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POSNER v. LANKENAU HOSP.

September 9, 1986

JOEL D. POSNER, M.D. and PULMONARY MEDICAL SERVICES, P.C.
v.
THE LANKENAU HOSPITAL, THE MEDICAL STAFF OF THE LANKENAU HOSPITAL, MICHAEL A. MANKO, MARGARET ANDERSON, WILLIAM G. FIGUEROA, ROBERT K. JONES, R. BARRETT NOONE, EDWARD A. CHASTENEY, 3RD, MILES H. SIGLER, FERREL G. PAULETTO, GORDON W. WEBSTER



The opinion of the court was delivered by: VANARTSDALEN

 Joel D. Posner, M.D., on behalf of himself and his corporation, Pulmonary Medical Services, P.C., filed this action on March 26, 1982, naming Lankenau Hospital, the Lankenau Medical Staff, and eleven *fn1" individual members of the Medical Staff as defendants. Plaintiff alleges that the defendants' refusal to allow him an associate on the Lankenau Medical Staff, of which he was a member, and their denial of his reappointment to the Medical Staff were in violation of section 1 of the Sherman Act and Pennsylvania's common law prohibiting unreasonable restraints of trade. Posner also asserts that defendants breached his contract with Lankenau Hospital and tortiously interfered with his contract rights and prospective contractual relations with other parties. Plaintiff and defendants submitted cross-motions for summary judgment. Following oral argument, both parties' motions were denied with respect to the antitrust claims. Regarding plaintiff's breach of contract and tortious interference claims, plaintiff's motion was denied and defendants' motion was taken under advisement. For the reasons stated below, defendants' motion will be granted in part and denied in part with respect to these claims.

 The following facts are undisputed. Dr. Posner joined the Lankenau Medical Staff on July 1, 1975, with admitting privileges in the Division of Internal Medicine and the Division of Pulmonary Diseases. Between 1977 and 1980, plaintiff sought to add an additional pulmonary physician to the Lankenau staff who would be affiliated with him. None of the candidates proposed by Dr. Posner were granted membership to the Lankenau Medical Staff.

 On September 11, 1980, plaintiff requested a one-year leave of absence from the Lankenau Medical Staff, effective as of November 1, 1980. He was granted a leave of absence until June 30, 1981. Plaintiff also entered into a contract with Dr. Robert Promisloff on September 29, 1980, which provided that Dr. Promisloff would take over Dr. Posner's practice as of November 1, 1980. The contract also gave Promisloff the option to purchase the practice in the event Posner did not desire to return to active practice.

 At their June 2, 1981 meeting, the Executive Committee of the Lankenau Medical Staff, acting on the advice of the Credentials Committee and defendants William Figueroa, M.D., and Michael Manko, M.D., recommended that plaintiff's reappointment to the Lankenau Medical Staff be denied, and notified Posner of this decision in a letter dated June 4, 1981. Ironically, Posner had written a letter to Dr. Cooper, President of the Lankenau Medical Staff, dated June 4, 1981, requesting a one-year extension of his leave of absence.

 Posner requested and was granted a hearing before the Fair Hearing Committee, as was his right under the Lankenau Medical Staff Bylaws. The Hearing Committee was composed of defendants Robert K. Jones, M.D., R. Barrett Noone, M.D., and Edward A. Chasteney, 3rd, M.D. The Hearing Committee determined that the Executive Committee's decision to deny Posner's reappointment was proper. After receiving this recommendation, the Executive Committee forwarded to the Lankenau Board of Trustees their final decision to deny plaintiff's reappointment. Plaintiff took no other action prior to the commencement of this suit.

 Both parties have moved for summary judgment. Summary judgment should not be granted unless the moving party establishes that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir. 1981). Further, all reasonable inferences must be drawn in favor of the non-moving party. Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 50 L. Ed. 2d 748, 97 S. Ct. 732 (1977).

 For the reasons stated hereafter, I will grant defendants' motion with respect to plaintiff's breach of contract claims concerning the defendants' refusal to allow him an associate on the Lankenau staff and their alleged failure to provide him with a hearing on the decision to deny his reappointment. I also conclude that defendants are entitled to summary judgment on the tortious interference claims concerning plaintiff's contracts with Lankenau Hospital and the Medical Staff, his patients, and Dr. Promisloff. Because I have determined that, under Pennsylvania law, plaintiff's contract claims are not barred by his failure to completely exhaust his contractual remedies, I will deny defendants' motion on this issue. Since the record indicates that material questions of fact exist concerning the remainder of plaintiff's claims, defendants' motion will be denied with respect to these claims. Additionally, I hold that defendants are not immune from federal antitrust liability pursuant to the "state action" immunity doctrine.

 Breach of Contract

 Plaintiff claims that defendants are liable, under Pennsylvania law, for breach of contract. Under Pennsylvania law, the Staff Bylaws of Lankenau Hospital constitute a contract between the hospital and the staff. Berberian v. Lancaster Osteopathic Hospital Association, 395 Pa. 257, 149 A.2d 456 (1959); Miller v. Indiana Hospital, 277 Pa. Super. 370, 419 A.2d 1191 (1980). Posner asserts that defendants breached the Bylaws by: (1) refusing, in bad faith, to add a physician to the Medical Staff who would associate with him; (2) failing to afford him a hearing on the decision not to reappoint him; and (3) denying his reappointment to the Medical Staff without regard to the criteria contained in the Bylaws.

 Posner contends that because the defendants' refusals to grant Medical Staff membership to any of his prospective associates were made in furtherance of the defendants' anti-competitive objectives, defendants breached the contract set out in the Bylaws. Each party to a contract has an implied duty under Pennsylvania law to act in good faith and deal fairly with the other parties to the contract during the performance and enforcement of the contract. See Atlantic Richfield Co. v. Razumic, 480 Pa. 366, 378, 390 A.2d 736, 742 (1978); Daniel B. Van Campen Corp. v. Building and Construction Trades Council, 202 Pa. Super. 118, 122, 195 A.2d 134, 136-37 (1963). However, the failure to deal with another party in good faith concerning something to which the complaining party has no right under the terms of the contract cannot constitute a breach of that contract. As the court in Van Campen stated:

 
In the absence of an express agreement, the law will imply an agreement by the parties to a contract to do and perform those things that according to reason and justice they should do in order to carry out the purpose for which the contract was made and to refrain from doing anything that would destroy or injure the other party's right to receive the fruits of the contract. Accordingly, a promise to do an act necessary to carry out the contract must be implied.

 Daniel B. Van Campen Corp. v. Building and Construction Trades Council, 202 Pa. Super. at 122, 195 A.2d at 136-37 (emphasis added).

 The Lankenau Bylaws do not provide members of the Medical Staff with the right to an associate on the Lankenau staff. *fn2" The Supreme Court of Pennsylvania has held that it will not grant physicians broader contractual rights beyond those explicitly stated in the bylaws. Adler v. Montefiore Hospital Association of Western Pennsylvania, 453 Pa. 60, 311 A.2d 634 (1973), cert. denied, 414 U.S. 1131, 38 L. Ed. 2d 755, 94 S. Ct. 870 (1974) (plaintiff physician had no entitlement to perform laboratory procedures merely because he was a member of the medical staff). Assuming, for the purposes of this issue, that defendants' denials of plaintiff's requests for an associate were made in bad faith, Posner's claim for breach of contract must fail, since he had no contractual right to an associate on the Lankenau staff. Therefore, defendants' motion will be granted on this issue.

 Posner makes a second breach of contract claim in his motion for summary judgment, asserting that he was not afforded a hearing on the decision not to reappoint him. The Bylaws provide that any member of the Medical Staff who is not reappointed has the right to a hearing before the Hearing Committee. Posner requested a hearing which was held on July 9, 1981. Plaintiff asserts that this hearing focused on the decision not to renew his leave of absence and that, in essence, he was never given a hearing concerning the decision not to reappoint him to the Lankenau Medical Staff.

 A review of the transcript of the hearing indicates that all the alleged reasons for defendants' denial of plaintiff's reappointment were discussed at the hearing. Additionally, Posner had no right to a hearing concerning the sole issue of nonrenewal of his leave of absence. *fn3" The record does not support a reasonable inference that plaintiff was not given the hearing on the decision not to reappoint him. Cf. Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 883 (3d Cir.), cert. denied, 454 U.S. 893, 70 L. Ed. 2d 208, 102 S. Ct. 390 (1981); Bank of America National Trust & Savings Association v. Hotel Rittenhouse Associates, 595 F. Supp. 800, 802 (E.D.Pa. 1984) (where no reasonable resolution of the conflicting evidence and inferences drawn from it could result in a judgment for the non-moving party, granting of summary judgment is appropriate). This court is not in a position to determine whether the hearing was conducted properly. Under the Bylaws, the plaintiff had a right to a hearing on the decision not to reappoint him to the Medical Staff. I conclude that he received the hearing to which he was entitled.

 Posner's third breach of contract claim is that the denial of his reappointment was not based on the criteria for reappointment contained in the Bylaws. The criteria governing reappointment decisions is set out in Section 5 of Article 4 of the Bylaws. Pursuant to Section 5, recommendations for reappointment are to be based on "each member's professional competence and clinical judgment in the treatment of patients, his fulfillment of teaching and service responsibilities, his ethics and conduct, his health status, his attendance at medical staff meetings and his compliance with the Medical Staff Bylaws, Rules and Regulations."

 Plaintiff asserts that his reappointment was denied because defendants wished to prevent him from competing with the other members of the Pulmonary Division. Defendants contend that their decision not to reappoint plaintiff was based on his conduct, i.e., his interpersonal conflicts with Dr. Anderson and his actions which were inconsistent with his stated desire to remain at Lankenau. Since the record indicates that questions of fact exist concerning the reasons why Posner's reappointment was denied, I will deny defendants' motion on this issue.

 Exhaustion of Contractual Remedies

 Defendants assert that Posner's failure to appeal the Executive Committee's final decision to uphold its denial of Posner's reappointment bars his contract claims. Article 7, section 11(1) of the Bylaws provides that a staff member has ten days in which to submit a request for an appeal before the Board of Trustees challenging a decision of the Executive Committee. Section 11(1) further provides that if an appeal is not requested within ten days of receipt of the Executive Committee's decision, "both sides shall be deemed to have accepted the action involved and it shall be effective immediately." Posner did not appeal the Executive Committee's final decision not to reappoint him.

 Plaintiff challenges this assertion, stating that because the letter notifying him of the Executive Committee's final decision stated that the matter "had been submitted to the Board of Trustees through the Joint Conference Committee for final deliberation," he was "entitled to expect . . . that the procedural requirements of an appeal would then be implemented." Plaintiff reasons that the reference to a "final deliberation" could have been inferred to mean that the Executive Committee had appealed its own decision to the Board of Trustees, preventing the decision from becoming final. Section 11(1) allows the Executive Committee to appeal only when the Board of Trustees has ruled adversely to a member after a favorable Executive Committee recommendation. Since the Board of Trustees had not made any final ruling at the time plaintiff received the letter noted above, and because their decision was in agreement with the Executive Committee's recommendation, precluding the Executive Committee from taking any appeal, this argument is implausible and I reject it as a matter of law.

 Plaintiff also argues that because the Executive Committee notified him only of the denial of his request for an extended leave of absence, not the final decision to deny his reappointment, this court cannot find that he failed to exhaust his contractual remedies. Since an examination of the record indicates that plaintiff was aware that the Executive Committee had denied his reappointment as well as an extension of his leave of absence, this argument merits no discussion. *fn4" Because I conclude that plaintiff failed to completely exhaust his contractual remedies which were contained in the Bylaws, the question to be determined is whether, under Pennsylvania law, this failure precludes him from proceeding with his contract claims.

 Research fails to reveal any Pennsylvania case law ruling on the precise issue before me. Where there are no precedents directly on point to guide this court when deciding issues of state law, I must predict how that state's courts would rule. See Samuelson v. Susen, 576 F.2d 546 (3d Cir. 1978). A survey of decisions indicates that, if faced with the instant situation, the Pennsylvania Supreme Court would hold that plaintiff's failure to completely exhaust his contractual remedies does not bar his contract claims.

 The Pennsylvania Supreme Court has held that a court may not exercise jurisdiction over claims brought by members of an unincorporated association unless all internal remedies afforded by the association have been exhausted. See Falsetti v. Local Union No. 2026, United Mine Workers of America, 400 Pa. 145, 161 A.2d 882 (1960). See also Borough of Ambridge Water Authority v. J. Z. Columbia, 458 Pa. 546, 328 A.2d 498 (1974) (when parties contract to arbitrate disputes, one party may not bring suit until attempt has been made to resolve dispute through arbitration). Pennsylvania courts have carved out exceptions to this general rule in situations where the internal remedies would not, in reality, yield a remedy, or when adherence to the general rule would cause irreparable harm to a potential plaintiff. 400 Pa. at 159, 161 A.2d at 889-90. Cf. Central Contracting Co. v. C. E. Youngdahl & Co., Inc., 418 Pa. 122, 133, 209 A.2d 810, 815 (1965) (agreement by parties to litigate all disputes in a specific county court system will not be enforced if it "would, under all circumstances existing at the time of litigation, seriously impair plaintiff's ability to pursue his cause of action").

 Pursuant to the Bylaws, plaintiff's failure to appeal the adverse decision of the Executive Committee within the prescribed time period precludes him from any further appeals before the Lankenau Hospital administration. Ruling that plaintiff's failure to exhaust his contractual remedies prevents this court from entertaining his contract claims will deprive him of any opportunity to seek redress for these claims. I conclude that this is the type of irreparable harm that would constitute an exception to the general exhaustion requirement under Pennsylvania law. Research discloses no Pennsylvania court that has applied the exhaustion requirement when doing so would leave the plaintiff without any means of obtaining relief. *fn5"

 In Miller v. Indiana Hospital, 277 Pa. Super. 370, 419 A.2d 1191 (1980), the plaintiff physician charged the defendant hospital with breach of contract, and appealed from the denial of a permanent injunction preventing revocation of his staff privileges. The court held that the defendant's conduct was not comparable to the type of impermissible breach committed by the defendants in Berberian, since the court determined that the hospital's deviations from the bylaws were minor, were eventually cured by the defendant, and caused no prejudice to the plaintiff. Id. at 375, 419 A.2d at 1193-94. In response to plaintiff's allegations that he was deprived of his due process rights, the court reasoned that these claims had to be assessed according to the standards set forth in the hospital's bylaws. 277 Pa. Super. at 379, 419 A.2d at 1195. Since the court determined that ...


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