Memorandum of Law in Opposition to the Motion to Dismiss

     [||11ea9f8d-1212-4d16-a85d-0b64bee70fe0||] IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF INDIANA 

HAMMOND DIVISION 

  

BARBARA LEEK WESSON, 

BERNICE TERRY, 

EDDIE GRAY, and 

ROSA KEETON, 

(1
) 

Plaintiffs, es
 

Ve ae
 

Cause No. H 76-373 

METHODIST HOSPITAL OF GARY, INC., 

An Indiana Not-For-Profit 

Corporation, and JOSEPH CALIFANO, 

United States Secretary of Health, 

Education and Welfare, 

4
 

(1
) 

Defendants. . 
“a
e 

    

  

MEMORANDUM OF LAW IN OPPOSITION TO THE MOTION TO 

DISMISS OF DEFENDANT METHODIST HOSPITAL OF 

GARY, INC. 

  

    
  

LB i a rE E> — cern emerge Ea ————.. RE CISTI ESTES T= Te —     

JACK GREENBERG 

BETH J. LIEF 

10 Columbus Circle 

New York, New York 10019 

JULIAN ALLEN 

2009 Broadway 

Gary, Indiana 

MARILYN G. ROSE 

CHRISTINE B. HICKMAN 

1751 N Street, N. W. 

Washington, D. C. 20036 

Attorneys for Plaintiffs 

 



  

II. 

IIT. 

IV. 

vill. 

INDEX 

TABLE OF CONTENTS 

Page 

STATEMENT OF THE CA Duns senses dines evevesesnsveved 

THE COMPLAINT STATES A CAUSE OF ACTION UNDER TITLE 
VI OF THE CIVIL RIGHTS ACT OF 1964 AND JUDICIAL RE- 
VIEW IS NOT PRECLUDED BY THE ADMINISTRATIVE PROCE- 
DURE ACT OR THE HILL-BURTON ACT. ssvcsssssvvsonsnses 

A, The Complaint, Which Alleges Racial Discrimi- 
nation By A Recipient Of Federal Financial 
Assistance, States A Cause Of Action Under 

Title Ml sss ss shsosnssvsesrsesvsessersesetovenesd 

B. Neither The Administrative Procedure Act Nor 

The Hill-Burton Act Preclude Jurisdiction Over 

The Subject Matter Of The Complainteeceececcceeesll 

METHODIST HOSPITAL OF GARY, INC, IS SUBJECT TO THE 

PROHIBITIONS OF THE FOURTEENTH AMENDMENT. .ccccseeslD 

PLAINTIFFS HAVE EXHAUSTED THEIR ADMINISTRATIVE 
REMEDIES, ANY FURTHER EFFORTS AT OBTAINING RELIEF 
THROUGH THE ADMINISTRATIVE PROCESS WOULD BE FU- 
TILE, AND THE DOCTRINE OF EXHAUSTION OF ADMIN- 
ISTRATIVE REMEDIES IS INAPPLICABLE TO THE CAUSES 
OF ACTION AGAINST THE SECRETARY OF HEWeeeoooeoosese0 

PLAINTIFFS HAVE STANDING TO BRING THIS ACTIONeeeo23 

THIS CASE IS RIPE FOR JUDICIAL REVIEW. .ccocecoonses’b 

THE DOCTRINE OF SOVEREIGN IMMUNITY IS INAPPLICABLE 
IN THIS CASE AND IS NO BAR TO THIS COURT'S JURIS~ 
DICTION OVER THE SECRETARY OF HEALTH, EDUCATION 

AND WE AR visu vn sons oorusos assesses iossnsnsonesds 

CONCUSSION , ss. so somos nes vos rsostnseahnessesessssesn edd 

 



  

TABLE OF AUTHORITIES 
  

CASES PAGE 

Adams v. Richardson, 

480 F.2d 1159 {D.C.C. T7973) sesaisiosssssovesensiviee eddy 14, 

22,30 

  

Albemarle Paper Co. v. Moody, 

922 U.S. 405 (1075) ev vss Bosesnesvevsinebonssnesssestl 

  

Arlington Heights v. Metropolitan Housing Corpe., 
45 U.S. LN, 4073 (January 11, 1977) cv esnseesvesoesass 24 

    

Ascherman v., Presbyterian Hospital, 
507 F.24 1103 (9th Cir. JOT) ssi nsva ven enssssves suid 

    

Baker v. Carr, 
369 U.S. 186 (1062) cnn nse sniinsessbonensesevsines vod 

Bob Jones University v. Johnson, 
396 FF. Supp. 597 (D.S.C. 1974), aff'd, 529 F.24 
514 (4th Cir, O76) Luss nnnsssnsnnsseevitiesveneeseensy 9 

  

Citizens to Preserve Overton Park v. Volpe, 

401 k 2 402 0107 1 eve canesimeisvnns sone nenseseronestds 14 

  

Conley v. Gibson, 
355 U.S. 41 (1057) 0 nsnevisnesevovessseveossoreeveey 15 

Data Processing Service v, Camp, 
397 U.S, 150 (1070) caves ene ds sviseesnsvnsesnssnossinesy 25 

  

Doe v, Bellin, 

479 Fe 2d 756 (7th Cir, 197 ec sv sce cencsvesenssnssls, 19 

  

Dugan v. Rank, 

372 U.S, 609 £1063) cannes oneioissssseseveines ss oe see sna 

Ex Parte Young, 

209 F.Se 123 {1008 ) cues svnsosssssvsnesnesesvenens sd 

  

Foman v. Davis, 
LR ——— 

371 U.S. 178 (L062) cde san tons sess esis vee ven's eesesld, 15 

Fuhrer v. Fuhrer, 
292 F.2d 140 (7th Cir, 1061) J vias Venn ss nnneveeveved 

Gautreaux v. Hills, 

425 U.S. 284 {A075 vv sion ons ssniosnvsdessevesmive esa, 30 

  

wf] 

 



CASES (cont'd) PAGE 

Glover v. St. Louis-San Francisco R. Co., 

393 P.O. 324 01069) binvioasvsensesesosossesesnvesenal 

  

Griggs v. Duke Power Co., 

401 U.S 424 C1071) von nvosvrosnvesvenveivevveeveeell 

  

Hicks v. Weaver, 
302 Fe. Supp. 619 {(£.D. La, JOEO) svn nensensvsesseid, 

Jackson v., Metropolitan Edison Co., 

419 U.S. 345 (1OT7A) un vanne nsiovnesindiveseiaeesensseeeld, 

  

Land v. Dollar, 

330 U.S. 731 (1047) sien snnossensenetnesssasvenersedds 

Larson v. Domestic and Foreign Commerce Corp., 

337 U.S. 682 (LOZ EY sian iv sins esosienineesvssssissvveenaSs 

  

Lau v. Nichols, 
414 U.S, 563 (1074) an tenvoivsssvnesinssvessensnsns vets 

Lee County School District No, 1 v. Gardner, 

263 Fe. Supp. 26 {D.S.C. 1067) cc dsnos sors snvilonws dod 

  

Malone v. Boudin, 

369 U.S. 642 (1002) 0s vnnosnesssseoeenne sees sensossves 

Moose Lodge No. 107 v. Irvis, 

407 U.S. 163 £1972 aia's thofnios sisinin sins dae nesvsnnsseesesld 

  

NAACP v. Brennan, 

360 F. Supp. 1006 DCA. V373) seme dos aseinsesnecsesl 

NAACP v. The Wilmington Medical Center, 
Civ. Action No, 76-298 "{D, Del, 1976) cc evesssneeseds 
  

Radovich v, National Football League, 

352 U.S. 445 (1057) snevvsnvsnssorensesetsowtnsvensd 

    

Schafly wv. Volpe, 

495 Fe 2d 273 (7th Cir. 1072) scene vances isesnniseveedd 

Shannon v, HUD, 
— iin, 

£36 FP, 20 809 (318 Cir. 1070). costes snnnevnviacese2, 30 

Sierra Club v. Morton, 
405 UeSs 727 (T0722) svn vveness sosunenssncetenns vases 

  

Simkins v. Moses Cone Memorial Hospital, 
323 F. 2d 959, cert. denied, 376 U.S. 938 (1964)..8, 17 
  

  

Simon v. Eastern Kentucky Welfare Rights Organization 

426 UsSe 26 0 Yh I ER IO RR ie ER he T 

  

-iii-  



  

CASES (cont'd) PAGE 

Spark v. Catholic University of America, 
510 F. 2d 1277 {(b.C.C. 1975) seuss swin esas ess sessed 

  

State of Washington v. Udall, 

417 Pa 2d 1310 (9th Cir, 1969). « wheiote so s 00 'ninin's ss nvinnva0 

  

United States v. SCRAP, 

412 US e 669 (1973) a a vne nines stn esteswinee oie vied ve side vas 

  

Warth v, Seldin, 

422 U.S. 490 L1O76) sno novos onnesvvisimeiee se seesennsieres 

  

STATUTES 
  

Fifth Amendment To The Constitution of the United States.2, 8 

Fourteenth Amendment To The Constitution of the United 

SALES seventeen ssinvncossssnsewronsesverssbesenssves eed 3, B., 

15, 16, 
17, 26 

5 UeS.Cu §701. ® © © © © © OO ® ® OOO OOPS OES OOO EE SOOO OO e000 OO 0 0 eee 00 i i 12, 13 

5 U.,S.Ce §702a ova veo nwieivitioie sve oe e oe ss esse viveeee seine swe ss 31 

28 UeSCoe S134 3nnsvesionsesevevesnsssssrecsrvess eens seveveld 

42 U.S.C §291 et. SCC a vic 0s nbesetesssesessesasseseses suse PasSsSim 
  

42 UL E80 21083 eves ess vsvoverssensevieesisesssssesssesseeeinsdd 

42 UeS Co §2000d et. SECs wvsssvnssssssssssssnesnssssesesnsPOSSim 

42 C.T.R. 853 ell dis vnnnvesvvierevmsisieesnnevsesssenieresviselOy 12 

42 C.EB.R. 8530127 cnvaninens oneness vesensineassseeeeessessseelO 

42 CCFLRL BS 31128 0s eie tosses ne sensors eesssveseeinvessnessll 

45 CF.R, Part BO ses oneseaivevniseevsieeeveeve ve siomeses10, 32, 13, 

16, 20 

Government Documents 
  

110 Congressional Record 7054-7058, 7060-7063, 14433- 

14440 (1OGA Ys ss snes votsnevssesssnsosevsersressssvees 

110 Congressional Record 13928, 14331 (1964)eccccccccccce? 

-—] 

 



  

Government Documents (cont'd) Page 
  

House Document No. 124, 88th Congress, First 
Session, at 120 bois vin ne evs snsensevictsens sews vives ened 

House Report No. 94-1656, September 22, 1976 Congres- 
sional and Administrative News 6553ccccceccccecessll 

Senate Report No. 752, 79th Congress 

First Session, 26 L104) sc ensniv snes nsneosnnesnsssele 

 



  

CERTIFICATE OF SERVICE 
  

I hereby certify that a copy of the foregoing MEMORANDUM 

OF LAW IN OPPOSITION TO THE MOTION TO DISMISS OF DEFENDANT 

METHODIST HOSPITAL OF GARY, INC., was served by United States 

Mail, postage prepaid, on the 5th day of March, 1977, on 

counsel for defendants as follows: 

HODGES, DAVIS, GRUENBERG, COMPTON 

& SAYERS, BRUCE E. SAYERS, ESQ. 

5525 Broadway 

Gary, Indiana 46401 

ATTORNEYS FOR DEFENDANT METHODIST 

HOSPITAL OF GARY, INC. 

  

BETH J." L1IEF 

Attorney For Plaintiffs 

 



  

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF INDIANA 

HAMMOND DIVISION 

  

BARBARA LEEK WESSON, : 

BERNICE TERRY, 

EDDIE GRAY, and 

ROSA KEETON, 

{1
} 

Plaintiffs, 

Yea Cause No. H 76-373 

[1
] 

METHODIST HOSPITAL OF GARY, INC., 

An Indiana Not-For-Profit 

Corporation, and JOSEPH CALIFANO, 

United States Secretary of Health, 

Education and welfare, 
se
 

(1
 

Defendants. 

  

MEMORANDUM OF LAW IN OPPOSITION TO THE 

MOTION TO DISMISS OF DEFENDANT METHODIST 

HOSPITAL OF GARY, INC. 

I. 

STATEMENT OF THE CASE 
  

This case was commenced by four black citizens who 

are residents of the City of Gary, Indiana against the 

Methodist Hospital of Gary, Inc., and the United States 

Secretary of Health, Education and Welfare (hereinafter 

"HEW") . Plaintiffs charge the defendants with violating 

their obligations and plaintiffs' rights under Title VI 

of the Civil Rights Act of 1964, 42 U.S.C. § 20004, and 

 



  

their rights to equal protection guaranteed by the Fifth 

and Fourteenth Amendments to the Constitution of the United 

States. 

Methodist Hospital of Gary, Inc., has operated a 

hospital facility, Gary Methodist Hospital, in the City of 

Gary for over fifty years. In 1975, Methodist Hospital of 

Gary, Inc., completed construction of another hospital, 

Broadway Methodist Hospital, which is located in Merrillville, 

Indiana, a suburb of Gary. The precipitating cause of this 

action was the approval by HEW of a $8,143,370 proposal by 

Methodist Hospital of Gary, Inc., and the grant of federal 

financial assistance under Title VI of the Public Health 

Services Act, 42 U.S.C. § 291 et seq. (hereinafter "Hill-Burton" 

Act). The majority of funds in this proposal are intended to 

be used to expand the facilities at Broadway Methodist Hospital. 

Plaintiffs contend that the construction and expansion 

of Broadway Methodist by Methodist Hospital of Gary, Inc., 

discriminates against the black citizens of Gary in the pro- 

vision of health services. To remedy this discrimination, 

plaintiffs seek an order enjoining HEW from continuing the 

federal financial assistance which HEW is giving and has 

given to Methodist Hospital of Gary, Inc., for the construction 

of Broadway Methodist Hospital and an order directing HEW to 

 



  

withhold Hill-Burton financial assistance on the $8,143,370 

proposal of Methodist Hospital of Gary, Inc. 

Defendant HEW has not filed an appearance in this 

action. Defendant Methodist Hospital of Gary, Inc., has 

filed a motion to dismiss on the grounds that (1) the Court 

lacks jurisdiction over the complaint under Title VI of the 

Civil Rights Act of 1964, the Administrative Procedure Act, 

the Hill-Burton Act, and the Fourteenth Amendment; (2) plain- 

tiffs have failed to exhaust administrative remedies: 

(3) plaintiffs lack standing to prosecute the action; (4) the 

cause is not ripe for judicial determination; and (5) the 

Court lacks jurisdiction over the Secretary of HEW. This 

memorandum of law is submitted in opposition to all grounds 

raised in the motion to dismiss. 

IX. 

THE COMPLAINT STATES A CAUSE OF ACTION UNDER 

TITLE VI OF THE CIVIL RIGHTS ACT OF 1964 AND 

JUDICIAL REVIEW IS NOT PRECLUDED BY THE AD- 

MINISTRATIVE PROCEDURE ACT OR THE HILL-BURTON 

ACT 
  

A. The Complaint,Which Alleges Racial 

Discrimination By A Recipient Of 

Federal Financial Assistance, States 

A Cause Of Action Under Title VI. 

Section 601 of Title VI of the Civil Rights Act of 1964 

provides: 

 



  

"No person in the United States shall 

on the ground of race, color or na- 

tional origin, be excluded from par- 

ticipating in, be denied the benefits 

of, or be subjected to discrimination 

under any program or activity receiving 

federal financial assistance." 42 U.S.C. 

§ 2000d. 

The allegations of the complaint, which on a motion to dismiss 

1/ 
are accepted as true, charge that Methodist Hospital of Gary, 

Inc., which is a recipient of federal financial assistance, 

discriminates against the black citizens of Gary, Indiana in 

the provision of health care (Complaint, paragraphs 4, 8, 11). 

This allegation falls squarely within the prohibitions of 

and states a cause of action under Title VI. 

Although defendant professes some uncertainty as to whether 

the complaint actually alleges racial discrimination, it is 

clear from the totality of the pleading, that racial dis- 

crimination forms the gravaman of the action. The allega- 

tion that Methodist Hospital of Gary, Inc., does not refuse 

black patients outright at Broadway Methodist in no way 

minimizes the allegation that black citizens are being dis- 

criminated against at Gary Methodist by receiving inferior 

health care, or by the construction of the more modern facility, 

Broadway Methodist, in a location not accessible to them. Any 

ambiguity in this regard must be resolved in favor of plain- 

tiffs, for in considering a motion to dismiss, the facts alleged 

  

l/ E.g., Radovich v. National Football League, 352 U.S. 445 
(1957). 
  

ue 

 



  

must be viewed in the light most favorable to the plaintiffs. 

Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Fuhrer v. Fuhrer, 
    

292. 9.24140, 143 (7th Cir. 1961). 

It is equally clear, and defendant admits that Methodist 

Hospital of Gary, Inc., has received substantial amounts of 

federal financial assistance. The affidavit of Larry Mangold, 

Chief Financial Officer of the Methodist Hospital of Gary, Inc., 

2/ 
submitted in Opposition to the Motion for a Preliminary Injunction, 

states: 

"2. +. «. . That The Methodist Hospital of Gary 

entered into an agreement with the Department 

of Health, Education and Welfare of the United 

States government dated September 5, 1973, pro- 

viding for a 3% interest subsidy on a real 
estate mortgage in the sum of $ 14,315,207.00 

. « « « [and] that the aggregate 3% interest 

subsidy over the next 24 months commencing 

February 1, 1977 is in the sum of $837,394.05. 

4. That the defendant, Methodist Hospital, 

has obtained approval of the Health Services 

Agency for Northern Indiana for three building 

projects being a health services building in 

Gary, a health services building in Merrillville 
and a laundry in Merrillville. This approval 

was granted September 28, 1976. In addition, 

defendant, Methodist Hospital, has obtained a 

loan guarantee agreement for said projects under 

Project Numbers 212 and 213 both of which are 

dated September 28, 1976. . . Said loan guaran- 

tee agreement provides for a loan guarantee and 

  

2/ The motion has since been withdrawn. 

 



  

3% interest subsidy provided the project is 

placed under contract within 12 months from 

the date of execution of these agreements by 

the Secretary (of HEW) unless a longer time 

is approved by the Secretary but in no case 

to exceed 18 months. Said loan guarantee 

for Project 212 is in the sum of $2,511,604.00 

and for Project 213 is $3,522,895.00 and the 

value of the interest subsidy thereon is in 

the sum of approximately $2,660, 

5. That in addition, the defendant, 

Methodist Hospital, has obtained approval for 

a grant of $491,573.00 in Hill-Burton Funds 

for the construction of said buildings, which 

it may lose in the event of a preliminary in- 

junction." 

Despite these admissions, Methodist Hospital contends that 

it is not subject to the obligations and prohibitions of Title 

VI by virtue of § 605 of the Title, which provides: 

"Nothing in this subchapter shall add to or 

detract from any existing authority with 

respect to any program or activity under 

which Federal financial assistance is ex- 

tended by way of a contract of insurance 

or guaranty." 42 U.S.C. § 2000d4-4. 

The legislative history of Title VI, case law, administrative 

determinations, and commonsense demonstrate that the defend- 

ant's attempt to evade the requirements of Title VI is merit- 

less. 

Title VI,and the other provisions of the Civil Rights 

Act of 1964, were passed in response to Congress' heightening 

determination to obliterate the evils of segregation and 

 



  

Pursuant to § 2000d-1, HEW promulgated regulations which set 

forth with specificity the obligations of Title VI. 

45 C.F.R. Part 80. Appendix A to those regulations is titled 

"Federal Financial Assistance to Which These Regulations Apply." 

Included within that list at Part 2, number 22, is the Hill- 

Burton program: "grants, loans, and loan guarantees with 

interest subsidies for hospital and medical facilities (Title 

VI, Public Health Service Act, 42 U.S.C. 291 et seq.)." More- 

over, the regulations promulgated by HEW under the Hill-Burton 

Act also recognize the applicability of Title VI to the program. 

42 G.F.R. § 53.112. 

It is well-recognized that the interpretation of a statute 

by the agency charged with its enforcement is entitled to 

great deference. E.g., Albemarle Paper Co. v. Moody, 422 U.S. 
  

405, 431 (1975), Griggs v. Duke Power Co., 401 U.S. 424, 433- 
  

434 (1971). Indeed, both HEW and Methodist Hospital of Gary, 

Inc., thought Title VI applied so that Methodist was subject 

to Title VI by virtue of the Hill-Burton financial assistance, 

since HEW had Methodist sign the "Civil Rights Assurance" which 

is attached as Exhibit "A" to the Complaint. Finally, the de- 

fendant admits that it is receiving not merely a loan guarantee, 

but a grant and interest subsidy which total substantial 

amounts of money. See, supra, pp. 5-6. 

Wo 

 



  

discrimination which had continued to plague the United States 

since the end of the Civil War. In the message accompanying 

the proposed Civil Rights Act of 1964, President Kennedy re- 

quested that Congress "pass a single, comprehensive provision 

making it: clear that the federal government is not required 

under any statute, to furnish any kind of financial assistance 

. « » to any program or activity in which racial discrimination 

occurs." House Document No. 124, 88th Cong., lst Sess., at 12. 

Section 605 was added to Title VI by a Senate floor amend- 

ment, and is therefore not analyzed in the committee reports 

on the Act. Debate on the floor of Congress establishes, how- 

ever, that the amendment was intended to exempt from coverage 

loans handled by banks which were members of the Federal 

Deposit Insurance Corporation, and handled Veterans Administration 

and Small Business Administration loans. 110 Cong. Rec. 13928, 

14331 (1964). The concern which prompted the amendment was 

that the conventional loan market not be affected. Id.   

In contrast to those types of conventional loans, Congress 

clearly intended to have Title VI cover financial assistance 

under the Hill-Burton grant and loan program. In the twenty- 

year period predating Title VI, a number of federal laws had 

been promulgated which provided federal tax dollars on an 

alleged "separate-but-equal" basis. Prominent among these laws 

 



3/ 
was the Hill-Burton program, the program pursuant to which 

  

Methodist Hospital has received, is receiving and will 

receive funds. In December, 1963, the Court of Appeals for 

the Fourth Circuit declared the "separate-but-equal" clause 

in the Hill-Burton Act unconstitutional, and held that other- 

wise "private" hospitals, built with Hill-Burton monies, 

violate the Fifth and Fourteenth Amendments of the Constitution 

when they discriminate on the basis of race. Simkins v. Moses 
  

Cone Memorial Hospital, 323 F.2d 959, cert. denied, 376 U.S. 
  

  

938 (1964). The need to rid the Hill-Burton program of such 

discrimination was very much on the minds of the sponsors of 

Title VI. 110 Cong. Rec. 7054-7058, 7060-6063, 14433-14440 

(1964) . 

Moreover, courts have recognized that the coverage of 

Title VI, a remedial civil rights statute, should be given a 

broad interpretation. As the District Court in Bob Jones 
  

University v. Johnson stated: 
  

"Beyond giving the literal language of Section 

601 its ordinary meaning . . . it is also im- 

portant to consider whether . . . a construction 

comports with the Congressional purpose under- 

lying Title VI. . . . In the absence of statutory 

language or legislative history which would clearly 

  

3/ Pub. L. 725, Title VI of the Public Health Services Act, 

42 U.S.C. § 291 et seq. 

 



  

seem to exclude Title VI coverage . . . 

the broad language of Title VI should be 

interpreted in the remedial context in 

which the Title was presented to Congress 

by the Kennedy Administration. Under such 

circumstances narrow readings of Title VI 

coverage are inappropriate. See Miller wv. 

Amusement Enterprises, Inc., 394 F.2d 342 

(5th Cir. 1968). Nothing in the congress- 

ional debate on what became the Civil Rights 

Act of 1964 compels exclusion of these 

statutes from Title VI coverage. The sweep- 

ing language of Section 601 suggests other- 

wise." 396 F. Supp. 597, 604 (p.S.C. 1974), 

aff'd, 529 v.24 514 {4th Cir. 1978). 

  

  

The Court in Bob Jones University held that VA payments to 
  

veterans are covered by Title VI; the reasoning of the Court 

there applies with equal, if not greater force to interest 

subsidy assistance under the Hill-Burton, in light of legisla- 

tive history. See supra. 

Defendant’s position is also contrary to that of HEW, 

which has responsibility for administering the Hill-Burton 

program. Section 602 of Title VI provides in pertinent part: 

"Each Federal department and agency which 

is empowered to extend Federal financial 

assistance to any program or activity, by 

way of grant, loan, or contract of insur- 

ance or guaranty, is authorized and di- 

rected to effectuate the provisions of 

Section 20004 of this Title with respect to 

such program or activity by issuing rules, 

regulations, or orders of general applica- 

bility which shall be consistent with 

achievement of the objectives of the statute 

authorizing the financial assistance in con- 

nection with which the action is taken." 

42 U.S.C. '§ 20004-1. 

Oe 

 



Neither The Administrative Procedure 

Act Nor The Hill-Burton Act Preclude 

Jurisdiction Over The Subject Matter 

Of The Complaint. 

The Administrative Procedure Act (hereinafter APA) pro- 

vides: 

"Right of Review 

A person suffering legal wrong because of 

agency action, or adversely affected or 

aggrieved by action within the meaning of 

a relevant statute, is entitled to judicial 

review thereof." 5 U.S.C. § 702. 

Section 702 confers jurisdiction over plaintiffs' complaint 

that HEW, by its actions, has failed to enforce the reguire- 

ments of Title VI. 

Defendant ' contends, however, that judicial review under 

the APA is foreclosed by the provisions of 5 U.S.C. § 701 that: 

"(a) This chapter applies . . . except to 

the extent that — 

(1) statutes preclude judicial review; or 

(2) agency action is committed to agency 

discretion by law." 

To support its contention that a statute precludes judicial re- 

view, Methodist Hospital relies on certain provisions of the 

Hill-Burton Act. This position misconceives the nature of 

the complaint. This action is not an action arising under 

the Hill-Burton Act. Plaintiffs do not allege that the Hill-  



  

Burton Act per se has been violated,but rather that the 

defendants have violated the provisions of Title VI, which 

apply to recipients of Hill-Burton funds. ‘See 42 C.F.R. § 53.112; 

4/ 
45 C.F.R,. Part 80. : Judicial relief 

concerning allegations under Title VI is not foreclosed by 

statute. §See., e€.9., Lau v. Nichols, 414 U.S. 563 (1974). 
  

Defendant 1s equally incorrect in its assertion 

that the actions of HEW in enforcing or failing to enforce 

its Title VI obligations with respect to recipients of Hill- 

Burton funds is committed to agency discretion by law. Again, 

plaintiffs are not challenging the failure of HEW to fulfill 

its responsibilities pursuant to the Hill-Burton Act, 42 U.S.C. 

§ 291) et seq., but are challenging the failure to enforce 

Title VI and its implementing regulations, 45 C.F.R. Part 80. 

The Supreme Court, in reviewing the agency discretion 

exception to the APA, has stated that the exception is an ex- 

tremely narrow one, "applicable in those rare instances where 

'statutes are drawn in such broad terms that in a given case 

there is no law to apply.' S. Rep. No. 752, 79th Cong., lst 

Sess., 26 (1945)." Citizens to Preserve Overton Park v. Volpe, 
  

401 U.S. 402, 410 (1971). The notion that the exception applies 

  

4/ To the extent that defendants' confusion is caused by the 

wording of the complaint, the proper course is not to dismiss 

the complaint but to allow leave to amend. Foman v. Davis, 

371 'U.8.»178 (192). 
  

Wo, 

 



  

to challenges under Title VI was laid to rest in Adams 

v. Richardson, 480 F.2d 1159, 1161 (D.C.C. 1973, where the   

Court of Appeals stated: 

"Appellants insist that the enforcement of 

Title VI is committed to agency discretion, 

and that review of such action is there- 

fore not within the jurisdiction of the 

courts. But the agency discretion exception 

to the general rule that agency action is reveiw- 
able the Administrative Procedure Act, 5 U.S.C. 

§§ 701-2, is a narrow one . . . . The terms 

of Title VI are not so broad ('That in a given 

case there is no law to apply' so] as to pre- 
clude judicial review. A substantial and 

authoritative body of case law provides the 

criteria by which noncompliance can be de- 

termined, and the statute indicates with 

precision the measures available to enforce 

the Act . . . Title VI not only requires 

the agency to enforce the Act, but also sets 

forth specific enforcement procedures . . . " 

As noted above, HEW has promulgated a detailed set of 

regulations, 45 C.F.R. Part 80, under Title VI which applies 

to recipients, like Methodist Hospital of Gary, Inc., of Hill- 

Burton financial assistance. In addition, Section 602 of 

Title VI, 42 U.S.C. § 2000d4-1, which directs the department 

or agency which extended financial assistance to enforce 

the prohibition against discrimination by terminating aid to 

programs which violate Title VI, sets forth specific measures 

of enforcement. When Section 602 is viewed in conjunction 

with the regulations, which set forth the criteria to apply 

in determining whether a recipient has violated Title VI, it 

213- 

 



  

is clear that the actions of HEW under the Title lie out- 

side the parameters of the narrow agency discretion rule 

enunciated in Citizens to Preserve Overton Park.v. Volpe, 
  

supra. The cases cited by defendant: are all inapposite 

because they involve different statutes whose standards are. 

not remotely as detailed as those of Title VI. 

In Adams, as here, the Court was asked to interpret Title 

VI and to determine whether HEW has correctly construed its 

enforcement responsibilities. The Adams court observed, supra, 

480 F.2d at 1163-1164; 

" [The purpose of the suit] is . . . to assure 

that the agency properly construes its 

statutory obligations, and that the policies 

it adopts and implements are consistent with 

those duties and not a negation of them . . . 

This action is consistent with the nature 

of judicial review exercised in other situa- 

tions. See Burlington Truck Lines v. United 

States, 371 U.S. 156, 165-169 (1962); Board 

of Public Instruction of Taylor City wv. Finch, 

414 F.2d 1068, 1073-1075 (5th Cir. 1969); Elgin 

Joliet & Eastern R. R. Co. v. Benj. Harris & Co., 

245 FP. Supp. 467, 472 (N.D. Ill. 1965)." 

  

  

  

This view directly applies in the instant case. 

~14= 

 



  

Ix: 

METHODIST HOSPITAL OF GARY, INC. IS 

SUBJECT TO THE PROHIBITIONS OF THE 

FOURTEENTH AMENDMENT 
  

The denial by Methodist Hospital of Gary, Inc., that 

it has discriminated against the black citizens of Gary is 

irrelevant in considering a motion to dismiss since, as 

noted above, on a motion to dismiss the facts pleaded in the 

3/ 
complaint are accepted as true. 

Moreover, defendant is incorrect in its assertion that 

its actions are not "state action" for purposes of the 

Fourteenth Amendment. To determine whether a defendant's 

action is "state action," ". . . The inquiry must be whether 

there is a sufficiently close nexus between the State and the 

challenged action of the regulated entity." Moose Lodge No.   

107 v. Irvis, 407 U. S. 163, 176 (1972), cited with approval 
  

in Jackson v. Metropolitan Edison Co., 419 U.S. 345, 351 (1974). 
  

The nexus in this case meets the Moose Lodge standard. 
  

In order to participate in the Hill-Burton program, a state is 

required to submit for approval by HEW a state plan which, 

among other things, designates a State Agency to administer the 

  

5/ It is true that the jurisdictional precedent for a cause of 

action which arises under the Fourteenth Amendment is 42 U.S.C. 

§ 1983 and 28 U.S.C. § 1343. However, to dismiss for 

omission of these statutes is improper; plaintiffs should be 

given an opportunity to amend. Conley v. Gibson, supra; Faman 

v. Davis, supra. 
  

  

-15< 

 



plan, provides minimum standards for the maintenance and 

operation of facilities providing inpatient care, and 

provides methods of administration of the State plan, 42 

U.S.C. § 291d. Both the state plans, 42 U.S.C. § 291d and 

the project applications, 42 U.S.C. §291le, 42 C.F.R. §§ 53.127, 

53.128, are subject to the requirements of Title VI, 42 C.F.R. 

§ 80.4 (a) (b), Appendix A. The State Agency is responsible 

for approving, recommending and forwarding applications for 

Hill-Burton financial assistance to the Secretary of HEW, 42 

C.F.R. § 53.127. Every application by a State Agency 

to carry out its Hill-Burton program must contain a statement 

that the program is conducted in compliance with Title VI 

and must provide or be accompanied by provision for "such 

methods of administration for the program as &e found . . . 

to give reasonable assurance that the applicant and all re- 

cipients of Federal financial assistance under such program" 

will comply with Title VI regulations, 45 C.F.R. § 80.4 (b). 

The Indiana State Board of Health is the State Agency 

in Indiana which is responsible for implementing the Hill- 

Burton program. According to Attachment #2-A to Defendant's 

Memorandum in Opposition to the Motion for a Preliminary 

Injunction, the Indiana State Board of Health approved  



  

Federal assistance in the form of Hill-Burton funds for 

Methodist Hospital of Gary, Inc.'s construction project. 

In addition, the affidavit of Larry Mangold, submitted in 

support of the Memorandum in Opposition to the Motion For a 

Preliminary Injunction, states that the defendant obtained 

approval of the project from the local agency designated by 

the State to review such projects, the Northern Indiana Health 

Services Agency (94 of Affidavit). 

Here we have not merely the massive use of public funds 

and state and federal involvement in the program. We have, in 

the approval by the State of a construction program which dis- 

criminates against plaintiffs and the black citizens of Gary, 

an imprimatur placed by the State on the very action challenged. 

Such an imprimature is sufficient to justify characterization of 

the actions of the hospitals as "state action." See Jackson v. 
  

Metropolitan Edison Co., supra, 419 U.S. at 354-355. 
  

The Court of Appeals in Simkins v. Moses Cone Hospital, 
  

supra, was faced with the identical question of whether the 

actions of a "private" hospital which receives Hill-Burton 

funds and which discriminates on the basis of race is 

"state action" for purposes of the Fourteenth Amendment and 

unequivocally answered yes. Supra, 323 F.2d at 967-968. 

There is no case involving a claim of racial discrimination 

by a hospital receiving Hill-Burton funds which has held 

-17 

 



  

otherwise. Cf. Spark v.Catholic University of America, 
  

510: F.24 1277,:1281-1282. {(DCC..1975);. 

The cases cited by defendant are readily distinguish- 

able. The claim in Ascherman v. Presbyterian Hospital, 507 
  

F.2d 1103 (9th Cir. 1974), involved a contention by a 

physician that he had been arbitrarily terminated from em- 

ployment by a private hospital receiving Hill-Burton funds. 

The Court of Appeals specifically stated in affirming a 

finding of lack of state action: 

"The appellant cites us to no regulation, 

and our independent research reveals none 

that authorizes the State of California 

or federal government to participate in 

the appointment of medical doctors to the 

staff of Presbyterian Hospital." Id. at 

1105. 

In contrast, as noted above, there are pervasive regulations 

which authorize and mandate that the recipient of federal 

funds, State Agency and HEW enforce the provisions of Title 

VI and affirmatively enforce the right of persons receiving 

benefits of Hill-Burton recipents not to be discriminated 

against on the basis of race. Indeed, in the opinion in 

Doe v. Bellin, cited by defendants and written by Justice, 
  

then Judge, Stevens, the Court stated: 

"No doubt the defendant hospital agreed 

to abide by a variety of regulatory terms 

related both to its operations and to the 

lB 

 



  

use of the Hill-Burton funds in connection 
with its acceptance of benefits under that 

Act. There is no evidence, however, that 

any condition related to the performance 

or non-performance of abortions was imposed 

upon the hospital. Unlike the fact situa- 

tion in Simkins v. Moses H. Cone Memorial 

Hospital, 323 FP.28.959 (4th Cir, 1963), on 

which plaintiffs place heavy reliance, this 

record does not reflect any governmental 

involvement in the very activity which is 

being challenged. We find no basis for con- 

cluding that by accepting Hill-Burton funds 

the hospital unwittingly surrendered the 

right it otherwise possessed to determine 

whether it would accept abortion patients." 

479 P.24 756, 761 {7th Cix. 1973). 

  

  

While hospitals receiving Hill-Burton funds may not have 

surrendered the right to determine whether to accept 

abortion patients, they certainly abandon any possible 

right to be racially discriminatory in the provision of 

health services. The receipt of Methodist Hospital of 

Hill-Burton funds, the approval of such funding by local 

and state agencies and HEW, and the provisions of the Hill- 

Burton Act, Title VI and their implementing regulations 

establish that, according to standards set forth by the Supreme 

Court, the defendant's actions are "state action" and there 

is no lack of subject matter jurisdiction over the plaintiffs’ 

constitutional claims. 

~1.G- 

 



IV 

PLAINTIFFS HAVE EXHAUSTED THEIR 

ADMINISTRATIVE REMEDIES, ANY FURTHER 

EFFORTS AT OBTAINING RELIEF THROUGH 

THE ADMINISTRATIVE PROCESS WOULD BE 

FUTILE, AND THE DOCTRINE OF EXHAUS- 

TION OF ADMINISTRATIVE REMEDIES IS 

INAPPLICABLE TO THE CAUSES. OF ACTION 

AGAINST THE SECRETARY OF HEW. 
  

Methodist Hospital of Gary, Inc., is correct that the 

Title VI regulations provide: 

"Conduct of Investigations. 
  

(b) Complaints. Any person who believes 

himself or any specific class of individ- 

uals to be subjected to discrimination pro- 

hibited by this part may by himself or by 

a representative file with the responsible 

department official or his designee a written 

complaint.” 45'C.F.R.:§80.7((). 

  

The simple answer to defendant's assertion that plaintiffs 

must exhaust this administrative procedure is that admin- 

istrative procedures have been exhausted. Attached as 

Exhibit C to the complaint are a letter and telegrams sent 

to HEW to oppose the approval of defendant's application 

for federal financial assistance. (See § 10 of Complaint.) 

Other persons, including Mayor Hatcher of Gary and Barbara 

Wesson, one of the named plaintiffs, sent detailed complaints. 

HEW sent a reply to the objectors which, among other things, 

acknowledged the existence of racial discrimination and  



  

stated that HEW could not assess the quality of care at 

Gary Methodist Hospital. (See affidavit of Beth J. Lief 

and attachment submitted as Exhibit I in opposition to 

Motion to Dismiss of defendant Methodist Hospital of Gary, 

Inc.) Despite these admissions, HEW informed the com- 

plainants that it granted the 1976 application of Methodist 

Hospital of Gary, Inc., for further Hill-Burton financial 

assistance. Thus, the administrative procedure provided 

under Title VI has been utilized. 

In view of HEW's determination, its knowledge of racial 

discrimination, and its refusal to assess the quality of 

care at the hospitals operated by Methodist Hospital of 

Gary, Inc., it is clear that further resort to HEW would be 

an exercise in futility. The doctrine of exhaustion of ad- 

ministrative remedies has no application where it is clear 

that the relevant administrative agency will not grant the 

relief in question. Glover v. St. Louis-San Francisco 
  

R. Co., 393 Uu.8. 3244 330-331. 41909). 

Plaintiffs allege that HEW, as well as Methodist Hospital, 

has violated Title VI. Cf. NAACP v. Brennen, 360 F. Supp. 
  

1006, 1012 (D.C. 1973). Plaintiffs are not required to ex- 

haust administrative remedies insofar as they challenge 

3) 

 



  

HEW's procedures in granting the Hill-Burton financial 

assistance. In a similar case, where plaintiffs allege 

violation of administrative responsibilities by government 

officials, the Court in Shannon v. HUD held:   

" . . « the procedures afforded under the 

Civil Rights Act of 1964 are designed 

to provide redress against specific dis- 

criminatory acts, and do not pertain to 

the adequacy of HUD procedures." 436 

F.24:809,:820 {3rd Cir. 1970). 

See also, Adams v. Richardson, supra; Lee County School 
  

District No. 1 v. Cardner, 263 PF, Supp. 26, 31 (D.S.C." 1967).   

The doctrine of exhaustion of administrative remedies 

is thus no bar to judicial review of this case since admin- 

istrative remedies have been exhausted, any further resort 

to administrative procedures would be futile, and, in any 

event, plaintiffs need not exhaust administrative remedies 

with regard to their charge that the Secretary of HEW has 

violated their rights. 

oD De 

 



  

V 

PLAINTIFFS HAVE STANDING TO BRING THIS ACTION     

The essence of the question of whether a plaintiff has 

standing "is whether the plaintiff has 'alleged such a 

personal stake in the outcome of the controversy' as to 

warrant his invocation of federal-court jurisdiction and 

to justify exercise of the courts' remedial powers on his 

  

behalf." Warth v. Seldin, 422 U.S. 490, 498-499, (1976) quoting 

Baker v. Carr, 369 U.S. 186, 204 (1962). In order to demon- 

strate that personal stake, plaintiffs must show that they 

are injured by the challenged actions of defendants. That 

injury may be indirect, see United States v. SCRAP, 412 U.S. 

669, 688 (1973) and need not be an economic injury. Arlington 

Heights v. Metropolitan Housing Corp., 45 U.S.L.W. 4073, 4076 

(January 11, 1977); Sierra Club v. Morton, 405 U.S. 727, 734 
  

  

(1970). 

As black citizens of Gary who have used, use or will use 

the facilities at Gary Methodist Hospital, plaintiffs suffer 

from the discrimination by defendant in the provision of 

health services. The fact that plaintiffs may not currently 

be in need of hospital care does not deprive them of standing 0}
 

3 

 



  

since they are potential users of Gary Methodist Hospital. 

In the recent case of Arlington Heights v. Metropolitan 

  

Housing Corp., supra, the Supreme Court stated that a 

black who would "probably" move into housing that was 

allegedly not built on the grounds of racial discrimination 

had standing to challenge official action which prevented 

the construction of the housing. Similarly, in Gautreaux 

v. Hills, supra; Hicks v. Weaver, 302 F. Supp. 619 ( E.D. 
    

La. 1969), the courts held that potential residents of 

federally assisted housing projects had standing to challenge 

federal agency decisions as to the location of those pro- 

jects. So, too, the stature of plaintiffs as black citizens 

who are potential users of the hospital facilities of 

Methodist Hospital of Gary, Inc. and suffer from discrimina- 

tory treatment at those facilities is sufficient to confer 

standing. 

Plaintiffs have also alleged an injury that is "likely 

  

Kentucky Welfare Rights Organization, 426 U.S. 26, 38 (1976). 
  

A decision that enjoins HEW and Methodist Hospital of Gary, 

Inc. to enforce the provisions of Title VI will ensure that 

federal funds are not spent on providers who violate the 

civil rights of black persons and will help to ensure 

that plaintiffs will not receive discriminatory or inferior 

ir ZA 

 



  

health care. 

Finally, plaintiffs are within the "zone of interests" 

which Title VI seeks to protect, that is, black benefi- 

ciaries of the services of a recipient of federal financial 

assistance. Plaintiffs therefore satisfy the second 

aspect of the standing test. Data Processing Service Vv. 

Camp, supra. 

 



  

VI 

THIS CASE IS RIPE FOR JUDICIAL REVIEW 
  

Plaintiffs allege that Methodist Hospital of Gary, Inc., 

and the Secretary of HEW have violated their obligations 

under Title VI. This issue 1s clearly ripe for judicial 

review. Methodist Hospital does not dispute the fact that 

it is currently and continually receiving the interest sub- 

sidy on the Hill-Burton financial assistance which was 

granted in 1973. Furthermore, the affidavit of Larry Mangold, 

q 4, submitted in opposition to Plaintiffs' Motion For A 

Preliminary Injunction, states that Methodist Hospital has 

also received approval on its 1976 application. The report 

of HEW in reply to the objections to the 1976 application 

(attached to Exhibit 1 of this memorandum) also states that 

HEW has approved the application. Indeed, Methodist Hospital 

has submitted no affidavits or other proof to establish that 

the 1976 application has not yet been approved. 

In short, Methodist Hospital has received, is receiving, 

and will receive federal financial assistance under the Hill- 

Burton program. Plaintiffs allege that the receipt of those 

funds in the face of continuing discrimination by Methodist 

Hospital violates their rights under Title VI and the 

Fourteenth Amendment. The statement of defendant that "the 

controversy alleged herein is too speculative" (Memorandum 

= Dh 

 



in Support of Motion to Dismiss, p. 

absurd. 

 



  

VII 

THE DOCTRINE OF SOVEREIGN IMMUNITY IS 

INAPPLICABLE IN THIS CASE AND IS NO 

BAR TO THIS COURT'S JURISDICTION OVER 

THE SECRETARY OF HEALTH, EDUCATION. AND 

WELFARE. 
  

Defendant Methodist Hospital of Gary, Inc., asserts 

that the doctrine of sovereign immunity bars suit against 

Sy 
the Secretary of Health, Education and Welfare. Methodist 

Hospital admits, however, that the doctrine is inapplicable 

where the Complaint alleges that the Secretary has acted out- 

side the scope of his duty or where there is statutory 

authority for the suit. Both situations are present in 

this case, rendering the principle of sovereign immunity no 

bar to jurisdiction over the Secretary of HEW. 

A long recognized exception to the doctrine of sovereign 

immunity allows suit against an officer of the United States 

who has acted or is acting beyond the scope of his duties. 

Dugan v. Rank, 372 U.S. 609, 621-622 (1963); Malone v. Boudin, 
  

  

369 U.S. 642, 647 (1962); Larson v. Domestic and Foreign 
  

  

iV; It is curious that defendant Methodist Hospital of Gary, 

Inc., raises an objection to jurisdiction over the Secretary 

of Health, Education and Welfare when the Secretary has not 

yet made an appearance in this case and did not make such an 

objection in another suit which alleges that he has violated 

his obligations under Title with respect to the grant of 

federal financial assistance to a hospital facility. NAACP 

v. The Wilmington Medical Center, et al., Civ. Action No. 

76-298 OD. Del.). 
  

Wy |: I 

 



  

commerce Corp., 337 U.S. 682 (1948); see Ex Parte Young, 
  

  

209 U.S. 123 (1908); Schalfy v. Volpe, 495 F.2d 273 (7th 
  

Cir. 1974). Title VI and its implementing regulations 

require the Secretary to terminate federal financial 

assistance to recipients who discriminate on the basis 

of race. Plaintiffs allege that Methodist Hospital of Gary, 

Inc., a recipient of federal financial assistance, discrim- 

inates against the black citizens of Gary. By continuing 

federal financial assistance in the Hill-Burton grant and 

loan given in 1973, and by approving additional financial 

assistance to Methodist Hospital of Gary, Inc., in 1976, 

the Secretary has failed to enforce his obligations not to 

continue financial assistance to a recipient who discrim- 

inates on the basis of race and has therefore acted beyond 

the scope of his duties (fq 10 and 11 of Complaint). More- 

over, this is not a case where the doctrine of sovereign 

immunity should apply because "the judgment sought would 

expend itself on the public treasury or domain," Land v. 

Dollar, 330 U.S. 731, 738 (1947). The relief sought is 

solely the cessation of the grant of federal funds. 
  

Nor is the statement in footnote 11 of the Larson 

opinion a bar to suit. In that footnote the Supreme Court 

stated: 

WL 

 



  

"Of course, a suit may fail, as one against 

the sovereign, even if it is claimed that 

the officer being sued has acted . . . be- 

yond his statutory powers, if the relief 

. « » will require affirmative action by 

the sovereign . . .". Supra 337 at 691, 

nS 11. 

As the Court of Appeals for this circuit held in Schalfy v. 

Volpe, supra, 495 F.2d at 280, footnote 11 exception "may 
  

bar a suit [only] in exceptional cases (i.e., where to do 

otherwise would impose 'an intolerable burden on governmental 

functions, outweighing any consideration of private harm')." 

(emphasis in original) Accord, State of Washington v. Udall, 
  

417 F.2d 1310 (9th Cir. 1969). In this case there is no 

such intolerable burden in governmental functions, and the 

narrow rule of that footnote does not apply. Plaintiffs 

seek an order requiring the Secretary to enforce his obli- 

gations under Title VI. Courts faced with the same request 

have not hesitated to grant the relief. See, e.g9., Hills 

v. Gautreaux, 425 U.S. 284 (1976); Adams v. Richardson, 
    

supra; Shannon v. HUD, supra; Hicks v. Weaver, supra. To bar suit 
    

against the Secretary here would fly in the face of long- 

standing precedent. 

Finally, an amendment to the Administrative Procedure 

Act, 5 U.S.C. § 702, effective October 2, 1976, specifically 

provides the right of judicial review in 

-30- 

 



  

“An action in a court of the United States 

seeking relief other than money damages 

and stating a claim that an agency or an 

officer or employee thereof acted or failed 

to act in an official capacity or under 

color of legal authority shall not be dis- 

missed nor relief therein denied on the 

ground that it is against the United States 

or that the United States is an indispensi- 

ble party." P. Law 94-574, October 21, 1976. 

The House Report accompanying the bill establishes that the 

purpose of the amendment was "to remove the defense of sovereign 

immunity as a bar to judicial review of Federal administra- 

tive action otherwise subject to judicial review." House 

Report No. 94-1656, Sept. 22, 1976 Cong. & Adm. News 6553. 

Although the applicability of the law is limited to cases 

where injunctive and declaratory relief, as distinct from 

damages, is sought, this is, as noted above, such a case. 

And this is a case "otherwise subject to judicial review." 

The allegation in the Complaint that the Secretary of HEW 

acted in concert with Methodist Hospital of Gary, Inc., to 

discriminate against the black citizens of Gary (fll of 

Complaint) charges that plaintiffs suffered a legal 

wrong and were adversely affected by the failure of the 

Secretary of HEW to enforce his obligations under the 

requirements of Title VI. These allegations render plain- 

tiffs "aggrieved" within the meaning of 5 U.S.C. § 702. 

“3 = 

 



  

VIII 

CONCLUSION 
  

For the reasons set forth above, the motion to dismiss 

of defendant Methodist Hospital of Gary, Inc., should be 

denied. 

Respectfully submitted, 

  

« JACK GREENBERG 

BETH J. LIEF 

10 Columbus Circle 

New York, New York 10019 

JULIAN ALLEN 

2009 Broadway 

Gary, Indiana 

MARILYN G. ROSE 

CHRISTINE B. HICKMAN 

1751 N Street, N. W. 

Washington, D. C. 20036 

Attorneys for Plaintiffs 

3 Du 

 



  

Rh ® 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF INDIANA 

HAMMOND DIVISION 

BARBARA LEEK WESSON, 

BERNICE TERRY, EDDIE GRAY, and 

ROSA KEETON, : 

Plaintiffs, 

AFFIDAVIT 
  

METHODIST HOSPITAL OF GARY, INC., 

An Indiana Not-For-Profit 

Corporation, and JOSEPH CALIFANO, 

United States Secretary of Health, 

Education and Welfare, 

Defendants. 

BETH J. LIEF, being duly sworn, deposes and says: 

l. I am one of the attorneys for plaintiffs in the above- 

captioned case and I make this Affidavit in opposition to the 

Motion To Dismiss Of defendant Methodist Hospital of Gary, Inc. 

with particular reference to the allegation of defendant that 

administrative remedies have not been exhausted. 

2. I visited the regional office of the Department of 

Health, Education and Welfare on February 9 , 1977 in order to 

review the office's files on Methodist Hospital of Gary, Inc. 

3. Included in those files were !letters from Richard 

Hatcher, Daisy Stone, Vernon Smith, Clarence Wood, Barbara 

Wesson and Stephen Inllackson protesting the grant of federal 

financial assistance to Methodist Hospital of Gary, Inc. on the 

grounds, inter alia that Methodist Hospital of Gary, Inc. was 
  

 



  

discriminating against the minority residents of Gary. 

4. Included in those files also was the reply by HEW to 

those objectors in the form of comments and a written report. 

A copy of that report is attached to this Affidavit. 

Respectfully submitted, 

  

BETH J. LIEF 

Sworn to and subscribed 

before me this “of March, 1977. 

  

NOTARY PUBLIC 

   
Commission a 

Exhibit #1 

 



T
R
 

  

INTRODUCTION 
  

HILL-BURTON APFLICATIONS 

OF THE METHODIST HOSPITAL 

OF GARY INC. 

po 5 SE Bry 

HE i 

gE TH 

OCT 22:18:86 

  

MEDICAL CENtun wo: ive 7 = 

AM 59 

The Department of Health, Education, and Welfare, particularly the 

Office for Civil Rights, has received objections from several sources 

to the approval of Hill-Burton funds for the Methodist Hospital of 

The applications are Methodist Hospital of Gary, Irc. 
(Project No. =~ Indiana 212) and Broadway Methodist Hospital (Project No. - 

Indiana 213). Objections have been reccived from the following persons: 

Gary, Inc. 

Sent 

9/28/76 

9/24/76 

9/24/76 

9/29 

9/29/76 

9/28/76 

9/7/76 

9/29/76 

Received 

10/1/76 

9/27/76 

10/1/75 

10/1/76 

10/1/76 

10/7/76 

9/15/76 

9/29/76 

Richard Gordon Hatcl.er 

Daisy R. Stone 

Vernon Smith 

Clarence N. Wood 

Barbara L. Wesson 

Stephen R. Tallackson 

I. Nature of Objections 
  

The specific objections are listed. 

of the author has been quoted. 

where 

Mayor, Gary, Indiana 

President, Gary Branch 

of the NAACP 

President, Gary Common 

Council 

Regional Director, 

Central Regional Office, 

Nacional Uxrbaa League, lnc. 

President, Medical Center 

of: Gary, Inc, 

Exccutive wirector, 

Gacy Human Relation: 

Commission 

possible, the actual laaguage 

  

   



® 

1. Ylgrhodist Hospital has already made a huge investment in 
contrary to present and projected health 
County, Indiana. . . . This unneeded and 

anteld expansion has duplicated services which are 
wvallable in Gary, Indiana and which will only 

ase the cost of health care throughout Lake 
is odd and conspicuous that no study had ever 

ead for more primary care facilities in South 
. Is. Wesson statement to HSA Executive 
Litee, August 25, 1976.)   

rnathodist Hospital has already invested heavily in 
Ezuth County area and the current proposal if closely. 

examinsl, will indicate that the ‘reasons' for expansion 
are rot Justified and will only serve to increase the 
alreacy nigh cost of medical care in Lake County, Indiana." 
(Mr. cod, Letter to ir. "loyd Russaw, September 238, 1976.) 

3. See Ms. Stone statement below (C-2). 

Increase in Cost of Health Care 

l. See Ms. Wesson statement above (A-1). 

Sce Mr. Wood statement above (A-2). 

"To allow Methodist Hospital to continue its expansion in 
the suburbs. . . will only serve to further reduce the 
quality of health care to the citizens of Gary, Indiana 
and to increase the cost of health care for everyone in 
Lake County." (Mayor Hatcher, Letter of September 28, 1976.) 

Lack of Commitment to Gary 

l. "Methodist Hospital's reluctance to totally modernize its 
Gary facility (evidenced by (i) its failure to replace its 
inadequate power plant, x-ray and OMATJENnCY rcol. -... “and 
(ii) Methodist deleting three of the original five inprove- 
ments for G.M.H. that were in the Present pending grant and 
loan application) will probably be furthered by thas 
increasing identification of G.M.H. as the 'black hospital.” 
(Mr. Tallackson, Letter of September 29, 1976.)   

 



2. Mietoodist Hospital will noi share with the citizens of 
Gary their ~ong range plans foi. the community. They also 
will not jein with the community (the Medical Center of 

nN 
ve 
i lary's Medical Center of Gary, and the 

o) om
 

P
s
 

0 ts
 

) acllity and program planning to combine, share, or 
te aQuplications, in order to achieve the maximum 

iiization of health care dollars and, thereby, maintain 
Gil service health facilities of the highest quality in 

Gary". (Ms. Stone, Letter to Secretary Matthews, 
Sestomsyr 24, 1076.) 

3. "We enczcurage you to demand Methodist Hospital to develop a 
long range plan, which will meet the needs of the citizens 
of Gary ind the needs of the citizens of the County". 

cher, Letter of September 22, 1976.) 

HSA Lack cI Responsibility 

"It is our opinicn that the Northern Indiana lcalth Systems Agency 
is abdicating its role and responsibility in the case of their 
position in regard to the application by Methodist Hospital «iui 
(Mr. Wood, Letter to Mr. Floyd Russaw, September 28, 1976.) 

Negative Impact on Gary 

1. Reduction of Quality of Care in Gary 

a) ". . . relegated to the institution within the city which 
would be unable to offer medical care on par with the 

"institution to the South". (Mr. Wood) 

b) See Mayor Hatcher statement above {(B--3;. 

c¢) "This proposal is another step in abandoning health services 
to the citizens of Gary, Indiana". "The poor and minorities 
will receive the leftover care when the health resources arc 
shifted to South County". {Ms. Wesson) 

2. Acceleration of "vihite Flight" 

a) "The serious question as to whether or not the original 
construction of B.M.H. has greatly accelerated the existing 
flight of white patients and physicians to the suburbs and 
suburban hospitals should be dealt with prior to . . . any 
rurther development/expansion at the Broadway sito". 
(iiz. Tallackson, Letter of Scptember 29, 197G.) 

  

   



   

           
        

       

      

   
. b) More &sotors will leave Gary and the health care in the 

rospital «will deteriorate". (Ms. Wesson) 

    

. wood statement bolow (E-5-b). 

    

raclal segregation of patient populations at the two 
Zs that already exist would be greatly accelerated". 
lackson) 

5 —- 

~r rey 
Te -    

  

  

  

       Zt 1s avident that the drive for this shift in resources 
on tne economic gain of a few and is fueled by 

ear and hatred". (Ms. Vesson) 
   
    

      

=~ 

A 

££ 
FN 

  

   
ine 1a Bed Occupancy at Gary Methodist 

  

        
     
    

               

        
     

    
       
     
  

"It has hzen brought to the attention of the Gary Human 
Relaticns Commission chat G.M.I{. normally has 120 to 160 
empty sods. . . If that exvansion occurs, then another 
sharp Crop in the number of occupied beds av G.u.Il. may occur” ! 
(Mr. Tallackson) 

5. Broadway Methodist Threatens Existence of Gary Methodist 

a) "We are opposing this application because of the negative 
impact this action will have on Gary, Indiana". (Mavoa: 
Hatcher) 

Pb) ". '. . the ultimate results of such an action. Namely, the 
weaving away from the City of Gary, the good physicians and 
the 'apying' patients". (Mr. Vood) 

     

    

      
  

c) « ow MethodlstJlospital's application's. + will . i 
adversely affect its Gary facility". (Mr. "allackson)     

    

    

       
     
  

"HEW should also consider withdrawing the $14 million 
; dollar Hill-Burton Loan Subsidy which was given to 

Mcthodist Hospital in 1973 to build their Broadway 
Suburban Hospital, which is a direct cause for the present 
deteriorating hospital situation in Gary'. (Ms. Stone)     
   
      
  

    II Comnaents 

      
   

   

A. Duplication of Services 

   

       

        

The possibility of duplication of services and the threat this would 
pose to Gary rethodist Hospital was foreseen by the Office For Civil 
Rights. To avert this problem HEW required the Methodist Hospital of 
Gary, Inc. Zo sign Assurances in 1973 that: 

 



Any and all pians to duplicat®. at Broadway Methodist Hospital 
services row present at Gary iethodist Hospital or the 
implementation of new programi,. in accordance with Public Law 
92-603, at either hospital must be submitted to and approved 
by the Regional Civil Kiyhts Director of the Department of 
Health, Education, and Welfare in a manner consistent with 
Title VI of the Civil Rights Act of 1964 and the regulations 
pursuant thereto. 

The Hospital has lived up to this assurance on two occasions: 
(a) upon the closure of the 0B department at St. Mary Mercy 
Medical Center in Gary and (b) by submitting its proposals for 
the current Hill-Burton funds to the Office for Civil Rights as 
early as July 19, 1974. 

The Northern Indiana Health Systems Agency has the responsibilicy 
for assessing the merits of certain applications for federal funcs. 
my This Office has relied on the HSA and its predecessor (tho Cp) for 
information regarding duplication of services. In a letter to our 
Office, dated August 23, 1976, the ISA informed us that each 
component of the Hospital's plan met real needs and did not rosuit 
in "unneeded or unwarranted" expansion with the possible excention 
of the laundry, which the HSA felt should be a joint venture with 
other hospitals. 

There does exist a duplication of services in Lake Cormbty, Indiana, 
namely a surplus of beds. This is not, however, solely the result 
of the building of the Broadway Methodist Hospital. It should be 
remembered that four new hospitals were builc at the same time: 
Broadway, Hobart Mercy, St. Anthony in Crown Point, and the 
Munster Hospital. The latter two were built without CHP or State 
approval. What is necded to stop the proliferation of hospital 
beds is legislation requiring certificate of rced. This is a 
State responsibility. Neither HEW nor this Office can reauire the 
State to enact such legislation. A study of health care in Lake 
County by the Northwest Indiana Comprehensive Planning Council and 
Arthur D. Little, Inc. warned against the very situation which now 
exists (Hospital Study, June 1971). That study and an earlier one 
in 1960 by the Hamilton Associates did see a need for health 
facilities in South Lake County, while warning against actions 
which would undermine Gary health facilities. 

  

  

  

  

 



the Northwest Indiana CHP in its 1971 Hogpital 

involved, 

Gary, Inc. Without such planning, 

CoLsgguences were likely: 

wealth Care 
    

  
~ facilities, bed facilities which arc kept filled 

the financial need of the institution rather than 

needs of the patient. Estimated annual operational 
hospitals were set at $30,000 per bed. - 

-cCrrrzTition for scarce manpower resources 

expansive and unnecessary duplication of facilities and equinmeat 

-pobariial maldigstribution of 

and p:nulation groups (PP 25 and 29-20). 

rosourcoes anong goeogrammic 

Gary Methodist Hospital is not the sole player in the game. Thus, 
it is not solely to blame. On the other hand, a case could be made 
that the blame worthy institutions are St. Anthony Hospital and the 
Munster iledical Center, which were not approved by the CHP. Iaeally, 
there should be a consolidated medical Program For the eastern half 
of the county. This issue, however, is not within the domain of the 
Office for Civil Rights. Title VI of the Civil Rights Act of 19564 
does not guarantee cost effective health programs. It guarantees 
that citizens will not be denied health care or treated differently 
on the basis of their race, color, or national origin whatever the 
quality of the health care offered by the recipient of federal 
funds. 

With respect to the specific actions to be taken by the Hospital, a 
CEP Analysis in July 1974 took the position that the steps would 
effectively result in cost savings. 

Lack of Commitment to Gavy     
  

1 The statements of the Board of Directors of the Methodist Hospital 
of Gary, Inc. affirming its commitment tc Gary are a matter of 
public record. A resolution was passed on April 13, 1972. The 
1973 Assurances between HEW and the Hospital were Yoported in the 
press. As recently as July 19, 1975, the Administrator reaffirmed 
this commitnent in alettor Lo Dr. Holliday of tha Medical Cunror 
of Gary, irc. So, apparently, the concern is nob whal the stated 
intent of tho Hospital is. Rather, tho concery is that coviain 
actions. ox lack of action reflect lack of comaitrent. Spaciiically 
mentioned zre the failure to modernize, the failure to share long- 
range plars, and the reluctance to plan jointly witli commualty 
health res: .r-es.    



Rights came a.r0$s no reports that Gary 
x-ray, ape. cmergency room fecilities' 

were "inaGecuats” “his charce i= apparently based on the 
Projec:aé use £3 iiich funds fron the 1966 Cary Joint Hospital 
Fund wCcull be use. The Fuad Drive letter of November 17, 1966 
does = sneak In terms of inadequacy as much as it does of 
"expansion 

  

Report to the Board of Directors, the Administrator 
reports : 2 partial remodelling of the E.R. is mentioned in the 
1972 Lonz-Fanye Program Recommendations made to the Board of Directors. 
The power tlzn is mentioned only in terms of expansion to meet the 
needs of <i: X:alth Services Building. X-Ray. facilities are not 
mentions z= all. 

In the 9273 snrual 

a 

The Gffice Zor Civil Rights also has a deep concern about the 
Hospital's Tirmicment to Gary. It bolioves thav actions nob WOLGS 

care proof cnls commitment. In chat light, considerable weight 
must be glil-zn to the following fects: 

1) The Imergency Room at Gary was remodelled in 1973. Yo 
2) The ICU--CCU at Gary were remodelled. 
3) The Hospital proposes to expend $3,281,370 for a Bealth 

Services Building in Gary. 
4) $1,262,200 of $4,862,000 earmarked for construction ac 

Merrillville is for a laundry which will also benefit 
the Gary Facility. ; 
Methodist Hospital assumed the responsibility for providing 
obstetrical care after St. Mary Mercy closed its obstetrical 
department. 

Whether these steps go far enough can be debated. lowever, i: is 
the judgment of this Office that thev do manifest commitment. 

1 A | 

Secondly, there is question of the Hospital's reluctance to share NEVE | 

| 

long-range plans with the people of Cary. Tac Bospital dous have “lon, 0) 
long-range plans, developed in 1972. The Office for Civil Rights ulin 
has no authority to compel the Hogpital to disclose these plans. 
It 1s surprising that a community hospital, such. as Gary Methodist, 
has not done so. 

| 
{ 

   



Finally, thore is thc guestion of the Hospital's reluctance to 
nls Shanomenon —~ of which all hospitals in Lake 

nas been noted in the aforementioned studies. 

: correct, ‘joint plaming is a ust. 'thig 

OLfice cinnot consi Yecipiwi.os of federal funds to plan jointly. or 

even drniividuas ly, What it can fo is insure that whatever plans 

rare cevelon .0 not discriminate on the basis of race, color, oz: 

nationa ied 

  

~&358 of the HSA in carrying cut its responsibilitics 

can.only Iz aiuated by the Public Health Services Administration 

of Hew. 

Negative _-—rct on Gary 
  

1, ReducCh.. on of ual Ly Caro in Gary 

This c:a.ity of health care is a conmplex lussue which this Dffica 

is not cualified to assess. Ve relied very much on ESA covalua- 

tions. Each single component of the two Hill-Rurton applications 
was found by the HSA to be nece ssary, cost cffective, and 

beneficial. The HSA, however, made no attempt to compare the 

quality of care at both institutions. It ig the exporionce of 

this Office that there is no wyency with an adoqueote instrument 
to compare the quality of carc at different institutions. ‘ihe 

best that can be done is to assess that auality of care within 
an institution. The Office for Civil Rights intends to concinu 

exploring this issue with the resources available to it. 

Quality of care is complex because it involves such diverse 

factors as the number and skill of medical personnel, the cuality 

of facilities and equipment, and the timeliness and ATTOTSA RE 

ness of treatment. The question of medical personnel will be 

treated later. Regarding facilities and equipment, the Q<fice 

for Civil Rights has no evidence, to date, that the Hospital las 

taken steps to reduce the lovel of quality in violation of 

Title VI. Likewise, we have nu evidence that the level of treat- 

nent has been reduced in violation of Title VI. However, acs 

mentioned previously, this is a difficult arca to measure. 

2. Acceleration of "White"Fliuht 
  

This iz an ugly reality and a persistent problem. Howecver, wo 

do not IZind that we can prove the Hospital guilty of comnlicity.   

  

 



show that "Whitc flight” Began as far 

1950, tho Hhite ponulation of nary hes 

ince 1960, the total populaticn of Gery 

wnile thc Black population increased by 

1950 

Favalation 133,911 178,320 

i 39,326 69,340 

94,585 108,980 

1971 Hospital Study noted that physiclans were 

ané were relocating to the South. 

noted a similar trend in Chicago. Thus, 

TAY be argued that the Hospital is gullty of racism by 

*oia the oxodus, it cannol ba argued that it initiated 
Ne 

WVhito 

ata Z.20i5000 to OCR hy Lhe lienpital sicw Lua holon 1470 - 4. 

1972, =hirty-four physicians on staff moved Hv Yerrillville 
from Gzr. This was prior to construction of the Broadway 

satel 

Docs the logpital's actions aid and abet "White EFligat"? 

This is one of those "Which came first? Tho chigknnior: the 

egy?" type questions. Ue have data that shows a declince in 

the number of white physicians on staff fron 1973 to 1976. 

Total - White . Black Hispanic Oriental       

1972 4 1: 27 i 

1976 28 1 27 

Thirty-six white physicians who were on the active staff in 

1372-1973 ar¢ nd longer on the active: staff. Bight are on the 

Courtesy staff and five are on the Honorary staff. We do not 

know what became of the remainder. If Broadway Methbtlist was 

intended as a "haven" or if the Hospital's actions accelerated 

Wnite flight, the Hospital has still lost over 30% of the White 

staff i: had in 1972-73. It should he remembered thal there are 

three other hospitals in South Lake County coawnelting with 

Broadway Methodist and the two Gary hosnitals for medical staff. 

A final comment concerns the limits off HEW's authoritv over 

physic-ans. At the time the Assurance: were originally drafted, 

a provizion was included waich obliged the liospital to compe) 

physicians to praclice at Gary Methodist as a condition for    



LEY Regic di Attorney ¥ tanat there 
; the government to dictate to pnysiciarn:s 

rad practice. ne 197) CUD study recomrernde:l 
5 eastern Lake County merge staffs to insure 
tion of plweiaians. Obviously, this recomaen- 
6 by all pariicg and no agcecacy has tho 

1 op 

Ena ysis, the availability of physicians is the 
in Gary. In that vein, the Hospital's 

ish a Family Practice Residency must be 
to attract physicians to Gary. liowovoer, 

been atlempting this since 1972 withoui 
Hospital's position is thal the space wnich 

afier construction of the Health Services 
ce a major step towards realization of the 

proctra~. The issue of phvsician availebility and the 
Hospital ls ole init is one that must be closely tracked. 

~5 a reality. It cen be attribuies directly Lo the 
physicians. Thus, this Office cannot charge the ilospital with 
the creation of a dual svsten in violation of Title VI. This i § 

Office polled one-third of the Black physicians on the Hospite staff. Their comments support Mr. Tallackson's statement. All staled: that thov are rFerfectly free to practices at Broaavey 
Hethodist and that some of their Black col HEH Ecwevoer, 
in gencra Ll, they prefer to practice at Gary Methodist and Vhite physicians prefer Broadway Methodist. Again, we come back to the free choice of physicians. 

Mr. Wesson's statement also bears truth. Develcuments in the 
health field in Lake County do seem to have been dictated nore by economics than health necds. The shift of resouices is 
undoubtedly prompted to some degree by racial fear and hatred. 
The question is whether the administration of the Hospital is ‘the primary and/or sole cause or whether the greed, Fear, and 
hatred of other hospitals, the physicians, and the Deople have 
created these forces. Our evaluation of tho gliwation, abt this 
time, is that the Hospital has acted in the he:st interests of Gary in the face of Jorces hayonG its control. 

Decline In Bed Occupancy at Gary Methodist 

In our judgment, the OCCupancy rate at Gary Mcthodist would have 
declined whethor or not Broadway Methodist opened given the 
construziion of St. Inthony, Liobart Mercy, and the Munster 
llospitals. It was the position of the Cli, the Z:ite Board of 
Health, oni IBW that the best hopes for Gary Methodist Jay in 
the zruction of the Broadway facility which would he park 
Of a mins... corporation with Gary Methodist. ‘This provided 
some insurance for the financial solvency of Gary tobthodist. 

S 

  

  

 



5. Broadway Methcdist Threatens: Fuislence of Gary Methodist 

The objectiens in this category have been treated specifically 

elsewhere. Tne primary concern cxpresseld 1s the negative 

impact the lospital's actions will have on Gary. 

CONCLUSION 
  

Based cn a review of the Hospital's application and the issues, the Office 

for Civil Rights founcé the applicant to be in compliance with Title Vi and 

recommended clearance to the Public Mealth Services. We have been informed 

that the applications were approved and that funds were granced. Tne 

granting of the funds does not preclude later action by the Office fox Civil 

Rights to seeX termination of the grant in the event that a Title VI 

violation is proven. 

Cffice for Civil Rights presently has no evidence that the Hospital's 

tions constitute a violation of Title VI. In an issue as complox as’ chis; 

here is always the possibility that previously unknown past developimcincs ox 

ew developments will come to light which will negate our findings or rcouire 

new ones. The granting of the funds does not preclude later action Ly the 

ffice for Civil Rights to seek termination of the grant in the event that a 

Title VI violation is proven. 

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