Locke expert hopes Ace Speedway case will help in NC CON challenge

A John Locke Foundation expert hopes North Carolina’s second-highest court will consider the impact of a two-year-old precedent as it considers a lawsuit challenging state certificate-of-need healthcare restrictions.

Jon Guze, Locke’s senior fellow in legal studies, argues in a new brief that the state Supreme Court’s decision in Kinsley v. Ace Speedway Racing should guide the North Carolina Court of Appeals in the CON case.

Dr. Jay Singleton, a New Bern eye surgeon, is challenging the state CON law. He argues that it violates his state constitutional rights by blocking him from performing most surgeries in his Singleton Vision Center.

The state Supreme Court ruled unanimously in October 2024 that Singleton could move forward with his suit. But a three-judge trial court panel dismissed the case in December 2025.

The case sits now with the intermediate Appeals Court.

Guze and the John Locke Foundation support Singleton’s case. “Locke has opposed North Carolina’s Certificate of Need Law for many years, not only because it is unconstitutional and violates the rights of North Carolinians, but also because it directly harms patients, employers, insurers, and taxpayers by making health care more expensive and less accessible,” Guze wrote in his new brief.

He urged appellate judges to consider the impact of the Ace Speedway precedent. The state Supreme Court ruled unanimously in August 2024 that the speedway’s owner could proceed with a lawsuit challenging state health officials’ decision to order the speedway closed during the COVID pandemic.

The high court’s Ace Speedway ruling offered guidance to North Carolina judges hearing cases involving claims about violations of fundamental state constitutional rights, Guze explained.

“When it remanded this case for rehearing by a three judge panel, the North Carolina Supreme Court ‘directed the trial court to’ its decision in Kinsley v. Ace Speedway Racing, Ltd.,” Guze wrote. “If the Superior Court Panel had followed that direction, this case would not be on appeal.”

When the state Supreme Court rejected Singleton’s request to take the case for a second time before an Appeals Court review, Justice Richard Dietz wrote that he found the trial judges’ handling of the Ace Speedway precedent “puzzling,” Guze explained. “Clearly, the Supreme Court thinks Ace Speedway is central to the disposition of this case.”

Much of Guze’s brief focused on the proper level of scrutiny a court must apply to a government action that limits fundamental rights.

“Whatever else Ace Speedway may portend for judicial review in North Carolina, it is clear that rational basis and strict scrutiny are no longer the only options,” he wrote, citing two forms of review judges often apply in lawsuits challenging government actions.

After Ace Speedway, “the challenged state action must be reasonably necessary to promote the accomplishment of a public good, or to prevent the infliction of a public harm,” Guze wrote. He labeled it the state Supreme Court’s “reasonably necessary” test.

Singleton claims violations of the “fruits of their own labor” economic rights in Article I, Section 1 of the North Carolina Constitution, along with the “law of the land” clause of Article I, Section 19.

“The upshot is that courts have no choice but to apply some sort of balancing test to determine whether a specific regulation is a legitimate exercise of the police power or one that violates the broad and abstract principles defined and affirmed by Sections 1 and 19,” Guze wrote. “If reasonably necessary is the right standard for one of those sections, it is almost certainly the right standard for the other. Indeed, it seems likely that reasonably necessary will turn out to be the standard that applies to claims under most of the sections of Article I that consist of broad and abstract declarations of principle.”

Singleton also claims the CON law violates Article I, Section 32’s ban of “exclusive emoluments” and Article I, Section 34’s ban of “perpetuities and monopolies.”

“The reasonably necessary standard that the Supreme Court applied in Ace Speedway may be regarded as the minimum level of scrutiny for state actions that allegedly violate express provisions of the state constitution,” Guze wrote. “A law that violates a clear and categorical restriction on legislative power can hardly be subject to less searching scrutiny than a law that infringes a vague and abstract principle.”

Courts might also decide that the bans described in Sections 32 and 34 are “absolute,” or that some exclusive privileges and monopolies can be allowed, “but only if the government could show they were necessary to serve a compelling governmental purpose,” Guze explained.

“When this case is finally heard on the merits, the parties will no doubt have much to say about which of these options makes the most sense,” he concluded. “The important thing at present, however, is to allow that to happen.”

“Article I, Section 18 of the North Carolina Constitution declares that ‘every person for an injury done him … shall have remedy by due course of law; and right and justice shall be administered without favor, denial, or delay,’” Guze wrote. “Plaintiffs have been waiting for justice to be administered in this case for more than six years. They have waited long enough.”

Singleton offered three reasons for reversing the trial court in a state Appeals Court brief filed one week ago.

“This lawsuit is about whether the North Carolina Constitution allows the state to ban a licensed eye doctor from using his own property to help his patients,” Singleton’s lawyers wrote. “Plaintiff Dr. Jay Singleton owns an operating room where he could safely perform surgeries at a lower cost than the only other nearby option — CarolinaEast hospital.”

“But the state’s certificate of need (CON) law forbids him from doing so,” the brief continued. “The CON law bans qualified healthcare providers from providing new services whenever the North Carolina Department of Health and Human Services (DHHS) declares they are not ‘needed.’ Because DHHS sees no need for a new operating room in Dr. Singleton’s region, he can’t compete with CarolinaEast’s monopoly. Nobody can.”

“That violates the North Carolina Constitution’s fruits of labor, law of land, exclusive privileges, and anti-monopoly clauses,” Singleton’s lawyers argued.

The state Supreme Court “struck down a materially identical CON law under these same provisions” in a 1973 case called Aston Park, the brief explained. “And we know that Aston Park remains binding, despite years of hearing otherwise from Defendants and their amici, because the North Carolina Supreme Court told us so in this very case.”

The state Supreme Court’s 2024 decision cited Aston Park when explaining that Singleton’s case  “contains allegations that, if proven, could render the [CON] law unconstitutional in all its applications,” the doctor’s lawyers wrote.

A three-judge Superior Court panel dismissed all of Singleton’s claims “despite that clear guidance” from the high court, the brief continued. “The panel also denied his motion for partial summary judgment on his claims that the current CON law, just like the one in Aston Park, facially violates the exclusive privilege and anti-monopoly clauses.”

The brief then focused on “three main reasons” to reverse the trial court’s decision. The first and “simplest one” focused on the trial court’s ruling that Singleton “failed to state any viable claims.” That holding “flouts the North Carolina Supreme Court’s holding that his ‘allegations … if proven’ would prevail under Aston Park,” Singleton’s lawyers wrote. “The trial court never even mentioned the high court’s decision. That alone warrants reversal.”

The second reason for reversal is that “Dr. Singleton stated viable fruits of labor and law of land claims,” according to the brief.

“To state a claim under those clauses, Dr. Singleton had to allege that the CON law is not ‘reasonably necessary’ to protect public health,” the doctor’s lawyers wrote. “He did that when he alleged, in detail, that the CON law does not make anybody safer, makes healthcare less accessible, and serves only to shield incumbents from competition. The trial court did not engage with a single factual allegation in the complaint.”

The third reason for reversal was “that dismissal was improper, and even more, Dr. Singleton is entitled to partial summary judgment, on his facial exclusive privilege and anti-monopoly claims,” according to the brief.

“Both of those clauses forbid the state from granting exclusive rights to provide private services,” Singleton’s lawyers explained. “The CON law, in turn, facially violates both clauses because CONs grant exclusive rights over private healthcare services. That’s why Aston Park declared the first CON law facially invalid.”

“The trial court escaped that result below only by ignoring Aston Park in favor of cases that did not involve CONs or any similar exclusive right over private services,” the brief continued. “That was wrong. Dr. Singleton is entitled to summary judgment on both of these claims.”

Singleton has been challenging North Carolina’s CON law in court since 2020 with help from the Institute for Justice. He argues that CON restrictions violate his state constitutional rights to provide services to his patients.

The certificate of need acts as a government permission slip. Health care providers need a CON before building hospitals and other facilities, adding beds, or purchasing the most expensive medical equipment.

Singleton argues that North Carolina’s CON law violates his state constitutional rights by preventing him from performing most eye surgeries at his Singleton Vision Center. He must send his patients instead to CarolinaEast, a hospital that holds the region’s only applicable CON. Singleton argues that his patients face much higher bills because of the state government regulation.

The trial court panel announced its decision on Dec. 12, less than one month after lawyers for Singleton and DHHS argued about the CON law in a 2 ½-hour hearing in Raleigh.

“Having considered the motions, pleadings, other filings of record, all other competent evidence of record, briefs and arguments of counsel, and relevant case law, this Panel determines N.C.G.S. § 1181E-175 et seq to be facially constitutional,” according to an 11-page order from Superior Court Judges Jeffery Foster, Jacqueline Grant, and Troy Stafford.

Foster and Stafford are Republicans from Pitt and Iredell counties, respectively. Grant is a Democrat from Buncombe County. State Supreme Court Chief Justice Paul Newby assigned them to hear the case.

“Plaintiffs’ allege the CON Law, on its face, violates their economic liberty and right to earn a living in violation of Article I, Sections 1 and 19 of the North Carolina constitution,” the judges wrote.

“[T]o survive constitutional scrutiny under Sections 1 and 19, the challenged state action ‘must be reasonably necessary to promote the accomplishment of a public good, or to prevent the infliction of a public harm,’” the order explained. “This test involves a ‘twofold’ inquiry: ‘(1) is there a proper governmental purpose for the statute, and (2) are the means chosen to effect that purpose reasonable?’”

In a 2010 case called Hope – A Women’s Cancer Center v. State, the state Appeals Court “previously upheld a challenge to CON Law under Sections 1 and 19 of the North Carolina constitution, determining that the purpose of the CON Law was proper and means chosen were reasonable,” the judges wrote. “The Court of Appeals held that the ‘purpose in enacting the CON law was to protect the health and welfare of North Carolina Citizens by providing affordable access to necessary health care,’ and that purpose is ‘legitimate.’”

“Defendants’ motion to dismiss regarding Plaintiffs’ fruits of labor and law of the land claims is granted,” the panel added.

The judges rejected Singleton’s argument that the CON law provides a monopoly and “exclusive emolument” to CarolinaEast.  

“While it is true that nine operating rooms in the Craven, Jones, Pamlico service area are owned by one provider CarolinaEast patients in the service area have access to a total of 80 operating rooms owned by nine different providers in the service areas bordering the Craven, Jones, Pamlico service area,” the order explained. “Competition is not stifled, and individuals are free to choose from any of those nine providers.”

“Plaintiffs’ arguments focus on their own inability to open an operating room without a certificate of need, but those allegations taken as true do not demonstrate that the CON Law is invalid in all circumstances,” the judges wrote. “The existence of numerous healthcare providers who have obtained certificates of need statewide confirms that the law operates constitutionally in a wide range of applications. Plaintiffs fail to address how it is facially unconstitutional in these applications.”

“Considering the merits, Plaintiffs’ facial challenge to CON Law cannot overcome the high bar imposed by the presumption of constitutionally given to legislative acts,” the panel concluded.

A unanimous state Supreme Court ruled in October 2024 that Singleton could move forward with his lawsuit. That decision reversed lower courts that had ruled against Singleton. In an unsigned unanimous four-page opinion, the court directed the case back to the trial level.

Justices said a trial court must take into account two unanimous state Supreme Court decisions. One dealt with claims that Kinston engaged in racial discrimination when choosing which city properties to condemn. The other involved Ace Speedway’s claim that state officials violated the Alamance County racetrack owners’ rights when targeting the track for a shutdown during the COVID-19 pandemic.

“Locke expert hopes Ace Speedway case will help in NC CON challenge” was originally published on www.carolinajournal.com.