Opinion ID: 1804083
Heading Depth: 1
Heading Rank: 4

Heading: Contested Case Proceedings.

Text: The Iowa Administrative Procedure Act, embodied in Iowa Code chapter 17A, classifies agency action within three distinct categories: rulemaking; adjudication, otherwise known as contested case; and other agency action. Sindlinger, 503 N.W.2d at 389; Allegre v. Iowa State Bd. of Regents, 349 N.W.2d 112, 114 (Iowa 1984); Polk County v. Iowa State Appeal Bd., 330 N.W.2d 267, 276 (Iowa 1983). The classification of the agency action determines whether the provisions of chapter 17A govern the action. Rulemaking and contested cases fall within the ambit of the Iowa Administrative Procedure Act. Iowa Code § 17A.1(2). However, only the judicial review provisions of section 17A.19 apply to other agency action. Polk County, 330 N.W.2d at 276. None of the parties in this case contend the Council's decision constituted rulemaking. [6] Instead, the dispute rests on whether the agency action implicated the contested case provisions of section 17A.12. A contested case is a proceeding in which the legal rights, duties or privileges of a party are required by Constitution or statute to be determined by an agency after an opportunity for an evidentiary hearing. Iowa Code § 17A.2(5); accord Bernau, 580 N.W.2d at 766; Messamaker v. Iowa Dep't of Human Servs., 545 N.W.2d 566, 567 (Iowa 1996); Citizens' Aide/Ombudsman, 454 N.W.2d at 817-18; Allegre, 349 N.W.2d at 114; Polk County, 330 N.W.2d at 277. On the other hand, other agency action is action that does not constitute rulemaking or a contested case. Sindlinger, 503 N.W.2d at 389; Polk County, 330 N.W.2d at 276-77. It is a residual category. Sindlinger, 503 N.W.2d at 389; Allegre, 349 N.W.2d at 114; Polk County, 330 N.W.2d at 276. Thus, if the statute or constitution does not require a hearing, or if the required hearing does not rise to the level of an evidentiary hearing, the agency action is considered other agency action. Allegre, 349 N.W.2d at 114; Polk County, 330 N.W.2d at 277; see L'Enfant Plaza Props., Inc. v. Dist. of Columbia Redevelopment Land Agency, 564 F.2d 515, 524 (D.C.Cir. 1977). The importance of the distinction between the categories lies in the due process afforded to parties involved in contested case proceedings. Allegre, 349 N.W.2d at 114; Polk County, 330 N.W.2d at 276. A contested case entitles parties affected by the agency action to an adversarial hearing with the presentation of evidence and arguments and the opportunity to cross-examine witnesses and introduce rebuttal evidence. See Iowa Code § 17A.12(4); Lunde v. Iowa Bd. of Regents, 487 N.W.2d 357, 359 (Iowa Ct.App. 1992). The underlying purpose of an evidentiary hearing is to adjudicate disputed facts pertaining to particular individuals in specific circumstances. Polk County, 330 N.W.2d at 277; Arthur Earl Bonfield, The Definition of Formal Agency Adjudication Under the Iowa Administrative Procedure Act, 63 Iowa L.Rev. 285, 294 (1977) [hereinafter Bonfield]. At most, other agency action entitles affected parties to an informal hearing. Lunde, 487 N.W.2d at 359. Parties are only entitled to those procedures voluntarily promulgated by the agency, and to the general requirement that the agency act reasonably. Farmers State Bank v. Bernau, 433 N.W.2d 734, 740 (Iowa 1988); Bonfield, 63 Iowa L.Rev. at 290. We conclude the evaluation of an application for a certificate of need by the Council does not implicate the contested case procedures. Neither a statute nor constitution requires the Council to provide an evidentiary hearing. See Hurd v. Iowa Dep't of Human Servs., 580 N.W.2d 383, 388 (Iowa 1998). Although section 135.66 provides affected persons the opportunity to be heard at a public hearing, Iowa Code § 135.66(3)(b), (4), this hearing does not rise to the level of an evidentiary hearing. The administrative rules governing the Department in certificate of need proceedings explicitly state that public hearings held pursuant to section 135.66(3)(b) do not constitute contested cases. See Iowa Admin. Code r. 641-202.6. Furthermore, the administrative rules direct district courts ruling on judicial review petitions to treat the Council's decision as other agency action. See id. We accord administrative rules the force and effect of law as long as they are reasonable and consistent with legislative enactments. Harlan Sprague Dawley, Inc. v. Iowa State Bd. of Tax Review, 601 N.W.2d 66, 69 (Iowa 1999); First Iowa State Bank v. Iowa Dep't of Natural Res., 502 N.W.2d 164, 168 (Iowa 1993). This well-established principle is supported by the legislature's delegation of authority to the Council to establish rules not inconsistent with the law that will aid the Council in the enforcement of the certificate of need law provisions. See Iowa Code § 135.11(13); id. § 135.72. We have previously upheld an agency's provision of less formal hearing procedures than those established in section 17A.12. See, e.g., Sindlinger, 503 N.W.2d at 390. Additionally, we find the legislature did not intend to create a contested case proceeding when it enacted the comprehensive certificate of need statute. We recognize the legislature does not need to expressly provide for an evidentiary hearing in order to find the requirement of a contested case. Allegre, 349 N.W.2d at 115; Bonfield, 63 Iowa L.Rev. at 312. Yet, we fail to discern any basis in the statute or its factual context impliedly requiring an evidentiary hearing. See id. In fact, by using the word public in Iowa Code section 135.66(3)(b) to qualify the type of hearing provided to affected persons, and by giving affected persons the right to present testimony, id. § 135.66(4), the legislature evidenced its intent to exclude the evaluation of a certificate of need application from the contested case requirements. If the legislature wanted to provide for a contested case, it could have so provided. See S.E. Iowa Coop. Elec. Ass'n v. Iowa Utils. Bd., 633 N.W.2d 814, 822 (Iowa 2001); State v. Rodenburg, 562 N.W.2d 186, 188 (Iowa 1997). For example, the legislature specifically commands the Council to adhere to contested case procedures in accordance with chapter 17A when determining what sanctions to impose on those who fail to obtain a certificate of need prior to constructing a new health institution and those who violate the terms of an approved certificate. Iowa Code § 135.73(2)(a), (b). Moreover, we are guided by the maxim expressio unius est exclusio alterius, i.e., the expression of one thing is the exclusion of another thing not similarly mentioned. Marcus v. Young, 538 N.W.2d 285, 289 (Iowa 1995); accord Callender v. Skiles, 591 N.W.2d 182, 186 (Iowa 1999). Clearly, the use of completely different language in sections 135.66 and 135.73 reflects the deliberate choice of the legislature to provide two different types of hearings for two different types of situations. See Farmers State Bank, 433 N.W.2d at 739; see also Marcus, 538 N.W.2d at 289 (the legislature expresses its intent through the omission as well as the inclusion of certain terms); Callender, 591 N.W.2d at 186 (same). As always, we are guided by what the legislature said, not what it could have said. Marcus, 538 N.W.2d at 289. Because the statute governing applications for certificates of need does not mandate an evidentiary hearing, there is no statutory right to contested case proceedings. See Bernau, 580 N.W.2d at 767. Consequently, we next address whether affected persons have a constitutional right to an adjudicatory hearing. See id. We examine both the Due Process Clauses of the Fourteenth Amendment to the United States Constitution and article I, section 9 of the Iowa Constitution to determine whether a contested case proceeding is constitutionally required when reviewing certificate of need applications. See id.; Sindlinger, 503 N.W.2d at 390. For purposes of our review, we deem the Due Process Clauses of our state and federal constitutions to be identical in scope, import, and purpose. See Callender, 591 N.W.2d at 187. Generally, a person has a constitutional due process right to an evidentiary hearing in accordance with contested case procedures if the underlying proceeding involves adjudicative facts. See Bernau, 580 N.W.2d at 767; Office of Consumer Advocate, 465 N.W.2d at 284; Hollinrake v. Iowa Law Enforcement Academy, 452 N.W.2d 598, 602 (Iowa 1990); Allegre, 349 N.W.2d at 115. Conversely, if the agency decision rests on legislative facts, the parties are not constitutionally entitled to an evidentiary hearing. See Bernau, 580 N.W.2d at 767; Hollinrake, 452 N.W.2d at 602. Thus, whether due process demands an agency to provide affected persons in certificate of need proceedings an evidentiary hearing depends upon whether the proceedings involve adjudicative or legislative facts. Adjudicative facts relate to the specific parties and their particular circumstances. Hollinrake, 452 N.W.2d at 602; Allegre, 349 N.W.2d at 115. They involve individualized facts peculiar to the parties, and ordinarily `answer the questions of who did what, where, when, how, why, with what motive or intent....' Allegre, 349 N.W.2d at 115 (quoting Bonfield, 63 Iowa L.Rev. at 323 (footnotes omitted)). Legislative facts, on the other hand, do not pertain to the specific parties. Id. Instead, legislative facts are generalized factual propositions, often consisting of demographical data and statistics compiled from surveys and studies, which aid the decision-maker in determining questions of policy and discretion. See Bernau, 580 N.W.2d at 767; Allegre, 349 N.W.2d at 115; Polk County, 330 N.W.2d at 277; see also Chevy Chase Citizens Ass'n v. Dist. of Columbia Council, 327 A.2d 310, 313-14 (D.C.1974) (hearing is legislative in nature when the agency seeks to make policy decisions affecting the general public, or a substantial portion thereof, instead of individual parties); McMurray v. City Council of West Des Moines, 642 N.W.2d 273, 277 (Iowa 2002) (legislative facts involve a determination of what is in the best interests of the public generally). We conclude the public hearing on a certificate of need application involves the presentation of legislative facts. The criteria of section 135.64, which the Council is to consider and rely upon in its evaluation, consist largely of generalized facts and statistical data. In determining the need for the proposed facility or service, the Council is to examine the projections derived from the state bed need formula. See Iowa Admin. Code r. 641-203.5(3)(c) (1987). Furthermore, the Council is to consider the availability of adequate resources and of current facilities and services, the relationship of the proposed facility to existing facilities, the geographic area, the accessibility of the facility, the proposed Medicaid utilization, construction costs, current utilization of existing health care providers, and the financial feasibility of the project, among others. See Iowa Code § 135.64(1); Iowa Admin. Code r. 641-203.5(3)(c), (5). The Council also reviews a report compiled by Department staff, which evaluates the specific application against the criteria of section 135.64. See Iowa Admin. Code r. 641-202.4(5) (1997) (Council is to receive staff report at least ten days prior to the scheduled public hearing); see also Chevy Chase Citizens Ass'n, 327 A.2d at 314 (when agency decision involves consultation of staff reports, this factor weighs in favor of finding the hearing to be legislative in nature). Even if the Council does consider individualized information from affected parties when evaluating the legislative-type data, the Council is not adjudging the individual parties' legal rights. See Hollinrake, 452 N.W.2d at 602; see also Bonfield, 63 Iowa L.Rev. at 291-92 (agency action which affects an individual party's legal rights constitutes a contested case). Moreover, even if we found the public hearing of section 135.66 involves the presentation of adjudicative facts, it would fall within two of the exceptions to the evidentiary hearing requirement for proceedings involving adjudicative facts. See Allegre, 349 N.W.2d at 115. First, an evidentiary hearing is unnecessary when there are no disputed relevant facts. Id. at 116. In essence, the parties in this case do not dispute the relevant facts. See Office of Consumer Advocate, 465 N.W.2d at 284; Allegre, 349 N.W.2d at 116. In challenging the need for the proposed facility, the existing facilities focused their opposition on staffing shortages in the health care profession. Fike did not dispute this contention, and, in fact, conceded staffing for the new facility would present a potential obstacle. Second, an evidentiary hearing is unnecessary when the alleged interest of the party seeking a contested case cannot be described as a life, liberty, or property interest under the Due Process Clause. Allegre, 349 N.W.2d at 115; Bonfield, 63 Iowa L.Rev. at 325. As with all procedural due process inquiries, we must first determine whether the party has a protected interest. See Mathews v. Eldridge, 424 U.S. 319, 332, 96 S.Ct. 893, 907, 47 L.Ed.2d 18, 31 (1976); Bowers v. Polk County Bd. of Supervisors, 638 N.W.2d 682, 691 (Iowa 2002). The affected parties in this case claim they have a protected property interest in another party's certificate of need application. We will find a property interest only if there is a legitimate claim of entitlement. 13 Southfield Assocs. v. Michigan Dep't of Pub. Health, 82 Mich.App. 678, 267 N.W.2d 483, 486 (1978) (citing Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548, 561 (1972)). A mere abstract desire or unilateral expectation of receiving a benefit are insufficient to establish an entitlement. Id. The record in this case fails to demonstrate the establishment of a property interest in a certificate of need application. Although the three petitioning nursing facilities allege they have a property interest in operating their facilities, that alleged interest is not involved in a proceeding involving the issuance of a certificate of need to a competing institution. See Cathedral Rock of Granite City, Inc. v. Illinois Health Facilities Planning Bd., 308 Ill.App.3d 529, 242 Ill.Dec. 158, 720 N.E.2d 1113, 1121 (1999). The issuance of a certificate of need does not prohibit the existing local facilities from continuing their operations. See id. We acknowledge that the actual issuance of a certificate of need conveys a property interest on the holder of the certificate. Downriver Nursing Assocs. v. Michigan Dep't of Pub. Health, 193 Mich.App. 594, 484 N.W.2d 748, 751 (1992). This is evident from the procedural safeguards provided to certificate-of-need-holders faced with the potential revocation or suspension of their certificates. See Iowa Code § 135.73 (Council must invoke contested case procedures before revoking or suspending certificate of need); Cathedral Rock of Granite City, Inc., 242 Ill.Dec. 158, 720 N.E.2d at 1121 (no entitlement to due process protections unless the agency's action is directed at the long-term care facilities' own certificate of need); Mercy Med. Ctr., Inc. v. Office of Health Policy, 121 Or.App. 587, 855 P.2d 1156, 1159 n. 6 (1993) (State cannot revoke certificate of need without providing contested case procedures). Nonetheless, until the certificate is issued, the applicant is in the same position as the other affected parties. See In re Certificate of Need Granted to the Harborage, 300 N.J.Super. 363, 693 A.2d 133, 144 (App.Div.1997) (applicant has no more than an expectation that it would receive the [certificate of need]). Thus, at the public hearing on a certificate of need application, neither the applicant nor the other affected parties have a protected property interest. The three petitioning nursing facilities essentially contend they are entitled to be free from the construction of a new facility because it would infringe upon their existing certificates. However, the interest in keeping a certificate is not equivalent to the interest in precluding potential competitors from providing the same services. Mercy Med. Ctr., Inc., 855 P.2d at 1159 n. 6; see Downriver Nursing Assocs., 484 N.W.2d at 751. An existing care facility does not have a protected property interest in being a competitor of another long-term care facility. See Cathedral Rock of Granite City, Inc., 242 Ill.Dec. 158, 720 N.E.2d at 1120-21; Mercy Med. Ctr., Inc., 855 P.2d at 1159 (legislature did not create an entitlement to a government sanctioned monopoly). If we recognized such a property interest, we would contravene the legislature's goal of ensuring the provision of necessary and adequate health services at a reasonable cost. See In re Application by St. Luke's Hosp., 414 N.W.2d 297, 299 (S.D.1987). Even if we assumed affected parties have a protected property interest, they are afforded sufficient due process through the public hearing. See Sindlinger, 503 N.W.2d at 390; Lunde, 487 N.W.2d at 361; see also Cathedral Rock of Granite City, Inc., 242 Ill.Dec. 158, 720 N.E.2d at 1122 (affected persons provided notice of the certificate of need application, the right to present testimony at a public hearing, and the right to seek judicial review). The public hearing provides affected parties an opportunity to present testimony and, at the same time, a review by the Council of their specific challenges. See Alfredo v. Iowa Racing & Gaming Comm'n, 555 N.W.2d 827, 833 (Iowa 1996); Sindlinger, 503 N.W.2d at 390; see also Hurd, 580 N.W.2d at 388-89 (finding interests to be adequately protected by the opportunity to present evidence and information refuting other party's evidence); Hale v. Petit, 438 A.2d 226, 232 (Me.1981) (cross-examination would not have provided additional benefit to certificate of need proceeding where parties provided sufficient opportunity to present evidence). Additionally, affected parties may submit written statements to be considered by the Council in its review of the application. See Iowa Admin. Code r. 641-202.6(2), (4). Lastly, parties dissatisfied with the Council's decision may request the Council to reconsider its ruling or seek judicial review. See Iowa Code § 135.70. Because the Council was not required by statute or constitution to provide an evidentiary hearing, the Council did not abuse its discretion or act unreasonably or arbitrarily in denying the three petitioning facilities' motion for contested case proceeding. The district court properly concluded the review of a certificate of need application is not a contested case. [7]