Johnson v. University Health Svcs.

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
No. 96-8787 U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
12/03/98
THOMAS K. KAHN
D. C. Docket No. 94-00033 CV-1 CLERK
CHERIE JOHNSON, M.D.,
Plaintiff-Appellant,
versus
UNIVERSITY HEALTH SERVICES, INC. d.b.a.
University Hospital; HOSSAM E. FADEL, M.D.;
HOSSAM E. FADEL, M.D., P.C.,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Georgia
(December 3, 1998)
Before TJOFLAT, BIRCH and MARCUS, Circuit Judges.
TJOFLAT, Circuit Judge:
The plaintiff in this case claims that a hospital’s refusal to provide her with over $1
million to start her own private practice constitutes a violation of the antitrust laws. We
disagree, and thus affirm the judgment of the district court.
I.
Cherie Johnson, M.D., is a perinatologist, which is an obstetrician who specializes in
high-risk pregnancies. She was recruited in May 1992 by Hossam E. Fadel, M.D. (a fellow
perinatologist), to work for his obstetrics/perinatology practice in Augusta, Georgia. Dr. Fadel is
a member of the obstetrics department of University Hospital in Augusta, which is run by the
non-profit University Health Services (UHS).
Only a few months into her employment, Dr. Johnson became dissatisfied with her
position. Her primary dissatisfaction was based on the low number of new patients that Dr.
Fadel allowed her to admit to University Hospital. According to Dr. Johnson, it was important
that she admit a large number of new patients in order to become a board certified perinatologist;
Dr. Fadel was not permitting her to admit patients in sufficient numbers to allow her to qualify
for certification as quickly as she would have liked. This violated Dr. Fadel’s oral promise,
made prior to the commencement of her employment, that he would allow Dr. Johnson to admit
2
all of the practice’s new patients.1 Dr. Johnson also had concerns regarding the quality of care
provided by Dr. Fadel to his patients.
In response to these problems, Dr. Johnson considered opening her own perinatology
practice in Augusta. She spoke with Clyburn Davis, a physician recruiter at UHS, and Lou
Imbrogno, UHS’ Vice President of Physician Services, about the possibility of receiving
financial assistance from UHS in setting up her own practice. These individuals led her to
believe that UHS would provide her with financial support to open her own practice should she
be unable to work out her differences with Dr. Fadel. Specifically, by April 1993, Dr. Johnson
claims to have been promised an $800,000 line of credit, an income guarantee of $200,000 for
her first year of practice,2 an income guarantee of $250,000 for her second year of practice, loan
forgiveness if she practiced in Augusta for two years and agreed to treat Medicare and Medicaid
patients, office space, staff, and medical equipment. UHS, however, insisted that Dr. Johnson
inform Dr. Fadel that she was considering other alternatives before it would provide any
assistance.
Dr. Johnson’s subsequent discussions with Dr. Fadel proved unhelpful; in response, UHS
organized a meeting of the obstetrics department to discuss the situation. At the meeting, Drs.
Johnson and Fadel both made oral presentations. The department then discussed the matter
1
There is some debate over when (and whether) this promise was made. Dr. Johnson
says it was made sometime prior to the start of her employment, but cannot remember whether it
was made prior to her signing the employment contract. Dr. Johnson’s husband, Dr. David
Johnson, states in his deposition that the promise was made prior to Dr. Johnson’s signing of the
employment contract. Meanwhile, Dr. Fadel denies ever making such a promise.
2
In other words, if Dr. Johnson grossed less than this amount, UHS would make up the
difference.
3
privately, and voted against subsidizing the establishment of a separate practice for Dr. Johnson.3
Later that day, Dr. Fadel terminated Dr. Johnson’s employment with his practice. She
subsequently joined a perinatology practice in Spokane, Washington.
Dr. Johnson then sued Dr. Fadel and UHS in the United States District Court for the
Southern District of Georgia.4 She brought five claims. First, Dr. Johnson claimed that Dr.
Fadel and UHS conspired to restrain trade in violation of section 1 of the Sherman Act, 15
U.S.C. § 1 (1994), by preventing her from starting her own practice in competition with Dr.
Fadel. Second, Dr. Johnson claimed that Dr. Fadel violated section 2 of the Sherman Act, 15
U.S.C. § 2 (1994), by monopolizing the practice of perinatology in the Augusta market. Third,
Dr. Johnson claimed that UHS breached its contractual agreement to provide her with a financial
assistance package to start her own perinatology practice. Fourth, as an alternative claim to
breach of contract, Dr. Johnson claimed that UHS was estopped from refusing to provide her
with financial assistance under the doctrine of promissory estoppel. Fifth, Dr. Johnson claimed
that Dr. Fadel fraudulently induced her to come to Augusta and work for him by giving her the
false promise that he would allow her to admit all of the practice’s new patients.
3
The final decision was in the hands of UHS, which followed the recommendation of the
obstetrics department.
4
Dr. Johnson also named as a defendant Hossam E. Fadel, M.D., P.C., the professional
corporation through which Dr. Fadel operates his practice. For purposes of this opinion, there is
no significant distinction between Dr. Fadel in his individual capacity and Dr. Fadel in his
corporate capacity; we therefore refer to both defendants simply as “Dr. Fadel.”
4
The district court granted summary judgment for the defendants on all counts.5 Dr.
Johnson appeals.
II.
In this part, we address each of Dr. Johnson’s claims. We conclude that they are without
merit, and thus affirm the judgment of the district court.
A.
Dr. Johnson’s first two causes of action are antitrust claims. We hold that she lacks
standing to bring these claims.
Any cause of action, whether created by statute or common law, is designed to protect a
certain class of people from certain types of injury. For instance, “breach of contract” is
designed to protect parties to a contract (the class) from noncompliance with the terms of their
contract (the type of injury). If A violates his supply contract with B, C cannot sue A for breach
of contract because C is not a party to the contract, and thus not among the class of people
protected by breach of contract. Likewise, if A assaults B, B cannot then sue A for breach of
contract, because B’s injury does not arise from noncompliance with the contract and thus B has
not suffered the type of injury against which breach of contract protects. These two facets of a
5
Because this case comes to us on appeal from a grant of summary judgment for
defendants, (1) all facts are viewed, and all factual disputes are resolved, in the light most
favorable to the plaintiff; and (2) we are to affirm if there is no genuine issue of material fact and
the defendants are entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Rayle
Tech, Inc. v. DEKALB Swine Breeders, Inc., 133 F.3d 1405, 1409 (11th Cir. 1998).
5
cause of action – class of plaintiff and type of injury – are the basis for the requirement that a
plaintiff have “standing.”
In antitrust law, the type of injury against which the law protects is unhelpfully called
“antitrust injury.” See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97
S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). What constitutes an antitrust injury is of course
determined by the intent of the antitrust laws – in this case, the Sherman Act. See Todorov v.
DCH Healthcare Auth., 921 F.2d 1438, 1449 (11th Cir. 1991). The Sherman Act, which the
Supreme Court has called “the Magna Carta of free enterprise,” was intended to protect “the
economic freedom of participants in the relevant market.” Associated Gen. Contractors of Cal.,
Inc. v. California State Council of Carpenters, 459 U.S. 519, 538 & n.38, 103 S.Ct. 897, 908 &
n.38, 74 L.Ed.2d 723 (1983) (quoting United States v. Topco Assocs., Inc., 405 U.S. 596, 610,
92 S.Ct. 1126, 1134, 31 L.Ed.2d 515 (1972)). Thus, antitrust injuries include only those injuries
that result from interference with the freedom to compete.
In this case, absolutely no one interfered with Dr. Johnson’s freedom to compete in the
Augusta market as an obstetrician/perinatologist. On the contrary, even after deciding to deny
Dr. Johnson her requested funding, UHS allowed Dr. Johnson to retain her privileges at
University Hospital, offered to help her obtain a commercial loan and office space, and
encouraged her to stay in Augusta. Neither UHS not Dr. Fadel did anything to impede Dr.
Johnson’s access to the necessary resources to start her own practice – she had full access to the
capital markets, the labor market, land for office space, necessary supplies, and so forth.6 Dr.
6
This fact distinguishes our case from those on which Dr. Johnson relies, cases in which
the defendant prevented the plaintiff from obtaining a necessary factor of production. See
Eastman Kodak Co. v. Image Tech. Serv., Inc., 504 U.S. 451, 455, 112 S.Ct. 2072, 2076, 119
6
Johnson could have even taken any patients that were willing to follow her away from Dr.
Fadel’s practice, because her employment contract did not contain a covenant not to compete. In
sum, the evidence demonstrates that Dr. Johnson had every opportunity to enter and be fully
competitive in the Augusta obstetrics/perinatology market; she simply chose not to do so.
The only “injury” that Dr. Johnson alleges is that UHS failed to confer an extraordinary
benefit upon her.7 UHS is a private, non-profit organization that generally is free to spend its
money however it chooses, consistent with its non-profit purposes. Its decision not to subsidize
Dr. Johnson’s proposed practice is not the type of injury that the antitrust laws were intended to
prevent. We therefore affirm the district court’s grant of summary judgment on Dr. Johnson’s
antitrust claims.
B.
Dr. Johnson claims that her discussions with UHS officials regarding financial assistance
were sufficient to create a contract, and that UHS breached that contract by ultimately deciding
L.Ed.2d 265 (1992) (defendant limited availability of necessary replacement parts); General
Indus. Corp. v. Hartz Mountain Corp., 810 F.2d 795, 799 (8th Cir. 1987) (defendant imposed
harsh credit and supply restrictions); Multiflex v. Samuel Moore & Co., 709 F.2d 980, 987-88
(5th Cir. 1983), disavowed on other grounds by Deauville Corp. v. Federated Dept. Store, 756
F.2d 1183 (5th Cir. 1985) (defendant impeded plaintiff’s access to capital and customers).
7
Dr. Johnson alleges that financial assistance from UHS is not extraordinary, but
common. Although UHS does appear to have provided financial assistance to a number of
physicians in the past, such financial assistance does not appear to be common in the amounts
that Dr. Johnson seeks. Furthermore, Dr. Johnson has presented no evidence that a substantial
number of physicians in Augusta needed hospital subsidization to allow them to enter the
market, and thus that she has suffered any special injury as a result of UHS’ actions.
7
not to provide her with any such assistance. We hold that this claim is barred by the statute of
frauds.
Georgia’s statute of frauds provides, inter alia, that an “agreement that is not to be
performed within one year from the making thereof” must be in writing. See Ga. Code Ann. §
13-5-30(5) (1982). Dr. Johnson concedes that the purported contract is not in writing; the
question thus becomes whether the alleged contract was to be performed more than one year
from its making. According to Dr. Johnson, UHS promised her the following: an $800,000 line
of credit, an income guarantee of $200,000 for her first year of practice, an income guarantee of
$250,000 for her second year of practice, loan forgiveness if she practiced in Augusta for two
years and agreed to treat Medicare and Medicaid patients, office space, staff, and medical
equipment. Dr. Johnson does not state exactly what she was required to do in exchange for this
package of benefits (with the exception of the conditions on loan forgiveness), but presumably
she was expected to open a perinatology practice in Augusta.
Certain of UHS’ promises clearly could not have been performed within one year from
the making of the contract – namely, the income guarantee for her second year of practice and
the loan forgiveness after two years. Furthermore, Dr. Johnson testified that two other promises
by UHS – the provision of office space and the line of credit – had a duration of two years. If
these promises are not severable from the rest of the contract, then the entire contract is invalid
under the statute of frauds. Whether one portion of a contract is severable from others depends
on the intent of the parties. See Ga. Code Ann. § 13-1-8(b) (1982). In this case, Dr. Johnson has
repeatedly and consistently treated UHS’ promises as a single two-year promise of financial
8
assistance, thus suggesting that she viewed the contract as a non-severable two-year agreement.8
In addition, the provisions that are directly barred by the statute of frauds make up the majority
of the value of the contract; severing these provisions would leave a contract much different
from the one originally contemplated. We therefore conclude that the entire contract (if one
existed) was intended to run for two years, and thus was required by the statute of frauds to be in
writing.
Dr. Johnson contends that her partial performance of the contract prevents application of
the statute of frauds. Partial performance of a contract by the party seeking to enforce it can
remove the contract from the statute of frauds. See Ga. Code Ann. § 13-5-31(3) (1982). Dr.
Johnson claims that she partially performed the contract by speaking with Dr. Fadel, at UHS’
request, about the possibility of leaving to start her own practice. We hold that this cannot
constitute partial performance of the contract. The alleged contract required Dr. Johnson, in
exchange for financial assistance, to start and maintain a perinatology practice in Augusta. Thus,
to have partially performed that contract, Dr. Johnson would have needed to take steps toward
opening a practice – e.g., hiring staff, opening an office, seeing patients, and advertising.
Speaking with Dr. Fadel was not part of the contract. Rather, such a conversation was a
condition precedent to the contract – UHS insisted that Dr. Johnson try to work out her
differences with Dr. Fadel before it would contract with her to start her own practice.
Performance of a condition precedent does not constitute partial performance of a contract
sufficient to make the statute of frauds inapplicable. See Vitner v. Funk, 354 S.E.2d 666, 670
8
UHS’ understanding of the contract is difficult to discern, because it denies ever having
made any contract with Dr. Johnson.
9
(Ga. Ct. App. 1987) (stating that “acts which are merely preparatory or preliminary to the
performance of a contract” do not constitute partial performance); Utica Tool Co. v. Mitchell,
218 S.E.2d 650, 652 (Ga. Ct. App. 1975) (same).
Furthermore, even if a talk with Dr. Fadel could be seen as part of the contractual
agreement, it would be too insubstantial to constitute part performance. The part performance
required by the relevant exception to the statute of frauds must be “substantial and essential to
the contract.” Ikemiya v. Shibamoto Am., Inc., 444 S.E.2d 351, 352 (Ga. Ct. App. 1994). In this
case, Dr. Johnson’s primary responsibility under the contract was to start a perinatology practice.
Speaking with Dr. Fadel was only tangentially related to that responsibility. Her performance
was thus an insubstantial part of the agreement, and therefore was insufficient to make the statute
of frauds inapplicable.
Because the alleged contract was not in writing as required by the statute of frauds, and
because no exception to the statute of frauds is applicable, we hold that the contract is
unenforceable and Dr. Johnson therefore cannot sue for its breach.
C.
As an alternative to the breach of contract claim, Dr. Johnson argues that UHS should be
prevented from refusing to provide her with the promised financial assistance under the doctrine
10
of promissory estoppel.9 We hold that Dr. Johnson has failed to present evidence of reasonable
reliance, and thus her promissory estoppel claim fails.
The district court granted summary judgment on this claim on the ground that it was
barred by the statute of frauds. Georgia law is unclear regarding whether the statute of frauds
can defeat a claim of promissory estoppel. See Eric Mills Holmes, Restatement of Promissory
Estoppel, 32 Willamette L. Rev. 263, 367-69 (1996) (attempting to summarize Georgia law on
promissory estoppel and expressing confusion over whether Georgia recognizes the doctrine as a
defense to a statute of frauds argument). Compare Presto v. Scientific-Atlanta, Inc., 388 S.E.2d
719, 720 (Ga. Ct. App. 1989) (holding that unenforceable promises cannot form the basis for a
claim of promissory estoppel), and Godwin v. City of Bainbridge, 322 S.E.2d 733, 735 (Ga. Ct.
App. 1984) (same), with Augusta Surgical Ctr., Inc. v. Walton & Heard Office Venture, No.
A98A1599 (Ga. Ct. App. Oct. 20, 1998) (holding that the absence of a binding agreement does
not defeat a promissory estoppel claim), and Kamat v. Allatoona Fed. Sav. Bank, 498 S.E.2d
152, 155 (Ga. Ct. App. 1998) (same). The one supreme court case discussing the issue,
however, clearly holds that promissory estoppel allows enforcement of promises that would
otherwise be defeated by the statute of frauds. See 20/20 Vision Ctr., Inc. v. Hudgens, 345
S.E.2d 330, 335 n.7 (Ga. 1986). Furthermore, promissory estoppel is an equitable doctrine, and
as such is intended to counteract the occasional harshness of common law rules – such as the
statute of frauds. See Simpson Consulting, Inc. v. Barclays Bank PLC, 490 S.E.2d 184, 193
9
Georgia law defines the doctrine of promissory estoppel as follows: “A promise which
the promisor should reasonably expect to induce action or forbearance on the part of the
promisee or a third person and which does induce such action or forbearance is binding if
injustice can be avoided only by enforcement of the promise.” Ga. Code Ann. 13-3-44(a)
(1998).
11
(noting that promissory estoppel is an equitable doctrine); Black’s Law Dictionary 540 (6th ed.
1990) (defining equity as “[j]ustice administered according to fairness as contrasted with the
strictly formulated rules of common law”). It would therefore defeat the purpose of promissory
estoppel to confine it to promises that conform to the statute of frauds. See Doll v. Grand Union
Co., 925 F.2d 1363, 1372 (11th Cir. 1991) (noting that “the doctrine of promissory estoppel . . .
was designed specifically to address cases where the plaintiff has no legally enforceable rights
but has suffered a loss due to reliance on the defendant’s promises”).
Promises that do not conform to the statute of frauds, however, will often be equally
unenforceable under a promissory estoppel theory. Promissory estoppel requires that reliance on
the promise be reasonable. See Simpson Consulting, 490 S.E.2d at 193. It usually is
unreasonable to rely on a substantial promise that has not been reduced to writing. See R.T.
Patterson Funeral Home, Inc. v Head, 451 S.E.2d 812, 817 (Ga. Ct. App. 1994) (noting the
“general rule that there is no justifiable reliance upon future promises which must be in writing
to be enforceable”). Such is the case here. Dr. Johnson claims that UHS offered her a complex,
multi-faceted aid package worth over $1 million. She bases this claim solely on a series of
telephone conversations with low-ranking UHS officials. Furthermore, these conversations were
at best discussions of individual contractual terms; in none of the conversations was there a
verbal exchange that even loosely resembled the making of a full contract. In light of the size of
the aid package, the limited authority of the persons with whom Dr. Johnson was speaking, and
the somewhat ambiguous nature of their conversations, it would have been patently unreasonable
for Dr. Johnson to act in reliance on the series of oral representations that she claims constituted
a promise of financial assistance. Her promissory estoppel claim therefore fails.
12
D.
Dr. Johnson’s final claim is fraudulent inducement. Specifically, she claims that Dr.
Fadel fraudulently induced her to move to Augusta and join his practice by promising her that
she would be permitted to admit all of the practice’s new patients, thus allowing her quickly to
become a board certified perinatologist.
Under Georgia law, the elements of fraud are as follows: (1) a misrepresentation by the
defendant, (2) intent to deceive, (3) intent to induce the plaintiff to act or refrain from acting, (4)
justifiable reliance on the misrepresentation, and (5) damage. See Smalls v. Blueprint Dev., Inc.,
497 S.E.2d 54, 57 (Ga. Ct. App. 1998). In this case, Dr. Johnson has failed to produce evidence
of justifiable reliance. Dr. Johnson worked for Dr. Fadel pursuant to a detailed, twelve-page,
custom-made contract. If the supply of new patients was as important to Dr. Johnson as she
argues in this action, there was no reason for her not to include a provision relating to this matter
in the contract.10 Under these circumstances, Dr. Johnson was unjustified in relying on Dr.
Fadel’s alleged promise.
III.
For the foregoing reasons, the judgment of the district court is AFFIRMED.11
10
As noted previously, see supra note 1, there is some debate over whether the promise
was made before or after the employment contract was signed. If the promise was made
afterwards, Dr. Johnson obviously could not have been expected to include it in the contract.
Just as obviously, however, if the promise was made after the contract was signed, Dr. Johnson
could not have acted in reliance on the promise when she signed the contract. Thus, she still
would not have a valid fraud claim.
11
Dr. Johnson also challenges the district court’s ruling granting UHS’ motion to strike
certain evidence as hearsay. None of our holdings in this opinion are contingent on this
13
evidence; we therefore reject this challenge as moot.
14