Golden Years Home v. C. Buckland

In the

United States Court of Appeals

For the Seventh Circuit

No. 07-1100

G OLDEN Y EARS H OMESTEAD ,

INCORPORATED ,

Plaintiff-Appellant,

v.

C. A NGELA B UCKLAND, D IANE N ILSON,

JULIE W AGONER, et al.,

Defendants-Appellees.

Appeal from the United States District Court

for the Southern District of Indiana, Indianapolis Division.

No. 02 C 771—Sarah Evans Barker, Judge.

A RGUED JANUARY 18, 2008—D ECIDED F EBRUARY 19, 2009

Before B AUER, R OVNER, and S YKES, Circuit Judges.

S YKES, Circuit Judge. Golden Years Homestead, Inc.,

operates a licensed nursing facility in Fort Wayne,

Indiana, and participates in the Federal Medicaid pro-

gram. As such, it is subject to periodic inspections, or

“surveys,” by the Indiana State Department of Health.

Golden Years underwent a series of surveys in 2000 and

2 No. 07-1100

was cited for numerous Medicaid-participation and state-

licensing violations. All but one of the citations, how-

ever, were dismissed after administrative and judicial

review. Golden Years then brought this suit against the

inspectors alleging violations of its Fourth and Four-

teenth Amendment rights and also asserting state-law

claims for malicious prosecution and abuse of process.

The district court concluded that Golden Years’ evidence

was insufficient as a matter of law on all claims and

entered summary judgment for the inspectors.

On appeal, Golden Years challenges only the dismissal

of its state-law claims, raising both procedural and sub-

stantive arguments. As to procedure, Golden Years

argues that because the inspectors never asked for a

merits dismissal of the malicious-prosecution and abuse-

of-process claims, the district court’s order amounted to

an improper sua sponte entry of summary judgment on

these claims. As to substance, Golden Years contends

that its evidence of unprofessional and abusive conduct

by the inspectors, considered together with the fact

that only one of the original citations survived admin-

istrative and judicial review, raised a material issue of

fact on the state-law claims.

We reject both arguments and affirm. The inspectors

sought summary judgment on all claims, and although

they focused most of their argument on certain affirma-

tive defenses and the sufficiency of the proof on the

federal claims, they did assert that Golden Years’ evidence

raised no material issues of fact as a general matter. As

importantly, Golden Years responded on the substance

No. 07-1100 3

of the state-law claims in its brief in opposition. The

deficiency that led the court to dismiss the federal

claims—lack of sufficient evidence that the inspectors

behaved unreasonably or harbored any improper mo-

tive—also required dismissal of the state-law claims.

Accordingly, the district court’s order was not an

improper sua sponte summary judgment on the state-

law claims. Summary judgment was also appropriate

on the merits; the state-law claims require proof of

malice or ulterior motive, and there was insufficient

evidence of that here.

I. Background

In the spring of 2000, the Indiana State Department of

Health sent a team of inspectors to conduct an annual

recertification survey of Golden Years’ nursing facility

in Fort Wayne. The agency had also received a com-

plaint about the facility, so the annual survey doubled

as a complaint inspection. The survey was conducted

over a period of ten days in late April and early May.

At some point, a disagreement arose between Golden

Years’ Director of Nursing and one of the inspectors

over the requirements of a particular federal regulation.

When the Director of Nursing challenged the inspector’s

interpretation, the inspector “became very upset” at

being second-guessed. The Director testified that the

inspectors as a group “gave me the impression that

they felt I shouldn’t be doing that, that I shouldn’t be

standing up for what I believed was right and know the

regulations and be able to quote back to them. They

didn’t like it at all.”

4 No. 07-1100

For the remainder of the inspection, the inspectors

subjected Golden Years and its staff to verbal and other

abuse. Among other things, the inspectors: loudly criti-

cized Golden Years’ staff in front of patients and visitors;

repeatedly slammed the door to the facility’s Alzheimer’s

wing in an effort to obtain a failure to lock; and omitted

favorable information from their report. In Golden

Years’ view, the inspectors were too quick to dismiss

exculpatory information identified by its staff, in one

instance calling it “crap” or “crud.” The inspectors also

failed to consider benign explanations for some of their

negative findings. As proof of this, Golden Years cites

two examples: In their report the inspectors recorded

that a patient was seen with excrement on her hand

when it was really a bit of dried sweet potato; the inspec-

tors also documented that another patient had ex-

perienced a significant weight loss, but failed to note

that this patient had been 20 pounds overweight when

admitted. Golden Years maintains that the inspection

was so hostile and accusatory that it caused 10 to 15 of

its nurses to quit.

Follow-up surveys were conducted over the summer,

and Golden Years was ultimately cited for 17 violations

of Medicaid-participation and state-licensing rules.

Golden Years brought an administrative appeal and a six-

day hearing ensued. The inspectors admitted as a

general matter that they had omitted information

favorable to Golden Years from their report but ex-

plained that they had been trained to include only the

information related to the cited deficiencies.

No. 07-1100 5

An administrative law judge reversed all but one of

the citations. After further administrative appeals and

judicial review in state court, the original administrative

determination was affirmed, leaving only one substanti-

ated regulatory violation. Golden Years then filed this

lawsuit against the inspectors and certain of their super-

visors (collectively, “the inspectors”) asserting claims

pursuant to 42 U.S.C. § 1983 for violation of its Fourth

and Fourteenth Amendment rights, along with claims

under Indiana law for abuse of process and malicious

prosecution.1

The inspectors moved for summary judgment on all

claims. They focused their arguments, however, on

certain affirmative defenses (most notably collateral

estoppel and qualified immunity) and the sufficiency of

the evidence on the federal claims. They argued that

the instances of incivility were insufficient to support a

violation of either Fourth or Fourteenth Amendment

rights and that the inspectors had conducted a rea-

sonable survey in accordance with their training. For

support they submitted training materials from the

Centers for Medicare and Medicaid Services (“CMS”) that

instruct inspectors to include in their reports only the

information relevant to potential violations. They also

1

Golden Years later joined the Centers for Medicare and

Medicaid Services (“CMS”), the federal agency which adminis-

ters Medicare and Medicaid, alleging that to the extent CMS

teachers had trained the inspectors to ignore exculpatory

evidence, CMS had also violated Golden Years’ rights. The

claims against CMS were later dismissed.

6 No. 07-1100

argued that because Golden Years had successfully de-

feated most of the citations through administrative and

judicial review, its claims were barred. Although they

did not explicitly address the substantive merits of the

state-law claims, they asserted as a general matter that

“[t]here are no genuine issues of material fact with

respect to this matter” and asked for dismissal of all

claims. In its response to the motion, Golden Years at

length addressed the substance of both its federal and

state claims.

The district court granted summary judgment for the

inspectors and dismissed all claims on the merits. Golden

Years Homestead, Inc. v. Buckland, 466 F. Supp. 2d 1059

(S.D. Ind. 2006). Noting that nursing homes are heavily

regulated and expectations of privacy in this context are

thus attenuated, the court held that the evidence was

insufficient to establish that the surveys had been con-

ducted or citations issued in an unreasonable manner,

for any improper motive, or “shocked the conscience”

for purposes of the Fourth and Fourteenth Amendment

claims. Id. at 1066-70. The court also held that because

both of the state-law claims required an element of im-

proper motive, the evidence was insufficient on these

claims as well. Id. at 1070-71. As the judge saw it, the

incidents of incivility and excessive investigatory zeal

and the omission of some favorable information from

the inspectors’ report was simply not enough to estab-

lish a constitutional violation or the torts of malicious

prosecution or abuse of process.

No. 07-1100 7

II. Analysis

We review a district court’s grant of summary judg-

ment de novo, viewing the evidence and inferences in

the light most favorable to Golden Years. S. Ill. Riverboat

Casino Cruises, Inc. v. Triangle Insulation & Sheet Metal Co.,

302 F.3d 667, 671 (7th Cir. 2002).

Golden Years first argues that the district court im-

properly entered summary judgment on the state-law

claims sua sponte, without giving it an opportunity to

respond. “While not encouraged, a district court can

enter summary judgment sua sponte, or on its own motion,

under certain limited circumstances.” Simpson v. Merchs.

Recovery Bureau, Inc., 171 F.3d 546, 549 (7th Cir. 1999); see

also Aviles v. Cornell Forge Co., 183 F.3d 598, 604 (7th Cir.

1999). However, “granting summary judgment sua sponte

warrants special caution” and generally requires that

the party against whom summary judgment is entered

have notice and an opportunity to present its evidence.

Simpson, 171 F.3d at 549.

Under the circumstances here, the district court’s entry

of summary judgment on the state-law claims cannot be

characterized as purely sua sponte. In their summary-

judgment motion and memorandum in support, the

inspectors specifically asked for dismissal of all the

claims in the lawsuit. In addition to arguing several

affirmative defenses, the basis for the inspectors’ motion

was that Golden Years’ evidence was insufficient to

establish that the inspectors had behaved unreasonably

or arbitrarily, harbored any improper motive or

personal animus, or otherwise engaged in behavior that

8 No. 07-1100

shocked the conscience. Although these arguments were

presented in the discussion of the § 1983 claims, the

inspectors also argued, as a general matter, that “[t]here

are no genuine issues of material fact with respect to

this matter” and asserted entitlement to judgment as a

matter of law on all claims.

It is true that the inspectors did not develop an argu-

ment on the substance of the malicious-prosecution or

abuse-of-process claims. But Golden Years took the oppor-

tunity in its response to the motion to present its

evidence and argument on the state-law tort claims, and

specifically addressed whether the evidence was suf-

ficient to create an issue for trial on the elements of mali-

cious prosecution and abuse of process under Indiana

law—especially the element of improper motive

common to both claims. Golden Years has not identified

any significant evidence that it omitted. The evidence

relating to the inspectors’ possible retaliatory motive

was the same for the state-law claims as the federal con-

stitutional claims, as was the district court’s rationale

for entering summary judgment on each category of claim.

In proceeding to the merits of the state-law claims, the

district court duly considered 28 U.S.C. § 1367, which

provides that the district court “may decline to exercise

supplemental jurisdiction over a claim . . . if . . . the district

court has dismissed all claims over which it has original

jurisdiction.” The court noted the general rule in this

circuit that when “the federal claim drops out before

trial, . . . the federal district court should relinquish juris-

diction over the supplemental claim.” Van Harken v. City

No. 07-1100 9

of Chicago, 103 F.3d 1346, 1354 (7th Cir. 1997). But the

court thought this case fell within an exception to the

general rule that applies when it is very clear that the

supplemental claim is meritless. Boyce v. Fernandes, 77

F.3d 946, 951 (7th Cir. 1996) (“[I]f the supplemental claim

is easily shown to have no possible merit, dismissing it

on the merits is a time saver for everybody.”). Under

the circumstances here, this was not procedurally im-

proper.

Nor was the entry of summary judgment on the state-

law claims substantively improper. Under Indiana law,

“[t]he elements of a malicious prosecution action are:

(1) the defendant instituted or caused to be instituted

an action against the plaintiff; (2) the defendant acted

maliciously in so doing; (3) the defendant had no

probable cause to institute the action; and (4) the original

action was terminated in the plaintiff’s favor.” Crosson v.

Berry, 829 N.E.2d 184, 189 (Ind. Ct. App. 2005). Malice

may be shown by evidence of personal animosity or

inferred from a complete lack of probable cause or a

failure to conduct an adequate investigation under

the circumstances. F.W. Woolworth Co. v. Anderson,

471 N.E.2d 1249, 1254 (Ind. Ct. App. 1985).

Golden Years argues that the disagreement between

its Director of Nursing and one of the inspectors is evi-

dence that the inspectors’ subsequent behavior was

motivated by personal animosity. But this incident was

insufficiently personal and too benign to support a

finding of malice as required for this tort. Golden Years

relies on Anderson and Kroger Food Stores, Inc. v. Clark, 598

10 No. 07-1100

N.E.2d 1084, 1089 (Ind. Ct. App. 1992), but these cases

are factually distinguishable.

In Anderson, a Woolworth auto-parts manager was

acquitted on charges that he was stealing from the

store and then sued his employer for malicious prosecu-

tion. He established that the charges had been initiated

by store employees whom he had previously turned in

for sexual harassment and theft. 471 N.E.2d at 1254.

He also established that he had been handling register

deposits in accordance with specific instructions given

to him by one of the employees who later investigated

him, yet the investigator ignored that fact. Id. at 1252.

In Clark, a grocery-store cashier was acquitted on

theft charges initiated by her employer and then

brought suit for malicious prosecution. She presented

evidence that the supervisor who investigated her har-

bored personal animus against her because of a previous

dispute with the union. 598 N.E.2d at 1089. Also, the

supervisor’s surveillance of the cashier had produced

no evidence that the cashier had engaged in any

illegal activity, and the cashier’s accounting practices,

which the supervisor had claimed were unusual, were

the same as every other employee’s. Id. at 1087-88.

Here, there is no comparable history between any of

the inspectors and the Director of Nursing from which

to infer personal animosity. That the inspector “didn’t

like it” that the Director of Nursing could quote the

relevant regulations is simply insufficient to support a

finding of personal animus. Golden Years also suggests

that the inspectors’ obnoxious behavior, which began

No. 07-1100 11

after the Director of Nursing asserted herself, is evidence

of personal animus. We disagree. Raised voices and

repeated door-slamming in order to induce a lock to

malfunction suggest that the inspectors were over-

zealous, overbearing, and unprofessional, but not that

they were motivated by personal animus.

Golden Years also claims that a reasonable jury could

infer malice from an absence of an adequate investiga-

tion by the inspectors. On this point, Golden Years sug-

gests that the dismissal of all but one of the citations on

administrative and judicial review is evidence that the

inspectors failed to conduct an adequate investigation.

Golden Years also points to the inspectors’ admission

before the administrative law judge that they sometimes

omitted extraneous information from their reports as

evidence of an inadequate investigation. However,

Golden Years has not challenged the district court’s

determination, in connection with the dismissal of the

Fourth Amendment claim, that the inspectors conducted

a reasonable inspection. We will assume for the moment

that a reasonable inspection (in the constitutional sense)

might at the same time be deemed so inadequate as to

give rise to an inference of malice for purposes of the

tort of malicious prosecution under Indiana law. But

Golden Years has discussed only two allegations that the

inspectors failed to adequately investigate: (1) the allega-

tion that a patient had excrement on her hand (it was

actually dried sweet potato); and (2) the allegation that

a patient sustained a significant weight loss (it turned

out that the patient was 20 pounds overweight when

admitted). The failure to thoroughly investigate these

12 No. 07-1100

two allegations is insufficient to support an inference of

malice; Golden Years has not identified any other

specific instances of inadequate investigation by the

inspectors.

Golden Years’ claim for abuse of process fares no

better. “The elements of abuse of process are 1) an

ulterior motive or purpose, and 2) a willful act in the use

of the process not proper in the regular conduct of the

proceeding.” Lindsay v. Jenkins, 574 N.E.2d 324, 326 (Ind. Ct.

App. 1991). An ulterior motive for purposes of this tort

may include a desire “to embarrass, annoy and ridicule.”

Id. Mere negligence, however, is insufficient. Conner v.

Howe, 344 F. Supp. 2d 1164, 1175 (S.D. Ind. 2004); Yater

v. Coy, 681 N.E.2d 232, 233 (Ind. Ct. App. 1997).

Golden Years argues that the incident between the

inspector and the Director of Nursing, when combined

with the rude and abusive behavior of the inspectors

that followed it, is sufficient to permit an inference of

ulterior motive. As we have already noted, however,

while this behavior was unprofessional, it does not

support an inference that the inspectors harbored

ulterior motives. The sole case Golden Years cites,

Lindsay, is easily distinguishable. There, the litigants had

a long-running dispute over a setback ordinance,

including proceedings before the local zoning board as

well as active prior litigation; the Indiana appellate

court held that this history could conceivably support a

finding of ulterior motive and reversed a summary judg-

ment that had been entered in favor of the defendant.

Lindsay, 574 N.E.2d at 325.

No. 07-1100 13

In contrast, here there was no such history; it is undis-

puted that the relationship between Golden Years and

Department of Health inspectors had previously been

cordial. Indeed, Golden Years’ president had written

letters to the Department of Health complimenting its

inspectors’ professionalism. Golden Years simply has

not presented sufficient evidence from which a rea-

sonable jury could infer that the inspectors issued the

citations because of an improper ulterior motive.

Accordingly, the judgment of the district court is AFFIRMED.

2-19-09