PBH: Compliance and contempt

While it details non-compliance in meeting a court order that led to Piedmont Behavioral Healthcare being held in contempt of court, a September opinion from the NC Court of Appeals also cites the agency’s arguments that it is literally above the law, at least as far as the state’s mental health statutes are concerned.

And in ruling against PBH’s arguments that it is protected from court action by sovereign immunity, the Appeals judges added yet another interesting twist to the unique and dysfunctional chaos that is the state’s mental health system.

The Court of Appeals findings stem from a March 26, 2010, order from Davidson County District Court that PBH provide PRTF placement and other necessary services to meet the mental health needs of a minor child under DSS guardianship or to appear in court and explain why it was not meeting the order. DSS had been seeking services for the child since August 2009.

The District Court set an April 7, 2010, date for PBH to explain why it was denying services, ordering the appearance of PBH Medical Director Dr. Craig Hummel, then assistant medical director Dr. Kristin Baker, the current clinical director of PBH, or psychiatrists familiar with the case.

On April 5, PBH filed an objection that the court lacked jurisdiction since the issue of services was before the state’s Office of Adminstrative Hearings. It further noted that Hummel was out of the country, that Baker was no longer employed by PBH, that the agency had no clincical director, and that there were no treating psychiatrists familiar with the case on PBH staff.

And on April 7, they simply failed to appear.

The District Court then issued a Show Cause order, ordering then CEO Dan Couglin to appear at a June 2 hearing to show cause why the agency should not be held in contempt. At that hearing, Couglin reiterated previous reasons none of the requested parties attended the April 7 hearing, but during cross-examination testified that PBH had really done nothing to comply.

While Baker was no longer an employee, she did continue to work for the agency as a consultant. Asked if PBH could not have retained Baker’s services for the court appearance, Coughlin replied: “Theoretically, I could; whether she’d accept such an assignment or not, I don’t know.”

As for the agency’s efforts to comply with the Court’s order:

“Q: Okay. What other efforts did you make … in order to comply with the Court’s order?

Couglin: Other than?

Q. Other than just say, ‘Well, Dr. Hummel’s not in the country.’ What else did you do in order to comply with the Court’s order?

A. We didn’t do anything else.”

The court did give PBH another chance at compliance, saying it could purge itself of the contempt charge by producing Hummel or other psychiatrists to explain its original denial of service and paying a $10,000 fine, and on June 17 Hummel made the required appearance. On August 3, 2010, PBH appealed the contempt ruling and fine, that appeal being the one heard this past May by the Court of Appeals.

While the Court of Appeals upheld the lower court’s ruling of willful contempt, it did find the District Court had erred in ordering the $10,000 fine. In August, an Office of Administrative Hearings judge ruled in favor of DSS and its request for services.

While the Circuit Court’s opinion details PBH’s delays, no details are given as to what an unnecessary delay of two years from the original DSS request meant for the child’s mental healthcare.

In its appeal, PBH argued the trial court was in error in holding it in contempt since it contracts with the Division of Medical Assistance and that division’s sovereign immunity extended to it. And, it argued that since it operates under provisions of Medicaid Waivers as a managed care organization, federal rules and regulations supercede those of North Carolina’s mental health statutes, Chapter 122C.

While the arguments are interesting, the Court’s declaration that the agency is an independent contractor has the potential to further confuse the legal status of Local Management Entities in the convulted system unique to North Carolina. And that status could affect LMEs standing in contracts, their liability, and their need to comply with the Public Records Law and other statutes.

David Cornwell
Executive Director
North Carolina Mental Hope


  1. This letter, below, from UNC Chapel Hill’s School of Law professor, Mark Botts, spells out just how PBH WOULD and IS ATTEMPTING to shred public records law which concerns itself with citizens who obtain Medicaid mental health services to have access to their records so that they can HOLD ACCOUNTABLE entities like PBH. It was predicted by Mr. Botts and it has come to pass. The Western Highlands Network LME BALKED at accepting the PBH Trojan Horse offer at their board meeting that I attended in June, 2011 and the above overview by Mr. Cornwell is proof that they intended to do just what the WHN LME Board FEARED that PBH would do and what Mr. Botts predicted could happen.

    Marsha V. Hammond, PhD, Licensed Psychologist, NC
    NC Mental Health Reform blogspot: http://madame-defarge.blogspot.com/
    See, as per the below: FRIDAY, JUNE 03, 2011
    WHN LME ‘Goes Its Own Way’ re: Medicaid Waiver: pbH Non-Disclosive Agreement Hoisted Upon LME’s Deemed by UNC Institute of Government to Be ‘Illegal’

    (e mail sent to WHN CEO Arthur Carder, CEO Western Highlands Network LME as presented at the WHN LME Board meeting on 6.1.2011):


    In response to your rquest that I examine some of the legal issues surrounding the use of the PBH “Non-Disclosure Agreement,” I discussed the matter with my colleague, Frayda Bluestein, who has expertise in state public records law. Our review of the agreement raised two specific legal questions that the parties should consider before executing the agreement. One is how the state public records law might apply to restrict your LME’s subsequent compliance with a public records request for documentary information you receive under the non-disclosure agreement. Another involves a state constitutional limitation, which I address in the next paragraph.

    The constitutional limitation: Paragraph 6 of the agrement, the indemnity clause, says that the LME promises to indemnify PBH for any losses, liability, damages, and claims caused not only by any act of omission of the LME, but also for the acts and omissions of the LME’s contractors. In other words, the LME promises to indemnify PBH for the negligence or liability of others. The Constitution of North Carolina, Art. V, Sec. 4, subsection 3, states that no unit of local government shall give or lend its credit in aid of any person, association, or corporation, except for public purposes and unless approved by a majority of the qualified voters. Because a loan of credit is defined to include the guaranteeing of debts of an individual, association, or private corporation, and because the indemnity clause (par 6 of the non-disclosure agrement) says that the LME promises to indemnity PBH for losses for which a contractor is liable (the contractor’s debts), paragraph 6 is a “loan of credit” that triggers a constitutional requirement that cannot be agreed to unless approved by the voters. Therefore, paragraph 6 of the agreement is invalid if this vote is not taken and, generally, local government attorneys would not agree to such a provision.

    The public records law question: I note that the non-disclosure agreement applies to “proprietary information,” which the agreement defines to include “know-how” and “ideas,” as well as “documents.” To the extent that the information to be shared is documentary in nature (paper, film, audio recordings, photographs, magnetic tapes, electrtonically stores records, etc.), it is “public record” as defined in G.S. 132-1 and subject to disclosure under the public records law unless some or all of the records are exempt from the law’s provision granting the public a right of access. On the rother hand, unrecorded information or knowledge in the minds of public employees (e.g., how to use or think about the records ) is not a public record. therefore, my discussion here of the public records law does not apply to the know-how or ideas that reside in PBH employees’ minds and that are intended to be shared pursuant to the non-disclosure agreement. By extension, my concern that the public records law raises obligations that compete with those created by the non-disclosure agreement does apply to know-how and ideas, nor do I examine the validity, appropriateness, or applicability of the non-disclosure agreement to know-how or ideas.

    My understanding is that the information PBH intends to share with other LME’s includes written (in paper or electronic form) policies and procedures, manuals, forms, contracts, privileging and credentialing tools, provider standards, provider appeal processes and forms, consumer appeal process and forms, etc. The North Carolina Public Records Act permits public access to all public records in an agency’s possession unles the agency or the record is specifically exempts from the statute. (I will presume, here, that no one takes the view that PBH is not a governmental agency subject tot he public records statute. If I am wrong on this point, and need to address this qustion, please let me know). I have identified no provision of state law that explicitly exempts the PBH records at issue here from public access under the public records law. The public records act exemption for trade secrets does not apply, as that exemption applies to a trade secret that is the property of a private person.

    Neverthtless, under federal law, a North Carolina local government may obtain copyright protection for appropriate materials that are public records. David Lawrence, in his book Public Records Law for North Carolina Public Governments (2nd ed., 2009), at page 55, writes, “a member of the public retains the right, under the public records law, to inspect and make a copy of copyrighted material when the government owns the copyright, but the government may assert its rights as copyright owner and restrict the uses that may be made of a copy of the copyrighted material.” It is unclear from a reading of the non-disclosure agrement whether PBH is asserting a copyright interest in the records to be shared and relying on that legal interest as the basis for the agreement. To the extent that PBH holds a copyright on material subject to the non-disclosure agrement, it may be lawful for PBH to refuse to produce the material unless the reeipient signs an agreement restricting the commercial use of the records without PBH consent (See, Seago v Horry County, 663 S.E. 2d 38 (S.C. 2008), holding that state public records law and federal copyright law could be read harmoniously by requiring the county to provide public access to its digital maps but allowing it to restrict the subsequent commercial distribution of the maps by requiring citizns to sign a licensing agreement prior to the county releasing the requested copyrighted material.)

    The issue at hand seems analogous to the Seago case. However, the terms of the PBH non disclosure agreement appear to create obligations on the part of the LME’s receiving PBH information that go beyond PBH’s interest in restricting the subsequent commercial distribution of public records subject to the copyright law. To put it another way, the PBH non-disclosure agreement does not appear to strike the harmonious balance between public records law and copyright law that is described in the Seago case. The PBH non-disclosure agreement, at paragraph 3,b., not only restricts the subsquent commercial use or distribution of records received by LME’s but has the recipient LMEs promise that they will not, without the prior written consent of PBH, “copy, use or disclose” any information that “has value in PBH’s business,” remove the information from the premises of the LME, or “deliver” any information “to any person or entity outside the LME.” (LME contractors are excepted from this promise). The terms of the agreement appear to prohibit the LME that receives PBH records from providing public access to the records under the state public records law. Thus, the LME that signs the agreement appears to agree that is will not only protect the records from commercial use and distribution, but also that is will not comply with the North Carolina Public Records Act.

    The Seago case is a South Carolina case that North Carolina courts are not bound by, and there is no North Carolina case on point. I don’t know how a North Carolina court might strike the balance between a copyright holder’s interests and the public’s interes in access to government documents. It is theroretically possible that a North Carolina court might permit public access and inspection, but not copying of copyrighted records. But, if we assume that State’s courts would reach the same or a similar result as Seago, then we can say that the public retains the right, under state public records law, to inspect and make a copy of copyrighted material when government owns the copyright. Because that public right would apply to requests made to the LME that receives PBH material, it is unclear from the agreement how the recipient LME would be able to comply with both the agreement and state law when subsequently faced with a public records requrest for PBH records (One way to strike the balance might be to require the LME, prior to complying with a public records request, to have the citizen or other seeker of records sign an agreement prohibiting commercial distribution and use.)

    The foregoing issues are not trivial. I am concerned that the non-disclosure agreement generally lacks the specificity necessary for the parties to clearly understand the scope of information to which it applies and the nature of obligations it imposes. Because the obligations imposed by the agreement on any LME signing it are broad and significant (e.g., permitting PBH attorneys to act on the LME’s behalf at the LME’s expense, the LME agreeing to pay PBH for damages arising out of contractors’ breach of the agreement, no disclosure permitted of information subject to the agrement to any person or entity other than LME contractors), because the agreement states that it applies to any and all information and records disclosed by PBH to the LME, and because the agreement, though possibly appropriate for private parties, does not acknowledge or reference the existence of laws applicable to governmental entities that may raise competing obligations, it is reasonable and appropriate for your governing board to carefully consider the agreement before signing it, seek advice from your agency attorney, and request modifications from PBH as necessary.

    PBH appears to have valuable and legitimate interests to protect, and a contract or licensing agreement may be the appropriate means for obtaining that protection. It strikes me that an agreement could be written that protects PBH intersts, but also permits the LME’s that receive the information to comply with laws applicable to local governments. Towards that end, I would rewrite paragraphs 6 and 3, b., to address the issues raised above, and perhaps add a paragraph that says that the obligations of the agreement are binding and enforceable only to the extent that they are consistent with any other state and federal law applicable to North Carolina local governments (I note that Paragarph 9 refers to resolving conflicts in accordance with NC law, but leaving “as is” provisions that we know conflict with NC law—which creates confusion and leaves the parties uncertain as to their obligations—and later, face the prospect of the parties having to litigate the meaning of NC law, does not seem prudent if agreement and clarity can be achieved now.) I also note that the agreement permits the LME to use PBH records “exclusively to prepare the LME to operate the waivers and for no other purpose.” Due to this language, it is possible to argue that the LME can use the records only to prepare for operation, and that once the LME begins to operate the waiver any continued use of the PBH materials would be a violation of the agreement. While this may not be the intention of the parties, the agreement would be better if it were clear and unambiguous on this point.

    The foregoing analysis and conclusions are based on my own research, and consultation with others who have expertise in local government law. I am not an expert in federal copyright law or intellectual property rights. Attorneys with expertise in those fields may have something to say that requires additions or modifications to my own analysis and conclusions. At a minimum, I hope this information helps you identify some specific issues raised by the non-disclosure agrement that are amenable to resolution through further discussion with PBH.

    Mark Botts “

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