruling are found to exist on remand. Id. (“AdventHealth satisfied its burden 

of proof in showing Agency error, but it failed to forecast particularized evidence of 

substantial prejudice. Yet, our determination in this case should not be 

misconstrued. AdventHealth may ultimately satisfy its burden; it may not. The ALJ 

2 Indeed, one can imagine that the beneficial or detrimental effect of a public hearing for any particular 

party would be circumstantial rather than categorical.
DUKE UNIV. HEALTH SYS., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

Opinion of the Court

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ruled on two specific issues that have been raised and briefed in this appeal: failure 

to conduct a public hearing under § 131E-185(a1)(2) and reversible error per se. We 

have resolved those specific issues. While this Court may address summary judgment 

on alternative grounds de novo, we deem this case an appropriate circumstance to 

remand for further proceedings not inconsistent with this opinion.”).

CONCLUSION

Failure to conduct a public hearing as required by N.C.G.S. § 131E-185(a1)(2), 

despite constituting improper procedure for purposes of N.C.G.S. § 150B-23(a)(3), 

does not automatically result in substantial prejudice to a petitioner before the Office 

of Administrative Hearings. We therefore vacate the final decision in this case and 

remand for further proceedings.

VACATED AND REMANDED.

Judges COLLINS and FLOOD concur.