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Onslow County Hospital Authority; Appointment of Hospital Authority Commissioners

[477] November 2, 2000

Robert V. Bode
Odes L. Stroupe, Jr.
Bode, Call & Stroupe, L.L. P.

P.O. Box 6338 Raleigh, N.C. 27628-6338

Re: Advisory Opinion: Onslow County Hospital Authority; Appointment of Hospital Authority Commissioners; N.C. GEN. STAT. § 131E-18 and 22

Gentlemen:

By letter dated September 26, 2000, you asked this office:

  1. Whether the appointments to the governing body of the Onslow County Hospital Authority made by the Onslow County Board of Commissioners on September 18, 2000, those appointments not being from a list of nominees submitted by the Hospital Commissioners, are valid and legal appointments to the Hospital Board; and

  2. Whether the newly appointed Hospital Board, as nominated and appointed by the Onslow County Commissioners on September 18, 2000, is a legally constituted governing body of Onslow County Hospital Authority?

We have reviewed the information in your request for an opinion; the July 31, 2000, report of the State Auditor; the pleadings and memoranda filed in Onslow County Superior Court in Onslow County Hospital Authority, et al. v. Onslow County Board of Commissioners, et al., 00 CVS 2718; the record of the removal hearing conducted by the Onslow County Board of Commissioners on August 21, 2000; a memorandum of law prepared by counsel for the Onslow County Board of Commissioners; and numerous newspaper articles reporting the events in question. Based on this review, we understand the material facts to be as follows.

The Onslow County Board of Commissioners (“the County Commissioners”) formed the Onslow County Hospital Authority (“the Hospital Authority”) on November 27, 1972, for the purpose of administering the not-for-profit community hospital known as Onslow Memorial Hospital (“the Hospital”). From that date until September 14, 2000, the Hospital Authority was governed by a board of twenty-one commissioners (“the Hospital Commissioners”).

During calendar year 1999, the Hospital’s chief executive officer (“CEO”) hired an individual to serve as the Hospital’s vice president for planning and then obtained that individual’s resignation before the individual had ever assumed office, at a cost of $360,000 in severance pay. The County Commissioners conducted a special meeting on February 3, 2000, to discuss the CEO’s actions. At the conclusion of the meeting, the County Commissioners adopted a resolution asking the State Auditor to audit the Hospital’s records from and after January 1, 1997. By letter dated February 11, 2000, the State Auditor agreed to conduct a special review of the Hospital’s records pursuant to the provisions of N.C. GEN. STAT. § 147-64.6(c)(16). Before receiving the audit report, the Hospital Commissioners terminated the CEO’s employment on March 29, 2000. The State Auditor presented his findings and conclusions to the County Commissioners on July 31, 2000. In brief, the State Auditor found and concluded that:

  1. The CEO deviated from standard practice, violated Hospital policies, and breached his fiduciary duty in the hiring and separation of the vice president for planning;

  2. The CEO recommended the acquisition of an administrative office building without having the building appraised;

  3. The CEO acquired real property without authorization from the Hospital Authority;

  4. An overpayment associated with the acquisition of a surgery center effectively became a loan to an Onslow County physician;

  5. The CEO did not substantiate the business purpose of expenses charged to Hospital credit cards;

  6. Invoices from an independent contractor for physician services were not verified against contractual agreements and hospital records before payment;

  7. Condominiums leased on North Topsail Island were an imprudent use of Hospital resources;

  8. The monetary value associated with the personal use of a vehicle was excluded from the CEO’s annual wage and tax statement;

  9. The CEO authorized the location of storage buildings at an
    employee’s residence;

  10. Hospital Commissioners may be in violation of conflict of interest bylaws and N.C. GEN. STAT. § 131E-21; and

  11. The CEO authorized the acquisition of radiology equipment that never became operational.

At their August 3, 2000, regular meeting, the County Commissioners passed a resolution asking all Hospital Commissioners to resign. By letter dated August 8, 2000, the County Commissioners informed the Hospital Commissioners that:

The Special Review findings clearly indicate that the Hospital Authority Commissioners permitted an environment in which Hospital policies were violated without sanction, in which Hospital financial affairs at best were mismanaged, and in which senior management was repeatedly able to misuse Hospital resources for personal gain over a substantial period of time. Accordingly, we conclude that your ineffective supervision of Hospital executives and operations under your direction and control constitutes inefficiency, neglect of duty, or misconduct in office.

The letter asked the Hospital Commissioners to tender their resignations by August 18, 2000, and directed those who chose not to resign to appear at a removal hearing at

1:00 p.m. on August 21, 2000. Seven Hospital Commissioners declined to resign.

At 10:03 a.m. on August 21, 2000, the remaining seven Hospital Commissioners filed a complaint in Onslow County Superior Court seeking to enjoin the County Commissioners from going forward with the removal hearing. Specifically, the Hospital Commissioners asked the court to:

  1. enjoin the County Board from conducting a removal hearing;

  2. enjoin the County Board from removing any Hospital Commissioner;

  3. enjoin the County Board from appointing any additional Hospital Commissioners; and

  4. appoint an independent tribunal to hear and determine whether any Hospital Commissioner should be removed.

The civil action was styled Onslow County Hospital Authority, et al. v. Onslow County Board of Commissioners, et al., 00 CVS 2718. The Hospital Commissioners’ motion for a temporary restraining order was heard that same morning by Superior Court Judge Steve A. Balog. At the conclusion of the motion hearing, Judge Balog denied the motion. To our knowledge there have been no further proceedings in this matter.

The removal hearing was held on the afternoon of August 21, 2000, pursuant to the August 8, 2000, notice. The following six Hospital Commissioners appeared at the hearing to oppose their removal: James Hamilton, Pete Mueller, Lois Dupuis, Jim Stroud, Karen Verell, M.D., and Benton Blaylock. Bobby L. McClain did not appear. County Commissioner Paul Starzynski recused himself and did not participate in the hearing and did not vote. The County Commissioners were represented by Mary Beth Johnston of Womble Carlisle Sandridge & Rice, L.L.C. The Hospital Commissioners were represented by Odes L. Stroupe, Jr. of Bode Call & Stroupe, L.L.P. After hearing the sworn testimony of the six Hospital Commissioners present at the hearing, the County Commissioners voted to take the matter under advisement and to vote on removal at a later date.

By letter dated September 8, 2000, the County Commissioners asked the Hospital Commissioners to nominate a slate of new Hospital Commissioners on or before September 18, 2000. On or about September 14, 2000, the Hospital Commissioners decided that they could not review credentials and check references of potential nominees by the deadline specified by the County Commissioners. Consequently, the Hospital Commissioners voted to inform the County Commissioners that they would compile a slate of nominees at their next regular meeting on September 27, 2000. At the same meeting, the Hospital Commissioners voted to withdraw several outstanding nominations that had not yet been acted upon by the County Commissioners and to reduce the size of the Hospital Board from twenty-one commissioners to nine commissioners.

On September 18, 2000, the County Commissioners voted to remove the seven remaining Hospital Commissioners. The County Commissioners concluded that each of the Hospital Commissioners had neglected his or her duty and had been inefficient in one or more of the following ways:

  1. By failing to implement adequate oversight or compliance structures for the Hospital necessary to effectively monitor Authority affairs. The failure to implement such structures was a substantial factor in the occurrence of the facts found by the State Auditor;

  2. By failing to be informed regarding the purpose, structure, and operation of the Hospital’s corporate compliance plan, which likewise would have assisted in the monitoring and supervision of Authority affairs;

  3. By failing to be informed as to the Authority’s corporate
    organizational structure and actions necessary to effectively
    oversee and monitor Hospital Authority affairs; and/or

  4. By failing to inquire when a reasonable Commissioner would have inquired as to the cause of the delay in the Audit, which is one process the Authority did have in place to monitor and review Hospital affairs.

The County Commissioners also concluded that one of the Hospital Commissioners had “committed misconduct in office in engaging in self-dealing with the Authority without seeking clarification or legal guidance whether such conduct was permitted under State law.” Having removed the seven remaining Hospital Commissioners, the County Commissioners then nominated and appointed nine new Hospital Commissioners.

The Hospital Authorities Act provides that “[t]he appointing authority . . . may remove a [hospital] commissioner for inefficiency, neglect of duty, or misconduct in office. N.C. GEN. STAT. § 131E-22(a). The Act also provides that:

When a [hospital] commissioner resigns, is removed from office, completes a term of office, or when there is an increase in the number of [hospital] commissioners, the remaining [hospital] commissioners shall submit to the mayor or the chairman of the county board of commissioners a list of nominees for appointment to the [hospital] commission. The mayor or the chairman of the county board of commissioners shall appoint, only from the nominees, the number of [hospital] commissioners necessary to fill all vacancies. However, the mayor or the chairman of the county board of commissioners may require the [hospital] commissioners to submit as many additional lists of nominees as he or she may desire.1

N.C. GEN. STAT. § 131E-18(d) (emphasis added).

On the basis of the foregoing facts and law, you have asked whether the County Commissioners’ September 18, 2000, appointments are valid and legal. Resolution of this issue requires two questions to be addressed: (1) whether the County Commissioners properly removed all of the seven remaining Hospital Commissioners on September 18, 2000; and (2) if so, whether the County Commissioners have the authority to appoint new Hospital Commissioners when there are no Hospital Commissioners to submit a list of nominees.

This office is authorized by N.C. GEN. STAT. § 114-2(5) to issue legal opinions to State officers. However, we ordinarily decline to render an advisory opinion when, as here, the person seeking the opinion has already instituted a civil action that will resolve or directly impact the issue in question. Furthermore, there is little or no North Carolina case law on point. The first and pivotal issue here is whether the County Commissioners properly removed all the Hospital Commissioners. However, N.C. GEN. STAT. § 131E-22(a) which authorizes County Commissioners to remove Hospital Commissioners for inefficiency, neglect of duty, or misconduct in office has never been construed by any North Carolina court. Likewise, there are no cases construing nine other statutes that authorize other boards and commissions to remove members for inefficiency.2 Consequently, it is difficult to predict how a North Carolina court might construe this standard.

There is a similar dearth of authority regarding the second issue — whether the County Commissioners have authority to appoint new Hospital Commissioners where there are no Hospital Commissioners to submit a list of nominees. We have found twenty instances in which the General Statutes require an appointing authority to appoint individuals from a list of nominees submitted to it by another entity.3 Despite the frequency with which this requirement occurs in the General Statutes, we have found no cases that address the question of whether an appointing authority can make appointments when the nominating entity either refuses or is unable to submit a list of nominees.

For these reasons, we conclude that it is inadvisable for us to issue an advisory opinion about the validity of the County Commissioners’ September 18, 2000 appointments. We trust, however, that this issue can be resolved promptly. When it established the Hospital Authority in November 1972, the Onslow County Board of Commissioners found “[t]hat the public health and welfare, including the health and welfare of persons of low income in Onslow County and said surrounding area, require the maintenance and operation of public hospital facilities for the inhabitants thereof.” We are certain that the same is true today. All of the parties to this dispute agreed to put the public interest first when they assumed public office. The citizens of Onslow County expect and deserve nothing less. We trust that you will all work diligently and in good faith to resolve your differences promptly and reasonably, so as to avoid any damage to the ability of the Hospital to provide quality health care to the citizens of Onslow County. Under these circumstances, a consent order in the pending lawsuit would appear to be the most appropriate vehicle for achieving this goal.

Signed by:

Ann Reed Senior Deputy Attorney General

James A. Wellons Special Deputy Attorney General

cc: Mary Beth Johnston

1 A local modification applicable to Onslow County provides that the authority to appoint hospital commissioners and to ask for additional nominees is vested in the full board of county commissioners rather than the chairman. 1987 (Reg. Sess., 1988) N.C. Session Laws, c. 945.

2 See N.C. GEN. STAT. § 95-135 (Safety and Health Review Board); N.C. GEN. STAT. § 96-3 (Employment Security Commission); N.C. GEN. STAT. § 143-436 (Pesticide Board); N.C. GEN. STAT. § 143B-299 (Sedimentation Control Commission); N.C. GEN. STAT. § 157-8 (Housing Authority); N.C. GEN. STAT. § 157-36 (Regional Housing Authority); N.C. GEN. STAT. § 160A-510 (Joint City-County Redevelopment Commission); N.C. GEN. STAT. § 160A-553 (Parking Authority); N.C. GEN. STAT. § 165-30 (Veterans’ Recreation Authority).

3 See e.g. N.C. GEN. STAT. § 17C-9 (Director of the Criminal Justice Standards Division the Department of Justice); N.C. GEN. STAT. § 58-78-1 (Fire and Rescue Commission); N.C. GEN. STAT. § 89F-5 (Board for Licensing of Soil Scientists); N.C. GEN. STAT. § 90-113.32 (Substance Abuse Professional Certification Board); N.C. GEN. STAT. § 90-210.42 (Crematory Authority).