St. Tammany Parish Hosp. Serv. Dist. No. 2 v. Purpera

Full title: ST. TAMMANY PARISH HOSPITAL SERVICE DISTRICT NO. 2 d/b/a SLIDELL MEMORIAL…

Court: STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT

Date published: Aug 10, 2016

2015 CA 1756 (La. Ct. App. Aug. 10, 2016)

Opinion

2015 CA 1756

08-10-2016

ST. TAMMANY PARISH HOSPITAL SERVICE DISTRICT NO. 2 d/b/a SLIDELL MEMORIAL HOSPITAL v. DARYL G. PURPERA, IN HIS OFFICIAL CAPACITY AS LEGISLATIVE AUDITOR OF THE STATE OF LOUISIANA

Harry J. Phillips, Jr. Ashley C. Meredith Baton Rouge, LA and Gilbert F. Ganucheau, Jr. Slidell, LA Attorneys for Plaintiff/Appellant St. Tammany Parish Hospital Service District No. 2 d/b/a Slidell Memorial Hospital Jenifer Schaye Patrick Virgadamo Baton Rouge, LA Attorneys for Defendant/Appellee Daryl G. Purpera, in his Official Capacity as Louisiana Legislative Auditor

HOLDRIDGE, J.

NOT DESIGNATED FOR PUBLICATION On Appeal from the Nineteenth Judicial District Court In and for the Parish of East Baton Rouge State of Louisiana
No. C640630 The Honorable Janice Clark, Judge Presiding Harry J. Phillips, Jr.
Ashley C. Meredith
Baton Rouge, LA
and
Gilbert F. Ganucheau, Jr.
Slidell, LA Attorneys for Plaintiff/Appellant
St. Tammany Parish Hospital
Service District No. 2 d/b/a
Slidell Memorial Hospital Jenifer Schaye
Patrick Virgadamo
Baton Rouge, LA Attorneys for Defendant/Appellee
Daryl G. Purpera, in his Official
Capacity as Louisiana Legislative
Auditor BEFORE: GUIDRY, HOLDRIDGE, AND CHUTZ, JJ. HOLDRIDGE, J.

St. Tammany Parish Hospital Service District No. 2 d/b/a Slidell Memorial Hospital (SMH) appeals from a trial court judgment denying its request for declaratory and injunctive relief. For the reasons that follow, we affirm.

FACTUAL AND PROCEDURAL HISTORY

SMH is a hospital service district created by Act 180 of the 1984 Regular Session of the Louisiana Legislature. SMH operates a hospital and other medical facilities in St. Tammany Parish. As a political subdivision of the state, SMH is required to undergo an annual audit. Pursuant to La. R.S. 46:1064(B) the audits must be completed within six months after the end of the fiscal year. See also La. R.S. 24:513(A)(5)(a)(i). Completed audit reports of the legislative auditor are public records, see La. R.S. 44:6; however, "any documents, data, or information furnished the legislative auditor which are deemed confidential by law" are specifically exempted from public disclosure. La. R.S. 23:513(G).

In June 2014, the Louisiana Legislature enacted 2014 La. Acts, No. 706, § 1 (Act 706), which amended La. R.S. 24:513(A)(1)(a), pertaining to audits, as follows:

(3) The financial statements of the offices of the independently elected public local officials, including judges, sheriffs, clerks of court, assessors, and district attorneys, all parish governing authorities, all political subdivisions created by parish governing authorities or by law , and all districts, boards, and commissions created by parish governing authorities either independently or in conjunction with other units of government, school boards, district public defender offices, municipalities, all political subdivisions created by municipal governing authorities , and all boards and commissions created by municipalities, either independently or in conjunction with other units of government, city courts, quasi-public agencies, housing authorities, mortgage authorities, or other political subdivisions of the state not included within the state's Comprehensive Annual Financial Reports, hereinafter collectively referred to as "local auditee", shall be audited or reviewed by licensed certified public accountants subject to Paragraphs (5) and (6) of this Subsection, but may be audited by the legislative auditor pursuant to Paragraph (4) of this Subsection. The

total compensation , reimbursements, and benefits of an agency head or political subdivision head or chief executive officer related to the position, including but not limited to travel, housing, unvouchered expenses, per diem, and registration fees shall be reported as a supplemental report within the financial statement of the local auditee. Any person authorized to conduct an audit of a governmental entity pursuant to R.S. 37:77, shall be permitted to continue auditing that governmental entity subject to the approval of the legislative auditor provided for in Paragraphs (5) and (6) of this Subsection. [Bolding and underline indicate the provisions added by Act 706.]

Thus, effective August 1, 2014, Act 706 now requires political subdivisions such as SMH to begin providing a supplemental report expressly detailing the compensation and related benefits received by its CEO. Because Act 706 expressly provides that the supplemental report be included "within" the audited financial statement, the legislative auditor concluded that it must be included in the completed audit report and, thus, made available for public review on its website three days after the issuance of the completed report. See La. R.S. 24:513(G) and La. R.S. 44:6.

On June 30, 2014, SMH delivered its completed 2014 audit report, including the supplemental report required by Act 706, to the legislative auditor's office. However, SMH strongly objected to the legislative auditor including the supplemental report in the publicly available audit report posted on the website.

SMH explained that its board of commissioners had designated the amount of compensation it paid to its CEOs to be a "strategic plan"; and, that under the provisions of the Enhanced Ability to Compete Act, La. R.S. 46:1071 et seq., a hospital service district's "marketing strategies" and "strategic plans" are "confidential" and exempt from the Public Records Law. See La. R.S. 46:1073(C). Therefore, SMH claimed that under the law, specifically La. R.S. 24:513(G) and La. R.S. 46:1073, the legislative auditor was precluded from posting the supplemental report on its website.

The legislative auditor disagreed with SMH's position; he maintained that Act 706 reflected the legislature's intent to make the supplemental report available to the public, and, to the extent the Enhanced Ability to Compete Act was in conflict, it had been tacitly repealed by Act 706.

On July 7, 2015, SMH filed a petition for declaratory judgment as well as for preliminary and permanent injunctive relief. SMH prayed that the trial court render judgment declaring that Act 706 did not repeal or supersede any provisions of the Enhanced Ability to Compete Act. SMH also requested an injunction prohibiting the legislative auditor from disclosing to the public any information about the compensation and related benefits it provided its CEO. SMH alleged that it would suffer irreparable harm if the amount of compensation it paid its CEO was made public.

A hearing on SMH's request for a preliminary injunction was ultimately set for August 5, 2015. On the day of the hearing, the parties stipulated as to their agreement to convert the preliminary injunction hearing into a trial on the merits on SMH's permanent injunction and declaratory judgment claims.

During the trial, SMH offered the testimony of David Manella, the chairman of SMH's board of commissioners. Mr. Manella maintained that the board had long considered the compensation and benefits it paid to its CEO to be part of its strategic plan and thus confidential. He testified that there were essentially two reasons why the Board wished to keep the information confidential. First, he indicated a concern that the public, particularly in a relatively small community like Slidell, might not understand why SMH pays its CEO the fairly high compensation that it does and might be unhappy about it. The second reason was that if a competitor of SMH found out how much it paid its CEO, that competitor could possibly offer him more and hire him away from SMH. Therefore, Mr. Manella felt that having to disclose the CEO's compensation and related benefits would put SMH at a "significant disadvantage." On cross-examination, Mr. Manella revealed that SMH's CEO was "under an employment contract."

Thomas Cole, First Assistant Legislative Auditor, was also called to testify. According to Mr. Cole, a total of 25 hospital service districts, including SMH, were required to submit their 2014 completed audits by June 30, 2015, and that SMH was the only one seeking to keep its supplemental report from public disclosure. Mr. Cole maintained that Act 706 required the disclosure of the supplemental report, and that as the latest expression of the legislative will, it trumped the Enhanced Ability to Compete Act.

The legislative auditor also called Senator Eric LaFleur to testify. Senator LaFleur sponsored the bill that ultimately became Act 706. His testimony with respect to Act 706 was generally consistent with Mr. Cole's.

Following the trial's conclusion, the trial court requested that both parties submit proposed findings of fact and law as well as proposed judgments. On August 11, 2015, the trial court signed a judgment in the form provided by the legislative auditor, dismissing SMH's request for injunctive relief. The judgment further decreed that Act 706 was the latest expression of legislative will with regard to financial reporting by hospital service districts and that the supplemental report containing the CEO's compensation was to be included in the publicly-available audit report. The judgment did not reference La. R.S. 46:1073 or the Enhanced Ability to Compete Act.

On August 27, 2015, SMH filed a motion for new trial and/or a motion to stay the effect of the judgment pending appeal. Both motions were subsequently denied.

SMH has appealed the trial court's August 11, 2015 judgment alleging the following three assignments of error: (1) the trial court erred as a matter of law in finding that Act 706 tacitly repealed provisions of the Enhanced Ability to Compete Act, La. R.S. 46:1071, et seq.; La. R.S. 24:513(G); and La. R.S. 44:4.1(B)(31); (2) the trial court erred as a matter of law in admitting into evidence and considering in its decision testimony by Senator LaFleur regarding the legislative intent of Act 706; and (3) the trial court erred in denying its request for declaratory judgment and permanent injunction.

DISCUSSION

As a preliminary matter, we take judicial notice of the fact that, following the trial court's denial of SMH's request to stay the effect of the judgment, SMH's supplemental report was added to its final audit report on the legislative auditor's public website. Therefore, the amount of compensation and related benefits received by SMH's CEO has been publicaly available for almost a year. Nevertheless, because audits must be performed annually, SMH's suit has not been rendered entirely moot. Therefore, the merits of the suit are properly before us.

Without question, Act 706 amended La. R.S. 24:513 to now require auditees (including political subdivisions such as SMH) to include within their financial statements a supplemental report detailing their CEO's compensation and other related benefits. In its suit, SMH has sought injunctive relief and a declaratory judgment declaring that Act 706 does not repeal or supersede the provisions of the Enhanced Ability to Compete Act, particularly La. R.S. 46:1073, which it claims protects its supplemental report from public disclosure. Consequently, most of the parties' arguments, both in the trial court and on appeal, center on whether La. R.S. 24:513 can be reconciled with La. R.S. 46:1073 or whether La. R.S. 24:513 has tacitly repealed La. R.S. 46:1073. However, such arguments are premised on the assumption that La. R.S. 46:1073 is applicable in this case. Consequently, the merits of these arguments, indeed the merits of SMH's entire suit, necessarily require us to first determine whether SMH has born its burden of proving that the pertinent information is protected under La. R.S. 46:1073. Absent such a showing, there is no controversy between the parties, and SMH is not entitled to injunctive relief and a declaratory judgment.

In 1984, the Louisiana Legislature enacted the Enhanced Ability to Compete Act, La. R.S. 46:1071, et seq., in order to help hospital service districts compete in a marketplace were other hospitals and health care providers where entering into economic joint ventures or partnerships to offer integrated health care services. Specifically, La. R.S. 46:1071 provides, in part:

The legislature finds that hospital and other health care providers are contracting to engage in economic joint ventures or form partnerships to offer integrated health care services to the public. The legislature finds that this increasing competition is forcing hospitals and other health care providers to develop market strategies and strategic plans to effectively compete. The legislature further finds that hospital service districts are presently at a competitive disadvantage. The legislature hereby declares that the purpose of R.S. 46:1071 through 1076 is to enhance the ability of a hospital service district to compete effectively and equally in the market for health care services. Towards this end, the provisions of R.S. 46:1071 through 1076 shall be construed liberally. [Emphasis added.]

At issue in this case is La. R.S. 46:1073, which provides, in part:

A. In addition to powers and duties otherwise provided and notwithstanding any law to the contrary, a hospital service district may develop marketing strategies for its existing hospital health services or any hospital health service to be provided in the future and may develop strategic plans for the development of any future hospital health service or facility.
* * * * *
C. Notwithstanding the provisions of R.S. 44:1 et seq. [Public Records Act] or any other law to the contrary, any marketing strategy and strategic plan of a hospital service district commission and the facility owned or operated by the district shall not be public record and shall be confidential but shall be subject to court subpoena. [Emphasis added.]

Louisiana Revised Statutes 46:1072 further provides, in part:

As used in this Subpart, the following words and phrases shall have the following meanings ascribed for each unless the context clearly indicates otherwise:
(1) "Hospital health services" means but is not limited to any clinical, diagnostic, or rehabilitation service and any administrative, managerial, or operational service incident thereto.
* * * * *
(3) "Market strategies" means any plan, strategy, or device developed or intended to promote, sell, or offer to sell any hospital health service.
(4) "Strategic plans" means any plan, strategy, or device developed or intended to construct, operate, maintain a health facility or engage in providing, promoting, or selling a hospital health service.

Thus, a hospital service district's "marketing strategies" for existing and future health services and its "strategic plans" to develop future facilities and services are exempt from the public records law.

SMH contends that it has deemed the compensation and related benefits it provides to its CEO to be "strategic," and, as a result of its decision, the information is exempt from public disclosure. While we realize that the provisions of the Enhanced Ability to Compete Act must be liberally construed towards the end of helping SMH compete in the health care market, we do not think it was legislature's intent to give hospital service districts, such as SMH, the unlimited ability to avoid the public records law by simply designating something as "strategic." Such designations must be reasonable in light of the facts. Based on the foregoing definitions and the evidence presented at trial, we find that SMH has failed to satisfy its burden of proving that the amount of compensation it paid to its CEO in a prior year constitutes a "marketing strategy" for existing or future health services or a "strategic plan" for a future facility or health services.

Obviously, the compensation paid to a CEO in a prior year is not automatically a matter of confidential strategy for hospital service districts, given that most of the of the other districts whose audit reports were due at the same time did not claim that the information was strategic and confidential or seek to keep it from public disclosure. The only "competitive" reason SMH offered for shielding its CEO's compensation was that a competitor could potentially learn the amount, compile a better offer, and hire the CEO "away." However, the testimony presented at trial established that SMH's CEO was "under an employment contract." According to La. R.S. 46:1056(B), such a contract is required to be for a fixed term of employment. However, there was no evidence presented regarding the length of the contract's term, how long the CEO was bound to remain employed at SMH, or whether the contract was about to be re-negotiated. Moreover, there was absolutely no evidence presented about current market conditions with respect to hospital CEOs, such as the level of competition or the number and availability of qualified candidates. Simply put, SMH offered nothing more than unsupported speculation to support its claim. Consequently, we find that SMH failed to present sufficient evidence to substantiate how the amount of compensation paid to its CEO constitutes a "marketing strategy" or "strategic plan," as defined under the Enhanced Ability to Compete Act.

In so concluding, we do not mean to suggest that such information could be "strategic," nor do we suggest it could never be "strategic." We simply find that, under the facts of this case, SMH did not satisfy its burden of demonstrating that the compensation it paid its CEO in the previous year falls within the protection afforded by La. R.S. 46:1073. Further, we render no opinion as to whether the compensation to be paid to SMH's CEO in future years is covered under La. R.S. 46:1073 because there is no evidence in the record to support such a holding.

Because La. R.S. 46:1073 is not applicable, we do not address, nor do we express any opinion on the parties' respective arguments regarding whether Act 706 tacitly repealed La. R.S. 46:1073.¹

1 The issue would be better addressed by the legislature, which could legislatively pass a statute that determines its intent as to whether Act 706 has repealed sections of La. R.S. 46:1073. --------

CONCLUSION

For all of the above reasons, the judgment of the trial court is affirmed. St. Tammany Parish Hospital Service District No. 2 d/b/a Slidell Memorial Hospital is cast with the costs of this appeal in the amount of $1,234.50

AFFIRMED.