William Laurence Hardy, M.D. v. State of Tennessee, Department of Health, Division of Health Related Boards ( 2010 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
December 2, 2009 Session
WILLIAM LAURENCE HARDY, M.D. v.
STATE OF TENNESSEE, DEPARTMENT OF HEALTH, DIVISION OF
HEALTH RELATED BOARDS
Direct Appeal from the Chancery Court for Davidson County
No. 07-596-IV, 07-2258-III-(IV) Russell Perkins, Chancellor
No. M2009-00619-COA-R3-CV - Filed January 19, 2010
This is an appeal from the decision of the Chancery Court, reversing a decision of an
administrative judge. The administrative judge denied Appellant’s Motion to Dismiss, but
found the parties had entered into two separate agreements and ordered the parties to submit
an agreed order to the Medical Board for review. On appeal, the Chancery Court, in
reversing the decision of the administrative judge, found that the parties had not entered into
any agreements and that the administrative judge could not order the parties to enter into a
consent order. Appellant appeals from this decision, contending that the parties have entered
into two separate agreements and that due process requires this action be dismissed. Upon
review of the record, we find material facts in dispute. Therefore the administrative judge
erred in finding that the parties entered into two agreements, and the Chancery Court erred
in finding that the parties did not enter into any agreements. Further, we affirm the Chancery
Court in finding that the administrative judge erred in ordering the parties to submit an
agreed order to the Medical Board after the Appellee withdrew its consent. Affirmed in part,
reversed in part and remanded.
Tenn. R. App. P. 3. Appeal as of Right; Judgment of the Chancery Court Affirmed
in Part, Reversed in Part and Remanded
J. S TEVEN S TAFFORD, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and D AVID R. F ARMER, J., joined.
Stephen Ross Johnson, Wade V. Davies, Knoxville, Tennessee, for the appellant, William
Laurence Hardy, M.D.
Robert E. Cooper, Jr., Attorney General and Reporter; Michael E. Moore, Solicitor General;
Sue A. Sheldon, Senior Counsel, for appellee, State of Tennessee, Department of Health
Division of Health Related Boards.
OPINION
On April 5, 2006, Appellee State of Tennessee Department of Health, Division of
Health Related Boards (“State”) filed Notice of Charges against Appellant William Laurence
Hardy, M.D. (“Dr. Hardy”).1 Dr. Hardy responded on April 17, 2006, by filing a Motion to
Dismiss. In his Motion to Dismiss, Dr. Hardy argued violations of due process, and prior
accord and satisfaction. Dr. Hardy attached to his Motion: (1)the depositions of Henry
Weddle and Rhonda Hooks-Kendrick and the exhibits thereto, (2) a letter dated July 12,
2005, to Dr. Hardy from Andrei Lee, Assistant General Counsel for the State, and (3) a letter
dated July 18, 2006, from Stephen Johnson, counsel for Dr. Hardy, to Laurie Doty and
Schean Belton, counsel for the State. The State filed a response to Dr. Hardy’s Motion to
Dismiss along with a Motion to Strike Dr. Hardy’s Motion to Dismiss.
The administrative judge held a telephonic hearing on Dr. Hardy’s Motion to Dismiss
on May 1, 2007. During this hearing, the administrative judge heard arguments from both
parties on the Motion to Dismiss. After hearing arguments, and reviewing “the pleadings,
testimony of the witnesses and a full and complete review of the record,” the administrative
judge denied the Motion to Dismiss.2 However, in addition to denying the Motion to
Dismiss, the administrative judge found that the “uncontroverted proof” showed that the
parties reached a settlement agreement resulting in an “Agreed Order” in May 2006, and had
reached another settlement agreement prior to the alleged 2006 agreement. The
administrative judge found that the first agreement could not be “reconstituted.” Pursuant to
these findings, the administrative judge ordered that the “Agreed Order” be presented to the
Medical Board and that neither party speak against the “Agreed Order.” The administrative
judge ordered the State to pay all expenses incurred after May 2006, including attorney fees.
The administrative judge found that Due Process required specific performance, but that
dismissal was not necessary because the “Agreed Order” could be entered. The
administrative judge also held that Dr. Hardy should be allowed to renew his Motion to
Dismiss on the basis of laches if the Medical Board did not approve the Agreed Order. When
issuing her ruling, the administrative judge also denied the State’s Motion to Strike Dr.
Hardy’s Motion to Dismiss. On May 8, 2007, the administrative judge entered an order
1
We note that Dr. Hardy’s name appears both as William Laurence Hardy and William Lawrence
Hardy throughout the record.
2
The testimony the administrative judge considered was the depositions of Henry Weddle and
Rhonda Hooks-Kendrick that were attached to Dr. Hardy’s Motion to Dismiss. From our review of the
record, it does not appear that any additional evidence was presented during the hearing on Dr. Hardy’s
Motion to Dismiss.
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reflecting this decision.
Pursuant to both parties’ request, the administrative judge held the May 8, 2007 Order
in abeyance to allow the parties time to further negotiate the matter. On August 14, 2007,
finding that the parties were unable to reach an agreement, the administrative judge entered
an order placing the prior decision into effect. The State filed a Petition for Reconsideration,
which the administrative judge denied.
Dr. Hardy filed an interlocutory appeal in the Chancery Court pursuant to Tenn. Code.
Ann. § 4-5-322(a)(1),3 appealing the denial of his Motion to Dismiss.4 After reviewing the
administrative record, the Chancery Court entered an order on February 27, 2009, affirming
the administrative judge’s denial of the Motion to Dismiss, but reversing the decision of the
administrative judge finding two settlement agreements. The Chancery Court made the
following conclusions of law: (1) the first agreement was never memorialized in a way that
would be enforceable against the state or signed by a representative of the State; (2) the July
24, 2005 letter from Dr. Hardy’s former counsel is not an agreement that could bind the State
or “serve as a predicate for a due process violation”; (3) the unsigned Agreed Order from
2006 is not a binding agreement; (4) because there were no binding agreements, there can
be no breach; (5) the parties had not finalized their agreements, nor submitted them to the
approval process; (6) Dr. Hardy’s reliance on criminal constitutional jurisprudence is
misplaced and this appeal is governed by civil legal standards; and (7) the State cannot be
bound by “a proposed settlement agreement or a contract based on letters from opposing
counsel, unsigned memoranda or orders, oral promises, or the recommendation of counsel
for the State.” The Chancery Court reiterated that it was concluding that the parties did not
reach any enforceable settlement agreement. The Chancery Court also held that courts may
not compel parties to be bound by an unsigned agreed order, as a party may withdraw his or
her consent before the order is submitted. Finding that there were no enforceable
agreements, the Chancery Court held that Dr. Hardy’s due process rights had not been
violated. The Chancery Court reasoned that Dr. Hardy had an opportunity for due process
in the contested hearing, and that, if he had been prejudiced, the administrative judge could
then consider any appropriate sanctions.
3
Tenn. Code Ann. §4-5-322(a)(1) provides in pertinent part, that “[a] preliminary, procedural or
intermediate agency action or ruling is immediately reviewable if review of the final agency decision would
not provide an adequate remedy.
4
This appeal was combined with another interlocutory appeal by Dr. Hardy, appealing the
administrative judge’s denial of Dr. Hardy’s motion to compel the State to produce Tennessee Bureau of
Investigation records. Dr. Hardy did not appeal the Chancery Court’s decision on this issue and therefore we
do not consider it on appeal.
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Dr. Hardy appeals the decision of the Chancery Court. He submits the following
issues for our review:
1. Whether the Chancery Court erred reversing the administrative judge’s finding that
the parties had entered into two separate settlement agreements?
2. Whether the administrative judge erred in determining that the first agreement could
not be reconstituted?
3. Whether due process requires dismissal of the administrative proceeding against Dr.
Hardy’s medical license?
Standard of Review
All disciplinary proceedings against medical licensees are to be conducted in
accordance with the Uniform Administrative Procedures Act (“UAPA”). Tenn. Code Ann.
§ 63-6-216. Accordingly, this Court reviews the administrative decision under the same
standard as the trial court. Miller v. Tenn. Board of Nursing, 256 S.W.3d 225, 229 (Tenn.
Ct. App. 2007). The standard of review is set forth in Tenn. Code Ann. § 4-5-322(h), which
provides:
(h) The court may affirm the decision of the agency or remand
the case for further proceedings. The court may reverse or
modify the decision if the rights of the petitioner have been
prejudiced because the administrative findings, inferences, or
conclusions or decisions are:
(1) In violation of constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion; or
(5)(A) Unsupported by evidence that is both substantial and
material in light of the entire record.
(B) In determining the substantiality of evidence, the court
shall take into account whatever in the record fairly
detracts from its weight, but the court shall not substitute
its judgment for that of the agency as to the weight of the
evidence on questions of fact.
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Tenn. Code Ann. § 4-5-322.
The court reviewing an administrative decision must use a three step analysis. Dillard
Smith Constr. Co. v. Comm’r of Labor and Workforce Dev., 2009 WL 4841073, No.
M2008-00735-COA-R3-CV at *4 (Tenn. Ct. App. 2009). “First, the court must determine
whether the agency identified the appropriate legal principles applicable to the case.” Id.
(citing McEwen v. Tenn. Dept. Of Safety, 173 S.W.3d 815, 820 (Tenn. Ct. App. 2005). Next,
the court must review the agency’s factual findings and determine whether they are supported
by substantial and material evidence. Id. Third, the court must examine how the agency
applied the law to the facts. Id. In reviewing the trial court’s review of an administrative
decision, this Court must determine whether the trial court applied the proper standard of
review. Papachristou v. Univ. of Tenn., 29 S.W.3d 487, 490 (Tenn. Ct. App. 2000).
Analysis
This appeal centers on Dr. Hardy’s Motion to Dismiss. The UAPA “directs the
[administrative judge] to permit the parties to submit motions at appropriate stages in the
proceedings.” Yokley v. State Bd. of Educ., 2009 WL 1410225, NO. M2008-00679-COA-
R3-CV, at *3 (citing Tenn. Code Ann. §4-5-308(a)(2005)). Further, the Tennessee
Department of State rules allow parties to seek relief through motions. Tenn. Comp. R. &
Regs. 1360-4-1-.09 (2004). Accordingly, the administrative judge has the authority to hear
and rule on motions to dismiss. However, the administrative judge must apply the proper
legal principles when ruling on a motion. The Tennessee Department of State rules require
that the administrative judge apply the Tennessee Rules of Civil Procedure in any situation
not otherwise specifically addressed. Tenn. Comp. R. & Regs. 1360-4-1-.01(3)(2004).
Finding no other rule or statute on how the administrative judge is to approach a motion to
dismiss, we will review the administrative judge’s decision based on the Tennessee Rules of
Civil Procedure.
If a party files a motion to dismiss for failure to state a claim and includes matters
outside the pleadings, the trial court, upon considering the material outside the pleadings,
must review the motion as a motion for summary judgment pursuant to Tenn. R. Civ. P. 56.
Tenn. R. Civ. P. 12.02; see also Staats v. McKinnon, 206 S.W.3d 532, 543 (Tenn. Ct. App.
2006). In this case, the administrative judge stated that she had reviewed and considered the
pleadings, testimony of the witnesses, and the record, in making her decision. Therefore, we
review the administrative decision based on the standards required for a motion for summary
judgment.
When a motion for summary judgment is made, the moving party has the burden of
showing that “there is no genuine issue as to any material fact and the moving party is
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entitled to judgment as a matter of law.” Tenn. R. Civ. P. 56.04. The moving party may
accomplish this by either: (1) affirmatively negating an essential element of the non-moving
party’s claim; or (2) showing that the non-moving party will not be able to prove an essential
element at trial. Hannan v. Alltel Publ’g Co., 270 S.W.3d 1, 8-9 (Tenn. 2008). However,
“[i]t is not enough for the moving party to challenge the nonmoving party to ‘put up or
shutup’ or even to cast doubt on a party’s ability to prove an element at trial.” Id. at 8. If the
moving party’s motion is properly supported, “The burden of production then shifts to the
nonmoving party to show that a genuine issue of material fact exists.” Id. at 5(citing Byrd
v. Hall, 847 S.W.2d 208, 215(Tenn. 1993)). The non-moving party may accomplish this by:
“(1) pointing to evidence establishing material factual disputes that were overlooked or
ignored by the moving party; (2) rehabilitating the evidence attacked by the moving party;
(3) producing additional evidence establishing the existence of a genuine issue for the trial;
or (4) submitting an affidavit explaining the necessity for further discovery pursuant to Tenn.
R. Civ. P., Rule 56.06.” Martin v. Norfolk Southern Ry. Co., 271 S.W.3d 76, 84 (Tenn.
2008)(citations omitted).
When reviewing the evidence, we must determine whether factual disputes exist. In
evaluating the decision to grant summary judgment, we review the evidence in the light most
favorable to the nonmoving party and draw all reasonable inferences in the nonmoving
party’s favor. Stovall v. Clarke, 113 S.W.3d 715, 721 (Tenn. 2003). If we find a disputed
fact, we must “determine whether the fact is material to the claim or defense upon which
summary judgment is predicated and whether the disputed fact creates a genuine issue for
trial.” Mathews Partners, 2009 WL 3172134 at *3(citing Byrd, 847 S.W.2d at 214). “A
disputed fact is material if it must be decided in order to resolve the substantive claim or
defense at which the motion is directed.” Byrd, 847 S.W.2d at 215. A genuine issue exists
if “a reasonable jury could legitimately resolve the fact in favor of one side or the other.” Id.
In this case, the administrative judge denied Dr. Hardy’s motion. We have reviewed
the record and find that there are material issues of fact in dispute. The parties dispute
whether and when any agreement was entered into, who had authority to enter into any such
agreement, what the proper procedure is to settle the action, and what the terms were of any
enforceable agreement. Accordingly, the administrative judge was correct in denying Dr.
Hardy’s motion.
However, the administrative judge, after denying the motion, went on to make the
factual finding that the parties had entered into two separate agreements and to order the
parties to submit the “Agreed Order” to the Medical Board. By doing so, the administrative
judge failed to follow the proper legal procedure. A motion for summary judgment is not a
substitute for a trial on the merits. Byrd, 847 S.W.2d at 210. “[T]he purpose of a summary
judgment proceeding is not the finding of facts, the resolution of disputed material facts, or
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the determination of conflicting inferences reasonably drawn from those facts. ‘The purpose
is to resolve controlling issues of law, and that alone.’” Id. at 215 (citations omitted). In
considering Dr. Hardy’s motion, the administrative judge was to first determine whether
there were material facts in dispute. Only upon finding that there were no material facts in
dispute could the administrative judge grant the motion and enter any appropriate order. If
the administrative judge found material facts in dispute, the analysis should have ended there,
with the administrative judge denying the motion and scheduling the case for an evidentiary
hearing. The trial court, in ruling on a motion for summary judgment, is not to weigh the
evidence. Id. Here the administrative judge, despite the existence of disputed material facts,
weighed the evidence, made factual determinations and entered an order. By failing to
follow the proper legal principles for a motion for summary judgment, the administrative
judge erred.
Moreover, the administrative judge, regardless of whether there was in fact a prior
agreement, erred by ordering the parties to submit the “Agreed Order” to the Medical Board
and requiring that neither party speak against the order. “[A] valid consent judgment can not
be entered by a court when one party withdraws his consent and this fact is communicated
to the court prior to entry of the judgment.” Harbour v. Brown, 737 S.W.2d 598. 599 (Tenn.
1987)(citations omitted). The parties must consent at the time the agreement is presented to
the court. Id. Until the order is entered by the court, either party may withdraw its consent.
Id. “This is not to say that the compromise agreement may not be a binding contract, subject
to being enforced as other contracts, but only that the court may not enter judgment based on
the compromise agreement, when it has notice that one of the parties is no longer
consenting....” Id.
Tenn. Adm. R. & Regs. 0880-2-.11 requires the Medical Board to approve any
settlement agreement before the agreement may become final. Accordingly, either party may
withdraw its consent until the agreement is presented to the Medical Board. In this case, the
State disputes that it ever agreed to settle the claim against Dr. Hardy. Therefore, consent,
if any, was withdrawn before the agreement was presented to the Medical Board for
approval. Consequently, the administrative judge acted erred in ordering the parties to
present the “Agreed Order” to the Medical Board.
Due Process
Our opinion renders all remaining issues moot. Nevertheless in the interest of judicial
economy and because the administrative judge held that due process required specific
performance, and Dr. Hardy relies significantly on the due process argument, we will briefly
address that issue. Dr. Hardy contends on appeal that, because the parties have twice settled
the claim, due process requires that this action be dismissed. “A professional license, issued
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by a State, which can be suspended or revoked only upon a showing of cause, is a
constitutionally protected property interest because the holder of the license has a clear
expectation that he or she will be able to continue to hold the license absent proof of culpable
conduct.” Martin v. Sizemore, 78 S.W.3d 249, 262-63 (Tenn. Ct. App. 2001)(citing Barry
v. Barchi, 443 U.S. 55, 64 & n.1 (1979)). The Tennessee Supreme Court recognized the
right to practice medicine as a constitutionally protected property interest in 1924. State Bd.
Of Med. Exam’rs v. Friedman, 263 S.W. 75, 79 (Tenn. 1974). A person’s liberty or
property interest cannot be taken away without due process. U.S. Const. amend. V & IV;
Tenn. Const. Art 1, §8.
Generally, due process requires notice and opportunity to be heard. Miller v. Tenn.
Bd. Of Nursing, 265 S.W.3d 225, 234 (Tenn. Ct. App. 2007)(citing Manning v. City of
Lebanon, 124 S.W.3d 562, 566 (Tenn. Ct. App. 2003)). Dr. Hardy has not provided this
Court with any authority requiring his case to be dismissed and we find none in our case law.
Moreover, whether the claim has been settled at all remains in dispute. The UAPA provides
for procedural safeguards in contested medical license revocation cases. See Watts v.
Burkhart, 978 F.2d 269, 275 (6th Cir. 1992). UAPA procedure “scrupulously protects the
fundamental right of notice and opportunity to be heard...” Id. Dr. Hardy has not alleged
that he was not provided either sufficient notice of the charges against him, or an opportunity
to be heard. In fact, from our review of the record, it appears that a contested hearing was
set when Dr. Hardy appealed from the administrative judge’s decision and was stayed
pursuant to his request. Accordingly, we do not find that due process requires dismissal of
the action. Dr. Hardy has been afforded due process by being given proper notice of the
charges and an opportunity to be heard, where he may present evidence of the alleged
settlement agreements and evidence disputing the substantive allegations.
Conclusion
In sum, we find that the Chancery Court did not err in reversing the decision of the
administrative judge finding that the parties had entered into two separate settlement
agreements. The Chancery Court, however, did err by not finding that the administrative
judge applied improper legal principles in reviewing Dr. Hardy’s motion and making the
findings that the parties had entered into two separate settlement agreements. While the
administrative judge denied Dr. Hardy’s motion, it effectively granted summary judgment
by finding that the parties had entered into two separate agreements. Further, we find that
the Chancery Court also applied improper legal principles when it found that the parties had
not entered into any enforceable agreements. Because there are disputed material facts, it
cannot yet be determined whether there are any enforceable agreements. Additionally, we
find that the Chancery Court correctly held that the administrative judge did not have the
authority to order the parties to present the “Agreed Order” to the Medical Board after the
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State withdrew its consent.
For the foregoing reasons we affirm in part and reverse in part the decision of the
Chancery Court and remand for entry of an order in accordance with this decision. Costs of
this appeal are taxed equally against the Appellant, William Laurence Hardy, M.D. and his
surety, and the Appellee, State of Tennessee, Department of Health Division of Health
Related Boards, for which execution may issue if necessary.
_________________________________
J. STEVEN STAFFORD, JUDGE
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