Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-07-01711/USCOURTS-ca8-07-01711-0/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 07-1711

___________

Estate of Horst G. Blume; *

Headache & Pain Control Center, P.C., *

*

Appellees, *

*

v. * Appeal from the United States

* District Court for the

Marian Health Center, successor- * Northern District of Iowa.

in-interest Mercy Medical Center, *

*

Appellant. *

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Submitted: December 13, 2007

 Filed: February 19, 2008

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Before BYE, ARNOLD, and MELLOY, Circuit Judges.

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ARNOLD, Circuit Judge.

Dr. Horst Blume and his professional corporation sued Marian Health Center

after it permanently revoked his staff privileges. Dr. Blume's complaint raised a

number of theories for relief, but the only one that survives is his claim that the

hospital breached its contract with him when it terminated his privileges without

giving him a hearing. The district court held as a matter of law that Marian had

breached its contract, and, after a trial on the matter of damages, a jury returned a

verdict in Dr. Blume's favor. This appeal followed and we reverse.

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We note that Dr. Blume died during the pendency of this case, and his estate

was substituted as a party. Also, Marian Health Center was succeeded in interest by

Mercy Medical Center. But these changes do not affect the issues on appeal and for

the sake of simplicity we will refer to the plaintiffs-appellees collectively as

"Dr. Blume" and to the defendant-appellee as "the hospital."

The hospital asserts first that under Iowa law the bylaws in question did not

constitute a contract between the hospital and Dr. Blume. But since both parties

agreed in the trial court that the bylaws did create a contract between them, the

hospital has conceded the point and thus has waived the right to raise it on appeal. See

Shanklin v. Fitzgerald, 397 F.3d 596, 602 (8th Cir. 2005), cert. denied, 546 U.S. 1066

(2005).

Even if we were to conclude that the point of law was not waived but merely

acquiesced in or forfeited in the trial court, we would not give relief because there is

no plain error here. It is true that there are two Iowa cases that refuse, in the particular

circumstances in those cases, to give hospital staff bylaws the effect of a contract

between the hospital and its staff. See Natale v. Sisters of Mercy of Council Bluffs,

243 Iowa 582, 591-95, 52 N.W.2d 701, 707-09 (1952); Tredrea v. Anesthesia &

Analgesia, P.C., 584 N.W.2d 276, 284-87 (Iowa 1998). In the latter case, however,

the Supreme Court of Iowa shrank from laying down a hard-and-fast rule on the

matter, id. at 285-87, and remarked upon the differences between the case before it

and Islami v. Covenant Med. Ctr., Inc., 822 F. Supp. 1361, 1370-71 (N.D. Iowa 1992),

where a federal district court, applying Iowa law, held that the staff bylaws in that case

had created a contract, see Tredrea, 584 N.W.2d at 286-87. We do not give relief

based on forfeited claims of error unless the error is obvious and resulted in a manifest

injustice. See United States Fire Ins. Co. v. Kresser Motor Serv., Inc., 26 F.3d 91, 95

(8th Cir. 1994). Given the subtlety of the Iowa law on the subject and the detailed

character of the bylaws in question here, treating the bylaws as a contract in the

present circumstances was neither an obvious error nor manifestly unjust.

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The hospital raised numerous defenses to this action in the trial court, including

an assertion that it was immune from suit under the hospital's bylaws, under Iowa

Code § 147.135(1), and under the Health Care Quality Improvement Act, see

42 U.S.C. § 11112(a). The district court rejected the hospital's motion for summary

judgment on these immunity defenses. After careful consideration, we conclude that

it was error to hold that the hospital's bylaws did not entitle the hospital to immunity

from the present suit.

Dr. Blume maintains that the hospital has waived a defense based on the

bylaws' immunity clause because the district court did not rule on that defense below

– despite the hospital's motion for summary judgment on that basis – and it was the

hospital's responsibility to ensure that the court made a ruling. But the district court

did in fact make a ruling: It rejected the hospital's motion for summary judgment on

immunity grounds, explicitly adverting to the hospital's argument relying on the

immunity provision in the bylaws. Even if the district court had not ruled on the

hospital's motion, the court twice entered orders foreclosing any proof at trial on the

matter of immunity and effectively granted summary judgment against the hospital on

the issue. The matter is therefore squarely before us.

Nor is there any merit in Dr. Blume's contention that the issue of the effect of

the immunity provision was not preserved because the hospital did not raise that issue

in its post-trial motion for judgment as a matter of law, see Fed. R. Civ. P. 50, though

it raised its other immunity defenses in that motion. But the "interpretation of a

contract is a question of law for the court to decide," and a party has no obligation to

raise a legal issue post-trial in order to preserve it for appeal. White Consol.

Industries, Inc. v. McGill Mfg. Co., 165 F.3d 1185, 1190 (8th Cir. 1999). The fact that

the hospital did raise some issues after trial does nothing to undermine that general

proposition in our mind. In fact, a post-trial motion would have been inappropriate

because under Rule 50, only a party that "has been fully heard on an issue during a

jury trial" may seek judgment as a matter of law. See Fed. R. Civ. P. 50(a)(1). Here

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the district court, not a jury, rejected the hospital's reliance on the immunity provision

in the bylaws when it twice held that the only issue that remained for trial was the

matter of damages.

We therefore turn to the merits of the hospital's argument. Dr. Blume's claim

was bottomed on the rather complex bylaws provisions governing a staff member's

right to a hearing, and the kind of hearing to which a staff member would be entitled,

before the hospital could revoke a staff member's privileges. But Section IX of the

bylaws themselves provides that "[t]he practitioner extends absolute immunity to ...

the hospital ... for any actions ... taken ... by this hospital ... relating [to] ... proceedings

for suspension ... of clinical privileges or for ... revocation of appointment, or for any

other disciplinary action." The breadth of the immunity afforded is evident, and it is

equally evident that the contract language covers the present claim because the claim

is based on actions that the hospital took to suspend Dr. Blume's clinical privileges.

Indeed, Dr. Blume does not argue otherwise.

As Dr. Blume also recognizes, we have held that a very similar immunity

provision contained in hospital bylaws was enforceable against a staff physician under

North Dakota law. See Everett v. St. Ansgar Hosp., 974 F.2d 77, 80 (8th Cir. 1992).

We see no material distinction between the provision at issue here and the one in

Everett or any indication that the Iowa courts would adopt a different rule regarding

the efficacy of such a provision. Dr. Blume points out that the immunity clause in

Everett applied only if the acts complained of were "performed or made in good faith

and without malice." Id. But the principle applied in that case, namely that waivers

ought to be given effect, was not limited to the particular language of the waiver

involved there. 

There is nothing in Iowa law that would forbid the enforcement of this clause

as written. Dr. Blume maintains, relying on Islami 822 F. Supp. at 1374, that the

immunity provision is invalid because Iowa law requires that a hospital staff member

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be afforded certain due process rights before his or her privileges can be revoked.

Assuming for present purposes that Islami correctly divined and applied Iowa law,

Dr. Blume nevertheless misconceives the context and the holding in that case. That

case, like this one, involved a claim that procedural rights outlined in hospital bylaws

had been ignored, and the district court simply held that a jury question had been

made out as to whether the procedure had been, as the bylaws required, "fair ... under

the circumstances." Id. at 1371-74. There was no hint there that the claim was based

on any statutory or common-law entitlement to due process: The claim was purely

contractual. 

We emphasize that the rights that Dr. Blume claims are only contractual. If the

due process rights that he claimed arose from an Iowa statute, then he would have a

good or at least colorable argument that they could not be waived or that the immunity

clause was invalid. That is because in Breton v. Ames Community Sch. Dist.,

291 N.W.2d 351, 351, 356-57 (Iowa 1980), the Supreme Court of Iowa invalidated

a provision in a teacher's contract stating that the contract could be terminated without

notice or a hearing, a provision that directly contradicted a state statute requiring

school districts to follow specific procedures before terminating a teacher's contract.

The court concluded that the statute did not merely establish a default rule that the

school board could contract out of: The statute instead established a "legislatively

declared public policy of promoting fairness and thoughtful decisionmaking" by

school boards. Id. at 356. But there is no Iowa statute governing the due process

rights of a hospital's staff members and therefore no legislative public policy that

weighs in here against the immunity provision in the hospital's bylaws.

Some state courts have held that staff physicians have certain common-law due

process rights whether or not those rights are set out in a contract with a hospital. See,

e.g., Applebaum v. Board of Directors, 104 Cal. App. 3d 648, 656-57, 163 Cal. Rptr.

831, 836 (1980). But there are cases to the contrary. See, e.g Pepple v. Parkview

Mem. Hosp., Inc., 536 N.E.2d 274, 276 (Ind.1989). Even if the Iowa courts were to

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recognize such a common-law right, moreover, there is nothing in the Iowa case law

that would indicate that a promise not to enforce it by way of action would be invalid.

A party seeking to avoid an agreement when no inconsistent statute exists carries a

heavy burden. The Iowa Supreme Court "proceed[s] cautiously and will invalidate

a contract on public policy grounds 'only in cases free from doubt.' " Walker v.

Gribble, 689 N.W.2d 104, 110-11 (Iowa 2004) (quoting DeVetter v. Principal Mut.

Life Ins. Co., 516 N.W.2d 792, 794 (Iowa 1994)). There is nothing in the present

record to indicate that an Iowa court would conclude that the immunity provision was

undoubtably contrary to public policy. Besides, Dr. Blume makes no argument that

he has a common-law right to due process. 

At oral argument, Dr. Blume's counsel asserted that to allow the immunity

clause to trump the promises of due process in the bylaws would render his

arrangement with the hospital nugatory. But the meaning of the clause is plain and

we have no warrant to ignore it. The promises still create a moral obligation on the

part of the hospital, moreover, and may create a scruple against their violation;

Dr. Blume just does not have an action if the hospital violates them. It is a nice

question whether the clause renders the promises illusory, but if it does it means that

they cannot serve as consideration and thus that Dr. Blume would simply have no

contract to sue on. See 3 Williston on Contracts § 7:7 (4th ed.).

For the reasons indicated, we vacate the judgment of the district court and

remand for the entry of a judgment for the hospital.

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