### IN THE CO URT OF APPEALS OF TE NNE SS EE AT JACKSON Octo be r 27 , 20 09 Ses si on

JAME S K. PATTERS ON, M.D., E T A L 

### . v. MET HODI ST HE ALTH CAREMEMPHI S HOS PITAL S

D i r e c t A p p e a l f

r o m t h e C i r c u i t C o u r t f o r S h e l b y C o u n t y N o . C T

- 0 0 2 6 1 1

- 0 4 K a r e n R

. W i l l i a m s , J u d g e

N o . W 2 0 0 8

- 0 2 6 1 4

- C O A

- R 3

- C V

- F e b r u a r y 2 , 2 0 1 0

The plaintiffs/appel l an t s , two doctors, filed suit afte r they wer e deeme d to have voluntarily

re l inquished their m edica l staff privilege s at M ethodist Hea lthcare -Memphis Hospitals for failure
to maintain compulsory insurance cover ag e. The doctors’ c o mp la in t a n d a me nded complaint alleg ed brea ch of contra ct, intentional interfe renc e with business rela tionships, commo n l aw re taliatory discharg e, and violation of fede ral and state whistleblower statutes. I n separ ate order s, the trial court dismiss ed the doctors’ whistleblower and reta liatory discharg e clai m s

. The court later g rante d
summary judgme nt in favor of

the def endant on the r emaining claims. We aff irm.

T e n n . R

. A p p . P

. 3 A p p e a l a s o f R i g h t ; J u d g m e n t o f t h e C i r c u i t C o u r t A f f i r m e d ; a n d R e m a n d e d

D A V ID R

. F A R M E R , J

. , d e l i v e r e d t h e o p i n i o n o f t h e C o u r t , i n w h i c h H O LLY M

. K IR B Y , J

. a n d J

. S T E V E N S T A F F O R D , J

. , j o i n e d

.

R o b e r t L

. M o o r e a n d D a w n D a v i s C a r s o n , M e m p h i s , T e n n e s s e e , f o r t h e a p p e l l a n t s , J a m e s K

. P a t t e r s o n , M

. D

. a n d R u s h t o n E

. P a t t e r s o n , J r

. , M

. D

.

W i l l i a m L

. B o m a r , M e m p h i s , T e n n e s s e e , f o r t h e a p p e l l e e , M e t h o d i s t H e a l t h c a r e

- M e m p h i s , H o s p i t a l s

.

O P I N I O N

I. Background and Proc edural History

The following fac ts are undisputed. The plaintiffs/appellants, J ames K. Patterson, M.D. and Rushton E

. Patterson, J r., M.D. (“doc tors”), opera ted an obstetrical and g y necolog ical prac tice located near Methodist Hospital -N o rt h in Memphis, Tenne ssee. The doctors first applied for and

rec eived medical staff privileg es at Methodist Hea lthcare -Memphis Hospitals (“Me thodist”) in thelate 1980' s. Until October 2003, Methodist did not suspend, revoke
, or t er m i nate the doctors’

privileg es for any rea son. On October 23, 2003, Methodist notified the doctors it would deem their
p ri v i l ege s voluntarily relinquished if the doctors did not provide proof of continuous and uninterrupted profe ssional liabili ty in s u r a n c e w it h o u t periods of non-cove rag e by October 27, 2003. 1 The doctors did not provide proof of the requisite insurance cover ag e and, as a result, wer e unable to continue trea ting pa tients at Methodist’s facilities.

The doctors filed suit following the relinquishment of their privileg es seeking compensa tory and punitive damag es. The doctors’ complaint and amende d complaint alleg ed brea ch of contra ct, intentional interfe renc e with busin e s s r e la ti o n ships, common law reta liatory discharg e, and violation of fede ral and state whistleblower statutes. The g rava men of the doctors’ complaint and amende d complaint was that Methodist wrong fully terminated the doctors’ privileg es in reta liation for repor ts Dr. Rushton Patterson made reg arding alleg ed TennCa r e a n d O mn iC a

re fra ud at Methodist HospitalNorth. Methodist disputed the doctors’ claims and, over the course of the proce eding s, filed sever al

2 motions to dismiss

. I n separ ate order s, the trial court dismiss ed the doctors’ whistleblower and
reta liatory

discharg e cla ims.

Methodist f

iled a motion to dismiss and/or for summary judgme nt arg

uing tha t the doctors could not establish their remaining claims for breac h o f contra ct and intentional interfe renc e with

I n J une 2001
, Me tho dis t’ s boa rd of dir ect ors re vised it s bylaws to exp re ssl y re qui re the m ai nte nan ce 1 of “co nti nuou s and uni nte rr upt ed pro fe ssi ona l li abi li ty ins ura nce covera ge, wit hout per iod s of non-cov er age,

a n d inc lud ing ei the r ext end ed re por ti ng (‘ ta il ’) or re tr oac ti ve (‘ pri or act s’ ) covera ge.” T he pri or vers i o n

re qui re d m edi cal st af

f to “m ai nta in a m ini m

um of one m il li on dol la rs pro fe ssi ona l lia bil it y ins ura nce fr om

an ins ura nce company li cen sed to do busi nes s in Te nne sse e.” T he par ti es dis put e whet her the la nguage of the re vised bylaw imposed a hei ghtene d ins ura nce re qui re m ent or con fi rmed the m ean ing of the pri or versi on, but it is unn ece ssa ry to re ach th is que st ion in th e pr ese nt app eal

.

I t is undi spu te d tha t Dr. Rush ton Pa t t e r s on pre par ed a le tt er to the n Governo r Don Sund qui st on 2
J une 20, 2002
, complai nin g of an inc ide nt in whic h he “de li vered an undo cumente d al ie n” whil e pro vidin g unpa id emergen c y s e r vices for Me tho dis t Hosp it al

- Nort h. Dr. Rush ton Pat te rs on ass er te d tha t il le gal or undo cumente d al ie ns had bee n re cei ving tou rs of Me tho dis t’ s fa ci li ti es we e ks i n a d vance of the ir “emergency” del iveri es. T his le d him to bel ie ve tha t cer ta in Me tho dis t emplo ye e s h a d ent er ed int o

ar ra ngem ent s wit h human tr af fi ckers to fa ci li ta te del iveri es at Me tho dis t wit h int ent to def ra ud Me tho dis t’ s physic ia ns of paym ent for the ir ser vices

. Dr. Patt er son la te r dis covere d that the complai ned of pat ie nt had obt ai ned T enn Car e and Om niCa re covera ge for her and her chi ld. T his pat ie nt fi le d a complai nt agains t him wit h the hosp it al , whi ch M et hodi st dis m is sed on Sept ember 13, 2002, foll owin g an int er nal inves ti gatio n. Dr. P at te rs on’ s l et te r t o Govern or Sund qui st as ser te d:

T hes e peo ple have suc ces s f u l l y st ole n ser vices fr om m e and the hone st ta xpa yers of T enn ess ee. T his was done wit h t h e h el p of employees of st at e gov er nm ent as wel l as employees of Me tho dis t Heal thc ar e. T his re pre sen ts a new twi st ed versi on of the Am er ic an dre am wit h il le gal al ie ns smug gling fa m il y m embers int o thi s cou ntr y so the ta xpa yers can sup por t t hem. I si nce re ly hope th at you wil l a ct to cor re ct th is pr obl em.

-2-business rela tionships. On the brea ch of contra ct claim, Methodist submitt ed that its by laws did not 3

cre ate an enfor cea

ble contra ct betwee n th e p arties and, in the alterna tive, that the doctors first brea ched the contra ct. Methodist arg ued that the doctors’ violations of hos p i t al by laws made the decision to r elinquish their privileg es an exercise of business judgme nt. Consequently
, Methodist
arg ued, the doctors could not establish the essential elements of intentional interfe renc e with business rela tionships, i n cl u ding the element of improper motive or improper means. Finally
, Methodist submitt ed that the rec ord was devoid of evidenc e of t h e al l eg ed illega l alien incident, which it arg ued should be dismissed or denie d as a suppor ting f actor for the doc tors’ cla ims.

The trial court g rante d summary jud gm en t i n fa vor of Methodist. Whil e not expli citly 4 addre ssing whether the by laws wer e a contra ct, the court found that the doctors could not establish claims for brea ch of contra ct. The court conclude d that the doctors: (1) knew of the revised by laws, (2) acknow ledg ed they wer e responsible for understanding the revised by laws, and (3) ag ree d to abide by and be bound by the revised by laws. The court further conclude d that the doctors failed to

car ry their burden of production on the issues of tortious interfe renc e with business rela tionships and punitive damag es. The doc tors timely filed a notice of appe al.

II. Issu es P rese nted

The doc tors limit their appe al to the trial cour t’s g rant of summar

y judgme nt. T he doctor s broadly frame the issues befor e this Court as wh et h er the trial court err ed in g ranting summary judgme nt in favor of Methodist and corr esponding ly whether there is a g enuine issue of materia l fac t that prec ludes a g rant of summary judgme nt. The deter minative issue s wi t h i n these broade r 5 questions, as we pe rce ive them, ar e:

(1) Whether Methodist has established that the doctors first brea ched the par ties’

co n t ract and are not entitled to rec over damag es, shifting the burde n o f production to the doctors;

For br evity’s sa ke, we wil l r ef er to th e motio n as a motio n f or summ ar y j udgm ent

. 3

Me tho dis t fi le d a m oti on to al te r or amend the cou rt ’s ini ti al ord er

. T he cou rt grant ed Me tho dis t’ s 4

m oti on, vacat ed it s ini ti al ord er , and fi le d a m odi fi ed ord er

. T he m odi fi ed ord er del et ed a not at ion and add ed

a fi ndi ng tha t “Pl ai nti ff

s acknowl edged that the y wer e re spo nsi ble for knowing the con te nts of the by- la ws and agree d t o ab ide by and b e bo und by the the n ex is ti ng m edi cal st af f b y- la ws.”

I n a sep ar at e sec ti on of the ir bri ef
, the doc tor s ar gue tha t the tr ia l cou rt er ron eou sl y con cl ude d the re 5

wer e no genuin e is sue s of m at er ia l fa ct

. T he doc tor s poi nt to sever al dis put ed fa ct s in the par ti es’ bri ef s and oth er pap er s in sup por t of the ir pos it ion ; however
, the y re cognize th a t c o u r t s s h oul d den y a pro per ly
sup por te d m oti on for summ ar y j udgm ent onl y if mate ri al fa ct s ar e in dis put e. T o det er m ine whet her dis put ed fa ct s a re m at er ia l, we m

ust fi rs t a nal yz e t he sub st ant ive is sue s to det er m ine whic h fa ct s ar e ess ent ia l. We wil l t her ef

ore add re ss the as ser te d i ssu es of m at er ia l f act wit hin our ana lysis of th e s ubs ta nti ve cla ims.

-3-(2) Whether t he doctors have demonstrated that a genuine issue of m ate ri al fac t exis ts that would prec lude summary judgme nt on their claims for br eac h of contra ct;

(3) Whether Methodist aff irmatively neg ated the el em ent of improper motive or improper means on the doctors’ claims for inten t i onal interfe renc e with business rela tionships, s hifting the burden of production to the doctors;

(4) Whether t he doctors have demonstrated that a genuine issue of m ater ial fa ct exis ts that would prec lude summary judgme nt on their claims for intentional inter fer ence with business relationships.

III. Stand ard of Review

Tenne ssee Rule of Civil Procedur e 56 provides t h at a party is entitled summary judgme nt only if the “plea dings, depositions, answe rs to interrog atories, and admissions on file, toge ther with the aff idavits

. . . show that there is no g enuine issue as to any materia l fac t and that the moving party is entitled to a judgme nt as a matter of law.” T en n. R. Civ. P. 56.04. “The moving party has the ultimate burden of persua ding the court that there are no g enuine issues of materia l fac t and that the moving party is entitled to judgme nt as a matter of law.” Martin v. Norfolk S. Ry. Co.
, 271 S.W .3d 76, 83 (Tenn. 2008) (citing Byrd v. Hall
, 847 S.W .2d 208, 2 15 (Tenn. 1993)). Acc ording ly
, the burden to show that summary judgme nt is appropr iate first rests with the moving party

. See id

. “The moving party may make the require d showing and there fore shift the burden of production to the nonmoving party by either: (1) aff irmatively neg ating an essential element of the nonmoving party ’s claim; or (2) showing that the nonmoving party cannot prove an essential el em ent of the claim at trial.” Id. (citation om itted). The nonmoving party has no duty

to provide evidence to support its claim unless the moving party car ries its initi al burde n. Id. (citations omitted).

A party wi l l not succe ed on a motion for summary judgme nt mere ly by asser ting that the nonmoving party is without evidenc e to support its claim. Id. at 83-84 (citing Byrd
, 847 S.W .2d at 215). “The moving party must either produce evidence or refer t o ev i d ence previously submitt ed by the nonmoving party that neg ates an essential element of the nonmoving party ’s claim or shows that the nonmoving party cannot prove an essential ele ment of the c laim at trial.” Id. at 84 (c iting Hannan v. Alltel Publ’g Co.
, 270 S.W

. 3 d 1
, 5 (Tenn. 2008)). Production of evidenc e that raises doubts about the merits of the nonmoving party ’s claim will not suffice

. Id. (citing McCarley v. W

. Quality Food Serv.
, 960 S.W .2d 585, 588 (Tenn. 1998)). “[ T ] h e m oving party must point to evidenc e that tends to disprove an essential fac tual claim made by the nonmoving party .” Id. (citing Blair v. W

. Town Mall , 130 S.W .3d 761, 768 (Tenn. 2004) ).

Once a moving part y ca rries its initial burden, the focus of the inquiry shifts to the nonmoving party who must “ produce evidenc e of specific fac ts e stablishing that g enuine issues of materia l fac t exis t.” Id. (citations omitted). The Tenne ssee Supreme Court has articula ted four methods by which the nonmoving party can satisfy its burden of production and defe at a motion for
summary judgme nt:

-4-(1) pointing to evidenc e establishing materia l fac tual disputes that wer e over- looked

or ignor ed by the moving party ; (2) reha bilitating the ev idence attacke d by the moving party ; (3 ) producing additional evidenc e establishing the exis tence of a g enuine issue for trial; or (4) submitt ing an aff idavit explaining the nece ssity for further discovery

pursuant to Tenn. R. Civ. P., Rul e 56.06.

McCarley
, 960 S.W .2d at 588. Courts must acc ept the evidenc e proff ere d by the nonmoving party

as true and resolve any doubts conce rning the exis tence of a g enuine issue of materia l fac t in favor of the nonmoving party

. Martin
, 271 S.W .3d at 84 (citation omitted). “‘A disputed fac t is materia l if it must be decide d in order to resolve the substantive claim or defe nse at which the motion is direc ted.’” Id. (quoting Byrd , 847 S.W .2d at 215). “A disput ed fa ct pre sents a g enuine issue if ‘ a

rea sonable jury could leg itimately resolve that fac t in f avor of one side or the other.’” Martin
, 271 S.W .3d at 84 (quoting Byrd , 847 S.W .2d at 215).

I f the party moving for summary judgme nt bea rs t h e b u rden of proof at trial, the burdenshifting analy sis differ s. Hannan
, 270 S.W .3d at 9 n.6. “F or example, a plaintiff who files a motion for partial summary judgme nt on an element of his or her claim shifts the burden by alleg ing undisputed fac ts that show the exis tence of th at el em en t and entitle the plaintiff to summary judgme nt as a matter of law.” Id. L ikewise, a defe ndant can shift the burden of production to a nonmoving plaintiff by alleg ing undisputed fac ts to show the exis tence of an af firmative de fense

. Id.

This Court revie ws a trial court’s decision on a motion for summary judgme nt de novo with

n o p re s u m p t ion of correc tness. Martin
, 271 S.W .3d at 84 (citing Blair
, 130 S.W .3d at 763). W e revie w the evidenc e in the light most favor able to the nonmov i n g p ar ty and draw all rea sonable infere nces in the favor of the nonmoving party

. Id. (citing Staples v. CBL & Assocs.
, 15 S.W .3d 83, 89 (Tenn. 2000) ).

IV. Analysis

A. Breach of Cont

ract

We f irst c onsider whether the trial cour t pr operly g rante d summary judgme nt to Methodist

on the doctors’ brea ch of co n t ra ct cl aims. Methodist arg ues that the doctors first brea ched the 6

Me tho dis t ar gued in sup por t of its m oti on for summ ar y j udgm ent tha t its bylaws did not cr eat e an 6 enf orc eab le con tr act bet ween the par ti es. T he T enn ess ee Supr eme Cour t in Lewi sbu rg Communi ty Hosp it al, Inc

. v. Alf red son , 805 S.W .2d 756 (T enn

. 1991 ), det er m ine d as a m at te r of fi rs t impres si on tha t “a hos pit al ’s bylaws ar e an int egral par t of it s con tr act ual re la ti ons hip wit h the m embers of it s m edi cal st af f.” Id. at 759 (c it at ion s om it te d). I n sub seq uen t cas es, the re has bee n li tt le doub t whet her the bylaws gov er nin g a

re la ti ons hip bet ween a hos pit al and it s m edi cal st af f ar e con tr act ual ly bin din g. See

, e.g. , Cit y of Cook evi ll e

v. Humphr ey , 126 S.W .3d 897, 903 (T enn

. 2004 ); Bry ant v. Tene t, Inc

. , 969 S.W .2d 923, 926 (T enn

. Ct. App. 1997 ); Eyr ing v. E. Tenn

. Bapt is t Hosp

. , 950 S.W .2d 354, 356 (T enn

. Ct. App. 1997 ). But her e the gov er nin g doc um ent exp re ssl y st at es tha t it “i s not and sha ll not be dee m ed to be a con tr act .” I n it s pri or sub m is si ons , (c ont inu ed.. .)

-5-parties’ contra ct–the revised by law s

– an d ar e n o t entitled to rec over on their claims. I t is well

acc epted that “[a] party who has materia lly brea ched a contra ct is not entitled to damag es stemming from the other party ’s later materia l br eac h of the same contra ct.” McClain v. Kimbrough Constr. Co.
, 806 S.W .2d 194, 199 (Tenn. Ct. App. 1990) (cita t i o ns omitted). The first materia l brea ch alleg ed in this c a s e is the doctors’ failure to maintain continuous and uninterrupted insurance without periods of non-cove rag e. There is substantial evidenc e in th e re co rd
, m u ch of it undisputed, to establish that the doctors consente d to the terms of the c ontrac t, violated the terms of the contra ct, and we re not e x cused f

rom perf orming the contra ct.

The rele vant by law require d the doctors to maintain “continuo u s and uninterrupted profe ssional liability insurance cover ag e, without periods of non-cove rag e, and including either extended repor

ting (‘tail’) or retroa ctive (‘pr ior acts’) cover ag e.” As the by law sug g ests, a phy sician who chang es insurance car riers may maintain the requisite cover ag e in one of two way s. First, the phy sician may purcha se “tail” cover ag e from his previous car rier; tail cover ag e insures a phy sician for acts that occur

red under an expiring insurance policy but are repor ted at a later date. Second, the phy sician may purcha se “prior acts” cover ag e from a new car rier
, wh i ch provides retroa ctive

cover ag e to a date prec eding the new policy ’s inception date. I n either case , the phy sician is able to obtain insurance for proce dures perf ormed under a prior insurance policy that has lapsed, preve nting uninsured g aps in cove rag e that mig ht expos e a hospital to liability

.

I t is undisput ed that the doc tors did not purchase tail or prior acts cove rag e upon cha ng ing insurance car

riers at various points and, as a conseque nce, develope d periods of non-cove rag e. Dr. J ames P atterson developed a gap i n co v er ag e from Dec ember 1, 2000, to Dec ember 1, 2001. Dr. Rushton Patterson develope d more extensive g aps from J uly 8, 1985, to Dec ember 31, 1996, and from J anuar

y 1, 1997, to Dec ember 31, 2001. The doctors develope d these g aps b ec ause they aff irmatively d ec i d ed n o t t o purcha se tail or prior acts cover ag e. The rec ord is reple te with deposition testimony from Fr eder ick Seilkop (“Mr

. Seilkop”), the doctors’ former insurance broker
, explaining that the doctors consciously choose to develop g aps i n t h eir cover ag e for “ec onomic

re asons,” often ag ainst the profe ssional advice of others. I n the late 1990' s and ear ly 2000' s, Mr. Seilkop expressly advised the doctors to keep their retroa ctive cove ra ge i n t act. The doctors nonetheless chose not to purcha se tail or prior acts cover ag e despite understanding the implications of deve loping g aps.

The doctors’ decisions not to purcha se tail or prior acts cover ag e ensure d it would be much

more costly for them to c over their g aps in the future. Acc ording to Mr

. Seilkop, once a phy sician allows his retroa ctive date to expire without purcha sing tail cover ag e it become s virtually impossibl e to fully cover pree x isting g aps. Michae l Bla um (“Mr

. Bla

um”), owner and president of Medica l Risk

(... con ti nue d) 6
Me tho dis t ar gued tha t suc h a dis cl ai m er is not il le gal or oth er wis e viola ti ve of T enn ess ee publ ic pol ic y. T he
par ti es’ bri ef

s, however, cont ai n curs ory dis cus si on of thi s iss ue with out ci ta ti on to legal supp ort on eit her si de of the ar gum ent

. We wil l ass um e, wit hout dec idi ng, tha t the bylaws a re a con tr act

. See Lis te r v. Me tho dis t M

ed. Ctr . of

Oak R idg e , 199 3 W L 481 402, at *1 ( T enn . Ct. App. No v. 18, 199 3).

-6-Service s, I nc., explained that allowing a g ap in cover ag e to ar i s e m akes it difficult to obtain

insurance cover ag e in the “standa rd” marke t. Specific t o t h e doctors, Mr. Bla um testified in his deposition that their adver se claims histories and prior insur ance decisions limit ed their ability to buy tail or prior a cts cove rag e.

The costly nature of procur ing tail or prior acts cover ag e with a pree x isting g ap was further

exacer bated by difficulties in the insurance marke t following the terror ists attacks of September 11, 2001. Bla

y ne Bur ns (“Ms. Bur

ns”), Methodist’s corpor ate direc tor of risk, financ e, and insurance
, descr ibed September 11th as a “sig nificant date for ever y ty pe of insurance including medical malprac tice insurance .” The insurance marke t beca me a “har d marke t” and many insurance car riers
went out of business including one of the larg est writers of medical malprac t i ce insurance

. Mr. Bla um added, “I t was the larg est insurance loss in the history of the world, and it adver sely aff ecte d all the reinsura

nce marke ts, and the reinsura nce marke ts are responsible for providing insurance to t he indi vidual phy sician i nsuranc e companies, so they had to pass t heir loss es on to t h e p h y s i ci an insurance companies.” Methodist notified its doctors of t he potential fa llout in a newsletter da ted J anuar y 2002, which it forwa

rded to all doctors’ office s and posted in its medical lounges

. The newsletter noti fi ed s t af

f members of the pos sibili ty of non-renew al as a result of t he hard marke t, reminded them of Methodis t’s compulsory insuran ce re q u irements, and provided them with a li st of insuranc e prof

essionals to contac t should difficulties arise.

Severa l months later, the doctors applied for rea ppointment with Methodist. By the doctors’ own admissions, they

understood at this time they had an oblig ation to purcha se tail cove rag e and knew it would be “ver

y expensive” to cover their g aps. The doctors n o n et h el ess applied for

rea ppointment with Methodist and ag ree d to abide by Methodist’s by laws. Eac h doctor signe d and dated a n application that expressly stated:

I further acknow ledg e that I am responsible for knowing the contents of the by laws, rules and reg ulations of the Org anizations a nd their medical/prof

essional staffs and
ag ree to be bound by

them if g rante d membership and/or privileg es or a ffiliation.

. . . .

I further acknow ledg e that I have rea d and unders tand t he foreg oing Authorization and Relea se.

Thus, there is no g enuine issue of materia l fac t as to whether the doctors ag ree d to purcha se continuous and uninterr

upted insuranc e with per iods of non-cove rag e as a condition of ex erc ising privileg es at Methodist.

The doctors never

theless arg ue that the parties’ contra ct did not include an obliga tion to purcha se t ail cover ag e or that their performanc e of this obliga tion was ex cu s ed

. The doctors first
arg ue that Methodist unilatera lly imposed the revised insuranc e re q u i rements, but we find no

-7-evidenc e to support this arg ument. I n order to form a valid contra ct, both parties must assent to its 7
terms. Johnson v. Central Nat’l Ins. Co. of Omaha, Neb.
, 356 S.W .2d 277, 281 (Tenn. 1962). Simi larly
, the modification of an exis ting contra ct is enfor cea ble only when acc omplished with the mutual assent of both parties. Buchholz v. Tenn. Farmers Life Reassurance Co.
, 145 S.W .3d 80, 84 (Tenn. Ct. App. 2003) (citation omitted); Galbreath v. Harris
, 811 S.W .2d 88, 92 (Tenn. Ct. App. 1990). Methodist has demonstrated that the doctors assented to the terms of the revised by laws. The doctors have failed to produce evidenc e to show that they did not assent to the terms of the rele vant by law whe n they submitt ed their applications for rea ppointment. The doctors have equally failed
to produce evidenc e to show that the Boa rd of Direc tor s i m proper ly adopted the resolution. Dr. J ames Patterson instead testified in his deposition that he did not complain about the revision in the rele vant by law beca

use “ther e was nothing to complain about.” We are unable to find any evidenc e to show that the Methodist imposed the revised insurance require ment on the doctors without their individual consent.

The doctors next arg ue that Methodist ag ree d to exclude the revised insurance require ment from their contra ct by acc epting their applications for rea ppointment. This arg ument is contra ry to the express terms of their applications, incons i s tent with the terms of the by laws included in the

rec ord, and not supported by citation to any testimony or other evid en ce

. T here is no citation to evidenc e in the re cord to show that the pa rties neg otiated a contrac t other than tha t repre sented by the by laws i n eff

ect. Fur ther, there is no evidenc e in the re cord to sug g est that Methodist actually had knowledg e of the g aps whe n it approved the doctors’ a pplications for re appointment.

I n their sworn aff

idavits, the doctors stated that they disclosed the g aps in their tail cover ag es to Methodist. The af

fi davits, howeve r, do not indicate when or how this purported “disclosure ”

occur red. I t become s clea

r upon revie w of the doctors’ deposition testimony
, s t at em en t of undisputed fac ts, and other paper s that their “disclosure ” did not specific ally identify the exis tence of g aps in their cover ag e; rathe r, the doctors at various points signe d rele ases that allowed Methodist
to contac t their i nsuranc e p ro viders and provided certifica tes of i nsuranc e covera g e that indicated
t h ei r policies’ eff

ective dates. And it is undisputed that the cer tificates of insuran ce an d 8

T her e is some sugg est ion tha t Me tho dis t cha nged it s bylaws wit h an int ent to te rminat e the doc tor s’ 7 pri vileges. We fi nd no s u p p o r t for thi s ar gum ent

. T he onl y eviden ce on thi s is sue demonst ra te s tha t Me tho dis t wa s no t s pec if ic al ly awar e t hat th e r evisi on might di squ al if y any of i ts physic ia ns. Fur the r, t he

re visio n occ urr ed wel l bef ore the al le ged il le gal al ie n inc ide nt, whic h is the onl y pro f f e r ed bas is of

re ta li at ion

.

For exa m ple Dr. Rush ton Pat te rs on and cou nse l for Me tho dis t had the fol lowing ex ch an g e re gardi ng 8 the doc tor s’ “di scl osu re s”:

Ques ti on: “Now, in your dis covery re spo nse s and ple adi ngs and st at ements by your la wyers, the y have ind ic at ed or you have ind ic at ed tha t you dis cl ose d to Me tho dis t and it s employees the exi st enc e of

th ese gaps a t var iou s t imes i n t he p ast ; i s t hat ri ght?”

(c ont inu ed.. .)

-8-rea

ppoi ntment applications did not indicate whether there wer e exis ting g aps in the doctors’ insurance cover ag es. Fur ther, the only testimony on this issue was t h at M et hodist did not have
proce dures in place prior to 2003 to catc h g aps in cover ag e. Thus, acc epting as true that the doctors “disclosed” their g aps – i.e. signe d rele ases to allow Methodist to contac t their insurance providers and provided Methodist with cer tificates of insura

n c e c o v e r a g e

–

th e r e is a b s o lu te ly nothing to sug g est that the objective manifestations of the p ar t i es showed that either party intended to exclude the revised b y l aw fr o m the parties’ contra ct. See Moody Realty Co. v. Huestis
, 237 S.W .3d 666, 674 (Tenn. Ct. App. 2007) (“Courts deter mine mutuality of asse n t by assessing the parties’ manifestations acc ording to an objective standard.” ). Rather, the objective manifes t at i o ns of the parties indica ted that the doctor s would be bound by the re vised by laws.

The doctors next submit that, even if they ag ree d to the revised by laws, t h ei r performanc e should be excused due to the impossibi lity or impractica bility of procur ing tail cover ag e following the attacks of September 11th. The doctors cite this Court’s decision in Groner v. On-Site Grading, Inc.
, No. E1999-00219-COA- R3-CV, 2000 WL 502843 (Tenn. Ct. App. Apr. 28, 200 0 ), for the
p roposition that “fa ilure t o perf orm a contract is excused if perf ormanc e becomes i mpossi b l e d u e to a cause not attributable to the non-per forming p ar t y and the impossibi lity is ‘not among the probable conting encie s which a man of ordinary prudenc e should have fore seen and provided for.’ ” Id. at *4 (quoting W

ilso n v. P age , 325 S.W .2d 294, 298 (Tenn. Ct. App. 1958) (italics om itted)). The rule of law cited, while g ood law, perta ins to the rule of superve ning impractica bility wher eby the occur renc e of an unforseen ci rcumstanc e following the formation of the contra ct excuses a party ’s perf

ormanc e. See Restatement (Second) of Con t ra ct s § 261 (1981); 30 Richard A. L ord, W illis ton on Contracts § 77:16 (4th ed. 2004).

More pertinent to the curr ent discussion is the simil ar rule of exis ting impractica bility

. The

9 Restatement (Sec ond) of Contrac ts states the rule of exis ting impra cticability

as follows:

Where, at the time a contra ct is made, a party ’s perf ormanc e under it is impractica ble

(... con ti nue d) 8 Answe r: “Def

ine di scl ose .”

Ques ti on: “T el l the m abo ut, te ll Me tho dis t or an a u t h o ri zed cor por at e re pre sen ta ti ve of Me tho dis t a bout th e gaps in your T ai l c overage?”

Answe r: “No, tho se wer e app ar ent when m y ins ura nce inf

ormati on was sen t to y’all and you inves ti gated it as you do f or every ren ewal .”

T he comm ent s to the Rest at ement re cognize tha t al tho ugh thi s rul e is “so m et imes phr ase d in te rms 9 of ‘i m pos si bil it y,’ it has lon g be en re cogni zed tha t it m ay o per at e to dis cha rge a par ty’s dut y even tho ugh the event has not m ade per for m anc e abs olu te ly impossi ble .” Rest at ement (Se con d) of Cont ra ct s § 261 cmt. d (19 81)

. T he T enn ess ee Supr eme Cour t has agree d tha t the rul e is one of “i m pra ct ic abi li ty” ra the r tha n act ual “i m

pos si bil it y.” See Nort h Am. Capi tal Corp

. v. Mc Cant s , 510 S.W .2d 901, 905 (T enn

. 1974 ) (c it ing Hinc hman v . Cit

y Water Co. , 167 S.W .2d 9 86, 9 91 ( T enn . 194 3))

.
-9-without his fault because of a fact of which he has no r ea son to know and the

non-ex istence of which is a basic assumption on which the contract is made
, no duty
to rende r that perf

ormanc e arises, unless the lang uag e or circ umstances indicate the
contra ry

.

Restatement (Second) of Contracts § 2 6 6 (1 ) (1 9 8 1) (empha sis added)

. The comments to the Restateme n t ex p l ain that “[a] party ’s perf ormanc e may be as easily aff ecte d by impractica

bility exis ting at t h e t i m e t h e contra ct was made, beca use of some fac t of which he was ignor ant, as by
superven i n g i m p ra cti cability .” Restatement (Second) of Contracts § 266 cmt. a (1981). I t is essential, howeve r, that “ the affected party must have had no reason to know at the time the contract was made of the facts on which he later relies .” Id. (empha sis added).

The doctors cannot avoid their contra ctual obliga tion to procur e tail cover ag e in the prese nt

case beca use it is undisputed that they knew of or had rea son to know of the exis ting difficulties in the insurance marke t when they agre ed t o b e bound by the hospital by laws. The complained of 1 0 deter ioration in the insurance marke ts indisputably occurre d i n late 2001 and ear ly 2002. The doctors nonetheless agr ee d t o procur e the requisite insurance cover ag e when they subsequently applied for rea

ppointment pursuant to hospital by laws. As the Tenne ssee Supreme Court has stated, “A man may contra ct to do what is impossibl e, as well as what is diff icult, a nd be liable for failure
to perf orm.” Hinchman v. City W ater Co.
, 167 S.W .2d 986, 991 (Tenn. 1943) (quoting Wil liston

on Contracts (Revised Ed.), Vol. 6, p. 5410). I f the doctors contra cted to do the impossib l e, they have produce d no evidenc e to demonstrate that their failure to perf orm was excusable. We hold that the doctors wer e bound to purcha se and maintain continuous and uninterrupted profe ssional liability insurance without periods of non-c overa g e.

Having conclude d that the doctors wer e bound to the terms of the revised by laws, it is clea r that the doctors first brea ched the parties’ contra ct. I t is undisputed that the doctors did not comply with the revised insurance require ment. I t is undisputed that the doctors’ alleg ed brea ches occur red prior to the relinquishment of their pri v ileg es in October of 2003. Wit h these undisputed fac ts, Methodist has demonstrated t h at the doctors brea ched the contra ct betwee n them by failing to maintain continuous and uninterrupted insurance cover ag e without periods of non-cove rag e. Meth o d is t th e r efor e met its burden to establish first brea ch. Summary judgme nt is appropr iate unless the doctors can establish a g enuine issue of materia l fac t that would prec lude summary judgme nt or otherwise de monstrate that summary judgme nt is inappropriate a s a matter of law.

The doctors are unable to es t ab l ish a g enuine issue of materia l fac t on the issue of first brea ch. The doctors have prese nted no specific fac ts, which if acc epted as true, show that they did
not understand or consent to the terms of the revised by laws. I t is undisputed that the doctors ag ree d

T he doc tor s at te m

pt to fr ame the is sue as whet her Me tho dis t gav e the m a re aso nab le per iod of ti m e 1 0 af te r Octob er 23, 2003, to obt ai n coverage. T he le tt er of not ic e, however
, did not ask the doc tor s to obta in

covera ge but to pro vide pro of tha t the y wer e in complia nce wit h the exi st ing bylaws. T hus
, we dis agree tha t the is sue bef

ore us is whet her it was pr act ic abl e f or the doc tor s t o f

ind cover age in le ss tha n a week.

-10-to the by laws and ag ree d to c arr y out the duties imposed on them in ex chang e for staff privileg es. They have prese nted no specific fac ts to establish that Methodist brea ched the parties’ contra ct prior
to their initial brea ch. They have not arg ued or prese nted specific fac ts t o show that they wer e entitled to notice, an opportunity to cure , or administrative revie w prior to the relinquishment of their privileg es. I n sum, they have pointed to nothing in the rec ord that raises a g enuine issue of materia l

1 1 fac t on the question of first bre ach.

The doctors nonetheless arg ue that Methodist is not entitled to judgme nt as a matter of law beca use i t waived or

should be equitably

estopped fr om asserting their first bre ach. “ ‘A waiver is an intentional re linquishm ent of a known right.’” Jenk ins Subway, Inc. v . Jones , 990 S.W .2d 713, 722 (Tenn. Ct. App. 1998) (quot i n g B a i r d v. Fidelity-Phe nix Fire Ins. Co.
, 162 S.W .2d 384, 388 (Tenn. 1942) ).

Waiver may be proved b y ex p re s s decla ration; or by acts and decla rations manifesting an intent and purpose not to claim th e supposed advanta g e; or by a

course of acts and conduct, or by so neg lecting and failing to act, as to induce a belief that it was [t he party ’s] intention and purpose to waive. I n order to establish waiver by conduct, the proof must show some absolute action or inaction inconsistent with the claim or r ight wa ived.

Id. at 722-23 (c itations omi tted) (a lteration in orig inal) (inter nal quotation marks omitted).

The e ssential elements of e quitable estoppel, on the othe r hand, a re:

(1) Conduct which amounts to a false repr esenta ti on or conce alment of materia l fac ts,
or, at least, which is calc ulated to convey the impression that the fac ts are otherwise than, and inconsistent with, those which the party subsequently attempts to asser t; (2) I ntention, or at lea st ex pecta tion that such conduct sha ll be acte d upon by the other party ; [ and] (3) Knowle dg e, ac tual or construc tive[,] of the re al fa cts.

Cracker Barrel Old Country Store, Inc. v. Epperson
, 2 8 4 S.W .3d 303, 315-16 (Tenn. 2009) (alter ations in orig inal) (quoting W erne v. Sanderson
, 954 S.W .2d 742, 745-46 (Tenn. Ct. App. 1997)).

T he bylaws in the ir ent ir et y ar e not fou nd in the re cor d. T he onl y eviden c e o n the que st ion of

1 1 whet her Me tho dis t act ed pur sua nt to it s bylaws when it dee m ed the doc tor s’ pri vileges vo l u nta ri ly

r e l inq uis hed ind ic at es tha t Me tho dis t had the ri ght to act imm edi at el y. I t is not cl ear whet her t h e d o c t o r s

wer e ent it le d to not ic e, a hea ri ng, or oth er pro ces s bef ore the re li nqui shment of the ir pri vileges. T he doc tor s h a ve n o t a r gued or pre sen te d eviden ce to est abl is h any suc h ri ght. Fur the r, the doc tor s have not pro p e r l y cha ll enged the valid it y of the re vised ins ura nce re qui re m ent or the pro ced ure s by whic h Me tho dis t ena ct ed the re qui re m ent . T he o nly su ch a rgum ent is fou nd in a si ngle, u nsu ppor te d as ser ti on i n t hei r b ri ef th at th e al le ged “ch ange” i n t he b ylaws wa s made “ wit hout not ic e or in put fr om [t he d oct ors ].”

-11-The doc tors’ position is t hat Methodist learne d of their g aps in cove rag e subseque nt to the

rene wal of their privil eg es and failed to act until Octo b er 2003. Assuming the evidenc e provided by the doctors is true, it appea rs that Methodist lear

ned of g aps in both doctors’ insurance cover ag es in late 2002. The fac t that Methodist discovere d the g aps some months prior to the relinquishment of the doctors’ privileg es does not persua de this Court that Methodist waived its rig ht to enfor ce the brea ch of the parties’ contra ct or that Methodist should be estopped from asser ting the brea ch. Waiver is not applicable under the circ umstances beca use Methodist did not neg lect its rig hts or so fail to act as to induce the belief that it was Methodist’s intention and purpose to waive the brea ch. Estoppel d o es not apply beca use there is no conduct that amounts to a false repr esenta tion or

conce alment of materia l fac ts. Fur ther, there is no conduct calc ulated to convey the impression that the fac ts a

re otherwise than, and inconsistent w ith, those w hich Methodist now relies. There is no evidenc e to indicate that Methodist in any way intended to relieve the doctors of their respe ctive obliga tions to m aintain the re quisite covera g e or e x hibited conduct conve y ing tha t impression.

For these re asons, we hold that Me thodist is entitled to summar y judgme nt on the doctors’ cl ai m s for brea ch of contra ct. Assuming the by laws wer e a contra ct, the doctors assented t o an d
agr ee d t o be bound by the revised terms of the by laws, including the require ment to procur e continuous and uninterrupted insurance without pe riods of non-cove rag e. I t is undisputed that the doctors did not procur e the requisite cover ag e, brea ching the parties’ contra ct. There is no g enuine issue of materia l fac t as t o wh ether the doctors’ brea ch occur red befor e Methodist deeme d their privileg es voluntari l y re l i n q u i s hed. Under the rule of first brea ch, the doctors are not entitled to

rec over for damag es arising out of a late r bre ach. T he trial c ourt’s g rant of summar y judgme nt on the doctors’ brea ch of c ontrac t claims is affirme d.

B. Int entional Interference

with Busi ness Relation ships

We next consider whether the trial court proper ly g rante d summary judgme nt to Methodist

on the issue of intentional interfe renc e with business rela tionships. The Tenne ssee Supreme Court expressly adopted the tort of intentio nal interfe renc e with business rela tionships in Trau-Med of America, I

nc. v. A llstat e Insuranc e Co.
, 71 S.W .3d 691 (Tenn. 2002). The elements of t he tort as set forth in Trau-Med

are :

(1) an exis ting business rela tionship with specific third parties o r a prospec tive rela tio n ship with an identifiable class of third persons; (2) the defe ndant’s knowledg e of that rela tionship and not a mere awa rene ss of the plaintiff’s business dealing s with others in g ener al; (3) the defe ndant’s intent to cause the brea ch or termination of the business rela tionship; (4) the defe ndant’s improper motive or improper means ; a nd finally , (5) da

mag es re sulting fr om the tortious interfer ence

.

Id. at 701 (c itations omi tted) (f ootnotes omitt ed).

The trial court g ener ally conclude d that the doctors could not establish the essential elements of their claim. Our revie w of the rec ord shows that Methodist raised substantial doubt as to whether

-12-the doctors demonstrat e t h e first throug h third elements of intentional interfe renc e with business

rela tionships. Genuine issues of m ater ial fac t never theless exist as to whethe r Methodist knew of

an exis ting business rela

tionship betwee n the doctors and patients with Methodist-only health plans

an d intended to cause termination of that rela tionship in reta liation for repor ts of TennCar e and OmniCare fra

ud. Additionally
, Methodist did not arg ue th at the doctors could not establish the element of damag es. We will there fore focus our revie w on the fifth element of the doctors’ claim – improper motive or imprope r mea ns.

I n order to shift the burden of production on this issue to the d o ctors, Methodist must aff irmatively neg ate or show that the doctors cannot establish the exis tence of both improper motive and improper means. See W atson’s Carpet and Floor Coverings, Inc. v. McCormick

, 247 S.W .3d 169, 176 (Tenn. Ct. App. 2007) (citing Trau-Med
, 71 S.W .3d at 701). Methodist can meet its burden

on the question of improper motive if it demonstrates that the doctors cannot show that Methodist’s predominant purpose in relinquishing their privileg es was to injure the doctors. See Trau-Med
, 71 S.W .3d at 701 n.5 (citing Leigh Furniture & Carpet Co. v. Isom
, 657 P.2d 293, 307-08 (Utah 1982)). Wit h respe ct to improper means, Methodist must establish that its conduct was not inappropria te in light of the circ umstances. Id. Whil e rec og nizi ng that impropriety in a g iven case is a fac t-intensive inquiry
, th e s u p reme court in Trau-Med offe red, as g uidance
, a non-exhaustive list of improper means including the following :

means that ar e illega l or independe ntly tortious, such as violations of statutes, reg ulations, or rec og nized common-law rules; violence, threa ts or intimi dation, bribery
, unfounded litigation, fra ud, misrepre sentation or dece it, defa mation, duress, undue influence
, misuse of inside or confide ntial information, or brea ch of a fiduciar y rela tionship; and t h o s e methods that violate an established standard of a trade or profe ssion, or otherwise involve unethical conduct, su ch as sharp dealing
, overr eac hing, or

unfair c ompetition.

Id. (citations omitted).

A showing of impropriety is essential in a case for intentional i n t er fe rence with business rela tionships. Our supreme court in Trau-Med imposed the element of improper motive or improper

means to g uard ag ainst a principal evil: the potential deg rada tion of fre e market principles “by holding liable those individuals eng ag ed in leg itimate business prac tices.” Id. at 699-700. Wit h its decision, Tenne ssee joined a majority of jurisdictions to have “re structure d the elements of the tort to add the require ment of proof of improper conduct extending bey ond the bounds of doing business in a fre ely competitive economy .” Id. at 700. The rest ru ct u re d t o rt balanc es society ’s desire to

encour ag e fr ee e nterprise with its desire to discourag e impermissible business conduct:

The theory of t he tort of i nterfe renc e, it is said, is that the l aw d ra ws a line bey ond which no member of the community may g o in intentionally intermeddling with the business aff

airs of others; that if acts of which complaint is made do not rest on some leg itimate interest, or if there is sharp dealing or overr eac hing or other conduct below

-13-the behavior of fair men simil arly situated, the ensuing loss should be redr essed; and

that the line of demar cation betwe en per missibl e beha

vior and interf

ere nce r efle cts the ethica l standards of the community

.

Id. at 701-02 (quoting City of Rock Falls v. Chi. Tit le & Trust C o. , 300 N.E.2d 331, 333 (I ll. App. Ct. 1973)).

This Court in W

atson’s Carpet and Floor Coverings, Inc. v. McCormick

, 247 S.W .3d 169 (Tenn. Ct. App. 2007), acc ording ly rec og nized that the tort of intentional interfe renc e with business rela tionships “should not be i n terpre ted in such a way as to prohibit or undermine the ability to contra ct fre ely and eng ag e in competition.” Id. at 178. We noted that “[i ] t i s a principle of long standing in Tenne ssee that the ‘g ener al rule [i s] that a person eng ag ed in business may , at his elec tion, and without g ood rea son, ref use to deal wi t h s o m e other person.’ ” Id. (alter ation in orig inal) (quoting Crumley v. W atauga W ater , Co., 41 S.W

. 1058, 1059 (Tenn. 1897)) (c it in g H a r r e ll v. De an Food Co. , 619 S.W .2d 528, 533 (Tenn. Ct. App. 1981)). “I n other wor ds, in Tennessee , a person has the fre edom or unfetter ed discretion to do business or not to do business with whomever he or she chooses f

or any rea son that does not violate the law.”

We cited with approva l the R es t at ement (F irst) of Torts § 762, which many jurisdictions

con s i d er v i able in the contex t of i nterfe renc e with business rela tionship claims. Id. at 179 (citing Van Natta Mec h. C o r

p

. v. Di Staulo
, 649 A.2d 399 (N.J. Super. Ct. App. Div. 1994); Circo v. S p a n i s h Ga r d

ens Food Mfg. Co.
, 643 F. Supp. 51 (W.D. Mo. 1985)). The Restatement (F irst) of Torts § 762 provides:

One who cause s intended or unintended harm to another mere ly by ref using to enter into a business relation with the other or t o continue a business rela tion terminable at his will is not liable for tha t harm if the r efusa l is not

(a) a brea ch of the actor ’s duty to the other arising from the nature of the actor ’s business or from a

leg islative enac tment, or

(b) a means of a ccomplishing an illeg al ef fec t on competition, or

(c) part of a conce rted ref

usal by a combination of persons of which he is a member.

Restatement (F irst) of Torts § 762 (1939). The comments to the Restatement explain that a ref usal
to deal is valid “re g ardle ss of the actor ’s motive for ref using to enter business rela tions with the other and even though the sole motive is a desire to ha rm the other.” Restatement (F irst) of Torts § 762 cmt. c (1939)

. Although the “re fusal to deal” privileg e does not square ly appl y in th e p r e sent fac tual context, it nonetheless aff

irms that privat e p ar t i es opera ting for profit maintain considera ble discretion to ref use to enter

into or continue a business r elationship. The re lationship between the hospital and

-14-the doctors is just that: a sy mbiotic business rela

tionship for profit g overne d by a contra ct. The question here is how much discretion either party has in terminating that rela tionship pursuant to the
express terms of the parties’ contra ct. Thus, it become s esse n t i al t o d et ermine wher e the line of demar cation betwee n permissible beh av i o r an d impropriety lies in light of the parties’ exis ting rela tionship.

As we determ i n e wh ere the line of demar cation lies in the prese nt case , we pause to acknow ledg e the nature of a h o s pital’s decision to enac t and enfor ce by laws. The Tenne ssee Supreme Court has rec og nized that “[a] hospital’s business judgment . . . is due g rea t de fer ence .” City of Cookev ille v. Humphrey
, 126 S.W .3d 897, 905 (Tenn. 2004) (citing Armstrong v. Bd. of Dirs. of Faye tte County Gene ral Hosp.
, 5 5 3 S

. W

. 2 d 77, 79 (Tenn. Ct. App. 1976)). To this point, the board of direc tors at a hospital is vested with “ a larg e measure of man age m en t d iscretion in the selec tion of m em b er s of the medical staff of a hospital” and “has the authority to promulg ate

rea sonable rules and reg ulations as perta in to staff members and their privileg es.” Armstrong
, 553 S.W

. 2 d at 79 (citation omitted). Methodist maintains that it deeme d the doctors’ privileg es voluntarily relinquished pursuant to hospital by laws for a leg itimate business rea son: manag ing the hospital’s risk expos u re

. I t arg ues that the doctors cannot show, as a matter of law, that 1 2 Methodist’s predominant purpose in enfor cing its by laws was to injure the doctors or that Methodist used improper

means to re linquish t he doctor s’ privileg es.

We ag ree that the enac tment and enfor ceme nt of the rele vant by law was to a larg e deg ree an exercise of business judgme nt. Methodist enac ted this particula r by law afte r it was forc ed to settle a lawsuit originally

filed ag ainst a phy sician who de veloped g aps in cove rag e bec ause he chang ed insurance car

riers. The phy sician was discove red to ha ve g aps in insura nce only afte r the filing of suit. P rior to that lawsuit, Methodist “neve r had a situation where it was broug ht to [i ts] attention that there could be g aps.” The revised by law was enac ted specific ally to addre ss doctors who allow
g aps in their prof

essional liability

cover ag e to ar ise there by exposi ng Methodist to incre ased risk. As Methodist explained, the revised by law is important to the manag ement of r isk at the hospital for three reasons: (1) Methodist’s risk of exposure i ncre ases if a phy sician has a gap in insurance

cover ag e, (2) allowing phy sicians to rema in on staff without continuous cover ag e adver sely aff ects Methodist’s ability to obtain cover ag e in the commerc ial marke t, and (3) choosing not to enfor ce its by laws would g ive incentive to other phy sicians to allow g aps in cove rag e to ar ise.

We conclude that Methodist acte d pursuant to a valid business objective when it enac ted and enfor ced revised by laws requiring members of its staff to maintain a mi nimum level o f i n s u ra n ce

cover ag e. I ts decision repr esents a delibera te decision to limit the number of phy sicians authorized
to trea t patients at its fac iliti es in exchang e for incre ased protec tion ag ainst liability for medical

Me tho dis t doe s not ar gu e t h a t it s enf orc ement of hos pit al bylaws is not sub j ect to re view. See 1 2 Bapt is t Heal th v. Mu rph

y , 226 S.W .3d 800, 811 (Ar k. 2006 ) (di scu ssi ng the app li cat ion of the “r ule of nonre view” to dec is ion s conce rni ng m edi cal st af f eli gibil it y); see gen era ll y Barr ows v. Nw. Me m’l Hosp
., 525 N.E.2d 50 ( I ll . 198 8) (a nal yz ing vari ous app roa che s t o t he r eview o f h osp it al st af f d eci si ons ).

-15-malprac tice. I n eff ect, Methodi s t ch o se t o “do busi ness” with only those phy sicians who do not 1 3
pose an unacc eptable threa t of liability

. I n t h i s ca s e, Methodist deter mined that the doctors, by violating the terms of hospital by laws, posed an u n ac cepta ble t hrea t of l iability

. Even if we draw the infere nce that Methodist initiated revie w of the doctors’ cover ag es in reta liation for repor ts Dr. Rushton Patterson made about alleg ed T en n C are and OmniCare fra ud, it is undisputed that the doctors did not maintain continuous interrupted insurance without pe riods of non-cove rag e. Even if the relinquishm ent of the doctors’ privi l ege s did not chang e the immediate risk exposure of t he hospital fo r t h eir prior proce dures, their relinquishment acte d as g ener al deter renc e to medical
personne l on staff who might have simil arly attempted to maintain privileg es without acquir ing tail

or re troac tive cover ag e.

We hold that Methodist has car ried its init i al burden on the improper means or motive element of the doctors’ claim for in te n ti o n a l in terfe renc e with business rela tionship. Methodist acte d consistent with its by laws and the contra ct betwee n the parties when it dismiss ed the doctors; it did
not use improper means to resc ind the d o ct o rs ’ p ri v ileg es. Fur ther, the doctors cannot show as a

m at t er o f law that the predominant purpose was to injure the doctors and not a valid busi n es s decision of the hospital to limit i ts risk ex posure.

The doctors have failed to cre ate a g enuine issue of materia l fac t on this i s s u e. I t is undisputed that six other doctors voluntarily relinquished their privileg es for failure to maintain continuous cover ag e. Fur ther, it is undisputed that th e re i n s t at em ent of the doctors’ privileg es at Methodist i s co n t i ng ent on the purchase of the requisite insurance

. I t has not been sugg ested that Methodist would ref

use to permit the doctors to reg ain their privileg es if they purcha sed the requisite

cover ag e. The fac t that Methodist Hea lthcare -F ay ette Hospital, an admittedly “sepa rate entity under the Methodist L eB onheur Hea lthcare corpor ate umbre lla,” g rante d a wa iver of a simil ar insurance require ment is irrele vant to whether the doctors wer e entitled to waiver

. Be cause the doctors have 1 4 failed to raise a g enuine issue of materia l fa ct t h at would prec lude summary judgme nt, the trial

T he doc tor s con ced e thi s poi nt in an int end ed j ab fou nd in the ir re ply bri ef : “I t is very bas ic
, 1 3
Me tho dis t is m ore worr ie d tha t the y m ight be sue d for gaps in the ir pri or ta il covera ge o r the ir ins ura nce pre m iums m ight go u p f o r h a ving someone on the ir st af f tha n for pat ie nt car e.” Wh il e we exp re ss no

comm ent on the doc tor s’ ch a ra ct er izat ion of Me tho dis t’ s m oti ve, the ir poi nt is wel l- ta ken. Me tho dis t’ s d eci si on to li m it the number of doc tor s avail abl e to ser ve pat ie nts at it s hos pit al is ult imatel y a bus in e s s dec is ion

. I f pat ie nts ar e diss at is fi ed with the le vel of care th ey rec ei ve at M et hodi st due to the el iminat ion of physic ia ns wi th gaps i n thei r ins ura nce cover ages, t hey ar e f re e t o en gag e wi th physic ia ns wh o pr act ic e el sewh er e a nd t o pu rc has e i nsu ra nce th at wil l a ll ow t hem to ob ta in ser vices at ano the r h osp it al

.

I f anythi ng, thi s exa m

ple sup por ts Me tho dis t’s ar g um en t tha t the dec is ion to re li nqui sh the doc tor s’ 1 4 pri vileges was a bus ine ss dec is ion

. Me tho dis t Heal thc ar e- Fayett e Hosp it al ind is put abl y grant ed it s wai ver bas ed on the nee d for a physic ia n’s ser vices in a m edi cal ly unde r- ser ved ar ea of Fayett e Count y. Pre sumably, the hos pit al grant ed the wai ver af te r wei ghing the ri sks ass oci at ed wit h al lowi ng the doc tor to re m ai n on st af f agains t the nee d for his ser vices

. I t is not at al l cl e a r t h a t the hos pit al woul d have re ach ed a si m il ar

con cl usi on i f it was l oca te d i n a comm uni ty suc h as Me m

phi s whe re th e s uppl y of physi ci an c ar e i s no t a s li m it ed.

-16-court’s holding on this iss ue is aff irmed.

V. Conclusion

For the fore g oing rea sons, we aff irm the g rant o f s u m m ar y judgme nt to Methodist on the doctors’ claims for brea ch of contra ct, in t en t i onal interfe renc e with business rela tionships, and punitive da

mag es in favor of Methodist. Costs of this a ppeal are assessed to the appellants, J ames K. P atterson, M.D. and R ushton E. Patterson, J r., M.D., and their surety for which execution may issue if nec essar

y

.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ D A V I D R

. F A R M E R
, J U D G E

-17-