News and Observer Publishing Co. v. Wake County Hospital System

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News and Observer Publishing Co. vs. Wake County Hospital System Number: 284 S.E.2d 542 Year: 1981 State: North Carolina Court: North Carolina Court of Appeals Other lawsuits in North Carolina Other lawsuits in 1981 Precedents include: This case established that private corporations are considered agents of public bodies when they exercise concrete decision making powers over governmental functions which have been granted by some public municipality or agency responsible for those functions and when their decision making power and activity is sufficiently intertwined through regulation with the public body granting the powers.

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News and Observer Publishing Co. v. Wake County Hospital System was a case before the North Carolina Court of Appeals in 1981 concerning the application of public records laws to private corporations.

Important precedents

This case established that private corporations are considered agents of public bodies when they exercise concrete decision making powers over governmental functions which have been granted by some public municipality or agency responsible for those functions and when their decision making power and activity is sufficiently intertwined through regulation with the public body granting the powers.

Background

• On May 25, 1955, The Wake County Board of Commissioners created the Wake County Hospital Authority. The board of the hospital authoriry was to be composed of 1 commissioner and 6 other citizens.
• On July 18, 1955, the commissioners granted the authority full power over the construction, operation and maintenance of the hospital. The commissioners did however reserve the power to remove any member of the authorities board at will. Also, all the funds of the hospital were entrusted to the county treasurer and the titles to the land were entrusted to the county government. The act also granted the commissioners budgetary review, approval to all budget and program changes, representation at the meetings of the authority board, for the purposes of regulation. In addition, the required that the hospital be run as a private nonprofit corporation.
• On June 7, 1965 the commissioners approved a measure to make the hospital a private nonprofit under the title of Wake County Hospital System, approved the articles of incorporation and established a lease contract for the hospital property which required a payment of only $1 a year.
• The articles of incorporation and the lease did not in any way change the relationship between the commissioners and the hospital and included provisions that required the commissioners to approve changes in the hospital board's membership and any budgetary or policy changes.
• On January 1, 1975 a new contract was established between the system and the commissioners. The majority of this contract resembled previous contracts. However, under this one, in exchange for $34,775,000 in county bond money, the hospital agreed to surrender all its profits to the county, allegeing that it was owned by the county. The hospital also opened up all of its records to county officials and agreed to not change its articles of incorporation of bylaws without the counties approval. The contract also contained a clause stating that both the county and the hospital, "understood and agreed that the [System] is an independent contractor and that none of the Trustees, officers, employees or agents of the [System] is or shall be deemed to be an agent or employee of the County by reason of anything contained in this Agreement."
• In 1977 the county issued another bond for 41,535,000 and entered into a new agreement, identical to the previous one.
• On December 19, 1978, three separate judicial actions were commenced for wrongful termination allegations made by medical professionals against the hospital. The cases ended in undisclosed settlements.
• News and Observer Publishing Co. submitted a records request for the results of the settlements and a request for recent budgets in an effort to determine how much money was spent on the settlements.
• When the request was denied, the newspaper filed suit, seeking the compel the hospital to release the records.
• The trial court ruled in favor of the newspapers and the hospital system appealed the decision.

Ruling of the court

The trial court delivered summary judgment in favor of the newspaper ordering the documents in question disclosed.

The Court of Appeals affirmed the decision of the trial court. Relying on federal statutes and rulings, the court determined that the definition of agency within the North Carolina Public Records Law must include all entities with legal authority to make decisions relating to governmental functions. The court went on to determine that the significant decision making power of the hospital with regards to its day to day operations, combined with the oversight and regulations placed on it by the county commissioners results in the hospital system being considered an agent of the county. The court went on to cite Coats v. Sampson County Memorial Hospital, Inc. as well as numerous ruling from other states including Moberly v. Herboldsheimer, in determining that hospital functions are considered governmental functions and thus, their decision making power is considered to be granted to them by a governmental authority, namely the county. These two factors combine to make the hospital system an agent of the county and thus subject to the public records law. Finally, the court determined that the records in question as they relate to litigation settlements and expense reports of government funds are in essence government records subject to the act. Based on this ruling the Court of Appeals affirmed the decision of the trial court and ordered the release of the documents in question.

Associated cases

• Coats v. Sampson County Memorial Hospital, Inc.
• Moberly v. Herboldsheimer

External links

• Ruling of the Court