Patel v. Scotland Mem Hosp ( 1996 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
URVASHI B. PATEL, an Individual,
Plaintiff-Appellant,
v.
SCOTLAND MEMORIAL HOSPITAL, a
No. 95-2704
North Carolina Corporation;
W. HARLEY DAVIDSON; GREGORY C.
WOOD,
Defendants-Appellees.
Appeal from the United States District Court
for the Middle District of North Carolina, at Rockingham.
William L. Osteen, Sr., District Judge.
(CA-94-284-3)
Argued: April 3, 1996
Decided: July 10, 1996
Before WIDENER, MURNAGHAN, and WILLIAMS,
Circuit Judges.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Clifford Neil Ribner, Tulsa, Oklahoma, for Appellant.
Peter J. Covington, SMITH, HELMS, MULLISS & MOORE, L.L.P.,
for Appellees. ON BRIEF: Denise S. Cline, MOORE &
VAN ALLEN, Raleigh, North Carolina, for Appellant. James H.
Guterman, Maurice O. Green, SMITH, HELMS, MULLISS &
MOORE, L.L.P.; George C. Covington, KENNEDY, COVINGTON,
LOBDELL & HICKMAN, L.L.P., Charlotte, North Carolina, for
Appellees.
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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
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OPINION
PER CURIAM:
Urvashi B. Patel, plaintiff-appellant, filed a lawsuit against Scot-
land Memorial Hospital ("SMH"), Harley Davidson, SMH's Chief of
Staff during most of the time the events at issue occurred, and Greg-
ory Wood, who was promoted to be SMH's Chief Administrator dur-
ing the relevant time period, (collectively "the defendants"), alleging
a violation of the Sherman Antitrust Act § 1, 15 U.S.C. § 1 (1988).
Additionally, she raised numerous state law claims--namely, a viola-
tion of North Carolina's antitrust laws, tortious interference with con-
tractual relations, intentional infliction of severe emotional distress,
and breach of contract. The district court dismissed four of the five
claims for failure to state a claim upon which relief could be granted
and subsequently dismissed the remaining claim for lack of subject
matter jurisdiction. Patel appeals the district court's dismissal of her
claims as well as its refusal to allow her to amend her complaint a
second time. Federal jurisdiction is based both on federal question
jurisdiction, 28 U.S.C. § 1331 (1988), and diversity-of-citizenship
jurisdiction, 28 U.S.C. § 1332 (1988). For the following reasons, we
affirm.
I.
In 1988, Patel entered into the first of a series of contracts with
SMH. Under her contract, she agreed to serve as the Medical Director
of the Department of Anesthesiology at SMH, to provide 24-hour
2
anesthesiology services to SMH, and to direct SMH's certified regis-
tered nurse anesthetists ("CRNAs"). In return, SMH agreed not to
enter into any other similar contracts.1 With the help of CRNAs, Patel
was able to supervise anesthesiology services in multiple operations
simultaneously and to build a lucrative practice, earning as much as
$750,000 per year.
As a condition of her contract, Patel agreed to pass her medical
boards in anesthesiology within two years. Patel, however, failed to
pass her boards within two years. Consequently, SMH notified her in
October 1990 of its intent to terminate her contract, but allowed her
temporarily to maintain her privileges under the contract. Subse-
quently, on March 27, 1991, SMH terminated the contract and with-
drew Patel's contract privileges. While SMH allowed Patel to
maintain staff privileges and to practice anesthesiology at the hospital,
it forbade all CRNAs from working with her. CRNAs were allowed,
however, to work with all other doctors with staff privileges.
The loss of the use of CRNAs meant that Patel could not maintain
the practice she had built by superving the anesthesiology in numer-
ous operations simultaneously. She was forced to cancel contracts she
had with other physicians to provide anesthesiology services and she
experienced a dramatic loss of income in her practice.
Patel filed a lawsuit against SMH, Davidson, and Wood alleging:
(1) a Sherman Antitrust Act § 1 violation, 15 U.S.C. § 1; (2) a viola-
tion of North Carolina's antitrust laws; (3) tortious interference with
contractual relations; (4) intentional infliction of severe emotional dis-
tress; and (5) breach of contract. Patel asked for and was granted per-
mission to amend her complaint once.
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1 As alleged in her complaint, Patel's contract provided that she was "to
serve as the Medical Director of the Department of Anesthesiology at
SMH, supervise its certified registered nurse anesthetists ("CRNAs") and
provide twenty-four hour per day three-hundred-sixty-five days-per-year
coverage of anesthesiology services for SMH, in exchange for which
SMH agreed not to make any similar contractual agreement to any other
anesthesiologist ``for the medical direction of CRNAs.'" Complaint ¶ 7,
amended complaint ¶ 7, and proposed second amended complaint, ¶ 7.
3
The district court dismissed all claims against the defendants under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim
upon which relief could be granted, with the exception of the breach
of contract claim against SMH. Patel subsequently requested permis-
sion to amend her complaint a second time. The district court denied
her motion to file a second amended complaint on the grounds that
the amendment would be futile. The district court also dismissed the
remaining contract claim for lack of subject matter jurisdiction, and
dismissed the lawsuit. Patel appealed.
II.
Patel argues that the district court erred by: (1) dismissing her
Sherman Antitrust Act, state antitrust, tortious interference with con-
tract, and intentional infliction of emotional distress claims for failure
to state a claim upon which relief could be granted; (2) refusing to
allow her to amend further her complaint; and (3) refusing to exercise
its supplemental jurisdiction over her breach of contract claim against
SMH. We address each argument in turn.
A. Rule 12(b)(6) Dismissals
We review dismissals pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure de novo. Estate Constr. Co. v. Miller &
Smith Holding Co., 14 F.3d 213, 217 (4th Cir. 1994). In conducting
our review of a Rule 12(b)(6) dismissal, we construe the factual alle-
gations in the nonmoving party's complaint as true. We will affirm
"only if it appears that the plaintiff[ ] would not be entitled to relief
under any facts which could be proved in support of[her] claim." Id.
at 218 (citation omitted). Thus, we do not evaluate whether Patel has
established any facts in comparison to those alleged by the defen-
dants, but rather examine whether, if all the facts she alleged were
true, she could make out her claims.
1. Sherman Act § 1 Claim
Patel argues that Davidson, Wood, and SMH conspired in violation
of the Sherman Antitrust Act § 1, 15 U.S.C.§ 1, to prevent her from
using CRNAs, which were essential to her practice. She concedes that
4
SMH, Davidson, and Wood had a right to terminate her contract
based on her failure to pass the Boards. Her claim is based, thus, only
on the defendants' decision to disallow CRNAs from working with
her, which she contends was motivated by a malicious intent to
destroy her practice.
Section one of the Sherman Antitrust Act prohibits combinations
or contracts in restraint of trade.2 In order to survive the defendants'
Rule 12(b)(6) motion on a § 1 claim, Patel must allege facts which,
if proven true, would establish the necessary elements of a Sherman
Act § 1 violation: (1) an agreement between at least two legally dis-
tinct persons or entities; and (2) that the agreement imposed an unrea-
sonable restraint on trade. Estate Constr., 14 F.3d at 220-21. Patel's
amended complaint fails to allege adequately those two elements.
a. Agreement to Conspire
Unilateral action is not considered actionable under§ 1 of the Sher-
man Act. Thus § 1 applies only to concerted action. Monsanto Co. v.
Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984). "Proof of concerted
action requires evidence of a relationship between at least two legally
distinct persons or entities." Oksanen v. Page Memorial Hosp., 945
F.2d 696, 702 (4th Cir. 1991) (en banc), cert. denied, 502 U.S. 1074
(1992). Under the doctrine of intraenterprise immunity, courts gener-
ally find that a company cannot conspire with its officers or employ-
ees because of the unity of economic interest between the company
and its employees. Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752, 769-71 (1984).
We have previously found that where the hospital staff acts as an
agent of the hospital, the Board of Trustees of a hospital and the med-
ical staff comprise a single entity and, therefore, are immune from
Sherman Act § 1 lawsuits. Oksanen, 945 F.2d at 699, 703. Contra
Bolt v. Halifax Hosp. Medical Ctr., 891 F.2d 810, 818-19 (11th Cir.),
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2 Section 1 provides, in pertinent part:
Every contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal.
5
cert. denied, 495 U.S. 924 (1990) (rejecting the rule that a hospital
cannot conspire with its medical staff for purposes of § 1 liability).3
We reasoned that a hospital and its staff have a unity of interest in
seeking to provide and upgrade the quality of patient care. Oksanen,
945 F.2d at 703. "Far from being a competitor with the hospital, the
medical staff [i]s in fact a natural component of the hospital's man-
agement." Id. Similarly, here, we conclude that SMH and its medical
staff could not conspire with one another in violation of Sherman Act
§ 1 where the staff acted as the hospital's agent.
Patel seeks to distinguish Oksanen by arguing that Davidson and
Wood did not act as agents of the hospital when they conspired to
direct SMH's CRNAs not to work with her. We are not convinced.
Members of the hospital staff, especially those with administrative
positions, such as Chief Administrator, clearly have responsibilities to
ensure adequate and quality care by the staff at the hospital, protect
against malpractice, ensure efficient operation, cut costs, and the like.
Staffing decisions and directives by the staff, and particularly the
Chief of Staff or Chief Administrator, to that end are made as agents
of the hospital. Patel had failed to meet the conditions of her contract.
Thus, SMH and its agents had reasons to terminate her contract and
to restrict her access to hospital resources.
Patel also argues that an exception to the intraenterprise immunity
doctrine applies. Where the individuals on the medical staff have an
independent personal stake in obtaining the objectives of the alleged
conspiracy, intraenterprise immunity does not apply. Id. at 705. In
Oksanen we explicitly limited the personal stake exception, however,
to include only instances where the individual conspiring has a per-
sonal financial interest in the conspiracy independent of the principal
--here SMH. Id.; see also Siegel Transfer, Inc. v. Carrier Express,
Inc., 54 F.3d 1125, 1136-37 (3d Cir. 1995) (exception to intraenter-
prise conspiracy doctrine arises "only where an agent acts to further
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3 The Eleventh Circuit has rejected expressly our holding in Oksanen,
reasoning that the agency relations in the corporate context are different
from those in a hospital where it finds that staff members are distinct and
independent from the hospital. See also Oltz v. St. Peter's Community
Hosp., 861 F.2d 1440, 1450 (9th Cir. 1988) (rejecting application of intr-
aenterprise immunity doctrine to the hospital context).
6
his own economic interest in a marketplace actor which benefits from
the alleged restraint and causes his principal to take the anticompeti-
tive actions"); Pink Supply Corp. v. Hiebert, Inc., 788 F.2d 1313,
1318 (8th Cir. 1986) (personal stake exception applies only where
agent of employer has "an economic stake in the gain to be realized
from the anticompetitive conspiracy"). None of the defendants had a
direct economic interest in Patel's status at SMH or competed with
her. Thus, the personal stake exception does not apply.
Finally, Patel attempts to limit the holding in Oksanen to the peer
review process only--the process by which the doctor in Oksanen had
been excluded from practicing at a hospital and through which the
doctor alleged the hospital and its staff had effected an illegal restraint
of trade. We find the peer review distinction unhelpful. Where hospi-
tal staff acts as an agency of the hospital--whether it is through peer
review or mere staffing decisions regarding efficiency, safety, quality,
or similar issues--there is a unity of interests. That unity is only
destroyed where the staff acts for a personal economic motive outside
of its agency.
b. Antitrust Injury
Patel has also failed to allege adequately facts necessary to demon-
strate an antitrust injury. Mere economic injury to Patel alone is insuf-
ficient. Instead, Patel must demonstrate an impact on the competition
as a whole within the relevant market. Oksanen , 945 F.2d at 708.4
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4 Patel argues that the exclusion of a single doctor from the market is
sufficient to allege an antitrust injury. We first note that Patel has not
necessarily even been excluded from the relevant market. She has only
been denied the use of CRNAs at SMH. She may still practice anesthesi-
ology at SMH by herself (although her ability to compete is somewhat
hampered because of her inability to use CRNAs). There are no allega-
tions that she has been unable to practice elsewhere because of SMH's
actions. Furthermore, the case law she relies on, Summit Health, Ltd. v.
Pinhas, 500 U.S. 322 (1991), addresses the jurisdictional prerequisite for
filing an antitrust lawsuit. Oksanen, 945 F.2d at 702 n.1. In Oksanen, a
summary judgment ruling, we found that while the jurisdictional prereq-
uisite had been met, the plaintiff still failed to demonstrate an antitrust
injury for purposes of surviving a motion for summary judgment. 945
7
There are two methods of demonstrating economic injury. The first
is to demonstrate per se illegal agreements whose effects are so
plainly anticompetitive that no elaborate study of the industry is
needed. National Soc'y of Professional Eng'rs v. United States, 435
U.S. 679, 692 (1978). Patel concedes in her brief that she does not
allege a per se Sherman Act violation.
The second approach is termed "the rule of reason." Id. at 692-93.
Under a rule of reason analysis, the plaintiff must demonstrate an
unreasonable restraint of trade. That requires Patel to allege in her
complaint a relevant market, facts demonstrating that trade was
restrained in that market, and that the defendants played a significant
role in restraining trade. Oksanen, 945 F.2d at 708-09.
Patel alleges that the defendants' actions, which prohibited her
from using CRNAs, destroyed her medical practice. The district court
found, however, that her complaint was completely void of any alle-
gations as to the effect of the defendants' actions on competition in
the market for anesthesiology services, effect on the price of anesthe-
siology services, or effect on the availability of anesthesiology ser-
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F.2d at 702 n.1, 709. Patel's reliance on Pinhas asks the court, in
essence, to adopt a more lenient standard on a motion to dismiss than is
required on a motion for summary judgment. See Bracken v. Allegheny
General Hosp., 64 F.3d 869, 875-78 (3d Cir. 1995). In effect, she
requests that the court adopt a standard for alleging an antitrust injury
that is similar, if not identical, to the jurisdictional requirement. The
question of federal jurisdiction, however, is distinct from that of whether
the underlying claim which supports jurisdiction fails to state a claim
upon which relief can be granted. Re/Max Internat'l v. Realty One, Inc.,
900 F. Supp. 132, 150 n.10 & 150 (N.D. Ohio 1995). Thus, we have held
that when confronted with a Rule 12(b)(6) motion to dismiss a Sherman
Antitrust Act § 1 claim, "we must determine whether allegations cover-
ing all the elements that comprise the theory for relief have been stated
as required." Estate Constr., 14 F.3d at 220 (citation omitted). In an anti-
trust lawsuit, we require that the plaintiff plead facts in terms that are nei-
ther vague nor conclusory. Id. at 220-21. We, therefore, conclude that to
survive a 12(b)(6) motion the plaintiff must allege sufficiently a cogniza-
ble antitrust injury, which includes allegations of negative impact on the
relevant market.
8
vices to the public. Rather, it found her complaint focused on the
injuries she incurred, not those the competitive market incurred. We
agree.
All Patel has alleged is a staffing decision, allegedly based on mal-
ice, which the court is not in a position to second guess. Only where
the anticompetitive effects were obvious could Patel rely on her mea-
ger pleadings. Oksanen, 945 F.2d at 79. Furthermore, there were
legitimate grounds for the staffing decision--Patel failed to pass her
Boards as required by her contract. Thus, the defendants had reason
to limit Patel's access to the hospital's resources. Repeatedly, courts
have found that a staffing decision by a single hospital as to a single
practitioner, in the absence of harm to the relevant market, does not
constitute an antitrust injury. Oksanen, 945 F.2d at 708-10; BCB
Anesthesia Care, Ltd. v. Passavant Memorial Area Hosp. Ass'n, 36
F.3d 664, 667-69 (7th Cir. 1994) (listing numerous cases). Personal
economic injury alone, e.g., loss of income, is simply not enough to
support a claim under § 1 of the Sherman Act. There must be some
cognizable effect on the competitive market. Thus, we affirm the dis-
trict court's dismissal of Patel's Sherman Antitrust Act § 1 claim.
2. Remaining State Claims
The district court also dismissed Patel's state antitrust claim, her
tortious interference with contractual relations, and her intentional
infliction of emotional distress claims for failure to state a claim upon
which relief could be granted. We have reviewed those claims and the
record and adopt the reasoning of the district court as to those claims.
B. Rule 12(b)(1) Dismissal
The district court dismissed Patel's one remaining claim against
SMH for lack of subject matter jurisdiction. Patel alleged breach of
contract against the defendants for failure to reimburse her for expen-
ditures she incurred on their behalf. Patel conceded that the claim
applied only to SMH. After the dismissal of Patel's Sherman Act
claim, no federal question jurisdiction remained. After the dismissal
of three of the four remaining state claims, diversity jurisdiction no
longer applied because the sole remaining claim was for $45,000--an
amount insufficient to meet the jurisdictional requirements of diver-
9
sity jurisdiction. 28 U.S.C. § 1332(a). SMH therefore moved to dis-
miss the breach of contract claim under Rule 12(b)(1) of the Rules of
Federal Civil Procedure for lack of subject matter jurisdiction.
The district court refused to exercise its supplemental jurisdiction
over the breach of contract claim and dismissed it without prejudice.
Where the district court has dismissed all claims that conferred fed-
eral jurisdiction, it may decline to exercise its supplemental jurisdic-
tion. 28 U.S.C. § 1367(c)(3). Patel contends on appeal, however, that
the district court should have exercised its supplemental jurisdiction
over the breach of contract claim.
We review a refusal to exercise supplemental jurisdiction for abuse
of discretion. Shanaghan v. Cahill, 58 F.3d 106, 112-13 (4th Cir.
1995). Courts generally refuse to exercise supplemental jurisdiction
where the claims conferring jurisdiction were dismissed at a very
early stage and there is no overriding interest in economy or conve-
nience dictating that the federal court retain jurisdiction. Carnegie-
Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988); Stetka v. Hunt
Real Estate Corp., 859 F. Supp. 661, 668-69 (W.D. N.Y. 1994).
Indeed, dismissal in such a case is the preferred course of action
unless there are overriding factors in favor of retaining federal juris-
diction. Here, no factors dictated that the court retain its jurisdiction.
Therefore, we conclude that the district court did not abuse its discre-
tion.
C. Refusal to Allow Further Amendments to Complaint
The district court allowed Patel to amend her complaint once. It,
however, refused to allow Patel to amend her complaint a second
time. We review the district court's denial of Patel's second motion
to amend her complaint for abuse of discretion. New Beckley Mining
Corp. v. International Union, United Mine Workers of America, 18
F.3d 1161, 1164 (4th Cir. 1994).
Rule 15(a) of the Federal Rules of Civil Procedure provides that "a
party may amend the party's pleading only by leave of the court or
by written consent of the adverse party" after a responsive pleading
had been served. "[L]eave shall be freely given when justice so
requires." Fed.R.Civ.P. 15(a). Leave, however, need not be granted
10
where the proposed amendment would be futile. New Beckley Mining,
18 F.3d at 1164. We have reviewed Patel's proposed second amended
complaint and conclude that the district court's finding that the
amendment would be futile and resulting refusal to allow the amend-
ment were not an abuse of discretion.
For the foregoing reasons, we
AFFIRM.
11