Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01386/USCOURTS-azd-2_08-cv-01386-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1981 Civil Rights

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

 

Saguaro Medical Associates, P.C., an

Arizona professional corporation; and

Rakesh Malhotra, M.D., 

Plaintiffs, 

vs.

Banner Health, an Arizona corporation,

d/b/a Banner Thunderbird Medical

Center,

Defendant.

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No. CV-08-1386 PHX-DGC

ORDER

Saguaro Medical Associates (“Saguaro”) filed a complaint against Banner Health

(“Banner) in state court on February 8, 2008. Dkt. #1-2 at 6-21. The complaint asserts

claims for breach of contract, breach of implied covenant, and declaratory judgment.

Saguaro filed an amended complaint naming Rakesh Malhotra, Saguaro’s president, as a

plaintiff and adding claims for intentional interference with contract and violations of civil

rights under 42 U.S.C. § 1981. Dkt. #1-4 at 5-22 . The action has been removed to this

Court. Dkt. #1.

Banner has filed a motion to dismiss the § 1981 claim pursuant to Rule 12(b)(6) of the

Federal Rules of Civil Procedure. Dkt. #8. Plaintiffs have filed a response to the motion and

a motion to amend the complaint. Dkt. ##11-12. Banner opposes the motion to amend.

Dkt. #13. For reasons stated below, the Court will grant the motion to amend and deny the

motion to dismiss.

Case 2:08-cv-01386-DGC Document 16 Filed 09/26/08 Page 1 of 4
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The parties agree that to the extent Malhotra asserts a claim for national origin

discrimination, such a claim is not viable under § 1981. Dkt. ##8 at 7, 12 at 1.

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Rule 15 declares that courts should “freely give leave [to amend] when justice so

requires.” Fed. R. Civ. P. 15(a). Banner opposes the motion to amend on the ground that the

proposed amendment is futile. See Foman v. Davis, 371 U.S. 178, 182 (1962). Malhotra’s

amended § 1981 claim would be subject to dismissal, Banner contends, because Malhotra has

failed to allege facts showing that the claim is “plausible” as required by Bell Atlantic Corp.

v. Twombly, 127 S. Ct. 1955 (2007). Dkt. #13 at 5-7.

Rule 8 requires a “short and plain statement of the claim showing that the pleader is

entitled to relief[.]” Fed. R. Civ. P. 8(a)(2). In Twombly, the Supreme Court interpreted

Rule 8 as requiring “more than labels or conclusions [or] a formulaic recitation of the

elements of a cause of action[.]” 127 S. Ct. at 1965. Rule 8 is satisfied only where the

“plain statement” contains enough facts to show a “plausible entitlement to relief[.]” Id. at

1966-67 (emphasis added).

Count six asserts a claim for race discrimination in violation of § 1981.1

 Section 1981

“guarantees ‘all persons’ the right to ‘make and enforce contracts.’” Johnson v. Riverside

Healthcare Sys., LP, 534 F.3d 1116, 1122 (9th Cir. 2008) (quoting 42 U.S.C. § 1981(a)).

“This right includes the right to the ‘enjoyment of all benefits, privileges, terms, and

conditions of the contractual relationship[.]’” Id. (quoting 42 U.S.C. § 1981(b)).

Banner contends that Malhotra’s § 1981 claim fails because he has identified no

contractual relationship between himself and Banner. Dkt. #8 at 6-7. Malhotra argues that

medical staff bylaws constitute a contract between a hospital and its medical staff under

Arizona law, see Samaritan Health Sys. v. Super. Ct. (Schwartz), 981 P.2d 584, 588 (Ariz.

Ct. App. 1998), and that he has sufficiently alleged his status as a member of the Banner

medical staff. Dkt. #11 at 2-3 (citing Dkt. #1-4 at 3, ¶ 7). Banner does not dispute that staff

bylaws can create a contractual relationship between a hospital and its medical staff or that

Malhotra, at all relevant times, was a member of Banner’s medical staff. Banner instead

claims that the amended complaint contains no reference to the bylaws. Dkt. #13 at 4.

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While the body of the amended complaint does not explicitly mention the bylaws, the

complaint’s exhibits include a letter from Banner asserting that Malhotra breached certain

bylaw provisions attached to the letter. Dkt. #1-4 at 24-27. Banner’s letter, and the bylaws

attached thereto, are deemed part of the complaint for purposes of Banner’s motion to

dismiss. See Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a

pleading is part of the pleading for all purposes.”); Outdoor Media Group, Inc. v. City of

Beaumont, 506 F.3d 895, 899 (9th Cir. 2007) (exhibits attached to complaint may be

considered on a motion to dismiss). Banner’s contention that the amended complaint

includes no reference to the medical staff bylaws is therefore incorrect.

Banner further contends that the second amended complaint fails to allege facts

making it plausible that Malhotra was denied contractual rights because of his race. Dkt. #13

at 5-7. Malhotra disagrees, arguing that the new allegations make clear that Banner breached

provisions of the bylaws and treated him differently than other physicians because of his

race. Dkt. #11 at 2-3.

The second amended complaint alleges that Malhotra served as Chairman of

the Department of Medicine and on Banner’s Medical Executive Committee (“MEC”)

(Dkt. #12-2 ¶ 8), that Banner sent him a letter of reprimand threatening his removal from

those positions (¶¶ 28-29), and that Banner falsely accused him of violating federal law and

initiated an unfair disciplinary proceeding against him resulting in his suspension (¶¶ 87,

95-102). The complaint further alleges that Banner’s actions were different than those taken

against white physicians and Banner thereby deprived Malhotra of his contractual rights

because of his race (¶¶ 88-92).

Banner asserts that these factual allegations are mere conclusions that lack the

specificity required by Twombly. Dkt. #13 at 5-7. But Twombly made clear that Rule 8 does

not require “heightened fact pleading of specifics, but only enough facts to state a claim to

relief that is plausible on its face.” 127 S. Ct. at 1974; see Erickson v. Pardus, 127 S. Ct.

2197, 2200 (2007).

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Accepting Malhotra’s factual allegations as true, and construing them in the light most

favorable to him, see Johnson, 534 F.3d at 1122, the Court finds that he has stated a plausible

race discrimination claim under § 1981. He has identified the contract Banner allegedly

breached (the medical staff bylaws (Dkt. #1-4 at 24-27)), he has alleged that Banner breached

that contract through its efforts to remove him from his positions in the Department of

Medicine and MEC (¶¶ 87, 95-102), and he has alleged that Banner’s actions were racially

motivated given that Banner treated white physicians differently (¶¶ 88-92). These factual

allegations “‘give [Banner] fair notice of what the claim is and the grounds upon which it

rests.’” Erickson, 127 S. Ct. at 2200 (citations and alterations omitted). Rule 8 does not

require more. See id.; Johnson, 534 F.3d at 1123-24. Banner’s “concerns about specificity

in [the] complaint [can be] handled by the array of discovery devices available to [Banner].”

Skaff v. Meridien N. Am. Beverly Hills, LLC, 506 F.3d 832, 842 (9th Cir. 2007).

The Court will grant the motion to amend and deny the motion to dismiss. Plaintiffs

shall file an amended complaint consistent with this order by September 26, 2008.

IT IS ORDERED:

1. Plaintiffs’ motion to amend complaint (Dkt. #12) is granted.

2. Plaintiffs shall file an amended complaint by October 3, 2008.

3. Defendant’s motion to dismiss (Dkt. #8) is denied.

4. The Court will set a Case Management Conference by separate order.

DATED this 26th day of September, 2008.

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