2020 SC BAR CONVENTION · SC Tax Law: What You Need to Know and Case Law Update Adam Neil 2020 SC...

2020 SC BAR CONVENTION

Government Law Section/Administrative & Regulatory Law

Committee

“South Carolina Administrative and Regulatory Extravaganza”

Friday, January 24

SC Supreme Court Commission on CLE Course No. 200517

SC Tax Law: What You Need to Know and Case Law Update

Adam Neil


Government Law Section/

Administrative & Regulatory Law Committee

Friday, January 24

SC Tax Law: What You Need to Know andCase Law Update

SOUTH CAROLINA ADMINISTRATIVE & REGULATORY EXTRAVAGANZAAdam J. Neil, Managing Counsel for Litigation JANUARY 24, 2020

Disclaimer

The opinions expressed in this presentation are the author’s alone and should not be attributed to the South Carolina Department of Revenue.

Common Misunderstandings AboutSouth Carolina Tax Law

Tax Law Is More Exciting Than You Think

Sales Tax is more complicated than you think

Rent A Center East, Inc. v. S.C. Dep’t of Revenue, 425 S.C. 582 (Ct. App. 2019)

• Issue: Does sales tax apply to the cost of damage liability waivers purchased with rented consumer goods? • Court of Appeals: Yes.

Rent A Center East, Inc. v. S.C. Dep’t of Revenue, 425 S.C. 582 (Ct. App. 2019)• Two Holdings:

• Under the “True Objective” test, the waiver is a part of the rental, not a separate transaction, therefore the cost of the waiver is subject to sales tax.

• The cost of waiver is included in the “gross proceeds of sales” (i.e. the rental fee) because the waiver and the rental agreement are “inextricably linked.”

Amazon Services, LLC v. Dept. of Revenue, 17‐ALJ‐17‐0238‐CC

Jack’s Custom Cycles, Inc. v. Dept. of Revenue, 18‐ALJ‐17‐0393‐CC

• Issue: Is an ATV/UTV a “motor vehicle” for purposes of the maximum motor vehicle sales tax?• ALC: Yes.

Jack’s Custom Cycles, Inc. v. Dept. of Revenue, 18‐ALJ‐17‐0393‐CC• “Max Tax” statute capped sales tax on “motor vehicles” at $300.• “Motor vehicle” is not defined in the max tax statute.• The Department followed the definitions of “motor vehicle,” “vehicle,” and “highway” in Title 56 to conclude that ATV/UTVs are not motor vehicles because they are not designed to be driven on the highway.

• In 2000 and again in 2018, SCDOR issued an opinion (in connection with the DMV) that ATV/UTVs are not “motor vehicles.”

Jack’s Custom Cycles, Inc. v. Dept. of Revenue, 18‐ALJ‐17‐0393‐CC• The ALC relied on definitions of “motor vehicle” found in Title 50 (Fish, Game & Watercraft) and Title 39 (Trade and Commerce) to conclude that ATV/UTVs are “motor vehicles” for purposes of the max tax.

• The ALC also found that SCDOR’s interpretation of “motor vehicle” was not entitled to agency deference because it involved Title 56, which DOR does not administer.

• The case is now on appeal.

Felony tax evasion convictions are not as complicated as you think (at least when its obvious)

State v. Sonny Ninan• State v. Hughes: Hughes indicted on 3 counts.• Circuit Court dismissed the felony tax evasion indictments on the basis that there is a more specific statute making Hughes act a misdemeanor, but the Court of Appels reversed.

• Sonny Ninan also indicted on six felony tax evasion counts.• Evidence showed that Ninan failed to report approximately $2 million in income over a six year period.

• Jury convicted on all six counts; sentenced to 18 months in prison.

Tax litigators spend more time dealing with alcohol beverage licensing than you think

Rooftop Bar, LLC v. Dept. of Revenue, Appellate Case No. 2018‐001870• Issue: Do the 2008 amendments to the liquor license restaurant requirements effectively overrule the decision in Brunswick Capitol Lanes v. S.C. Alcoholic Beverage Control Comm’n, 273 S.C. 782 (1979)?

• ALC ruled that the food sales requirement established in Brunswick was no longer good law because the “restaurant requirements” were defined in the statutory amendments. Therefore, the amount of food sales was no longer a proper consideration.

Rooftop Bar, LLC v. Dept. of Revenue, Appellate Case No. 2018‐001870• What does it mean to be “bona fide engaged primarily and substantially in the preparation and service of meals”?

• The Brunswick court held that if only 10% of an entity’s sales were food, the entity did not qualify for a liquor license.

• 2008 amendments defined “meal,” “kitchen,” and “primarily.”• Must an applicant actually sell and serve meals or just be ready, willing, and able to do so?

Sam’s East, Inc. v. Dept. of Revenue, 19‐ALJ‐17‐0145‐CC

• How many liquor stores does one mega‐store need and how do they get more?

Sam’s East, Inc. v. Dept. of Revenue, 19‐ALJ‐17‐0145‐CC• Prior to 2017 a single licensee could only hold three retail liquor store licenses, but the Supreme Court held that was unconstitutional.

• In 2018 the General Assembly amended the statute to allow for up to six licenses, phased in between 2018 and 2022. (2018 Act No. 147)

• If a licensee has three licenses already, the additional three must be in counties with more than 250,000 residents.

Sam’s East, Inc. v. Dept. of Revenue, 19‐ALJ‐17‐0145‐CC• Sam’s held three licenses in Charleston, Greenville, and Horry counties, but wanted to open a fourth liquor store in Beaufort County.

• Sam’s application for Beaufort store was denied because Beaufort has fewer than 250,000 residents, but Sam’s subsequently agreed with SCDOR to surrender the Greenville license if the Beaufort license was granted.

• Several Beaufort liquor stores protested and the agreement was considered by the ALC

Sam’s East, Inc. v. Dept. of Revenue, 19‐ALJ‐17‐0145‐CC

Legal Remedy Brewing Co. v. Dept. of Revenue, 2019‐CP‐46‐03095• Issue: Does the Administrative Law Court have exclusive jurisdiction to hear all disputes with SCDOR involving alcohol licensing and regulation?

• The dispute involved a specific statute that deals with the beer that may be sold at licensed breweries and the distinction between breweries and other retail sellers of beer and wine.

• Legal Remedy brought a declaratory judgment action in Circuit Court.

Legal Remedy Brewing Co. v. Dept. of Revenue, 2019‐CP‐46‐03095• SCDOR moved to dismiss the case on the basis that the ALC has exclusive jurisdiction to decide all issues related to the licensing and regulation of alcohol sales and distribution.

• Filing a preemptive Declaratory Judgment action that asks the Circuit Court to make a decision before the potentially illegal transfer occurs is effectively divesting the ALC of its jurisdiction.

• The Circuit Court dismissed the case.

Pollution Control Devices are not what you think they are

McEntire Produce, Inc. v. Dept. of Revenue, 17‐ALJ‐17‐0060‐CC• McEntire Produce claimed that a variety of equipment items that it purchases and uses in its vegetable processing business are exempt from sales and use tax.

• McEntire contended that these items were subject to the Machine Exemption and the Pollution Control Exemption.

• At issue: clothing items, forklift parts, bar code scanners, brooms, white boards, squeegees, and computer stands

McEntire Produce, Inc. v. Dept. of Revenue, 17‐ALJ‐17‐0060‐CC• Machine Exemption: Warning signs & stickers; White boards; Brooms; Squeegees; Drain covers; Cleaning machines and chemicals; Water storage tanks; Protective clothing; Bar code scanners; Aerosol ink cans; Computer stands; Stacking containers; Warehouse racks; Blower fans; Maintenance tools; Forklift parts; and Hand trucks

• Pollution Control Exemption: Coveralls; Eyewear; Aprons; Gloves; and Hairnets

• The Department appealed the Order.

Cases to Watch

• Jimmie Aiken v. SCDOR (GEAR/SCDCA) (Ready for Decision)• Dispute about the Department’s collection of debt pursuant to the GEAR/SCDCA program

• Precise issue is whether the Department can be sued in a class action brought in circuit court

• Books‐a‐Million v. SCDOR (sales tax) (Oral argument in March)•Whether membership fees are subject to sales tax

•Greenville Hospital System v. SCDOR (sales tax) (ready for consideration)•Whether GHS is exempt from Sales and Use taxes as either a charitable institution or a political subdivision

• CSX Transportation, Inc. v. SCDOR (property tax) (4th Cir. ‐ awaiting oral argument)•Whether South Carolina has violated the federal “4‐R” Act by refusing to give the 15% assessment increase cap to real property valued according to the unit valuation method

• Clarendon Co., et al. v. Farmers Telephone Coop., Inc.(awaiting ALC decision)• Counties are contesting SCDOR’s decision to grant a property tax exemption to providers of cellular telephone service under the Rural Telephone Service Exemption

• Synovus Bank v. SCDOR (awaiting ALC decision)•Whether Synovus can deduct net operating loss carryforwards when computing its bank tax liability

•Mary Cromey v. SCDOR (property tax) (ready for consideration)• Application of disabled veteran property tax exemption to a surviving spouse where veteran never lived in South Carolina

• Richland Co. v. SCDOR (transportation penny tax)• Preliminary Audit completed

•Michael’s Stores, Inc. v. SCDOR (corporate income tax) (at ALC)•Whether SCDOR properly combined income of foreign sister companies with the South Carolina taxpayer

dor.sc.gov/dor.sc.gov@scdor

Adam NeilManaging Counsel for Litigation803‐898‐[email protected]

The Publix Service Commission of South Carolina - An Overview and Update

The Honorable Florence P. Belser Commissioner Comer H. Randall

Jocelyn Boyd




Friday, January 24

The Public Service Commission of S.C.An Overview and UpdateSouth Carolina Bar Convention

January 24, 2020

Randy Randall, Chair Public Service Commission, District 3Florence P. Belser, Public Service Commissioner, District 2Jocelyn Boyd, Chief Clerk, Public Service Commission

The S.C. Public Service Commission

• Purpose: To serve the public of South Carolina by providing open and effective regulation and adjudication of the state's public utilities, through consistent administration of the law and regulatory process.• Electricity• Water/Sewer• Telecom• Transportation

S.C. Bar Convention 2020 2

Public Service CommissionersSeven Commissioners, one from each Congressional District

3

Randy Randall, Chair,District 3

Justin Williams, Vice‐Chair,District 6Swain Whitfield,

District 5

Tom Ervin, District 4

Butch Howard,District 1

O’Neal Hamilton,District 7

Florence Belser,InterimVice‐Chair,District 2

Act 62

4

May 16, 2019 S.C. Bar Convention 2020

Act 62 ‐ The Big Picture: Renewable Energy

• 58‐41‐05: “The commission is directed to address all renewable energy issues in a fair and balanced manner, considering the costs and benefits to all customers of all programs and tariffs that relate to renewable energy and energy storage…”

• “The commission also is directed to ensure that the revenue recovery, cost allocation, and rate design of utilities that it regulates are just and reasonable and properly reflect changes in the industry as a whole, the benefits of customer renewable energy, energy efficiency, and demand response…”

5S.C. Bar Convention 2020

Comprehensive Updates

• Avoided Cost • Contract Terms & Conditions

• Integrated Resource Planning

• Interconnection• Commercial & Industrial Green Tariffs

• Net Metering• Integration Analyses• Community Solar


Major Issues Addressed in Act 62

• Consumer choice and expansion of solar energy• Consumer protection• Transparency and accountability• Public Service Commission empowerment• Encouraging competition, especially from “small power producers”


What Is a “Small Power Producer”?

• “A small power production facility is a generating facility of 80 MW or less whose primary energy source is renewable(hydro, wind or solar), biomass, waste, or geothermal resources.” (FERC)


9

Small power producers accounted for only 13.6% of the 103 GWof renewable energy capacity added in the U.S.from 2008 to 2017.

Standard Offer & Avoided Costs Proceeding

• By November 16, 2019, and at least once every 24 months thereafter, the PSC shall establish or approve each electrical utility’s [Section 58‐41‐20 (A)]: • Avoided (marginal) cost rates• Avoided cost methodologies • Standard offer power purchase agreements (PPAs)• Form contract power purchase agreements• Commitment to sell forms

• PSC shall approve a standard form PPA for small power producers that are not eligible for the standard offer.



For small power producers that have active interconnection requests on file with a utility before May 16, 2019: [58‐41‐20 (F)(1)]

• Utility shall offer to enter into fixed PPAs (at avoided cost) with small power producers with commercially reasonable terms for 10 years.

• PSC may approve fixed PPAs with a duration > 10 years.



• Authorizes PSC to employ a third‐party consultant to evaluate utilities’ avoided costs rates, methodologies, terms, calculations, and conditions. • Consultant shall submit a report concerning his or her independently derived conclusions concerning each utility’s avoided cost calculations.


Voluntary Renewable Energy Programs

• Requires each electrical utility to file by September 13, 2019 a proposed voluntary renewable energy program for its commercial and industrial customers for review and approval by the commission. [Section 58‐41‐30(A)].

• Requires PSC to conduct a proceeding to review and establish reasonable terms and conditions for the program. Interested parties shall have the right to participate in the proceeding.


Community Solar (58‐41‐40)

“It is the intent of the General Assembly to expand the opportunity to support solar energy and to support access to solar energy options for all South Carolinians…”• Authorizes PSC to review electric utilities’ community solar programs

• Requires electrical utilities to update their reports on their existing programs and to propose new programs.

15Image credit: A Community Solar Farm, SEPAS.C. Bar Convention 2020

Community Solar Deployment in the Southeast

16Source: Jenny Heeter, Jeffrey J. Cook, and Jennifer Sauer, “Existing and Potential Corporate Off‐Site Renewable Procurement in the Southeast,“ National Renewable Energy Laboratory, February 2019, p. 1.

Recognition of Customer Rights Under Act 62

“…a critical need to:• protect customers from rising utility costs.• provide opportunities for customer measures to reduce or manage electrical consumption from electrical utilities in a manner that contributes to reductions in utility peak electrical demand and other drivers of electrical utility costs.

• equip customers with the information and ability to manage their electric bills.” [58‐27‐845 (A)]


Customer Protection Regulations [58‐27‐2660 (A)]

• Directs ORS and the Dept. of Consumer Affairs to develop consumer protection regulations. • Formal complaint process.• Proper disclosures pertaining to sale and lease of equipment by solar companies.• Enforcement provisions, including fines and contract cancellation.


Rooftop Solar (58‐40‐20 (A))

• Extends existing net metering energy credits for customers through June 1, 2021.

• Authorizes PSC to establish a method for calculating the value of energy ( e.g., “value of solar (VOS)”) produced by customer‐generators.• “Value” – Updated annually• “Methodology” – Updated every 5 years.

• Authorizes PSC to establish a “solar choice metering tariff,” including a methodology for compensating customer‐generators for the power they provide, for applications received after May 31, 2021. • Directs PSC to establish a minimum guaranteed # of years to which rooftop solar customers are entitled to be compensated.


Leases of Renewable Energy Equipment

• Act supports customers’ leasing rather than purchasing renewable energy equipment, such as rooftop solar panels. [58‐27‐2610]• Customers’ renewable energy generation equipment must serve only one premises or residence.

• Utilities may offer customers in their service territories renewable energy equipment leases.

• Utilities cannot recover leasing costs from nonparticipating customers.


Integrated Resource Plans (IRPs)

• Expanded IRP process [58‐37‐40]:• L‐T forecasts of sales and peak demand.• Detailed portfolio scenario modeling, including various levels of renewable energy adoption, energy efficiency, and demand response measures.

• Sensitivity analyses for various risk factors.• Enhanced transparency: PSC must permit reasonable discovery after utility files its IRP.• Reasonableness and prudence of the IRP.


Integrated Resource Plans (IRPs)

• PSC ‐ IRP proceeding and final order approving, modifying, or denying IRP required within 300 days of filing.• If modified or rejected, resubmittal is required within 60 days and ORS must submit a report to the PSC on the revised IRP. • Three year cycle with annual updates.

• ORS shall submit a report to PSC on each annual update, providing a recommendation as to its reasonableness.


Integrating Emerging Energy Technologies

• The PSC and ORS are authorized to initiate an independent study to evaluate the integration of renewable energy and emerging energy technologies into the electric grid. • Requires an opportunity for interested parties to provide input on the appropriate scope of the study and to provide comments on a draft report before it is finalized.

• Study results reported to General Assembly. • The PSC may require regular updates from utilities regarding the implementation of the state’s renewable energy policies. [58‐37‐60]


Construction of Major Utility Facility

• Before constructing a major generation facility, applicant must demonstrate that it has compared the facility to other generation options:• Cost• Reliability• Other regulatory implications

• PSC authorized to adopt rules for evaluating other generation options.[58‐33‐110]


Interconnection Agreements• PSC must ensure such standards provide for efficient and timely processing of interconnection requests and take into account the impact of generator interconnection on electrical utility system assets, service reliability, and power quality.

• Standards must address the impact of the addition of energy storage and the interconnection processes for amending existing interconnection requests to include energy storage.

• Standards must be fair, reasonable, and nondiscriminatory with respect to interconnection applicants, other utility customers, and electrical utilities… [Section 58‐27‐460]


Interconnection AgreementsPSC shall consider whether a comprehensive independent review of interconnection should be performed and consider whether to require each electrical utility to: 1. Conduct a study to determine the scope and cost of necessary transmission

upgrades to support development of renewable energy resources to maintain system reliability.

2. Evaluate the cost of developing and maintaining hosting capacity maps to allow power producers to identify areas of the distribution grid that are more amenable to building and interconnecting their generation facilities and to avoid areas that are already saturated with distributed generation.

3. File a list of interconnected facilities with the commission each quarter.


PSC’s Web Site – www.psc.sc.gov


PSC’s Web Site – www.psc.sc.gov• Allowable Ex Parte Briefings


PSC’s Document Management System (DMS)• Matters


PSC’s Document Management System (DMS)

• E‐mail subscription


PSC’s Document Management System (DMS)• Electronic Service of Orders


The South Carolina Office of Regulatory Staff -An Overview and Update

Nanette S. Edwards Jeffrey M. Nelson

Andrew M. Bateman




Friday, January 24

South Carolina Office of Regulatory StaffSC Bar Association Meeting

January 24, 2020

Nanette Edwards- Executive DirectorJeff Nelson- Chief Legal OfficerAndrew Bateman- General Counsel

The concerns of the using and consuming public with respect to public utility services, regardless of the class of customer, and

preservation of continued investment in and maintenance of utility facilities so as to provide reliable and high-quality utility services

ORS Represents the Public Interest

Safety, Transportation & Telecom

October 2015 Flooding and Hurricane Matthew, Irma,

Florence and Michael

Distribution: 37,551

Transmission: 2,775

LNG facilities: 2

LNG tanks: 3

Progress Report Score: 48

Program Evaluation Score: 110 out of 112

25,632 miles

Safety: Natural Gas Pipelines

Telecommunications

Dual Party Relay FundRelay Service

SC Equipment Distribution Program

Closed Captioning of the General Assembly

Real-time Closed Captioning of Local News Broadcasts

Audit

• Audit books and records of regulated utilities

• Examine all rate impacting filings and provide testimony

• Examine costs for low level radioactive waste disposal facility in Barnwell, SC

• Audit compliance with regulatory fees (Dual Party, USF)

• Conduct financial compliance reviews of grantees in support of Energy Office

• Beginning 2020, conduct compliance reviews of electric cooperatives (in accordance with Act No. 56)

Utility Rates & Services

Investor-owned electric utilities in SC• Act 236/Leasing• DSM/EE• Utility facility siting of transmission

and generation facilities by any entity in SC – excluding Santee Cooper

• No authority over the activities of Santee Cooper

• Territorial disputes• Radioactive Waste Disposal Program

Investor-owned natural gas utilities in SC• With the exception of natural

gas pipeline safety, no authority for non-jurisdictional utilities including municipal systems, natural gas authorities, and liquid propane systems

Privately owned water and wastewater utilities in SC• No regulatory authority over publicly

owned providers of water and wastewater services -- counties, water and sewer districts, municipalities

• No regulatory authority over self-serving systems – i.e. member-owned cooperatives

Electric Gas Water & Wastewater

Consumer Services

1809

82

23029 84 80

FY 2018 Complaints/Inquiries

1934

64

273

44

240105

FY 2019 Complaints/Inquiries

Energy Policy

• Implement the State Energy Plan

• Provide Technical Assistance

• Provide Outreach/Education to Promote

Energy Efficiency and Renewable Energy

• Provide Financial Assistance

• Promote Clean Transportation

• Maintain Energy Data Clearinghouse

Applicant PrefiledTestimony Due

Other Parties of Record Prefiled Testimony Due

Rebuttal Testimony Due

Surrebuttal Testimony Due Public Hearing Order Issued

Application ReceivedNotice of Filing

and Hearing Issued

Notice of Filing and Hearing

Published

Proof of Publication

Due

2 weeks 10 days 20 days

2 weeks

1 week

1 week 4 weeks 8 weeks

Public Service Commission of SC RATE CASE SCHEDULE

Pleading

Provide technical assistance to Utilities prior to their filing

Review Application or Pleading

Discovery

Generate information requests to the Utility

Conduct interviews

Inspect & Verify

Conduct site visits to verify expenditures and compliance (Rates)Inspect books and records (Audit)Verify and test revenue and expenses

Analyze

Determine rate of return or operating marginAnalyze the prudency of decisions made by the UtilityBrainstorm options for resolution between all parties

ParticipatePrepare & present pre-filed testimonyEngage in settlement negotiationsParticipate in hearings before the PSCPrepare and Submit Proposed OrderRespond to or file Motions for ReconsiderationParticipate in cases on appeal

Interesting Legal Cases

• Duke Energy Progress, LLC and Duke Energy Carolinas, LLC Rate Cases– Public Service Commission of South

Carolina Order Nos. 2019-341 and 2019-323 and Petitions for Reconsideration

• Current Status:– Appeal and Cross-Appeal Filed with South

Carolina Supreme Court

What you Need to Know About the Administrative Law Court and Case Law

The Honorable Ralph King “Tripp” Anderson III

Jana Shealy




Friday, January 24

Recent ALC Orders Involving the Automatic Stay in DHEC Cases and Recent Supreme Court and Court of Appeals Cases from the ALC

The Honorable Ralph K. “Tripp” Anderson, III

Chief Administrative Law Judge

SOUTH CAROLINA ADMINISTRATIVE LAW COURT

A. Lifting the Automatic Stay - CON

CareAlliance Health Services v. S.C. Dep’t of Health and Envtl. Control and Trident Medical Center, LLC, Docket No. 17-ALJ-07-0433-CC; Trident Medical Center, LLC v. S.C. Dep’t of Health and Envtl. Control and Medical University Hospital Authority, Docket No. 17-ALJ-07-0441-CC; and CareAlliance Health Services v. S.C. Dep’t of Health and Envtl. Control and Medical University Hospital Authority, Docket No. 17-ALJ-07-0444-CC (May 4, 2018, J. Robinson): These cases are before the ALC pursuant to three separate requests for contested case hearings challenging DHEC’s concurrent approval of two Certificate of Need applications for freestanding emergency departments in Berkeley County. DHEC reviewed and approved applications by both Trident Medical Center (Trident) and the Medical University Hospital Authority (MUHA). Trident opposed MUHA’s application, but MUHA did not oppose Trident’s application. CareAlliance Health Services (Roper) opposed both applications. After the requests for contested case hearings were filed with the ALC, MUHA filed a motion to lift the automatic stay imposed by S.C. Code Ann. §1-23-600(H)(2). Both Trident and Roper opposed the motion. In evaluating the motion, the Court first determined that the amendments to the automatic stay statute, which became effective two days prior to MUHA’s motion, were not applicable because the former statute was in effect on the day the stay was statutorily imposed. Moreover, the amendments could not be applied retroactively because they changed the substantive standard for lifting an automatic stay, thus imposing new obligations upon the parties. Nonetheless, the Court reviewed the motion using the standards in both the former statute and the amended statute. The former statute required a showing of good cause by the party moving to lift the stay. MUHA provided data on population growth in the Berkeley County area in an attempt to show good cause via the demonstration of patient need, but it failed to submit adequate evidence that existing emergency services were insufficient to meet patient needs, nor did it demonstrate that moving forward with its project would alleviate those alleged needs while the case was pending. Accordingly, the Court concluded that MUHA had failed to demonstrate good cause for lifting the automatic stay under the former version of Section 1-23-600(H)(4). Next, under either the former or current standard, a showing of irreparable harm is required, and the Court found the motion must fail under either standard. Trident and Roper both established a likelihood of irreparable harm in the form of loss of market share and loss of revenue. Since MUHA’s current market share for emergency services in the service area is relatively small, the evidence indicated that to be sustainable MUHA’s project would have to redirect market share

from Trident and Roper. The Court found that Trident and Roper made a prima facie showing of irreparable harm if the stay is lifted, and that MUSC had not satisfied the former standard of showing that no irreparable harm would occur. The Court also held that Trident and Roper made a prima facie showing of likelihood of success on the merits. Both alleged, with particularity, that there is no need for two additional freestanding emergency departments in the service area, and that DHEC evaluated MUHA’s application without considering Roper’s Berkeley Hospital. Next, the Court found that the balance of the equities required maintenance of the status quo pending resolution of the cases on the merits because the potential damage to Trident and Roper outweighed MUHA’s allegation that emergency services were so needed in the area that it must proceed with its project at once. Finally, the Court concluded the public interest also favored keeping the automatic stay in place. MUHA’s project will require the expenditure of taxpayer dollars. The Court expressed its concern that if the project proceeded and the case was ultimately resolved adversely to MUHA, it may not be possible to adequately recoup these public funds. For all these reasons, the Court denied MUHA’s motion to lift the stay. Trident Medical Center, LLC v. S.C. Dep’t of Health and Envtl. Control and Medical University Hospital Authority, Docket No. 18-ALJ-07-0205-CC (October 30, 2018, J. Durden): This case involved DHEC’s issuance of a CON to Medical University Hospital Authority (MUHA), a Level III perinatal provider, to convert 14 intermediate care bassinets to intensive care bassinets to satisfy the need for additional intensive care bassinets identified by the 2017-18 State Health Plan. Trident Medical Center, LLC (Trident), a Level II perinatal provider, had submitted its own application to convert four intermediate care bassinets to intensive care bassinets and to add two intensive care bassinets at Summerville Medical Center. DHEC determined that MUHA and Trident were competing applicants pursuant to S.C. Code Ann. § 44-7-130(5) and S.C. Code Ann. Regs. 61-15 § 103(6). DHEC also determined that MUHA’s application was the superior application. DHEC approved MUHA’s application for 14 intensive care bassinets and denied Trident’s application for 6 intensive care bassinets. Trident requested a contested case hearing to challenge DHEC’s decision. Thereafter, MUHA filed a motion to lift the automatic stay to allow it to proceed with acquisition, installation, and testing of ancillary equipment in preparation for the opening of its new Children’s Hospital and new Neonatal Intensive Care Unit (NICU). Trident opposed the motion. The Court applied the amended version of S.C. Code Ann. § 1-23-600 (H)(4)(a), which required Trident to prove the four statutory elements we previously discussed to continue the automatic stay. With respect to the first element, likelihood of irreparable harm if the stay is lifted, Trident argued that lifting the stay would allow MUHA to spend 2 million dollars on the purchase of ancillary equipment and that money would be wasted if Trident prevailed in the contested case. Thus, Trident asserted that the expenditure of those funds would cause irreparable harm to the public and to Trident in its efforts to become a Level III perinatal provider. MUHA, on the other hand, asserted no waste would result from lifting the stay because, even if it lost on the merits, the

ancillary equipment would be utilized in conjunction with its existing intermediate and intensive care bassinets. The Court found that Trident had failed to prove that lifting the stay was likely to cause irreparable harm either to Trident or to the public. The Court next addressed whether Trident had proved a substantial likelihood that it would succeed on the merits in the contested case. In order to prevail, Trident would either have to prove that it was not a competing applicant or that its application was superior to MUSC’s application. Since both applications sought to provide the same service in the same area and the approval of both applications would exceed the need for intensive care bassinets identified in the State Health Plan, DHEC identified the applications as competing. Trident argued the applications were not competing because the State Health Plan permitted MUHA, as a Level III perinatal provider, to utilize a provision in the Plan which allows such providers to request additional intensive care bassinets beyond those indicated as needed by the Plan based on factors demonstrating additional need. However, MUHA did not submit its CON application under this provision and it was not considered by DHEC. Accordingly, the Court found that Trident had not shown a substantial likelihood that it would prevail on the merits of this claim. Trident also argued that its application was superior because it would create a new NICU in Summerville, which would allow premature babies to stay closer to their parents’ homes and would promote regionalization of perinatal care in accordance with the State Health Plan. The Court reviewed the evidence and concluded that, for purposes of the motion, Trident had not proven it was substantially likely to succeed with this claim either. In particular, the Court found it was questionable whether Trident could satisfy the 1,500 deliveries per year required for a hospital to be licensed to provide a NICU with intensive care bassinets. Therefore, overall Trident failed to carry its burden of proving a substantial likelihood of success on the merits. Finally, the Court addressed the third and fourth statutory elements, the balancing of the equities and the public interest, together. Trident asserted that these elements were best served by continuing the stay for two reasons. First, the stay would prevent MUHA from spending 2 million dollars on ancillary equipment which would be wasted if Trident prevailed. Second, if the stay was lifted and MUHA made the expenditures, the Court would be aware of those expenditures and would improperly impose a “heightened burden of persuasion” on Trident. The Court found that these arguments did not prove that the balancing of the equities or the public interest would favor continuing the stay, as the evidence contradicted Trident’s assertion that MUHA’s expenditures would be wasted. Moreover, the Court’s noted its ruling on the stay would not affect the Court’s ability to adjudicate the case on the merits. Finally, Trident argued that the balancing of equities favored, and the public interest would be served by, continuing the stay because MUHA had not yet put into operation 16 intensive care bassinets previously approved by DHEC. However, all parties agreed that 46 intensive care bassinets were needed in the region; that MUHA held CONs for 32 of those bassinets; and that left a need for 14 more intensive care bassinets in the region. Therefore, contrary to Trident’s assertion, the balancing of the equities favored, and the public interest would be better served by, lifting the stay to allow all the intensive care bassinets needed in the area to operate during the pendency of the case. For all these reasons, the Court granted MUHA’s motion to lift the automatic stay.

Conway Hospital, Inc. v. S.C. Dep’t of Health and Envtl. Control and Tidelands Health ASC, LLC, Docket No. 19-ALJ-07-0015-CC (June 10, 2019, J. Kimpson): In this case, Tidelands Health ASC, LLC (Tidelands) applied to DHEC for a Certificate of Need (CON) for the construction of an endoscopy-only ambulatory surgical facility in Myrtle Beach, South Carolina in Horry County. Conway Hospital, which operates health care facilities performing endoscopic procedures in the service area, filed a request for a contested case hearing with the ALC. Tidelands subsequently filed a motion to lift the automatic stay imposed pursuant to S.C. Code Ann. § 1-23-600(H)(4)(a), and Conway opposed the motion. Initially, the Court addressed two arguments raised by the parties: (1) whether case law interpreting the automatic stay under the prior version of Section 1-23-600(A)(4) remained applicable in evaluating motions filed under the new version of the statute and (2) whether Conway’s standard of proof for each element in the statute was a prima facie showing. Regarding the former issue, the Court noted that the cases addressing the former statute dealt with many of the same issues and concepts that arose under the new statute. Therefore, these cases were still useful for purposes of analysis. However, the new statute shifted the burden of proof to the party opposing the motion to lift the stay, so the cases dealing with the former statute must be viewed with the revised burden of proof in mind. As for the second issue, the Court reviewed the parties’ arguments and the language of the revised statute and concluded that, as to the elements of irreparable harm, balancing of the equities, and the public interest, Conway was only required to make a prima facie showing. The Court noted the second element, the substantial likelihood of success on the merits, contained the modifier “substantial” whereas the other three elements did not. Applying the ordinary definition of the word “substantial,” the Court concluded that the use of this modifier meant that a party seeking to continue the stay must prove a “real probability” of success on the merits. The court held that this standard was higher than a prima facie standard, but lower than a preponderance of the evidence; thus, the party seeking to keep the stay in place must demonstrate that its evidence is substantive and more than illusory such that there is a real probability of success on the merits. Considering the four-prong analysis required by Section 1-23-600(H)(4)(a), the court addressed Conway’s arguments regarding irreparable harm. Conway argued that health care dollars would be wasted if the project were constructed but the CON ultimately denied, and that lifting the stay would cause Conway to suffer an irreparable private harm in the form of adverse effects to its endoscopy patient base. The Court first concluded that some waste of health care dollars would result if the stay was lifted but the CON was ultimately denied. Although Tidelands asserted it would repurpose the operating room space for other purposes should the CON be denied, the extra expense needed to repurpose specially designed operating rooms would result in waste. As for private harm to Conway resulting from the lifting of the stay, the evidence showed that the opening of the new facility would change the market dynamics in southern Horry County and shift market share from existing providers like Conway. Furthermore, if the stay was lifted, adverse economic effects from the existence of the new facility would begin to occur fairly soon, and there is no showing that the potential patient base would expand quickly enough to ameliorate any harm to existing providers. Therefore, the Court concluded Conway had demonstrated a prima facie case that lifting the stay would cause irreparable harm.

Next, the Court addressed whether Conway demonstrated a substantial likelihood that it would succeed on the merits. Conway argued that Tidelands’ proposed project failed to comply with the Project Review Criteria in the State Health plan, did not contain costs, and had questionable financial feasibility. Further, Conway asserted Tidelands’ application was deficient because it failed to address the existing capacity for endoscopy services and the negative effects on existing providers as required by the State Health Plan. In support of these arguments, Conway submitted affidavits and utilization data regarding Tidelands’ current number of endoscopy procedures, pointing out that Tidelands’ current facilities were underutilized and additional capacity was not needed. The Court found Conway had proven a substantial likelihood of success on the merits for purposes of the motion. For the balance of equities element, Conway relied on its affidavits, which questioned the need for the facility based upon Tidelands’ current volume of endoscopic procedures. The Court found that Conway had raised a sufficient question regarding the immediate need for the facility and that this factor weighed in Conway’s favor. Further, the fact that Tidelands had been granted a second CON to build a multispecialty ambulatory surgery facility in the same space to be occupied by the endoscopy-only facility revealed Tidelands’ intent that the endoscopy-only facility would be replaced by subsequent construction. This factor also weighed in favor of maintaining the stay until the case is determined on the merits. Additionally, Conway had previously met its prima facie burden to show irreparable harm would result if the stay was lifted. Therefore, the Court found Conway had met its prima facie burden on this element. Finally, the Court determined that based on the evidence presented regarding cost containment and unnecessary duplication of services, and based on its analysis on the other three statutory factors, Conway had adequately made a prima facie showing that continuing the stay was in the public interest. The Court therefore denied Tidelands’ motion to lift the automatic stay. CareAlliance Health Services, d/b/a Roper St. Francis Healthcare, et. al. v. S.C. Dep’t of Health and Envtl. Control and Medical University Hospital Authority, d/b/a MUHA Community Hospital, Docket No. 18-ALJ-07-0358-CC Walterboro Community Hospital, Inc., d/b/a/ Colleton Medical Center v. S.C. Dep’t of Health and Envtl. Control and Medical University Hospital Authority, d/b/a MUHA Community Hospital, Docket No. 18-ALJ-07-0360-CC Trident Medical Center, LLC, d/b/a Trident Medical Center and Summerville Medical Center v. S.C. Dep’t of Health and Envtl. Control and Medical University Hospital Authority, d/b/a MUHA Community Hospital, Docket No. 18-ALJ-07-0366-CC

DHEC approved a CON for the Medical University Hospital Authority (MUHA) to build a 128-bed general acute hospital in Berkeley County. CareAlliance (Roper) was constructing a 50-bed hospital to open in Fall 2019 only miles away from the project. Trident had a CON for a 50-bed

hospital (not yet under construction) only miles away from the project. Other hospitals also opposed the CON through the contested case hearing.

MUHA filed a Motion to Lift Automatic Stay, which was denied. MUHA then filed a Motion for Reconsideration of the denial. Although the Court found that the denial was not a final decision subject to a Motion for Reconsideration or appeal, the Court nevertheless addressed the motion to clarify its previous order and to address concerns.

Pursuant to S.C. Code Ann. § 1-23-600 (H)(4)(a), Petitioners have the burden of proof to meet four requirements to preserve the automatic stay. The requirements are set out below. Although neither appellate court in South Carolina has issued an opinion on the application of § 1-23-600 (H)(4)(a), the Court found guidance in the fact that the four requirements have been considered previously in this State’s jurisprudence, primarily in area of injunctions.

Irreparable Harm

The first requirement is showing a likelihood of irreparable harm if the stay is lifted. The statute does not set forth what harm is to be considered when evaluating whether to lift the stay; therefore, the Court found it necessary to determine harm from the legal and factual considerations before the Court. The Court looked to the purpose of the CON Act, and in doing so, determined it was appropriate to consider the harm to the healthcare system as a whole (not necessarily personal harm to the Petitioners) that would result if the stay was lifted but the CON was later denied. As a result, the Court considered two harms: (1) public harm in the form of wasted health care dollars and (2) economic harm to facilities where services are unnecessarily duplicated, leading to declines in market share and revenue. The Court determined MUHA would spend approximately $4 million on design and architectural plans if the stay was lifted and this expenditure could not be repurposed or recouped if the CON was not granted. MUHA argued the design costs were not construction costs requiring a CON, but the Court rejected this argument. The Court found that irreparable harm would be caused to the public in the form of wasted healthcare dollars.

Substantial Likelihood of Success on the Merits

Next, the Court evaluated whether MUHA established a substantial likelihood of success on the merits. The Court found the State’s injunction jurisprudence applicable regarding the likelihood of success on the merits. The Court thus examined the merits of the underlying case only to the extent necessary to determine whether the Petitioners made a sufficient prima facie showing of entitlement to relief.

To show they would be successful on the merits, Petitioners contended MUHA’s application was deficient because it failed to justify the adverse impact of its proposed hospital on the service area. Similarly, Petitioners argued DHEC improperly failed to consider the PRC governing “Adverse Effects on Other Facilities.” The Court determined DHEC did not substantively review these issues. Petitioners showed that there was a substantive issue as to whether the application adequately justified the potential adverse impact, particularly in light of Roper’s and Trident’s pending hospitals.

Petitioners further contended that MUHA failed to justify a need for its proposed community hospital. They argued that according to the South Carolina Health Plan, the applicant “must justify through patient origin and other data, the need for a new hospital at the chosen site . . . .” Petitioners presented sufficient evidence to cast doubt on the need for a 128-bed hospital at the particular location selected.

Overall, the Court concluded that, at this stage of the litigation, Petitioners’ successfully made a prima facie case that MUHA’s application was deficient in showing a need for a new hospital at the chosen site.

Balancing of the Equities

The Court then balanced the equities, weighing the harm resulting from lifting the stay and determining who would suffer the greater harm. The Court found it was unwise to allow a third hospital to begin moving forward until the issue of need was more thoroughly vetted in light of the two hospitals awaiting completion. Without a clear need, it is more likely the expenditure of healthcare dollars could be wasted.

Public Interest

Lastly, the Court addressed whether it would be in the public’s interest to lift the stay. Public policy under the CON Act is served by preventing the waste of healthcare dollars, and it is also served by preventing the unnecessary duplication of health care services. The Court found the avoidance of the wasteful spending of health care dollars outweighed the unclear need for more facilities in Berkeley County. There was a public interest in preventing unnecessary duplication of services. There was also a public concern regarding MUHA’s debt load and financial feasibility.

For all these reasons, the Court issued an Amended Order Denying Motion to Lift Stay.

B. Lifting the Automatic Stay – Environmental

Harbor Island Oceanfront Property Owners Group, Inc. v. S.C. Dep’t of Health and Envtl. Control and S.C. Parks, Recreation and Tourism-Hunting Island State Park, Docket No. 18-ALJ-07-0166-CC (December 7, 2018, J. Kimpson): This case arose from DHEC’s decision to grant PRT a permit to engage in beach renourishment and groin construction on Hunting Island at Hunting Island State Park. Petitioner, a group of property owners on Harbor Island, which is adjacent to Hunting Island, requested a contested case hearing to oppose the decision. PRT moved to lift the automatic stay pursuant to S.C. Code Ann. §1-23-600(H)(4)(a) and Petitioner opposed the motion. The Court considered each of the four elements set forth in the statute. First, with respect to irreparable harm, Petitioner made several arguments. Petitioner asserted that the proposed groin construction and beach renourishment would cause erosion on Harbor Island such that property owners on Harbor Island would be severely damaged to the point of a taking. Petitioner also alleged that sea turtles, birds, and other animals on Harbor Island would suffer loss of habitat. Petitioner further argued that tax revenues from Harbor Island would decrease as a result of the damage to property. Finally, Petitioner argued that the shrimping industry and other interstate

commerce would be impeded. The Court found that, while Petitioner provided evidence that homes in the area had been damaged as a result of erosion generally, Petitioner had failed to produce credible evidence of damage caused by past beach renourishment activities on Hunting Island, nor did it produce credible evidence of irreparable harm to homes in the area that would occur as a result of lifting the stay. Moreover, there is a statutory administrative remedy in S.C. Code Ann. § 48-39-290(A)(8)(e) which allows a property owner who claims a groin is causing adverse impact to request a determination from DHEC regarding the impact. Further, Section 48-39-290(A)(8)(b) requires an applicant seeking to construct a new groin to provide a performance bond or letter of credit to cover costs of removing the groin or renourishing the affected beach if the groin causes harm. The court determined that the existence of these statutory remedies obviated a finding of irreparable harm to Petitioner. Finally, the Court found Petitioner’s arguments that animals and plants on Harbor Island would be adversely affected, that loss of tax revenue would result, and that federal waterways and interstate commerce would be impeded were not supported by sufficient evidence. Therefore, Petitioner failed to establish lifting the automatic stay would cause irreparable harm. The Court next examined whether Petitioner had shown a substantial likelihood of success on the merits. Petitioner argued the permit was deficient because it did not require the establishment of monuments on the beach for the monitoring of beach erosion. The Court noted that “monuments” need not be physical structures, but can instead be GPS coordinates, and stated that if the permit failed to call for monuments, the permit could be modified to require them. Moreover, if the Court ordered such a modification, this would not equate to “success” on the merits for Petitioner. The Court applied the same reasoning to Petitioner’s argument that PRT’s financial commitment for remedial activities was deficient; the Court could order a modification of the permit to increase the amount of funds to be set aside for remediation rather than deny the permit solely on that basis. As such, the Court did not find that Petitioner had shown a substantial likelihood of success on the merits regarding these possible defects. Petitioner further asserted that it had made a sufficient showing that PRT’s beach renourishment activities had caused erosion at Harbor Island in the past and that granting the permit would cause further damage to Harbor Island. However, the engineering reports submitted by Petitioner did not suggest that the erosion on Harbor Island was caused by PRT’s prior activities on Hunting Island; rather, the reports tended to attribute that erosion to natural processes. Accordingly, the Court concluded that Petitioner had not met its burden to show a substantial likelihood of success on the merits for purposes of lifting the automatic stay. With regard to the balancing of the equities, Petitioner relied on its allegations that PRT had failed to live up to its monitoring and remediation obligations under previous permits authorizing activities on Hunting Island. The Court found that whether this argument factored into the required equities analysis hinged on whether Petitioner established a causal connection between PRT’s prior activities and the beach erosion on Harbor Island. Since Petitioner had not yet shown such a connection, this factor did not weigh in Petitioner’s favor. On the other hand, PRT’s expert testified that the beach renourishment efforts were necessary on Hunting Island due to continuing erosion. Moreover, he testified that Hunting Island’s lighthouse and public access areas would be compromised if the erosion were not alleviated by renourishment. The Court found that Petitioner failed to meet its burden that the balancing of the equities weighed in favor of keeping the stay in place.

Finally, the Court found that continuing the stay did not serve the public interest. While Petitioner asserted that protecting the wildlife on Harbor Island and minimizing the loss of tax revenue from Harbor Island accommodations would serve the public interest, Petitioner was required to show a causal connection between the erosion on Harbor Island and PRT’s prior beach renourishment efforts on Hunting Island. For purposes of the stay, Petitioner did not sufficiently show such a connection. On the other hand, PRT demonstrated that beach renourishment efforts were essential to maintaining Hunting Island as a state park. Therefore, the Court could not find that maintaining the stay would serve the public interest. The Court granted PRT’s motion to lift the automatic stay. S.C. Coastal Conservation League v. S.C. Dep’t of Health and Envtl. Control and DeBordieu Colony Community Ass’n, Docket No. 19-ALJ-07-0089-CC and The Belle W. Baruch Foundation v. S.C. Dep’t of Health and Envtl. Control and DeBordieu Colony Community Ass’n, Docket No. 19-ALJ-07-0088-CC (August 28, 2019, J. Anderson): In this case, which is still ongoing like many of the cases we will discuss, DHEC issued a Critical Area Permit and Coastal Zone Consistency Certification (CZCC) to DeBordieu Colony (DeBordieu). The Permit authorized DeBordieu to perform beach renourishment and to install three groins on the beaches of DeBordieu Island. The South Carolina Coastal Conservation League and The Belle W. Baruch Foundation requested contested case hearings to challenge the permit. Thereafter, DeBordieu filed a motion to lift the automatic stay imposed pursuant to S.C. Code Ann. § 1-23-600(H) (Supp. 2018). In its order denying the motion, the Court noted that recent amendments to Section 1-23-600(H) shifted the burden of proof to lift the stay to the petitioner instead of the movant. The amended statute further requires that the petitioner prove each of four elements: irreparable harm; substantial likelihood of success on the merits, balance of the equities, and public interest. Although the combination of these four elements is “new” for the purpose of the stay; individually, these elements are old because they were either part of the prior requirements to lift the stay or are similar to well-established principles applicable to injunctions. Furthermore, this case came before the Court in a unique posture in that DeBordieu also has a pending permit application with the U.S. Army Corps of Engineers which must be approved before work on the project can commence. It was unclear at the time of the motion hearing whether lifting the stay would result in the Corps granting the permit and allowing work to proceed. With regard to irreparable harm, the Court found that, because the construction of groins is a legal activity in certain circumstances, allowing such construction did not, in of itself, constitute irreparable harm. Moreover, there was no evidence to support Petitioners’ assertion that extensive erosion on the adjacent Hobcaw tract owned by Petitioner Baruch would occur during the pendency of this action. Accordingly, if the stay were lifted and work on the groins proceeded, but Petitioners prevailed on the merits, the groins could be removed and the beach restored without causing irreparable harm. In addition, any loss of use of the beach during construction to members of Petitioner SCCCL would be temporary. Nonetheless, DeBordieu did not commit adequate funds for the removal of the groins if it did not prevail on the merits. If there is insufficient money

to remediate the harm from groin construction, such harm is irreparable. Therefore, the Court found Petitioners had met their burden to show irreparable harm. For the second element, substantial likelihood of success on the merits, the Court applied injunction jurisprudence and determined Petitioners were required to make a prima facie showing that they were entitled to relief to prove this element. Petitioners raised the issue of whether DeBordieu’s estimated erosion rate at Hobcaw was inappropriately inflated and incorrect. The erosion rate is important because it establishes the point at which DeBordieu would be required to engage in mitigation efforts pursuant to the permit. Petitioners’ experts and DeBordieu’s experts disagreed as to the correctness of the estimated erosion rate. Furthermore, Petitioners raised the issue of whether the erosion rate at DeBordieu qualified as “high” under the applicable statute governing the construction of groins. The Court found that Petitioners presented a prima facie case on these issues and, therefore, satisfied the second element likelihood of success on the merits. Next, the Court found that the balance of the equities favored maintaining the automatic stay based upon the circumstances of this case. Because the Corps must grant its permit before any construction can begin, and because construction is prohibited from taking place during sea turtle nesting season April 30 through October 30 it is uncertain how long it would take after the lifting of the stay for construction to begin. Since there is no way to determine what the impacts of lifting the stay might be because of factors outside of the Court’s control, the benefit to DeBordieu of decreasing the frequency and intensity of future beach renourishments is offset by the danger of allowing an uncertain project to proceed. Finally, Petitioners had to establish that keeping the stay in place served the public interest. The Court weighed the public policy of preserving the beach against the public policy of protecting public access to the beach. At the time of the motion, the evidence did not establish that the groins should be constructed to protect the beach, and the current condition of the beach at DeBordieu did not reflect an immediate need for renourishment. Accordingly, the Court found that continuing the stay served the public interest in protecting access to the beach. Despite finding that Petitioners had proven the four elements to defeat lifting the stay, the Court concluded that DeBordieu should be allowed to proceed with its permit application with the Corps of Engineers as well as the initial development of the project, including the beach renourishment. However, the stay was not lifted to allow construction of the groins. Following the merits hearing, the Court may revisit the stay to determine if it should be lifted pending the Court’s decision on the merits. Karolczyk, et al. v. S.C. Dep’t of Health and Envtl. Control and Stevens Towing Co., Docket No. 18-ALJ-07-0241-CC (June 7, 2019, J. Lenski): In this case, DHEC issued a critical area permit to Stevens Towing Company--a marine transportation company, vessel maintenance and repair facility, and shipyard--for the installation of two travel lift piers and to upgrade an existing mooring field at its location on Yonges Island adjacent to the Wadmalaw River in Charleston County. Petitioners, who are property owners on Wadmalaw Island, filed a request for a contested case hearing with the ALC. Subsequently, just before the contested case was heard on the merits, Stevens Towing filed a motion to lift the

automatic stay to allow it to implement the permit before the 2019 hurricane season. The Court issued its order on the motion before it issued the final hearing in the case but after it had conducted the hearing on the merits. Applying the statutory amended factors of S.C. Code Ann. § 1-23-600 (H)(4)(a), the Court first considered whether lifting the stay would result in irreparable harm. Contrary to Petitioners’ assertions, there was no evidence that the proposed modifications to Stevens Towing’s facilities would result in expanded operations at the site. Rather, Stevens Towing sought the permit to better allow its business to comply with new federal regulations and to improve safety at the facility. Additionally, there was insufficient evidence that the sinking of new hollow pilings at the mooring field would result in any irreparable harm to the environment. Furthermore, there was no evidence, other than the Petitioners’ lay opinion evidence, that the lifting of the stay would cause additional ship traffic or diminish Petitioners’ enjoyment of their property. Therefore, the Court held Petitioners had failed to establish irreparable harm. Since the contested case hearing in this matter had already occurred, the Court declined to make a determination whether the Petitioners had demonstrated a substantial likelihood of success on the merits. Even if the Court had determined Petitioners made a prima facie showing that they could succeed on the merits, this was only one of the four requirements that must be established to keep the stay in place. In balancing the equities, the Court referred back to it finding that found Petitioners had not demonstrated irreparable harm if the stay were lifted. Moreover, the testimony at the hearing indicated that declining to lift the stay, and thus keeping Stevens Towing’s facilities in their current state, would create a less safe and less efficient environment for the employees at the facility. Furthermore, lifting the stay would allow Stevens Towing to drive the pilings at the mooring field before any negative weather conditions from hurricanes or tropical storms could hamper the project. The Court found that equity favored lifting the stay. Finally, in considering whether continuing the stay served the public interest, the Court held that no irreparable harm had been proven and there did not appear to be any public interest served in continuing the stay. If the project were implemented and the Court ultimately found in Petitioners’ favor, there was no evidence that the pilings and travel lifts could not be removed. Therefore, the Court granted Stevens Towing’s motion to lift the automatic stay.

C. Lifting the Automatic Stay – Timeliness Denise Mulvihill, Darlene Rawls, M.D., James Rawls, M.S., Green Island, LLC, Pumpkin Island, LLC, v. South Carolina Department of Health and Environmental Control and Charleston Moorings and Marine, L.L.C., Docket No. 18-ALJ-07-0127-CC

This case involved DHEC’s issuance of a Critical Area Permit to Charleston Moorings and Marine, LLC, for the installation of 330 floating OysterGro cages in Green Creek. Petitioners, who are property owners adjacent to the portion of the creek where the proposed cages would be located, filed for a contested case hearing to challenge the permit. Petitioners argued their use and

enjoyment of the Green River would be adversely affected, the environment would be harmed, and that the cages would unreasonably conflict with existing public use and interfere with public navigation.

Three days before the hearing on the merits was set to begin, Charleston Moorings filed a Motion to Lift Stay. After the hearing on the merits was concluded, Petitioners filed a Return in Opposition to the Motion to Lift Stay and the Respondent filed a Reply to the Return.

First, the Court decided that the Motion to Lift Stay was not filed in an appropriate time frame. Section 1-23-600(H)(4)(a) prohibits a motion to lift stay from being filed earlier than ninety days after a contested case is initiated, but it does not set a deadline. However, the statute also provides that action taken once the stay is lifted does not moot the case and is not otherwise considered an adjudication of the issues raised in the hearing request. Based on this latter portion of the statute, the Court determined it is implicit in the language that the Legislature intended any motion to lift stay to be filed, heard, and decided before the hearing on the merits. Further, the Court concluded that because the motion to lift stay and the decision on the merits have different burdens of proof, it is not the most efficient use of the Court’s time and resources to evaluate the evidence under the motion standard and then again under the merits standard. Nevertheless, the Court then decided to address the motion “out of an abundance of caution” since few cases have been decided under the amended statute. The Court determined that even if the motion to lift stay had been filed appropriately, the motion must be denied.

In addressing the motion, the Court first considered what standard of proof to apply. It adopted this Court’s previous application of the prima facie standard for the first, third, and fourth prongs. However, under the prong for success on the merits, the Court found the statute requires proof of a substantial likelihood of success.

Irreparable Harm

Petitioners presented evidence that they would suffer private harm from the floating cages because their use and enjoyment of their property would be adversely affected. They also presented evidence that the public would be harmed by the adverse effect on the public use of the creek. Petitioners presented a prima facie case of the likelihood of irreparable harm.

Substantial Likelihood of Success on the Merits

Under the substantial likelihood of success on the merits, Petitioners again argued the project would harm their personal use and enjoyment of the creek. Further, they argued the project would not meet regulatory standard for mariculture projects in tidelands and coastal waters. Petitioners provided testimony that the cages would unreasonably impact navigation along the creek and would unreasonably affect public use. The Court found that at this stage of the litigation it need not determine which party’s case was more compelling but rather found that Petitioners met their burden to show there was a “real probability” of success on the merits.

Balancing of the Equities

The Court evaluated the harm in assessing the balance of the equities. The Court found that Petitioners met their prima facie burden regarding the balance of the equities.

Public Interest

Petitioners contended that laws protecting the public interest would be violated. The Legislature has declared that the quality of the coastal environment should be protected and that the economic and social improvement of the coastal zone should be promoted. The Court found Petitioners’ arguments under the other three prongs made a prima facie showing that maintaining the stay would serve the public interest.

The Motion to Lift Stay was denied.

SOUTH CAROLINA SUPREME COURT AND COURT OF APPEALS: JANUARY 2019 TO PRESENT

Rent-A-Center East, Inc. v. South Carolina Dept. of Revenue, 425 S.C. 582, 824 S.E.2d 217 (Ct. App. 2019), cert. granted August 5, 2019: In this case, Rent-A-Center East, Inc. and Rent Way, Inc. (collectively, Taxpayers) operate retail stores in South Carolina. Taxpayers’ stores allow customers to rent-to-own durable consumer goods if the consumer enters a Rental Agreement. Taxpayers’ Rental Agreement offered customers weekly, monthly, or semi-monthly rental terms. Customers could acquire ownership of rental items by making all term payments for the specified number of rental terms. Customers could unilaterally terminate the Rental Agreement at any time by returning the rental property and paying any overdue fees. The Rental Agreement contained a “Risk of Loss and Damages” section which provided the customer was responsible for the fair market value of the rental property if it was lost, stolen, damaged, or destroyed. Additionally, Taxpayers offered customers a Waiver. The Waiver allowed customers the option to pay an additional fee with the rental term payment. The terms of the Waiver state the Waiver is “an additional part of the Rental Agreement.” With the Waiver fee paid, Taxpayers would waive the customer’s liability for the value of the rental property in the event of certain enumerated conditions. These conditions were lightning, fire, smoke, windstorm, theft, and flood. Customers were also required to pay “all periodic rental payments including the liability waiver fee through the date of loss and . . . compl[y] with all other terms of [the] Rental Agreement . . . .” The customer and the Taxpayers could independently terminate the Waiver at any time without notice. The termination became effective at the end of the rental term. The South Carolina Department of Revenue (the Department) audited Taxpayers and determined Taxpayers failed to pay sales taxes on proceeds from the Waivers. The Department calculated Rent-A-Center East, Inc. owed $521,694.93 and Rent Way, Inc. owed $192,158.64. Taxpayers submitted payment in the amount of $919,585.55 for all taxes and interest owed and timely requested a contested hearing before the ALC. Taxpayers argued:

• S.C. Code Ann. Section 12-36-910(A) only imposes a sales tax on transactions as opposed

to people;

• the Rental Agreement and the Waiver constituted separate agreements under the true object text; and

• the Waiver proceeds were not gross proceeds of the sale of the Rental Agreements After a hearing, the ALC found the Rental Agreements and Waivers were “fundamentally interconnected” because the Waivers were described as “provisions” of the Rental Agreements, the Waivers could not be entered into independently of the Rental Agreements, and the Waiver fees were calculated based on the term payment of the Rental Agreements. The ALC also found the true object of the transaction was “to obtain the use of an item while minimizing the financial risk of its damage, loss, or destruction.” The ALC concluded the Waivers were subject to sales tax and ordered Taxpayers to remit payment of $851,622.31 plus accrued interest to the department. This appeal followed.

• The Court of Appeals found the ALC applied the appropriate rules of statutory construction to the tax statutes at issue. Namely, the ALC properly applied the plain meaning rule to S.C. Code Ann. Section 12-36-910(A) (Supp. 2018) and S.C. Code Ann. Section 12-36-60 (Supp. 2018) to find that a sales tax of five percent is imposed on the “gross proceeds” of all persons engaged in the business of selling tangible personal property at retail and “gross proceeds” means “the value proceeding or accruing from” the sale or lease of tangible personal property.

• The ALC correctly utilized the true object test to find the Rental Agreement and Waiver constituted a single agreement because the sale of the Waivers was incidental to the sale of the Rental Agreements, which were the “true object” intended by customers purchasing the Rental Agreements.

• The ALC correctly found that the Waiver proceeds were gross proceeds of the sale of the Rental Agreements. Since the sale of the Waivers was incidental to the sale of the Rental Agreements, the Waivers are necessarily subject to sales tax as gross proceeds of the Rental Agreements per section 12-36-910(A).

Sanders v. South Carolina Dept. of Motor Vehicles, 426 S.C. 21, 824 S.E.2d 454 (Ct. App. 2019), cert. granted June 28, 2019: In this case, Appellant Bradley Sanders (Appellant) appealed the suspension of his driver’s license by the South Carolina Department of Motor Vehicles (DMV). Appellant was involved in a single-car accident in Columbia, South Carolina. Officer Scott Desrochers (Desrochers) was dispatched to the scene and found Appellant standing near the scene, bleeding, and smelling of alcohol. Desrochers verified that personal belongings in the vehicle belonged to Appellant. Appellant denied involvement in the accident and could not explain his injury. Desrochers noted Appellant’s

speech was slurred and that Appellant was mentally and physically “off-balance.” Appellant was transported by ambulance to Lexington Medical Center. Relying on statements by an individual named Nurse Albright, Desrochers determined that Appellant was medically unable to provide a breath sample. Desrochers requested a blood sample instead. Following DMV’s suspension of Appellant’s license, the Office of Motor Vehicles Hearings, also known as OMVH, held a hearing to review the suspension. Desrochers testified that Nurse Albright told him that Appellant would not be able to provide a breath sample. Appellant objected based on hearsay. The hearing officer found the testimony was not hearsay because the testimony was not offered to prove Appellant was unable to provide a breath test. Rather, the testimony was offered to prove Desrochers’ reliance on a medical professional to determine that he needed to request a blood sample. DMV offered a South Carolina Law Enforcement Division (SLED) urine/blood collection report signed by Nurse Albright. The report stated Sanders was unable to leave the hospital to take the breath test due to unspecified medical reasons. Appellant objected based on hearsay, arguing there was no proof that Nurse Albright was actually a nurse and Appellant was unable to cross-examine Nurse Albright regarding her credentials and the medical reasons preventing Appellant from giving a breath sample. The hearing officer again held the report was admissible as evidence of Desrochers’ reliance on a statement for the purpose of requesting a blood sample. OMVH sustained the suspension and the ALC affirmed. On appeal, Appellant argued the ALC erred in affirming:

• the admission of hearsay evidence to establish his inability to submit to a breath test; and

• the finding that Desrochers presented a prima facie case that the individual who determined Sanders was unable to submit to a breath test was a licensed medical professional pursuant to S.C. Code Ann. section 56-5-2950(A) (2018).

This appeal followed.

• The Court of Appeals found the ALC properly admitted the evidence establishing Appellant’s inability to submit to a breath test. Neither Desrochers’ testimony concerning the statements of Nurse Albright nor the urine/blood collection report constituted hearsay because they were not offered for the purpose of proving the truth of the matter asserted. Section 56-5-2950(A) requires arresting officers to offer a breath test to a motorist the officer suspects is intoxicated in order to determine the person’s alcohol concentration. The officer may only request a blood sample “[i]f the [motorist] is physically unable to provide an acceptable breath sample because he has an injured mouth, is unconscious or dead, or for any other reason considered acceptable by the licensed medical personnel.” S.C. Code Ann. § 56-5-2950(A) (2018). DMV submitted the above evidence to prove that Desrochers relied on the statements to determine that he was legally permitted to request a blood sample from Appellant.

• The ALC properly found that Desrochers presented a prima facie case that Nurse Albright was a licensed medical professional pursuant to section 56-5-2950(A). Nurse Albright

signed a medical collection report indicating she was a registered nurse and wore a nametag identifying her as such. Desrochers also observed Nurse Albright performing medical tasks and treating patients at the hospital. This evidence sufficiently establishes that Nurse Albright was a medical professional.

Sierra Club v. South Carolina Dep’t of Health and Envtl. Control, 426 S.C. 236, 826 S.E.2d 595 (2019): In this case, Chem-Nuclear operated a low-level radioactive waste disposal facility in Barnwell County, South Carolina. The facility is on property owned by the State and leased to Chem-Nuclear. The facility began disposal operations in 1971 and Chem-Nuclear has been the sole operator of the facility since then. Chem-Nuclear’s license and operations are overseen by the South Carolina Department of Health and Environmental Control (DHEC). Chem-Nuclear’s operating license has been amended and renewed multiple times as standards in disposal practices have changed. Chem-Nuclear uses three types of trenches designed to house nuclear waste based on the radiation dose rates external to the waste packages. Each trench design has a drainage system to assist in the monitoring of water infiltration entering the trench. The bottoms of the trenches are lined with clay sand or sandy clay that is designed to be permeable to allow liquids to infiltrate the soil below the trenches. None of the trenches have an impermeable liner or a leachate collection system. “Leachate” is defined as “any liquid, including any suspended or dissolved components in the liquid, that has percolated through or drained from the [radioactive] material.” 10 C.F.R. Pt. 40, App. A (2018). Chem-Nuclear implements a surface water management plan to pump precipitation from the trenches into adjacent trenches or a lined pond. Chem-Nuclear also utilizes concrete disposal vaults that are, by design, not sealed against water intrusion. The floors of the vaults are perforated to permit water to drain into the trenches. The lids of the vaults are not sealed. In the past, the holes in the vault floor have allowed enough water into the trenches to result in the trench water level rising into the vault. Vaults are considered active until they are filled to capacity with disposal containers. Trenches are active until they are filled to capacity with vaults and other large components. Full vaults are considered inactive and covered with “general cover soils and an initial clay cap” to reduce further infiltration of surface water. Full trenches are considered inactive and covered with a multi-layer “enhanced cap” consisting of an initial clay cap, polyethylene, bentonite, a sand drain layer, and general soil material for vegetation growth. Active vaults are not covered and rain falls directly into them. Rainwater also collects in active trenches. The process of installing an enhanced cap can take as long as two years to complete. On average, forty-seven inches of rain falls on the Barnwell facility annually. Water that comes into contact with disposed materials in the vaults and trenches becomes contaminated with radioactive materials such as tritium before eventually percolating into the soil and groundwater. Chem-Nuclear discovered tritium in the trenches in 1974 and has since implemented a groundwater monitoring system to track tritium concentrations in the surrounding groundwater.

Chem-Nuclear is required to follow S.C. Code Ann. Sections 13-7-10 to -100 (2017) and S.C. Code Ann. Regs. 61-63 (2011 & Supp. 2018) in designing, building, and operating the Barnwell facility. In 2000, Chem-Nuclear applied for the renewal of its operating license with DHEC. DHEC renewed Chem-Nuclear’s license in 2004. Sierra Club requested a contested hearing before the ALC to challenge the renewal, arguing Chem-Nuclear’s practices for waste disposal at the Barnwell facility did not meet regulatory requirements for the prevention of ground water contamination. In 2005, the ALC affirmed DHEC’s renewal of Chem-Nuclear’s license, finding Sierra Club did not present sufficient evidence to warrant reversal. However, the ALC found that Sierra Club raised sufficient evidence suggesting additional studies were needed regarding the feasibility of: (1) sheltering the disposal trenches from rainfall; (2) providing temporary dry storage facilities for the storage of waste received during wet conditions; and (3) providing for sealing and grouting the concrete disposal vaults to prevent the intrusion of water to the maximum extent feasible. The ALC ordered Chem-Nuclear to conduct studies to this effect and submit the results to DHEC within 180 days. Sierra Club appealed and the Court of Appeals affirmed in part and remanded in part. The Court of Appeals found the ALC failed to consider whether Chem-Nuclear’s disposal practices were in compliance with sections 7.11, 7.23.6, and 7.10.5 through 7.10.10 of Regulation 61-63. The Court of Appeals found section 7.11 “imposes additional compliance requirements for Chem-Nuclear such that the balancing test of ALARA would not be sufficient to address whether Chem-Nuclear is in compliance with section 7.11.” “ALARA” stands for “as low as reasonably achievable” and is used in the regulation to mean “making every reasonable effort to maintain exposures to radiation as far below the dose limits . . . as is practical.” S.C. Code Ann. Regs. 61-63 § 3.2.6 (2011). The Court of Appeals also instructed the ALC on remand to apply the factual findings set forth in the ALC’s 2005 order when addressing the portions of the regulations the ALC failed to consider. This meant the ALC could not consider any improvements made to the facility since the 2005 order or the study the ALC mandated in 2005. In 2012, the ALC issued a new order affirming DHEC’s conclusion that Chem-Nuclear complied with the relevant sections of the regulation. Sierra Club appealed and the Court of Appeals affirmed in part and reversed in part, finding Chem-Nuclear had not complied with Regulation 61-63, subsections7.11.11.1, 7.11.11.2, 7.11.11.4, and 7.10.7. On remand, the Court of Appeals provided that DHEC shall consider all available information as to whether Chem-Nuclear complied with the regulations. Chem-Nuclear petitioned for a writ of certiorari to the South Carolina Supreme Court, arguing:

• Chem-Nuclear complied with Part VII of Regulation 61-63;

• The Court of Appeals erred by not giving deference to DHEC’s interpretation of the requirements under section 7.11;

• The Court of Appeals erred by improperly shifting the burden of proof away from Sierra Club when concluding Chem-Nuclear was not in compliance with DHEC’s regulations;

• The Court of Appeals misapprehended or overlooked Chem-Nuclear’s compliance with the ALC’s directive in its 2005 order to conduct further studies to address concerns regarding the reduction of contact between rainfall and waste; and

• The Court of Appeals erred by not considering the facilities’ natural physical attributes when concluding Chem-Nuclear was noncompliant with subsections 7.11.11.1 and 7.11.11.2.

The South Carolina Supreme Court granted Chem-Nuclear’s petition for certiorari.

• The South Carolina Supreme Court found subsections 7.11.11.1, 7.11.11.2, and 7.11.11.4 were technical requirements that Chem-Nuclear was required satisfy as a condition of its license, but the Court of Appeals’ ruling was modified to refrain from mandating Cham-Nuclear take specific actions to comply;

• Chem-Nuclear had complied with subsection 7.11.11.4. The Court of Appeals erred by interpreting the subsection to specifically require the removal of “radioactive waste material” when the subsection only referred to the “collection and retention of water and other liquids;”

• Chem-Nuclear failed to comply with subsections 7.11.11.1 and 7.11.11.2, though the Supreme Court’s ruling should not be construed to mandate that covers be erected over the disposal units;

• The Court of Appeals’ opinion was modified to refrain from suggesting that ALARA is eliminated from an analysis of compliance with the technical requirements of the regulation;

• Due deference was given to DHEC’s interpretation of the applicable regulations;

• The Court of Appeals did not improperly shift the burden of proof away from Sierra Club when concluding Chem Nuclear was not in compliance with DHEC’s regulations;

• The report detailing Chem-Nuclear’s compliance with the ALC’s 2005 order directing further studies was not part of the record on appeal; and

• The Court of Appeals did not err by failing to consider the natural attributes of the facility in evaluating Chem-Nuclear’s compliance with subsections 7.11.11.1 and 7.11.11.2 because such attributes were not a factor that excused noncompliance with those subsections.

Charleston County Assessor v. University Ventures, LLC, 427 S.C. 273, 831 S.E.2d 412 (2019)

University Ventures (Taxpayer) purchased a vacant lot in Charleston County (the Property) in 2006. In 2008, Taxpayer received building permits to construct a hotel and pool on the Property. The hotel and pool were completed in April 2009 and a certificate of occupancy was issued. The Charleston County Assessor (the Assessor) reappraised the property pursuant to law when the

improvements to the Property were completed. The value of the property increased under the appraisal, increasing Taxpayer’s 2010 property tax bill. Taxpayer paid the 2010 tax bill without objection. Taxpayer challenged the 2011 tax bill, which continued to value the Property as an improved lot. Taxpayer claimed the 2011 tax bill should have been based on the Property’s value as a vacant lot as of December 31, 2008. In September 2011, Taxpayer filed an objection to the Assessor’s valuation of the Property. The Assessor refused to adjust the valuation, so Taxpayer appealed to the Charleston County Board of Assessment Appeals (the Board). The Board agreed with Taxpayer and valued the Property at the 2008 value of $628,439. The Assessor requested a contested hearing before the Administrative Law Court (ALC). The ALC found that the reassessment cycle consisted of the years 2005 through 2009 rather than the Assessor’s belief the cycle was from 2006 through 2010. The ALC also found that the improvements to the Property were not complete as of the uniform date of value, December 31, 2008. Therefore, the ALC found the Property should have been valued as vacant land for the purposes of the 2010 reassessment.

On appeal, the South Carolina Court of Appeals affirmed the ALC’s findings as to the years comprising the reassessment cycle but reversed the ALC’s finding as to the valuation of the Property. The Court of Appeals found that valuing the Property as though it were a vacant lot when it had a completed hotel on it was inappropriate. Both parties petitioned the South Carolina Supreme Court for writs of certiorari. The Assessor argued the Court of Appeals erred in characterizing the years comprising the reassessment cycle. Taxpayer argued the Property should be valued as a vacant lot for the 2011 tax year. The Supreme Court granted both petitions.

• The Supreme Court found the Assessor correctly characterized the reassessment cycle as 2006 through 2010; and

• The Court of Appeals did not err in reversing the ALC’s valuation of the Property as a vacant lot.

A.O. Smith Corporation v. South Carolina Dep’t of Health and Envtl. Control, 428 S.C. 189, 833 S.E.2d 451 (Ct. App. 2019)

Appellant A.O. Smith Corporation (Appellant) owns a water heater and boiler manufacturing facility in Chesterfield County outside the city limits of the town of McBee, South Carolina (the Town). The facility requires a water supply to manufacture its products and maintain the minimum instant water flow in its fire protection system as required by the facility’s insurance carrier. In 1979, the Town agreed to supply Appellant with “a reasonable supply of water.” Appellant makes up about sixty percent of the Town’s water revenue.

The Town’s water system consists of two wells. From 1995 to 1999, the Town’s water system received three consecutive “unsatisfactory” ratings from South Carolina Department of Health and Environmental Control (DHEC) sanitary surveys. In 1999, Alligator Rural Water & Sewer Company, Inc. (Alligator Water) entered into a forty-year agreement for Alligator Water to supply the Town’s water. The Town ceased operating the two wells and Alligator Water took over operation of the Town’s entire water system. Alligator Water had DHEC transfer the Town’s operating permits to it.

In 2005, the Town received a $4.5 million loan from the United States Department of Agriculture. The loan was used to refurbish the water system. The Town became aware of information that called into doubt Alligator Water’s financial situation, prompting the Town to consider whether Alligator Water should remain the Town’s sole source of water. In 2009, Alligator Water took one of the Town’s wells offline due to contaminants discovered in routine sampling.

On December 7, 2010, the Town submitted a Preliminary Engineering Report to DHEC for upgrades to the system and on June 13, 2011, DHEC Staff approved the Town’s Report. The next day DHEC issued a public water operating permit to the Town. On January 10, 2012, the Town applied to DHEC to modify Well No. 2, and on November 13, 2012, DHEC issued the Town a permit for modifications to Well No. 2.

In 2013, the Town received a letter from Alligator Water that it was increasing the water wholesale rate by 56%.

On October 10, 2013, the Town informed Appellant that the Town was working with DHEC to perform upgrades to the existing water supply system. On October 16, the Town increased the rate charged to water customers by 25%. The Town informed Alligator Water that it would not pay the increased water wholesale rate until Alligator Water supplied the Town with certain financial data. On December 20, 2013, the Town applied to DHEC for the construction of two granulated carbon contactors to be connected to both wells. DHEC issued the Town a permit for construction of the contactors on June 30, 2014. Appellants upgraded their fire protection system the same year. Appellant’s engineer determined the new fire protection system required more water than the Town’s water storage capacity could provide. Appellant discussed water service with Alligator Water, which began construction of a water line to Appellant’s facility in May 2015.

On September 3, 2015, Appellant raised concerns with the Town about the adequacy of the Town’s water supply to meet the flow needs of its fire protection system. On January 12, 2016, DHEC issued the Town two Final Approvals to Place into Operation – one associated with the 2012 permit and one associated with the 2014 permit. The Final Approvals stated they were conditional based upon the Town’s ability to show its two wells had adequate capacity.

On January 27, 2016, Appellant requested a final review conference before the DHEC Board regarding the Final Approvals. The Board’s counsel sent Appellant a letter stating the Board would not conduct a final review and cited to Section 44-1-60, which provides that when the Board declines in writing to schedule a final review conference, the staff decision becomes the final agency decision for the purpose of judicial review.

On March 15, 2016, Appellant filed a request for a contested case with the ALC to review the Final Approvals. The Town filed a motion to dismiss, arguing the ALC lacked jurisdiction on the ground that Appellant’s request was untimely because Appellant was essentially challenging the underlying permits that had been issued by DHEC in 2011, 2012, and 2014 without being challenged.

The ALC granted the motion to dismiss. Following a motion for reconsideration filed by Appellant, the ALC vacated the order and issued a new order granting the motion to dismiss again. The ALC found Appellant did not timely submit comments raising concerns about the 2012 and 2014 permits and did not file requests for final review of these permits even though it had actual

notice of these undertaking no later than October 2013. Accordingly, the ALC determined the DHEC staff decisions became final fifteen days after they were mailed. The ALC also held the Final Approvals were not appealable “initial decisions” simply because they contained conditions. This appeal followed.

On appeal, Appellant argued the ALC erred in finding the Final Approvals were not staff decisions subject to appeal under section 44-1-60 of the South Carolina Code (2018 & Supp. 2018) because DHEC had a legal duty to issue the Final Approvals. Appellant argued the ALC erred in interpreting Final Approvals to not count as appealable “initial decisions” or appealable “licenses.” Finally, Appellant argued that Regulation 61-58.1(K) of the South Carolina Code does not provide for conditional approvals, making the Final Approvals subject to appeal even if they are not appealable under section 44-1-60. The Court of Appeals found:

• Section 44-1-60 specifically provides that contested cases for affected persons are for initial decisions, which does not encompass the Final Approvals;

• Appellant failed to request a contested hearing when it became aware of DHEC’s initial permitting decisions and thus the ALC properly found that section 44-1-60 did not allow Appellant to request a contested hearing for the Final Approvals; and

• DHEC’s interpretation of Regulation 61-58.1(K) that the regulation allows the Final Approvals to contain conditions controls because the court must give deference to the agency’s interpretation of the regulation when the regulation is silent or ambiguous with respect to a specific issue.

2020 SC BAR CONVENTION · SC Tax Law: What You Need to Know and Case Law Update Adam Neil 2020 SC...

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