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Weiss v. York Hospital and Medical and Dental Staff of York Hospital

September 27, 1984


On Appeal from the United States District Court for the Middle District of Pennsylvania

Author: Becker

Before: ADAMS*fn* and BECKER, Circuit Judges, and VAN DUSEN, Senior District Judge



This antitrust case arises from the refusal to grant hospital staff privileges to a physician. The plaintiff, Malcolm Weiss, is an osteopath*fn1 who was denied staff privileges at York (Pennsylvania) Hospital. Dr. Weiss brought this suit, both individually and as representative of the class of all osteopathic physicians in the York Medical Service Area (York MSA),*fn2 against York Hospital ("York"), the York Medical and Dental Staff, and ten individual physicians who served on the York Medical Staff Executive Committee and the York Judicial Review Committee. York is controlled by, and, at the time Dr. Weiss applied for staff privileges, was exclusively staffed by doctors who graduated from allopathic medical schools.*fn3

The gravamen of Weiss' lawsuit is that although allopaths (hereinafter referred to as medical doctors or M.D.s) and osteopaths (D.O.s) are equally trained and qualified to practice medicine,*fn4 his application for staff privileges at York hospital was turned down solely because of his status as an osteopath. Generally, a physician can admit and treat patients only at hospitals where he has staff privileges. If a patient desires to receive medical treatment at a hospital for which that patient's doctor does not have staff privileges (either because the patient prefers the reputation of that hospital or because that hospital is the only available hospital with equipment that is necessary for the patient's treatment) then the patient's doctor will have to refer the patient to another physician who has staff privileges at the hospital in question. See Weiss v. York Hospital, 548 F. Supp. 1048, 1053 (M.D. Pa. 1982) (finding of fact, No. 32-34). As the result of such a referral the first doctor loses the opportunity to treat (and therefore to charge) the patient.

In addition, Weiss alleged that the treatment that he received at the hands of the M.D.s who control York sent a message to other D.O.s in the York MSA not to apply for staff privileges at York. In Weiss' submission, this scheme to exclude D.O.s from York Hospital was motivated by a desire to restrict the ability of D.O.s to compete with M.D.s, thereby increasing the profits of the M.D.s. Weiss contends that this conduct violates sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2, and state law (tortious interference with contractual relations).

The district court bifurcated the trial. The liability phase commenced on August 11, 1982, and on September 1, 1982, the jury returned unanimous answers to 42 special verdict questions. The district court molded the jury's responses into findings of liability in favor of the class (but not Weiss) and against the medical staff on the section 1 claim; in favor of Weiss and the class and against the hospital on the section 2 claim; and in favor of Weiss and against the hospital and four of the individually named defendants on the state law claims. All other defendants were exonerated on all other claims. Adopting the jury's findings of fact (by which it considered itself bound), the district court thereupon entered a final injunction against the hospital and the medical staff pursuant to section 16 of the Clayton Act, 15 U.S.C. § 26, essentially prohibiting them from future discrimination against osteopaths. In addition, the district court scheduled a second trial to determine damages based on plaintiffs' claim for treble damages under section 4 of the Clayton Act. 15 U.S.C. § 15, ordered for all class members be notified of their right to apply for damages. Prior to commencement of that trial, defendants and plaintiffs brought these appeals.

The case raises a number of complicated legal questions. Our opinion is divided into five parts. Part I is this introduction and general background. In part II we detail the facts. Part III discusses a number of preliminary issues, including the extent of our appellate jurisdiction over the questions presented by the appeals, the propriety of the class certification, and the proper vicinage for the jury trial in this case. We hold that we have no appellate jurisdiction to review the defendants' challenges to the district court's findings of liability under section 1 and 2 of the Sherman Act to the extent that those findings relate solely to plaintiffs' claims for treble damages under section 4 because there is no final judgment as to these claims, and no exception to the final judgment rule applies. We reach the same conclusion with respect to the state law claims. We thus limit this opinion to a review of questions raised by the district court's issuance of an injunction under section 16 and its exoneration of some of the defendants on some of plaintiff's claims. We also hold that the class certification was proper and that the trial was held in an appropriate location.

In part IV we turn to the heart of this appeal: a review of the findings of liability under sections one and two of the Sherman Act against the hospital and the medical staff, and the consequent issuance of an injunction under section 16 of the Clayton Act. We affirm the court's issuance of an injunction against the medical staff for violating section 1, an injunction that also benefits Weiss. However, we reverse the district court's grant of an injunction against the hospital for violating section 2 because we believe that that plaintiff has failed to adduce sufficient evidence to enable him to carry his burden of demonstrating that the hospital engaged in any willful behavior designed to acquire or maintain its monopoly power. Because of a problem with the jury charge we grant a partial new trial on the question of Weiss' professional competence and character, a factor relevant to the defendants' defenses to Weiss' section 1 damage claims. In addition, we affirm, as supported by the evidence, the district court's exoneration of various defendants on various claims. We then review the scope of the injunction issued by the district court and conclude that, given our substantive decisions on the questions of liability under sections 1 and 2, the district court should be given the opportunity to re-consider the appropriate scope of injunctive relief in the first instance. Part V contains a summary of our conclusions.


A. Hospital Services in the York MSA

There are two providers of in-patient hospital services in the York MSA: York, which is run by M.D.s, and Memorial Hospital ("Memorial"), which is run by D.O.s. York is by far the larger of the two, with approximately 450 beds and 2,500 employees. Memorial has 160 beds.*fn6 The testimony at trial established that York had a market share of 80% of the patient-days of hospitalization in the York MSA.

In addition to York's overall market dominance, testimony at trial establishes that certain complex, highly technical "tertiary care"*fn7 services and facilities are, for a number of reasons, only available at York.*fn8 Included among the services offered only at York are therapeutic radiology, open heart surgery, cardiac catherization, renal dialysis, neo-natal intensive care, short-term acute psychiatric care, monitored stroke treatment, audiology, burn care, cardiopulmonary laboratory, cardiopulmonary rehabilitation, electroencephalography, genetic counseling, prosthetic service, speech therapy, computerized axial tomography (CAT scan),*fn9 and infusion aspirator.

B. Discrimination Against D.O.s at York

Prior to 1974, both York hospital's corporate charter and the bylaws of the York medical staff barred D.O.s from obtaining staff privileges at York. "Without staff privileges, a physician cannot admit, effectively follow, or treat patients at York Hospital. "Weiss, 548 F. Supp. at 1053 (finding of fact No. 32). Consequently, whenever a patient of a D.O. wanted to go to York for treatment, either because the patient preferred the reputation and size of York over Memorial, or because the patient required tertiary care services that were available only at York, the treating D.O. had no choice but to refer the patient to an M.D. with staff privileges at York. Weiss, 548 F. Supp. at 1053 (finding of fact No. 33).

The evidence adduced at trial indicated several ways in which D.O.s were economically disadvantaged as a result of this discrimination. First, D.O.s lost fees directly when one of their patients was admitted for treatment at York. Obviously, if the patient required treatment that the D.O. was qualified to provide but could perform only at York, the D.O. lost the fees that would ordinarily be charged for those services. Moreover, even if the patient required services that the D.O. was not qualified to provide, the D.O. lost the fees for those non-specialized services provided to patients both before and after the specialized care that he was qualified to perform but which had to be performed in York Hospital by an M.D. It is primarily the loss of these latter fees, derived from monitoring a patient who is receiving tertiary care from a specialist, that economically disadvantaged general practice D.O.s, who were forced to refer patients needing tertiary care to a general practice M.D. with staff privileges at York.

D.O.s were also indirectly disadvantaged as the result of York's discriminatory policy. When patients of D.O.s were referred to M.D.s in order that they could be treated at York, they sometimes did not return to the referring D.O. after the treatment at York was completed, but instead remained in the care of the referred M.D. See Weiss, 548 F. Supp. at 1053 (finding of fact No. 35).Thus the referring D.O. lost the patient not just for purposes of the immediate treatment at York, but for purposes of subsequent medical care which the D.O. was qualified to provide.*fn10 Additionally, the evidence establishes that the absence of staff privileges is a competitive disadvantage, in that it indicates to patients that the doctor is a second-class practitioner. See Weiss, 548 F. Supp. at 1052-53 (findings of fact Nos. 29 & 35).*fn11 Both of these factors placed D.O.'s at a competitive disadvantage vis-a-vis M.D.s in obtaining and retaining patients.

In 1974 York amended its corporate charter to allow osteopathic physicians to practice at York. Osteopaths were still barred from admission to York, however, because of the prohibition in the medical staff bylaws. Nevertheless, in early 1976, Weis and another osteopath named Dr. Michael Zittle, both of whom were engaged in family practice in the York MSA, applied for staff privileges at York. Dr. Weiss informed representatives of the York medical staff that if York excluded him because of his osteopathic training he would institute legal action.

The York medical staff considered the applications and Weiss' threat of legal action, and in November of 1976 amended its bylaws to permit admission of osteopaths at York. Dr. Weiss' contends that the amendment of the bylaws was purely cosmetic, and that since 1976 the York medical staff has engaged in a deliberate covert policy of discrimination against osteopaths. In support of this contention Weiss offered evidence that York had a historical presumption in favor of admitting any M.D. who applied for staff privileges, regardless of the applicant's medical ability or social graces,*fn12 but that in the case of D.O. applicants York engaged in "strict scrutiny" of the applicant's medical qualifications, and, in addition, considered the applicant's social acceptability. If the D.O. was found lacking, even minimally, in either area, his application was denied. Finally, Weiss adduced evidence that in the evaluation process for D.O.'s (but not M.D.'s), York relied on hearsay as grounds for rejecting an application for staff privileges. Because "the denial of hospital staff privileges to a physician or the revocation of such privileges is a serious adverse professional event which is likely to besmirch the professional reputation of such a physician," Weiss, 548 F. Supp. at 1052 (finding of fact No. 29), the district court found that application of the strict scrutiny standard to Weiss' application for staff privileges, and the consequent denial of Weiss' application, "could reasonably be anticipated to cause [other] osteopathic physicians to refrain from applying for staff privileges at York Hospital." Weiss, 548 F. Supp. at 1053 (finding of fact No. 31).*fn13

In addition to discriminating against D.O.s in the admissions process. Weiss also offered evidence that York automatically gave any D.O. who survived the strict scrutiny of that process the lowest category of staff privileges offered by York, that of "Assistant Staff," regardless of the D.O.'s actual skill level. Under the Assistant Staff category of privileges the physician is required to consult with other members of the department in the care and treatment of his patients. By contrast, M.D.s who applied for and received staff privileges at York were given different levels of staff privileges depending on their level of skill as certified by the various M.D. specialty Boards. See Weiss 548 F. Supp at 1051, 1060, & 1061 (finding of fact No. 8, conclusion of law No. 1, & order Nos. 1.1 & 1.3). The alleged effect of this discrimination was to brand D.O.s as second class doctors.

C. Staff Privileges Application Procedure

When a physician applies for staff privileges at York, the following procedure is customarily followed. After the applicant's background and reference information has been gathered, the chairman of the hospital department in which the applicant seeks privileges evaluates the application. In the Family Practice Department, to which Weiss applied, the department chairman selects a department credentials committee to assist the chairman in formulating the evaluation. Once the department makes a recommendation, the Medical Staff's Credentials Committee reviews the application and related file, including the (Family Practice) department's recommendation, and formulates its own recommendation to the Medical Staff Executive Committee. The Medical Staff Executive Committee independently reviews the application and related file and formulates a recommendation on the application to the hospital's Board of Directors.*fn14

The hospital Board of Directors then refers the application to its standing Medical Affairs Committee, which recommends a disposition of the application. Finally, based on the applicant's file and the various recommendations of the committees, the Board of Directors decided whether to accept or reject the application. If either the Medical Staff Executive Committee or the hospital's Board of Directors makes an adverse decision, the applicant is informed in writing. The applicant may, at that point, request and obtain (1) a written statement of the reasons for the recommendation or decision, and (2) the impaneling of a "judicial review" committee composed of physicians who have had no part in the consideration of the application to that point. The judicial review committee is authorized to hear testimony and receive other evidence to determine whether the adverse recommendation on the application was "in error, unreasonable, arbitrary, or capricious." The applicant is entitled to attend the hearing, to call witnesses and introduce evidence, to cross-examine and impeach witnesses, and otherwise to rebut adverse evidence.*fn15

D. Doctor Weiss' Application for Staff Privileges

In 1976 Doctors Weiss and Zittle applied for staff privileges in York's Family Practice Department. In accordance with the procedures outlined above, the Family Practice Department Credentials Committee and the chairman of the Family Practice Department considered the applications. On January 17, 1977, the department recommended that they be accepted. The Medical Staff Credentials Committee then reviewed the applications and also recommended acceptance. The Medical Staff Executive Committee, however, did not approve either application. Instead, it took the unusual step of deciding to conduct a further investigation.*fn16 The Committee made extensive oral and written inquiries concerning the professional competence and moral character of both Weiss and Zittle. No such survey had ever been conducted by the hospital before. Ultimately the investigation turned up some questions about Dr. Weiss' personality.*fn17 The investigation also raised some glimmer of a question about Dr. Weiss' medical competence, but the sole "evidence" that was adduced was hearsay, often second or third level hearsay.*fn18 Nevertheless, the Medical Staff Executive Committee, apparently based on this "new evidence," decided not to recommend Weiss for staff privileges.

On June 30, 1977, the hospital Board of Directors considered the recommendations of the various committees which had considered Weiss' and Zittle's applications. The Board voted to approve Zittle's application and deny Weiss' application. Notice of the Board's action was sent to Weiss the same day.

On August 19, 1977, following meetings with York officials, Weiss requested that his application be reactivated and hence reconsidered. This request was granted, and Weiss again received the favorable recommendation of the Family Practice Department's Credentials Committee, and the Family Practice Department chairman. The Credentials Committee's written report is revealing in both its assessment of the "evidence" against Weiss, and in its frank recognition of the "controversy" at York over the admission of D.O.s to staff privileges:

The Committee invited Dr. Weiss to discuss the reactivation of his application and to direct certain questions to him. He was told of the developments in the past and precisely how his application has been handled and of the problems that had arisen. He was specifically told that almost everybody with whom we spoke acknowledged him to be an intelligent, competent, conscientious physician whose care of his patients in the Hospital was quite competent. He was told that the Chairman of his Department suggested that he probably was the best general practitioner. However, almost everyone to whom we spoke acknowledged that he has had personality problems in the past which have caused him to have difficult interpersonal relations with other members of the staff. He was told that because of this personality problem, his application was rejected. It was further explained to him that because of the controversy that accompanied the application of osteopaths to the York Hospital, it was felt that acceptance of his application would jeopardize that endeavor. We explained to Dr. Weiss that his admission to the staff would be met in some instances with outright hostility and in others with indifference and it was a matter of real concern to the Committee how he would react to this sort of reception.

Weiss replied that he felt his personal problems had been overstated. . . .

He was questioned at length by every member of the Committee concerning his background, his motivation and his reputed personality problems. Dr. Weiss conducted himself throughout the interview in a professional manner and responded to a number of very difficult questions in a positive, constructive fashion.

On February 28, 1978, the Medical Staff Credentials Committee voted to recommend again that Weiss' renewed application be accepted. However, on March 6, 1978, the Medical Staff Executive Committee again voted to recommend that the application be denied.*fn19

Weiss' application was next referred to the Medical Affairs Committee of the hospital's Board of Directors. This committee directed that the members of the Family Practice Department Credentials Committee, the Medical Staff Credentials Committee, and the Medical Staff Executive Committee meet informally to attempt to reach a consensus on Weiss' application. The members of these committees then met on March 20, 1978, and voted to recommend that Weiss' application be denied.*fn20 The Medical Staff Executive Committee then met on April 19, 1978, to re-reconsider Weiss' application and, for the third time, voted to recommend that the hospital Board of Directors deny the application.

On April 21, 1978, York sent Weiss written notice of the April 19, 1978, unfavorable recommendation of the Medical Staff Executive Committee. Upon being advised of the decision of that Committee, Weiss requested and received a statement of reasons. Weiss' status as a D.O. rather than a M.D. was not one of the reasons cited by the Committee in its official statement of reasons. Weiss also requested an appeal to a "judicial review" committee as provided for in the hospital bylaws.

A "Judicial Review" Committee was impaneled*fn21 and a hearing was held. Weiss was present and represented by counsel at this proceeding. After reviewing all the evidence, the committee, on December 28, 1978, determined unanimously that the decision of the Medical Staff Executive Committee not to recommend Weiss for staff privileges was not unreasonable, arbitrary, or capricious. The committee also determined, with one member dissenting, that the Medical Staff Executive Committee was not in error in its recommendation.

The hospital Board of Directors then held a special meeting at which presentations were made by counsel for Weiss and special counsel for the Hospital. On March 13, 1979, the Board voted to deny Weiss staff privileges.


A. Before the District Court

On February 6, 1980, Weiss filed this suit in the United States District Court for the Middle District of Pennsylvania. The complaint named as defendants York Hospital, the York Hospital Medical and Dental Staff, and ten individual members of the York medical staff: the five physicians who in their capacity as members of the Medical Staff's Executive Committee voted on Dr. Weiss' application for privileges, and the five physicians who constituted the Judicial Review Committee that was specially impaneled to review the Executive Committee's recommendation that Weiss not be given staff privileges at York.*fn22 Weiss' complaint alleged that his application for staff privileges at York was denied because of: (1) a concerted refusal to deal with him and all other osteopathic physicians located in and around York, Pennsylvania, in violation of section 1 of the Sherman Act, 15 U.S.C. § 1; (2) monopolization, attempted monopolization, and conspiracy to monopolize in violation of section 2 of the Sherman Act, 15 U.S.C. § 2; and (3) violation of Pennsylvania antitrust and common law. The alleged relevant geographic market coincided with the York MSA. The district court certified the class of all osteopaths in the York MSA as the plaintiff class.*fn23

The liability issues were tried to a jury for three weeks in September, 1982. At the end of the trial the court submitted 42 special verdict questions to the jury. The jury answered all the questions unanimously. The district court molded the jury's answers into findings of fact,*fn24 and, based on these findings, the court reached the following conclusions of law:

1.On the § 1 claim, the staff (but not the hospital) is liable to the plaintiff class but not to Weiss;

2. On the § 2 claims, the hospital (but not the staff) is liable to both Weiss and the class for monopolization, attempted monopolization, and conspiracy to monopolize;

3. On the pendent state law claims, the hospital (but not the staff) and four physicians are liable to Weiss but not the class for interference with contractual relations; and

4. The remaining six physician defendants are not liable to anyone for anything.

Weiss, 548 F. Supp. at 1061-62.*fn25 The court then held an additional one-day hearing to consider plaintiff's request for equitable relief. Based on the jury's answers to the special verdict questions, the court's findings of fact and conclusions of law, and the additional hearing on equitable relief, the district court entered a final order pursuant to section 16 of the Clayton Act, 15 U.S.C. § 26, enjoining the hospital and the medical staff from:

1. undertaking any act against Weiss or the class "which would in any way impede or deny the Plaintiffs full, reasonable, fair, or equal access to the facilities of York Hospital and full, reasonable, fair or equal access to staff privileges at the York Hospital;"

2. "applying standards of review to applications by osteopathic physicians for staff privileges at the York Hospital different from the standards of review applicable to similar applications of allopathic physicians." and

3. "interpreting the expression "American Board of Medical Specialty" as used in the York Hospital Medical Staff By-Laws to exclude osteopathic boards of medical specialty."

Weiss. 548 F. Supp. at 1061.

In addition to entering the injunction, the district court also entered the following "judgment on special verdict":

JUDGMENT ON SPECIAL VERDICT -- "that the York Hospital Medical and Dental Staff is liable to the Plaintiff Class for violations of Section 1 of the Sherman Act: Further, that the York Hospital is liable to Plaintiff Malcolm Weiss and the Plaintiff Class for violations of Section 2 of the Sherman Act: Further, that the York Hospital, Thomas L. Bauer, M.D., Ivan L. Butler, M.D., S. W. Deisher, M.D. and Lois Kushner, M.D., are liable to Plaintiff Malcolm Weiss for tortiously interfering with his contractual relations with third parties. It is Further Adjudged that Gary Ardison, M.D., Jack A. Kline, M.D., S. Philip Laucks, M.D., Harold H. MacDougall, M.D., Iain L. MacKenzie, M.D. and John P. Whiteley, M.D., are not liable to either Plaintiff Malcolm Weiss or the Plaintiff Class: Further, that as against the Defendants named in the preceding paragraph Plaintiff Malcolm Weiss and the Plaintiff Class shall take nothing and this action shall be dismissed" as to the them.

Weiss, 548 F. Supp. at 1062. On October 12, 1982, the defendants moved the district court to certify this "judgment on special verdict" as final pursuant to Fed. R. Civ. P. 54(b). Plaintiff opposed this motion for certification by memorandum filed October 27, 1982. On November 18, the district court granted the defendant's motion and entered the following order:

1. The defendants' motion for certification is granted.

2. This Court hereby certifies that there is no just reason for the delay of an appeal in this case.

3. The Clerk of Court is hereby directed to amend the judgment on special verdict entered September 30, 1982, as follows:

It is ordered that the judgment on Special Verdict entered on September 30, 1982, is final pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

B. Appellate Jurisdiction

Three appeals have been filed in this case. The first is an appeal filed on October 28, 1982, by the hospital and staff from the district court's injunction which was entered on September 30, 1982. The second appeal is by the hospital, the staff, and the four individual defendants who were found liable to the plaintiffs under the Sherman Act and state law; this appeal was filed on December 9, 1982, from the "order and final judgment entered 11/18/82 and order entered 11/22/82 denying these defendants' motion for judgment notwithstanding verdict or for a new trial and all other orders, rulings and judgments of the court." The third appeal was filed on December 13, 1982, by the plaintiff. This appeal is denominated a "cross-appeal" and is from the "orders directing judgment in favor of certain defendants which became final on November 18, 1982."

The defendants' appeal from the grant of the injunction is authorized by 28 U.S.C. § 1292(a)(1) and therefore it is clearly before us.*fn26 The viability of the other two appeals presents much more difficult questions. Because the two appeals raise different problems, we consider them separately.

1. The Defendants' December 9th Appeal

The December 9th appeal by the defendants purports to be from the "judgments" (other than the injunction) that resulted from the district court's September 30th "special verdict." However, because the trial was bifurcated and additional proceedings, including the determination of certain defenses and of damages, are yet to take place, most of these "judgments" (i.e., those not resulting in verdicts for the defendants) are not final within the meaning of 28 U.S.C. § 1291, see Catlin v. United States, 324 U.S. 229, 233, 89 L. Ed. 911, 65 S. Ct. 631 (1945) (a "final decision" for purposes of 28 U.S.C. § 1291 "is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment"); Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1321 (5th Cir. 1976) ("a finding of "liability" in Phase I of a bifurcated trial is interlocutory"); see also Sun Shipbuilding & Dry Dock Co. v. Benefit Review Board, 535 F.2d 758, 760 (3d Cir. 1976). Moreover, as to those judgments in defendants' favor, having prevailed, they cannot appeal. Therefore, it would appear that we have no jurisdiction to hear this appeal.

The defendants argue, however, that we have jurisdiction because of the November 18, 1982, order of the district court certifying the September 30, 1982, "judgment on special verdict" as final pursuant to Fed. R. Civ. P. 54(b).*fn27 Rule 54(b), however, does not authorize the district court to certify non-final decisions as final; rather, the Rule's purpose is to permit the district court to separate out final decisions from non-final decisions in multiple party and/or multiple claim litigation in order to allow the losing party an immediate appeal. See Liberty Mutual Ins. Co. v. Wetzel, 424 U.S. 737, 742-44, 47 L. Ed. 2d 435, 96 S. Ct. 1202 (1976) (partial summary judgment limited to the issue of liability, which reserves the issue of damages and other relief, is not "final" within the meaning of 28 U.S.C. § 1291).

The defendants' December 9th appeal must therefore be dismissed for two reasons. First, all of the final decisions that resulted from the September 30th "judgment on special verdict" were in favor of the defendants and the defendants cannot appeal decisions that they have won. Second, because additional portions of the bifurcated trial have not yet been held, all the "judgments" against the defendants arising out of the September 30th special verdict are non-final and therefore not appealable under 28 U.S.C. § 1291. Furthermore, these non-final "judgments" do not fall within any of the ...

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