for the same reasons noted earlier in connection with my discussion of Hill-Burton funding.
With the exception of the two classes of cases noted below, courts have unanimously held that receipt of Medicare and Medicaid funds by a hospital does not convert all of its actions into actions taken under color of state law. Briscoe v. Bock, supra; Chrisman v. Sisters of St. Joseph of Peace, supra; Greco v. Orange Memorial Hospital Corp., supra; Doe v. Bellin Memorial Hospital, supra; Ward v. St. Anthony Hospital, supra; Place v. Shepherd, 446 F.2d 1239 (6th Cir. 1971); Trageser v. Libbie Rehabilitation Center, Inc., 462 F. Supp. 424 (E.D.Va.1977), aff'd, 590 F.2d 87 (4th Cir. 1978); cert. denied, 442 U.S. 947, 99 S. Ct. 2895, 61 L. Ed. 2d 318 (1979); Fuzie v. Manor Care, Inc., 461 F. Supp. 689 (N.D.Ohio 1977); Berrios v. Memorial Hospital, Inc., supra; Staelens v. Yake, supra; Hobbins v. Methodist Hospital of Madison, supra; Holton v. Crozer-Chester Medical Center, supra; Sament v. Hahnemann Medical College and Hospital, supra; Acosta v. Tyrone Hospital, supra; Aasum v. Good Samaritan Hospital, supra; Spencer v. Community Hospital of Evanston, supra; Hoberman v. Lock Haven Hospital, supra; Barrett v. United Hospital, supra; Ozlu v. Lock Haven Hospital, supra; Allen v. Sisters of St. Joseph, supra; Wood v. Hogan, supra.
(iv) Tax-exempt status :
Plaintiffs might be able to show that CCMC enjoys substantial benefits as a result of its tax-exempt status. As a matter of logic, such proof would be insufficient to maintain plaintiffs' state action allegations. Such an argument would, if extended to its logical limits, convert every private charity into a state agency for purposes of section 1983. I decline to read the civil rights statute in such a fashion. Further, mere proof that defendant CCMC enjoys such a status does nothing to establish the requisite nexus between the alleged government involvement and the denial of specialized privileges of which plaintiffs are complaining.
With apparently no exception,
the courts have held that the tax-exempt status of defendant hospitals is insufficient as a matter of law to convert all of its actions into actions taken under color of state law. Aasum v. Good Samaritan Hospital, supra; Briscoe v. Bock, supra; Taylor v. St. Vincent's Hospital, supra; Watkins v. Mercy Medical Center, supra; Ascherman v. Presbyterian Hospital of Pacific Medical Center, Inc., supra; Chrisman v. Sisters of St. Joseph of Peace, supra; Greco v. Orange Memorial Hospital Corp., supra; Ward v. St. Anthony Hospital, supra; Robinson v. Magovern, 456 F. Supp. 1000 (W.D.Pa.1978); Hodge v. Paoli Memorial Hospital, supra; Holton v. Crozer-Chester Medical Center, supra; Acosta v. Tyrone Hospital, supra; Sokol v. University Hospital, Inc., supra; Hoberman v. Lock Haven Hospital, supra; Barrett v. United Hospital, supra; Allen v. Sisters of St. Joseph, supra; Holmes v. Silver Cross Hospital, supra; Wood v. Hogan, supra.
(v) Monopoly status :
Finally, plaintiffs might be able to show that CCMC, or some aspect of CCMC's operations, has achieved a monopoly status in a particular geographic region, presumably as a result of government regulation. As a matter of logic, such proof would be insufficient to maintain plaintiffs' state action allegations. The Supreme Court in Jackson v. Metropolitan Edison Company unequivocally established that a defendant's holding of a state-created monopoly, even a "public service" monopoly such as that of a hospital or utility, "is not determinative" in considering whether a defendant's action is in effect that of the state. Jackson, 419 U.S. at 351, 95 S. Ct. at 453-54.
With the exception of only one case,
the reasoning applied in the Jackson decision has repeatedly been followed by lower courts in holding that the occupation of a monopoly position by a private hospital does not transform its action into state action. Schlein v. Milford Hospital, supra; Taylor v. St. Vincent's Hospital, supra; Holton v. Crozer-Chester Medical Center, supra; Barrett v. United Hospital, supra; Berrios v. Memorial Hospital, Inc., supra.
The precedents cited above are contradicted by two limited lines of cases, both of which are clearly and conclusively distinguishable from the instant case, and neither of which was cited by plaintiffs in support of their claims. First, courts in the Fourth Circuit uniformly hold that receipt of Hill-Burton funds,41a the existence of extensive regulation, and/or receipt of Medicare and Medicaid funds is sufficient to support a finding of state action. Doe v. Charleston Area Medical Center, Inc., 529 F.2d 638 (4th Cir. 1975); Duffield v. Charleston Area Medical Center, Inc., 503 F.2d 512 (4th Cir. 1974); Christhilf v. Annapolis Emergency Hospital Ass'n, 496 F.2d 174 (4th Cir. 1974); Sams v. Ohio Valley General Hospital Ass'n, 413 F.2d 826 (4th Cir. 1969); Cypress v. Newport News General & Nonsectarian Hospital Ass'n, 375 F.2d 648 (4th Cir. 1967); Smith v. Hampton Training School for Nurses, 360 F.2d 577 (4th Cir. 1966); Eaton v. Grubbs, 329 F.2d 710 (4th Cir. 1964); Simkins v. Moses H. Cone Memorial Hospital, 323 F.2d 959 (4th Cir. 1963), cert. denied, 376 U.S. 938, 84 S. Ct. 793, 11 L. Ed. 2d 659 (1964); Large v. Reynolds, 414 F. Supp. 45 (W.D.Va.1976); Harron v. United Hospital Center, 384 F. Supp. 194 (N.D.W.Va.1974), rev'd on other grounds, 522 F.2d 1133 (4th Cir. 1975), cert. denied, 424 U.S. 916, 96 S. Ct. 1116, 47 L. Ed. 2d 321 (1976). This line of cases has been recognized as idiosyncratic, and has been explicitly rejected in the Third Circuit. See, e.g., Hodge, 576 F.2d at 564. I therefore decline to follow these cases.
Second, some cases decided previous to 1974, before the Supreme Court decision in Jackson v. Metropolitan Edison Company, including one of my own earlier decisions, hold that receipt of Hill-Burton funds, the existence of extensive regulation, and/or receipt of Medicare and Medicaid funds justifies a finding that a private defendant acted under color of state law. O'Neill v. Grayson County War Memorial Hospital, 472 F.2d 1140 (6th Cir. 1973); Chiaffitelli v. Dettmer Hospital, Inc., 437 F.2d 429 (6th Cir. 1971); Meredith v. Allen County War Memorial Hospital Commission, 397 F.2d 33 (6th Cir. 1968); Stanturf v. Sipes, 335 F.2d 224 (8th Cir. 1964), cert. denied, 379 U.S. 977, 85 S. Ct. 676, 13 L. Ed. 2d 567 (1965), overruled by Briscoe v. Bock, 540 F.2d 392 (8th Cir. 1976); Suckle v. Madison General Hospital, 362 F. Supp. 1196 (W.D.Wis.1973), aff'd on other grounds, 499 F.2d 1364 (7th Cir. 1974), questioned in Barrio v. McDonough District Hospital, 377 F. Supp. 317 (N.D.Ill.1974); Holmes v. Silver Cross Hospital, 340 F. Supp. 125 (N.D.Ill.1972); Bricker v. Sceva Speare Memorial Hospital, 339 F. Supp. 234 (D.N.H.1972); Citta v. Delaware Valley Hospital, 313 F. Supp. 301 (E.D.Pa.1970), overruled by Hodge v. Paoli Memorial Hospital, 576 F.2d 563, 564 (3d Cir. 1978). Because the intervening Supreme Court decision in Jackson substantially tightens state action requirements, I do not find any cases decided before 1974 particularly persuasive on this point. I am joined in my refusal to follow this pre-1974 precedent by the vast majority of courts considering the issue. See Briscoe, 540 F.2d at 395; Holton, 419 F. Supp. at 341.
b. Facts and circumstances test
My holding that proof of each hypothetical factual allegation alone would not be sufficient to justify a finding that defendants acted under color of state law is not dispositive of the state action issue. It is possible that, because the state action test is a "facts and circumstances" test, proof of several of the hypothetical factual allegations would be sufficient cumulatively to support a finding that defendants acted under color of state law. I also hold, however, that under the facts and circumstances of this case, viewed in the light most favorable to plaintiffs, defendants are entitled to judgment on the pleadings as a matter of law.
First, neither plaintiffs nor defendants have been able to cite, and I have not been able to locate, a single post-1974 decision outside the Fourth Circuit that, under any set of facts and circumstances, has held that a private hospital has acted under color of state law for purposes of section 1983.
Most of the cases cited above involve proof by plaintiffs of more than one of the hypothetical factual allegations discussed. Thus, many of those cases stand for the proposition that even proof of a number of factual elements would be insufficient to support a finding that defendants acted under color of state law.
Second, my holding that, under the facts and circumstances of this case, defendants are entitled to judgment on the pleadings on the state action issue is fully supported by a comparison of plaintiffs' meager factual allegations, see part IV B supra, with the allegations deemed insufficient as a matter of law to support a finding of state action in a number of other representative cases. Most significantly, a comparison of plaintiffs' factual allegations on the state action issue in this case with the plaintiffs' allegations in Holton v. Crozer-Chester Medical Center, 419 F. Supp. 334 (E.D.Pa.1976), vacated on other grounds, 560 F.2d 575 (3d Cir. 1977), would be fruitful. In Holton, Judge Newcomer was asked to determine whether the actions of one of the defendants in the present case, CCMC, should be considered sufficient to constitute state action. After a review of the applicable legal authority in this area and the relevant facts concerning CCMC, the court determined that no state action was involved in connection with the CCMC policy requiring spousal consent for sterilizations.
With regard to the relevant facts surrounding the operation of CCMC, Judge Newcomer noted the following: (1) CCMC is a private, nonprofit hospital; (2) CCMC was built on privately donated land; (3) CCMC is administered on a day-to-day basis by a Board of Directors, none of whose members are government appointees; (4) CCMC had received more than one million dollars of Hill-Burton funds since 1963 for construction costs; (5) approximately eight percent of CCMC's operating budget was supplied by federal, state, or county grants; (6) in fiscal year 1975, CCMC received nearly ten million dollars in Medicare and Medicaid payments; (7) as a participant in the Hill-Burton program, and Medicare and Medicaid, CCMC was subject to numerous federal and state statutes and regulations; (8) contracts between CCMC and hospital insurers were subject to approval by the Pennsylvania Department of Insurance, and (9) CCMC was exempt from state and federal taxes. Notwithstanding these extensive contacts, which go far beyond anything in plaintiffs' current complaint in this case, the court concluded that the activity undertaken by CCMC and challenged by plaintiffs did not constitute state action. Holton, 419 F. Supp. at 341-42.
The Third Circuit's opinion in Hodge v. Paoli Memorial Hospital, 576 F.2d 563 (3d Cir. 1978), aff'g 433 F. Supp. 281 (E.D.Pa.1977), provides further support for my holding that plaintiffs' factual allegations in the instant case are insufficient. The Court of Appeals stated:
We have determined to stand with the vast majority of Courts of Appeals and hold that the receipt of Hill-Burton construction funding, Medicare and Medicaid funds, and the existence of tax exemption, as well as state licensing requirements for non-profit hospitals, do not constitute state action under 42 U.S.C. § 1983.
Id. at 564.
E. Appropriate Relief
Having determined that defendants are entitled to judgment on the pleadings on Count II of plaintiffs' complaint because of a failure sufficiently to aver factual allegations on the state action element of section 1983, the only issue remaining is whether plaintiffs' complaint should be dismissed with, or without, prejudice. For the reasons noted below, I hold that Count II of plaintiffs' complaint should be dismissed with prejudice.
Plaintiffs' complaint fits within the category of complaints that fail to meet even the minimal notice pleading requirements of the federal rules. See part II B supra. Further, plaintiffs' complaint fails to meet at least the more stringent Third Circuit pleading rules for civil rights cases, if not the more relaxed standard used in all other circuits. See part IV A supra. These two conclusions alone, however, would support only a dismissal without prejudice, notwithstanding the gross insufficiency of plaintiffs' complaint.
My holding that plaintiffs' complaint should be dismissed with prejudice is therefore based on two additional considerations. First, given the precedent discussed extensively above, I hold that plaintiffs' civil rights claim against CCMC, a private hospital, is legally deficient as it cannot be maintained under section 1983. I can imagine no amended complaint that could pass muster under the standards discussed above.
Second, permitting plaintiffs to engage in even limited jurisdictional discovery on a state action issue would run squarely contrary to the efficiency policy discussed in part II B supra. Plaintiffs have not suggested one single avenue of facts relevant to the state action determination that they intended to pursue through discovery. At oral argument, counsel for plaintiffs argued that he should be permitted to discover whether "there are specific restrictions imposed by the State of Pennsylvania that affect who may have a (Catheterization Lab or a Burn Lab)." Oral Argument Re Defendants' Motion for Judgment on the Pleadings 33.
Having held that this factual theory would be insufficient to establish that defendants acted under color of state law even if proved, it is unnecessary for me to grant plaintiffs discovery to explore that issue. Indeed, having held that even if plaintiffs can prove that CCMC receives government funds from Medicare, Medicaid, and Hill-Burton, has a federal and/or state tax exemption, is subject to extensive state and federal regulation, and maintains a monopoly position as a result of state regulations they will fail to state a cause of action under section 1983, there is no reason to subject both plaintiffs and defendants to the costly discovery process.
Thus, plaintiffs' complaint fits squarely into one category of cases for which summary disposition, without opportunity to amend or to engage in substantial discovery, is mandated by the federal rules. When plaintiffs' claims are legally deficient, no matter what set of facts could be proved in support of them, summary dismissal is appropriate. Indeed, some courts would consider it an abuse of the trial judge's discretion to permit such a case to remain in federal court. I decline to order such a wasteful procedure.
This case has presented complex questions of law for resolution by this court. The difficulty of the issues is the result of the need to balance two equally important policies underlying the Federal Rules of Civil Procedure. First, the rules contemplate that any party with a potentially viable claim should not be dismissed summarily merely because of a technical pleading error. On the other hand, the second policy within the federal rules requires complaints to meet certain minimal standards so that frivolous cases can be dismissed at the lowest cost possible to both the court system and the prospective defendant.
In this case, I was confronted with a complaint that, in my judgment, failed even to approach the minimal standards required by the Federal Rules of Civil Procedure. Even gross inadequacy of a complaint, however, does not always justify summary disposition of cases, particularly summary dismissals with prejudice. Count I of plaintiffs' complaint in this case fits within this category and is therefore dismissed without prejudice. In certain circumstances, however, gross inadequacy of a complaint, coupled with complete legal insufficiency of the claim, can justify a more permanent disposition. Count II of plaintiffs' complaint fits within this second category and is therefore dismissed with prejudice. An appropriate order follows.