The court's decision does not mean the Heffernan Memorial Hospital District or the city of Calexico will be allowed to sue the state along with the private parties of the management group.
Three of the Fourth District's appellate judges heard the appeal of Donnelly's dismissal Oct. 10 in Imperial County Superior Court in El Centro.
At the hearing the judges heard the background of the case.
The group contends in legal filings that the state promised but failed to conduct a survey of Calexico Hospital that would have allowed the management group to possibly pass the survey and qualify to receive "provider numbers" with which it could have billed Medicare and Medi-Cal.
Because the state never conducted the survey, the group never obtained the provider numbers, contending it was forced into bankruptcy.
The hospital closed its doors in January 1998, seven months after Ash and Smith's group re-opened the hospital.
After the group filed an administrative claim in 1998 — which was never acted upon by the state Department of Health — the group filed a lawsuit in 1999 against the state, the Department of Health and various state employees.
In September 2000, Donnelly dismissed the group's lawsuit for three reasons.
1. Donnelly decided the lawsuit was not filed in a timely manner.
The appellate court's decision states, "We conclude … the cause of action was timely and the court's order … must be reversed."
2. Donnelly dismissed the group's lawsuit because a sentence in the legal filings included the words "fraud and deceit" that were not in the group's earlier administrative claim.
According to the district court, "We conclude that the allegations in the claim were sufficient to put respondents (the state) on notice that (the management group) was alleging fraud against them and therefore the court's dismissal of the second cause of action was in error and must be reversed."
3. Donnelly dismissed a claim in the group's lawsuit that its due process and equal protection rights were violated.
The district court upheld that decision, which means the group can't sue the state for alleged state constitutional rights violations.
Staff Writer Aaron Claverie can be reached at 337-3419 or firstname.lastname@example.org