MUSC Health Cancer Care Org. v. Med. Univ. Hosp. Auth.

659 F.Supp.3d 700

MUSC HEALTH CANCER CARE ORGANIZATION, LLC,a Delaware Limited Liability Company, Plaintiff, v. The MEDICAL UNIVERSITY HOSPITAL AUTHORITY,a state authority of the State of South Carolina, Defendant.

Civil Action No. 2:22-cv-3066-RMG

United States District Court, D. South Carolina, Charleston Division

Signed March 6, 2023

Beth B. Richardson, Robinson Gray Stepp and Laffitte LLC, Columbia, SC, Daria A. Porta, Pro Hac Vice, Dmitry Shifrin, Pro Hac Vice, Polsinelli PC, Chicago, IL, for Plaintiff.

Celeste Tiller Jones, Chad Nicholas Johnston, Burr and Forman LLP, Columbia, SC, for Defendant.

ORDER AND OPINION

Richard M. Gergel, United States District Judge

Before the Court is Defendant's motion to dismiss (Dkt. No. 12). For the reasons set forth below, the Court dismisses this action without prejudice.

I. Background

Plaintiff provides market focused radiation therapy solutions to healthcare facilities and other types of healthcare providers. In February 2014, Plaintiff entered into an Oncology Service Agreement (the "Contract") with Defendant the Medical University Hospital Authority ("MUHA" or the "authority") to provide radiation therapy services, equipment, space, personnel, and supplies to patients at specified locations in Charleston, South Carolina, and surrounding areas. (Dkt. No. 1 at 1). Plaintiff alleges that MUHA is in breach of the Contract and that MUHA's conduct is "a pretextual attempt to oust" Plaintiff from the parties' "longstanding contractual relationships so that [MUHA] can improperly assume all of [Plaintiff's] functions under the [Contract] . . . for [its] sole and exclusive monetary benefit." (Id. at 2). Plaintiff brings claims for (1) Breach of Contract; (2) Declaratory Judgment under 15 S.C. Code Ann. § 15-53-10, et seq.; and (3) Unjust Enrichment/Quantum Meruit.

MUHA moves to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(1), 12(b)(2), and 12(b)(6). (Dkt. No. 13). Plaintiff filed a response in opposition, (Dkt. No. 15), and MUHA filed a reply, (Dkt. No. 19).

On March 1, 2023, the Court held oral arguments on MUHA's motion.

MUHA's motion is fully briefed and ripe for disposition.

II. Legal Standards

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) examines whether the court lacks subject matter jurisdiction. Generally, the burden of proving subject-matter jurisdiction is on the plaintiff, the party asserting jurisdiction. See Richmond, Fredericksburg & Potomac R.R. v. United States, 945 F.2d 765, 768 (4th Cir. 1991). However, where a party challenges the subject-matter jurisdiction of the court on the grounds that the party is an arm of the state entitled to sovereign immunity, the burden of persuasion lies with the party asserting the immunity. See Woods v. Rondout Valley Cent. Sch. Dist. Bd. of Educ., 466 F.3d 232, 237 (2d Cir. 2006) (noting that the majority of federal circuit courts are in agreement with this allocation of the burden of proof on the issue of sovereign immunity). In evaluating a defendant's challenge to subject matter jurisdiction, the court is to "regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg & Potomac R.R., 945 F.2d at 768. The court should grant the motion "only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999) (internal quotation marks and citations omitted)

A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted "challenges the legal sufficiency of a complaint." Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) ("A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses."). To be legally sufficient a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support her claim and would entitle her to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at 1134. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

III. Discussion

a. Eleventh Amendment Immunity — Generally

Even though the language of the Eleventh Amendment preserves sovereign immunity of only the States of the Union,¹ it is settled that this protection extends also to "state agents and state instrumentalities," Regents of the University of California v. Doe, 519 U.S. 425, 429, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997) or stated otherwise, to "arm[s] of the State" and State officials, Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977). But Eleventh Amendment immunity "does not extend to counties and similar municipal corporations." Id. This is so, even if the counties and municipalities exercise a "slice of State power." Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 401, 99 S.Ct. 1171, 59 L.Ed.2d 401 (1979).

The issue before this Court, as articulated by the Supreme Court, therefore turns on whether MUHA "is to be treated as an arm of the State partaking of the State's Eleventh Amendment immunity, or is instead to be treated as a municipal corporation or other political subdivision to which the Eleventh Amendment does not extend." Mt. Healthy, 429 U.S. at 280, 97 S.Ct. 568. Stated otherwise, this Court must determine whether MUHA "has the same kind of independent status as a county or is instead an arm of the State, and therefore 'one of the United States' within the meaning of the Eleventh Amendment." Regents, 519 U.S. at 429 n. 5, 117 S.Ct. 900.

Before elucidating the factors necessary to resolve this question, it is worthwhile to recognize that the immunity in question derives from the original sovereignty of the states and not from the Eleventh Amendment. "The Eleventh Amendment confirmed, rather than established, sovereign immunity as a constitutional principle." Alden v. Maine, 527 U.S. 706, 728-29, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999). And, "it follows that the scope of the States' immunity from suit is demarcated not by the text of the Amendment alone but by fundamental postulates implicit in the constitutional design." Id. at 729, 119 S.Ct. 2240. That design reserves to States "a substantial portion of the Nation's primary sovereignty, together with the dignity and essential attributes inhering in that status," id. at 714, 119 S.Ct. 2240, and preserves "a system in which the State and Federal Governments would exercise concurrent authority over the people," id. (quoting Printz v. United States, 521 U.S. 898, 919-20, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997)). The States thus "retain the dignity, though not the full authority, of sovereignty." Id. at 715, 119 S.Ct. 2240. Central to the dignity of a State's sovereignty is the proposition that the State not be amenable to suit without its consent. At the time the federal Constitution was proposed, the fear expressed during the debates was that adoption of the new Constitution would strip States of their sovereign immunity, thereby exposing them to lawsuits for collection of Revolutionary War debts. Id. at 716-17, 119 S.Ct. 2240.

"Even with a clear understanding of the source and nature of a State's sovereign immunity, no bright line of demarcation can be drawn separating 'state agents and state instrumentalities,' which partake of the State's Eleventh Amendment immunity, from local governmental entities, which do not." Cash v. Granville Cnty. Bd. of Educ., 242 F.3d 219, 223 (4th Cir. 2001). But when the factors for resolving whether a governmental entity is an arm of the State or more like a county or municipality point in different directions, the inquiry seeks guidance in the "twin reasons" for the Eleventh Amendment: (1) "the States' fears that 'federal courts would force them to pay their Revolutionary War debts, leading to their financial ruin,' " and (2) "the integrity retained by each State in our federal system," including the States' sovereign immunity from suit. Id. (citing Hess v. Port Auth. Trans-Hudson Corp., 513 U.S. 30, 39, 115 S.Ct. 394, 130 L.Ed.2d 245 (1994) (quoting Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 151, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984))). Indeed, these twin reasons must "dominate" any analysis of whether a governmental entity is to be accorded Eleventh Amendment immunity. Id. (citing Gray v. Laws, 51 F.3d 426, 432 (4th Cir. 1995)).

Courts evaluate four non-exclusive factors when considering whether a state-created entity functions as an arm of its creating state:

(1) whether any judgment against the entity as defendant will be paid by the State [ ];

(2) the degree of autonomy exercised by the entity, including such circumstances as who appoints the entity's directors or officers, who funds the entity, and whether the

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