# In the Missouri Court of Appeals **Eastern District**

DIVISION FOUR MICHAEL H. RALPH, M.D., ) No. ED102035 ) Plaintiff/Appellant, ) A ppeal from the Circuit Court ) of St. Louis County v. ) ) ST. ANTHONY’S MEDICAL CENTER, ) Honorable Michael D. Burton ) Defendant/Respondent. ) Filed: September 22, 2015

Introduction Michael H. Ralph, M.D. (Dr. Ralph or Appellant) appeals from the trial court’s Order and Judgment granting St. Anthony’s Medical Center’s (SAMC or Respondent) motion to dismiss Appellant’s second ame nded petition bringing a claim for tortious interference with his business expectancies. We affirm. Factual and Procedural Background Dr. Ralph is a licensed physician who had medical staff privileges as an orthopedic surgeon to operate upon patient s at SAMC, a Missouri not-for-profit corporation, which opera tes as a hospital. On August 23, 2013, Dr. Ralph received a letter from SAMC’s Chief Executive Officer purporting to limit his clinical privileges and impose certain monitoring requirements. Dr. Ralph engaged in negotia tions with SAMC to continue to perform surgeries at the hospital.2 Dr. Ralph filed his original petition ag ainst SAMC on September 4, 2013. In his original petition, Dr. Ralph sought both damage s and injunctive relief against SAMC in a three-count petition, including temporary and preliminary injunctive relief to require SAMC to comply with its medical staff bylaw s, which he contended had been violated by SAMC in connection with restrictions, limita tions, and reductions of his privileges. On September 5, 2013, Dr. Ralph filed a mo tion in the trial court for a temporary restraining order (TRO) and se t the motion for a hearing for the following day. The TRO hearing was then canceled, to be reset upon request. After a dispute arose over the form of a non-standard informed consent for patients, SAMC summarily suspended Dr . Ralph on September 11, 2013. Dr. Ralph timely requested a hearing on the summary susp ension of his medical staff privileges. Also on September 11, 2013, Dr. Ralph filed a motion for leave to file an amended petition against SAMC and a verified motion for a TRO, and noticed the TRO hearing for the next day. On September 12, 2013, the trial court heard and denied Dr. Ralph’s motion for TRO and/or preliminary in junction and set the preliminary injunction request for hearing on October 22, 2013. This hearing was continued to June 11, 2014. In October and November 2013, a hear ing was held under the Amended and Restated Bylaws of the Medical, Dental and Podiatric Staff of SAMC (Bylaws). On December 31, 2013, the Hearing Committee i ssued its Report and Recommendation revoking Dr. Ralph’s medical staff privileges and clinical privileges. Dr. Ralph appealed from the Report and Recommendation of th e Hearing Committee, and the Appellate

Review Committee affirmed the decision. On February 28, 2014, SAMC’s Board of3 Directors issued its Notice of Final D ecision in which Dr. Ralph’s medical staff privileges and clinical pr ivileges were revoked. Dr. Ralph did not have priv ileges at any other medical center or hospital in which to perform surgeries on his pati ents. Dr. Ralph was also on st aff at, and had an ownership interest in, an ambulatory surgery center the bylaws of which required its doctors to have staff privileges at a local hos pital. Dr. Ralph maintains he could no longer continue his staff membership at or ownership intere st in the ambulatory surgery center. On April 10, 2014, Dr. Ralph moved for leav e to file a Second Amended Petition, which was granted by the trial court. Inhis Section Amended Petition, Dr. Ralph presented a single count allegi ng tortious interference with his business expectancies and seeking monetary damages from SAMC predicated upon the allegedly wrongful

revocation of his medical st aff privileges at SAMC. On April 29, 2014, SAMC moved to dism iss the Second Amended Petition for failure to state a claim upon which relief c ould be granted. On May 6, 2014, the motion was heard by trial court and taken under submission. On August 7, 2014, the trial court issued its Order and Judgment dismissing Dr. Ralph’s Second Amended Petition, finding Miss ouri law did not authorize a claim for damages by a physician against a private Mi ssouri hospital regard ing the hospital’s

medical staff decisions. This appeal follows.

Points Relied On In his first point, Dr. Ralph argues the tr ial court erred in dismissing his cause of

action for tortious interference with busin ess expectancy because he alleged facts4 essential to recovery and his petition was not inadequate, in that he properly pled all

elements of this cause of action. In his second point, Dr. Ralph argues th e trial court erred in finding that a physician could not bring a cause of action against a hospital for damages, in that his lawsuit seeks relief for tortious interference with business expectancy. In his third point, Dr. Ralph argues the tria l court erred in finding that the cause of

action for tortious interference with busin ess expectancy related to a contractual obligation with SAMC because the business expectancy pled in the Second Amended Petition was of his continued orthopedic surg ical practice and ownership interest in the ambulatory surgery center.

Standard of Review Appellate review of a circuit court’s order to grant a motion to dismiss is de novo

. Fenlon v. Union Elec. Co., 266 S.W.3d 852, 854 (Mo. App. E.D. 2008). A motion to dismiss for failure to state a claim only tests the adequacy of the plai ntiff’s petition. Id. All factual allegations contained in the petiti on are assumed to be true and this Court makes no attempt to weigh their credibility or pe rsuasiveness. Id. It is not the function of either the trial court or this Court to determine on the merits whether the plaintiff is

entitled to relief. Fenlon v. Union Elec . Co., 266 S.W.3d 852, 854 (Mo. App. E.D. 2008).

Discussion

To state a claim for tortious interferen ce with business expectancy, a plaintiff must plead and prove: 1) a valid business e xpectancy; 2) defendant’s knowledge of the expectancy; 3) intentional interference by th e defendant inducing or causing a breach of the expectancy; 4) absence of justification; and 5) damages. Misischia v. St. John’s5 Mercy Med. Ctr., 30 S.W.3d 848, 863 (Mo. App. E.D. 2000), abrogated on other grounds by Ellison v. Fry, 437 S.W.3d 762 (Mo. banc 2014). At issue in this case is the adequacy of Dr. Ralph’s Second Amended Petition. See Smith v. City of St. Louis, 409 S.W.3d 404, 417 (Mo. App. E.D. 2013) (once a pleading has been amended, all prior pleadings ar e considered abandoned unless they are incorporated into th e amended pleading). In Cowan v. Gibson, 392 S.W.2d 307, 308 (Mo. 1965), the Missouri Supreme Court first addressed the ques tion of whether a physician co uld sue a private hospital for revoking the physician’s staff priv ileges. The Cowan Court adopted the general rule that “the exclusion of a physician or surgeon from practicing [in a private hospital] is a matter which rests in the discretion of the [hospital’s] managing authorities.” Id. Cowan stands for the proposition that, under Missouri law, a private hospital’s deci sions regarding staff privileges are not subject to judicial over sight. Id. at 309; Egan v. St. Anthony’s Med. Ctr., 244 S.W.3d 169, 171 (Mo. banc 2008) (Ega n I). Cowan did carve out a narrow exception to the general rule, recognizing a cause of action in the case before it because the plaintiff alleged more than just the wrongf ul denial of staff privileges by the hospital, but also that two practicing physicians conspire d with others for thei r financial advantage to exclude plaintiff from pract icing medicine. Id. at 309. Following Cowan, the general rule that the denial of a physician or surgeon from practicing in a private hospital is a matter wh ich rests in the discretion of the hospital’s managing authorities has been consistently applied. See Richardson v. St. John’s Mercy Hosp., 674 S.W.2d 200, 201 (Mo. App. E.D. 1984) (framing the issue as a question of jurisdiction); and Misischia, 30 S.W.3d at 863, abrogated on other grounds by Ellison,6 437 S.W.3d 762 (rejecting physicia n plaintiff’s claim seeki ng monetary damages for

tortious interference with his business relationship and expectancies based upon the general rule that a private hospital has the legal right to summarily suspend and ultimately terminate a physician’s staff privile ges, as such matters rest within the discretion of the hospital’s managing authorities). In Zipper v. Health Midwest, 978 S. W.2d 398, 415-17 (Mo. App. W.D. 1998), the court held that a hospital’s byl aws do not constitute a contra ct between a hospital and the medical staff, and therefore a physician could not maintain a contra ct action for damages against a hospital based on the fa ilure to abide by such. In support, the court reiterated that a grant of hospital privileges to a physic ian does not confer on the physician absolute authority to practice medicine at that hospital and that the hospital retains authority to restrict or revoke a staff member’s privil eges by reasonable and nondiscriminatory rules and regulations. Id. at 417. The court f ound that “[a] hospital’ s consideration, when terminating the privileges of a physician, of its potential liability for monetary damages could unduly impugn a hospital’s ac tions in terminating the privileges of a physician providing substandard patient care.” Id. In Egan I, 244 S.W.3d at 171, the Missour i Supreme Court reexamined its holding in Cowan. The Court noted some changes in th e law, in particular the implementation of a state regulation, 19 CSR 30–20.021(2)(C)1–5, pr omulgated in 1982 by the State Board of Health, mandating all Miss ouri hospitals to ad opt bylaws governing the professional activity of the medical staff, including “heari ng and appeal procedures for the denial of reappointment and for the denial, revocati on, curtailment, suspension, revocation, or other modification of clinical privileges of a member of the medical staff.” Id. at 1737 (quoting 19 CSR 30–20.021(2)(C)(5)). The Cour t concluded “it is implicit under this regulation that hospitals notonly have a legal duty to adopt bylaws, but also a corresponding duty to abide by those bylaws.” Id. Distinguishing actions brought for damages, the Court establishe d a limited exception to the ru le of non-review, holding an aggrieved member of a medical st aff may bring an action in equ ity for injunctive relief to compel the hospital to substantially comply with its own bylaws before his privileges may be revoked. Id. at 174. The Court “em phasized that the purpose of the [state] regulation is to implement a sy stem of medical staff peer re view, rather than judicial oversight, and it is clear that fi nal authority to make staffing decisions is securely vested in the hospital’s governing body with advice from the medical staff.” Id. The Court stated it “will not impose judici al review on the merits of a hospital’s staffing decisions, but will act only to ensure substantial comp liance with the hospital’s bylaws.” Id. After Egan I, Dr. Egan’s case was remanded to the trial court to determine whether the hospital had substantially complie d with the medical staff bylaws. Egan v. St. Anthony’s Med. Ctr., 291 S.W.3d 751, 757 (Mo. App. E.D. 2009) (Egan II). On remand, the trial court denied Dr. Egan’s re quested injunctive reli ef, finding substantial compliance by the hospital. Id. On app eal, this Court defined the standard for “substantial compliance,” looking to Egan I fo r guidance. Id. at 758-760. We reiterated that Egan I created a limited departure fr om the rule of non-review, which did “not impose judicial review of the merits of a hos pital’s staffing decisions.” Id. at 760. The Egan II court held “if a hospital substantia lly complies with its bylaws, the adversely

affected medical staff member is not entitle d to equitable relief and a reviewing court may not reweigh the evidence or interfere with the hospital’s decision on the merits.” Id.8 On appeal, Dr. Ralph asserts he is no t seeking review of SAMC’s decision regarding his medical staffing privileges, but rather is seeking relief from SAMC’s

tortious interference with hi s business relationships with his patients and his ambulatory surgery center. Dr. Ralph’s petition, however , belies his argument on appeal. In his Second Amended Petition, Dr. Ralph alleged various violations by SAMC of its own bylaws in suspending and revoking his staff pr ivileges. Dr. Ralph also alleged as

follows: (1) he had a reasonable belief a nd expectation that he would continue to have staff privileges at SAMC to schedule and perform surgeries upon his patients at SAMC; (2) his staff membership and clin ical privileges at SAMC were revoked; (3) he has been unable to perf orm surgeries on patients which were, or would have been, scheduled at SAMC; (4) since his privileges were suspended, surgeries which were scheduled prior to the suspension were adversely impacted or cancelled; (5) SAMC knew or should have known of his active orthopedic surgical practice which necessarily in cluded the scheduling of surgeries at SAMC; (6) SAMC knew, or should have known, he was required to maintain staff privileges at a local hospital in order to continue his staff membership or ownership interest for the ambulatory surgery center; (7) SAMC intentionally interfered with his reasonable expectations by attempting to prohibit him from perf orming said surgeries, interfering with his practice of medicine, and ending his staff membership and ownership interest in the ambulatory surgery center; (8) SAMC’s intentional and unreasonable interference has injured him financially; and (9) SAMC lacked justification in revoking his staff membership and clinical privileges, and interfer ing with his practi ce of medicine. Contrary to Dr. Ralph’s asse rtions otherwise, the only r easonable interpretation of the allegations in his Second Amen ded Petition is that his claim of tortious interference of business expectancy against SAMC is prem ised upon Dr. Ralph’s loss of business as a result of SAMC’s alleged wrongful suspensi on and revocation of his staff privileges.9 Prevailing under this theory w ould require “judicial review of the merits of a hospital’s staffing decisions,” which is strictly prohibi ted. Egan I, 244 S.W.3d at 174. This Court has previously rejected similar claims for da mages for tortious interference with business relationship and expectancy re sulting from a private hosp ital’s summary suspension and termination of a physician’s st aff privileges. See Misischi a, 30 S.W.3d at 863. Missouri

law is clear

− Dr. Ralph may only bring an action in e quity for injunctive relief to compel SAMC to substantially comply with its bylaws and may not main tain an action for damages premised upon such alleged failure. Id. at 174. The trial court did not err in granting SAMC’s motion to dismiss Dr. Ra lph’s Second Amended Petition bringing a claim for damages for tortious interf erence with his business expectancy. Based on the foregoing, Dr. Ralph’s Po ints I, II, and III are denied.

Conclusion The trial court’s judgment granting SAMC ’s motion to dismiss is affirmed.

Sherri B. Sullivan, P.J. Patricia L. Cohen, J., and Kurt S. Odenwald, J., concur.