Golden Years Home v. C. Buckland ( 2009 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 07-1100
G OLDEN Y EARS H OMESTEAD ,
INCORPORATED ,
Plaintiff-Appellant,
v.
C. A NGELA B UCKLAND, D IANE N ILSON,
JULIE W AGONER, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Indiana, Indianapolis Division.
No. 02 C 771—Sarah Evans Barker, Judge.
A RGUED JANUARY 18, 2008—D ECIDED F EBRUARY 19, 2009
Before B AUER, R OVNER, and S YKES, Circuit Judges.
S YKES, Circuit Judge. Golden Years Homestead, Inc.,
operates a licensed nursing facility in Fort Wayne,
Indiana, and participates in the Federal Medicaid pro-
gram. As such, it is subject to periodic inspections, or
“surveys,” by the Indiana State Department of Health.
Golden Years underwent a series of surveys in 2000 and
2 No. 07-1100
was cited for numerous Medicaid-participation and state-
licensing violations. All but one of the citations, how-
ever, were dismissed after administrative and judicial
review. Golden Years then brought this suit against the
inspectors alleging violations of its Fourth and Four-
teenth Amendment rights and also asserting state-law
claims for malicious prosecution and abuse of process.
The district court concluded that Golden Years’ evidence
was insufficient as a matter of law on all claims and
entered summary judgment for the inspectors.
On appeal, Golden Years challenges only the dismissal
of its state-law claims, raising both procedural and sub-
stantive arguments. As to procedure, Golden Years
argues that because the inspectors never asked for a
merits dismissal of the malicious-prosecution and abuse-
of-process claims, the district court’s order amounted to
an improper sua sponte entry of summary judgment on
these claims. As to substance, Golden Years contends
that its evidence of unprofessional and abusive conduct
by the inspectors, considered together with the fact
that only one of the original citations survived admin-
istrative and judicial review, raised a material issue of
fact on the state-law claims.
We reject both arguments and affirm. The inspectors
sought summary judgment on all claims, and although
they focused most of their argument on certain affirma-
tive defenses and the sufficiency of the proof on the
federal claims, they did assert that Golden Years’ evidence
raised no material issues of fact as a general matter. As
importantly, Golden Years responded on the substance
No. 07-1100 3
of the state-law claims in its brief in opposition. The
deficiency that led the court to dismiss the federal
claims—lack of sufficient evidence that the inspectors
behaved unreasonably or harbored any improper mo-
tive—also required dismissal of the state-law claims.
Accordingly, the district court’s order was not an
improper sua sponte summary judgment on the state-
law claims. Summary judgment was also appropriate
on the merits; the state-law claims require proof of
malice or ulterior motive, and there was insufficient
evidence of that here.
I. Background
In the spring of 2000, the Indiana State Department of
Health sent a team of inspectors to conduct an annual
recertification survey of Golden Years’ nursing facility
in Fort Wayne. The agency had also received a com-
plaint about the facility, so the annual survey doubled
as a complaint inspection. The survey was conducted
over a period of ten days in late April and early May.
At some point, a disagreement arose between Golden
Years’ Director of Nursing and one of the inspectors
over the requirements of a particular federal regulation.
When the Director of Nursing challenged the inspector’s
interpretation, the inspector “became very upset” at
being second-guessed. The Director testified that the
inspectors as a group “gave me the impression that
they felt I shouldn’t be doing that, that I shouldn’t be
standing up for what I believed was right and know the
regulations and be able to quote back to them. They
didn’t like it at all.”
4 No. 07-1100
For the remainder of the inspection, the inspectors
subjected Golden Years and its staff to verbal and other
abuse. Among other things, the inspectors: loudly criti-
cized Golden Years’ staff in front of patients and visitors;
repeatedly slammed the door to the facility’s Alzheimer’s
wing in an effort to obtain a failure to lock; and omitted
favorable information from their report. In Golden
Years’ view, the inspectors were too quick to dismiss
exculpatory information identified by its staff, in one
instance calling it “crap” or “crud.” The inspectors also
failed to consider benign explanations for some of their
negative findings. As proof of this, Golden Years cites
two examples: In their report the inspectors recorded
that a patient was seen with excrement on her hand
when it was really a bit of dried sweet potato; the inspec-
tors also documented that another patient had ex-
perienced a significant weight loss, but failed to note
that this patient had been 20 pounds overweight when
admitted. Golden Years maintains that the inspection
was so hostile and accusatory that it caused 10 to 15 of
its nurses to quit.
Follow-up surveys were conducted over the summer,
and Golden Years was ultimately cited for 17 violations
of Medicaid-participation and state-licensing rules.
Golden Years brought an administrative appeal and a six-
day hearing ensued. The inspectors admitted as a
general matter that they had omitted information
favorable to Golden Years from their report but ex-
plained that they had been trained to include only the
information related to the cited deficiencies.
No. 07-1100 5
An administrative law judge reversed all but one of
the citations. After further administrative appeals and
judicial review in state court, the original administrative
determination was affirmed, leaving only one substanti-
ated regulatory violation. Golden Years then filed this
lawsuit against the inspectors and certain of their super-
visors (collectively, “the inspectors”) asserting claims
pursuant to 42 U.S.C. § 1983 for violation of its Fourth
and Fourteenth Amendment rights, along with claims
under Indiana law for abuse of process and malicious
prosecution.1
The inspectors moved for summary judgment on all
claims. They focused their arguments, however, on
certain affirmative defenses (most notably collateral
estoppel and qualified immunity) and the sufficiency of
the evidence on the federal claims. They argued that
the instances of incivility were insufficient to support a
violation of either Fourth or Fourteenth Amendment
rights and that the inspectors had conducted a rea-
sonable survey in accordance with their training. For
support they submitted training materials from the
Centers for Medicare and Medicaid Services (“CMS”) that
instruct inspectors to include in their reports only the
information relevant to potential violations. They also
1
Golden Years later joined the Centers for Medicare and
Medicaid Services (“CMS”), the federal agency which adminis-
ters Medicare and Medicaid, alleging that to the extent CMS
teachers had trained the inspectors to ignore exculpatory
evidence, CMS had also violated Golden Years’ rights. The
claims against CMS were later dismissed.
6 No. 07-1100
argued that because Golden Years had successfully de-
feated most of the citations through administrative and
judicial review, its claims were barred. Although they
did not explicitly address the substantive merits of the
state-law claims, they asserted as a general matter that
“[t]here are no genuine issues of material fact with
respect to this matter” and asked for dismissal of all
claims. In its response to the motion, Golden Years at
length addressed the substance of both its federal and
state claims.
The district court granted summary judgment for the
inspectors and dismissed all claims on the merits. Golden
Years Homestead, Inc. v. Buckland, 466 F. Supp. 2d 1059(S.D. Ind. 2006). Noting that nursing homes are heavily
regulated and expectations of privacy in this context are
thus attenuated, the court held that the evidence was
insufficient to establish that the surveys had been con-
ducted or citations issued in an unreasonable manner,
for any improper motive, or “shocked the conscience”
for purposes of the Fourth and Fourteenth Amendment
claims. Id. at 1066-70. The court also held that because
both of the state-law claims required an element of im-
proper motive, the evidence was insufficient on these
claims as well. Id. at 1070-71. As the judge saw it, the
incidents of incivility and excessive investigatory zeal
and the omission of some favorable information from
the inspectors’ report was simply not enough to estab-
lish a constitutional violation or the torts of malicious
prosecution or abuse of process.
No. 07-1100 7
II. Analysis
We review a district court’s grant of summary judg-
ment de novo, viewing the evidence and inferences in
the light most favorable to Golden Years. S. Ill. Riverboat
Casino Cruises, Inc. v. Triangle Insulation & Sheet Metal Co.,
302 F.3d 667, 671 (7th Cir. 2002).
Golden Years first argues that the district court im-
properly entered summary judgment on the state-law
claims sua sponte, without giving it an opportunity to
respond. “While not encouraged, a district court can
enter summary judgment sua sponte, or on its own motion,
under certain limited circumstances.” Simpson v. Merchs.
Recovery Bureau, Inc., 171 F.3d 546, 549 (7th Cir. 1999); see
also Aviles v. Cornell Forge Co., 183 F.3d 598, 604 (7th Cir.
1999). However, “granting summary judgment sua sponte
warrants special caution” and generally requires that
the party against whom summary judgment is entered
have notice and an opportunity to present its evidence.
Simpson, 171 F.3d at 549.
Under the circumstances here, the district court’s entry
of summary judgment on the state-law claims cannot be
characterized as purely sua sponte. In their summary-
judgment motion and memorandum in support, the
inspectors specifically asked for dismissal of all the
claims in the lawsuit. In addition to arguing several
affirmative defenses, the basis for the inspectors’ motion
was that Golden Years’ evidence was insufficient to
establish that the inspectors had behaved unreasonably
or arbitrarily, harbored any improper motive or
personal animus, or otherwise engaged in behavior that
8 No. 07-1100
shocked the conscience. Although these arguments were
presented in the discussion of the § 1983 claims, the
inspectors also argued, as a general matter, that “[t]here
are no genuine issues of material fact with respect to
this matter” and asserted entitlement to judgment as a
matter of law on all claims.
It is true that the inspectors did not develop an argu-
ment on the substance of the malicious-prosecution or
abuse-of-process claims. But Golden Years took the oppor-
tunity in its response to the motion to present its
evidence and argument on the state-law tort claims, and
specifically addressed whether the evidence was suf-
ficient to create an issue for trial on the elements of mali-
cious prosecution and abuse of process under Indiana
law—especially the element of improper motive
common to both claims. Golden Years has not identified
any significant evidence that it omitted. The evidence
relating to the inspectors’ possible retaliatory motive
was the same for the state-law claims as the federal con-
stitutional claims, as was the district court’s rationale
for entering summary judgment on each category of claim.
In proceeding to the merits of the state-law claims, the
district court duly considered 28 U.S.C. § 1367, which
provides that the district court “may decline to exercise
supplemental jurisdiction over a claim . . . if . . . the district
court has dismissed all claims over which it has original
jurisdiction.” The court noted the general rule in this
circuit that when “the federal claim drops out before
trial, . . . the federal district court should relinquish juris-
diction over the supplemental claim.” Van Harken v. City
No. 07-1100 9
of Chicago, 103 F.3d 1346, 1354 (7th Cir. 1997). But the
court thought this case fell within an exception to the
general rule that applies when it is very clear that the
supplemental claim is meritless. Boyce v. Fernandes, 77
F.3d 946, 951 (7th Cir. 1996) (“[I]f the supplemental claim
is easily shown to have no possible merit, dismissing it
on the merits is a time saver for everybody.”). Under
the circumstances here, this was not procedurally im-
proper.
Nor was the entry of summary judgment on the state-
law claims substantively improper. Under Indiana law,
“[t]he elements of a malicious prosecution action are:
(1) the defendant instituted or caused to be instituted
an action against the plaintiff; (2) the defendant acted
maliciously in so doing; (3) the defendant had no
probable cause to institute the action; and (4) the original
action was terminated in the plaintiff’s favor.” Crosson v.
Berry, 829 N.E.2d 184, 189 (Ind. Ct. App. 2005). Malice
may be shown by evidence of personal animosity or
inferred from a complete lack of probable cause or a
failure to conduct an adequate investigation under
the circumstances. F.W. Woolworth Co. v. Anderson,
471 N.E.2d 1249, 1254 (Ind. Ct. App. 1985).
Golden Years argues that the disagreement between
its Director of Nursing and one of the inspectors is evi-
dence that the inspectors’ subsequent behavior was
motivated by personal animosity. But this incident was
insufficiently personal and too benign to support a
finding of malice as required for this tort. Golden Years
relies on Anderson and Kroger Food Stores, Inc. v. Clark, 598
10 No. 07-1100
N.E.2d 1084, 1089 (Ind. Ct. App. 1992), but these cases
are factually distinguishable.
In Anderson, a Woolworth auto-parts manager was
acquitted on charges that he was stealing from the
store and then sued his employer for malicious prosecu-
tion. He established that the charges had been initiated
by store employees whom he had previously turned in
for sexual harassment and theft. 471 N.E.2d at 1254.
He also established that he had been handling register
deposits in accordance with specific instructions given
to him by one of the employees who later investigated
him, yet the investigator ignored that fact. Id. at 1252.
In Clark, a grocery-store cashier was acquitted on
theft charges initiated by her employer and then
brought suit for malicious prosecution. She presented
evidence that the supervisor who investigated her har-
bored personal animus against her because of a previous
dispute with the union. 598 N.E.2d at 1089. Also, the
supervisor’s surveillance of the cashier had produced
no evidence that the cashier had engaged in any
illegal activity, and the cashier’s accounting practices,
which the supervisor had claimed were unusual, were
the same as every other employee’s. Id. at 1087-88.
Here, there is no comparable history between any of
the inspectors and the Director of Nursing from which
to infer personal animosity. That the inspector “didn’t
like it” that the Director of Nursing could quote the
relevant regulations is simply insufficient to support a
finding of personal animus. Golden Years also suggests
that the inspectors’ obnoxious behavior, which began
No. 07-1100 11
after the Director of Nursing asserted herself, is evidence
of personal animus. We disagree. Raised voices and
repeated door-slamming in order to induce a lock to
malfunction suggest that the inspectors were over-
zealous, overbearing, and unprofessional, but not that
they were motivated by personal animus.
Golden Years also claims that a reasonable jury could
infer malice from an absence of an adequate investiga-
tion by the inspectors. On this point, Golden Years sug-
gests that the dismissal of all but one of the citations on
administrative and judicial review is evidence that the
inspectors failed to conduct an adequate investigation.
Golden Years also points to the inspectors’ admission
before the administrative law judge that they sometimes
omitted extraneous information from their reports as
evidence of an inadequate investigation. However,
Golden Years has not challenged the district court’s
determination, in connection with the dismissal of the
Fourth Amendment claim, that the inspectors conducted
a reasonable inspection. We will assume for the moment
that a reasonable inspection (in the constitutional sense)
might at the same time be deemed so inadequate as to
give rise to an inference of malice for purposes of the
tort of malicious prosecution under Indiana law. But
Golden Years has discussed only two allegations that the
inspectors failed to adequately investigate: (1) the allega-
tion that a patient had excrement on her hand (it was
actually dried sweet potato); and (2) the allegation that
a patient sustained a significant weight loss (it turned
out that the patient was 20 pounds overweight when
admitted). The failure to thoroughly investigate these
12 No. 07-1100
two allegations is insufficient to support an inference of
malice; Golden Years has not identified any other
specific instances of inadequate investigation by the
inspectors.
Golden Years’ claim for abuse of process fares no
better. “The elements of abuse of process are 1) an
ulterior motive or purpose, and 2) a willful act in the use
of the process not proper in the regular conduct of the
proceeding.” Lindsay v. Jenkins, 574 N.E.2d 324, 326 (Ind. Ct.
App. 1991). An ulterior motive for purposes of this tort
may include a desire “to embarrass, annoy and ridicule.”
Id. Mere negligence, however, is insufficient. Conner v.
Howe, 344 F. Supp. 2d 1164, 1175 (S.D. Ind. 2004); Yater
v. Coy, 681 N.E.2d 232, 233 (Ind. Ct. App. 1997).
Golden Years argues that the incident between the
inspector and the Director of Nursing, when combined
with the rude and abusive behavior of the inspectors
that followed it, is sufficient to permit an inference of
ulterior motive. As we have already noted, however,
while this behavior was unprofessional, it does not
support an inference that the inspectors harbored
ulterior motives. The sole case Golden Years cites,
Lindsay, is easily distinguishable. There, the litigants had
a long-running dispute over a setback ordinance,
including proceedings before the local zoning board as
well as active prior litigation; the Indiana appellate
court held that this history could conceivably support a
finding of ulterior motive and reversed a summary judg-
ment that had been entered in favor of the defendant.
Lindsay, 574 N.E.2d at 325.
No. 07-1100 13
In contrast, here there was no such history; it is undis-
puted that the relationship between Golden Years and
Department of Health inspectors had previously been
cordial. Indeed, Golden Years’ president had written
letters to the Department of Health complimenting its
inspectors’ professionalism. Golden Years simply has
not presented sufficient evidence from which a rea-
sonable jury could infer that the inspectors issued the
citations because of an improper ulterior motive.
Accordingly, the judgment of the district court is AFFIRMED.
2-19-09