Petition of University Hospitals Authority

953 P.2d 314, 1997 WL 819439

• Court: Supreme Court of Oklahoma
• Decided: January 29, 1998
• Docket: 90212
• Status: Published

Opinions

WATT, Justice:

FACTS AND PROCEDURAL . BACKGROUND

¶ 1 This is' an original action brought by petitioners University Hospitals Authority and University Hospitals Trust seeking approval by this Court of a lease of the University Hospitals from University Hospitals Trust to HCA Health Services of Oklahoma, d/b/a Presbyterian Hospitals¹ pursuant to process issued in conformance with § 3225 of the Act, which is set out in full in note 3.

¶2 In 1993 the Legislature transferred “jurisdiction, supervision, management and control” of the University Hospitals from the Department of Human Services to the Authority. 63 O.S.Supp.1993 § 3204. Section 3204 is a part of the University Hospitals Authority Act, 63 O.S.Supp.1993 §§ 3201, et seq. The Legislature amended the Act in 1997 to authorize the creation of a public trust to be called the University Hospitals Trust. 63 O.S.Supp.1997 § 3224.² The Trust, the Authority, and HCA, together with the Board or Regents of the University of Oklahoma, agreed to the lease of the University Hospitals to HCA, called the “Transaction” by the parties. The Transaction is memorialized in an agreement called the “Closing Agreement,” which includes by reference several earlier agreements.

¶ 3 Under the terms of the Act the Legislature made a public policy determination that the needs of Oklahoma citizens would be best served if the Authority were “charged with the mission of operating or leasing ” the hospitals. [Emphasis added.] 63 O.S.Supp. 1997 § 3203.B.

¶4 The Act requires that before any “proposed agreement regarding the lease and operations of the University Hospitals” could become effective, it would have to be approved by the Contingency Review Board, and by this Court. 63 O.S.Supp. § 3225.³ The members of the Contingency Review Board are the Governor, the Speaker of the House of Representatives, the President Pro Tem of the Senate, and the Director of State Finance, who is an ex officio non voting member. 74 O.S.Supp.1992 § 3605. The Contingency Review Board approved the Transaction.

¶ 5 If this Court is “satisfied that the proposed agreement is in accordance with the ... Act and Oklahoma Laws” the Act states that we shall “enter a declaratory judgment approving and declaring the proposed agreement to be valid,” and “permanently [enjoin] all persons described in the notice [of the application filed in the Supreme Court] ... irom ... instituting any-action or proceeding contesting the validity of the proposed agreement.” 63 O.S.Supp.1997 § 3225.B.3.

¶ 6 No contention is made that the Act violates this Court’s proscription against issuing advisory opinions, established, in Application of Fun Country Development Authority, 1977 OK 138, 566 P.2d 1167, and we hold that it does not do so because the Act called for notice and gave all protestants the opportunity to be heard. Thus, there is before us an actual case or controversy, and our decision today is not advisory. Further, because of the importance to the public of settling the issue of the lawfulness of the Transaction, we hold that the Act appropriately invoked this Court’s jurisdiction. Application of Goodwin, 1979 OK 106 ¶ 2, 597 P.2d 762.⁴

THE TRANSACTION

¶ 7 The Transaction involves a long term lease and transfer of the University Hospitals properties and other non-cash assets from the Authority to the Trust. The Trust agrees in a sublease and contract to transfer to HCA the right to use those assets and operate the Hospitals. A Joint Operating Agreement provides how the University Hospitals and HCA’s Presbyterian Hospital are to be operated. The Trust retains all duties imposed upon it under the Act. The day-today management and operation of the Hospitals is left to HCA. Certain major decisions, however, are reserved for decision by a Governing Committee created by the Act. At closing, HCA is to pay the Trust $19,200,-000.00, and the University of Oklahoma $10,-000,000.00. HCA is to deposit $10,800,000.00 in an interest bearing escrow account, and pay from it to the University four annual installments of $2,700,000.00 each. In return, all revenues from the operation of the Hospitals will be owned exclusively by HCA but HCA is to pay up to $9,000,000.00 per year of the Hospitals’ earnings plus 30% of all pre-tax earnings of the Hospitals over $39,000,000.00. The Agreement expressly states that it does not create a partnership, joint venture, or agency relationship between the Trust and HCA.

¶ 8 In a separate “Indigent Care Agreement” HCA has agreed with the Authority to provide indigent care at all HCA hospitals. HCA agrees to provide care at costs defined in the Agreement in return for the Authority’s promise to pay to HCA the amounts appropriated for indigent care by the Legislature.

¶ 9 The Regents and HCA have agreed that HCA will continue to allow students and faculty at the University of Oklahoma Health Sciences Center to use the University Hospitals, and the University of Oklahoma will continue to use the University Hospitals as its primary teaching hospitals. HCA also agrees to use its best efforts to provide patients under managed care agreements for treatment to the Hospitals, and to pay to the University monthly compensation specified in the agreement for the services provided.

¶ 10 The only Protestants who responded to the Notice of this proceeding within the time allowed by the Notice and by the order of this Court of October 13, 1997 that all protests were to be filed not later than November 3,1997 and are represented by counsel are Common Cause Oklahoma, the N.A.A.C.P., Oklahoma Branch, and the Oklahoma Coalition for Health Security. Their counsel candidly concedes that this Court has jurisdiction, under the Act, and that the parties to the Transaction complied with the requirements of the Act.⁵

DISCUSSION

The Standard of Review

¶ 11 Protestants have raised several public policy issues, some of which are that the Transaction will cause staff reductions at the University Hospitals, that HCA should not be allowed to lease and operate the hospitals because it is a large private corporation, that the Transaction will put competing hospitals out of business, that the costs of health care will rise, and that HCA will gain control over medical education in Oklahoma. In addition, some Protestants raise an ethical issue, claiming that the President pro tem of the Senate and the Governor, both members of the Contingency Review Board, have an unethical and unlawful conflict of interest because of their relationship with HCA and that we should, therefore, declare the Transaction unlawful. The public policy issues are within the purview of the Oklahoma Legislature, and the ethics issue, if any, should initially lie within the province of the Ethics Commission and the Legislature. These issues are, therefore, not available to this Court as reasons to declare the Transaction unlawful. In Application of Oklahoma Capitol Improvement Authority, 1960 OK 207, 355 P.2d 1028, 1031, we said:

In construing the constitutionality of a statute the Supreme Court is not authorized to consider its propriety, wisdom, or its practicability as a working proposition. Those questions are clearly and definitely established by our fundamental law to a certainty as functions of the legislative department of the government.... There is a presumption that the act is constitutional.... Courts must sustain statutes, if possible, and nullify them only when they are clearly unconstitutional.

A determination of the validity of the claimed ethics violations is constitutionally vested with the Ethics Commission. This Court does not exercise power that is constitutionally granted to another entity. Okla. Const. Art. IV § 1; State v. Freeman, 1968 OK 54 ¶¶ 35-43, 440 P.2d 744, 753-54. Thus, the public policy and ethics issues listed above are beyond our purview here and we must limit our review to whether the Act violates other laws or is unconstitutional. We expressly refuse to pass on the wisdom and business advisability of the Transaction, or the lack thereof. Here, we conclude that the Transaction is not in discord with the requirements of the Act and other Oklahoma law.

¶ 12 Protestants raise two issues into which we shall inquire: (1) Did Petitioners violate the Open Meeting Act, 25 O.S.1991 §§ 301, et seq., and the Open Records Act, 51 O.S.Supp.1997 §§ 24A.1, et seq.; and (2) Does the Transaction violate Okla. Const. Art. 10 § 15. For the reasons discussed below, we declare that neither the Open Meeting Act, the Open Records Act nor Okla. Const., Art. 10 § 15, was violated.

The Transaction Violates Neither the Open Meeting Act nor the Open Records Act

¶ 13 Title 63 O.S.Supp.1997 § 3207.1 expressly, provides that the Authority is subject to the Open Meeting Act, 25 O.S.1991 §§ 301, et seq., and to the Open Records Act, 51 O.S.Supp.1997 §§ 24A.1, et seq. Nevertheless, we find no violation of either act here.

¶ 14 The obligation imposed on public bodies to hold open meetings and to give notice of such meetings is set out in 25 O.S.1991 § 303 of the Open Meeting Act, which provides in relevant part as follows:

All meetings of public bodies ... shall be held at specified times and places ... and shall be open to the public.... All meetings of such public bodies ... shall be preceded by advance public notice....

¶ 15 Title 51 O.S.1991 § 24A.2 of the Open Records Act declares that Oklahoma’s public policy and the purpose of the Act is to “ensure and facilitate the public’s right of access to and review of government rec-ords_” Section 24A.3 of the Open Records Act defines the term “Record” as “all documents [used] in connection with the transaction of public business.... ”

¶ 16 Protestants do not claim that they were not given notice of the meetings, or notice of the fact that the agreement with HCA was under consideration. In fact, some or all of the Protestants attended the Authority meeting at which the Closing Agreement was approved. Protestants claim, however, that the Open Meeting Act and Open Records Act were violated because copies of the contract were not made available to them until two days before the Meeting of the authority at which the contract was approved. The Authority observes, without contradiction, that the contract was not completed until two days before the meeting, at which time it was made available to Protestants. Thus, the “record” demanded by Protestants was made available to them as soon as it came into existence. The Authority, therefore, violated neither the Open Meeting Act nor the Open Records Act.

The Transaction Does not Violate Okla. Const, Art. 10 § 15

¶ 17 Protestants urge us to hold that the Transaction violates Okla. Const., Art. 10 § 15, which states in material part:

A. Except as provided by this section, the credit of the State shall not be given, pledged, or loaned to any individual, company, corporation, or association, municipality, or political subdivision of the State, nor shall the State become an owner or stockholder in, nor make donation by gift, subscription to stock, by tax, or otherwise, to any company, association, or corporation.

¶ 18 On December 18, 1997 Protestant, Common Cause Oklahoma, was given the opportunity to introduce evidence it contended would show that the Transaction was a gift in violation of Art. 10 § 15.⁶ Both Common Cause Oklahoma and Petitioners presented evidence. The Referee before whom the hearing was held filed Findings of Fact, conclusions of law, and a Memorandum of Authorities on December 24, 1997. Among other findings, the Referee found as a fact that the Transaction allows the state to eliminate a multimillion dollar annual loss while gaining the potential to earn 1.1 billion dollars over the fifty year term of the lease of the University Hospitals. Based on the record and applicable law, the Referee concluded as a matter of law that (1) the consideration, both monetary and non-monetary, received under the terms of the Transaction prevents the Transaction from constituting a gift that violates Art 10 § 15, and (2)- the Indigent Care Agreement does not violate Art 10 § 15. Common Cause Oklahoma argues that the Transaction violates Art. 10 § 15 in the same way it was violated in Veterans of Foreign Wars v. Childers, 1946 OK, 197 Okla. 331, 171 P.2d 618. There, the legislation at issue had given state money to the VFW, and the VFW was not required to provide any services to the state but was merely directed to help veterans and their families. The Referee concluded that the Transaction was more akin to Burkhardt v. City of Enid, 1989 OK 45, 771 P.2d 608, and Children’s Home & Welfare Association v. Childers, 1946 OK, 197 Okla. 243, 171 P.2d 613. We agree, and approve the Referee’s findings and conclusions.

¶ 19 In Burkhardt the City passed a bond issue to buy Phillips University. The City bought the property, transferred it to a public trust, and the trust then leased the school to Phillips University. The City admitted that the consideration for the transfer was less than the property’s market value. Nevertheless, we rejected the contention that the transfer had been a gift in violation of Art. 10 § 17, which is the version of Art. 10 § 15 that applies to municipalities.⁷ We held that the public benefits flowing to the City of Enid and the obligations assumed by Phillips University from the legislation constituted consideration sufficient to satisfy the requirements of Art. 10 § 17. Burkhardt ¶ 12.

¶ 20 Burkhardt applies here, and we are bound by the Legislature’s express finding that benefits will accrue to Oklahoma citizens as a result of leasing the operations of the University Hospitals to a private organization. 63 O.S.Supp.1997 § 3203.B. Further, the State will realize many millions of dollars from the Transaction.

¶ 21 Protestants argue that the Indigent Care Agreement constitutes a transfer of state money to a private organization in violation of Art. 10 § 15 because the funds to pay HCA for those services are to come from legislative appropriations. This argument ignores the fact that the services HCA ■will provide under the Indigent Care Agreement are services just as are computer service contracts, and other contracts for services that are paid for with appropriated funds. We addressed virtually the same issue in Children’s Home & Welfare Association v. Childers, 197 Okla. 243, 171 P.2d 613 (1946) where we held that a contract between the state and a children’s home for the care of orphaned children did not violate Art. 10 § 15. We held that the payment of appropriated funds in return for these services was not a prohibited transfer of public funds to a private organization.

The Legislature shall not authorize any county or subdivision thereof, city, town, or incorporated district, to become a stockholder in any company, association, or corporation, or to obtain or appropriate money for, or levy any tax for, or to loan its credit to any corporation, association, or individual.

¶ 22 Counsel for Protestants concedes that each of the individual contracts comprising the Transaction is constitutional, but claims that the recitations in the Closing Agreement make the agreements as a whole unconstitutional. Because the Authority and the Trust are both parties to the Closing Agreement, Protestants apparently believe it is ipso facto violative of Art. 10 § 15. For the reasons discussed above, the Closing Agreement and its component contracts are constitutional.

Relief Granted

¶ 23 Section 3225.B.2 of the Act provides that Notice of the petition filed by Petitioners in this Court shall be given to “property owners, taxpayers, citizens, and. all persons having or claiming any right title or interest in the proposed agreement or properties or funds to be affected” by the Transaction. Petitioners gave such a notice on October 13, 1997.

¶ 24 Section 3225.B.3 of the Act provides,

If the Court is satisfied that the proposed agreement is in accordance with the University Hospitals Authority Act and Oklahoma laws, the Court shall enter a declaratory judgment approving and declaring the proposed agreement to be valid and conclusive as to the Authority, the Trust, and all other parties to the proposed agreement; and, upon petition of the Authority, shall issue an order permanently enjoining all persons described in the notice required by this subsection from thereafter instituting any action or proceeding contesting the validity of the proposed agreement.

¶ 25 The materials in the record before us here show that the proposed agreement is not in discord with the University Hospitals Authority Act and Oklahoma laws. This is the only justiciable issue before us. Under Const. Art. 7 § 4 we have jurisdiction to grant the declaratory judgment and in-junctive relief as called for in § 3225.B.3. We grant declaratory judgment but decline to grant injunctive relief. The Transaction’s terms are to be carried out ovér fifty year's. It is impossible to say what circumstances not evident from the record before us today might arise at some future time that would expose a Critical infirmity in the Transaction. Based on the record before us, the proposed agreement is not in discord with the University Hospitals Authority Act and Oklahoma laws. Because of'this conclusion, the parties to the Transaction may proceed as directed by the Act.

,1126 JURISDICTION ASSUMED, AND RELIEF GRANTED PER OPINION.

¶ 27 KAUGER, C.J., SUMMERS, V.C.J., and HODGES, HARGRAVE and WATT, JJ., concur. ¶ 28 OPALA and ALMA WILSON, JJ., concur in judgment. ¶ 29 LAVENDER and SIMMS, JJ., disqualified.

1 . The University Hospitals include University Hospital, Children's’ Hospital of Oklahoma, the Child Study Center, and the O'Donoghue Rehabilitation Institute, all located in Oklahoma City.

2 . 63 O.S.Supp. § 3224 provides:

A. The State of Oklahoma expressly approves the creation of a public trust to be denominated the "University Hospitals Trust”, of which the State of Oklahoma shall be the beneficiary, provided such approval shall be contingent upon the following conditions being satisfied:

1. Finalizing of the Declaration of Trust;

2. Adoption of the Declaration of Trust by an official action of the trustees of the Trust;

3. Submission of the Trust for acceptance of the beneficial interest and approval as required by Section 177 of Title 60 of the Oklahoma Statutes; and

4. The approved Declaration of Trust shall:

a. clearly state that the principal purpose of the University Hospitals Trust is to effectuate the purposes of the University Hospitals Authority as established in the University Hospitals Authority Act,

b. except as otherwise provided by law, provide that the fee simple title to real property held by the University Hospitals Authority shall not be transferred, conveyed, or assigned to the University Hospitals Trust without the express consent of the Legislature as the governing entity of the beneficiary pursuant to Section 176 of Title 60 of the Oklahoma Statutes,

c. provide that any indebtedness incurred by the University Hospitals Trust or the trustees of the Trust shall not be secured with or create a lien upon real property to which title is held by the University Hospitals Authority and shall not involve the bonding capacity of the University Hospitals Authority,

d. provide that the trust estate of the University Hospitals Trust shall not include fee simple title to real property owned by the University Hospitals Authority,

e. clearly state that the creation of the University Hospitals Trust shall not in any way reduce, limit or interfere with the power granted to the University Hospitals Authority in the University Hospitals Authority Act,

f. provide that any lease or contractual agreement involving use of the real property to which title is held by the University Hospitals Authority and any improvements thereto shall contain a provision and covenants requiring the proper maintenance and upkeep of the real property and improvements,

g. provide that the trustees of the University Hospitals Trust shall be the acting members of the University Hospitals Authority as provided in the University Hospitals Authority Act, and

h. provide that the trustees of the University Hospitals Trust shall have the duly to submit an annual report to the Governor, the President Pro Tempore of the Senate, the Speaker of the House of Representatives and members of the Task Force created by subsection D of this section. The report shall be submitted by January 1 of each year and shall include an account of all operations, actions of the Trust, account of all revenue received and disbursed by the Trust for the previous fiscal year. The report shall also provide a complete.accounting of how the Trust meets its primary function of effectuating the purposes of the University Hospitals Authority, as established in the University Hospitals Authority Act. The Trust shall meet with the Task Force created in subsection D of this section to review the contents of the annual report.

B.The University Hospitals Trust shall require any agreements which it enters into with any entity pursuant to Section 3226 of this title for the operations of facilities leased by the University Hospitals Authority to the Trust to include, but not be limited to:

1.The inclusion of four of the five members of the Trust as four of the five members representing the State of Oklahoma as state appointees to the governing committee created pursuant to a proposed agreement;

2. Binding arbitration shall not be involved in such agreements for resolving issues under consideration by the governing committee; and

3. Major decisions shall be resolved by the governing committee, and approval of any major decision by the governing committee must include the approval of a majority of the state appointees and the approval of a majority of the members of the private entity appointees to the governing committee. Major decisions shall include:

a. approval of the annual operating and capital budgets,

b. sale or disposition of assets that individually have a fair market value over Two Hundred Fifty Thousand Dollars ($250,000.00),

c. the termination or transfer or material addition or material diminution of medical services at the Oklahoma Medical Center related to and part of a teaching program of the University of Oklahoma Health Sciences Center, and

d. other major decisions as may be agreed upon by the Trust and the private entity.

C. To the extent it is determined by legislative enactment that the Trust has expended funds in contravention of its mission as set forth in this section, the Trust shall remit, upon thirty (30) days' written notice from the University Hospitals Authority, such sum or sums to the University Hospitals Authority.

D. There is hereby created the "University Hospitals Trust Legislative Advisory Task Force”.

1. The Speaker of the House of Representatives and the President Pro Tempore of the Senate shall each appoint three legislators from their respective legislative bodies, provided that they shall each appoint one member from the minority party.

2. ■ The chair and vice-chair position shall rotate between the House of Representatives and Senate, provided that the Speaker shall appoint the initial chair whose term shall expire on the first day of the First Regular Session of the Forty-sixth Oklahoma Legislature. The chair and vice-chair shall rotate on the first day of the first regular sessions of subsequent legislatures.

3. Members of the Task Force shall be reimbursed by their respective legislative bodies for necessary duties related to the Task Force pursuant to Section 456 of Title 74 of the Oklahoma Statutes.

4. The purpose of the Task Force is to provide a means of communication between the Legislature and the University Hospitals Trust. The Trust shall invite members to attend meetings of the Trust. Task Force members shall be able to participate in discussions of the Trust in an advisory capacity.

3 . 63 O.S.Supp.1997 § 3225 provides:

A. Contingent upon the creation of the University Hospitals Trust as provided in Section 3224 of this title, the Trust, prior to acceptance, shall submit to the Contingency Review Board for review the proposed agreement regarding the lease and operations of the University Hospitals to any entity authorized to transact business in the state and an independent statement as to the fairness of said proposed agreement for the State of Oklahoma. The Contingency Review Board shall upon receipt of the proposed agreement meet within fifteen (15) business days to review the proposed agreement; and unless the Contingency Review Board disapproves the proposed agreement, the proposed agreement may be executed, but no lease of the University Hospitals shall become effective until after Supreme Court approval pursuant to subsection B of this section.

B. 1. If a proposed agreement is not disapproved by the Contingency Review Board pursuant to subsection A of this section, the University Hospitals Authority and University Hospitals Trust, within thirty (30) calendar days after the time for Contingency Review Board action hás expired, may file a petition with the Supreme Court of Oklahoma for a declaratory judgment determining the validity of the proposed agreement. The review of the Court shall be based upon the exercise of any of the powers, rights, privileges, and functions conferred upon the Authority or the University Hospitals Trust, as applicable, under the University Hospitals Authority Act and Oklahoma laws. Exclusive original jurisdiction is conferred upon the Supreme Court to hear and determine such petitions. The Supreme Court shall give such petitions precedence over other business of the Court except habeas corpus proceedings.

,2. Notice of the hearing of such a petition shall be given by a notice published in a newspaper of general circulation in this state that on a day specified the Supreme Court will hear the petition to approve the proposed agreement and enter a declaratory judgment. The notice shall be published one time not less than ten (10) days prior to the date specified for the hearing. The notice shall inform property owners, taxpayers, citizens, and all persons having or claiming any right, title, or interest in the proposed agreement or properties or funds, to be affected by the implementation of the proposed agreement, or affected in any way thereby, that they may file protests against the approval of the proposed agreement, and be present at the hearing to contest the legality of the proposed agreement. The hearing may be adjourned from time to time at the discretion of the Court.

3. If the Court is satisfied that the proposed agreement is in accordance with the University Hospitals Authority Act and Oklahoma laws, the Court shall enter a declaratory judgment approving and declaring the proposed agreement to be valid and conclusive as to the Authority, the Trust, and all other parties to the proposed agreement; and, upon petition of the Authority, shall issue an order permanently enjoining all persons described in the notice required by this subsection from thereafter instituting any action or proceeding contesting the validity of the proposed agreement. A declaratory judgment rendered pursuant to this subsection shall have the force and effect of a final judgment of decree and shall be incontestable in any court in this state.

4. As used in the University Hospitals Authority Act, “proposed agreement” means one or more contracts regarding the lease and operations of the University Hospitals and all other agreements contemplated by or referred to in the contract regarding such lease and operations.

4 . "Whenever widespread interest may demand an immediate resolution of some vital public law issue, no impediment arising from infirmity in the procedural posture of the case — however well recognized in purely private litigation — will bar our exercise of reviewing powers.” Goodwin, 1979 OK 106 ¶ 2, 597 P.2d 762, 764.

5 . On November 19, 1997 counsel for these Protestants filed an application on behalf of another protestant, Gail L. Offerman, M.D. to file a brief on behalf of Dr. Offerman. We denied Dr. Offer-man's application because (1) it was filed out of time, in violation of our October 13, 1997 order that all protests be filed no later than November 3, 1997, and (2) Dr. Offerman’s contentions were raised by other Protestants and are addressed in this opinion.

6 . Our order, dated December 18, 1997, directed that such a hearing be held before the Referee. Other Protestants appeared at the hearing but were not allowed to participate because the purpose of the hearing was to allow Common Cause Oklahoma to present evidence in support of its contention that the Transaction violated Art. 10 § 15.

7 . Art. 10 § 17 provides: