A federal District Court in Ohio has dismissed a suit by the Mayor and City of Cleveland seeking to force the Cleveland Clinic Foundation to maintain its service and Level II trauma center at Huron Hospital in East Cleveland.  The Court has held that the City did not state a claim under Title VI of the federal Civil Right Act, did not have standing to claim a breach of charitable trust, and was not a party to tax-exempt bond financing documents that could claim a breach of contract.  (Jackson v. Cleveland Clinic Foundation, N.D. OH, No. 1:11 CV 1334, 9/9/11.)

The City filed suit after the Cleveland Clinic system said it would close the hospital and its emergency room and trauma center even though it would increase the time necessary to obtain services for residents of the community.  The hospital previously served the highest number of poor, was the second busiest trauma center in the region, and served more patients with wounds caused by penetration, such as gun shots and knives, than any other hospital in the state. The Cleveland Clinic is a 501(c)(3) charity and has more than $1.4 billion in tax-exempt bonds with the State of Ohio.  The Clinic participates in both Medicare and Medicaid programs.

Title VI provides that “no person in the United States shall, on the ground of race, color or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.”  The U.S. Supreme Court has ruled that the statute permits private individuals to sue to enforce its provisions, but has also held that the section prohibits only intentional discrimination, not activities that merely have a disparate impact on protected groups.

Since the City claimed only that the closure of the hospital would have a disparate impact on minorities, the Court said the complaint failed to state a claim on which relief could be granted under Title VI. The City argued in its brief that the Clinic showed “deliberate indifference to the consequences to Huron’s closure,” but the Court said there was no such allegation in the complaint itself and no allegation of facts to support a claim of intentional discrimination.

The City also argued that by accepting federal, state and local tax exemptions, tax-exempt financing, and participating in a Northern Ohio trauma system, the Clinic “created and entered into a public charitable trust to provide essential Level II trauma care and emergency room services in a fair and equitable manner.” 

The Court first rejected the idea that the Clinic was subject to trust rules, saying that the City had not alleged any facts that would support that conclusion.  “Under Ohio law,” the Court said, “charitable trusts are express trusts that are created, not by tax-exempt status or funds, but by an expression by the settlor of an intent to create a trust for the benefit of the public.  Thus, courts have routinely rejected claims that an implied trust arises out of tax-exempt status.”

Even assuming that a trust had been created, Ohio law provides that only the Attorney General has the authority to bring suit to enforce the trust and the City and Mayor have no standing to do so.  Citing language in a state Supreme Court case, the City argued that standing was limited to “the pubic officer that lawfully represents the entire community” and claimed that the Mayor was such a person.  The Court, however, said the Mayor and the City did not represent the entire community, and not even East Cleveland where the hospital was located.

Finally, the City argued that acceptance of bond financing through the state creates a contract with the citizens of the state “to continue to provide for the fair and equitable delivery of essential medical services to the citizens of East Cleveland and Cleveland.”  But the Court said that the City was not a party to the bond financings and was not a third party beneficiary of the contracts. And even if they had authority to sue, they had not shown that closure of the hospital constitutes a breach of the contract.

YOU NEED TO KNOW

Even if you can overcome the limitations on standing, it is very hard to force a person to perform professional or artistic services.  When we went to law school, the bumper sticker principle was that you can’t force (opera singer) Caruso to sing.

But this case also shows the difficulty in overcoming the limitations on standing when seeking to require charitable services.  Once again the Attorney General is the only person with standing to represent the general public interest, and the Attorney General is a political animal.