Court Opinion

ID: 156629
Source: CourtListenerOpinion
Date Created: 2010-08-14 04:42:38+00
Date Added: 2024-06-11T15:01:51.590870
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                     UNITED STATES COURT OF APPEALS
                                                                         JUL 17 1998
                                   TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                                Clerk

 VANCE H. SMITH and DEBORAH P.
 SMITH,

          Plaintiffs-Appellants,

 v.
                                                           No. 97-2164
 EASTERN NEW MEXICO MEDICAL
                                                   (D.C. No. CIV-92-641-LH)
 CENTER; ORSON TRELOAR; JOHN
                                                    (District of New Mexico)
 KIKER; MIKE MCGUIRE; RICHARD
 MOONEY; THOR STANGEBYE;
 KEVIN LOWE; MATT FOSTER; and
 DONALD WENNER,

          Defendants-Appellees.

                             ORDER AND JUDGMENT        *

Before BRORBY , McWILLIAMS , and HENRY , Circuit Judges.

      Vance and Deborah Smith appeal the district court’s grant of the

defendants’ summary judgment motion on their Fourteenth Amendment equal

protection claims. The district court found that the Smiths’ claims were barred by

the law of the case doctrine and, further, that Mrs. Smith’s claim was barred

      *
             This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
because she could not assert what was, in the district court’s view, a cause of

action belonging to her corporation. We vacate and remand because there is no

law of the case barring the Smiths’ equal protection claims and because Mrs.

Smith has alleged injuries separate and distinct from those of other corporate

shareholders.

                               I.   BACKGROUND

      Dr. Vance Smith, a board-certified surgeon in general and vascular surgery,

had medical privileges at the Eastern New Mexico Medical Center (“ENMMC”), a

general hospital in Roswell, from 1985 to 1991. Dr. Smith had numerous

conflicts with the defendant doctors and others working at the hospital. He

claims these conflicts led to many adverse actions that cost him money when,

among other things, the defendants forced him to stop performing (1) general

surgery and various specific surgical procedures, (2) certain surgeries that should

have been attended by an anesthesiology group that wouldn’t work with him, and

(3) all surgeries when his medical staff privileges were summarily suspended. He

also alleges that the defendants caused him damages when they forced him to

leave Roswell by unlawfully threatening a second summary suspension of his

medical privileges, a disciplinary action that, he claims, would have ruined his

career. Dr. Smith asserts that all of these actions and others–including placing

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him on chart review, maintaining a secret file on him, and accusing him of being

disruptive–were only done to him and were done specifically to force him out of

practice in Roswell.

      The defendants respond that Dr. Smith created many of the problems he

complains of and that they provided him with procedural due process protections

every time they took or threatened adverse actions against him. Further, they

assert that the record simply does not support the vast majority, if any, of his

claims.

      During roughly the same time period, Dr. Smith’s wife, Deborah P. Smith,

a registered nurse and registered vascular technician, operated the Eastern New

Mexico Medical Center Noninvasive Peripheral Vascular Laboratory, Ltd.,

(“Vascular Lab”) on property leased from the ENMMC. She and a trust created

for the benefit of Dr. Smith’s children were the only shareholders in the Vascular

Lab. Although the Vascular Lab was a corporate entity, Mrs. Smith avers that she

personally signed a promissory note obligating her to repay the debt for some of

the equipment in the Vascular Lab and that, using her own funds, she bought

other equipment for the corporation. She asserts that she had to leave Roswell

with her husband, close the Vascular Lab, and pay the note. Thus, she also

contends she was injured by the defendants’ alleged efforts to force her husband

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out of the ENMMC, and her injuries are in the form of lost profits from the

Vascular Lab and losses on the equipment in the Lab.

       This appeal is the second we have heard concerning this litigation.

Initially, the Smiths sued the ENMMC and doctors working at the ENMMC

asserting fourteen federal civil rights, antitrust, and state law tort claims. The

district court granted the defendants’ Fed. R. Civ. P. 12(b)(6) motion to dismiss

the Smiths’ Fourteenth Amendment equal protection claim. The district court

then granted the defendants’ summary judgment motion on the Smiths’ remaining

claims.

       The Smiths appealed, and, in an unpublished Order and Judgment, our

Court affirmed the grant of summary judgment.         See Smith v. Eastern New

Mexico Med. Ctr. , Nos. 94-2213 & 94-2241, 1995 WL 749712 (10th Cir. Dec. 19,

1995). However, we reversed dismissal of the equal protection claim, noting that

“the Equal Protection Clause protects not only against discrimination where

victims within an identified classification or group are injured, but also where the

plaintiff alleges an element of intentional or purposeful discrimination so as to

invoke the clause to protect an individual victim.”     Id. at **7 (internal quotation

marks omitted). After listing some of the above acts alleged by the Smiths as

proof that they pled “intentional or purposeful discrimination,” we remanded

stating that “the plaintiffs may or may not be able to prove [an equal protection

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violation], but we . . . are persuaded that the complaint states an equal protection

claim.” Id. at **8.

       On remand, the defendants moved for summary judgment on the equal

protection claim, and the district court granted their motion. Concluding that Dr.

Smith’s injury claim relied on his being forced or coerced into an involuntary

resignation from the ENMMC,        see Dist. Ct.’s Mem. Op. filed Apr. 17, 1997, at

10, and that in its earlier grant of summary judgment, it had decided, and the

Tenth Circuit had affirmed, “that Dr. Smith was not forced or coerced into

departing,” id. at 10-11, the district court granted summary judgment to the

defendants on Dr. Smith’s claim using law of the case doctrine.

       As to Mrs. Smith’s equal protection claim, the district court found two

reasons to grant summary judgment against her. First, it ruled that her losses

were actually those of the corporation and that a corporate officer may not

prosecute a corporation’s § 1983 claim.         See id. at 13. Second, the district court

stated that, in its earlier order, it granted summary judgment against Mrs. Smith

on all her claims regarding the Vascular Lab, and she did not appeal the summary

judgment ruling.    See id. at 14. Thus, according to the district court, “even

though the [Tenth Circuit] found that Ms. Smith stated an equal protection claim

in [her] Second Amended Complaint sufficient to withstand a motion to dismiss,

this claim is barred by the law of the case.”         Id. The Smiths again appeal.

                                                -5-
                         II.   STANDARD OF REVIEW

      We review a summary judgment ruling de novo, applying the same legal

standard used by the district court pursuant to Fed. R. Civ. P. 56(c). See Kaul v.

Stephan, 83 F.3d 1208, 1212 (10th Cir. 1996). “Summary judgment is appropriate

if the pleadings, depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a matter of law.”

Id. (quoting Wolf v. Prudential Ins. Co. of Am., 50 F.3d 793, 796 (10th Cir.

1995)). A “material fact is one which might affect the outcome of the dispute

under the applicable law.” Ulissey v. Shvartsman, 61 F.3d 805, 808 (10th Cir.

1995). “An issue of material fact is genuine if a reasonable jury could return a

verdict for the non-movant.” Kaul, 83 F.3d at 1212 (quoting Wolf, 50 F.3d at

796). We examine the factual record and reasonable inferences from it in the

light most favorable to the non-movant. See id. “If there is no genuine issue of

material fact in dispute, then we next determine if the substantive law was

correctly applied by the district court.” Id. (quoting Wolf, 50 F.3d at 796).

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               III.   DR. SMITH’S EQUAL PROTECTION CLAIM

       Dr. Smith argues, first, that our earlier ruling did not specifically decide

that he could not produce facts to prove his equal protection claim but rather only

that he had not complied with the district court’s local procedural rule in resisting

summary judgment on his other claims. Second, he asserts that even if our earlier

ruling did hold that he cannot produce facts showing he was forced to leave

Roswell, he still can show the defendants injured him before he left the ENMMC,

by, for example, suspending his surgical privileges and, thereby, causing him to

lose revenue.

       “Law of the case principles do ‘not bar a district court from acting unless

an appellate decision has issued on the merits of the claim sought to be

precluded.’”    Wilmer v. Board of County Commissioners       , 69 F.3d 406, 409 (10th

Cir. 1995) (quoting    United States v. Caterino , 29 F.3d 1390, 1395 (9th Cir.

1994)). “Thus, when a dispositive procedural deficiency has obviated or

deflected consideration of the underlying merits of a claim, the law of the case

doctrine does not reach through that procedural ruling to enshrine a substantive

determination never in fact made.”        Id.

       In Wilmer , the district court denied a procedurally defective motion without

reaching the merits of the jurisdictional issue it raised.   See Wilmer , 69 F.3d at

409. Our Court affirmed because of the procedural defect, also without reaching

                                                -7-
the merits of the jurisdiction question.     See id. On remand, the moving party

again raised the jurisdictional issue, but the district court refused to consider the

claim on law of the case grounds.       See id. On appeal, we reversed stating that

“given the majority’s unqualified reliance on the procedural disposition of the

district court and its silence with respect to the . . . jurisdictional [issues] . . . , we

cannot say this court’s prior decision actually resolved on the merits the

jurisdictional question . . . .”   Id. at 410.

       We agree with the district court that there is large overlap in the factual

basis for Mr. Smith’s equal protection claim and his claims on which we affirmed

summary judgment. We also agree that our affirmance in the earlier appeal was

based on our conclusion that Mr. Smith could not rely upon those facts to resist

summary judgment. However, as our earlier ruling was based on the Smiths’

failure to follow local summary judgment rules, a procedural deficiency, we

disagree that the earlier appeal automatically forecloses Mr. Smith’s efforts to

produce those facts to resist summary judgment on his equal protection claim.

       In the Smiths’ first appeal, we relied on a procedural defect to affirm the

grant of summary judgment on their other-than-equal-protection claims. We

stated that the district court granted summary judgment for the defendants

because the Smiths did not comply with the district court’s local summary

judgment motion rules.       See Smith , 1995 WL 749712, at **2. We then affirmed

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because “we c[ould not] say that the court abused its discretion by relying [on its

local rules] and concluding that plaintiffs failed to identify any disputed material

facts precluding summary judgment.”     Id. at **4. Therefore, our earlier holding

was based on a dispositive procedural deficiency and does not prevent Mr. Smith

from producing facts in support of his equal protection claims.

      Nor would it have been logical for us to remand if our earlier opinion had

foreclosed the possibility of Mr. Smith producing facts in support of his equal

protection claim. It simply would make no sense for us to have ruled (1) that the

district court improperly granted a 12(b)(6) motion dismissing the equal

protection claim, then (2) that Dr. Smith could not produce facts to support the

equal protection claim, then (3) that the equal protection claim should be

remanded even though we had already ruled Dr. Smith could not identify facts

supporting that claim.

      Additionally, although the district court’s opinion was premised on the

conclusion that we decided that Dr. Smith cannot prove he was forced to leave

Roswell, see Dist. Ct.’s Mem. Op. at 10-11, Dr. Smith claims that the defendants

caused him monetary damages on many occasions before he was allegedly forced

to leave the ENMMC. Therefore, even if we were to agree that our earlier

decision foreclosed Dr. Smith’s claim that he was forced to leave the ENMMC,

                                         -9-
we would have to remand for consideration of the other facts underlying his equal

protection claim.

      As our affirmance of the district court’s grant of summary judgment was

based on the Smiths’ failure to follow the local rules and because procedural

decisions cannot be the basis of a law of the case ruling, we vacate and remand

for consideration of Dr. Smith’s equal protection claim.

            IV.     MRS. SMITH’S EQUAL PROTECTION CLAIM

      The district court’s grant of summary judgment to the defendants on Mrs.

Smith’s equal protection claim was based on two grounds: (1) that Mrs. Smith’s

claim is barred by law of the case because she did not appeal the district court’s

initial grant of summary judgment against her and (2) that Mrs. Smith cannot sue

for losses to the Vascular Lab because those losses were to the corporate entity.

However, we vacate the district court’s order because the district court had

already dismissed Mrs. Smith’s equal protection claim when it entered its

summary judgment order, and Mrs. Smith did appeal the district court’s dismissal

of her equal protection claim. Additionally, Mrs. Smith has alleged an injury

separate and distinct from the other Vascular Lab shareholder.

                                        -10-
A.     Mrs. Smith’s prior appeal

       The district court stated that it granted the defendants’ first motion for

summary judgment on all “‘claims related to the [Vascular Lab],’ including the

equal protection claim.”    See Dist. Ct.’s Mem. Op. at 14. According to the

district court, Mrs. Smith did not appeal that ruling.     See id. Therefore, the

district court concluded, “even though [the earlier panel of] the appellate court

found that Mrs. Smith stated an equal protection claim . . . sufficient to withstand

a motion to dismiss, this claim is barred by law of the case.”     Id.

       We do not think Mrs. Smith’s equal protection claim is barred by law of the

case. First, the record informs us that the district court had already dismissed

Mrs. Smith’s equal protection claim before it ruled on the defendants’ motion for

summary judgment.      See Dist. Ct. Order filed Aug. 9, 1994. Therefore, her equal

protection claim was no longer before the district court at the time it entered its

summary judgment order, and we simply fail to see how it could have entered

summary judgment on that claim. Second, although Mrs. Smith may not have

appealed the summary judgment order regarding the Vascular Lab, our record

shows that Mrs. Smith did appeal the district court’s dismissal of her equal

protection claim.   See Aplts’ Opening Br. in No. 94-2241, at 23-25; Aplts’ Reply

Br. in Nos. 94-2213 & 94-2241, at 12-16. Thus, we properly had Mrs. Smith’s

equal protection claim before us when we reinstated it in our earlier opinion. We

                                             -11-
once again reinstate her equal protection claim because it was not before the

district court at the time it entered its summary judgment order and because Mrs.

Smith appealed the dismissal of the claim.

B.     Separate and distinct injury

       “[A] stockholder of a corporation does not acquire standing to maintain an

action in his own right, as a shareholder, when the alleged injury is inflicted upon

the corporation and the only injury to the shareholder is the indirect harm which

consists in the diminution in value of his corporate shares.”     Marchman v. NCNB

Tex. Nat’l Bank , 898 P.2d 709, 716 (N.M. 1995);       see Stat-Tech Int’l Corp. v.

Delutes (In re Stat-Tech Int’l Corp.)   , 47 F.3d 1054, 1059 (10th Cir. 1995). “The

theory behind this rule is that, once the corporation recovers its losses and

replenishes its assets, the recovery will be reflected in the price of the stock and

will allow the corporation to distribute the proceeds of the recovery, and thus the

shareholders and creditors will also recover for the indirect harm they have

suffered.” Marchman , 898 P.2d at 716. However, when the theory of indirect

loss, which is behind the rule, would not be vindicated, exceptions to the rule

apply. See id. at 716-17. For instance, when “the shareholder suffer[s] an injury

separate and distinct from that suffered by other shareholders. . . . the shareholder

is entitled to sue.”   Id. at 717.

                                            -12-
      Mrs. Smith, who owned 40% of the corporate stock, avers that she paid for

and signed a promissory note in her individual capacity for some of the

corporation’s equipment. Thus, she claims, when the corporation folded, she

suffered individual loss. According to Mrs. Smith, that individual loss was

separate and distinct from the loss suffered by the trust for Dr. Smith’s children,

which owned 60% of the corporate stock, but which had not purchased any of the

equipment. If she can prove her individual losses, she would have standing to sue

in her individual capacity for a portion of the corporation’s losses. As this is a

material factual issue, we remand to the district court to give Mrs. Smith an

opportunity to show her individual losses.

                               IV.    CONCLUSION

      There was no law of the case requiring summary judgment be entered in

favor of defendants on Dr. Smith’s equal protection claim. Additionally, Mrs.

Smith asserted a separate and distinct injury from that suffered by the other

shareholder in the Vascular Lab, and Mrs. Smith appealed the district court’s

earlier dismissal of her equal protection claim, which was not before the district

court when it entered summary judgment on her other claims relating to the

Vascular Lab. Therefore, we vacate and remand for consideration of the merits of

the Smiths’ equal protection claims. When considering the merits, the district

                                         -13-
court may grant summary judgment in favor of the defendants if, as they claim,

the evidence submitted by the Smiths to resist summary judgment would be

inadmissible at trial, or if summary judgment would be appropriate for any other

reason.

                                      Entered for the Court,

                                      Robert H. Henry
                                      Circuit Judge

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