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Osmond Senior Living LLC v. Utah Department of Public Safety

Court of Appeals of Utah

November 23, 2018

Osmond Senior Living LLC, Appellant,
Utah Department of Public Safety and Utah Department of Health, Appellees.

          Fourth District Court, Provo Department The Honorable M. James Brady No. 150401586

          Richard J. Armstrong and Judson D. Burton, Attorneys for Appellant

          Sean D. Reyes and Joshua Davidson, Attorneys for Appellees

          Judge David N. Mortensen authored this Opinion, in which Judges Kate A. Toomey and Diana Hagen concurred.


          MORTENSEN, Judge:

         ¶1 Osmond Senior Living, LLC (Osmond) submitted plans and obtained the appropriate building permit to construct a new, three-story assisted living facility in Lindon City (the City). The State Fire Marshal Division alerted Osmond that the structure, the construction of which was well underway, might not be approved for licensure as an assisted living facility because the third floor violated building codes for such facilities. Osmond changed its plans, removed the partially completed third story, and built a two-story facility instead. About six months later, the State Fire Marshal told Osmond that three-story assisted living facilities were now allowed. Osmond brought an unconstitutional takings claim against the Department of Public Safety and the Department of Health, seeking millions in compensation for renovation costs and lost revenue. The district court ruled that it lacked subject matter jurisdiction because Osmond did not exhaust its administrative remedies. In the alternative, the court ruled that Osmond failed to state a claim for which relief could be granted because it never held a vested interest in the three-story facility. Osmond appeals. We affirm.


         ¶2 Osmond planned to build a three-story assisted living facility in the City, with the first two floors built for Institutional Group 2 (I-2) occupancy and the third floor built for Institutional Group 1 (I-1) occupancy.[1] Osmond received the required building permit from the City prior to construction. The permit, issued in late January 2014 (1) required the applicant to comply with all city, county, and state building laws and ordinances and (2) prohibited occupancy "until after final inspection and zoning and occupancy compliance certificate is issued."

         ¶3 With permit in hand, Osmond began construction as planned, building for I-2 occupancy on the first two levels and I-1 occupancy on the third level. Part of Osmond's attempt to construct a compliant facility involved the inclusion of a two-hour firewall between the I-1 and I-2 levels. But in April 2014-several months after construction began and after Osmond had erected the structural components for all three floors-Osmond's architect received a letter (the Letter) from the Utah Department of Health signed by the Architect and Special Deputy of the Utah State Fire Marshal.[2] The Letter stated that it was the third "plan review letter" issued by the department concerning the project. The Letter indicated that the department had received drawings for the project in February 2014 and that it had sent an earlier letter in March 2014 regarding "outstanding items" that needed to be addressed. Although the Letter referenced these earlier communications, the appellate record contains no other documentary evidence of prior communication between Osmond and any state agency.

         ¶4 In bold type, the Letter warned: "Plans for the project have not been approved by our office. Any items that are currently being constructed that are found not to be in compliance with the required rules will need to be corrected before we can approve plans and ultimately recommend approval for licensure." The Letter opined that the project did not comply with the International Building Code [IBC] or Utah law for an assisted living facility. Specifically, the Letter stated:

As we see it, the biggest issue on this project is the permissibility of a 3 story, wood framed building that contains an I-2 occupancy and a type-2 assisted living population. . . . [A]fter reading through the commentary to the IBC and consulting with different code officials and Life Safety surveyors . . . it is our opinion that a 3 story, wood framed building containing an I-2 occupancy is not allowed per the IBC.

         The Letter then made the following request:

We ask that you and the owner consider removing the top floor of the new building to meet not only what we interpret to be required in the IBC, but more so to comply to what we have been told is the intent of the [State of Utah] amendment allowing a maximum of 2 stories, wood framed construction for I-2 occupancies.

         The Letter expressed that the Utah Department of Health was concerned about the consistent application of regulations:

Owners from competing [assisted living] facilities have frequently stated to us that we have allowed leniency to their competition on rules relating to assisted living facilities while requiring them to be in strict compliance. It is our intent to apply the rules for assisted living facilities evenly throughout the State of Utah. I am concerned that if this project is built as currently designed, it may set a bad [precedent] for current and future assisted living facilities in the State of Utah.

         Lastly, the Letter said, "We will leave the permissibility of the 3 story buildings containing I-2 occupancies up to the local Building Official having jurisdiction to enforce as they ultimately have jurisdiction on this matter." The Letter concluded by asking Osmond's architect to "respond to these comments in writing and with appropriate drawings so that approval may be considered."

          ¶5 In May 2014, Osmond representatives met with State Fire Marshal Division officials and other state officials to discuss the Letter and the future of the project (the Meeting).[3] According to Osmond, the Deputy State Fire Marshal and other state officials warned that the three-story facility "would never be licensed to operate as an assisted living facility." Although Osmond asserts throughout its brief that state officials ordered the construction to be "stopped," the record is not so absolute. Rather, it indicates that Osmond was told that its facility would be not be licensed as an assisted care facility if it had three floors instead of two, but it was never told to "stop" construction. The State contends that the State Fire Marshal merely "advised" Osmond that a three-story facility would "not comply with the [IBC] and would not be licensed."

         ¶6 In response to the Letter and the Meeting, Osmond redesigned the project as a two-story facility. Osmond incurred significant expenses in redesigning, reengineering, and rebuilding the project. Osmond also alleges it lost the ...

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