Tex. Health & Human Servs. Comm'n v. Sacred Oak Med. Ctr. LLC

Texas Health and Human Services Commission; and Cecile Erwin Young,Executive Commissioner of the Texas Healthand Human Services Commission, Appellants v. Sacred Oak Medical Center LLC, Appellee

NO. 03-21-00136-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

June 9, 2021

FROM THE 250TH DISTRICT COURT OF TRAVIS COUNTY

NO. D-1-GN-21-000074, THE HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING

ORDER

PER CURIAM

Appellants, Texas Health and Human Services Commission and its Commissioner ("Commission" or "State appellants"), have appealed the trial court's March 22, 2021 order granting appellee Sacred Oak Medial Center LLC's application for temporary injunction and denying the Commission's plea to the jurisdiction. The underlying case arises from an order issued by the Commission on December 21, 2020 ("December 2020 Order"), denying Sacred Oak's renewal application for the license for its psychiatric hospital and requiring it to cease operations immediately. The trial court granted Sacred Oak's application for a temporary injunction, issuing an order restraining the Commission from enforcing the December 2020 Order and requiring the Commission to "immediately take all actions within its jurisdiction that are necessary to restore Sacred Oak to the operational status quo that existed prior to [the Commission's] enforcement of the Order, which shall include reinstating and returning any state license or certification from [the Commission] held and/or possessed by Sacred Oak on December 20, 2020," which would allow Sacred Oak to reopen its psychiatric hospital.

Because the State appellants are a state agency and the head of a state agency, upon the filing of the notice of appeal, the trial court's order was superseded by operation of law, and the Commission asserted in the notice of appeal that it was not subject to being counter-superseded under Texas Rule of Appellate Procedure 24.2(a)(3). See Tex. Civ. Prac. & Rem. Code § 6.001(a); see also Tex. R. App. P. 24.2(a)(3) ("When the judgment is for something other than money or an interest in property, . . . . [and] [w]hen the judgment debtor is the state, a department of this state, or the head of a department of this state, the trial court must permit a judgment to be superseded except in a matter arising from a contested case in an administrative enforcement action."). Sacred Oak filed a motion requesting that the trial court "refuse to suspend enforcement of the judgment," arguing that the trial court was not required to allow the Commission to supersede the temporary injunction because this matter arises from a contested case in an administrative enforcement action and thus the trial court has discretion to allow it to post a counter-supersedeas bond. See Tex. R. App. P. 24.2(a)(3). In response, the Commission argued that the trial court should decline to hear the motion because the Commission's accelerated interlocutory appeal was taken from the trial court's denial of its plea to the jurisdiction, and thus the appeal had stayed all other proceedings in the trial court. See Tex. Civ. Prac. & Rem. Code § 51.014(b); see also In re Texas Educ. Agency, 441 S.W.3d 747, 751 (Tex. App.—Austin 2014, orig. proceeding) (holding that trial court abused its discretion by issuing orders denying agency's right to supersedeas after Section 51.014(b) automatically stayed "all other proceedings in the trial court"). The trial court subsequently issued a letter ruling in whichit found that In re Texas Education Agency "is binding precedent on this court" and that "[t]here is no indication that it has been overruled or revisited by the Third Court of Appeals or Texas Supreme Court." Therefore, the trial court stated that the hearing set on Sacred Oak's Motion to Refuse Suspension of Judgment would not go forward because "the trial court lacks the discretion to hear the matter under binding Third Court precedent."

Sacred Oak subsequently filed in this Court an "Emergency Motion for Review of Denial of Counter-Supersedeas or for a Rule 29.3 Temporary Order," which the Commission opposes. For the reasons discussed below, we grant the alternative relief requested by Sacred Oak, and pursuant to our authority under Texas Rule of Appellate Procedure, we order that the trial court's March 22, 2021 temporary injunction is reinstated and remains in effect, pending disposition of the appeal.

BACKGROUND

The parties had previously entered into an Agreed Order on October 1, 2019, after Sacred Oak had applied to renew its license on May 1, 2019, and the Commission had issued April 18, 2019 and June 5, 2019 Notices of Violations and a proposed administrative penalty. The Agreed Order resolved two Notices of Violation by probating the denial of Sacred Oak's renewal application for a period of twelve months, subject to Sacred Oak's compliance with the terms of the Agreed Order, which among other things, required Sacred Oak's facility to hire an outside consultant approved by the Commission to create a corrective action plan identifying specific actions to be taken "to achieve sustained compliance with all applicable statutes and regulations" and to provide the Commission with monthly reports detailing Sacred Oak's progress in implementing the specific actions identified in the plan and confirming whetherSacred Oak was sustaining compliance with all applicable statutes and regulations. The Agreed Order allowed the Commission to deny the license renewal at any time during the probation period if it found Sacred Oak had not made sufficient progress in implementing the plan and achieving sustained compliance. The Agreed Order further provided that upon completion of the corrective action plan, Sacred Oak was to request a survey by the Commission, and if the Commission did not find that Sacred Oak had "achieved sustained compliance with all applicable statutes and regulations by the end of the Probation Period, the Commission may deny the license renewal." After conducting the required post-probation survey, the Commission identified deficient practices that it cited in the December 2020 Order in support of its finding that Sacred Oak did not achieve sustained compliance with all applicable statutes and regulations, which was the basis for its denial of Sacred Oak's renewal application.

On January 7, 2021, Sacred Oak sued the Commission, arguing that the Commission's December 2020 Order failed to find that it did not comply with applicable statutes and regulations that were the subject of the Notices that led to the Agreed Order. See Tex. Health & Safety Code § 577.016(f) (establishing that facility in repeated noncompliance may be scheduled for probation and "[d]uring the probation period, the hospital or facility must correct the items that were in noncompliance and report the corrections to the department for approval"). In its petition, Sacred Oak contends that to the extent the Commission alleged the occurrence of different violations during the probation period as the basis for denying its renewal application, Sacred Oak is entitled to a hearing and an opportunity to demonstrate or achieve compliance before the Commission could deny its renewal application and order it to close. Id. § 577.016(b). Sacred Oak seeks judicial review of the December 2020 Order, asserting that although it submitted a request for a hearing on the order, the Commission had advised it that the requestwould be refused because the Commission's decision is final.¹ Id. § 577.018. Sacred Oak also seeks a declaratory judgment that the denial of its license renewal and closure of its hospital are void as ultra vires acts that violate the Texas Health and Safety Code and Texas Administrative Code. Finally, it seeks injunctive relief requiring the Commission to withdraw its December 2020 Order, pending the administrative processes established by Texas Administrative Code Title 26, Section 510.83 and Texas Health and Safety Code Section 577.016.

On February 1, 2021, the trial court conducted a hearing on the Commission's plea to the jurisdiction and Sacred Oak's application for temporary injunction. At the hearing, the Commission informed the court that although Sacred Oak's application to the Commission for an appeal of the December 2020 Order had been docketed with its appellate division, the Commission intended to argue that Sacred Oak is not entitled to an administrative appeal, based on the waiver clause in the Agreed Order.

On March 22, 2021, the trial court issued its order denying the plea to the jurisdiction, granting Sacred Oak's application for temporary injunction, and granting the Commission's motion to quash subpoenas for certain witnesses to appear at the temporary-injunction hearing. In its order, the trial court made the following findings to support its grant of the temporary injunction:

Finding that Sacred Oak has demonstrated the likelihood of success on the merits at trial, including that the December 21, 2020 Order . . . may violate Texas Administrative Code §510.83 by purporting to deny Sacred Oak's application for renewal of its hospital license without providing prior notice of same, prior opportunity to demonstrate or achieve compliance, and prior opportunity for a hearing; and

Finding that irreparable harm and economic injury will be sustained by Sacred Oak by the continued closure of the hospital and consequent disruption of its business with the enforcement of the [December] Order . . . .

As a result, the trial court ordered that:

[the Commission] is RESTRAINED from enforcing the [December] Order and that [the Commission] shall immediately take all actions within its jurisdiction that are necessary to restore Sacred Oak to the operational status quo that existed prior to [the Commission's] enforcement of the Order, which shall include reinstating and returning any state license or certification from [the Commission] held and/or possessed by Sacred Oak on December 20, 2020, and thereafter terminated and/or

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