Franciscan Alliance, Inc. v. City of Hammond, Indiana

FILED Jun 30 2023, 10:27 am

CLERK Indiana Supreme Court Court of Appeals and Tax Court

ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE Robert A. Anderson Michael E. Tolbert Hillary N. Buchler Candace C. Williams Krieg DeVault LLP Tolbert & Tolbert, LLC Merrillville, Indiana Gary, Indiana Libby Yin Goodknight Kevin C. Smith Krieg DeVault LLP Smith Sersic, LLC Indianapolis, Indiana Munster, Indiana David W. Westland Westland & Bennett, P.C. Hammond, Indiana

IN THE COURT OF APPEALS OF INDIANA

Franciscan Alliance, Inc., June 30, 2023 Appellant-Defendant, Court of Appeals Case No. 22A-PL-3085 v. Appeal from the Lake Superior Court City of Hammond, Indiana, The Honorable Bruce D. Parent, Appellee-Plaintiff Judge Trial Court Cause No. 45D11-2212-PL-707

Court of Appeals of Indiana | Opinion 22A-PL-3085 | June 30, 2023 Page 1 of 11

Opinion by Judge Weissmann Judges Bailey and Brown concur.

Weissmann, Judge. [1] Following years of financial losses, Franciscan Alliance, Inc. (Franciscan)

moved to close St. Margaret’s Hospital (the Hospital) in Hammond, Indiana, at

the end of 2022. But little more than two weeks before the Hospital’s closure,

the City of Hammond (the City) sought a preliminary injunction to keep the

Hospital open, relying on a purported promise made by Franciscan executives

17 months prior that Franciscan would not shut down the Hospital and its

emergency room. [2] Under a tight deadline to act, the trial court granted the injunction and ordered

Franciscan to keep the Hospital open for nine more months. Because the

looming loss of the Hospital’s licensure and accreditation at the end of the year

would make it impossible to comply with the injunction, Franciscan filed an

emergency motion to stay, which this Court granted on December 30, 2022. [3] We now find the City lacks standing and, therefore, reverse and remand to the

trial court to dismiss the City’s claim.

Facts [4] The Hospital has operated in Hammond for over a century. Dwindling patient

numbers, however, caused significant losses in recent years. To turn things

around, Franciscan decided in May 2021 to downsize the Hospital to eight beds

and an emergency department. A group of Franciscan executives met with the

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City’s Mayor, Joseph McDermott, Jr., and his executive team the next month

to discuss the downsizing plans. At the meeting, the Franciscan executives

stated their intent to keep the Hospital’s emergency department open. The

executives then reiterated this desire in a letter to Mayor McDermott the next

day, writing:

Our Hammond hospital will continue to offer an emergency department staffed with board certified emergency medicine physicians and well-trained, experienced ER nurses. Eight short- stay beds will be open and another eight-bed area shelled for expansion if volumes are sufficient to support them. As the downtown residential area grows, the hospital will grow with it.

Exhs. Vol. III, pp. 6, 22. [5] Despite the downsizing, the Hospital’s financial health continued to deteriorate,

with an annualized operating loss exceeding $39 million in 2022. Recognizing

this bleak future, Franciscan decided to close the Hospital completely. On

November 3, 2022—roughly 17 months after the June 2021 meeting with

Mayor McDermott—Franciscan sent a letter to the Mayor informing him of

Franciscan’s “plans for ceasing inpatient admissions in Hammond” by the “end

of this year.” Id. at 23. Franciscan moved quickly to shut down the Hospital,

terminating its employment and service provider contracts effective the last day

of 2022. [6] To Mayor McDermott, Franciscan’s actions were an “absolute betrayal” of

Franciscan’s statements at the June 2021 meeting. Tr. Vol. II, p. 34. And so, on

December 19, 2022, a month and a half after receiving Franciscan’s letter, the Court of Appeals of Indiana | Opinion 22A-PL-3085 | June 30, 2023 Page 3 of 11

City brought a claim for promissory estoppel against Franciscan and sought

injunctive relief to keep the Hospital open. In its complaint, the City claimed

that Franciscan had “renege[d]” on its “promise to keep the emergency

department of [the Hospital] operational.” App. Vol. II, pp. 19-20. The City

alleged that Franciscan’s conduct would leave “approximately 80,000 residents

without immediate access to emergency medical services” and that “people

[would] die as a result of [the Hospital’s] closure.” Id. Facing dual time

constraints with the Hospital set to close at the end of the year and the winter

holidays, the trial court set a hearing on the City’s complaint for the following

afternoon. [7] Franciscan responded to the City’s complaint just before the hearing.

Franciscan challenged the City’s standing to bring its claim and argued that it

did not qualify for injunctive relief. Franciscan also argued that the City could

not establish the elements of promissory estoppel, the only legal theory

underlying its request for injunctive relief. [8] After an evidentiary hearing, the trial court issued its order granting the

preliminary injunction on December 22. The injunction provided:

1. The Court hereby enjoins [Franciscan] from closing the emergency department presently operating in downtown Hammond.

2. The emergency department is to remain open and [Franciscan] is Ordered to take all steps necessary to ensure that the facility in downtown Hammond remains legally licensed and operational.

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3. [Franciscan] is prohibited, until further Order of this Court, from taking steps to diminish or in any way reduce the health care currently provided to patients at the downtown Hammond facility for a period of nine (9) months.

App. Vol. II, p. 15. [9] In granting the preliminary injunction, the trial court concluded that the City

was “the proper party to bring this action” and that it had standing. Id. at 12.

The trial court also determined that the City had met the requirements to obtain

a preliminary injunction, including that it “demonstrated a reasonable

likelihood of success on the merits of its promissory estoppel claim.” Id. at 13-

15. [10] After the trial court denied Franciscan’s motions to stay the injunction,

Franciscan appealed and filed an emergency motion to stay the proceedings and

the preliminary injunction with this Court on December 28, 2022. Two days

later, this Court’s motions panel granted Franciscan’s request, stayed the

preliminary injunction, and required Franciscan to post a $100,000 appeal

bond. After the resolution of Franciscan’s emergency motions, this appeal

proceeded in due course to address the merits of the preliminary injunction.

Discussion and Decision [11] Franciscan raises two issues on appeal. It alleges that the City lacks standing to

bring its claims and that the trial court erred in granting the preliminary

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injunction. But because we find the standing issue dispositive, we do not reach

the preliminary injunction’s merits.

I. Standing [12] “Standing is a fundamental, threshold, constitutional issue that must be

addressed by this, or any, court to determine if it should exercise jurisdiction in

the particular case before it.” Doe v. Adams, 53 N.E.3d 483, 495 (Ind. Ct. App.

2016) (quoting Alexander v. PSB Lending Corp., 800 N.E.2d 984, 989 (Ind. Ct.

App. 2003)). “The main purpose of standing is to insure that the party before

the court has a substantive right to enforce the claim that is being made in the

litigation.” Schulz v. State, 731 N.E.2d 1041, 1044 (Ind. Ct. App. 2000).

Standing is an issue of law that we review de novo. City of Gary v. Nicholson, 190

N.E.3d 349, 351 (Ind. 2022). [13] To establish standing, a plaintiff must demonstrate “a personal stake in the

outcome of the litigation and . . . show that they have suffered or were in

immediate danger of suffering a direct injury as a result of the complained-of-

conduct.” Solarize Ind., Inc. v. S. Ind. Gas & Elec. Co., 182 N.E.3d 212, 217 (Ind.

2022) (quoting Bd. of Comm’rs of Union Cnty. v. McGuiness, 80 N.E.3d 164, 168

(Ind. 2017)). The City has not made such a showing here. [14] In its initial complaint and at the evidentiary hearing, the City argued that the

Hospital’s closure would “negatively impact” Hammond’s citizens by leaving

“approximately 80,000 residents without immediate access to emergency

medical services.” App. Vol. II, p. 10. And the City also alleged that the closure

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would significantly damage the City’s reputation and its ability to attract

businesses. Yet even if true, any alleged negative effects on Hammond’s citizens

cannot sustain the City’s standing. As a municipality, the City may not assert

claims on behalf of its citizens. See Bd. of Comm’rs of Union Cnty. v. McGuinness,

80 N.E.3d 164, 167-68 (Ind. 2017) (holding county did not have standing to

seek a declaratory judgment and injunctive relief on behalf of its residents

because it lacked a “personal interest” in the case). Additionally, damages for

the loss of one’s reputation are not recoverable on a promissory estoppel claim.

Greives v. Greenwood, 550 N.E.2d 334, 338 (Ind. Ct. App. 1990) (“Damages for

loss of reputation are only available in actions for libel, slander, abuse of

process, malicious prosecution and third-party contract interference.”).

Consequently, our analysis of City’s standing focuses on other grounds. [15] City officials testified that in the short time since Franciscan announced it

would close the Hospital, discussions had taken place about increased costs that

may result from the closure. These potential costs included new ambulances

(with a price tag of $300,000 each), costs associated with the search to find a

new emergency healthcare provider, and the potential for increased legal

liability stemming from delayed response times to medical emergencies. The

City anticipated it would take around 18 months to adequately plan, approve a

budget, and incur these costs. Because of this extended timeline, city officials

blamed Franciscan for the “loss of an opportunity” to address these problems

earlier when Franciscan first discussed its downsizing plans in June 2021.

Appellee’s Br., p. 13.

Court of Appeals of Indiana | Opinion 22A-PL-3085 | June 30, 2023 Page 7 of 11 [16] The trial court agreed with these claims. In its order granting the preliminary

injunction, the trial court noted that closing the Hospital would endanger

Hammond’s citizens by delaying response times to medical emergencies. The

court also noted the high cost of new ambulances to mitigate this danger and

that the City’s officials quickly began discussing the need to buy new

ambulances upon learning of the Hospital’s closure. Taken together, the trial

court believed that Franciscan denied City an “opportunity to secure a

substitute emergency care provider” and City was “in immediate danger of

further suffering[] a direct injury as a result . . . .” App. Vol. II, pp. 12, 14. [17] But in arriving at that conclusion, the trial court improperly focused on

speculative and hypothetical damages. In particular, the City’s potential future

purchases of new ambulances and allegations of lost time are “too remote and

speculative” to constitute the “direct injury” necessary for standing. Solarize

Ind., Inc., 182 N.E.3d at 220. For example, the following testimony between

Franciscan’s counsel and the City’s Fire Chief highlights the extent of the City’s

plans to buy new ambulances:

Q: You were asked about ambulances, and I only want to know about ambulances that you’re adding to increase capacity. Do you have ambulances under contract right now to increase your capacity due to the closing of the emergency room at [the Hospital]?

A. What do you mean under contract?

Q. Well, are you under contract to buy some additional ambulances or are you intending to buy additional ambulances,

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not to replace old ambulances but because [the Hospital] is closing its ER?

A. It just recently came up in conversation December 13th because of what happened on December 12th. So, it’s been talked about.

Q. What was the result of that?

A. The talks aren’t done yet.

Q. What’s that?

A. We’re not done talking about it yet.

Q. Okay. So, it’s under discussion.

Tr. Vol. II, pp. 93-94. [18] To Franciscan, this exchange proves the City had no immediate plans to buy

new ambulances and any alleged injury is correspondingly remote and

speculative. At the same time, to the City, this conversation is proof that “[it]

would be required to purchase new ambulances.” Appellee’s Br., p. 13 (emphasis

added). We side with Franciscan’s reading. [19] First, the City has failed to show it “‘has sustained or was in immediate danger

of sustaining’ a demonstrable injury.” Solarize, 182 N.E.3d at 220 (quoting

Hammes v. Brumley, 659 N.E.2d 1021, 1029-30 (Ind. 1995)). The City does not

contend that it suffered or sustained any injury at the time of this case. Rather,

it alleged that the Hospital’s closure will lead to damages born out of new

ambulances or the loss of prospective businesses moving to Hammond. But as

city officials admitted to above, the City was not at any immediate risk of

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incurring costs from new ambulances, and any “possible effect[s] on ‘potential’”

businesses moving to Hammond evidently “isn’t a demonstrable injury.”

Solarize, 182 N.E.3d at 220. [20] Nor has the City alleged a “direct injury” from Franciscan’s conduct. The direct

injury required for standing is “an injury resulting directly from a particular

cause, without any intervening causes.” Solarize, 182 N.E.3d at 220 (quoting

Black’s Law Dictionary (11th ed. 2019)). In Solarize, a company promoting the

use of solar power in Indiana sought judicial review of an administrative

decision by the Indiana Utility Regulatory Commission (IURC) alleging that

the decision would “result in fewer people entering the solar market” and

thereby reduce the company’s funding. Id. But, as the Court noted, the IURC’s

decision did not directly impact the company—its theoretical injury resulted

from “market forces” on the company’s “potential customers and suppliers.” Id.

In essence, “this sort of ‘abstract speculation’” on the “indirect result of

intervening causes” does not constitute direct injury. Id. (citing Pence v. State,

652 N.E.2d 486, 488 (Ind. 1995)). So too here. [21] The Hospital’s closure is not the direct cause of the City’s feared harms. Indeed,

the City admits as much when it links the Hospital’s closure not to tangible

costs or expenses, but to “a delay in response times for Hammond ambulances

arriving to patients,” potentially resulting in avoidable injuries that increase the

City’s legal liability. Appellee’s Br., p.12. Just as the “market forces” in Solarize

were an intervening cause, the potential increase in patient response times plays

the same role here. The City merely fears that it will incur the cost of new

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ambulances from the pressure of increased response times—which arises only

indirectly from Franciscan’s decision to close the Hospital. Thus, there is no

direct injury traceable to Franciscan’s conduct. See, e.g., Fort Wayne Educ. Ass’n

v. Ind. Dep’t of Educ., 692 N.E.2d 902, 904 (Ind. 1998) (holding no direct injury

suffered in challenge to a school board’s funding decisions that would “result in

less money being available for other programs”). Without more, the City lacks

standing.

Conclusion [22] The City of Hammond lacks standing to bring this case because any alleged

injury is speculative and not directly traceable to Franciscan’s conduct.

Accordingly, we reverse the trial court’s preliminary injunction and remand to

the trial court with instructions to dismiss the City’s claim.

Bailey, J., and Brown, J., concur.

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