Public Hospital District No. 1 v. University Of Washington & U.w. Medicine ( 2014 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
PUBLIC HOSPITAL DISTRICT NO. 1 No. 70633-1-1
OF KING COUNTY,
DIVISION ONE
c— r
Appellant,
03
v.
•^39 —f" T-«, "
UNIVERSITY OF WASHINGTON and PUBLISHED ^~ 'J~>
U.W. MEDICINE,
FILED: June 23, 2014
Respondents.
Cox, J. — Public Hospital District No. 1 of King County seeks to invalidate
as ultra vires the Strategic Alliance Agreement between it and the University of
Washington. Because there are no genuine issues of material fact and the
university is entitled to judgment as a matter of law, we affirm the summary
dismissal of this action.
The district is a public agency, as defined by RCW 39.34.020. It both
owns and operates Valley Medical Center in Renton, Washington.
The university is also a public agency under RCW 39.34.020. For
purposes of this matter, the university operates through U.W. Medicine, one of its
component organizations.
No. 70633-1-1/2
The district, through its commissioners, and the university entered into the
Strategic Alliance Agreement dated June 30, 2011. The initial term of the
agreement runs through December 31, 2026, subject to the occurrence of certain
early termination conditions. The initial term of the agreement may be extended
for each of two 15-year additional periods.
The stated purpose of the agreement is to establish "joint or cooperative
action pursuant to RCW 39.34.030," the statute that provides for agreements for
joint or cooperative action by public agencies.1 Among other things, the
agreement establishes the governance structure for overseeing the operation of
the district's health care system as an integral component of U.W. Medicine. The
agreement also sets forth, in detail, a number of terms and conditions, some of
which we discuss more fully later in this decision.
After the district and university executed this agreement and following the
2011 election of new commissioners of the district, three of the five
commissioners of the new board approved a resolution that authorized the
president of the board of commissioners to "initiate litigation, if necessary, to
determine the validity of the Strategic Alliance Agreement with the University of
Washington."2 This litigation followed.
The district and the university both moved for summary judgment. The
trial court granted the university's motion and denied the district's motion. It
dismissed the district's action with prejudice.
1 Clerk's Papers at 416.
2 Id. at 512-14.
No. 70633-1-1/3
The district appeals.
VALIDITY OF STRATEGIC ALLIANCE AGREEMENT
The district contends that the agreement is ultra vires. Specifically, it
contends that the former district commissioners "effectively divested the Board of
Commissioners of core responsibilities as elected officials."3 The district
identifies these responsibilities as "crucial fiscal decisions, like establishing the
District budget, levying taxes, and incurring debt, and selecting the District's chief
executive officer."4 We hold that this agreement is not ultra vires.
Summary judgment is appropriate when there is no genuine issue of
material fact, and the moving party is entitled to a judgment as a matter of law.5
We review de novo summary judgment orders.6
Generally, "independent of statute or charter provisions, the hands of
[successor officers of a municipal entity] cannot be tied by contracts relating to
governmental matters."7 But predecessor officers "may limit by contract their
3 Brief of Appellant at 19.
4la\
5 CR 56(c).
6 Cornish Coll. of the Arts v. 1000 Va. Ltd. P'ship, 158 Wn. App. 203, 215-
16, 242P.3d 1 (2010).
710A Eugene McQuillin, Municipal Corporations! 29.102 at 70 (3d ed.
rev. 2009).
No. 70633-1-1/4
own police powers as well as those of their successors where the agreement is
authorized by statute."8
Statutory construction is a question of law.9 This court's objective is to
determine the legislature's intent.10 "Where the language of a statute is clear,
legislative intent is derived from the language of the statute alone."11
Here, no one argues that any genuine issue of material fact exists. The
arguments of the parties are primarily focused on the provisions of the
agreement that they signed in 2011. Thus, the issue is whether the university is
entitled to judgment as a matter of law based on the provisions of the agreement
and controlling law.
The fundamental legal question for this issue is whether relevant
legislation authorizes this agreement. If so, a mere change in the view of the
8 Id at 70-71 n.4 (citing Terminal Enters., Inc. v. Jersey Citv, 54 N.J. 568,
258 A.2d 361 (1969)); see also Citv of Seattle v. Auto Sheet Metal Workers Local
387, 27 Wn. App. 669, 685, 620 P.2d 119 (1980), overruled on other grounds by
Citv of Pasco v. Pub. Emp't Relations Comm'n, 119 Wn.2d 504, 511-12, 833
P.2d 381 (1992) (citing Lutz v. Citv of Longview, 83 Wn.2d 566, 570, 520 P.2d
1374 (1974); Noe v. Edmonds Sch. Dist. 15, 83 Wn.2d 97, 515 P.2d 977 (1973);
In re Puget Sound Pilots Ass'n, 63 Wn.2d 142, 145-46 n.3, 385 P.2d 711 (1963);
Roehl v. Public Util. Dist. No. 1 of Chelan County. 43 Wn.2d 214, 240, 261 P.2d
92 (1953); Neils v. City of Seattle, 185 Wash. 269, 53 P.2d 848 (1936); Benton v.
Seattle Elec. Co., 50 Wash. 156, 96 P. 1033 (1908)) ("The rule in this state and
others is that where the legislature by enabling legislation indicates the legislative
body authorized to perform a legislative function, that body may not delegate its
power absent specific legislative authorization.").
9 Citv of Spokane v. Rothwell, 166 Wn.2d 872, 876, 215 P.3d 162 (2009).
10 Id,
11 Id.No. 70633-1-1/5
majority of the commissioners as to the validity of the agreement does not render
the agreement ultra vires.
We conclude that the agreement was authorized by the statutes governing
public hospital districts and the Interlocal Corporation Act.12
The legislature first enacted the statutes governing public hospital districts
in 1945.13 It authorized local communities to establish municipal corporations,
known as "public hospital districts."14 These districts are established "to own and
operate hospitals and other health care facilities and to provide hospital services
and other health care services for the residents of such districts and other
persons."15
Chapter 70.44 RCW sets forth the powers of public hospital districts.
Among others, these powers include: (1) the powerto "contract indebtedness";16
(2) the power to "raise revenue by the levy of an annual tax on all taxable
property";17 (3) the power to "adopt the budget";18 and (4) the power to appoint
and compensate the chief administrative officer for the district.19
2 See Clerk's Papers at 414-15.
3 RCW 70.44.010.
4 Id
5 RCW 70.44.003.
6 RCW 70.44.060(5).
7 RCW 70.44.060(6).
8 id,
9 RCW 70.44.070, .080.
No. 70633-1-1/6
Importantly, RCW 70.44.060(7) provides the district with the power "[t]o
enter into any contract with the United States government or any state,
municipality, or other hospital district, or any department of those governing
bodies, for carrying out any of the powers authorized by this chapter."20
The plain language of this provision authorizes the district to contract with the
university, a state entity, to carry out any of the district's powers.
Additionally, RCW 70.44.240 specifically authorizes public hospital
districts to contract with or join with certain other entities to provide health care
services:
Any public hospital district may contract or join with any other public
hospital district, publicly owned hospital, nonprofit hospital, legal
entity, or individual to acquire, own, operate, manage, or provide
any hospital or other health care facilities or hospital services or
other health care services to be used by individuals, districts,
hospitals, or others, including providing health maintenance
services.
The agreement that is before us establishes a means for joint or cooperative
action between the district and the university for the operation of the district's
health care system. Reading together RCW 70.44.060(7) and RCW 70.44.240,
the legislature expressly authorized this type of agreement. Thus, the agreement
falls within the express scope of authority specified in these statutes.
The Interlocal Corporation Act, enacted in 1967, provides further support
that the Strategic Alliance Agreement is expressly authorized.21 The purpose of
this act is:
20 (Emphasis added.)
21 Chapter 39.34 RCW.
No. 70633-1-1/7
to permit local governmental units to make the most efficient use of
their powers by enabling them to cooperate with other localities on
a basis of mutual advantage and thereby to provide services and
facilities in a manner and pursuant to forms of governmental
organization that will accord best with geographic, economic,
population and other factors influencing the needs and
development of local communities.'221
Specifically, RCW 39.34.030 authorizes public agencies to enter into agreements
to act jointly and cooperatively. This provision explains that "[a]ny power or
powers, privileges or authority exercised or capable of exercise by a public
agency of this state may be exercised and enjoyed jointly with any other public
agency of this state having the power or powers . . . ."23 Thus, this act provides
additional support that the agreement is expressly authorized.
The district argues that the Strategic Alliance Agreement is ultra vires
because it delegates to others the district's core legislative powers: the power to
establish a budget, the power to levy taxes, the power to issue public debt, and
the power to appoint and compensate the district's chief administrative officer.
We conclude that this statutorily authorized agreement is not an unlawful
delegation of the district's powers.
A New Jersey case is illustrative of the principles at issue when public
agencies enter into statutorily authorized agreements.24 In Terminal Enterprises,
22 RCW 39.34.010.
23 RCW 39.34.030(1).
24 Terminal Enters., Inc., 54 N.J. at 575.
No. 70633-1-1/8
Inc. v. Jersey Citv, the supreme court considered a claim that the agreements
between public agencies was an unlawful delegation of power.25
There, the city of Jersey City (city) and Hudson County Board of Chosen
Freeholders (county) entered into agreements with the Port Authority Trans-
Hudson Corporation (PATH) regarding the construction and operation of a
transportation center in the Journal Square area.26 Plaintiffs, David Rodnon and
Journal Square Board of Trade, filed a complaint against the city and county
alleging, among other claims, that the city and county had "unlawfully delegated
power to PATH" by entering into these agreements.27
The court rejected this claim because it concluded that the legislature had
authorized the "municipalities to cooperate with PATH" and enter into such
agreements.28 It explained:
The . . . allegation is that the [city and county] have by the
agreements illegally delegated their powers to PATH. It must be
remembered however, that PATH is a public agency performing an
essential governmental function in the construction and operation of
the Center and that the Legislature has found this project to be in
the "public interest." The Legislature can reallocate the powers of a
municipality to a public agency. There is no difference between the
Legislature reallocating powers from a municipality to a public
agency and authorizing a municipality to partially cede those
powers to such an agency.[29]
25 Jd at 576-77.
26 jd, at 571.
27 jd at 574-75.
28 Id at 576-77.
29 Id (citations omitted).
No. 70633-1-1/9
Here, like Terminal Enterprises, the legislature has statutorily authorized
the district and the university, two public agencies, to enter into the Strategic
Alliance Agreement. While this agreement provides for the district to partially
delegate some of its powers to the university, as the Terminal Enterprises court
stated, "There is no difference between the Legislature reallocating powers from
a municipality to a public agency and authorizing a municipality to partially cede
those powers to such an agency."30 Thus, Terminal Enterprises supports our
conclusion that this statutorily authorized agreement is not an unlawful delegation
of the district's powers.
Additionally, despite the district's arguments to the contrary, we note that
the express terms of the Strategic Alliance Agreement provide that the district
retains powers that it now argues have been delegated. Article VII, Reserved
Powers, sets forth the "District-Reserved Powers," which include the following:
(a) Notwithstanding anything in this Agreement to the
contrary, none of the following actions may be taken by or on behalf
of the District Healthcare System by either the Board or the UW
Medicine CEO, unless first approved by the District's Board of
Commissioners:
(iii) the exercise of the District's statutory power to
raise revenues by the levy of Regular Property Taxes on
taxable property within the District's boundaries; provided, however,
the District is subject to the requirements of Section 9.1;
(vii) the incurrence of Indebtedness except as
otherwise permitted by Section 4.18(a) and as long as such
Indebtedness does not exceed the amounts permitted under
Section 7.1(a)(ii);
30 Id. at 577.
No. 70633-1-1/10
(viii) the issuance of Bonds by the District, which
actions may be taken only be resolutions duly adopted by the
District's Board of Commissioners; provided, however, the District
has committed itself to incure Indebtedness and issue, or cause to
be issued, Bonds as and to the extent required to fund the
expenses referenced in Section 4.18(c); . . . .t31]
Moreover, Exhibit 3.10(c) of the agreement provides a detailed chart titled
"Allocation of Statutory Obligations of District."32 The chart identifies specific
actions that may be taken, identifies relevant statutes, and specifies whether the
power to take such actions is retained by the district, delegated to the Board of
the District Healthcare System, or jointly shared. Items numbered 22, 23, 25, 27,
28, and 30 on this chart show that the powers relevant to this challenge are
retained by the district, not delegated.33 In short, the argument that there was an
abdication of governmental powers by the previous majority of commissioners by
entering into this agreement is not supported by a fair reading of this agreement.
The district also asserts that the Strategic Alliance Agreement is ultra vires
because the agreement purports to bind successor commissioners in the
performance of governing functions. It cites McQuillin and two attorney general
opinions to support this assertion.
First, the district cites Eugene McQuillin's treatise in support of this
argument. Specifically, the district states in its opening brief:
"Respecting the binding effect of contracts extending beyond the
terms of officers acting for the municipality, there exists a clear
31 Clerk's Papers at 444-45 (emphasis added).
32 jd at 470-76.
33 jd at 472-73.
10
No. 70633-1-1/11
distinction in the judicial decisions between the governmental and
business or proprietary powers. With respect to the former, their
exercise is so limited that no action taken by the governmental
body is binding upon its successors, whereas the latter is not
subject to such limitations, and may be exercised in a way that will
be binding upon the municipality after the board exercising the
power shall have ceased to exist."1341
While that is the general rule on the binding effect of contracts that extend
beyond the terms of officers acting for a municipality, that rule is inapplicable
here. That is because this case falls into the well-recognized exception that such
contracts are binding where legislation authorizes them.35 As we discussed
previously in this opinion, the Strategic Alliance Agreement is expressly
authorized by RCW 70.44.060(7), RCW 70.44.240, and the Interlocal
Corporation Act.
Second, the district cites a 2012 attorney general opinion, which is
persuasive but not binding authority, to support this argument.36 In Attorney
General Opinion No. 4, the attorney general explains that Washington law
"establishes that boards of county commissioners may not take actions that
impair the core legislative powers oftheir successors in office."37 The attorney
34 Brief of Appellant at 19-20 (quoting McQuillin, supra, § 29.102 at 67-
68).
35 See McQuillin, supra, § 29.102 at 70-71.
36 Brief of Appellant at 24; Reply Brief of Appellant at 11-12 (citing 2012
Op. Att'y Gen. No. 4): see Thurston County ex rel. Bd. of County Comm'rs v. Citv
of Olvmpia, 151 Wn.2d 171, 177, 86 P.3d 151 (2004) ("Although not controlling,
attorney general opinions are entitled to great weight.").
37 2012 Op. Att'y Gen. No. 4 at 1.
11
No. 70633-1-1/12
general cites State ex rel. Schlarb v. Smith for this principle.38
In Schlarb, King County and Pierce County entered into an agreement to
improve, confine, and protect the White River.39 The counties agreed to pay a
certain percentage for the project, but King County declined to levy a tax
pursuant to the agreement.40 King County argued that the agreement was
against public policy because "one board of county commissioners cannot enter
into contracts binding upon future boards of commissioners."41 But the supreme
court explained that the principle did not apply "to a contract entered into under
specific statutory authority."42
Here, a similar conclusion is appropriate. The principle on which the
district relies does not apply because, as previously discussed, the Strategic
Alliance Agreement was entered into under specific statutory authority.43
Consequently, the attorney general opinion and Schlarb do not support the
district's argument.
Third, by statement of additional authorities, the district points to another
attorney general opinion for the assertion that the "Attorney General also
38 ]d at 2-3 (citing State ex rel. Schlarb v. Smith, 19 Wn.2d 109, 141 P.2d
651 (1943)).
39 Schlarb, 19 Wn.2d at 111.
40 id at 111-12.
41 id at 112.
42 Jd at 112-13.
43 See RCW 70.44.060(7); RCW 70.44.240; RCW 39.34.030.
12
No. 70633-1-1/13
acknowledges that public hospital districts may not avoid statutory requirements
by delegating management responsibilities to an administrator under RCW
70.44.060 because the elected commissioners of a district remain 'legally
responsible for operations and policy.'"44 Here, the district did not try to avoid
statutory requirements by entering into the Strategic Alliance Agreement.
Rather, as previously discussed, the district was acting within its statutory
authority when it contracted with the university. Thus, this additional authority is
also not helpful.
The district next contends that RCW 70.44.240 prohibits the district from
"relinquish[ing] the core responsibilities of its elected commissioners to unelected
trustees."45 But the plain language of RCW 70.44.240 does not support the
district's argument. Rather, this provision explains who must be a part of the
governing body when a public hospital districts chooses to contract or join with
another entity:
The governing body of such legal entity shall include
representatives of the public hospital district, which representatives
may include members of the public hospital district's board of
commissioners.1461
This provision requires representatives from the district, but the representatives
do not have to include the district's commissioners. Thus, RCW 70.44.240
contemplates a situation where the governing body does not include the elected
44 Statement of Additional Authorities at 1 (quoting 2013 Op. Att'y Gen.
No. 3 at 8).
45 Brief of Appellant at 28-35.
46 RCW 70.44.240 (emphasis added).
13
No. 70633-1-1/14
commissioners. In any event, the board of trustees created by the Strategic
Alliance Agreement includes the five commissioners and five individuals residing
within the district's service area. Thus, there is no violation here of this statutory
provision.
The district also relies on Chemical Bank v. Washington Public Power
Supply System to support its position.47 It argues that this case supports the
principle that municipalities cannot "abdicate[] their statutory responsibilities."48
While that principle of law is correct, that case does not control here.
In Chemical Bank, a large number of "participants," including cities, public
utility districts, and other districts, entered into agreements regarding the
construction of two nuclear generating plants.49 Statutes authorized cities and
public utility districts to build or buy their own plants.50 But to have authority for
these types of joint projects, cities and districts needed an ownership interest or
control in the projects.51
The supreme court looked to the participants' agreements to determine
their level of management and control in the projects.52 The agreement created
47 Brief of Appellant at 22-24 (citing Chem. Bank v. Wash. Pub. Power
Supply Svs.. 99 Wn.2d 772, 666 P.2d 329 (1983), affd, 102 Wn.2d 874 (1984)).
48 jd at 23.
49 Chemical Bank, 99 Wn.2d at 777.
50 Id at 784-85.
51 id at 785, 787.
52 id at 787.
14
No. 70633-1-1/15
a "part-time committee of representative participants," but the court concluded
that these representatives could not provide "significant input to the management
of the projects" given rigid procedural requirements.53
The court recognized the "necessity and propriety of establishing
representative committees to manage and oversee joint development projects."54
But the court was concerned that the committee "served as a rubber stamp" for
project decisions, and the participants did not actually have management or
control in the projects.55 The court went on to conclude that the participants'
agreements were ultra vires based on this concern and a number of other
concerns.56
Here, there is a similar project as the one in Chemical Bank, where the
supreme court expressly acknowledged the "necessity and propriety of
establishing representative committees to manage and oversee joint
development projects."57 The Strategic Alliance Agreement that the district
attacks provides for a management structure composed of representatives of the
district and the university.
But Chemical Bank is distinguishable because the new board of trustees
is not a "rubber stamp." The five elected commissioners of the district are part of
53
id.54
id
55
i4 at 788.
56
Id at 798.
57
Id. at 787.
15
No. 70633-1-1/16
the board of trustees. In that capacity, they help to manage and oversee the
delivery of health care services to the public. Nothing in this record substantiates
the claim that they rubber stamp anything. Even though the commissioners do
not represent a majority of the board, they are able to provide "significant input."58
For these reasons, this case is distinguishable from Chemical Bank.
The district next argues that the delegation of legislative powers under the
Strategic Alliance Agreement is "anti-democratic and impermissible under our
constitutional system."59 It contends that the university's "argument, far from
honoring democratic principles, represents a dangerous invitation to elected
officials to abdicate their responsibility for the operation of a local government to
an unelected group of 'trustees' who are not accountable to the voters served by
the local government."60
The simple answer to this argument is that the elected representatives of
the people—the legislature—expressly authorized the type of agreement in this
case. This is consistent with both representative democracy and our constitution.
The remedy for disagreement with these statutes is to seek redress from the
legislature, not the courts.
Finally, the district, in its reply brief, asserts that to the extent the statutes
condone the "cession of the elected Commissioners' core legislative
58 id
59 Reply Brief of Appellant at 24.
60 id
16
No. 70633-1-1/17
responsibilities to the unaccountable trustees," the statutes are unconstitutional.61
It cites article I, section 9 of the state constitution.62 But the district provides no
further argument.63 "'[N]aked castings into the constitutional seas are not
sufficient to command judicial consideration and discussion.'"64 Because statutes
are presumed to be constitutional and the district's constitutional claim is not
supported by sufficient argument, the district has failed to meet its burden to
overturn the statutes.65 Accordingly, we do not address this claim further.66
In sum, all that has changed since the signing of the Strategic Alliance
Agreement is the view of the majority of the members of the board of
commissioners about its validity. Under the circumstances of this case, that does
not constitute a basis for declaring the agreement ultra vires. The trial court
properly granted the university's motion for summary judgment dismissing the
district's claims with prejudice.
61 jd at 17.
62 id (citing Const, art. I, § 19) ("All elections shall be free and equal, and
no power, civil or military, shall at any time interfere to prevent the free exercise
of the right of suffrage.").
63 See id. at 17-18.
64 State v. Johnson, 179 Wn.2d 534, 558, 315 P.3d 1090 (2014) (alteration
in original) (internal quotation marks omitted) (quoting State v. Blilie, 132 Wn.2d
484, 493 n.2, 939 P.2d 691 (1997)).
65 See Halev v. Med. Disciplinary Bd., 117 Wn.2d 720, 739, 818 P.2d 1062(1991) ("A statute is presumed to be constitutional.").
66 See State v. Johnson, 119Wn.2d 167, 171,829P.2d 1082(1992);
Cowiche Canyon Conservancy v. Boslev, 118 Wn.2d 801, 809, 828 P.2d 549(1992).
17
No. 70633-1-1/18
MOTION TO EXPAND APPELLATE RECORD
The district moves, pursuant to RAP 9.11(a), to expand the appellate
record to consider an e-mail from Valley Medical Center's general counsel to the
secretary of the district commissioners.67 We deny this motion.
First, this e-mail was sent after the trial court granted the university's
motion for summary judgment. Thus, it was not before the court when it granted
summary judgment. For this reason alone, we could deny the motion.
Second, even if we reach the substance of the motion, it has no merit.
RAP 9.11(a) provides that an "appellate court may direct that additional evidence
on the merits of the case be taken before the decision of a case on review" if the
following six requirements are all met:
(1) additional proof of facts is needed to fairly resolve the issues on
review, (2) the additional evidence would probably change the
decision being reviewed, (3) it is equitable to excuse a party's
failure to present the evidence to the trial court, (4) the remedy
available to a party through postjudgment motions in the trial court
is inadequate or unnecessarily expensive, (5) the appellate court
remedy of granting a new trial is inadequate or unnecessarily
expensive, and (6) it would be inequitable to decide the case solely
on the evidence already taken in the trial court.
Here, the e-mail from Valley Medical Center's general counsel raises
concerns about several agenda items for a particular board of commissioners
meeting. The e-mail explains general counsel's view of how the commissioners'
powers and activities have allegedly changed since the Strategic Alliance
Agreement with respectto the hiring of bond counsel and community outreach
67 District's Motion to Expand Appellate Record Pursuant to RAP 9.11 at
1-2.
18
No. 70633-1-1/19
expenditures. The district argues that this e-mail "represents] the position of the
trustees [and] demonstrates unequivocally the severity of the curtailment of the
fiscal authority of the elected [c]ommissioners."68
This e-mail is not "needed to fairly resolve the issues on review" and it
does not "probably change the decision being reviewed."69 Because these
requirements of RAP 9.11(a) are not met and this e-mail was not before the trial
court when it rendered its decision on summary judgment, we deny the motion.
We affirm the summary judgment order of dismissal.
Ou*,^
WE CONCUR:
J^&cs&.
68 id at 2.
69 See RAP 9.11(a)(1), (2).
19