Court Opinion

ID: 2806780
Source: CourtListenerOpinion
Date Created: 2015-06-10 15:12:26.192433+00
Date Added: 2024-06-11T08:50:19.652203
License: Public Domain

Jun 10 2015, 10:05 am

ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
Randall R. Fearnow                                         Gregory F. Zoeller
Quarles & Brady, LLP                                       Attorney General of Indiana
Chicago, Illinois 60654
                                                           Frances Barrow
Lucy R. Dollens                                            Deputy Attorney General
Larissa E. Koshatka                                        Indianapolis, Indiana
Quarles & Brady, LLP
Indianapolis, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Northlake Nursing and                                      June 10, 2015
Rehabilitation Center, L.L.C.                              Court of Appeals Cause No.
d/b/a Northlake Nursing and                                49A02-1411-PL-813
Rehabilitation Center,                                     Appeal from the Marion Superior
                                                           Court
Appellant-Petitioner,                                      Cause No. 49D13-1110-PL-41539

        v.                                                 The Honorable Timothy Oakes,
                                                           Judge
State of Indiana Department of
Health,
Appellee-Respondent.

Barnes, Judge.

Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015                   Page 1 of 12
                                               Case Summary
[1]   Northlake Nursing and Rehabilitation Center, L.L.C., (“Northlake”) appeals

      the trial court’s denial of its petition for judicial review of a decision by the

      Indiana State Department of Health (“ISDH”). We affirm.

                                                       Issue
[2]   Northlake raises one issue, which we restate as whether the trial court properly

      denied its petition for judicial review.

                                                       Facts
[3]   Northlake operated a nursing facility in Merrillville, and the ISDH licenses such

      facilities. In January 2009, the ISDH conducted a recertification and licensure

      survey of Northlake’s facility and found that it was “not in compliance with

      health facility regulations.” Appellant’s App. p. 79. The ISDH filed an

      administrative complaint against Northlake, and Northlake agreed to enter into

      a Consent Decree to resolve the complaint. Under the May 2009 Consent

      Decree, the ISDH agreed to issue a three-month probationary license to

      Northlake. At the end of the probationary period, the ISDH agreed to

      reevaluate conditions at the facility. If it found that Northlake was “in

      substantial compliance with 410 I.A.C. 162,” the ISDH agreed to issue a full

      license to Northlake upon Northlake’s submission of an application and license

      fee. If Northlake was not in substantial compliance, the ISDH could extend the

      probationary license. Under Indiana Code Section 16-28-3-4, the ISDH can

      issue no more than three probationary licenses in a twelve-month period.

      Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015      Page 2 of 12
[4]   Northlake’s first probationary license was in effect from May 1, 2009, through

      July 31, 2009. At the end of the probationary license, the ISDH found that

      Northlake was not in substantial compliance and issued a second probationary

      license effective from August 1, 2009, to October 31, 2009. The ISDH again

      found that Northlake was not in substantial compliance during its second

      probationary period and issued a third probationary license effective from

      November 1, 2009, to January 31, 2010. The ISDH again found that Northlake

      was not in substantial compliance during the third probationary period and

      denied issuance of a full license to Northlake.

[5]   On February 1, 2010, the ISDH issued an Emergency Order for Relocation of

      Residents of Northlake. Northlake initiated an administrative appeal of this

      order on February 2, 2010, under ISDH Cause No. AEO-146-10. On February

      3, 2010, ISDH issued a Notice of Non-Renewal of License. Northlake initiated

      an administrative appeal of that order on February 9, 2010, under ISDH Cause

      No. C-814-10. On February 22, 2010, Northlake was notified by the federal

      agency that oversees the Medicare and Medicaid programs in Indiana that its

      Medicaid provider agreement was being terminated effective March 15, 2010.

[6]   Northlake sought a stay of the Emergency Order for Relocation and argued that

      it was in substantial compliance when it filed its license application after the

      second probationary period and that the ISDH was required to issue a full

      license pursuant to the Consent Decree. After a hearing, the administrative

      law judge (“ALJ”) entered findings of fact and conclusions of law denying

      Northlake’s stay request and affirming the issuance of the Emergency Order for

      Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015   Page 3 of 12
      Relocation on March 8, 2010. The ALJ found that Northlake “was not in

      substantial compliance for a large or substantial portion of the second or third

      probationary period” and that the “preponderance of the evidence shows that

      the Emergency Order was valid.” Appellant’s App. p. 70.

[7]   Northlake sought emergency relief by filing a petition for judicial review in the

      Marion Superior Court No. 11 on March 8, 2010 (“First Petition”). The First

      Petition concerned both the Emergency Order for Relocation and the Notice of

      Non-Renewal of License. It sought a stay of both orders before March 15, 2010

      and argued that the orders were arbitrary and capricious. According to

      Northlake, exhaustion of its administrative remedies would be futile because its

      Medicaid certification would be terminated before those remedies concluded,

      and it would suffer irreparable harm because all of the residents would have

      already moved to other nursing facilities. On March 16, 2010, the trial court

      granted a stay of the Emergency Order for Relocation and the Notice of Non-

      Renewal of License until a final determination was made in the judicial review

      action.1

[8]   Northlake’s facility closed on May 7, 2010. On June 30, 2010, Northlake’s

      counsel withdrew from the judicial review action. On August 20, 2010, the trial

      1
        Although the federal agency that governed Medicaid issued a notice on March 31, 2010, that lifted the
      mandatory termination and set a discretionary termination date of April 20, 2010, another survey found that
      Northlake was again not in substantial compliance. The agency then terminated Northlake’s Medicaid
      eligibility. Northlake appealed the termination, but a federal ALJ found that the decision was proper and a
      federal Appeals Board affirmed the ALJ’s decision. Northlake sought judicial review in federal court, but the
      district court denied the petition in August 2014.

      Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015                          Page 4 of 12
       court dismissed Northlake’s petition for judicial review with prejudice because

       Northlake failed to appear at a Trial Rule 41(E) hearing.2

[9]    In October 2010, the ISDH issued a final order that affirmed the ALJ’s March

       2010 order regarding the Emergency Order for Relocation. Northlake then

       filed a second petition for judicial review in Marion Superior Court No. 5

       (“Second Petition”). In November 2013, the trial court granted Northlake’s

       Second Petition. The trial court concluded that the action was not barred by res

       judicata, that the action was not moot, and that “ISDH’s failure to issue

       Northlake a full license to operate its health care facility was a breach of the

       parties’ Consent Decree and was arbitrary, capricious, and contrary to law.”

       Appellant’s App. p. 117. The ISDH did not appeal the trial court’s decision.

[10]   While the trial court was considering the Second Petition, the administrative

       appeal of the Notice of Non-Renewal of License also proceeded. On February

       25, 2011, the ISDH filed a motion to dismiss Northlake’s administrative appeal.

       The ISDH argued that the administrative appeal was moot because: (1)

       2
           Indiana Trial Rule 41(E) provides:

                  Whenever there has been a failure to comply with these rules or when no action has been
                  taken in a civil case for a period of sixty [60] days, the court, on motion of a party or on
                  its own motion shall order a hearing for the purpose of dismissing such case. The court
                  shall enter an order of dismissal at plaintiff’s costs if the plaintiff shall not show sufficient
                  cause at or before such hearing. Dismissal may be withheld or reinstatement of dismissal
                  may be made subject to the condition that the plaintiff comply with these rules and
                  diligently prosecute the action and upon such terms that the court in its discretion
                  determines to be necessary to assure such diligent prosecution.

       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015                                    Page 5 of 12
       Northlake had relocated its residents and closed prior to its license being

       terminated; and (2) ISDH did not have the authority to grant a full license to

       Northlake because Northlake did not have at least four residents. The ISDH

       also argued that Northlake’s petition for administrative review was untimely.

       On May 13, 2011, the ALJ found that Northlake’s petition was timely but that

       it was moot. The ALJ noted that Northlake had initiated judicial review of the

       Notice of Non-Renewal of License in the First Petition but had “elected not to

       pursue or further contest the Non-Renewal of License.” Appellant’s App. p.

       43. The ALJ also determined that Northlake was ineligible to receive a full

       license because it did not have at least four residents. Consequently, the ALJ

       dismissed Northlake’s administrative appeal, and a final order was issued on

       September 26, 2011.

[11]   Northlake then filed another petition for judicial review regarding the Notice of

       Non-Renewal of License in Marion Superior Court No. 13 (“Third Petition”).

       The trial court ultimately entered findings of fact and conclusions of law

       denying Northlake’s Third Petition and affirming the agency action. The trial

       court concluded:

               Respondent’s decision that this case is moot is in conformity with the
               law. Northlake brought a judicial review on the underlying issue of
               the notice of nonrenewal of its license, sought and gained relief in the
               form of a stay of agency action from the court, but closed its facility
               and abandoned the judicial review. Now, because there is no facility
               that ISDH may license due to Northlake’s closure of its facility, this
               Court cannot provide relief to Northlake. Similarly, Northlake already
               brought a claim seeking review of the same underlying issue in a
               previous judicial review, failed to prosecute the case, and that judicial
               review was dismissed with prejudice. Thus, litigation of this case is
       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015        Page 6 of 12
               barred by the principle of res judicata. For these reasons, Northlake’s
               judicial review must be denied and ISDH’s decision is affirmed.
       Appellant’s App. p. 18.

[12]   Northlake filed a motion to correct error, arguing that the trial court’s order

       conflicted with Marion Superior Court No. 5’s November 2013 order in the

       Second Petition. The ISDH argued that the Second Petition concerned only the

       Emergency Order for Relocation and was not relevant to the judicial review of

       the Notice of Non-Renewal of License in the Third Petition. The trial court

       denied Northlake’s motion to correct error. Northlake now appeals.

                                                     Analysis
[13]   Northlake challenges the trial court’s denial of its Third Petition regarding the

       Notice of Non-Renewal of License. “The burden of demonstrating the

       invalidity of agency action is on the party to the judicial review proceeding

       asserting invalidity.” Ind. Code § 4-21.5-5-14(a). Our review is limited to

       determining whether the agency possessed jurisdiction over the subject matter,

       and whether the agency’s decision was made upon substantial evidence, was

       not arbitrary or capricious, and was not in violation of any constitutional,

       statutory or legal principles. Bryant v. Indiana State Dep’t of Health, 695 N.E.2d
975, 978 (Ind. Ct. App. 1998) (citing Ind. Code § 4-21.5-5-14). The trial court

       proceeding is not intended to be a trial de novo, but rather the trial court simply

       analyzes the record as a whole to determine whether the administrative findings

       are supported by substantial evidence. Id. Courts that review administrative

       determinations, at both the trial and appellate level, are prohibited from

       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015           Page 7 of 12
       reweighing the evidence and judging the credibility of witnesses and must

       accept the facts as found by the administrative body. Id. Although a reviewing

       court owes some deference to an administrative agency’s findings of fact, no

       such deference need be accorded an agency determination of a matter of law.

       Id.

[14]   On appeal, Northlake argues that the trial court erred by denying its petition for

       judicial review. Specifically, Northlake argues that its petition was not moot.

       However, the trial court also found that Northlake’s petition should be denied

       because it was barred by res judicata, and Northlake does not address this

       finding by the trial court. We agree with the trial court’s finding regarding res

       judicata.

[15]   The doctrine of res judicata operates to preclude the litigation of matters that

       have already been litigated. Dev. Servs. Alternatives, Inc. v. Indiana Family & Soc.

       Servs. Admin., 915 N.E.2d 169, 179 (Ind. Ct. App. 2009), trans. denied. The

       principle of res judicata is divided into two branches: claim preclusion and issue

       preclusion. “Claim preclusion applies where a final judgment on the merits has

       been rendered which acts as a complete bar to a subsequent action on the same

       issue or claim between those parties and their privies.” Id. “Issue preclusion,

       also referred to as collateral estoppel, bars the subsequent relitigation of the

       same fact or issue where the fact or issue was necessarily adjudicated in a

       former suit and the same fact or issue is presented in a subsequent action.” Id.

       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015     Page 8 of 12
[16]   Claim preclusion is at issue here. When a party argues that the claim

       preclusion component of res judicata applies, four factors must be present,

       namely:

               (1) the former judgment must have been rendered by a court of
               competent jurisdiction; (2) the former judgment must have been
               rendered on the merits; (3) the matter now in issue was, or could have
               been, determined in the prior action; and (4) the controversy
               adjudicated in the former action must have been between parties to the
               present suit or their privies.
       Id. (quoting Indpls. Downs, LLC v. Herr, 834 N.E.2d 699, 703 (Ind. Ct. App.

       2005), trans. denied).

[17]   Here, Northlake sought emergency relief of the Emergency Order for

       Relocation and the Notice of Non-Renewal of License by filing the First

       Petition in March 2010. Northlake’s First Petition sought a stay of both orders,

       and Northlake argued that exhaustion of its administrative remedies would be

       futile. Northlake requested a finding that the ISDH’s Emergency Order for

       Relocation and the Notice of Non-Renewal of License were arbitrary and

       capricious. On March 16, 2010, the trial court granted a stay of the Emergency

       Order for Relocation and the Notice of Non-Renewal of License until a final

       determination was made in the judicial review. However, on June 30, 2010,

       Northlake’s counsel withdrew from the judicial review action. On August 20,

       2010, the trial court dismissed Northlake’s petition for judicial review with

       prejudice because Northlake failed to appear at a Trial Rule 41(E) hearing. The

       administrative appeal of the Notice of Non-Renewal of License later continued,

       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015      Page 9 of 12
       but the ALJ dismissed it, and the trial court, in the Third Petition, found in part

       that the action was barred by res judicata.

[18]   The first factor in determining whether res judicata applies is whether the

       former judgment was rendered by a court of competent jurisdiction. In its reply

       brief, Northlake argues that the trial court in the First Petition lacked subject

       matter jurisdiction because Northlake had not exhausted its administrative

       remedies. Our supreme court has held that “the exhaustion of administrative

       remedies under [the Administrative Orders and Procedures Act] is a procedural

       error and does not implicate the trial court’s subject matter jurisdiction.” First

       Am. Title Ins. Co. v. Robertson, 19 N.E.3d 757, 760 (Ind. 2014), amended on reh’g,

       27 N.E.3d 768 (Ind. 2015). Moreover, Northlake argued in the First Petition

       that it was not required to exhaust its administrative remedies because it would

       suffer irreparable harm while the administrative appeal was finalized. See, e.g.,

       State Bd. of Tax Comm’rs v. Ispat Inland, Inc., 784 N.E.2d 477, 483 (Ind. 2003)

       (holding that a party may gain judicial review without exhausting its

       administrative remedies “where pursuit of administrative remedies would be

       futile, where strict compliance would cause irreparable harm, and where the

       applicable statute is alleged to be void on its face”). Northlake cannot now

       argue that the trial court in the First Petition lacked the ability to hear the case.

       The judgment was rendered by a court of competent jurisdiction.

[19]   The next factor is whether the former judgment was rendered on the merits.

       The trial court dismissed the First Petition with prejudice under Indiana Trial

       Rule 41(E). “Unless the court in its order for dismissal otherwise specifies, a

       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015    Page 10 of 12
       dismissal under Trial Rule 41(E) operates as an adjudication upon the merits.”

       Indiana Dep’t of Natural Res. v. Ritz, 945 N.E.2d 209, 213 (Ind. Ct. App. 2011)

       (citing Ind. Trial Rule 41(B)), trans. denied. We have held that “a dismissal with

       prejudice constitutes a dismissal on the merits and is therefore conclusive of the

       rights of the parties and res judicata as to the questions that might have been

       litigated.” Baker & Daniels, LLP v. Coachmen Indus., Inc., 924 N.E.2d 130, 135

       n.5 (Ind. Ct. App. 2010), trans. denied; see also Ilagan v. McAbee, 634 N.E.2d 827,

       829 (Ind. Ct. App. 1994). Consequently, the dismissal with prejudice was a

       judgment rendered on the merits.

[20]   The next factor is whether the matter now in issue was, or could have been,

       determined in the prior action. In the First Petition, Northlake asked the trial

       court to enter a stay of the Emergency Order for Relocation and the Notice of

       Non-Renewal of License and to find that the orders were arbitrary and

       capricious. The trial court granted the stay, but Northlake abandoned

       continued judicial review. The trial court could have determined whether the

       Notice of Non-Renewal of License was arbitrary and capricious, which is the

       same issue presented in the Third Petition.

[21]   The final factor is whether the controversy adjudicated in the former action was

       between parties to the present suit or their privies. Northlake and the ISDH are

       parties to both the First Petition and the Third Petition.

       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015   Page 11 of 12
[22]   All of the factors are present, and we conclude that the trial court properly

       found that res judicata barred Northlake’s Third Petition.3 Because the trial

       court properly denied Northlake’s Third Petition based on res judicata, we need

       not address Northlake’s mootness arguments. See, e.g., Angelopoulos v.

       Angelopoulos, 2 N.E.3d 688, 698 (Ind. Ct. App. 2013) (affirming the trial court’s

       dismissal of the plaintiff’s claims based on res judicata), trans. denied.

                                                    Conclusion
[23]   The trial court properly denied Northlake’s Third Petition based on res judicata.

       We affirm.

[24]   Affirmed.

       Riley, J., and Bailey, J., concur.

       3
         In the context of its mootness argument, Northlake briefly argues that the res judicata holding conflicts with
       the holding in the Second Petition. We acknowledge that, “[u]nder traditional res judicata doctrine, where
       there are conflicting judgments and each would be entitled to preclusive effect if it stood alone, the last in
       time controls in subsequent litigation.” Ruth B. Ginsburg, Judgments in Search of Full Faith and Credit: The
       Last-in-Time Rule for Conflicting Judgments, 82 Harv. L. Rev. 798 (1969). However, Northlake makes no
       cogent analysis that the Second Petition, which concerned the Emergency Order for Relocation, is entitled to
       preclusive effect. Consequently, we decline to address res judicata in the context of the Second Petition.

       Court of Appeals of Indiana | Opinion 49A02-1411-PL-813 | June 10, 2015                           Page 12 of 12