Court Opinion

ID: 3029138
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:42:18.962662+00
Date Added: 2024-06-11T11:48:01.857908
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 01-3252
                                  ___________

Kurt R.E. Madsen, D.O.,               *
                                      *
             Appellant,               *
                                      *
      v.                              * Appeal from the United States
                                      * District Court for the Eastern
Audrain Health Care, Inc., doing      * District of Missouri.
business as Audrain Medical           *
Center, Joseph A. Corrado, M.D.,      *
Michael D. Jones, M.D.,               *
                                      *
             Appellees.               *
                                 ___________

                            Submitted: April 18, 2002

                                 Filed: July 18, 2002
                                  ___________

Before WOLLMAN, BEAM, and LOKEN, Circuit Judges.
                          ___________

BEAM, Circuit Judge.

      Appellant Dr. Kurt Madsen appeals the order of the district court dismissing
each count in his complaint. Upon review de novo, we affirm in part and reverse in
part.
I.    BACKGROUND

       For purposes of our review, we accept as true the factual allegations in
Madsen's complaint. Botz v. Omni Air Int'l, 286 F.3d 488, 490 (8th Cir. 2002). Dr.
Madsen is a licensed physician specializing in orthopedics medicine who worked in
Mexico, Missouri, for Audrain Health Care, Inc. In his complaint, Madsen alleges
that on August 14, 1997, he entered into a contract ("Physician Agreement") with
Audrain, which provided for Madsen to establish an orthopedic medical practice in
Mexico in return for a guaranteed minimum income paid by Audrain. On September
1, 1998, Madsen applied for and was granted medical staff privileges at the hospital.
On September 24, 1998, Madsen alleges that Dr. Corrado and Dr. Jones, Chief of
Staff and Chief of Surgery at Audrain respectively, contacted him with concerns they
had regarding Madsen's practice and skills. Madsen further alleges that on November
19, 1998, he was again called to meet with Corrado, Jones, and Garf Thomas,
Audrain's administrator, to further discuss these concerns. Following these
communications, the hospital brought a complaint against Madsen before the Medical
Staff Executive Committee. Madsen alleges that the Executive Committee made
certain adverse recommendations in response to the complaint and forwarded its
report to Audrain's Medical Staff Board of Directors for approval.

       When Madsen received notice of the Executive Committee's adverse
recommendations, he requested a hearing before an ad hoc committee of Audrain's
Medical Staff, as provided for in the Medical Staff Bylaws. At this hearing, held
February 25, 1999, the only evidence presented by Jones, Corrado, and the hospital,
was Jones' statement. Madsen points out in his complaint that he presented several
witnesses, including a Board Certified Orthopedic Surgeon who reviewed every
patient chart at issue and found no indication of any need to reduce Madsen's
privileges. Following this hearing, the Executive Committee's recommendation
remained adverse to Madsen. Madsen sought appellate review before the Board,
which concluded that the recommendations were "justified and not arbitrary or

                                        -2-
capricious" and therefore adopted them as a final decision. Madsen was notified on
May 5, 1999. This final Board action was reported to the Missouri State Board of
Registration for the Healing Arts and the National Practitioner Data Bank.

       Madsen alleges that as a direct result of the defendants' wrongful acts, he was
forced to close his profitable practice in Missouri and relocate to Indiana. Count I of
Madsen's complaint alleges that Audrain breached the Physician Agreement by
causing his privileges at Audrain to be adversely impacted, thus terminating Audrain's
obligation to guarantee compensation to Madsen. Madsen brings Count II against all
defendants alleging that they tortiously interfered with his business relationships and
expectancies with his patients. Count III, against Audrain, alleges that Audrain's
Medical Staff Bylaws constitute a contract between Audrain and Madsen and that
Audrain breached this contract. Count IV, against Jones and Corrado, alleges that
they conspired to cause Audrain to breach and terminate the Physician Agreement.
In Count V, Madsen alleges that Jones and Corrado conspired to cause Audrain to
breach and terminate the Medical Staff Bylaws, which Madsen claims support a
contractual relationship between the parties. Madsen seeks a declaratory judgment
in Count VI, declaring that the adverse decision is unjustified, arbitrary, and
capricious. Madsen further requests that this declaratory judgment be communicated
to the Missouri Board of Registration for the Healing Arts, the National Practitioner
Data Bank, and all other persons or entities to whom such adverse decision was
communicated. Finally, in Count VII, Madsen alleges that all of the defendants
maliciously communicated false information about him to others, including actual and
potential patients and state and federal agencies, damaging his reputation and earning
potential.

II.   DISCUSSION

      We review de novo the district court's grant of the defendants' 12(b)(6) motion
to dismiss. Omni, 286 F.3d at 491. We construe Madsen's complaint in the light

                                         -3-
most favorable to him and determine whether he can prove any set of facts that would
entitle him to relief. Id.

      A.     Count IV

       Before we reach the merits of this appeal, we must first resolve the unique
procedural posture created by the district court's dismissal of Count IV at Madsen's
request. Count IV, which survived the defendants' motion to dismiss, alleges that
defendants Jones and Corrado individually conspired to cause Audrain to breach and
terminate the Physician Agreement with Madsen. Although this count was not
dismissed by the district court in its December 7, 1999, memorandum and order,
Count IV was later dismissed without prejudice per Madsen's suggestion at a hearing
concerning Madsen's motion to alter or amend judgment.1 Although the district court
did not clearly articulate the basis for the dismissal of Count IV in its order, we
presume that this dismissal was entered pursuant to Federal Rule of Civil Procedure
41(a) (2), which allows for dismissal of actions by court order. Madsen's intentions
with respect to Count IV are unclear.

       Clearly Madsen sought dismissal of Count IV to allow immediate appeal of the
court's otherwise interlocutory order when the district court denied Madsen's request
to amend the earlier dismissal of all other counts. During briefing and at oral
argument, Madsen only sought reinstatement of Counts I, II, III, V, VI and VII. The

      1
        Madsen boldly challenges the "flawed logic" of the district court in that it
dismissed Count I of the complaint, which alleged breach of contract with regard to
the Physician Agreement, while allowing Count IV, which alleged tortious
interference with that same agreement by Drs. Jones and Corrado. Madsen's own
logic eludes us. Count I was dismissed because a private hospital has discretion
regarding its exclusion of a physician or surgeon from practicing therein. This
certainly does not mean the Physician Agreement is wholly unenforceable in other
respects.

                                        -4-
question before us is whether the district court abused its discretion when it dismissed
Count IV without prejudice for the purpose of allowing Madsen to appeal the
dismissal of the remaining claims. See Great Rivers Coop. v. Farmland Indus., Inc.,
198 F.3d 685, 689 (8th Cir. 1999). Our precedent in this type of case does not bode
well for Madsen. In fact, "[i]n most cases . . . a district court does abuse its discretion
when it frustrates the limitations on federal appellate jurisdiction by entering a Rule
41(a)(2) order dismissing remaining claims without prejudice for the purpose of
facilitating the immediate appeal of an earlier interlocutory order." Id. at 689-90.

       Under these circumstances, the question of remedy looms. "In most cases, the
proper remedy will be to reverse the Rule 41(a)(2) order and remand for completion
of the case, without considering the merits of the earlier interlocutory order(s)." Id.
at 690. We may also deem the ambiguous voluntary dismissal of Count IV to be with
prejudice and go on to consider the appeal from the district court's dismissal of all
remaining claims. Id.; see also Minnesota Pet Breeders, Inc. v. Schell & Kampeter,
Inc., 41 F.3d 1242, 1245 (8th Cir. 1994). Madsen may not evade the final judgment
requirement of Federal Rule of Civil Procedure 54(b) by seeking a non-prejudicial
dismissal of Count IV. Minnesota Pet Breeders, 41 F.3d at 1245. Under this rubric,
we choose the latter remedy, discussed at oral argument,2 and deem Madsen's request
for dismissal of Count IV to be with prejudice.

      B.     Counts I and II

     In addressing Counts I and II of Madsen's complaint, the district court turned
to Cowan v. Gibson, 392 S.W.2d 307 (Mo. 1965). In Cowan, a physician who had

      2
        Madsen was notified at oral argument of the risk of losing Count IV altogether
if he proceeded under the current procedural posture. He assured the court that
treating Count IV as being dismissed with prejudice would not hurt the case and
proceeded to argue, as he did in briefing, what he considers to be the "meat of the
case."

                                           -5-
been denied reinstatement to a hospital's medical staff alleged a wrongful conspiracy
to exclude him and to injure him in the practice of medicine. Id. at 308. The
Missouri Supreme Court reiterated 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 managing authorities.'" Id. (quoting Annotation 24 A.L.R. 2d 850,
852). However, Cowan was not "a suit between the doctor and the hospital or its
governing board or staff alone in their hospital character and capacities." Id. at 309.
Because the physician named two doctors in their individual capacity alleging "that
the two doctors in their personal professional capacities conspired with hospital board
members to the end and for the purpose of interfering with Dr. Cowan and his
contractual rights with his patients all to their financial advantage–all of which [was]
outside the operation and government of the hospital," the allegations fell outside of
the general rule and the case was remanded. Id.

       In Count I, Madsen alleges breach of contract by the hospital with respect to
the Physician Agreement. Count II alleges tortious interference with business
relationships against all defendants. As explained by the district court, nothing in
Madsen's complaint removes it from the general rule that the exclusion of a physician
from practicing in a private hospital is a discretionary matter resting with the
managing authorities. Id. at 308. This is a suit between a doctor and the hospital and
its governing staff in their hospital character and capacities. Further, contrary to
Madsen's argument, no factual determination is required. The construction of an
unambiguous contract is a question of law for the court. Contract Freighters, Inc. v.
J.B. Hunt Transport, Inc., 245 F.3d 660, 663 (8th Cir. 2001) (applying Missouri law).
The Physician Agreement provides that if Madsen loses staff privileges at Audrain,
such action terminates the agreement. Thus, termination is not a breach of contract,
but instead, is expressly provided for in the contract. The rule from Cowan applies
and Counts I and II were appropriately dismissed.

                                          -6-
      C.     Counts III and V

       The district court determined that the Medical Staff Bylaws were not
incorporated into the Physician Agreement and dismissed Counts III and V
accordingly. We agree with the reasoning of the district court as to these counts. The
mere reference in the Physician Agreement to the Medical Staff Bylaws does not
create a contractual relationship between Madsen and Audrain with regard to those
Bylaws in their entirety. The Medical Staff Bylaws were not incorporated into the
Physician Agreement, as Madsen argues, and are not part of the terms of the contract
that existed between these parties. Accordingly, there is no basis for Madsen's claims
of breach of contract or tortious interference with the Medical Staff Bylaws.

       In Zipper, D.O. v. Health Midwest, 978 S.W.2d 398 (Mo. Ct. App. 1998), the
Missouri court held that "hospital bylaws cannot be considered a contract under
Missouri law because consideration is lacking." Id. at 416. Madsen correctly notes
that in some instances a hospital can be subjected to contractual enforcement of its
Medical Staff Bylaws if a contractual relationship is established in a separate
document. Id. at 417. However, like in Zipper, procedures purportedly available to
Madsen through Audrain Bylaws are not set forth in a separate document. The
limited reference to the Bylaws in the Physician Agreement is insufficient to support
the creation of a separate contractual relationship. Madsen alleges that the Medical
Staff Bylaws were incorporated in three ways–by way of the implied terms of the
contractual relationship of the parties, directly incorporated in the Physician
Agreement, and by subsequent agreements of the parties. We disagree.

      Any reference to the Bylaws in the Physician Agreement is cursory, and only
then articulates what Madsen's responsibilities are in relation to his contracted
obligations. For example, the Physician Agreement in section 1.2 states that "[d]octor
shall perform the duties described in this Section 1.2, and such duties shall be
performed, in accordance with the bylaws, policies and rules of the Hospital and the

                                         -7-
Medical Staff." Requiring that Madsen act in accordance with the Medical Staff
Bylaws is hardly incorporation of the Bylaws in their entirety, binding both parties.
Further, the fact that the Medical Staff Bylaws were specifically binding on Madsen
as part of the contractual relationship, does not necessarily mean that the parties
reciprocally contracted for the same as to Audrain. "There is no necessity 'that for
each stipulation in a contract binding the one party there must be a corresponding
stipulation binding the other.'" Laclede Gas Co. v. Amoco Oil Co., 522 F.2d 33, 36
(8th Cir. 1975) (quoting James B. Berry's Sons Co. v. Monark Gasoline & Oil Co.,
32 F.2d 74, 75 (8th Cir 1929). So even recognizing the potential for hospitals to
separately create a contractual relationship with their physicians under their bylaws,
it did not exist in this instance.

       Finally, Missouri law in this respect is clear. The expressed policy in Missouri
is the assurance of quality health care, which is unduly impinged by allowing a
physician to seek damages for an alleged failure of a hospital to follow the procedures
established by its bylaws. Zipper, 978 S.W.2d at 417. The district court
appropriately dismissed Counts III and V of Madsen's complaint.

      D.     Counts VI and VII

       The district court dismissed Madsen's Count VI, seeking a declaratory
judgment, and Count VII, which alleges that all defendants committed slander,
holding that the rule in Cowan requires dismissal of both counts. Cowan certainly
addresses Count VI of Madsen's complaint but we fail to see how Cowan is
instructive on Count VII.

       In Count VI, Madsen alleges that the decision adverse to Madsen should be
declared unjustified, arbitrary and capricious, and ordered to be set aside in toto, and
that such finding be communicated to the Missouri Board of Registration for the
Healing Arts, the National Practitioner Data Bank and all other persons or entities to

                                          -8-
whom such adverse decision was communicated. Because we previously determined
that nothing in Madsen's complaint removes it from the general rule that the exclusion
of a physician from practicing in a private hospital is a discretionary matter resting
with the managing authorities, there is no support for a declaratory judgment in this
regard. As such, we affirm the district court's dismissal of Count VI.

       As to Count VII, we must remember at what stage of the proceedings these
determinations are being made. "In reviewing a motion to dismiss, we construe the
complaint liberally, taking all factual allegations as true, and 'will affirm only if it
appears beyond doubt that [the plaintiff] cannot prove any set of facts in support of
[the] claim which would entitle [him] to relief.'" Turner v. Holbrook, 278 F.3d 754,
757 (8th Cir. 2002) (quoting Sisley v. Leyendecker, 260 F.3d 849, 850 (8th Cir.
2001)). Further, "[a]t the pleading stage, 'we "presum[e] that general allegations
embrace those specific facts that are necessary to support the claim."'" American
Canoe Ass'n, Inc. v. E.P.A., 289 F.3d 509, 512 (8th Cir. 2002) (quoting Bennett v.
Spear, 520 U.S. 154, 168 (1997) (quoting Lujan v. Defenders of Wildlife, 504 U.S.
555, 561 (1992)). Given the legal standard at this stage in the proceedings, we find
no basis for the dismissal of Count VII. Madsen properly alleges each element of his
slander claim in his complaint. Cowan is wholly inapplicable in this regard and the
district court did not provide any explanation illuminating its conclusion that Cowan
provided the basis for its dismissal of Count VII.

      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 managing
authorities,'" Cowan, 392 S.W.2d at 308 (quoting Annotation 24 A.L.R. 2d 850, 852),
would not dispose of a claim of slander such as that raised by Madsen in Count VII.
At the very least, we cannot state with certainty at this stage that Madsen is unable

                                          -9-
to prove any set of facts that would entitle him to relief.3 Accordingly, we reverse
the district court's dismissal of Count VII.

III.   CONCLUSION

      The district court properly dismissed Counts I, II, III, V, and VI of Madsen's
complaint. We reverse the district court's dismissal of Count VII and deem Count
IV dismissed with prejudice.

       A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

       3
       Defendants argue that the Health Care Quality Improvement Act, 42 U.S.C.
§ 11101 et seq., grants immunity from any civil liability in this case. However,
"HCQIA immunity is a question of law for the court to decide and may be resolved
whenever the record in a particular case becomes sufficiently developed." Bryan v.
James E. Holmes Reg'l Med. Ctr., 33 F.3d 1318, 1332 (11th Cir. 1994). We have no
record to speak of on a motion to dismiss, thus any analysis in this regard is
premature.

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