Milos v. Hall

Milos v. Hall

Milos v. Hall,
No. 5-00-0285 (Ill. App. Sept. 28, 2001)

The husband of a deceased patient sued, among others, the pathologist who performed
the autopsy on his wife, alleging that he intentionally omitted pertinent facts
in his autopsy report and misrepresented his conclusions regarding the cause
of death to protect from liability the hospital and Emergency Department physician
who examined and then discharged his wife. The trial court dismissed the claims,
ruling that the plaintiff had failed to file an affidavit as required by the
state rules of civil procedure in all "healing art malpractice" actions.
The Illinois appeals court reversed, ruling that an autopsy is a medical procedure,
but is not, by definition, a "healing art." Thus, the rules for "healing
art malpractice" actions did not apply.

Mitchell v. Mid-Ohio Emergency Services

Mitchell v. Mid-Ohio Emergency Services

[Cite as Mitchell v. Mid-Ohio Emergency Services, L.L.C., 2004-Ohio-5264.]

IN THE COURT OF APPEALS OF OHIO

TENTH APPELLATE DISTRICT

Geoffrey C. Mitchell, M.D.,

Plaintiff-Appellant,

:

:

v.

Mid-Ohio Emergency

Services, L.L.C. et al.,

Defendants-Appellees.

:

:

:

:

O P I N I O N

Rendered on September 30, 2004

No. 03AP-981

(C.P.C. No. 90CVH03-2427)

(REGULAR CALENDAR)

Mike Moore, for appellant/cross-appellee Geoffrey C. Mitchell.

Roetzel & Andress, Stephen D. Jones and Eric Bravo, for
appellees/conditional
Grant/Riverside
cross-appellant
Methodist Hospitals and Suzanne DeWoody.

Wickens, Herzer, Panza, Cook & Batista, Matthew W. Nakon
and Rachelle Kuznicki Zidar, for appellees/conditional cross-
appellants Mid-Ohio Emergency Services, L.L.C., John
Drstvensek, M.D., InPhyNet Hospital Services, Inc. and Acute
Care Specialists, Inc.

Steve J. Edwards and David J. Millstein, for Amici American
Academy of Emergency Medicine.

APPEAL from the Franklin County Court of Common Pleas.

WATSON, J.

No. 03AP-981

2

{¶1}

Plaintiff-appellant, Geoffrey C. Mitchell (“Mitchell”), appeals from the

decision of the Franklin County Court of Common Pleas granting defendants-appellees’

motions for summary judgment. For the following reasons, we affirm.

{¶2} Mitchell is an emergency physician licensed to practice medicine in the

state of Ohio. Mid-Ohio Emergency Services, L.L.C. (“Mid-Ohio”) employed Mitchell for

the three months prior to his termination, September 1, 1998 through November 30,

1998. Prior to Mid-Ohio, Olentangy Emergency Physicians (“OEP”) employed Mitchell.

OEP operated the emergency department at Riverside Methodist Hospital (“ED”) until

August 31, 1998.1 RMH entered into an exclusive contract with Mid-Ohio for the provision

of medical services at ED. Under the contract, only a physician employed by Mid-Ohio

could perform services in the ED. As part of Mid-Ohio’s operating agreement, ownership

of Mid-Ohio was divided 50% to InPhyNet and 50% among the member physicians.

{¶3} Mid-Ohio selected Dr. John Drstvensek to serve as its medical director over

both the Grant and RMH campuses. Dr. Drstvensek maintains the same interest in Mid-

Ohio as the other member physicians. Dr. Gregory Decker is President of Mid-Ohio.

Mitchell was hired by Mid-Ohio as a part-time emergency physician. Mitchell received his

paycheck from Mid-Ohio and Mid-Ohio scheduled his shifts at ED. Mitchell was given the

additional title of Medical Education Coordinator (“MEC”).2 At that time, Mitchell signed a

contract with Dr. Decker to become a part-time employee as well as serve as Mid-Ohio’s

1 Riverside Methodist Hospital (“RMH”) and Grant Hospital (“Grant”) were merged into a single hospital in
1995. Riverside’s emergency department was previously serviced by OEP. Acute Care serviced Grant
Hospital’s emergency department. After the merger, InPhyNet Medical Management, Inc. (“InPhyNet”)
assumed all the emergency duties. Mid-Ohio was eventually formed, in which InPhyNet became a
shareholder and was responsible for the management of the new physician group.

2 Mid-Ohio maintains it was hesitant to initially offer Mitchell any position because of his reputation as a
disruptive force in the ED, did not work as a team player, and violated hospital policy by taking home patient
charts for dictation.

No. 03AP-981

MEC for an additional salary of $20,000. As MEC, Mitchell reported to Pam Boyers,

3

Ph.D., Director of Medical Education at RMH.

{¶4}

In 1998, Grant/RMH implemented the stable admit policy to reduce

overcrowding in the RMH ED. The protocol required stable patients being admitted to the

hospital to be moved to regular hospital beds to free up ED beds and ED examination

rooms. Mitchell opposed the policy stating it conflicted with the teaching nature of RMH

because the resident physician would not have the chance to see and examine the

patient in the ED with the guidance of the ED physician.

{¶5}

The situation at Grant/RMH came to a head on November 9, 1998. A

patient came to the RMH ED with chest pains and was initially assessed as being low risk

for cardiac arrest. The patient was put in a bed in the hallway. However, while the

patient was waiting, she collapsed and suffered cardiac arrest. Dr. Ron Taylor was the

ED physician on duty at the time of the incident and Mitchell spoke with him about it the

following day. Although the patient ultimately lived, Mitchell decided to write a letter to Dr.

Richard Shonk, Vice President of Medical Affairs for RMH (“Shonk letter”), regarding the

incident. The letter indicates it is a Clinical Process Improvement Team (“CPIT”) referral.

It further states:

Dear Dr. Shonk:

I believe you are the appropriate individual to review this
case. I understand that you are the ultimate agent of quality
medical care and chair of the hospital wide CPIT committee.

Mrs. XXXXX is another unfortunate victim of the gross
overcrowding of our department. It is my contention that this
is a significant quality of care issue.

Mrs. XXXXX presented to our ED in the early afternoon.
Because the ED was in its usual * overcrowded state, she

No. 03AP-981

4

was triaged to a hallway bed. It (sic) spite of the fact that she
had complained of chest pain, no EKG was done because
she was in the hallway. It was not until she dropped dead (V-
Fib = “cardiac sudden death”) that she was moved into a
room. There she was vigorously resuscitated by 4 or 5
physicians * * * .

* * * Any good physician knows that it is a good idea to obtain
an EKG on a middle-aged patient with chest pain. We
already have written chest pain policies which stipulate that a
physician should have had Mrs. XXXXX’s EKG in his hand
within 5 minutes of her arrival. Unfortunately this protocol
didn’t do her any good.

* * *

Believe me, I am well aware that bad things happen in the
ED. I have spent 17 years there. I do understand. I think I
also understand the role of QA/QRM/CQI/TQM etc. I believe
your goal should be to prevent unnecessary deaths. This is
the ultimate function of any QA committee, whatever its new
name. This sort of review activity has a long and honorable
role in American medicine. For generations it was called
M&M. It has been repeatedly emphasized that modern QA
committees want
to address “systems”
issues.
The
perpetuance of “hallway medicine” in the RMH ED is a
“systems” monster of the highest order. * * *

I realize I’m not making friends by lobbying to spend more
money in the current environment. I’m all in favor of saving
money and improving medical care. As you know, I have
invested thousands of hours of my own time to develop
workable ways to do so. I am also aware that we are
spending $150 million to purchase two more hospitals. I
suspect that these two hospitals are fraught with problems or
they would not be for sale. The assumption of a huge debt
burden and
the responsibility of reforming problematic
hospitals virtually guarantee that the quality of care in our ED
will decline further. Until we expand our facility and eliminate
the practice of “hallway medicine” this nightmare in the ED is
destined to continue.

* * *

No. 03AP-981

{¶6} Dr. Shonk was a member of RMH’s CPIT, a quality assurance committee.

5

Mitchell also gave a copy of the Shonk letter to the following: (1) Dr. Taylor, the ED

physician on duty at the time of the incident; (2) Dr. Larry Lilly, a member of the board of

trustees; and (3) Dr. Steve Yakubov, cardiologist and chair of the department of internal

medicine. Dr. Shonk gave the letter to Suzanne DeWoody, a member of the CPIT, for

investigation. Ms. DeWoody is also the Vice-President of Grant/RMH and primary

administrator of the ED. Ms. DeWoody determined that the Shonk letter primarily dealt

with the size of the ED and did not address quality assurance issues. Therefore, Ms.

DeWoody did not turn the Shonk letter over the CPIT committee for further review. A few

days later, Mitchell wrote a second letter to Dr. Yakubov (“Yakubov letter”). This letter

addressed concerns about procedures for evaluation of patients with chest pain in the

ED. He distributed the Yakubov letter to Dr. Drstvensek, Dr. Lee Davis, Dr. Decker, Dr.

Mike Hindeman, and nurse Lee Underman.

{¶7} On November 18, 1998, a few days after the two letters were written, Mid-

Ohio held its scheduled board meeting. The Shonk and Yakubov letters were distributed

to all present. Dr. Decker testified that he had concerns with the Shonk letter. He stated

that it could expose Mid-Ohio to liability for violating patient confidentiality because

Mitchell used patient identifying information and dispersed it to individuals outside the

quality assurance chain, namely Dr. Taylor, Dr. Lilly, and Dr. Yakubov. At the end of the

board meeting, the board unanimously voted to terminate Mitchell’s position as the MEC.

The board reserved its decision as to whether Mitchell’s employment as a physician was

terminated until the next board meeting. However, on November 30, 1998, the board

decided to terminate Mitchell. During the seven years Mitchell provided services at RMH,

No. 03AP-981

he expressed his opinions regarding issues in the ED on several occasions without being

6

subjected to any adverse employment action.3

{¶8} Mitchell

filed a complaint against Mid-Ohio,

InPhyNet, Acute Care

Specialists, Inc., Dr. Drstvensek, Grant/RMH, and Ms. DeWoody, alleging: (1) wrongful

termination in violation of public policy as to his position of MEC as well as ED physician;

(2) violation of due process for being terminated without a hearing; (3) tortious

interference of contract; (4) civil conspiracy; (5) negligent retention; and (6) breach of

contract. The trial court did find a clear public policy articulated in Ohio’s peer review

statutes in support of Mitchell’s wrongful termination claim. However, the trial court found

that Mitchell’s own actions in violating patient confidentiality and the peer review process

eliminated the jeopardy element. Therefore, the trial court granted summary judgment on

all claims. Mitchell filed the instant appeal.

{¶9} Mitchell asserts the following assignments of error:

[1.]
IN FAILING TO
THE TRIAL COURT ERRED
RECOGNIZE DR. MITCHELL’S OBJECTIONS TO UNSAFE
EMERGENCY DEPARTMENT PROCEDURES AS A BASIS
FOR WRONGFUL TERMINATION AND IN GRANTING
SUMMARY JUDGMENT TO APPELLEES ON HIS
WRONGFUL TERMINATION CLAIM

[2.] THE TRIAL COURT ERRED IN HOLDING THAT
“EQUITABLE MAXIMS” PRECLUDE DR. MITCHELL FROM
PURSUING HIS WRONGFUL TERMINATION CLAIMS AND
THUS, IN GRANTING PARTIAL SUMMARY JUDGMENT ON
APPELLANT’S WRONGFUL TERMINATION CLAIM

[3.] THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT
GRANT/RIVERSIDE
APPELLEE
TO
METHODIST HOSPITALS ON APPELLANT’S DUE
PROCESS CLAIM

3 For example, a letter dated April 3, 1997, addressed the need for a larger ED so patients were not
serviced in the hallways. Mitchell analogized the ED to the type of medicine practiced in third world
countries. Mitchell wrote the letter to Dr. Bruce Wall, predecessor to Dr. Shonk.

No. 03AP-981

7

[4.] THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT ON APPELLANT’S SUMMARY JUDGMENT TO
GRANT/RIVERSIDE METHODIST HOSPITALS ON
APPELLANT’S BREACH OF CONTRACT CLAIM

[5.] THE TRIAL COURT ERRED IN DISMISSING THE
SIXTH CLAIM: CONSPIRACY

[6.] THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT TO THE INDIVIDUAL APPELLEES SUSAN
DEWOODY AND JOHN DRSTVENSEK

[7.] THE TRIAL COURT ERRED IN GRANTING SUMMARY
JUDGMENT ON THE
ISSUE OF GRANT/RIVERSIDE
METHODIST HOSPITAL’S (SIC) STATUS AS PLAINTIFF’S
EMPLOYER FOR PURPOSES OF THE MEDED
COORDINATOR POSITION

[8.] THE TRIAL COURT ERRED IN HOLDING THAT DR.
MITCHELL’S
FOURTH
CLAIM
FOR
TORTIOUS
INTERFERENCE WAS PRECLUDED BY HIS “AT-WILL”
EMPLOYMENT AND THUS IN GRANTING SUMMARY
JUDGMENT TO DEFENDANTS SUSAN DEWOODY, JOHN
DRSTVENSEK, INPHYNET HOSPITAL SERVICES, INC.,
AND GRANT/RIVERSIDE METHODIST HOSPITAL[S] ON
THAT CLAIM

{¶10} Mid-Ohio, Dr. Drstvensek, InPhyNet, and Acute Care also filed a cross-

appeal asserting the following error:

1. The trial court erred in determining that appellant satisfied
the “clarity” element of his claim for wrongful discharge in
violation of public policy.

{¶11} Grant/RMH and Ms. DeWoody have also filed a cross-appeal asserting the

following assignment of error:

1. The trial court erred in finding Mitchell’s claim for wrongful
discharge in violation of public policy to have satisfied the
“clarity” element of a public policy wrongful discharge claim.

No. 03AP-981

{¶12} Appellate review of summary judgment motions is de novo. Helton v.

8

Scioto Cty. Bd. Of Commrs. (1997), 123 Ohio App.3d 158, 162. “When reviewing a trial

court’s ruling on summary judgment, the court of appeals conducts an independent

review of the record and stands in the shoes of the trial court.” Mergenthal v. Star Banc

Corp. (1997), 122 Ohio App.3d 100, 103. Civ.R. 56(C) provides that summary judgment

may be granted when the moving party demonstrates the following: (1) there is no

genuine issue of material fact; (2) the moving party is entitled to judgment as a matter of

law; and (3) reasonable minds can come to but one conclusion and that conclusion is

adverse to the party against whom the motion for summary judgment is made. State

ex rel. Grady v. State Emp. Relations Bd. (1997), 78 Ohio St.3d 181, 183. In the

summary judgment context, a “material” fact is one that might affect the outcome of the

suit under the applicable substantive law. Turner v. Turner (1993), 67 Ohio St.3d 337,

340. When determining what is a “genuine issue,” the court decides if the evidence

presents a sufficient disagreement between the parties’ positions. Id.

{¶13} In Dresher, the Supreme Court of Ohio held that a party seeking summary

judgment on the ground that the nonmoving party cannot prove its case bears the initial

burden to inform the trial court of the basis for the motion and identifying the portions of

the record demonstrating an absence of a genuine issue of material fact. Dresher v. Burt

(1996), 75 Ohio St.3d 280. The moving party does not discharge its burden simply by

making a conclusory assertion that the nonmoving party has no evidence to prove its

case. Id. Rather, the moving party must specifically point to evidence of the type listed in

Civ.R. 56(C) that affirmatively demonstrates the nonmoving party has no evidence to

support its claims. Id. Further, when a motion for summary judgment has been

No. 03AP-981

supported by proper evidence, the nonmoving party may not rest on the mere allegations

9

of the pleading, but must set forth specific facts, by affidavit or otherwise, demonstrating

that there is a genuine triable issue. Jackson v. Alert Fire & Safety Equip., Inc. (1991),

58 Ohio St.3d 48, 52. If the nonmoving party does not demonstrate a genuine triable

issue, summary judgment shall be entered against that party. Civ.R. 56(E).

{¶14} In the first assignment of error, Mitchell argues the trial court erred in its

determination of his wrongful termination claim against all appellees. In the second

assignment of error, Mitchell asserts the trial court erred in finding that Mitchell’s own

conduct precluded him from recovering on the wrongful termination claim. These two

assignments of error are interrelated and will be discussed together.

{¶15} Generally, absent an employment contract,

the employer/employee

relationship is considered at-will. Greely v. Miami Valley Maintenance Contrs., Inc.

(1990), 49 Ohio St.3d 228. Thus, the employer may terminate the employee for any

lawful reason and the employee may leave the relationship for any reason. Id. There are

exceptions to the general rule. In Greely, the Supreme Court of Ohio held an exception to

the traditional at-will employment rule exists where an employee is terminated wrongfully

in violation of public policy. Id. at 235. Public policy is generally discerned from the

United States and Ohio Constitutions, statutes, administrative rules and regulations, and

common law. Painter v. Graley (1994), 70 Ohio St.3d 377, 384. However, the public

policy must be “of equally serious import as the violation of a statute.” Id. at 384.

{¶16} To state a claim of wrongful termination in violation of public policy, a

plaintiff must satisfy the following elements: (1) a clear public policy existed and was

manifested in the federal or state constitution, statute, administrative regulation, or

No. 03AP-981

common law; (2) terminating employees under circumstances such as those involved in

10

the plaintiff’s termination would jeopardize the public policy; (3) plaintiff’s dismissal was

motivated by conduct related to the public policy; and (4) the employer lacked overriding

legitimate business justification for the dismissal. Collins v. Rizkana (1995), 73 Ohio

St.3d 65, 69-70. The first two prongs are questions of law for the court while the latter

two prongs are questions for the trier of fact. Id.

{¶17} For example, in Kulch, the plaintiff was discharged after filing complaints

with the Occupational Safety and Health Administration (“OSHA”). Kulch v. Structural

Fibers, Inc. (1997), 78 Ohio St.3d 134. The plaintiff brought a claim for wrongful

discharge in violation of public policy. The court recognized the numerous statutes and

constitutional provisions that support workplace safety, in keeping with the important

objectives of OSHA. Id. The court held that retaliation against employees who filed

complaints relating to workplace safety clearly contravened the public policy of Ohio. Id.

Similarly, in Collins, supra, a discharged employee could maintain a wrongful termination

claim based on sexual harassment and discrimination. The clear public policy against

sexual harassment was expressed in statutory law and the statute’s remedies were not

available to the employee because her employer did not employ four or more persons.

Anders v. Specialty Chem. Resources, Inc. (1997), 121 Ohio App.3d 348 (stating claim

for violation of public policy in terminating employee for refusing to engage in insurance

fraud); Trader v. People Working Cooperatively, Inc. (1994), 104 Ohio App.3d 690, app.

dism. (1996), 74 Ohio St.3d 1286 (stating claim where employee was terminated for

reporting illegal drug use). Accordingly, the first issue we address is whether a clear

public policy exists to support Mitchell’s claim.

No. 03AP-981

{¶18} Mitchell argues that R.C. 2305.24, R.C. 2305.251, and R.C. 2305.252

11

reflect the important public policy of encouraging physicians to report substandard patient

care issues without retaliation to a quality assurance committee or a member thereof, and

as such, protects Mitchell’s actions in this case. R.C. 2305.24 provides in part:

Any information, data, reports, or records made available to a
quality assurance committee or utilization committee of a
hospital * * * are confidential and shall be used by the
committee and the committee members only in the exercise
of the proper functions of the committee. * * * A right of action
similar to that a patient may have against an attending
physician for misuse of information, data, reports, or records
arising out of the physician-patient relationship shall accrue
against a member of a quality assurance committee or
utilization committee for misuse of any information, data,
reports, or records furnished to the committee by an attending
physician. No physician, * * * shall, by reason of the
furnishing, be deemed liable in damages to any person, or be
held to answer for betrayal of a professional confidence * * *.
Information, data, or reports
to a utilization
furnished
committee of a state or local medical society shall contain no
name of any person involved therein.

* * *

{¶19} R.C. 2305.251 provides immunity to health care entities for any acts,

omissions, decisions, or other conduct within the scope of the functions of a peer review

committee. R.C. 2305.252 provides for confidentiality of peer review committee

proceedings and records. There is no question that R.C. 2305.24 protects physicians

from personal liability if he or she provides information to a quality assurance committee

in accordance with the statute. However, the case at bar is not so simple. Mitchell is

asking us to find a clear public policy that employers cannot discharge employees who

complain about patient care outside the quality assurance chain. We decline to extend

the narrow public policy exception to the employment at-will doctrine this far.

No. 03AP-981

{¶20} Mitchell stated that the Shonk letter and the Yakubov letter were quality

12

assurance documents. Appellees argue the Shonk and/or Yakubov letters were never a

part of the quality assurance process. Whether or not the letters were quality assurance

documents is of no relevance to resolving the question as to whether Mitchell’s actions

are protected by public policy.

{¶21} We have a situation where the physician, Mitchell, distributed the letters to a

number of different individuals. Several of those individuals were not members of the

quality assurance committee. To afford protection to Mitchell’s actions would destroy the

entire purpose behind the creation and protection of quality assurance committees and

proceedings. Any physician could document a complaint about an issue, call it a quality

assurance document, distribute it to whomever he or she pleased, and be protected from

termination even though the physician may have breached patient confidentiality,

exposed the health care entity to potential liability, or violated hospital policy. Therefore,

we find there is no clear public policy evidenced in the above-mentioned statutes or case

law to protect Mitchell in this case.

{¶22} To the extent Mitchell suggests an even broader public policy by arguing

that anyone who complains about patient care to anyone is protected from discharge, we

cannot extend the exception this far. While the cases cited by Mitchell note the

importance of patient care, they do not clearly define a public policy that would be

applicable to this case. If Mitchell’s argument were accepted, any physician or health

care worker who complained to anyone about patient care issues at any time during their

employment who is later discharged, could file an action for wrongful termination in

violation of public policy. Ohio law does not support such a sweeping interpretation of the

No. 03AP-981

public policy exception to employment at-will. If we were to hold otherwise, Ohio’s long-

13

standing and predominate rule that employees are terminable at-will would disappear.

{¶23} Further, Mitchell’s argument that his opposition to the stable admit policy

should be protected under this doctrine is without merit. Greeley, supra; Collins, supra.

For the reasons stated above, Ohio law does not extend the public policy exception to

protect Mitchell from discharge. Greeley, supra; Collins, supra. We are simply not willing

to extend public policy this far.4 Accordingly, Mitchell’s first and second assignments of

error are overruled and summary judgment is appropriate on Mitchell’s wrongful

termination in violation of public policy claim against appellees.5 Mid-Ohio’s and

Grant/RMH’s cross-assignment of error are also sustained.

{¶24} In the third assignment of error, the trial court erred in granting summary

judgment to appellee Grant/RMH on Mitchell’s due process claim. Mitchell argues that

upon being terminated from Mid-Ohio, he was entitled to a due process hearing based on

Grant/RMH’s by-laws. Mitchell relies on provision 12.1(a) of the by-laws:

4 Mitchell also argues that his termination violated his First Amendment protections under the Ohio and
United States Constitutions. However, these constitutional provisions do not apply to private actors.
Stephenson v. Yellow Freight Sys., Inc. (Oct. 26, 1999), Franklin App. No. 99AP-77), discretionary appeal
not allowed (2000), 88 Ohio St.3d 1432; Petrovski v. Fed. Express Corp. (N.D.Ohio 2002), 210
F.Supp.2d 943, 947 (holding plaintiff’s wrongful discharge claim in violation of public policy based on
freedom of speech is without merit “as the prohibitions contained therein apply only to state action, not the
actions of a private citizen or employer.” (Citation omitted.)

5 To the extent Mitchell argues that his own conduct should not preclude recovery on his public policy claim
based on Pytlinski v. Brocar Products, Inc. (2002), 94 Ohio St.3d 77 and/or Himmel v. Ford Motor Co.
(C.A.6, 2003), 342 F.3d 593, the argument is without merit. In Pytlinski, the Supreme Court of Ohio stated
in a footnote that the specific requirements for filing a complaint set forth in a statute need not be met so
long as the discharge is “related to the public policy.” Id. at 80, fn. 3. The case at bar is completely
distinguishable from Pytlinski. Here, the public policy identified in the statute would be defeated if
complaints were not kept confidential. Similarly, in Himmel, the plaintiff reported his employer’s illegal
activities. The plaintiff necessarily engaged in some of those activities. The Sixth Circuit held the plaintiff’s
own conduct did not defeat his wrongful termination claim as plaintiff’s conduct fell within the scope of the
policy and was necessary to further the policy manifested in the labor laws. Himmel, supra. Again, in the
case at bar, Mitchell’s actions do not further the policy manifested in the peer review and quality assurance
statutes. To the contrary, his actions defeat that policy by not following the procedures set forth in the
statutes, namely distributing both letters to individuals outside the CPIT.

14

No. 03AP-981

Except as otherwise provided for herein, any Practitioner
whose appointment or reappointment to the Medical staff or
advancement in Medical staff membership has been denied
or any Practitioner whose Clinical Privileges have been
curtailed, suspended, revoked or denied, or any Practitioner
who has received any adverse recommendation from the
Medical Executive Committee, Medical Staff or Governing
Body, relative to a matter of Medical Staff appointment or
Clinical Privileges (“adverse action”) will have the right to a
formal hearing by a panel of individuals or a hearing officer
appointed by the Governing Body, or its designee.

* * *

(Emphasis added.)

{¶25} We agree with the trial court that Mitchell’s due process claim against

Grant/RMH fails for the reason that it never took any action against Mitchell. Grant/RMH

did not curtail, suspend, revoke, or deny Mitchell any privileges at the hospital. The letter

of termination from Mid-Ohio sufficiently illustrates this fact. It states: “[y]our employment

as an emergency department physician at Grant/[RMH] shall continue until you are

otherwise notified.” Grant/RMH simply did not take adverse action against Mitchell. Holt

v. Good Samaritan Hosp. and Health Ctr. (1990), 69 Ohio App.3d 439; Collins v.

Associated Pathologists, Ltd. (C.A.7, 1988), 844 F.2d 473; Plummer v. Community Gen.

Hosp. of Thomasville, Inc. (2002), 155 N.C.App. 574 (the right to exercise medical

privileges is separate and distinct from the granting or revoking of those privileges and a

physician is not guaranteed employment to exercise those privileges). The Collins court

succinctly stated:

Dr. Collins also asserts that St. John’s [Hospital] wrongfully
removed or reduced his staff privileges in violation of the by-
laws of the hospital. However, the record reflects that St.
Johns has neither removed nor reduced Dr. Collins’ staff
privileges. * * * Staff privileges reflect the hospital’s decision
that a physician is qualified to practice in the facility, but do

No. 03AP-981

not in and of themselves confer employment. Employment as
a pathologist at St. John’s was determined by the legal
contract between St. John’s and APL
[the exclusive
contractor]. * * * Although without concurrent employment by
St. John’s as a pathologist these staff privileges may be of
little or no value to Dr. Collins, the fact remains that the
privileges were neither removed nor reduced. * * *

Collins, supra, at 481. (Citation omitted; emphasis added.)

15

The fact that Grant/RMH did not curtail, suspend, or revoke Mitchell’s privileges

defeats his due process claim based on the by-laws as well as a common law due

process claim. Accordingly, Mitchell’s third assignment of error is overruled.

{¶26} In the fourth assignment of error, Mitchell claims the trial court erred in

granting summary judgment to Grant/RMH on appellant’s breach of contract claim.

Mitchell argues Grant/RMH breached its contract with him by denying him due process

upon his termination from Mid-Ohio. He maintains that Grant/RMH promised that if he

was denied the opportunity to practice, he would have access to a grievance process to

determine if the denial was justified.

{¶27} In Munoz, the court discussed whether hospital by-laws contractually bind

the hospital. Munoz v. Flower Hosp. (1985), 30 Ohio App.3d 162. The court mentioned

cases that hold a hospital is bound by the by-laws otherwise the by-laws are

meaningless, while other cases find the hospital is not bound because there is no

consideration or mutuality of obligation between the parties. Id. (Citations omitted.) The

court concluded the “most enlightened reasoning seems to be that staff bylaws can form

a binding contract between the doctors and hospital but only where there can be found in

the bylaws an intent by both parties to be bound.” Id. at 166; Wolf v. McCullough-Hyde

Mem. Hosp., Inc. (1990), 67 Ohio App.3d 349.

No. 03AP-981

{¶28} However, we do not resolve the issue of whether the parties intended to be

16

bound by the by-laws. Mitchell maintains his staff privileges at Grant/RMH. As with

Mitchell’s due process claim, his breach of contract claim against Grant/RMH fails

because Grant/RMH has not taken any adverse action against him. It has not curtailed,

suspended, denied, or revoked his privileges. The hospital is under no obligation by

virtue of the by-laws to insure that Mitchell is provided work at the hospital. Khosla v.

Magruder Mem. Hosp. (June 30, 1993), Ottawa App. No. 92OT053 (whether or not

hospital by-laws constitute a contract is a non-issue where the plaintiff anesthesiologist

retained staff privileges at the hospital. “The hospital has no obligation under the bylaws

to insure that [plaintiff doctor] is provided work at the hospital.”) Thus, Mitchell’s breach of

contract claim fails. Accordingly, the fourth assignment of error is overruled.

{¶29} We now turn to Mitchell’s eighth assignment of error. Mitchell claims the

trial court erred in finding that his employment at-will status precluded recovery for

tortious interference with contract. Mitchell asserts this claim against Mid-Ohio, InPhyNet,

Acute Care, and Dr. Drstvensek. To prevail on a claim of tortious interference with

contract, Mitchell must show: (1) the existence of a contract; (2) the wrongdoer’s

knowledge of the contract; (3) the wrongdoer’s intentional procurement of the contract’s

breach; (4) lack of justification for the interference; and (5) resulting damages. Fred

Siegel Co., L.P.A. v. Arter & Hadden (1999), 85 Ohio St.3d 171, paragraph 1, syllabus.

“Tortious interference with contract requires an actor to improperly interfere with the

performance of a contract between two other persons.” Emergency Preemption, Inc. v.

Emergency Preemption Sys., Inc. (Aug. 14, 1997), Cuyahoga App. No. 71350. The trial

court held there could be no interference with contractual relations if the contract is

No. 03AP-981

terminable at-will. We agree. If an employee is at-will, tortious interference with contract

17

is not a viable cause of action. Emergency Preemption, Inc., supra; Hoyt, Inc. v. Gordon

& Assocs., Inc. (1995), 104 Ohio App.3d 598. In this case, Mitchell was an at-will

employee. Therefore, his claim for tortious interference with contract must fail.

{¶30} Mitchell argues on appeal that he alleged tortious interference with

employment relations in addition to or instead of tortious interference with contract. Ohio

law recognizes both torts as independent of one another. Dryden v. Cincinnati Bell Tel.

Co. (1999), 135 Ohio App.3d 394. “Tortious interference with contractual or business

relations does not require a showing of malice, and is largely an adaptation of the

Restatement of the Law * * * .” Dryden, supra, at 400. On the other hand, the tort of

wrongful interference with employment relations requires a showing of “either wanton or

malicious behavior” when the tort is asserted against an “outsider,” meaning an individual

not worthy of a qualified privilege.

Id., citing Contadino v. Tilow

(1990),

68 Ohio App.3d 463, 467. Both torts recognize the applicability of a qualified privilege.

Smith v. Ameriflora 1992, Inc. (1994), 96 Ohio App.3d 179, 187; Emergency Preemption,

Inc., supra. In order to overcome the defense of qualified privilege the claimant must

demonstrate that the interferer(s) acted with actual malice. Ameriflora, supra.6

{¶31} With respect to tortious interference with employment relations, “[t]he

general rule in Ohio is that an employee earning a living has a right to pursue such

6 We would point out that courts do not always distinguish between the two torts when an employee is
terminated and is the plaintiff. However, if tortious interference with contract or business relations is not
available because the employee is at-will and tortious interference with employment relations is available,
the distinction must be recognized as the court did in the Dryden case. Further, we find the malice or
wanton requirement necessary to ensure the employment at-will doctrine is not destroyed by employees
who are discharged and later bring an action against an outsider who did something the employee did not
like. Wilson v. Procter & Gamble (Nov. 6, 1998), Hamilton App. No. C-970778, citing Anderson v. Minter
(1972), 32 Ohio St.2d 207 (“a cause of action may be recognized against an outsider for malicious
interference, but the court cautioned that liability must be predicated on a finding of malicious conduct”).

No. 03AP-981

employment free from unwarranted interference by third persons * * * . Moreover, it has

18

been held that this right of noninterference extends even to an at-will employee.”

Contadino, supra, at 467. However, the right of noninterference is limited by the

applicability of a qualified privilege. Id. For example, a person in a supervisory capacity

or other position of authority over the employee cannot be held liable for interfering if it is

that person’s duty to monitor, supervise, or enforce. Id. (Holding that director of crisis

intervention did not maliciously interfere with employment even though director advocated

employee’s dismissal where director owed a duty to the program to advocate the

dismissal if it was in the program’s best interest); Emergency Preemption, supra (a

corporate officer cannot interfere with contract in the capacity as corporate officer if the

officer or person is legitimately asserting a legally protected interest); Smiddy v. Kinko’s,

Inc., Hamilton App. No. C-020222, 2003-Ohio-446; Hall v. United Labs,

Inc.

(N.D.Ohio 1998), 31 F.Supp.2d 1039 (doctor and laboratory hired by the employer to

analyze employee drug tests were privileged to intervene in employment relationship and

not liable for tortious interference).

{¶32} Mitchell titled the pertinent cause of action tortious interference with contract

and alleged the following: “Defendants Grant/[RMH], DeWoody, Shonk and/or IMMI

tortiously interfered with Plaintiff’s agreement with Mid-Ohio, causing Mid-Ohio to sever its

relationship with him, and to breach its agreement to convey upon Plaintiff and (sic)

ownership interest.” (Dec. 27, 2000, Amended Complaint, at ¶33.) We find these

allegations insufficient to state a claim for tortious interference with employment relations.

As stated above, this tort requires a showing of malicious interference or wanton

behavior. Robinson v. Springfield Local School Dist. Bd. of Edn., Summit App.

No. 03AP-981

No. 20606, 2002-Ohio-1382 (an employee’s interference may be justified and not

19

actionable when it comes within the scope of one’s duties and is not malicious);

Contandino, supra. Accordingly, Mitchell’s claim for tortious interference with contractual

or business relations and/or tortious interference with employment relations fails. The

eighth assignment of error is overruled.

{¶33} In the fifth assignment of error, Mitchell contends the trial court erred in

granting summary judgment on his civil conspiracy claim. To state a claim for civil

conspiracy, Mitchell must establish four elements. Those elements include: (1) a

malicious combination; (2) of two or more persons; (3) resulting in injury to person or

property; and (4) the existence of an unlawful act independent of the actual conspiracy.

Davidson v. BP Am., Inc. (1997), 125 Ohio App.3d 643. A civil action for conspiracy

cannot be maintained unless something is done which without the conspiracy, would give

rise

to a cause of action.

Khosla, supra, quoting Minarik v. Nagy (1963),

8 Ohio App.2d 194, 195. In other words, there must be a viable claim distinct from the

conspiracy in order for the conspiracy claim to survive. In this case, there are no

surviving claims. Therefore, Mitchell’s fifth assignment of error is overruled.

{¶34} In the sixth assignment of error, Mitchell claims the trial court erred in

granting

summary

judgment

to Ms. DeWoody

and Dr. Drstvensek.

For all of the reasons stated above, Mitchell asserts no viable claims. Accordingly,

Mitchell’s sixth assignment of error is overruled.

{¶35} In the seventh assignment of error, Mitchell argues the trial court erred in

granting summary judgment on the issue of Grant/RMH’s status as plaintiff’s employer for

purposes of the MEC position. Because Mitchell was not employed by Grant/RMH, he

No. 03AP-981

cannot succeed on any of his claims against any appellees, and it is unnecessary to

20

address this issue. Accordingly, Mitchell’s seventh assignment of error is overruled.

{¶36} Based on the foregoing, the trial court properly granted summary judgment

to Mid-Ohio, InPhyNet, Acute Care, Grant/RMH, Ms. DeWoody, and Dr. Drstvensek.

There is no clear public policy to protect Mitchell from discharge in this case. Mitchell

destroyed the purpose of the statutes he seeks to use as a shield by deciding to take it

upon himself to disperse the so-called quality assurance letters to individuals outside the

quality assurance chain.

{¶37} Grant/RMH owed Mitchell no due process. Moreover, for the same reason,

Grant/RMH did not breach its contract with Mitchell by virtue of any violation of the by-

laws as it never sought to curtail, suspend, or revoke Mitchell’s privileges. Mitchell’s claim

for tortious interference with contract fails since Mitchell was an employee at-will. Further,

Mitchell did not sufficiently plead a claim for tortious interference with employment

relations as he failed to plead malicious or wanton behavior. Mitchell’s civil conspiracy

claim fails because no underlying tort remains viable. Finally, we do not reach the issue

of whether Grant/RMH was Mitchell’s employer for purposes of the MEC position.

{¶38} Based on the foregoing, Mitchell’s first, second, third, fourth, fifth, sixth,

seventh, and eighth assignments of error are overruled. The sole error on cross-appeal is

sustained. Accordingly, the judgment of the trial court is affirmed.

Judgment affirmed.

BRYANT and KLATT, JJ., concur.

Miller v. Milton Hosp. & Med. Ctr, Inc.

Miller v. Milton Hosp. & Med. Ctr, Inc.

Miller v. Milton Hosp. & Med. Ctr, Inc.,
No. 99-P-2114 (Mass. App. Ct. April 12, 2002).

A physician and his medical corporation sued a hospital, its president, and
its chief of surgery, for failing to renew his contract. The lower court granted
the hospital defendants’ motion to exclude a letter the chief of surgery wrote
to the hospital president regarding a joint meeting of the departments of emergency
medicine and of surgery, based on a conclusion that the letter was a "proceeding,
record, or report" of a "medical peer review committee" under
the state Peer Review Statute.

The Appeals Court reversed, holding that the record did not support the lower
court’s decision to exclude the letter as a record or report of a "medical
peer review committee." It concluded that on the face of the letter alone,
it was impossible to tell whether the joint meeting of the two departments engaged
the departments in a medical peer review function (considering problems with
the quality of patient care which could result from a refusal by the emergency
department to refer patients to the surgery department for follow-up care) or,
as the physician claimed, simply described a meeting to discuss an effort by
the surgery department to assure a lucrative source of referral business from
the emergency department. Accordingly, the Appeals Court vacated the judgments
on several counts and remanded for further proceedings.

Ming Wei Liu v. Bd. of Tr. of the Univ. of Alabama (Full Text)

Ming Wei Liu v. Bd. of Tr. of the Univ. of Alabama (Full Text)

[DO NOT PUBL ISH ]

IN THE UN ITED STATES COURT O F A PPEALS

FOR THE ELEVENTH C IRCU IT
________________________

N o . 09 -10011
N on -A rgum en t C a lendar
________________________

FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MAY 19, 2009
THOMAS K. KAHN
CLERK

D . C . D ocke t N o . 07 -00381 -CV -AR -S

M ING WE I L IU ,

BOARD O F TRU STEES O F THE
UN IVERS ITY OF ALABAMA ,
ROBERT C . BOURGE ,

P la in tiff-A ppe llan t,

versus

D efendan ts-A ppe llees .

________________________

A ppea l from the U n ited S ta tes D istr ic t Cou rt
fo r the N o r thern D istr ic t o f A labam a
_________________________

(M ay 19 , 2009 )

B efo re CARNES , W ILSON and KRAV ITCH , C ircu it Judges .

PER CUR IAM :

A ppe llan t D r . M ing W e i L iu (“L iu”) cha llenges the d istric t cou r t’s g ran t o f

summ ary judgm en t in th is case .

I .

L iu is a card io log ist w ho , be tw een 1991 and 2001 , w as a tenu red A ssoc ia te

P ro fesso r o f M ed ic ine a t the U n iversity o f A labam a B irm ingham (“UAB ”) . In

2001 , fo r reasons no t re levan t to th is appeal, the d irec to r o f the D iv ision o f

C ard iovascu lar R esearch a t UAB D r . Rober t Bou rge (“Bou rge”) summarily

suspended L iu ’s c lin ica l p r iv ileges and institu ted a “peer rev iew ” investiga tion o f

L iu ’s c lin ica l p r iv ileges . U pon the adv ice o f counse l, L iu subm itted h is resigna tion

before the investiga tion w as comp leted . A s requ ired by the H ea lthcare Q uality

Imp rovem en t A c t o f 1986 (“HCQ IA ”), 42 U .S .C . § 11101 , e t seq ., UAB repo r ted

L iu ’s resigna tion du r ing the pendency o f an investiga tion to the N a tiona l

P rac titioner D a ta B ank (“N PDB ”) .

A f ter resign ing from h is position a t UAB , L iu app lied fo r a p ro fesso rsh ip a t

the U n iversity o f Sou thern C a lifo rn ia H osp ital (“U SC ”) . A s a par t o f h is

app lica tion fo r staff p r iv ileges, U SC asked L iu to request tha t UAB fo rw ard cer ta in

peer rev iew in fo rm a tion to U SC , so tha t it cou ld eva lua te the repo r t on the N PDB .

Instead o f send ing the requested peer rev iew in fo rm a tion , Bou rge sen t a

“recommenda tion le tter” to USC sta ting tha t L iu w as p laced on p roba tion and w as

2

be ing investigated because h is “perfo rm ed p rocedu res , p lanned p rocedures , cer ta in

aspec ts o f m ed ica l care , and h is hosp ita l char t docum en ta tion w ere no t w ith in the

standard o f care a t ou r institu tion .” U pon rece iv ing th is le tter , U SC aga in

requested add itiona l peer rev iew in fo rm a tion regard ing the cases Bou rge asser ted

w ere no t w ith in UAB ’s “standard o f care .” UAB invoked A labama sta te m ed ica l

peer rev iew p r iv ilege , A la . Code §§ 6 -5 -333 and 22 -21 -8 (“peer rev iew p r iv ilege”) ,

and refused to p rov ide the peer rev iew in fo rm a tion concern ing L iu to U SC .

B ecause it d id no t rece ive the requested peer rev iew in fo rm a tion , the U SC

creden tialing comm ittee den ied L iu ’s app lica tion fo r staff p r iv ileges as incomp lete .

A f ter being den ied staff p r iv ileges a t U SC , L iu w as even tua lly g ran ted c lin ica l

p r iv ileges a t severa l hosp ita ls in the Los A nge les , C a lifo rn ia area , w here he is

cu rren tly p rac tic ing m ed ic ine .

L iu comm enced th is case aga inst UAB and Bou rge seek ing , in ter a lia , a

dec lara to ry judgm en t and in junc tive re lief to requ ire UAB to prov ide the peer

rev iew in fo rm ation concern ing L iu to the creden tialing comm ittee o f USC . In

add ition to severa l sta te law c laim s , L iu asser ted tw o c la im s pu rsuan t to 42 U .S .C .

§ 1983 , a lleg ing tha t UAB ’s invoca tion o f the A labam a peer rev iew p r iv ilege to

refuse to p rov ide the peer rev iew in fo rm a tion to U SC (1 ) v io la ted the Sup rem acy

C lause o f the U n ited S ta tes Constitu tion by obstruc ting the “essen tia l pu rpose” o f

3

the HCQ IA and (2) v io la ted L iu ’s Fou r teen th Am endm en t r igh t to substan tive and

p rocedu ra l due p rocess and to equa l p ro tection by in terfer ing w ith h is r igh t to

pu rsue h is chosen p ro fession . U pon cross-mo tions fo r summ ary judgm en t, the

d istr ic t cou r t found , in ter a lia , tha t (1 ) UAB , as an instrum en tality o f the sta te o f

A labam a , is immune from su it under the E leven th Am endm en t; (2 ) Bou rge’s

refusa l to p rov ide the peer rev iew in fo rm a tion requested by U SC d id no t v io la te

the “essen tia l pu rpose” o f the HCQ IA ; and (3 ) because L iu is cu rren tly p rac tic ing

as a card io log ist and has no t show n tha t UAB /Bou rge’s conduc t has p reven ted h im

from emp loym en t as a p ro fesso r o f m ed icine w ith a ll emp loyers , L iu has no va lid

due p rocess c la im . A cco rd ing ly , the d istr ic t cou r t d ism issed a ll c la im s asser ted

aga inst UAB and d ism issed the federal cla im s asser ted aga inst Bou rge . Then ,

1
because ju risd iction w as p rem ised upon federa l question and a ll o f the federa l

c la im s had been d ism issed , the d istr ict cour t declined to exerc ise ju r isd ic tion over

the sta te law c la im s and d ism issed them w ithou t p rejud ice .

L iu appea ls , cha lleng ing the d ism issa l o f h is federa l cla im s aga inst Bou rge .2

In his complaint, Liu also claimed federal jurisdiction on the basis of diversity of
1
citizenship. The district court, however, found that Liu had not established the requisite amount
in controversy and that federal jurisdiction was only proper because Liu asserted federal claims.
Liu does not dispute this finding on appeal.

Liu does not appeal the district court’s determination that UAB is immune from suit
2
under the Eleventh Amendment.

4

II .

“W e rev iew the d istr ic t cou r t’s g ran t o f summ ary judgm en t de novo ,

app lying the sam e lega l standards tha t bound the d istr ic t cou r t, and v iew ing a ll

fac ts and reasonab le in ferences in the ligh t most favo rab le to the nonmov ing

par ty .” C ruz v . Pub lix Super M arke ts , Inc ., 428 F .3d 1379 , 1382 (11 th C ir . 2005 )

(citation and quo ta tion om itted ). Summ ary judgm en t is app ropr ia te w hen “there is

no genu ine issue as to any m a ter ia l fac t and . . . the mov ing par ty is en titled to a

judgm en t as a m a tter o f law .” F ed . R . C iv . P . 56 (c) .

III.

L iu appea ls the g ran t o f summ ary judgm en t, asser ting tha t the d istr ic t cou r t

erred (1 ) by f ind ing tha t Bou rge’s refusa l to p rov ide the requested peer rev iew

info rm a tion d id no t v io late the Sup rem acy C lause as inconsisten t w ith the HCQ IA ;

and (2 ) by f ind ing that L iu had no t estab lished that h is constitu tiona lly p ro tec ted

“r igh t to pu rsue h is chosen pro fession” w as v io la ted . 3

Liu also argues that the district court erred in its “threshold conclusion” that the
3
Alabama peer review privilege could be invoked to refuse to provide peer review information
properly requested by a hospital in another state. The district court, however, did not actually
reach this conclusion; rather, it considered whether the peer review privilege, as it was asserted
by Bourge, violated Liu’s constitutional rights. After finding that Bourge’s invocation of the
privilege to deny USC’s request for peer review information did not violate any of Liu’s
federally protected rights, the district court declined to exercise its supplemental jurisdiction
over the pending state law claims and therefore had no need to determine whether the state law
privilege was intended to be asserted in such a manner. See Pintando v. Miami-Dade Housing
Agency, 501 F.3d 1241, 1242 -1243 (11th Cir. 2007) (noting that a district court “may decline to
exercise supplemental jurisdiction over a claim if . . . the district court has dismissed all claims

5

R egard ing L iu ’s f irst assignm en t o f erro r , L iu argues tha t Bou rge’s

in terp re ta tion of the A labam a peer rev iew p r iv ilege “frustra tes” Cong ress’s in ten t

in enac ting the HCQ IA and tha t therefo re the p r iv ilege as app lied is

unconstitu tiona l as v io la tive of the Sup rem acy C lause. S ee W isconsin Pub lic

In terveno r v . M o r tier , 501 U .S . 597 , 604 -05 (1991 ) . W e d isag ree .

Cong ressiona l in ten t is the “u ltim a te touchstone” in a Sup rem acy C lause

case, M ed tron ic , Inc . v . Loh r , 518 U .S . 470 , 485 (1996 ) , and th is in ten t “governs

ou r de term ina tion o f w he ther federa l law preemp ts sta te law .” Boyes v . She ll O il

P rods . Co ., 199 F .3d 1260 , 1267 (11 th C ir . 2000 ) ; see Th is Tha t and O ther G if t and

Tobacco , Inc . v . Cobb Coun ty , G a ., 285 F .3d 1319 , 1322 (11 th C ir . 2002 ) . O n ly if

the app lica tion o f a sta te law “stands as an obstac le to the accomp lishm en t and

execu tion o f the fu ll pu rposes and ob jec tives o f Cong ress” w ill it be deem ed a

v io la tion o f the Sup rem acy C lause and therefo re p reemp ted by the federa l law .

S ee M o r tier , 501 U .S . a t 604 -05 (1991) .

Cong ress enac ted the HCQ IA to add ress the r ising p rob lem of m ed ica l

m a lp ractice and the ab ility o f incompe ten t doc to rs to move be tw een sta tes w ithou t

4
hav ing the ir p r io r prac tice reco rds fo llow them and to crea te a p resump tive

over which it has original jurisdiction”). Our review therefore is limited to the district court’s
findings regarding the sufficiency of Liu’s constitutional claims.

To that end, it created the NPDB, a national registry which requires health care entities,
4
inter alia, to report the following information upon accepting a physician’s surrender of clinical

6

immun ity from mone tary dam ages aw arded aga inst par tic ipan ts in the peer rev iew

p rocess . 42 U .S .C . §§ 11101 – 11111 . The A labam a sta tu tes a t issue , A la . Code

§§ 22 -21 -8 and 6 -5 -333 (d ), supp lem en t the HCQ IA by p rov id ing par ticipan ts in

the peer rev iew p rocess w ith an exp lic it p r iv ilege from d iscovery in the c iv il

5
litiga tion con tex t. W e conclude tha t the in ten t o f bo th the federa l and sta te

sta tu tes , therefo re , is “to fac ilita te the frank exchange o f info rm a tion among

p ro fessiona ls conduc ting peer rev iew inqu iries w ithou t the fear o f rep r isa ls in c iv il

law su its .” B ryan v . Jam es E . H o lm es R eg ’l M ed . C tr ., 33 F .3d 1318 , 1322 (11 th

C ir . 1994 ) ( in terp re ting the HCQ IA ) ; accord Ex par te K ro thapa lli, 762 So . 2d 836 ,

838 (A la . 2000 ) (“In o rder to m ake m ean ing fu l peer rev iew possib le , the [A labam a

sta te] leg isla tu re p rov ided a guaran tee o f con f iden tia lity for the peer rev iew

p rocess . . . .”) (quo ting C ruger v . Love , 599 So . 2d 111 , 113 -14 (F la. 1992 )) ;

M arsha ll v . P lanz , 145 F . Supp . 2d 1258 , 1265 (M .D . A la . 2001 ) ; M cG ee v . B ruce

privileges while under an investigation: “the name of the physician involved; a description of the
acts or omissions or other reasons for the action or, if known, for the surrender; and such other
information respecting the circumstances of the action or surrender as the Secretary deems
appropriate.” 42 U.S.C. § 11133(a)(3). Liu does not allege that UAB’s report to the NPDB
failed to satisfy HCQIA’s statutory disclosure requirements.

“The plain language of Alabama’s two statutes, §§ 6-5-333 and 22-21-8 . . . declares as
5
privileged ‘all information, interviews, reports, statements, or memoranda furnished to any
committee as defined in this section’ . . . and provides that ‘no person involved in preparation,
evaluation or review of accreditation, quality assurance or similar materials shall be permitted or
required to testify in any civil action as to any evidence or other matters produced or presented.’”
Ex parte Burch, 730 So. 2d 143, 149 (Ala. 1999) (finding testimony of a peer review committee
chairman privileged).

7

H osp . Sys ., 439 S .E .2d 257 , 259 -60 (S .C . 1993 ) (“The underlying pu rpose beh ind

the con f iden tia lity sta tu te is no t to fac ilita te the p rosecu tion o f c iv il ac tions , bu t to

p romo te comp le te cando r and open d iscussions among par tic ipan ts in the peer

rev iew p rocess .”) .

In th is case , how ever , Bou rge in terp re ted the sta te law p r iv ilege as ex tend ing

beyond the litiga tion con tex t and requ ir ing UAB to no t d isc lose to U SC ’s

creden tialing comm ittee the in fo rm a tion the UAB peer rev iew comm ittee had

ga thered du r ing its investiga tion o f L iu . W ithou t dec id ing w he ther the A labam a

leg isla tu re in tended for the peer rev iew p r iv ilege to be app lied in th is m anner , w e

conc lude tha t the peer rev iew pr iv ilege as app lied d id no t thw art Cong ress’s in ten t

in enac ting the HCQ IA and th is app lica tion o f the p r iv ilege is therefore no t

unconstitu tiona l under the Sup rem acy C lause . N o th ing in the HCQ IA m anda tes

tha t hea lth care en tities p rov ide peer rev iew in form a tion to creden tia ling au tho r ities

in o ther sta tes in excess o f the in fo rm a tion requ ired to be repo r ted to the NPDB .

Indeed , as sta ted above , Cong ress enac ted the HCQ IA “to fac ilita te the frank

exchange o f in fo rm a tion among p rofessiona ls conduc ting peer rev iew inqu ir ies”

and to ensu re tha t som e m in im a l amoun t o f in fo rm a tion regard ing a physic ian ’s

“p rev ious dam ag ing o r incompe ten t perfo rm ance” w ill fo llow the physic ian w hen

he o r she moves from sta te to sta te . Bou rge’s invoca tion o f the A labama peer

8

rev iew p r iv ilege to refuse to prov ide spec if ic requested de ta ils regard ing the

surrender o f L iu ’s c lin ica l p r iv ileges does no t con f lic t w ith e ither o f these goa ls o f

the HCQ IA . A s such , the A labam a sta tu tes a t issue , as app lied in th is case , do no t

v io la te the Sup rem acy C lause . 6

L iu also argues on appea l tha t Bou rge’s refusa l to p rov ide the peer rev iew

m a teria l and send ing o f the “recomm endation” le tter to U SC effec tive ly b lack listed

h im and p reven ted h im from pursu ing h is chosen p ro fession as a p rofesso r o f

7
m ed ic ine . A cco rd ing ly, because the r igh t to fo llow a p ro fession free from

un reasonab le governm en t in terference is a p ro tec ted p roper ty r igh t, L iu asser ts that

he has p resen ted su ff ic ien t ev idence suppo r ting h is substan tive due p rocess c la im .

A gain , w e d isag ree .

The Sup rem e Cou r t has recogn ized tha t the liber ty componen t o f the

Fou r teen th Amendm en t’s D ue P rocess C lause inc ludes the r igh t to pu rsue a

p ro fession . S ee Conn v . G abber t, 526 U .S . 286 , 291 -92 (1999 ) (stating tha t there

is “som e genera lized due p rocess r igh t to choose one’s f ie ld o f p r iva te

emp loymen t”) . In recogn iz ing a v io la tion o f th is r igh t, how ever , the Cou r t has

This is not to say Liu is without legal recourse if Bourge in fact wrongfully invoked the
6
privilege to deny Liu’s request for his peer review information; we only conclude that Liu has
identified no Supremacy Clause violation.

The parties dispute whether Liu’s “chosen profession” is as a cardiologist or as a
7
professor of medicine. We reach the same conclusion regardless; therefore, we need not decide
this issue.

9

no ted tha t its cases “a ll deal w ith a comp le te p roh ib ition o f the r igh t to engage in a

ca lling , and no t [a] so r t o f b r ief in terrup tion .” Id . a t 292 (emphasis added ) . In

Board o f R egen ts v . Ro th , 408 U .S . 564 , 573 (1972 ) , fo r examp le , the Sup rem e

Cou r t found that an emp loyee’s due p rocess righ ts are tr iggered w here the sta te

emp loyer imposes “a stigm a o r o ther d isab ility tha t forec loses h is freedom to take

advan tage o f o ther emp loym en t oppo r tun ities .” (Emphasis added) . In C lemons v .

D ougherty Coun ty, G eo rg ia , 684 F .2d 1365 , 1371 (11 th C ir. 1982 ) , th is cou r t

reitera ted the standard fo r p rov ing a dep r iva tion o f the liberty in terest, sta ting tha t a

p la in tiff must estab lish tha t the sta te emp loyer m ade “stigm a tiz ing charges w h ich

forec lose h is freedom to take advan tage o f o ther emp loym en t oppor tun ities .” S ee

a lso Su llivan v . Schoo l Bd . of P ine llas Coun ty , 773 F .2d 1182 , 1187 (11 th C ir .

1985 ) (find ing tha t pub lished comm en ts regard ing pub lic emp loyee’s non -renew a l

d id no t imp lica te a liber ty in terest because they d id no t “forec lose [her] freedom to

take advan tage o f o ther emp loym en t oppo r tun ities”) ; P iro lo v . C ity o f C learw a ter ,

711 F .2d 1006 , 1011 (11 th C ir . 1983 ) (d ism issing a irpo r t operato r’s substan tive

due p rocess c la im w here o rd inances d id no t p reven t h im from con tinu ing h is

p ro fession “e ither a t ano ther loca tion o r under the restr ic tions imposed”) . A s such ,

to su rv ive summ ary judgm en t, a c la im an t must p resen t ev idence suggesting tha t a

governm en ta l act effec tive ly banned h im o r her from a p rofession . S ee C lemons ,

10

684 F .2d a t 1374 ; see a lso Borde lon v . Ch i. S ch . R efo rm Bd . o f T rs ., 233 F .3d 524 ,

531 (7 th C ir . 2000 ) (“I t is no t enough tha t the emp loyer’s stigm a tiz ing conduc t has

som e adverse effec t on the emp loyee’s job p rospec ts; instead , the emp loyee must

show tha t the stigm a tiz ing ac tions m ake it v ir tually impossib le fo r the emp loyee to

f ind new emp loym en t in h is chosen f ie ld .”) ; Engqu ist v . O regon D ep t. o f

A g ricu ltu re , 478 F .3d 985 , 996 -98 (9 th C ir . 2007 ) ( lim iting a substan tive due

p rocess occupationa l liber ty c la im “to ex trem e cases , such as a governm en t

b lack list, w h ich w hen c ircu la ted o r o therw ise pub licized to p rospec tive emp loyers

effec tive ly exc ludes the b lack listed ind iv idua l from h is occupa tion , much as if the

governm en t had yanked the license o f an ind iv idua l in an occupa tion tha t requ ires

licensu re”) ; see also O liv ier i v . Rod r iguez , 122 F .3d 406 , 408 (7 th C ir . 1997 )

(sam e) .

In th is case , it is und ispu ted tha t L iu has received staff p r iv ileges and is

cu rren tly p rac tic ing m ed ic ine w ith a t least one hosp ita l in C a lifo rn ia , desp ite the

a lleged ly stigm a tiz ing conduc t o f h is fo rm er pub lic emp loyer . Fu r thermo re ,

a lthough he w as den ied a p ro fesso rsh ip a t U SC , L iu has p resen ted no ev idence tha t

he w ou ld be unab le to secu re a sim ilar position w ith any o ther emp loyer . A s such ,

L iu has simp ly fa iled to show tha t a sta te agen t’s conduc t en tire ly fo rec losed h is

freedom to pu rsue emp loym en t in h is chosen f ie ld as e ither a card io log ist o r a

11

p ro fesso r o f m ed ic ine . A cco rd ing ly , w e conc lude tha t the d istr ic t cou rt p roper ly

g ran ted summ ary judgmen t on L iu ’s substan tive due p rocess c la im .

IV .

Fo r the reasons stated here in , w e A FF IRM the judgm en t o f the d istr ic t cou r t.

12

Mitchell v. Mid-Ohio Emergency Services

Mitchell v. Mid-Ohio Emergency Services

PHYSICIAN EMPLOYMENT / WHISTLEBLOWER

Mitchell v. Mid-Ohio Emergency Services,
No. 03AP-981 (Ohio Ct. App. Sept. 30, 2004)

The Ohio Court of Appeals ruled that a “whistleblowing” physician
who failed to use proper channels to raise quality concerns could not bring a
claim for wrongful termination of employment. The physician in question was employed "at
will" as an emergency room physician. After a patient suffered a cardiac
arrest in the emergency room, the physician wrote a letter outlining his concerns
to the chairperson of the quality assurance committee. However, he also distributed
his letter to the chairperson of the board of directors, a department chairperson,
and another employed physician. Shortly thereafter, the board of directors voted
to terminate the physician’s employment. He sued, claiming that his termination
was contrary to public policy. The court disagreed, stating that "[t]o afford
protection to [the physician’s] actions would destroy the entire purpose behind
the creation and protection of quality assurance committees and proceedings," since
any individual claiming to be a whistleblower could disregard the peer review
procedures that are established by hospitals and protected by statute. The court
also ruled that termination of the physician’s employment did not entitle him
to a medical staff hearing because his clinical privileges had not been restricted,
even if he was prevented from exercising them.

 

Miller v. St. Alphonsus Reg’l Med. Ctr.

Miller v. St. Alphonsus Reg’l Med. Ctr.

IN THE SUPREME COURT OF THE STATE OF IDAHO

Docket No. 28639

STEVEN J. MILLER,

Plaintiff-Appellant,

v.

ST. ALPHONSUS REGIONAL MEDICAL
CENTER, INC., a non-profit corporation
and JOHN DOES 1-20,

Defendants-Respondents.

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Boise, December 2003 Term

2004 Opinion No. 6

Filed: February 6, 2004

Frederick C. Lyon, Clerk

Appeal from the District Court of the Fourth Judicial District of the State of
Idaho, in and for Ada County. Hon. Joel D. Horton, District Judge.

The judgment of the district court is affirmed.

Jim Jones & Associates, Boise, for appellant. Jim Jones argued.

Givens Pursley, LLP, Boise, for respondent. Patrick J. Miller argued.

EISMANN, Justice.
This is an appeal by a physician from a judgment entered by the district court after a
court trial dismissing a complaint seeking to force the defendant hospital to grant the physician
medical staff privileges and from the award of attorney fees to the hospital under Idaho Code §
12-120(3). We affirm the judgment of the district court and award attorney fees on appeal.
I. FACTS AND PROCEDURAL HISTORY
On February 28, 1999, the plaintiff-appellant Stephen J. Miller (Dr. Miller) applied for
medical staff privileges at the defendant-respondent St. Alphonsus Regional Medical Center,
Inc., (Hospital), a private hospital located in Boise, Idaho, and licensed by the state of Idaho.
Staff privileges permit a physician to provide medical or other patient care services in the
Hospital. At the time he applied, Dr. Miller was licensed to practice medicine in the states of
Washington, Alaska, Mississippi, and Idaho; he was board certified by the American Board of

Surgery; he was a fellow with the American College of Surgeons; and he had been previously
granted privileges at hospitals located in all states in which he was licensed to practice medicine.
The Hospital has delegated to its medical staff the authority and responsibility, among
other things, of making recommendations to the Hospital’s Board of Trustees (Board)
concerning an application for medical staff privileges. To provide a framework to govern the
functioning of the medical staff, the Board adopted “Bylaws of the Medical Staff of Saint
Alphonsus Regional Medical Center” (Bylaws). Pursuant to the Bylaws, the Chair of the
Surgery Department conducted an initial investigation and recommended that Dr. Miller should
be granted temporary staff privileges. Effective May 13, 1999, the Hospital granted him
temporary privileges “until processed through appropriate committees and final Board
recommendation or 90 days whichever occurred first consistent with med. staff bylaws.”
The Credentials Committee, chaired by Dr. Adcox, then began its review of Dr. Miller’s
application. Consistent with the Bylaws, Dr. Miller’s name was posted in the doctors’ lounge so
that other members of the Hospital’s medical staff would have an opportunity to submit written
information bearing upon his application for privileges. A number of physicians contacted Dr.
Adcox and advised him to carefully consider Dr. Miller’s application for privileges. As a result
of those contacts, Dr. Adcox made a number of telephone calls between May 18 and 24, 1999, to
physicians who had previously worked with Dr. Miller. Because of negative information
received in these telephone conversations, Dr. Adcox relayed the information to Sandra Bruce,
the Hospital’s President and CEO. She telephoned hospital administrators in Washington and
Mississippi, which confirmed the substance of information obtained by Dr. Adcox. Dr. Miller
was technically competent, but he was unable to work collegially with others, he was critical of
others, and he exhibited serious, repeated behavioral problems in his interactions with support
staff. Based upon that information, the Hospital terminated Dr. Miller’s temporary privileges by
letter dated May 28, 1999, which was signed by Ms. Bruce and Dr. Adcox.
The Credentials Committee met on May 26, 1999, to discuss Dr. Miller’s application for
privileges. As a result of various concerns, the Committee asked Dr. Adcox to conduct further
investigation into the matter. The Committee met again on July 8, 1999, and during that meeting
Ms. Bruce shared the information she had received during her telephone conversations with the
two hospital administrators. On July 15, 1999, the Committee met with Dr. Miller. Prior to that
meeting, Dr. Adcox prepared a written summary of information he had gathered in the telephone

2

calls he had made in May. That summary omitted favorable information from those telephone
calls, and some of the negative information reported in the summary was inaccurate. Dr. Adcox
testified that because doctors are used to charting by exception, he included in the summary only
the unexpected unfavorable information and omitted the expected favorable information. On
July 21, 1999, the Credentials Committee issued a report to the Hospital’s Medical Executive
Committee recommending that Dr. Miller’s application for privileges be denied.
Under the Bylaws, the Medical Executive Committee was required to make a
recommendation to the Board, after reviewing the report from the Credentials Committee, the
application for privileges, and any other related documentation or relevant information. The
Medical Executive Committee could also conduct a personal interview of the applicant if it so
desired. In this case, the Medical Executive Committee elected not to interview Dr. Miller, and,
after considering the matter, it recommended against granting him staff privileges. Ms. Bruce
gave Dr. Miller written notification of the Committee’s recommendation by letter dated July 26,
1999, to which was attached the Committee’s written report. That report merely adopted the
report and recommendation of the Credentials Committee, which was also attached.
The Bylaws provided that an applicant could then seek review by an Ad Hoc Review
Committee, which would review all prior recommendations and supporting materials and, in its
discretion, could also conduct its own investigation and meet with the applicant or other
individuals. It was then to make a recommendation to the Medical Executive Committee. Dr.
Miller timely requested that his application be reviewed by an Ad Hoc Review Committee. The
Medical Executive Committee appointed an Ad Hoc Committee consisting of four physicians,
none of whom were surgeons, to review Dr. Miller’s application for privileges. Dr. Miller wrote
to the chair of the Ad Hoc Committee requesting that he be permitted to meet with it, but that
request was denied. After reviewing the documents compiled in connection with Dr. Miller’s
application, the Ad Hoc Committee on September 23, 1999, recommended to the Medical
Executive Committee that Dr. Miller’s application for privileges be denied.
On September 27, 1999, the Medical Executive Committee met and voted unanimously,
with two abstentions,1 to adopt the report of the Ad Hoc Committee. By letter dated September
29, 1999, Ms. Bruce gave Dr. Miller written notice of the Medical Executive Committee’s

1
Dr. Adcox and another physician abstained from voting because they had served on the Credentials
Committee.

3

recommendation that his application for medical staff privileges be denied. The reason given for
that recommendation was the Committee’s determination that Dr. Miller had demonstrated
disruptive behavior in his prior hospital affiliations and that his inability to get along with others
or to rely on others for assistance and advice often resulted in poor surgical judgment and
decisions, which the Committee believed had a high potential to disrupt the medical, nursing and
support staff and could lead to difficulty in those individuals effectively performing their
respective jobs.
The Bylaws provided that if the Medical Executive Committee made a recommendation
adverse to an applicant, he or she could request a formal hearing before a panel of at least three
persons appointed by the Hospital CEO. The members of the Hearing Panel had to be members
of the hospital staff who had not actively participated in the consideration of the matter at any
previous level, or physicians or lay people not connected with the Hospital, or any combination
of such persons. Dr. Miller requested a formal hearing, and Ms. Bruce then appointed three
retired physicians to serve as the Hearing Panel.
The formal hearing was conducted on January 6, 7, and 27, 2000. The Bylaws provided
that the Hearing Panel “shall recommend against the person who requested the hearing unless it
finds that said person has proved that the recommendation which prompted the hearing was
unreasonable, not sustained by the evidence, or otherwise unfounded.” On March 2, 2000, the
Hearing Panel issued its report and recommendation that Dr. Miller’s application for staff
privileges be denied. The Panel summarized its recommendation as follows:
In four different locations in approximately seven years, the Applicant has
repeatedly had significant and perhaps serious problems. There appears to be a
consistent inability to evaluate with insight the dynamics of his professional
environment. The Panel recognizes and appreciates the positive endorsements
from a variety of sources, but these endorsements are not so persuasive as to
negate the findings of the Committees. In his relatively short professional life, the
Applicant has demonstrated an inability to work cooperatively with others; and
the Panel believes there is a likelihood that such inability would cause problems
with patient care at St. Alphonsus.
The Hearing Panel’s report and recommendation was then sent to the Medical Executive
Committee. After reviewing that report, the Medical Executive Committee on March 20, 2000,
sent Ms. Bruce a letter stating that it affirmed its initial recommendation that Dr. Miller’s
application for medical staff membership be denied.

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(c)

(b)

Dr. Miller then timely requested the final appeal provided in the Bylaws—an appeal to an
Appellate Review Panel composed of at least three persons appointed by the Chair of the Board.
The Bylaws provided that the failure to request such appellate review constituted acceptance of
the adverse recommendation. Under the Bylaws, the grounds for an appeal were:
There was substantial failure on the part of the Medical Executive
(a)
Committee or Hearing Panel to comply with the Hospital or Medical Staff
Bylaws in the conduct of hearings and recommendations based on
hearings so as to deny due process or a fair hearing; or
the recommendation was made arbitrarily, capriciously or with prejudice;
or
the recommendation of the Medical Executive Committee or Hearing
Panel was not supported by the evidence.
The three-person Appellate Review Panel met on April 25, 2000, to consider the appeal. The
next day it issued its report and recommendation denying the appeal.
On May 17, 2000, the Board met to consider the Medical Executive Committee’s
recommendation that Dr. Miller’s application for privileges be denied. After discussing the
matter, the Board voted unanimously to accept the recommendations of the Appellate Review
Panel and the Medical Executive Committee. As a result, Dr. Miller was denied medical staff
privileges at the Hospital.
On May 22, 2000, Dr. Miller filed this action, and two days later he filed an amended
complaint seeking: (a) a declaratory ruling that the credentialing proceeding involving him was
void; (b) an injunction prohibiting the Hospital from reporting the denial of privileges to the state
of Idaho or to a national physician database; and (c) a writ of mandate requiring the Hospital to
provide him with temporary staff privileges during the pendency of the litigation and permanent
privileges thereafter. He also requested an emergency temporary restraining order and
preliminary injunction to prohibit the Hospital from reporting the denial of his request for
privileges. After hearing evidence, the district court denied that request on June 1, 2000.
Dr. Miller then filed a motion for injunctive relief or mandamus to require the Hospital to
grant him privileges. After an evidentiary hearing, the district court denied his motion for a writ
of mandamus on the ground that the Hospital had no clear legal duty to grant the privileges and
that Dr. Miller had an adequate remedy at law. The district court also denied the request for
injunctive relief. It found that the Bylaws constituted a contract between Dr. Miller and the
Hospital, and he was therefore entitled to demand that the Hospital comply with the letter and

5

spirit of the procedure set forth in the Bylaws. The district court also held that it could review
the Bylaws to ensure that they afford basic notice and fair hearing procedures, including an
impartial tribunal, but it would apply a deferential standard when reviewing the factual basis for
the Hospital’s decision. It would consider whether there is a factual basis for the Hospital’s
decision, but not substitute its opinion as to the weight or effect of the evidence. The district
court found that the Bylaws provided a fair process for evaluating Dr. Miller’s application for
privileges, and that he had failed to show that the Hospital’s conclusion was without a factual
basis or was otherwise arbitrary, capricious, or improperly motivated.
After obtaining leave of the district court, Dr. Miller filed a second amended complaint
on April 25, 2001, by which he sought: (a) a declaratory ruling that the credentialing proceeding
involving him was void; (b) an injunction requiring the Hospital to grant him privileges and
notify the National Practitioner Data Bank of the reversal of its action; and (c) either specific
performance of the contract between him and the Hospital or damages for its breach.
The Hospital moved for summary judgment. The district court denied the motion on the
ground that both the Bylaws and the contract between Dr. Miller and the Hospital required that
the Hospital act in good faith and without malice when considering his application for privileges
and that there was a genuine issue of material fact regarding that issue.
This case was then tried to the district court, and, at the end of Dr. Miller’s case in chief,
the district court orally granted the Hospital’s motion for involuntary dismissal. On May 28,
2002, the district court issued its written findings of fact and conclusions of law in support of the
granting of the motion. It found that Dr. Miller had failed to prove, by a preponderance of the
evidence, that any particular actor at any stage of the proceedings acted in bad faith or that any
decision of any relevant committee was the product of bad faith.
Dr. Miller filed a notice of appeal on June 17, 2002. The Hospital requested court costs
and attorney fees, to which Dr. Miller timely objected. On June 26, 2002, judgment was entered
dismissing this action with prejudice. On August 6, 2002, the district court issued an order
awarding the Hospital $1,469.00 in costs as a matter of right, $2,497.39 in discretionary costs,
and $126,725.17 in attorney fees under Idaho Code § 12-120 on the ground that this was an
action to recover on a commercial transaction. An amended judgment was entered the same day,
and on August 15, 2002, Dr. Miller filed an amended notice of appeal.

6

A.

B.
C.
D.
E.
F.

G.

II. ISSUES ON APPEAL
Did the district court err by limiting the scope of its review of the hospital’s decision
denying medical staff privileges to Dr. Miller?
Did the procedures set forth in the Bylaws afford Dr. Miller due process?
Did the Hospital fail to substantially follow the Bylaws?
Did the evidence at the formal hearing support the findings of the Hearing Panel?
Did the district court err in refusing to admit evidence?
Did the district court err in awarding the Hospital attorney fees under Idaho Code § 12-
120(3) on the ground that this was an action to recover on a commercial transaction?
Is the Hospital entitled to an award of attorney fees on appeal under Idaho Code § 12-
120(3)?

III. ANALYSIS
A. Did the District Court Err by Limiting the Scope of Its Review of the Hospital’s
Decision Denying Medical Staff Privileges to Dr. Miller?
In its memorandum opinion denying Dr. Miller’s motion for injunctive relief or
mandamus, the district court stated that it “views its authority to determine the parties’ respective
rights and duties as originating in contract.” The district court relied upon the decision of the
West Virginia Supreme Court of Appeals in Mahmoodian v. United Hospital Center, Inc., 404
S.E.2d 750, 755 (W. Va. 1991), wherein it stated:
Utilizing breach of contract principles, most courts explicitly addressing
the issue presented here have held, and we hereby hold, that the decision of a
private hospital to revoke, suspend, restrict or to refuse to renew the staff
appointment or clinical privileges of a medical staff member is subject to limited
judicial review to ensure that there was substantial compliance with the hospital’s
medical staff bylaws governing such a decision, as well as to ensure that the
medical staff bylaws afford basic notice and fair hearing procedures, including an
impartial tribunal.
The district court concluded that the Bylaws constituted the contract between Dr. Miller and the
Hospital. By the time of the hearing on the Hospital’s motion for summary judgment, the parties
both agreed that a contract was formed when Dr. Miller applied for privileges. In its findings of
fact and conclusions of law entered in support of its grant of the Hospital’s motion for
involuntary dismissal, the district court stated, “The Court holds a contract existed which
required Saint Alphonsus to consider Dr. Miller’s application in accordance with the Bylaws.”

7

The district court held that because every contract contains an implied covenant of good faith, it
would examine the evidence to determine whether Dr. Miller had proven the existence of bad
faith in the consideration of his application for privileges. The district court concluded “that Dr.
Miller has failed to prove, by a preponderance of the evidence, that any particular actor at any
stage of the proceedings acted in bad faith, much less that any decision of any relevant
committee was the product of bad faith.”
Dr. Miller alleges that the district court erred in finding that he had failed to prove bad
faith. A trial court’s findings of fact will not be set aside on appeal unless they are clearly
erroneous. Bramwell v. South Rigby Canal Co., 136 Idaho 648, 39 P.3d 588 (2001); IDAHO R.
CIV. P. 52(a). When deciding whether findings of fact are clearly erroneous, this Court does not
substitute its view of the facts for that of the trial court. Id. It is the province of the trial court to
weigh conflicting evidence and to judge the credibility of witnesses. Rowley v. Fuhrman, 133
Idaho 105, 982 P.2d 940 (1999). On appeal, this Court examines the record to see if challenged
findings of fact are supported by substantial and competent evidence. Id. Evidence is regarded
as substantial if a reasonable trier of fact would accept it and rely upon it in determining whether
a disputed point of fact has been proven. Bramwell v. South Rigby Canal Co., 136 Idaho 648, 39
P.3d 588 (2001). As explained below, we do not agree that the Bylaws constituted a contract
between Dr. Miller and the Hospital. Because the Hospital has not challenged that conclusion on
appeal, however, we have reviewed the record to determine whether the district court’s findings
regarding good faith are supported by substantial and competent evidence. The district court’s
findings in this regard are not clearly erroneous.
Dr. Miller argues that the district court erred in limiting the scope of its review of the
Hospital’s decision denying him medical staff privileges. He argues that the district court should
not have limited its review to whether or not Dr. Miller had proven bad faith, but it should have
treated this as any other action for breach of contract and made findings of fact upon every
critical issue, including whether there was a sufficient basis for denying him privileges. The
Bylaws provide a list of factors to consider when determining whether to grant staff privileges.
They state:

Each recommendation concerning the appointment or reappointment of an
Applicant and the Clinical Privileges to be granted for the Applicant, and the
determinations made with respect thereto, shall be based upon such Applicant’s
current competence and clinical judgment in the treatment of patients; his or her

8

professional ethics; his or her education, training and experience; his or her
participation in continuing education; his or her meeting of the qualifications for
staff status and his or her anticipated ability in or history with respect to fulfilling
of the responsibilities of staff status; his or her anticipated and/or historical use of
the Hospital facilities; his or her discharge of obligations hereunder; his or her
compliance with the Medical Staff Bylaws, Rules and Regulations and hospital
and Board policies in this hospital and others where he or she has provided
clinical services; his or her cooperation with other members, patients and hospital
employees; his or her disruption, if any, of hospital operations; his or her physical
health, mental health and emotional stability; and other matters bearing on his or
her ability and willingness to contribute to high quality patient care practices in
the Hospital including, without limitation, previously successful or currently
pending challenges to any professional license or registration or any voluntary
relinquishment of such professional license or registration and any voluntary or
involuntary termination of Medical Staff privileges or any voluntary or
involuntary limitation or reduction or loss of Clinical Privileges at this or another
hospital. The basis for privileges determinations to be made in connection with
appointments, reappointment, or otherwise shall be uniformly applied to all
Applicants and shall include observed clinical performance and the documented
results of quality assurance activities conducted at the Hospital or other health
care facilities. Clinical Privileges shall also be based on pertinent information
concerning clinical performance obtained from staff members, peers and other
sources, especially other institutions and health care settings where the Applicant
exercises or has exercised Clinical Privileges. This information shall be added to
and maintained in the Hospital’s file established for a staff member.
According to Dr. Miller, under the contract between him and the Hospital, he was entitled to
have his application for privileges judged according to the above criteria. He contends that in his
breach of contract action, the district court was required to make findings of fact regarding how
Dr. Miller met these criteria.
This Court has never addressed the issue of what is the appropriate standard of judicial
review, if any, applicable to the denial of staff privileges by a private hospital.2 Courts around
the country are divided on this issue. The positions range from no judicial review, Barrows v.
Northwest Mem. Hosp., 525 N.E.2d 50 (Ill. 1988); to judicial review of whether the hospital
followed the applicable procedures, Rosenberg v. Holy Redeemer Hosp., 506 A.2d 408 (Pa.
Super. Ct. 1986); to judicial review of the applicable procedures to ensure that they afford basic
notice and fair hearing procedures, including an impartial tribunal, Mahmoodian v. United Hosp.

2
We are dealing here only with a private hospital’s denial of medical staff privileges. We express no
opinion herein regarding either the appropriate standard for judicial review of a private hospital’s decision to revoke
or refuse to renew hospital privileges or the appropriate standard for judicial review of a public hospital’s decision to
deny, revoke, or refuse to renew staff privileges.

9

Ctr. Inc., 404 S.E.2d 750 (W. Va. 1991); to judicial review of whether a regulation giving rise to
exclusion is arbitrary, capricious and unrelated to any legitimate aim of the hospital, Reiswig v.
St. Joseph’s Hosp. and Med. Ctr., 634 P.2d 976 (Ariz. Ct. App. 1981); to judicial review of
whether the denial is founded upon reasonable and sensible grounds and is supported by
sufficient reliable evidence to justify the result, Garrow v. Elizabeth Gen. Hosp. and Dispensary,
401 A.2d 533 (N. J. 1979). Courts have used various rationales in order to justify judicial
intervention into the affairs of a private hospital. We believe, however, that the determination of
the appropriate standard of judicial review, if any, must begin with the applicable law.
The district court concluded, and the parties agreed, that the Bylaws constituted a
contract between Dr. Miller and the Hospital. That conclusion was in error. The Hospital’s
Bylaws did not confer any contractual rights. We agree with the reasoning of the Georgia Court
of Appeals in St. Mary’s Hospital of Athens, Inc. v. Radiology Professional Corp., 421 S.E.2d
731, 736 (1992) (citations omitted), wherein the court stated:
Our courts have held that because hospitals have the authority to establish and
revise rules and regulations governing the appointment of physicians to the
hospital staff, medical staff bylaws alone do not create any contractual right to
continuation of staff privileges. Indeed, hospitals are entitled to change the staff
bylaws or the terms of appointment even if that act results in the termination of a
physician’s staff privileges. Given that the bylaws themselves confer no
contractual rights, we conclude that no cause of action lies against a hospital ex
contractu based solely on an alleged breach of bylaw provisions.
The Bylaws merely provided the procedures setting forth how the Hospital would process Dr.
Miller’s application for medical staff privileges. Dr. Miller’s agreement in his application to
abide by the Bylaws, and the Bylaws provision stating that by applying for appointment he
agreed to be bound by them, did not create a contract between Dr. Miller and the Hospital. We
see no need to expand contract law in order to provide a basis for some form of judicial review
of applications for medical staff privileges.
There are two provisions of Idaho law that relate to this issue. Idaho Code § 39-1395
provides, insofar as is relevant, as follows:
Except as otherwise provided in this section, no provision or provisions of
this section shall in any way change or modify the authority or power of the
governing body of any hospital to make such rules, standards or qualifications for
medical staff membership as they, in their discretion, may deem necessary or
advisable, or to grant or refuse membership on a medical staff.

10

An applicant for medical staff membership may not be denied membership
solely on the ground that the applicant holds a license to practice podiatry issued
by the Idaho state board of podiatry. The criteria utilized for granting medical
staff membership shall be reasonable and shall not discriminate against podiatry.
The process for considering applications for medical staff membership and
privileges shall afford each applicant due process.
All applications for medical staff membership shall be acted upon within
one hundred twenty (120) days from the date the required information is
submitted.
The title to the legislation adopting § 39-1395 stated that its purpose was “to provide standards
for determining staff membership for hospitals.” Ch. 134, 1992 Idaho Sess. Laws 421.
The first paragraph of § 39-1395 recognizes the general rule that hospitals have the
authority “to make such rules, standards or qualifications for medical staff membership as they,
in their discretion, may deem necessary or advisable.” The statute limits the hospital’s discretion
in three areas, however, to prevent discrimination against podiatrists, to require that the process
for considering applications afford each applicant due process, and to require that applications be
acted upon within one-hundred-twenty days.
The legislature has also given the Idaho Department of Health and Welfare authority to
adopt rules, regulations, and standards for the licensing of hospitals. IDAHO CODE § 39-1303a
(2002). Pursuant to that authority, the Department has adopted3 IDAPA 16.03.14.200.01.d
which provides:
Medical Staff Appointments and Reappointments:
d.
i.
A formal written procedure shall be established for appointment to
the medical staff;
ii.
Medical staff appointments shall include an application for
privileges, signature of applicant to abide by hospital bylaws, rules, and
regulations, and delineation of privileges recommended by the medical staff. The
same procedure shall apply to nonphysician practitioners who are granted clinical
privileges.
iii.
The procedure for appointment and reappointment to the medical
staff shall involve the administrator, medical staff, and the governing body.
Reappointments shall be made at least biannually.

3
The Department has also adopted IDAPA 16.03.14.250.01.b, which provides, insofar as is relevant, “The
medical staff, with governing body approval, shall develop and implement a written procedure for determining
qualifications for medical staff appointment, and for determining privileges.”

11

iv.
The governing body bylaws shall approve medical staff authority
to evaluate the professional competence of applicants, appointments and
reappointments, curtailment of privileges, and delineation of privileges;
v.
Applicants for appointment, reappointment or applicants denied to
the medical staff privileges shall be notified in writing;
vi.
There shall be a formal appeal and hearing mechanism adopted by
the governing body for medical staff applicants who are denied privileges, or
whose privileges are reduced.
Thus, Idaho Code § 39-1395 requires hospitals to adopt procedures for considering applications
for medical staff membership and privileges that afford each applicant due process. IDAPA
16.03.14.200.01.d requires that those procedures be in writing; that the applicant must agree to
abide by hospital bylaws, rules, and regulations; that the procedures involve the hospital
administrator, medical staff, and governing body; that the medical staff must have the authority
to evaluate applicants; that applicants who are denied privileges must be notified in writing; and
that there must be a formal appeal and hearing mechanism for applicants who are denied
privileges.
Implicit in those mandates is the requirement that the hospital substantially follow
whatever procedures it adopts for determining qualifications for medical staff appointment. It
would be meaningless to require a hospital to adopt written procedures that afford due process to
applicants for medical staff privileges unless the hospitals were also required to substantially
comply with the procedures they adopt. Thus, the appropriate standard of judicial review in this
case is limited to determining whether the procedures adopted by the Hospital afforded each
applicant due process, whether the procedures included the requirements set forth in IDAPA
16.03.14.200.01.d, and whether the Hospital substantially followed its procedures when
considering Dr. Miller’s application for staff privileges. The district court did not err by failing
to expand the scope of judicial review as asserted by Dr. Miller.

B. Did the Procedures Set Forth in the Bylaws Afford Dr. Miller Due Process?
Idaho Code § 39-1395 mandates that hospitals have a process for considering
applications for medical staff membership and privileges that affords each applicant due process.
Due process is a flexible concept, Bradbury v. Idaho Judicial Council, 136 Idaho 63, 28 P.3d
1006 (2001), and the legislature has not specified what process it considers due in this
circumstance. A common definition of procedural due process is the opportunity upon

12

reasonable notice for a fair hearing before an impartial tribunal. See Id.; Aberdeen-Springfield
Canal Co. v. Piper, 133 Idaho 82, 982 P.2d 917 (1999); Yellowstone Pipe Line Co. v.
Drummond, 77 Idaho 36, 287 P.2d 288 (1955); Abrams v. Jones, Comm’r of Dept. of Law
Enforcement, 35 Idaho 532, 207 P. 724 (1922). Implicit in the requirement of a fair hearing is an
understandable standard against which the applicant’s qualifications can be judged, Dupont v.
Idaho State Bd. of Land Comm’rs, 134 Idaho 618, 7 P.3d 1095 (2000), although the specificity
required here would not be as great as is required for criminal statutes. Dr. Miller argues that the
Bylaws deprived him of due process4 in several respects.
1. Did the Bylaws provide an understandable standard? Dr. Miller argues that the
Bylaws did not provide a clear, ascertainable standard against which his conduct could be
measured. The two standards that he challenges are “his or her cooperation with other members,
patients and hospital employees” and “his or her disruption, if any, of hospital operations.” He
argues that such standards are too vague unless they are tied to patient care or safety.
These two factors were included in a list ending with the statement, “and other matters
bearing on his or her ability and willingness to contribute to high quality patient care practices in
the Hospital.” This phrase could be read as indicating that the preceding factors were understood
as bearing on the applicant’s ability and willingness to contribute to high quality patient care
practices. The Hospital appears to have so interpreted the two challenged factors.
In its report, the Credentials Committee stated, “The primary concerns are related to
disruptive behavior, possible creation of a hostile work environment and concerns that disruptive
behavior has interfered with clinical decision making/medical care.”
When initially
recommending that Dr. Miller’s application for privileges be denied, the Medical Executive
Committee stated, “The primary concerns relate to disruptive behavior, possible creation of a
hostile work environment and concerns that the disruptive behavior has interfered with clinical
decision making/medical care in the past.” Dr. Miller’s application was then considered by the
Ad Hoc Review Committee, which also linked its negative recommendation to patient care. In
its report, it concluded:
The Committee believes that Dr. Miller has demonstrated disruptive
behavior at all prior locations of practice. This included behavior that was
contentious, threatening, unreachable, insulting and at times litigious. His

4
He bases his due process argument not upon Idaho Code § 39-1395, but upon appellate opinions from other
jurisdictions holding that applicants for medical staff privileges must be afforded due process.

13

inability to get along with others or to rely on others for assistance and advice
often resulted in poor surgical judgment and decisions. His behavior has high
potential to disrupt the medical, nursing and support staff which could lead to
difficulty in these individuals to perform their respective jobs effectively. We
believe that his behavior holds a significant threat to patient care at Saint
Alphonsus.
Dr. Miller then had a formal hearing before the Hearing Panel. It also linked its adverse
recommendation to patient care. It summarized its recommendation as follows:
In four different locations in approximately seven years, the Applicant has
repeatedly had significant and perhaps serious problems. There appears to be a
consistent inability to evaluate with insight the dynamics of his professional
environment. The Panel recognizes and appreciates the positive endorsements
from a variety of sources, but these endorsements are not so persuasive as to
negate the findings of the Committees. In his relatively short professional life, the
Applicant has demonstrated an inability to work cooperatively with others; and
the Panel believes there is a likelihood that such inability would cause problems
with patient care at St. Alphonsus.
The Appellate Review Panel then considered the application and recommended that the Board
accept the report and recommendation of the Hearing Panel. The Board did so, and made the
specific finding that Dr. Miller “failed to demonstrate his ability to work with others; and that the
ability to work with others is an important qualification that would likely impact patient care.”
Thus, throughout the process, the various recommendations to deny Dr. Miller’s application for
medical staff privileges and the final determination to deny that application were all tied to
patient care. He was on notice from the initial recommendation of the Credentials Committee
through the various levels of review that the primary issue was the concern that his inability to
work cooperatively with others could adversely impact patient care. The challenged factors in
the Bylaws for evaluating applications were not so vague as to deny Dr. Miller due process as
required by Idaho Code § 39-1395.
2. Did Dr. Miller have an impartial tribunal? The Bylaws provide that any member
of the medical staff who is appointed to serve on the Hearing Panel cannot have actively
participated in the consideration of the matter at any previous level. In compliance with this
provision, Ms. Bruce appointed three retired physicians to serve on the Hearing Panel. The
Bylaws do not prohibit, however, a physician who is in direct economic competition with an
applicant from serving on the Hearing Panel. In this case, however, the three members of the
Hearing Panel were all retired, so none of them was an economic competitor of Dr. Miller.

14

Dr. Miller contends that Dr. Austin Cushman, one of the members of the Credentials
Committee, was a general surgeon who was in direct economic competition with Dr. Miller and
that he had allegedly made negative comments about Dr. Miller’s employer Primary Health, Inc.
Dr. Miller alleges that Dr. Cushman, should therefore not have served on the Credentials
Committee when Dr. Miller’s application for privileges was being considered. The due process
hearing to which Dr. Miller was entitled was, under the Bylaws, the hearing before the Hearing
Panel. The various levels of review prior to that hearing are not required in order to provide
procedural due process. Dr. Miller has not presented any argument or authority supporting the
proposition that such other levels of review, if provided, must comport with due process. Under
the facts of this case, we need not address that issue. The vote of the Credentials Committee was
unanimous, and the district court found that “Dr. Cushman did not express any opinion at any
time to the Credentials Committee as to whether Dr. Miller’s application for privileges should be
granted. Dr. Cushman did not attempt to exert any influence over the Credentials Committee’s
decision.” Thus, even if Dr. Cushman’s service on the Credentials Committee violated the
statutory right to due process provided by Idaho Code § 39-1395, any such violation was
harmless.
Dr. Miller also points out that some members of the Credentials Committee also served
on and participated in the decision of the Medical Executive Committee, that a physician who
served on the Ad Hoc Review Committee also participated in the final action of the Medical
Executive Committee, and that Ms. Bruce provided information to the Credentials Committee
and the Board and participated in the meeting of the Medical Executive Committee where it
voted to recommend against approving Dr. Miller’s request for medical staff privileges. Dr.
Miller does not argue, however, that any of this conduct violated either the procedural due
process required by Idaho Code § 39-1395 or the Bylaws.
Dr. Miller also argues that various members of the medical staff who participated in
reviewing his request for medical staff privileges were motivated by bias against his employer
Primary Health, Inc. The district court found to the contrary, and that finding is supported by
substantial and competent evidence.

C. Did the Hospital Fail to Substantially Follow the Bylaws?

15

1. Did the Hospital properly consider the various factors listed in the Bylaws as a
basis for determining whether or not to grant medical staff privileges? One of the factors
listed in the Bylaws as a basis for determining whether to grant medical staff privileges is the
applicant’s “current competence and clinical judgment in the treatment of his patients.” Another
is “pertinent information concerning clinical performance obtained from staff members, peers
and other sources.” Dr. Miller argues that the Hospital failed to give sufficient weight to these
two factors. He also contends that he was not treated equally because he is the first physician to
be denied medical staff privileges by the Hospital based upon his inability to work cooperatively
with others. The weight to be given the various factors is entirely within the discretion of the
Hospital and is not subject to judicial review.
2. Did the Hospital fail to substantially comply with the Bylaws by not providing
Dr. Adcox’s notes prior to the hearing? The Bylaws provided that an applicant can request a
formal hearing before a Hearing Panel when the Medical Executive Committee recommends
against granting him or her medical staff privileges. The Bylaws further provided:
If pertinent, all patient records or information supporting the recommendation
shall be identified. This statement may be amended or added to at any time, even
during the hearing so long as material is relevant to the continued appointment or
Clinical Privileges of the person requesting the hearing, who shall have sufficient
time to study this additional information and rebut it.
By letter dated December 1, 1999, Dr. Miller’s counsel requested from the Hospital’s counsel,
“If any of the hospital’s witnesses are going to be giving testimony based on notes of
conversations, I think we are entitled to see those notes, as are the hearing panel members.” The
Hospital’s counsel responded by letter dated December 3, 1999, stating:
In response to your December 1, 1999 letter, I do not have any objection
to notes of members of the hospital staff being admitted into evidence at the
hearing provided that such individual is called to testify and testifies from his or
her notes. I do not have copies of such individual’s notes nor does the medical
staff office. Any such notes (and assuming such notes exist) would be maintained
by the individual staff members who took notes. As a result, I would propose to
deal with this at the time of the hearing and not try to provide the notes to the
hearing panel in advance.
By letter dated December 17, 1999, Dr. Miller’s counsel again requested such notes, particularly
any made by Dr. Adcox, in order to prepare a response. He stated that Dr. Miller needed to
know the source of several allegations in order to respond. By letter dated December 28, 1999,
the Hospital’s counsel responded, “The notes of individual physicians who participated in

16

telephone interviews are not intended by me to be an exhibit at the hearing. Obviously, to the
extent I call a witness who will testify from notes, you will be entitled to review those notes.”
Dr. Adcox was the first witness called to testify when the formal hearing before the
Hearing Panel commenced on January 6, 2000. As chair of the Credentials Committee, he had
between May 18 and 24, 1999, telephoned various physicians who had previously worked with
Dr. Miller and had made notes of those telephone calls. When he was asked to testify regarding
those conversations, he requested permission to review his personal notes. At that point, a copy
of the notes was given to Dr. Miller’s counsel. After Dr. Adcox testified to his telephone
conversation with one physician, Dr. Miller’s counsel objected to anything from the notes
because they had not been provided to him prior to the hearing. The hearing officer ruled that
Dr. Adcox could use the notes to refresh his memory, but he could not read from them or quote
them. That was a discretionary ruling of the hearing officer that is not subject to judicial review.
Dr. Miller also alleges that he could not adequately prepare for the hearing without the
notes. He was notified before the hearing of the reason for the denial of his application for
privileges and provided with the names of those persons from whom information had been
obtained. The Bylaws did not require that the expected testimony of the various witnesses be
disclosed prior to the hearing. They only require the exchange of a list of the names and
addresses of witnesses that a party intends to call and a list of exhibits that the party intends to
introduce at the hearing. The Hospital did not offer Dr. Adcox’s notes as an exhibit. The
Hospital did not fail to substantially comply with the procedures set forth in the Bylaws.

D. Did the Evidence at the Formal Hearing Support the Findings of the Hearing Panel?
The Bylaws provided:
The hearing shall not be conducted according to rules of law relating to the
examination of witnesses or presentation of evidence. Any relevant evidence
shall be admitted by the Presiding Officer if it is the sort of evidence on which
responsible persons are accustomed to rely in the conduct of serious affairs,
regardless of the admissibility of such evidence in a court of law.
Dr. Miller contends that Dr. Adcox’s notes contained many inaccuracies, that they did not
include the positive comments made by those Dr. Adcox contacted, and Dr. Adcox accepted
without further investigation various negative comments made by two physicians that he
contacted. As a result, Dr. Miller contends that no responsible person should have relied upon

17

Dr. Adcox’s testimony. He also argues that some of the findings of the Hearing Panel were not
supported by the evidence.
Dr. Miller has not pointed to any provision in the law that permits judicial review of the
findings of the Hearing Panel. The admission of evidence is within the sole discretion of the
hearing officer, and the Panel’s findings are not reviewable by a court.

E. Did the District Court Err in Refusing to Admit Evidence?
Dr. Miller contends that the district court erred in refusing to admit the transcript of the
testimony before the Hearing Panel into evidence for all purposes. He argues that it was
relevant, and therefore admissible, even though it was hearsay. The district court was not
conducting an appellate review of the decision of the Hearing Panel. It therefore did not err in
refusing to admit the transcript into evidence.
Dr. Miller also contends that the district court erred by refusing to permit him to take the
depositions of out-of-state physicians who were familiar with his professional behavior. He
argues that because the Hospital relied upon unfavorable comments by two out-of-state
physicians contacted by Dr. Adcox, he should be permitted to depose other physicians where Dr.
Miller practiced in order to show that those two physicians were influenced by bias or prejudice.
The district court correctly recognized that it could not substitute its judgment for that of the
Hospital regarding whether or not Dr. Miller should be granted medical staff privileges. The
deposition testimony of these other physicians was not relevant to any matters to be decided by
the district court. It therefore did not err in refusing to permit Dr. Miller to take those
depositions.

E. Did the District Court Err in Awarding the Hospital Attorney Fees Under Idaho Code §
12-120(3) on the Ground that This Was an Action to Recover on a Commercial
Transaction?
The district court found that this was an action to recover on a commercial transaction
and awarded the Hospital attorney fees pursuant to Idaho Code § 12-120(3) in the sum of
$126,725.17. That statute provides:
(3) In any civil action to recover on an open account, account stated, note,
bill, negotiable instrument, guaranty, or contract relating to the purchase or sale of
goods, wares, merchandise, or services and in any commercial transaction unless

18

otherwise provided by law, the prevailing party shall be allowed a reasonable
attorney’s fee to be set by the court, to be taxed and collected as costs.
The term “commercial transaction” is defined to mean all transactions
except transactions for personal or household purposes. The term “party” is
defined to mean any person, partnership, corporation, association, private
organization, the state of Idaho or political subdivision thereof.
In his second amended complaint, Dr. Miller alleged as one count that his application for
medical staff privileges created a contract between him and the Hospital and that the Hospital
breached that contract. The focus of the trial was whether the Hospital acted in good faith in the
performance of its alleged contractual obligations. Although we have held that there was no
contract, that does not end the inquiry regarding the Hospital’s claim for attorney fees.
We have previously held that if a party alleges the existence of a contractual relationship
of the type embraced by Idaho Code § 12-120(3), that claim triggers the application of the
statute, and the prevailing party is entitled to an award of attorney fees even though no liability
under a contract was ultimately established. Property Mgmt. West, Inc. v. Hunt, 126 Idaho 897,
894 P.2d 130 (1995); Magic Lantern Prods., Inc. v. Dolsot, 126 Idaho 805, 892 P.2d 480 (1995).
Likewise, if a party asserts a claim that is based upon the existence of an alleged commercial
transaction, attorney fees are awardable to a prevailing party who defends against such claim
even if the alleged commercial transaction is found not to have existed. In that circumstance,
attorney fees are awardable under Idaho Code § 12-120(3) even if there were other theories also
asserted in support of the claim that would not have triggered the application of the statute.
Great Plains Equip., Inc. v. Northwest Pipeline Corp., 136 Idaho 466, 36 P.3d 218 (2001),
Therefore, if the contractual relationship asserted by Dr. Miller in his second amended complaint
constituted the allegation of a claim based upon a commercial transaction between him and the
Hospital, then the Hospital was entitled to an award of attorney fees under Idaho Code § 12-
120(3).

Idaho Code § 12-120(3) defines a commercial transaction as “all transactions except
transactions for personal or household purposes.” Dr. Miller’s application for medical staff
privileges was not for personal or household purposes. Thus, if the contract alleged in his second
amended complaint constituted a transaction, then it would be a commercial transaction under
the statute. We have previously held that a transaction cannot exist under the statute unless the
parties dealt with each other directly. Ag Servs. of Am., Inc. v. Kechter, 137 Idaho 62, 44 P.3d
1117 (2002); Great Plains Equip., Inc. v. Northwest Pipeline Corp., 136 Idaho 466, 36 P.3d 218

19

(2001); Brower v. E.I. DuPont De Nemours and Co., 117 Idaho 780, 792 P.2d 345 (1990). We
have also held that a commercial transaction can exist in the absence of a contract. Great Plains
Equip., Inc. v. Northwest Pipeline Corp., 136 Idaho 466, 36 P.3d 218 (2001). In this case, Dr.
Miller’s allegation of a contract between him and the Hospital that was for other than personal or
household purposes constituted the allegation of a commercial transaction. Even though we have
held that no such contract existed, the Hospital was entitled to an award of attorney fees under
Idaho Code § 12-120(3).

G. Is the Hospital Entitled to an Award of Attorney Fees on Appeal under Idaho Code §
12-120(3)?
The Hospital has requested an award of attorney fees on appeal under Idaho Code § 12-
120(3). Since we have upheld the award below under that statute, the Hospital is also entitled to
an award of attorney fees on appeal. Eagle Water Co., Inc. v. Roundy Pole Fence Co., Inc., 134
Idaho 626, 7 P.3d 1103 (2000).

IV. CONCLUSION
We affirm the judgment of the district court dismissing this action with prejudice and
awarding attorney fees to the Hospital under Idaho Code § 12-120(3). We award the Hospital
costs and attorney fees on appeal.

Chief Justice TROUT, and Justices SCHROEDER, KIDWELL and BURDICK
CONCUR.

20

Minnesota Senior Fed’n v. United States

Minnesota Senior Fed’n v. United States

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________

No. 99-2356
___________

Plaintiff – Appellant,

v.

Minnesota Association of Nurse
Anesthetists, United States of
America, ex rel.,

*
*
*
*
*
*
*
*
Allina Health System Corp.; Unity
*
Hospital; Mercy Hospital; Mark Sperry, *
M.D.; Gary Baggenstoss, M.D.; John
*
Murphy; David Cumming, M.D.; John * Appeal from the United States
Rydberg, M.D.; Midwest
* District Court for the
* District of Minnesota.
Anesthesiologists, P.A.; Metropolitan
*
Anesthesia Network; Health Billing
Systems, Inc.; Allen Tank; Thelma M.
*
Albay, M.D.; Minda Castillejos, M.D.; *
Teri Heil, M.D.; Sang Hong, M.D.; Ted *
Janossy, M.D.; Raymond Kloepper, II, *
*
M.D.; John Magdsick, M.D.; Thomas
*
Maggs, M.D.; Thomas Polta, M.D.;
John Roseberg, M.D.; Jai Suh; Jeffrey
*
Yue, M.D.; Craig Johnson, M.D.; St.
*
Cloud Hospital; Anesthesia Associates, *
of St. Cloud Ltd.; Gary A. Boeke, M.D.; *
*
Philip F. Boyle, M.D.; L. Michael
Espeland, M.D.; Alan D. Espelien,
*
M.D.; Paul J. Halverson, M.D.; Lanse *
C. Lang, M.D.; A. Wade McMillan,
*
*
M.D.; William H. Rice, M.D.; Allan

Reitz, M.D.; Annette E. Zwick, M.D.;
*
Anesthesiology, P.A.; Does, I through *
*
XX; Abbott Northwestern Hospital,
Inc., Sued as Abbott Northwestern
*
*
Hospital; Northwest Anesthesia, P.A.;
Bryce Beverlin, M.D.; Richard
*
Blomberg, M.D.; Jean Boening, M.D.; *
Mitchell Burke, M.D.; Rajarao
*
Dwarakanath, M.D.; Richard Engwall, *
M.D.; James Gayes, M.D.; Luis Giron, *
*
M.D.; Nancy Groves, M.D.; Jonathan
Gudman, M.D.; Richard W. Johnson,
*
M.D.; John C. Lillehei, M.D.; Robert
*
McKlveen, M.D.; Judith Meisner, M.D.; *
Michael Menzel, M.D.; James Musich, *
M.D.; Mark Nissen, M.D.; Xavier
*
*
Pereira, M.D.; David Plut, M.D.;
*
Jeffrey Shaw, M.D.; Richard Skoog,
M.D.; William Stauffer, M.D.; Ofelio
*
*
Tiu, M.D.; Robert Tronnier, M.D.;
*
John Wintermute, M.D.; Does, I
through XX (other unknown
*
*
defendants);
*
*
*
*
*
*
*
*
*
*
*
*

Amicus on Behalf of Appellant.

United States of America,

Defendants – Appellees.

Movant

________________

United States of America,

___________

-2-

Submitted: December 11, 2000
Filed: January 17, 2002
___________

Before McMILLIAN and JOHN R. GIBSON, Circuit Judges, and LAUGHREY,1
District Judge.

___________

JOHN R. GIBSON, Circuit Judge.

The Minnesota Association of Nurse Anesthetists brought this qui tam suit as
relator for the United States, alleging that the defendant hospitals2 and
anesthesiologists3 had knowingly made false claims on the United States government

1The Honorable Nanette K. Laughrey, United States District Judge for the
Western District of Missouri, sitting by designation.

2The defendant hospitals are Unity Hospital, Mercy Hospital, Abbott
Northwestern Hospital, and St. Cloud Hospital. Also named as defendants are
hospital employees John Murphy and Allina Health System Corp., which is an
“integrated health care system.” We will refer to all these defendants collectively as
the hospitals.

3Anesthesiologists are physicians who specialize in anesthesia. The defendant
anesthesiologists are Thelma M. Albay, Gary Baggenstoss, Minda Castillejos, David
Cumming, Teri Heil, Sang Hong, Ted Janossy, Raymond Kloepper, II, John
Magdsick, Thomas Maggs, Thomas Polta, John Roseberg, Jai Suh, Mark Sperry,
Jeffrey Yue, John Rydberg, Gary A. Boeke, Philip F. Boyle, L. Michael Espeland,
Alan D. Espelien, Paul J. Halverson, Craig Johnson, Lanse C. Lang, A. Wade
McMillan, William H. Rice, Allan Reitz, Annette E. Zwick, Bryce Beverlin, Richard
Blomberg, Jean Boening, Mitchell Burke, Rajarao Dwarakanath, Richard Engwall,
James Gayes, Luis Giron, Nancy Groves, Jonathan Gudman, Richard Johnson, John
Lillehei, Robert McKlveen, Judith Meisner, Michael Menzel, James Musich, Mark
Nissen, Xavier Pereira, David Plut, Jeffrey Shaw, Richard Skoog, William Stauffer,
Ofelio Tiu, Robert Tronnier, and John Wintermute. The Association also joined
several practice groups and persons and corporations associated with them: Midwest

-3-

by mischaracterizing services they had provided to Medicare patients. The
Association pleaded that the defendants violated the False Claims Act, 31 U.S.C. §
3729 (1994), by overcharging the government for their services, and that they had
conspired among each other to do so. The district court entered summary judgment
for the defendants, holding that the Association’s own earlier, public disclosure of the
information on which this suit is based precluded subject-matter jurisdiction of this
suit. The court also held that the Association lacked standing to bring this suit as
relator because it had not shown that the mischaracterizations of the services resulted
in pecuniary injury to the government. In addition to the jurisdictional and standing
rulings, the court also made three holdings on the merits of the Association’s case:
that there was no showing of intent to defraud the government because the defendants
billed in accordance with the advice given them by the Medicare carriers; that the
“overwhelming majority of the evidence on the record” established that the
defendants did not mischaracterize the services they provided; and that the
Association adduced no evidence of conspiracy. We reverse except as to the
judgment on the conspiracy allegations, which we affirm.

I.

This case alleges false claims for services rendered under Part B of the
Medicare program. The Medicare program is administered by the Department of
Health and Human Services through the Health Care Financing Administration, or
HCFA. Medicare Part B is a federally subsidized medical insurance program that
pays a portion of the insured’s medical expenses. The United States reimburses the
medical expenses through the HCFA, which, in turn, contracts with private insurance

Anesthesiologists, P.A., Metropolitan Anesthesia Network, Health Billing Systems,
Inc., Allen Tank, Anesthesia Associates of St. Cloud Ltd., Anesthesiology, P.A.,
Northwest Anesthesia, P.A. We will refer to all these defendants collectively as the
anesthesiologists.

-4-

companies to administer and pay claims from the Medicare Trust Fund. United States
v. Mackby, 261 F.3d 821, 824 (9th Cir. 2001).

The Association represents the certified nurse anesthetists of Minnesota. Nurse
anesthetists are registered nurses who administer anesthesia, either alone or under the
supervision of an anesthesiologist. The Association claims that the defendant
anesthesiologists and hospitals presented
for payment by
false claims
mischaracterizing anesthesia services rendered to Medicare patients from about 1989
to 1997. Four kinds of mischaracterizations are alleged: billing on a reasonable
charge basis when the services the anesthesiologists provided did not meet the criteria
for reasonable charge reimbursement; billing services as personally performed by the
anesthesiologist when the services did not meet the criteria for personal performance;
billing as if the anesthesiologist involved were directing fewer concurrent cases than
he or she actually did direct; and certifying that it was medically necessary for both
an anesthesiologist and anesthetist to personally perform cases that in fact an
anesthetist alone personally performed. Understanding the significance of these
alleged mischaracterizations requires some understanding of the Medicare regulations
as they existed at the various times in question. We will therefore briefly explain the
nature of each allegation before considering the questions of jurisdiction and standing
and the merits of the case.

A.

The first type of mischaracterization alleged is that anesthesiologists billed
services for reasonable charge reimbursement when they did not render services
eligible for such reimbursement. In the early 1980s Congress became concerned that
hospital-based physicians were charging Medicare for work performed by hospital
employees. S. Rep. No. 97-494, at 22 (1982), reprinted in 1982 U.S.C.C.A.N. 781,
797-98. To stop this, Congress directed the Department of Health and Human
Services to adopt regulations governing Medicare payments to physicians working

-5-

in hospitals. Tax Equity and Fiscal Responsibility Act of 1982, Pub.L. No. 97-248,
Title I, § 108, 96 Stat. 324, 337 (codified as amended at 42 U.S.C. § 1395xx(a)(1)
(1994)). The regulations were to establish criteria for distinguishing between services
rendered by a physician to an individual patient, which could be reimbursed on a
reasonable charge basis, and services rendered to the provider or to the provider’s
patient population as a whole, which would be reimbursed on a reasonable cost basis.
Id. Accordingly, the Department adopted regulations in 1983 outlining when
physicians providing anesthesia services would be reimbursed on a reasonable charge
basis. Conditions for payment of charges: Anesthesiology services, 48 Fed. Reg.
8902, 8926-28 (March 2, 1983). A physician could be reimbursed for anesthesiology
services in a hospital on a reasonable charge basis if:
(1) For each patient, the physician
(i) Perform[ed] a pre-anesthetic examination and evaluation;
(ii) Prescrib[ed] the anesthesia plan;
(iii) Personally participat[ed] in the most demanding procedures in the
anesthesia plan, including induction and emergence;
(iv) Ensure[d] that any procedures in the anesthesia plan that he or she
d[id] not perform [were performed] by a qualified individual;
(v) Monitor[ed] the course of anesthesia administration at frequent
intervals;
(vi) Remain[ed] physically present and available for immediate
diagnosis and treatment of emergencies; and
(vii) Provide[d] indicated postanesthesia care.
(2) The physician either perform[ed] the procedure directly, without the
assistance of an anesthetist, or direct[ed] no more than four anesthesia
procedures concurrently and [did] not perform any other services while
he or she [was] directing those concurrent procedures.
42 C. F. R. § 405.552(a) (1983).

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If the physician’s services did not meet the criteria outlined above, then they
were reimbursable only on a reasonable cost basis, as physician services to the
provider. 42 C.F.R. § 405.552(b) (1983); 48 Fed. Reg. at 8927.

In its complaint in this case, the Association claimed that the anesthesiologists
billed on a reasonable charge basis when they had not met the criteria for reasonable
charge reimbursement and that the hospitals actively aided the anesthesiologists in
the false billing. Specifically, the Association alleged that anesthesiologists at Unity,
Mercy, and North Memorial hospitals commonly billed for medical direction of cases
in which they never entered the operating room and of cases in which they were not
present at the patient’s emergence from anesthesia. At Abbott Northwestern and St.
Cloud hospitals, the Association alleged that, while the anesthesiologists were usually
present at emergence, they sometimes billed on a reasonable charge basis even though
they were unavailable for emergencies (as shown by their failure to answer pages)
and were absent at emergence.

B.

Second, the Association alleged that the anesthesiologists billed for personally
performing cases when they did not meet the criteria for personal performance of the
case.

Effective in 1992, HCFA adopted a three-tier system of payment for
anesthesiologists providing anesthesia. 56 Fed. Reg. 59502, 59628 (Nov. 25, 1991)
(codified at 42 C.F.R. § 414.46(c) (1992)). Under that system, Medicare would pay
the highest rate when the anesthesiologist either personally performed the entire
anesthesia case or was “continuously involved” in only one case in which an
anesthetist was also involved. When an anesthesiologist billed a case as personally
performed, the anesthetist involved would not be entitled to any Medicare
reimbursement, unless there were special conditions requiring attendance of both an

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anesthesiologist and an anesthetist at once. Sec. 414.46(c)(2). On the second tier, for
medically directing two to four concurrent cases, the anesthesiologist would receive
a lower rate, which in turn was diminished (during part of the relevant time) by a set
percentage for each additional concurrent case. 42 C.F.R. § 414.46 (d). At the third
tier, the lowest rate was paid for supervision of more than four concurrent cases. 42
C.F.R. § 414.46(e).

The Association alleged that the anesthesiologists billed with the highest-rate
“AA” modifier, designating that they had performed cases personally, when they were
not continuously present during the case and in fact were simultaneously engaged in
other activities, including medical direction of concurrent cases.

The anesthesiologists contend that when an anesthesiologist and anesthetist
were both involved in one case, with no concurrent procedures, an anesthesiologist
was entitled to designate a case as personally performed so long as he or she met the
criteria for medical direction of the anesthetist. Specifically, the anesthesiologists
contend that personal performance of a single case involving an anesthetist did not
require the anesthesiologist’s continuous presence in the operating room, as long as
the anesthesiologist was present in the operating suite. Thus, according to the
anesthesiologists, when they had only one case at a time, they were entitled to be paid
at the higher, “personal performance” rate even though they were performing the
same duties otherwise compensated at the lower, “medical direction” rate. The
corollary of this theory is that anesthetists would be paid for their work on a case if
the anesthesiologist happened to be performing a concurrent case, but would not be
entitled to Medicare reimbursement for performing the very same duties in a case in
which the anesthesiologist had no concurrent case.

The Association, on the other hand, contends that in order to be paid the higher
rate for personally performing a case, an anesthesiologist had to be more closely

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involved than was necessary to satisfy the medical direction criteria of section
405.552, and in fact, had to be continuously present with the patient.

C.

The Association also alleged that the anesthesiologists misrepresented the
number of cases they were performing concurrently. As we said in section B, the
1992 regulations reduced an anesthesiologist’s medical direction fee per case as the
number of cases he or she directed increased (up to the maximum of four). 42 C.F.R.
§ 414.46(d) (1992). This was apparently a short-lived policy, which was changed as
of January 1, 1994 to a flat rate per case, no matter whether the anesthesiologist was
directing two, three or four concurrent procedures. Omnibus Reconciliation Act of
1993, Pub. L. No. 103-66, § 13516, 107 Stat. 312, 583-84 (1993). The Association
alleged that while the 1992 regulations were in force, the anesthesiologists regularly
understated the number of concurrent cases they were directing simultaneously in
order to get a bigger payment from Medicare than they were entitled to.

D.

Finally, the Association alleges that the hospitals represented in many cases
that it was necessary for both an anesthesiologist and anesthetist to personally
perform the case, whereas only the anesthetist actually satisfied the criteria for
personal performance.

Congress decided in 1986 that anesthetists’ services should be reimbursable
under Part B of Medicare on a reasonable charge basis, starting on January 1, 1989.
Omnibus Reconciliation Act of 1986, Pub. L. No. 99-509, § 9320, 100 Stat. 1874,
2013-16 (1986). Before this, Medicare did not pay for anesthetists’ anesthesia
services on a reasonable charge basis. See 48 Fed. Reg. at 8927. Even after the law
was changed to allow direct reimbursement for anesthetists’ services, when an

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anesthesiologist was involved with only one case at a time and an anesthetist worked
on that case as well, Medicare would not ordinarily pay for the anesthetist’s services
because it was considered inefficient to have both an anesthesiologist and an
anesthetist wholly engaged in one case. 57 Fed. Reg. 33878, 33887 (July 31, 1992)
(“[W]e are concerned that recognizing medical direction in a single anesthesia
procedure would encourage inefficiencies in anesthesia practice arrangements. Our
policies should not encourage the involvement of both practitioners in a single
anesthesia procedure if either practitioner could appropriately furnish the service
alone.”). However, if there was some unusual medical necessity requiring the
attendance of both anesthesiologist and anesthetist on the same case, Medicare would
then pay for both at 100% of their usual personal performance rate. 42 C.F.R. §
414.46(c)(3) (1992); see HCFA Transmittal No. B-98-2 (1998). Later, the regulation
was amended to allow both anesthesiologist and anesthetist to bill for these “one-on-
one” cases even without special medical necessity, but the total payout was to be
limited to the amount that would have been paid to the anesthesiologist for doing the
case alone. 60 Fed. Reg. 38400, 38416 (July 26, 1995) (proposing payment scheme
to begin in 1998).

The Association alleges that in order to collect payment for both an
anesthesiologist and an anesthetist performing a single case, the hospitals sometimes
certified that there was a medical necessity for both to attend, whereas in fact the
anesthesiologist did not assist throughout the case, demonstrating that no necessity
existed.

II.

On December 28, 1994, the Association brought this suit on behalf of the
United States alleging violation of the False Claims Act, 31 U.S.C. §§ 3729(a) (1) and
(2) and (7), conspiracy to violate the Act, and violation of the hospitals’ Medicare

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provider agreements in connection with their anesthesia billing practices. The United
States declined to intervene.

At the threshold, we must decide whether we have subject-matter jurisdiction
over this case. On November 8, 1994, some seven weeks before filing this case, the
Association and several individual anesthetists sued many of the same defendants
alleging various federal antitrust and state law violations, again in connection with
their anesthesia billing practices. The antitrust complaint alleged:

[T]he defendant anesthesiology groups and their co-conspirators have
engaged in a wide-spread practice of fraudulent billing of anesthesia
services in violation of . . . Federal statutes, including § 1128(a)(1)(A).
Such violations include, but are not limited to, billing for services that
they did not render, billing for operations at which they were not present
and inaccurately designating operations as one-on-one for Medicare
purposes.

The allegations in the Association’s antitrust case were immediately reported in the
local newspapers in St. Paul and St. Cloud on November 10 and 11. The Association
also provided a copy of the antitrust case to the United States government. Only after
this publicity did the Association file this False Claims Act case, under seal, as
provided by statute.

The district court held that the disclosure of allegations of fraud in the
Association’s antitrust suit and in newspaper articles about the antitrust suit precluded
subject-matter jurisdiction over this qui tam case because of a special jurisdictional
limitation in the False Claims Act disallowing suits based on publicly disclosed
information, 31 U.S.C. § 3730(e)(4)(1994). In addition to the disclosures the district
court cited, the defendants contend that instances of one type of claim alleged by the
Association, improper billing of one-on-one cases, were disclosed in the course of an

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administrative audit before the Association had assembled its allegations, likewise
depriving the district court of subject-matter jurisdiction over that claim.

The level of our review of a district court’s ruling on subject-matter jurisdiction
depends on whether the district court based its determination on the complaint, on
undisputed facts outside the complaint, or on findings of fact. See Osborn v. United
States, 918 F.2d 724, 729-30 (8th Cir. 1990). In this case, the district court limited
its jurisdictional inquiry to the complaint and undisputed facts, styling its order as a
summary judgment. See generally id. at 729-30 (discussing distinction between
subject-matter jurisdiction determination under Fed.R.Civ.P. 12(b)(1) and summary
judgment). Therefore, we exercise de novo review, limited to “determining whether
the district court’s application of the law is correct and, if the decision is based on
undisputed facts, whether those facts are indeed undisputed.” Id. at 730 (quotations
omitted).

The limitations on subject-matter jurisdiction over False Claims qui tam cases
were enacted as part of the False Claims Amendments Act of 1986, Pub. L. No. 99-
562, 100 Stat. 3153, 3157 (1986). The 1986 amendments were an avowed attempt
to reinvigorate the False Claims Act after a 1943 amendment and judicial decisions
interpreting the 1943 amendment had emasculated the 1863 law. Understanding the
Congressional intent expressed in the 1986 amendments therefore requires a review
of False Claims Act history.

The original False Claims Act was enacted in 1863 in order to strike back
against the fraud of unscrupulous Civil War defense contractors. S. Rep. No. 99-345,
at 8 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5273. The Act contained a qui tam
provision allowing private persons to sue as relators representing the government’s
interests, and it rewarded relators who prevailed in their suits with a bounty of half

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the damages and forfeitures they recovered for the government.4 Id. at 10. The large
size of the relator’s share, which came out of the government’s ultimate recovery, had
an obvious potential to put the relator and the government at odds with each other.

During World War II there were many qui tam cases against defense
contractors, and in one notorious case, United States ex rel. Marcus v. Hess, 317 U.S.
537 (1943), the government contended that the relator had simply copied allegations
from a criminal indictment already on file. The Supreme Court held that, even if the
relator, Marcus, had simply taken allegations from a criminal indictment, the False
Claims Act would nevertheless permit him to proceed as relator. Id. at 545. In
reaction to Hess, Attorney General Francis Biddle asked Congress to repeal the qui
tam provisions of the False Claims Act. S. Rep. No. 99-345, at 11. Congress refused
to go so far, but it did amend the Act to provide that there would be no jurisdiction
over qui tam suits “whenever it shall be made to appear that such suit was based upon
evidence or information in the possession of the United States, or any agency, officer
or employee thereof, at the time such suit was brought.”5 31 U.S.C. § 232(C) (1946);
S. Rep. No. 99-345, at 12. The provision was explained as an attempt to curtail
parasitical suits in which the informer “rendered no service” to the government. 89
Cong. Rec. 10846 (1943). In United States ex rel. Wisconsin v. Dean, 729 F.2d 1100
(7th Cir. 1984), the State of Wisconsin brought a qui tam suit based on Medicaid
fraud that it had already disclosed to the federal government. The Seventh Circuit,
interpreting the 1943 amendment, held that even though the discovery of the fraud
was entirely due to the State’s investigation, qui tam jurisdiction was barred because
the federal government knew of the fraud before Wisconsin filed suit. Id. at 1104-07.

4Under the current statute the size of the bounty varies, but can be as high as
thirty percent of the proceeds of the suit. 31 U.S.C. § 3730(d) (1994).

5This provision was interpreted to apply only in the event the government
declined to take up prosecution of the case itself. S. Rep. No. 99-345, at 12.

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Within months of the Dean decision, the National Association of Attorneys
General adopted a resolution urging Congress “to rectify the unfortunate result of the
Wisconsin v. Dean decision.” S. Rep. No. 99-345, at 13. Congress responded.
Senate Bill 1562, which became the 1986 False Claims Amendments Act, was
introduced shortly after and was “aimed at correcting restrictive [court]
interpretations” of the False Claims Act which “tend to thwart the effectiveness of the
statute.”6 Id. at 4, 13. The goals of the 1986 Amendments Act were (1) to encourage
those with information about fraud against the government to bring it into the public
domain; (2) to discourage parasitic qui tam actions by persons simply taking
advantage of information already in the public domain; and (3) to assist and prod the
government into taking action on information that it was being defrauded. United
States ex rel. Mistick PBT v. Hous. Auth., 186 F.3d 376, 401 (3d Cir. 1999) (Becker,
C.J., dissenting) (citing S. Rep. No. 99-345, at 1-8, 23-24 ), cert. denied, 529 U.S.
1018 (2000).

The 1943 amendments could bar qui tam suits on the ground of information
technically in the government’s possession, even if no one in the government knew
about the information. 132 Cong. Rec. 22340 (1986) (remarks of Rep. Bedell). The
supporters of the 1986 Amendments Act believed that this prevented relators from
bringing suits in situations in which their participation was needed and in which the
fraud would not be prosecuted without their intervention. In an apparent attempt to
correct this shortcoming of the 1943 version of the Act, Congress switched from
barring suit on the ground of government possession of information before the relator
filed suit to barring suit on the ground of public disclosure of such information. See

6In addition to recalibrating the provisions dealing with parasitical suits, the
1986 Amendments Act aimed to “encourage more private enforcement suits,” S. Rep.
No. 99-345, at 23-24, by various other measures, including increased monetary
awards, a lower burden of proof, and a guaranteed role for the relator even when the
government intervenes in the action. United States ex rel. Stinson, Lyons, Gerlin &
Bustamonte, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1154 (3d Cir. 1991).

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id. (referring to House bill). Congress evidently assumed that if information was
publicly disclosed, the government was likely to discover it on its own, without the
need for a qui tam relator. See United States ex rel. Stinson, Lyons, Gerlin &
Bustamonte, P.A. v. Prudential Ins. Co., 944 F.2d 1149, 1169 (3d Cir. 1991) (Scirica,
J., dissenting).

The 1986 Act also added an important exception to the jurisdictional bar for
relators who are “an original source of such information.” The relevant section is 31
U.S.C. § 3730(e)(4):

(A) No court shall have jurisdiction over an action under this section
based upon the public disclosure of allegations or transactions in a
criminal, civil, or administrative hearing,
in a congressional,
administrative, or Government Accounting Office report, hearing, audit,
or investigation, or from the news media, unless the action is brought by
the Attorney General or the person bringing the action is an original
source of the information.
(B) For purposes of this paragraph, “original source” means an
individual who has direct and independent knowledge of the information
on which the allegations are based and has voluntarily provided the
information to the Government before filing an action under this section
which is based on the information.

Section 3730(e)(4) is crucial to resolving the jurisdictional issue in the present
case. Applying the section requires us to answer three questions: (1) Have
allegations made by the relator been “publicly disclosed” before the qui tam suit was
brought? (2) If so, is the qui tam suit “based upon” the public disclosure? and (3) If
so, was the relator an “original source” of the information on which the allegations
were based? See United States v. Bank of Farmington, 166 F.3d 853, 859 (7th Cir.
1999)(applying tripartite test). Jurisdiction exists only if the answer to one of the first
two questions is “no” or the answer to the third question is “yes.” The original source
inquiry, in turn, has three parts; the relator’s knowledge of the information must be

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(1) direct and (2) independent, and (3) the relator must have voluntarily provided the
information to the Government before filing suit.

The Association contends that the goals of the 1986 Amendments, including
the intent to revise the law after the unsatisfactory result in Dean, would be thwarted
by interpreting the 1986 Amendments Act to bar suits by relators who caused the
public disclosure of the fraud. However, the various components of the statute have
been interpreted by the courts in such a way that, when the pieces are put together,
the result is sometimes to bar such actions. See, e.g., United States ex rel. Dhawan
v. New York Med. Coll., 252 F.3d 118, 121-22 (2d Cir. 2001) (relator who disclosed
information in state court suit was thereby barred); United States ex rel. Hafter v.
Spectrum Emergency Care, Inc., 190 F.3d 1156, 1163 (10th Cir. 1999) (relator whose
information was “impetus” for investigation was barred by disclosure of results of
investigation); United States ex rel. Mistick PBT, 186 F.3d at 389 (relator whose
FOIA request brought fraud to light was barred because the government’s response
to the request was public disclosure); United States ex rel. Jones v. Horizon
Healthcare Corp., 160 F.3d 326, 335 (6th Cir. 1998) (relator’s state lawsuit disclosed
claims and therefore barred federal qui tam suit); United States ex rel. Devlin v.
California, 84 F.3d 358, 360, 363 (9th Cir. 1996) (relator who fed allegations to
newspaper barred because resulting article disclosed fraud); United States ex rel.
Kreindler & Kreindler v. United Tech. Corp., 985 F.2d 1148, 1159 (2d Cir. 1993)
(relator who caused information to be revealed in the course of discovery in a lawsuit
barred thereby). The Association cites a letter by the sponsors of the 1986
Amendments Act reviewing the career of the public disclosure bar in the courts:
“Certain courts have exploded this limited bar in ways that mock the very purpose
and intent of the 1986 Amendments.” Letter from Rep. Howard L. Berman and Sen.
Charles E. Grassley to Janet Reno, 145 Cong. Rec. E1540, 1546 (July 14, 1999).7

7While legislators’ comments regarding the intent of an earlier Congress are
entitled to no special weight, Central Bank of Denver, N.A. v. First Interstate Bank

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Our task, of course, is to effectuate Congress’s intent, and we must interpret the
three subsidiary components of section 3730(e)(4) with a view to how they contribute
to the effect of the statute as a whole.

[A] section of a statute should not be read in isolation from the context
of the whole Act, and . . . in fulfilling our responsibility in interpreting
legislation, we must not be guided by a single sentence or member of a
sentence, but [should] look to the provisions of the whole law, and to its
object and policy.

State Highway Comm’n v. Volpe, 479 F.2d 1099, 1111-12 (8th Cir. 1973) (citations
omitted).

A.

The first question, whether the allegations have been publicly disclosed, must
be answered “yes.” The Association essentially concedes that the antitrust suit and
the resulting newspaper articles amounted to public disclosure, as the district court
held.

However, on appeal the defendants further contend that the Association’s
allegations were also publicly disclosed through a 1991 audit performed for Medicare
by The Travelers, which, as an administrative audit, would qualify as one of the types
of public disclosure that could trigger the jurisdictional bar. In the audit, Travelers
notified Mercy Medical Center that it had been billing for anesthetists’ services in
cases in which the anesthetist and anesthesiologist were both working on the same
case and no other concurrent cases, known as one-on-one cases.

of Denver, N.A., 511 U.S. 164, 185-86 (1994), their legal analysis is entitled to the
same consideration as any other commentator’s.

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Review of the Association’s claims indicates that this is not one of the practices
the Association alleges is fraudulent. The Association contends that some of the
alleged fraudulent practices arose as a response to the 1991 audit, when the hospitals
realized they could no longer bill for both the anesthesiologist and an anesthetist’s
service in routine one-on-one situations, and so began falsely certifying that such
cases required the involvement of both an anesthesiologist and an anesthetist.
Therefore, the 1991 audit was not a public disclosure of this allegation.

The Association also contends that the anesthesiologists billed for personally
performing cases in which they were not “continuously involved” with the patient or
case. In contrast, the audit letter does not say that the anesthesiologists were not
performing the cases, but instead concludes that they were performing them, which
meant that the hospital could not bill for the anesthetist’s involvement in the same
case. Therefore, the audit did not publicly disclose this allegation of fraud, either.
The defendants contend that the transactions pointed out in the audit are some of the
same transactions on which the Association now bases its claims. The audit may
have revealed the fact that the defendants represented that the anesthesiologists
performed these cases, but the audit did not state that the anesthesiologists had not
in fact done so. In order to bar jurisdiction, a public disclosure must reveal both the
true state of facts and that the defendant represented the facts to be something other
than what they were. United States ex rel. Rabushka v. Crane Co., 40 F.3d 1509,
1514 (8th Cir. 1994). The audit did not reveal what the Association now contends
was the true state of the facts, i.e., that the anesthesiologists were not performing the
cases they billed for. Therefore, the audit was not a public disclosure that could bar
jurisdiction over the Association’s claims.

B.

The second question under section 3730(e)(4) is whether the allegations in the
qui tam case were “based upon” the public disclosure. This requires us to address the

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meaning of those words, a question which has split the federal circuits, but which our
court has not yet explicitly addressed.

The minority view, shared only by the Fourth Circuit and one panel of the
Seventh Circuit (in schism with another panel),8 is that “based upon” should be given
its ordinary meaning of “derived from,” so that the qui tam allegation must have
resulted from the disclosure in order to bar jurisdiction. United States ex rel. Siller
v. Becton Dickinson & Co., 21 F.3d 1339, 1348 (4th Cir. 1994); United States v.
Bank of Farmington, 166 F.3d 853, 863 (7th Cir. 1999). The minority bases its
reading on a “straightforward textual exegesis” of the phrase “based upon,” Siller, 21
F.3d at 1348, as well as the policy consideration that a suit not derived from the
public disclosure is not “parasitic,” and so is not the kind of suit the 1986
Amendments Act was meant to prevent, Bank of Farmington, 166 F.3d at 863.

The majority view is that a qui tam suit is “based upon” a public disclosure
whenever the allegations in the suit and in the disclosure are the same, “regardless of
where the relator obtained his information.” United States ex rel. Doe v. John Doe
Corp., 960 F.2d 318, 324 (2d Cir. 1992). Accord United States ex rel. Findley v.
FPC-Boron Employees’ Club, 105 F.3d 675, 682-85 (D.C. Cir. 1997); United States
ex rel. Mistick PBT v. Housing Auth., 186 F.3d 376, 385-88 (3d Cir. 1999) (qui tam
suit based upon disclosure if the disclosure “sets out” allegations or all essential
elements of qui tam claim), cert. denied, 529 U.S. 1018 (2000); United States ex rel.
McKenzie v. BellSouth Telecom., Inc., 123 F.3d 935, 940 (6th Cir. 1997) (“based
upon” public disclosure means “supported by” disclosure); United States ex rel.

8The split of authority is not quite as lopsided as it seems, for the issue has
provoked spirited disagreements in some circuits that have adopted the majority view.
See, e.g., United States ex rel. Mistick PBT v. Housing Auth., 186 F.3d 376, 394-402
(3d Cir. 1999) (Becker, C.J., dissenting), cert. denied, 529 U.S. 1018 (2000); United
States ex rel. Jones v. Horizon Healthcare Corp., 160 F.3d 326, 336 (6th Cir. 1998)
(Gilman, J., concurring in result).

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Lamers v. City of Green Bay, 168 F.3d 1013, 1017 (7th Cir. 1999) (relevant facts
disclosed in media after relator filed administrative complaint and before relator filed
qui tam suit; therefore qui tam jurisdiction barred unless relator an original source);
United States ex rel. Biddle v. Board of Trustees of the Leland Stanford, Jr., Univ.,
161 F.3d 533, 536-40 (9th Cir. 1998); United States ex rel. Precision Co. v. Koch
Indus., Inc., 971 F.2d 548, 552-53 (10th Cir. 1992) (“As a matter of common usage,
the phrase ‘based upon’ is properly understood to mean ‘supported by.’”); Cooper v.
Blue Cross and Blue Shield, 19 F.3d 562, 567 (11th Cir. 1994) (per curiam) (“based
upon” means “supported by”).

The majority view has a powerful argument to commend it: if a suit is only
based upon a public disclosure if it results from the disclosure, as the minority
interpretation would have it, then the statute’s additional provision allowing suit if
the relator is “an original source” of the underlying information is of no effect,
because no one could be an original source if his knowledge was derived from public
disclosure.9 More specifically, a relator’s knowledge could not be “independent” of

9Chief Judge Becker of the Third Circuit has proposed a reading by which
Congress could have used “based upon” in its ordinary sense of “derived from” and
still have denoted something different by the “original source” provision. Mistick
PBT, 186 F.3d at 399 (“[I]t is possible that a qui tam claim need not be derived
entirely from public disclosures to fall under the ‘based upon’ jurisdictional bar, as
long as some essential element of the qui tam claim is derived from public
disclosures. . . . Under this view, a relator who is barred because he has derived some
of his fraud information from a public disclosure may still bring the claim as an
original source if he has direct and independent knowledge of some other essential
element of the claim.”). According to his interpretation, a suit derived in part from
public disclosure may be allowed if it is also partly not derived from a public
disclosure.

This interpretation is possible, but not plausible. It requires us to conclude that
Congress used the “based upon” language and the “original source” language to refer
to the same concept–whether a suit is derived from a public disclosure. Moreover,

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the public disclosure, sec. 3730(e)(4)(B), if it was derived from the public disclosure.
The majority of courts have considered it inconceivable that Congress would have
drafted the statute so poorly as to have included a provision that could never have any
effect.

There are two considerable objections to this majority rule. First, its reading
distorts the plain meaning of the words “based upon the public disclosure,” since if
the qui tam allegations are not derived from the public disclosure itself, they are not
based upon the public disclosure, but rather on the facts which have been publicly
disclosed. Elsewhere in the statute, Congress used the phrase “based on the facts
underlying the pending action,” 31 U.S.C. § 3730(b)(5), which suggests the drafters
distinguished between basing a suit on facts and basing it on a disclosure of such
facts. The majority’s interpretation also distorts the words “based upon” by taking
away the causal relation inherent in the phrase. As the Fourth Circuit remarked, “We
are unfamiliar with any usage, let alone a common one or a dictionary definition, that
suggests that ‘based upon’ can mean ‘supported by.’” Siller, 21 F.3d at 1349. This
objection may well be unanswerable. The Third Circuit, in adopting the majority
rule, candidly admitted that the “in ordinary usage the phrase ‘based upon’ is not
generally used to mean ‘supported by,’” Mistick PBT, 186 F.3d at 386, but
concluded that there was elsewhere evidence that the statute was not carefully
drafted. Id. at 387. Evidently, the words “based upon” were simply not well chosen
to express Congress’s meaning.

The second objection to the majority view is that the policy justification
sometimes given by courts in the majority, if taken to its logical conclusion, would
return us to the rule of the Dean case, which Congress was specifically attempting to

it would have been much more natural and straightforward for Congress to have said
“partly based upon the public disclosure” and “original source of part of the
information” if the distinction between partial derivation and sole derivation had been
central to how Congress meant the statute to work.

-21-

overrule by means of the 1986 Amendments Act. For instance, the District of
Columbia Circuit justified its adoption of the majority rule as follows:

[T]he blocking of freeloading relators who copy their complaints
directly from public disclosures is not the FCA’s only concern. From its
inception, the qui tam provisions of the FCA were designed to inspire
whistleblowers to come forward promptly with information concerning
fraud so that the government can stop it and recover ill-gotten gains.
Once the information is in the public domain, there is less need for a
financial incentive to spur individuals into exposing frauds.

FPC-Boron Employees’ Club, 105 F.3d at 685. By this reasoning, once the
information is available to the government, the government has no need to pay a
relator for disclosing it, even if the relator discovered the fraud in the first instance.
Against this, the minority view reasons that by attempting to overrule the Dean case
legislatively and especially by enacting the “original source” exception to the
jurisdictional bar, Congress obviously rejected this one-shot view of its financial
interests in favor of a fairness policy. Rather than biting the hand that fed it,
Congress apparently chose to take a longer view, reasoning that its interests over time
would be served by rewarding informants rather than confiscating their claims
whenever it could do so.10

10At the same time, Congress’s view of what a relator deserves to recover is
plainly affected by the utility of the information to the government, rather than merely
whether the discovery was original or derivative. Thus, section 3730(b)(5) provides,
“When a person brings an action under this subsection, no person other than the
Government may intervene or bring a related action based on the facts underlying the
pending action.” So, once a qui tam action is pending, no new relator can bring suit
on the same fraud, no matter how he or she discovered it. Therefore, it is not
inconsistent with Congress’s scheme that some claimants who are not parasitic
nevertheless do not get to be relators.

-22-

The minority objects that the majority’s reading of “based upon” throws up a
jurisdictional bar in some suits that are not parasitical, in the sense of being cribbed
from the public disclosure, whereas the avowed goal underlying the 1986
Amendments Act was to eliminate parasitical suits. See FPC-Boron Employees’
Club, 105 F.3d at 685 (acknowledging that “our interpretation of the jurisdictional bar
may on occasion prevent qui tam lawsuits that may not be truly ‘parasitic’”). The
minority view contends that by trying to rectify Dean, Congress showed a desire to
treat relators fairly, which would be frustrated by kicking relators out of court when
their claim was not parasitical, but was merely disclosed before the relator had filed
suit.

In our view, however, these policy objections disappear if one considers the
overall design of the public disclosure provision. Congress’s fairness concern is not
effectuated by each part of the statute read in isolation, but rather by the statute as a
whole. The “based upon” clause serves the concern of utility, that is of paying only
for useful information, and the “original source” exception serves the concern of
fairness, that is of not biting the hand that fed the government the information. If the
“based upon” clause threatens to kick relators out of court because the government
does not need them, the “original source” exception reopens the courthouse door for
certain deserving relators. Therefore, the majority view reaches the correct result, not
because Congress cared nothing for fairness and everything for utility, but because
it used two different provisions to strike a balance between these concerns.

Thus, the majority reading of section 3730(e)(4) is consistent with Congress’s
apparent policy. We also conclude that the majority view, though not free of strain,
gives a more coherent meaning to the confusing language of the section than the
minority view does. A final factor supporting the majority’s reading is that it fits with
the drift of our circuit precedent.

-23-

Our court has not expressly considered the meaning of the “based upon” clause,
although Judge Magill has announced his support of the majority rule in a dissent.
United States ex rel. Rabushka v. Crane Co., 40 F.3d 1509, 1527-28 (8th Cir. 1994).
However, in United States ex rel. Barth v. Ridgedale Electric, Inc., 44 F.3d 699, 702
(8th Cir. 1995), we held that a suit was barred because of a public disclosure in
newspaper articles that were not published until after one would-be relator had
completed its investigation and reported the allegations to the County Attorney.
From the chronology of these events, it is obvious that the allegations of the qui tam
complaint in Barth were not derived from the newspaper articles. Nevertheless, Barth
parsed the original source provisions, which would have been utterly unnecessary if
the suit had not been “based upon” public disclosures, and concluded that the relators
could not prosecute the suits because they were not original sources of the
information. Id. at 704. Because the result in Barth would have been different if
“based upon” meant “derived from,” that case suggests that the issue has been
resolved in this circuit, albeit implicitly, consistently with the majority rule.

Having concluded that the majority rule makes better sense of the 1986
Amendments Act and better effectuates the policy goals of that Act, we now
explicitly endorse the majority view and hold that the allegations in this case were
“based upon” the antitrust case and accompanying newspaper accounts.

C.

Finally, we come to the question of whether the Association was an “original
source” of the information disclosed. If not, then there is no jurisdiction over this
case. Since we know from the history of the False Claims Act that the original source
provision was added in 1986 to permit claims like the one in Dean, in which a
claimant investigated the fraud and then revealed it to the government before filing
suit, we would expect that the effect of the original source provision is to protect from
the public disclosure bar those who first bring a claim to light. However, “original

-24-

source” is defined in section 3730(e)(4)(B) in a way that does not distinguish between
those who first bring a claim to light and others who later make the same discovery
independently,11 and it does not always protect those responsible for the initial
disclosure of a fraud claim, e.g., Barth, 44 F.3d at 702-04.

Under section 3730(e)(4)(B), a claimant is deemed an original source if he or
she (1) has “direct and independent knowledge of the information on which the
allegations are based” and (2) has voluntarily provided the information to the
“Government” before filing the qui tam suit.12

We have determined that the words “direct” and “independent” were intended
to express two ideas, rather than one. Barth, 44 F.3d at 703. We have interpreted
“independent knowledge” to mean knowledge not derived from the public disclosure.
Id. But see United States ex rel. Fine v. Advanced Sciences, Inc., 99 F.3d 1000,
1006-07 (10th Cir. 1996)(independent means independent of anyone else–i.e., the

11The Second and Ninth Circuits have held that only a person who caused the
public disclosure can be an original source. Wang v. FMC Corp., 975 F.2d 1412,
1418-20 (9th Cir. 1992); United States ex rel. Dick v. Long Island Lighting Co., 912
F.2d 13, 16-18 (2d Cir. 1990). That rule would perhaps be an improvement in the
operation of the original source provision, but it has no basis in the statutory language
and we therefore decline to adopt it.

12The defendants argue that there is an additional requirement that an original
source must be a natural person because section 3730(e)(4)(B) says: “‘original source’
means an individual . . . .” But if examination of a statute shows “no plausible reason
why Congress would have intended to provide for . . . special treatment of actions
filed by natural persons and to have precluded entirely jurisdiction over comparable
cases brought by corporate persons,” Clinton v. City of New York, 524 U.S. 417, 429
(1998), the word “individual” does not limit the statute’s scope to human beings. Id.
Neither the 1986 Amendments Act nor a review of its background or legislative
history suggests that Congress meant to exclude suits on the basis of whether the
relator was a natural person, corporation, or association. We therefore reject this
argument.

-25-

same thing as direct). The independent knowledge requirement clearly serves the
congressional goal of barring parasitic actions, but it is worth noting that it does not
bar actions based on old news, in which the relator independently discovers
information already known to the public. See Fed. Recovery Servs., Inc. v. United
States, 72 F.3d 447, 452 (5th Cir. 1995) (this situation addressed in 31 U.S.C. §
3730(d)(1), which reduces size of relator’s award). There is no doubt that the
Association’s knowledge was independent of the Association’s antitrust case and the
newspaper articles based on that case.

But did the Association also have direct knowledge? This term is more
problematic. Courts have used various formulations, sometimes looking at the words
without any reference to what Congress hoped to accomplish by using the term, and
sometimes focusing on the policy of avoiding parasitism without paying much
attention to the actual words Congress employed. The Third Circuit cited a dictionary
definition of “direct” as “marked by absence of an intervening agency, instrumentality
or influence: immediate.” Stinson, Lyons, 944 F.2d at 1160 (quoting Webster’s Third
International Dictionary 640 (1976)). We reiterated this definition in Barth, 44 F.3d
at 703 (quoting United States ex rel. Springfield Term. Ry. Co. v. Quinn, 14 F.3d 645,
656 (D.C. Cir. 1994)). Also in Barth we quoted the Ninth Circuit’s definition of
direct knowledge as “unmediated by anything but [the plaintiff’s] own labor,” id.
(quoting Wang , 975 F.2d at 1417), which reflects the congressional intent to avoid
parasitical suits in which the plaintiff contributed nothing.

The district court held that the Association had no direct knowledge of the
information because its knowledge came from its members. The court cited two cases
in which corporations were formed after the information had been discovered and
disclosed by people who became shareholders of the corporations; in these cases, the
corporations were not original sources of the information. Federal Recovery Servs.,
72 F.3d at 451-52; Precision Co., 971 F.2d at 554. These cases are easily
distinguishable, because they involved a corporate plaintiff that did not exist at the

-26-

time the information was discovered. No courts have held that corporations
responsible for the discovery of information cannot have “direct knowledge” because
they have to act through agents. In fact, corporate plaintiffs have been held to have
direct knowledge making them an original source. In Springfield Terminal Railway
Co., 14 F.3d at 657, the District of Columbia Circuit held that a corporate relator had
sufficiently direct knowledge of information to be an original source. Accord United
States ex rel Durcholz v. FKW Inc., 997 F. Supp. 1159, 1166 (S.D. Ind. 1998).
Moreover, in Barth one relator was a labor union; although we held that the union had
no direct knowledge of the information because its representative did not have such
knowledge, we did not suggest organizations can never be original sources. 44 F.3d
at 703-04. There is no hint in the history of the 1986 Amendments Act that Congress
intended to disqualify organizational relators.13 To the contrary, any such rule would
have disqualified the State of Wisconsin from proceeding as relator in Dean and so
would defeat one of the announced motivations behind the 1986 Amendments Act.
Though organizations must, of course, act through agents, this does not render their
knowledge parasitical or their agency “intervening” in the sense of interrupting the
causal connection between the corporation’s efforts and the knowledge. See Black’s
Law Dictionary 212 (7th ed. 1999) (“intervening cause” or “intervening agency” is
“An event that comes between the initial event in a sequence and the end result,
thereby altering the natural course of events that might have connected a wrongful act
to an injury”).

In further contrast to the corporate relators in Precision Co. and Federal
Recovery Services, the Association is an unincorporated association. Unlike a
corporation, a voluntary unincorporated association has no legal status separate from
its members. See St. Paul Typothetae v. St. Paul Bookbinders’ Union, 102 N.W. 725

13If Congress had harbored some hostility to organizational relators, it would
have been odd to disqualify them only in the event that their claims were publicly
disclosed before they filed suit, but that would be the effect of the interpretation
defendants propose.

-27-

(Minn.1905) (“Such [unincorporated] societies, in the absence of statutes recognizing
them, have no legal entity distinct from that of their members.”). By statute
Minnesota altered the common law to permit persons associated under a common
name to sue under that name, Minn. Stat. Ann. § 540.151 (2000), but this statute is
only procedural. Unincorporated associations derive their rights from the rights of
their members. See Federal Election Comm’n v. Colo. Republican Fed. Campaign
Comm., 121 S. Ct. 2351, 2362 n.10 (2001) (First Amendment rights). Thus,
associations can have standing to assert their members’ rights in court, see United
Food & Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544,
551-53 (1996), whereas a corporation has no standing to assert rights belonging to
its shareholders, Waseca Co. Bank v. McKenna, 21 N.W. 566 (Minn. 1884). An
association’s knowledge is in no way parasitic of its members and is “direct” within
the meaning of the original source clause.

In this case, the Association pleaded that its members have “personal
knowledge that defendant anesthesiologists have routinely billed Medicare for
personal performance of anesthesia procedures in which they were not continuously
involved or present.” It further pleaded that its members “have personal knowledge
of defendants’ false claims by virtue of communications with defendants themselves,
participation in the anesthesia procedures which were later fraudulently billed by the
defendant anesthesiologist, and familiarity with hospital records disclosing
defendants’ fraud.” The defendants’ response is that the anesthetists did not have
direct knowledge of the anesthesiologists’ billing practices, which came to light in
an audit.

There are two problems with the defendants’ argument. First, the record shows
that the anesthetists often did see the anesthesiologist filling out forms used for
billing with misleading information. These observations would support an inference
that the anesthesiologist submitted false bills.

-28-

Second, to qualify as an original source, a relator does not have to have
personal knowledge of all elements of a cause of action. Springfield Term. Ry., 14
F.3d at 656-67. Direct knowledge of the anesthesiologists’ operating room practices
would be enough. A false claim consists of a representation contrary to fact, made
knowingly or recklessly. If the relator has direct knowledge of the true state of the
facts, it can be an original source even though its knowledge of the misrepresentation
is not first-hand. Id. We therefore conclude that the Association has not only
independent, but also direct knowledge of the information in question within the
meaning of section 3730(e)(4)(B).

The last statutory condition for qualifying as an original source is that the
relator must have voluntarily provided the information to the government before
filing suit. The defendants concede that the Association sent a copy of its antitrust
complaint to the local Medicare Part B office several days after it filed the antitrust
suit. The Association’s attorney filed an affidavit saying he received a call from a
Medicare representative within a few days after mailing the complaint. The
representative said he was referring the complaint to the Justice Department. We
conclude that the Association fulfilled the requirement that it provide the information
to the government before filing suit.

The defendants urge us to adopt an additional requirement that the relator must
have revealed the allegations to the government before the public disclosure in order
to be an original source. This rule has been adopted by the District of Columbia and
Sixth Circuits. FPC- Boron Employees’ Club, 105 F.3d at 690-91; McKenzie, 123
F.3d at 943. This additional requirement has no textual basis in the statute.
Moreover, the courts adopting this requirement have justified it by arguing that after
public disclosure, the relator has no utility to the government. FPC-Boron
Employees’ Club, 105 F.3d at 691 (“Once the information has been publicly
disclosed, however, there is little need for the incentive provided by a qui tam
action.”). However, as we have seen, through the original source provisions Congress

-29-

chose to reward persons who discovered and revealed fraud, rather than confiscating
their claims. At the same time, Congress limited that beneficence by denying the
bounty even to those who uncovered the fraud unless they had revealed it to the
government before filing suit. Sec. 3730(e)(4)(B). We would change the balance
Congress struck if we were to further restrict the class of those whose discoveries had
been made public but who were nevertheless permitted to proceed as relators. We
decline to adopt the proposed additional requirement.

We hold that the Association qualifies as an original source of the information
on which its allegations are based. We have subject-matter jurisdiction over this case.

III.

The district court held that the Association lacked standing to pursue the qui
tam claim because there was no pecuniary injury to the United States when the
anesthesiologists allegedly billed for medically directing or personally performing
cases without fulfilling the requirements for medical direction or personal
performance. The district court went beyond the pleadings to examine the evidence
on the injury issue. We therefore review this issue under the summary judgment
standard, rather than limiting our inquiry to the pleadings. See Lujan v. Defenders
of Wildlife, 504 U.S. 555, 561 (1992).

We review the district court’s entry of summary judgment de novo, applying
the same standard appropriate in the district court. Breeding v. Arthur J. Gallagher
& Co., 164 F.3d 1151, 1156 (8th Cir. 1999). Summary judgment is proper only if,
taking the evidence in the light most favorable to the non-moving party, there is no
genuine issue of material fact and the moving party is entitled to judgment as a matter
of law. Id.

-30-

After the date of the district court’s decision, the Supreme Court decided
Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765,
778 (2000), in which it held that “a qui tam relator under the [False Claims Act] has
Article III standing.” The Court identified two discrete injuries to the United States
that are redressed through False Claims cases: “both the injury to its sovereignty
arising from violation of its laws (which suffices to support a criminal lawsuit by the
Government) and the proprietary injury resulting from the alleged fraud.” Id. at 771.
The Court held that a qui tam relator gained standing to assert the government’s rights
through a “partial assignment of the Government’s damages claim.” Id. at 773. The
defendants contend that if there are no damages, a qui tam relator does not have
standing to assert the government’s claim for penalties. The United States, appearing
as amicus, contends that the relator can pursue such a claim. We have no occasion
to address this argument, since the district court erred in holding that the United
States would have suffered no pecuniary injury even if the Association proved false
claims. That holding was based on a misunderstanding of the payment rules.

The Association alleges that the anesthesiologists billed for medical direction
in cases in which they fell short of the requirements for that designation. The district
court concluded that if the anesthesiologists had not billed these cases as medical
direction, “[p]resumably” they could only have billed them as personally performed,
which would have been even more expensive. This does not follow. The services of
an anesthesiologist who was involved in some way with a case but failed to meet the
requirements of personal performance or medical supervision were not reimbursable
on a reasonable charge basis under Medicare as services to the patient. Instead, the
anesthesiologist’s services would be considered supervisory services furnished to the
hospital, reimbursable to the hospital on a reasonable cost basis only. 42 C.F.R. §
405.552(b) (1983); 48 Fed. Reg. 8902, 8927 (March 2, 1983). The defendants
contend that if the anesthesiologists were not billed as performing or directing the
cases, the government would have had to pay the anesthetists for the same service and
therefore there would have been no net loss to the government. Before 1989,

-31-

anesthetists were not eligible for reasonable charge reimbursements for anesthesia
services. 48 Fed. Reg. at 8927. After January 1, 1989, Medicare reimbursed for
anesthetists’ services, but at least for some of that time it paid a lower rate than it paid
for anesthesiologists’ anesthesia services. United States General Accounting Office
Report to Congressional Committees, Medicare Payments for Medically Directed
Anesthesia Services Should Be Reduced 24-27 (March 1992). The Association filed
an affidavit asserting that anesthetists were paid less than anesthesiologists for
performing cases personally during much of the relevant time period. Therefore, it
is incorrect to conclude that the government would have paid the same for the
services no matter whether they were billed as personally performed by an
anesthesiologist or not. Additionally, the Association claims that in some cases the
hospitals certified that it was medically necessary for both an anesthesiologist and
anesthetist to perform anesthesia on a single patient, with no concurrent cases, when
in fact the anesthesiologist did not personally perform the case. In such cases, if the
government paid the personal performance rate to both the anesthetist and the
anesthesiologist, the government’s cost would be doubled. These sorts of pecuniary
injury plainly confer standing on the relator who alleges them. The district court’s
legal conclusion that the Association lacked standing was premised on a faulty
understanding of the applicable regulations.

IV.

The Association also appeals the district court’s entry of summary judgment
against it on the merits of its suit.

The district court entered summary judgment against the Association on the
merits of its claims to the extent the claims were based on anesthesiologists billing
cases as “personally performed.” The district court held that Medicare regulations in
effect at the time in question were “susceptible” to the interpretation that an
anesthesiologist need not have been continuously physically present in the operating

-32-

room to bill a case as “personally performed.” The court concluded that this
ambiguity ruled out the possibility that the defendants knew they were presenting
false claims when they billed for personal performance of the cases in which they
were not continuously present.

The United States has filed an amicus brief taking strong exception to the
proposition that one cannot make a false statement by verifying compliance with an
ambiguous regulation so long as one’s actions satisfied any possible interpretation of
the regulation. The government’s argument finds support in the Ninth Circuit’s
recent case of United States ex rel. Oliver v. Parsons Co., 195 F.3d 457, 460, 463 (9th
Cir. 1999) (court’s interpretation of ambiguous regulation determines whether claim
of compliance with regulation was false), cert. denied, 530 U.S. 1228 (2000). The
defendants fall back from this position, arguing that the district court “did not . . .
hold that the ambiguity of the anesthesia regulations negated a finding of falsity.”
Instead, the defendants contend the district court held that “many considerations
precluded a finding of intent.”

The False Claims Act prohibits the knowing presentation of false claims for
government payment or approval. 31 U.S.C. § 3729(a). The Act defines “knowing”
and “knowingly” to mean that the actor had actual knowledge of the pertinent
information or acted in deliberate ignorance or in reckless disregard of the truth or
falsity of that information. Sec. 3729(b). The question on intent here is whether the
defendants knew (or would have known absent deliberate blindness or reckless
disregard) that their bills would lead the government to believe that they had provided
services that they actually did not provide. If a statement alleged to be false is
ambiguous, the government (or here, the relator) must establish the defendant’s
knowledge of the falsity of the statement, which it can do by introducing evidence of
how the statement would have been understood in context. See United States v.
Garfinkel, 29 F.3d 1253, 1256 (8th Cir. 1994) (“evidence offered at trial could
potentially resolve any ambiguity on the face of the document”); United States v.

-33-

Anderson, 579 F.2d 455, 460 (8th Cir. 1978) (“In light of these ambiguities . . . the
government must negative any reasonable interpretation that would make the
defendant’s statement factually correct.”); United States v. Mackby, 261 F.3d 821,
827 (9th Cir. 2001) (False Claims Act violation consisted of filling in Medicare claim
form contrary to instructions received in Medicare bulletins). If the Association
shows the defendants certified compliance with the regulation knowing that the
HCFA interpreted the regulations in a certain way and that their actions did not
satisfy the requirements of the regulation as the HCFA interpreted it, any possible
ambiguity of the regulations is water under the bridge. However, it is important to
remember that the standard for liability is knowing, not negligent, presentation of a
false claim. Oliver, 195 F.3d at 464-65.

The alleged ambiguity is limited to the meaning of the requirement in the 1992
regulation 42 C.F.R. § 414.46(c)(2)(ii), that an anesthesiologist must be
“continuously involved” in a case in order to have personally performed an anesthesia
case in which an anesthetist was also “involved.” The defendants contend that there
was confusion about what was required of an anesthesiologist in order to bill a case
as personally performed or “AA.” The record shows that up until September 1993,
while there may have been some uncertainty about the interpretation of “continuously
involved,” the defendants were on notice of the possibility that they were expected
to be present with the anesthetist in order to represent that they had personally
performed a case. There is at least a question of fact as to their state of mind during
this early period. During this time frame, defendant Allina’s in-house lawyer advised
that it was his understanding that an anesthesiologist had to be “continuously present”
with the anesthetist to bill for personal performance. The same lawyer inquired of
Travelers, the Medicare carrier for the Twin Cities area, whether an anesthesiologist
had to be in the operating room the whole time to bill a single case as personally
performed. Travelers agreed to get an answer from HCFA to this question. The
defendants contend that they considered this question settled by an HCFA memo,
which Travelers relayed to its provider community in September 1993, and which

-34-

Blue Cross, carrier for the St. Cloud area, relayed to its providers in April 1994. The
memo stated:

It has been reported that anesthesiologists will bill using the AA
modifier even though they are outside the operating room performing
other activities, such as pain blocks, doing pre or post operative
evaluations, or administering and /or monitoring a labor epidural. For
the anesthesiologist to bill using the AA modifier [for personally
performed case] under these circumstances, he must be physically
present in the operating suite while the [anesthetist] is attending to the
case. If the anesthesiologist is not continuously involved with the case,
then it is considered neither personally performed nor medically
directed.

(emphasis added). The defendants introduced evidence that at least some of them
relied on this memo in forming the belief that they could bill for personally
performing cases despite leaving the operating room, so long as they were present in
the operating suite, which they define as the area in the hospital where surgery takes
place.

In response, the Association contends that it was not reasonable to read this
memo as authorizing anesthesiologists to bill for personal performance when they
were not in the room with the patient. The Association argues that the 1993 HCFA
memorandum was not intended to authorize anesthesiologists to leave while an
anesthetist performed their one-on-one cases, so long as they stayed in the operating
suite. Instead, as the HCFA pointed out in April 1996, the intended point of the 1993
memorandum was to emphasize that, whoever physically performed the work in a
one-on-one case, the anesthesiologist had to be solely devoted to that case in order
to bill it as personally performed. The 1996 HCFA memo reasoned: “It should be
assumed that, if the physician leaves the operating room, he/she is performing other
duties. If the physician leaves the operating room to perform any other duties, the
anesthesia procedure may not be billed as personally performed.”

-35-

A few months after Travelers’ dissemination of the 1993 HCFA memorandum,
a further memorandum from HCFA on the subject of personally performed
procedures was published in the American Society of Anesthesiologists newsletter
of April 1994. This memorandum made it clear that anesthesiologists were not to
leave a patient during a personally performed procedure. The memo stated that an
anesthesiologist performing medical direction of concurrent procedures could
“momentarily leave that procedure and perform another physician service” so long
as this did not occur during a demanding part of the procedure. The memo contrasted
the requirements for medically directed procedures with those for personally
performed procedures: “Of course, we have not extended this policy to the case in
which the anesthesiologist is personally performing the case. The reason for this is
rather obvious. The anesthesiologist who is billing for personal performance of the
case must personally perform the case. In theory, there is no one else to hand the case
to.” The memo concluded by saying that if the anesthetist, rather than the
anesthesiologist was actually performing the case, then the anesthetist, rather than the
anesthesiologist, should be paid for it. Thus, the time frame within which the 1993
HCFA memorandum could have been thought to have given the anesthesiologists
permission to bill cases as personally performed when they were not immediately
involved in the procedure was quite brief.

Even assuming that, for six months or so, the 1993 HCFA memorandum misled
some defendants into believing that anesthesiologists could leave the operating room
and still represent that they had personally performed the case, this would only rule
out claims in which leaving the operating room was the only respect in which the
anesthesiologist fell short of fulfilling the personal performance standard. The
Association amassed a record that would support the conclusion that the
anesthesiologists regularly fell short of the standard in other respects.

First, whether or not the anesthesiologists disqualified themselves per se from
billing at the personal performance rate by absenting themselves from the operating

-36-

room, various anesthetists
testified by deposition and affidavit
that
the
anesthesiologists did not merely step out of the room, but in fact were often gone for
large periods of time and at crucial times.14 For instance, anesthetist Drew Mathews
testified that in heart operations billed as personally performed, for over ninety
percent of the cases he worked on, the anesthesiologist was present less than fifty
percent of the time. Mathews kept extensive records of anesthesiologists’ presence
during the cases he worked on. Genevieve Crofoot testified that in one-on-one cases,
the anesthesiologists would perform the induction and never come back. Kathleen
Antoline also said that the anesthesiologists “circled 1 [denoting personally
performed] and that was the end of their participation directly with that patient with
me.”

Second, the Association’s witnesses stated that the anesthesiologists billed as
personally performing cases when they were unavailable for emergencies on the case.
Sometimes they were in a completely different part of the hospital during the case or
even left the hospital. Mary Buchanan said anesthesiologists would circle one but
would be unavailable for emergencies or would even leave the building. Kathleen
Antoline said that a quarter of the time when she paged for emergencies, no one
would come. Bart Barry testified that he had a case in which the anesthesiologist
billed one-to-one despite being gone for three hours; when he returned, he had a

14The Association’s brief makes numerous general citations to vast tracts of the
record, sometimes as much as three hundred pages to support a single assertion. Rule
28(e) of the Federal Rules of Appellate Procedure requires page references to the
appendix or parts of the record or transcript to support factual assertions. We have
in the past criticized counsel for violating this rule and have even refused to consider
arguments not supported by proper citations. E.g., Miller v. Citizens Security Group,
Inc., 116 F.3d 343, 346 n.4 (8th Cir. 1997). We consider burying a needle in a
haystack to amount to a violation of Rule 28. In this case we conclude that the
interest of justice requires us to search the record to make appropriate rulings;
however, counsel’s violation of Rule 28 has multiplied the effort and prolonged the
time necessary to prepare this opinion.

-37-

blanket and appeared to have just woken up. Barry said that when someone is
sleeping, the person may not hear a page. One anesthesiologist, John Magdsick,
testified that he would consider himself in personal attendance of a patient as long as
he was anywhere in the hospital. Nothing in the HCFA memorandum could have led
the defendants to think that they could bill a case as personally performed when they
were not present in the operating suite or when they were not available for
emergencies in the case.

Third, many of the cases cited in the complaint involved anesthesiologists
billing for personal performance while doing other duties inconsistent with personal
performance, such as billing a concurrent case. Gayle McKay tesified that
anesthesiologists at Abbott-Northwestern would routinely bill cases as personally
performed when they had left the room to do other billable procedures with other
patients. Other times, they would leave to do post-operative rounds. The Association
also filed copies of records it contends were altered to conceal the fact that a case
done concurrently with another was actually billed as personally performed.
Additionally, the evidence of the anesthesiologists’ protracted absences from the
operating rooms may give rise to the reasonable inference that the anesthesiologists
were actually engaged in other duties while they were gone from the room. The 1996
HCFA memo on this subject assumes that significant absence from the room during
the surgery would indicate performance of other duties that would render personal
performance billing inappropriate.

Defendants have certainly made no showing that they were led to believe that
the kind of conduct outlined above qualified as the personal performance of an
anesthesia case. They were not entitled to summary judgment on the allegations that
they knowingly billed cases as personally performed when their services did not

satisfy HCFA criteria for that designation.

-38-

V.

The district court also entered summary judgment on the merits of the
Association’s claim that the anesthesiologists failed to participate in patients’
“emergence” from anesthesia. As outlined earlier, the Medicare regulations required
that anesthesiologists billing for “medical direction” of anesthetists must satisfy seven
requirements in each case. One of those requirements was personal participation in
“the most demanding procedures in the anesthesia plan, including induction and
emergence.” 42 C. F. R. § 405.552(a)(1)(iii) (1983).

The Association produced witness after witness who said that the
anesthesiologists at the hospitals where they worked routinely left after induction of
anesthesia and did not return for emergence. The district court summarized this
evidence: “[T]he record shows that anesthesiologists routinely left the operating
room before the end of the procedure, often speaking with patients in the recovery
room or by telephone hours or even days after their procedures.”

The Association’s witnesses said that emergence occurs at the end of the
surgery, in the operating room, and involves removing the breathing tube, allowing
the patient to wake up, determining that the patient is stable, and finally taking the
patient to the recovery room and relinquishing him to the care of a non-anesthesia
caregiver. The Association produced letters from the American Society of
Anesthesiologists and an excerpt from an anesthesia textbook, which were all
consistent with this definition of emergence. The Association also presented the
expert report of William Birnie, who worked for the HCFA when it was drafting the
regulations in question. Birnie testified that the regulations were based on advice
from the American Society of Anesthesiologists that emergence was a particularly
demanding part of the anesthesia process and it occured at “the end of the case when
the surgical procedure has been completed and the patient is being prepared by the
anesthesiologist to be turned over to a non-anesthesia provider.”

-39-

Despite this extensive record, the district court held that “the overwhelming
majority of the evidence on the record relating to the medical definition of
[emergence]” supports the defendants’ contention that emergence goes on for days.
Therefore, according to the district court, the anesthesiologists did not need to
participate in the extubation, stabilization, and transfer to the recovery room in order
to fulfill the requirements of medical direction. Apparently the district court chose
to disregard a record full of evidence contrary to its factual conclusion. This is
impermissible on summary judgment, and we must therefore reverse.

VI.

The district court also entered summary judgment against the Association on
its conspiracy claim, holding that there was no evidence that the anesthesiologists and
hospitals had conspired to present false claims. We agree. The Association limits its
attack on this holding to a footnote, and it presents no significant evidence for
reversal. Accordingly, the judgment of the district court is reversed, except insofar
as it enters summary judgment for the defendants on Count III of the Third Amended
Complaint, alleging conspiracy, and on that part of Count V alleging conspiracy. In
those two respects, the summary judgment is affirmed.

A true copy.

Attest:

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

-40-

Miteen v. Genesys Reg’l Med. Ctr.

Miteen v. Genesys Reg’l Med. Ctr.

S T A T E O F M I C H I G A N

C O U R T O F A P P E A L S

UNPUBLISHED
January 24, 2006

No. 262410
Genesee Circuit Court
LC No. 03-076705-NH

WINSTON MITEEN,

v

Plaintiff-Appellee,

Defendant-Appellant,

GENESYS REGIONAL MEDICAL CENTER,

and

JOHN TOLFREE HEALTH SYSTEM CORP,
d/b/a WEST BRANCH REGIONAL MEDICAL
CENTER, DR. ROGER BLACK, DR. STEWART
WEINER, DR. MARK RITTENGER, DR. SCOTT
GARNER, and DR. ALAN IPPOLITO,

Before: Cavanagh, P.J., and Hoekstra and Markey, JJ.

PER CURIAM.

Defendants.

Defendant, Genesys Regional Medical Center (“Genesys”), appeals by leave granted
from an order denying its motion for summary disposition. We reverse.

Defendant argues that the trial court erred by ruling that an issue of material fact exists
with respect to plaintiff’s vicarious liability claim against Genesys based on ostensible agency.
We agree.

This Court reviews a trial court’s decision on a motion for summary disposition de novo.
Spiek v Dep’t of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). A motion brought
under MCR 2.116(C)(10) tests the factual support for a claim. Id. When deciding a motion for
summary disposition, a court must consider the entire record in a light most favorable to the
nonmoving party. Corley v Detroit Bd of Ed, 470 Mich 274, 278; 681 NW2d 342 (2004). The
court properly grants a motion for summary disposition under MCR 2.116(C)(10) when the
proffered evidence fails to establish a genuine issue regarding any material fact and the moving
party is entitled to judgment as a matter of law. Id.

-1-

Plaintiff alleges that Genesys is vicariously liable for the acts of the individually named
doctors. The trial court ruled:

. . . looking at the evidence in the light most favorable to the plaintiff, as I must do
in this motion, I find that there is at the very least a fact question on the issue of
whether or not Mr. Miteen had a reasonable belief. The use of the phrase
reasonable belief is a clear invitation to a jury resolution or a fact finder
resolution. That applies . . . to Genesys . . . .

“Generally speaking, a hospital is not vicariously liable for the negligence of a physician
who is an independent contractor and merely uses the hospital’s facilities to render treatment to
his patients.” Grewe v Mt Clemens General Hosp, 404 Mich 240, 250; 273 NW2d 429 (1978);
see also Chapa v St Mary’s Hospital, 192 Mich App 29, 33-34; 480 NW2d 590 (1991). Here, it
is undisputed that the individual treating physicians were not employees of Genesys.

However, our Supreme Court acknowledged in Wilson v Stilwill, 411 Mich 587, 609-610;

309 NW2d 898 (1981), that a hospital may be liable for the acts of medical personnel who are
the hospital’s ostensible agents when a plaintiff looks to the hospital for treatment and does not
merely view the hospital as the location where his physician will treat him. For plaintiff to prove
his ostensible agency theory, he must show that he dealt with the physician with a reasonable
belief in the physician’s authority as an agent of the hospital, that his belief was generated by an
act or neglect on the part of the hospital, and that he was not guilty of negligence. Zdrojewski v
Murphy, 254 Mich App 50, 66; 657 NW2d 721 (2002). Thus, when an independent doctor-
patient relationship exists before the patient’s admission to a hospital, a finding of ostensible
agency is generally precluded unless the acts or omissions of the hospital override the
impressions created by the preexisting relationship to create a reasonable belief that the doctor is
an agent of the hospital. Id.; Chapa, supra at 33-34.

The record presented to this Court indicates that the only basis for plaintiff’s belief that
the doctors were employees of Genesys was the fact that they were present and working at the
hospital. Nevertheless, plaintiff argues that because he was transferred to Genesys without
knowledge of who his treating physician would be at that hospital, Genesys is liable under an
ostensible agency theory of liability, i.e., plaintiff “looked to” Genesys for treatment. Plaintiff,
however, relies primarily on his counsel’s recitation of the facts at the summary disposition
hearing, with virtually no citation to the lower court record. Plaintiff devotes significant effort
explaining his erroneous belief that the doctors who treated him at Genesys were agents of
Genesys was reasonable. But, his brief cites no evidence supporting the second element of
ostensible agency: that his belief was generated by an act or neglect on the part of the hospital.
Zdrojewski, supra at 66.

Plaintiff’s deposition testimony demonstrates that neither Genesys nor the doctors who

treated him there comported themselves in any manner to create his belief that these treating
physicians were employees of Genesys. To the contrary, when plaintiff was asked during his
deposition about what he recalled about being at Genesys, he candidly testified, “not very
much.” Plaintiff offers no evidence that Genesys’ actions or neglect generated his purported
belief that his treating physicians were employees of Genesys. Therefore, plaintiff’s ostensible
agency theory of vicarious liability fails as a matter of law. “Simply put, defendant, as putative
principal, must have done something that would create in [plaintiff’s] mind the reasonable belief

-2-

that [the individual doctor] was acting on behalf of defendant.” Chapa, supra at 33-34.
“Apparent authority must be traceable to the principal and cannot be established only by the acts
and conduct of the agent.” Alar v Mercy Mem Hosp, 208 Mich App 518, 528; 529 NW2d 318
(1995). The trial court should have granted Genesys summary disposition. MCR 2.116(C)(10).
Because resolution of this issue in Genesys’ favor resolves plaintiff’s action against Genesys, we
need not address the remaining issues Genesys raises on appeal.

We reverse and remand for entry of judgment for defendant. We do not retain

jurisdiction.

/s/ Mark J. Cavanagh
/s/ Joel P. Hoekstra
/s/ Jane E. Markey

-3-

Mikes v. Straus,

Mikes v. Straus,

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

_______________

August Term, 2000

(Argued: May 23, 2001 Decided: December 19, 2001 )

Docket Nos. 00-6269, 00-6270

_______________

PATRICIA S. MIKES, U.S. Gov’t. Ex Rel., Patricia S.
Mikes,

Plaintiff-Appellant-Cross-Appellee,

v.

MARC J. STRAUS, JEFFREY AMBINDER, ELIOT L. FRIEDMAN,


Defendants-Appellees-Cross-Appellants.

_______________

Before: CARDAMONE, F. I. PARKER,
Circuit Judges,
and SPATT*,
District Judge.


_______________


This appeal is taken from a judgment
entered August 7, 2000 in the United States District Court for the Southern
District of New York (McMahon, J.). Plaintiff appeals the district court’s grant
of summary judgment dismissing her complaint under the federal False Claims
Act, which alleged that the defendants requested Medicare reimbursement for
medical procedures performed in a substandard manner. Plaintiff also appeals
the district court’s award of attorneys’ fees to defendants, while defendants
cross-appeal the amount of the award.


Affirmed.


_______________



HAROLD R. BURKE, Greenwich, Connecticut (Holland Kaufmann &
Bartels,
LLC, Greenwich, Connecticut, of counsel), for Plaintiff-Appellant Patricia
S. Mikes, M.D.


BARRY B. CEPELEWICZ, White Plains,
New York (David J. Meiselman,
Arthur
G. Larkin, Meiselman, Denlea, Packman & Eberz, P.C., White Plains, New York,
of counsel), for Defendants-Appellees Marc J. Straus, M.D., Jeffrey M. Ambinder,
M.D. and Eliot L. Friedman, M.D.


GIDEON A. SCHOR, Assistant United
States Attorney, New York, New
York
(Jeffrey Oestericher, Assistant United States Attorney, Mary Jo White, United
States Attorney for the Southern District of New York, New York, New York, of
counsel), for Amicus Curiae United States of America.


JESSIE K. LIU, Washington, D.C.
(Paul M. Smith, Robert M.
Portman,
Jenner & Block, LLC, Washington, D.C., of counsel), for Amici Curiae
American Medical Association, Medical Society of the State of New York, American
Academy of Family Physicians, American Academy of Orthopaedic Surgeons, American
Association of Neurological Surgeons-Congress of Neurological Surgeons, American
College of Chest Physicians, American Society of Cataract and Refractive Surgery,
and Association of American Medical Colleges
.


_______________


Anthony L. DeWitt, Jefferson City,
Missouri (Bartimus,
Frickleton, Robertson
& Obetz, PC, Jefferson City, Missouri, of counsel), filed a brief for
the American Association for Respiratory Care as Amicus Curiae
.


Amy M. Wilken, Washington, D.C.
(Dylan G. Trache, Taxpayers
Against
Fraud, The False Claims Act Legal Center, Washington, D.C.; Bruce J. Terris,
Terris, Pravlik & Millian, LLP, Washington, D.C., of counsel), filed
a brief for Taxpayers Against Fraud, The False Claims Act Legal Center as Amicus
Curiae
.


_______________

CARDAMONE, Circuit Judge:

On this appeal we review a complaint asserting
violations of the False Claims Act (Act), 31 U.S.C. §3729 et seq.
(1994), brought by a plaintiff employee against her former employers, who are
health care providers. The appeal raises issues of first impression in this
Circuit concerning the applicability of medical standards of care to the Act.

Congress enacted the False Claims Act after
disclosure of widespread fraud during the War-Between-The-States revealed that
the union government had been billed for nonexistent or worthless goods, had
been charged exorbitant prices, and had its treasury plundered by profiteering
defense contractors. See United States v. McNinch, 356 U.S. 595,
599 (1958). In 1986 the Act was substantially amended to combat fraud in the
fields of defense and health care. See S. Rep. No. 99-345, at 2-4, 8
(1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5267-73. As of February
2000 over half of the $3.5 billion recovered since that amendment derived from
cases alleging fraud against the Department of Health and Human Services. See
Shelley R. Slade & Thomas A. Colthurst, Health-Care Fraud and the False
Claims Act: The Supreme Court Supports a Federal Weapon
, 10 Bus. L. Today,
Sept.-Oct. 2000, at 24, 27.

The Act contains a qui tam
provision designed to encourage private individuals to file suit by offering
them a percentage of any money recovered. Those persons bringing a qui
tam suit are known colloquially as whistle-blowers. The plaintiff in
this case purports to blow the whistle on those practices of her employers she
believes violate the Medicare statute, payment for which would defraud the government.
Regardless of whether such suit is successful or unsuccessful (and here it is
unsuccessful), a tale-bearer stands out, and risks being thought as bad as those
alleged to be the tale-makers.

BACKGROUND

A. Facts

In 1991 defendants Dr. Marc J. Straus,
Dr. Jeffrey Ambinder and Dr. Eliot L. Friedman, physicians specializing in oncology
and hematology, formed a partnership called Pulmonary and Critical Care Associates
to extend their practice to include pulmonology, the branch of medicine covering
the lungs and related breathing functions. In July of that year defendants hired
plaintiff Dr. Patricia S. Mikes, a board-certified pulmonologist, to provide
pulmonary and critical care services in defendants’ offices in Westchester and
Putnam Counties, New York. In September 1991 Mikes discussed with Dr. Straus
her concerns relating to spirometry tests being performed in defendants’ offices.
Three months later, plaintiff was fired.

The parties dispute the reason for Mikes’
termination. Plaintiff says she was fired because she questioned how defendants
conducted their medical practice. Defendants declare that Mikes’ employment
agreement provided she was terminable-at-will, and that plaintiff had difficulty
procuring privileges at area hospitals.

On April 16, 1992 Mikes commenced the instant
litigation against defendants in the United States District Court for the Southern
District of New York, asserting not only causes of action for retaliatory discharge
and unlawfully withheld wages, but also a qui tam suit under the
False Claims Act. She served the complaint on the United States Attorney who,
on April 19, 1993, notified the district court that it declined its statutory
right to substitute for Mikes in the prosecution of this litigation. See
31 U.S.C. §3730(b)(2), (b)(4)(B).

B. Prior Proceedings

Plaintiff’s qui tam cause
of action under the Act alleged that defendants had submitted false reimbursement
requests to the federal government for spirometry services. Plaintiff contended
that defendants’ failure to calibrate the spirometers rendered the results so
unreliable as to be "false" under the Act. In addition, Mikes averred
that spirometry is an eligible service under the Medicare statute, and that
defendants submitted Medicare claims for reimbursement during the period relevant
to this dispute ­- now said to be 1034 claims from 1986 through 1993 ­-
for a total Medicare payout of $28,922.89.

After the government declined to take over
as plaintiff, Mikes served defendants with her complaint on December 22, 1993.
District Court Judge Vincent L. Broderick, before whom the complaint was then
pending, dismissed it in May 1994 finding fraud had not been pleaded with particularity
as required by Fed. R. Civ. P. 9(b). See United States ex rel. Mikes
v. Straus
, 853 F. Supp. 115, 118 (S.D.N.Y. 1994).

Mikes then filed an amended complaint repeating
the spirometry, retaliation and withholding wages claims, and also asserting
that defendants improperly received Medicare reimbursement for referrals to
Magnetic Resonance Imaging (MRI) facilities in which they held a financial interest.
It was Mikes’ contention that receipt of these referral fees violated the anti-kickback
provision of the Medicare statute, 42 U.S.C. §1320a-7b(b)(1) (1994), and
thus defendants’ claims for reimbursement for the MRIs also violated the False
Claims Act. District Court Judge William C. Conner, now assigned to the case,
denied a motion to dismiss the False Claims Act causes of action, and ordered
arbitration of the employment-based claims. See United States ex rel.
Mikes v. Straus
, 889 F. Supp. 746, 751-57 (S.D.N.Y. 1995).

Mikes then filed in March 1996 a second
amended complaint that eliminated the claim for improperly withheld wages, and
on July 20, 1999 filed a three count supplemental complaint ­- the pleading
relevant to the present appeal ­- containing only the spirometry claims
brought under the False Claims Act. The case was again reassigned, this time
to District Court Judge Colleen McMahon.

Defendants moved for summary judgment on
August 13, 1999, and the government again chose not to intervene. In granting
defendants’ motion on November 18, 1999, the district court ruled that submitting
a claim for a service that was not provided in accordance with the relevant
standard of care does not make that claim false or fraudulent for False Claims
Act purposes. United States ex rel. Mikes v. Straus, 84 F. Supp. 2d 427,
433 (S.D.N.Y. 1999). Defendants’ submission of claims for reimbursement, the
court continued, did not implicitly certify that their performance of spirometry
conformed to any qualitative standard. See id. at 436-38. And,
it concluded, that even were the Medicare claims objectively false, plaintiff
had not shown defendants submitted the claims with the requisite scienter. See
id. at 438-39. Plaintiff’s motion for reconsideration was denied. United
States ex rel. Mikes v. Straus
, 78 F. Supp. 2d 223, 224 (S.D.N.Y. 1999).

After plaintiff’s complaint had been dismissed,
defendants asked for attorneys’ fees pursuant to §3730(d)(4) of the Act.
The district court conducted a two-day bench trial and found plaintiff’s withdrawn
MRI claims were vexatious, but that her spirometry claims were not. See
United States ex rel. Mikes v. Straus, 98 F. Supp. 2d 517, 529 (S.D.N.Y.
2000). It held that defendants Ambinder and Friedman were entitled to either
two-thirds of any attorneys’ fees attributable solely to defending the MRI claims
or a default fee of $5000. See id. at 530.

Despite defendants’ declaration that they
had expended $437,000 defending the action, the district court agreed with the
magistrate judge ­- to whom the attorneys’ fees issue had been referred
­- that defendants’ records did not sufficiently delineate the time spent
between the MRI and spirometry causes of action. Judge McMahon accordingly awarded
defendants only the default sum of $5000. From this disposition, plaintiff appeals
the grant of summary judgment and the award of attorneys’ fees for defendants.
Defendants cross-appeal with respect to the amount of the attorneys’ fees award.
1 We affirm.

C. Spirometry

Before turning to a discussion of the law,
it will be helpful to define spirometry ­- a subject that lies at the heart
of this case ­- and plaintiff’s allegations regarding defendants’ performance
of this diagnostic test. Spirometry is an easy-to-perform pulmonary function
test used by doctors to detect both obstructive (such as asthma and emphysema)
and restrictive (such as pulmonary fibrosis) lung diseases. The type of spirometers
used by defendants measures the pressure change when a patient blows into a
mouthpiece, thereby providing the doctor with on-the-spot analysis of the volume
and speed by which patients can exhale. The spirometry equipment consists of
readily transportable lightweight machines, and defendants apparently used at
least one in each of their several offices.

Plaintiff’s expert stated that spirometers
are susceptible to inaccuracy through time and usage because they become clogged,
causing false readings. Erroneous measurements may also arise from damage to
the instrument through cleaning or disturbance during transport, or from variations
in barometric pressure, temperature or humidity. Mikes claims that guidelines
first published in 1979 and later updated in 1987 and 1994 by the American Thoracic
Society (ATS guidelines), a division of the American Lung Association, set out
the generally accepted standards for spirometry. To ensure accuracy, these guidelines
recommend daily calibration of spirometers by use of a three liter calibration
syringe, the performance of three successive trials during test administration
and the appropriate training of spirometer technicians. In support of her contention
that the ATS guidelines are the medical standard for spirometry, Mikes notes
they are incorporated by reference in the federal Longshore and Harbor Workers’
Compensation Act, 33 U.S.C. §902(10) (1994), and included in regulations
promulgated pursuant to the Social Security Act, see 20 C.F.R. pt. 404,
subpt. P, app. 1, pt. A, §3.00(E) (2001), the Radiation Exposure Compensation
Act, see 28 C.F.R. §79.36(d)(1)(ii)(B)(1) (2001), and the
Federal Mine Safety and Health Act, 52 Fed. Reg. 34,460, 34,551 (Sept. 11, 1987).

Mikes maintains further that defendants’
performance of spirometry did not conform to the ATS guidelines and thus would
yield inherently unreliable data. She argues that defendants allowed medical
assistants to perform spirometry tests when they were not trained in its proper
administration. Plaintiff states she personally observed the medical assistants
fail to calibrate the spirometer daily and that she was informed the assistants
could not recall the last time the machine had been calibrated. Moreover, defendants
did not possess a three liter calibration syringe, nor did the assistants properly
instruct the patients during the administration of the test or perform three
successive tests.

Defendants insist that after plaintiff
raised her concerns regarding the spirometer and its use in their practice,
they told her to review exam results for inaccuracy, and to train the medical
assistants in proper spirometric administration. Dr. Straus reports that plaintiff
did not apprise the practice of any false readings in response to this directive,
nor did she supervise the medical assistants. With this factual background,
we turn to the law.

DISCUSSION

I Elements of Plaintiff’s False Claims
Act Causes of Action

Mikes challenges the district court’s grant
of summary judgment to defendants that resulted in the dismissal of her False
Claims Act causes of action. Summary judgment is a remedy we review de
novo, see Hamilton Bank, N.A. v. Kookmin Bank, 245 F.3d
82, 89 (2d Cir. 2001), affirming only if we conclude "there is no genuine
issue as to any material fact and that the moving party is entitled to a judgment
as a matter of law," Fed R. Civ. P. 56(c); see also Anderson
v. Liberty Lobby, Inc.
, 477 U.S. 242, 247-49 (1986).

Liability under the False Claims Act occurs
when a person

(1) knowingly presents, or causes
to be presented, to an officer or employee of the United States Government …
a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or
causes to be made or used, a false record or statement to get a false or fraudulent
claim paid or approved by the Government; [or]

(3) conspires to defraud the Government
by getting a false or fraudulent claim allowed or paid.


31 U.S.C. §3729(a). Plaintiff brought
suit under each of these subdivisions, but since our analysis applies equally
to all three, we limit discussion primarily to the first. As the language of
that subdivision makes clear, to impose liability under the Act Mikes must show
that defendants (1) made a claim, (2) to the United States government, (3) that
is false or fraudulent, (4) knowing of its falsity, and (5) seeking payment
from the federal treasury. Because plaintiff’s claims fail on other grounds,
we need not decide whether the Act contains another element of proof, namely
a showing that the United States sustained damages. Cf. Harrison v.
Westinghouse Savannah River Co.
, 176 F.3d 776, 785 n.7 (4th Cir. 1999) (noting
split of authority on whether False Claims Act contains damages element). We
set out briefly the requirements of the above five elements.

The Act expansively defines the term "claim"
to cover "any request or demand, whether under a contract or otherwise,
for money or property … if the United States Government provides any portion
of the money or property which is requested or demanded." 31 U.S.C. §3729(c).
As required by the Medicare implementing regulations, see 42 C.F.R. §424.32
(2000), defendants submitted Medicare reimbursement claims for spirometry on
form "HCFA-1500" or an electronic equivalent. Each submission of the
HCFA-1500 form meets the first two elements of a False Claims Act cause of action
in that it qualifies as a claim made to the United States government. See
United States v. Krizek, 111 F.3d 934, 940 (D.C. Cir. 1997) (holding
that number of claims under Act based upon submission of HCFA-1500 forms).

Regarding the third element, the term "false
or fraudulent" is not defined in the Act. A common definition of "fraud"
is "an intentional misrepresentation, concealment, or nondisclosure for
the purpose of inducing another in reliance upon it to part with some valuable
thing belonging to him or to surrender a legal right." Webster’s Third
New International Dictionary
904 (1981). "False" can mean "not
true," "deceitful," or "tending to mislead." Id.
at 819. The juxtaposition of the word "false" with the word "fraudulent,"
plus the meanings of the words comprising the phrase "false claim,"
suggest an improper claim is aimed at extracting money the government otherwise
would not have paid. See Clarence T. Kipps, Jr. et al.,
Materiality as an Element of Liability Under the False Claims Act, A.B.A.
Center for Continuing Legal Educ. Nat’l Inst. (1998), WL N98CFCB ABA-LGLED B-37,
B-46 ("[A] claim cannot be determined to be true or false without consideration
of whether the decisionmaker should pay the claim ­- that is, a claim is
‘false’ only if the Government or other customer would not pay the claim if
the facts about the misconduct alleged to have occurred were known.").

This notion also applies to subdivisions
(2) & (3) of 31 U.S.C. §3729(a). The former prohibits a party from
knowingly using or making "a false record or statement to get a false
or fraudulent claim paid or approved
by the Government," id.
§3729(a)(2) (emphasis added), while the latter prohibits conspiring "to
defraud the Government by getting a false or fraudulent claim allowed or
paid
," id. §3729(a)(3) (emphasis added). The language of
these provisions plainly links the wrongful activity to the government’s decision
to pay.

On this appeal, the parties’ dispute whether
defendants’ Medicare claims rise to the level of being false or fraudulent.
They disagree, in addition, as to the fourth element ­- i.e., whether
any false or fraudulent claims were "knowingly" made. The Act defines
"knowingly" as either: (1) possessing actual knowledge; (2) acting
in deliberate ignorance of falsity; or (3) acting in reckless disregard of falsity.
See id. §3729(b).

The fifth element of the Act further supports
the conclusion that the statute reaches only those claims with the potential
wrongfully to cause the government to disburse money. The Senate Report accompanying
the 1986 amendments to the Act states that "[t]he purpose of [the amendments]
is to enhance the Government’s ability to recover losses sustained as a result
of fraud against the Government." S. Rep. No. 99-345, at 1, reprinted
in
1986 U.S.C.C.A.N. 5266, 5266. The Supreme Court has further indicated
that the Act’s primary purpose is to indemnify the government ­- through
its restitutionary penalty provisions ­- against losses caused by a defendant’s
fraud. See United States ex rel. Marcus v. Hess, 317 U.S. 537,
549, 551-52 (1943). With these understandings of the Act’s language in mind,
we turn to plaintiff’s contentions.

II "Legally False" Certification
Theory

The thrust of plaintiff’s qui tam
suit is that the submission of Medicare reimbursement claims for spirometry
procedures not performed in accordance with the relevant standard of care, that
is, the ATS Guidelines ­- violates the False Claims Act. Mikes relies principally
on the "certification theory" of liability, which is predicated upon
a false representation of compliance with a federal statute or regulation or
a prescribed contractual term. See Lisa Michelle Phelps, Note, Calling
off the Bounty Hunters: Discrediting the Use of Alleged Anti-Kickback Violations
to Support Civil False Claims Actions
, 51 Vand. L. Rev. 1003, 1014-15 (1998).
This theory has also been called "legally false" certification. See
Robert Fabrikant & Glenn E. Solomon, Application of the Federal False
Claims Act to Regulatory Compliance Issues in the Health Care Industry
,
51 Ala. L. Rev. 105, 111-12 (1999). It differs from "factually false"
certification, which involves an incorrect description of goods or services
provided or a request for reimbursement for goods or services never provided.
Id.

Although the False Claims Act is "not
designed to reach every kind of fraud practiced on the Government," United
States v. McNinch
, 356 U.S. at 599, it was intended to embrace at least
some claims that suffer from legal falsehood. Thus, "a false claim may
take many forms, the most common being a claim for goods or services not provided,
or provided in violation of contract terms, specification, statute, or regulation."
S. Rep. No. 99-345, at 9, reprinted in 1986 U.S.C.C.A.N. 5266, 5274 (emphasis
added).

Just as clearly, a claim for reimbursement
made to the government is not legally false simply because the particular service
furnished failed to comply with the mandates of a statute, regulation or contractual
term that is only tangential to the service for which reimbursement is sought.
Since the Act is restitutionary and aimed at retrieving ill-begotten funds,
it would be anomalous to find liability when the alleged noncompliance would
not have influenced the government’s decision to pay. Accordingly, while the
Act is "intended to reach all types of fraud, without qualification, that
might result in financial loss to the Government," United States v.
Neifert-White Co.
, 390 U.S. 228, 232 (1968), it does not encompass those
instances of regulatory noncompliance that are irrelevant to the government’s
disbursement decisions.

We join the Fourth, Fifth, Ninth, and District
of Columbia Circuits in ruling that a claim under the Act is legally false only
where a party certifies compliance with a statute or regulation as a condition
to governmental payment. See United States ex rel. Siewick v. Jamieson
Sci. & Eng’g, Inc.
, 214 F.3d 1372, 1376 (D.C. Cir. 2000) ("[A]
false certification of compliance with a statute or regulation cannot serve
as the basis for a qui tam action under the [False Claims Act]
unless payment is conditioned on that certification."); Harrison,
176 F.3d at 786-87, 793; United States ex rel. Thompson v. Columbia/HCA Healthcare
Corp.
, 125 F.3d 899, 902 (5th Cir. 1997); United States ex rel. Hopper
v. Anton
, 91 F.3d 1261, 1266-67 (9th Cir. 1996).

We add that although materiality is a related
concept, our holding is distinct from a requirement imposed by some courts that
a false statement or claim must be material to the government’s funding decision.
See, e.g., Harrison, 176 F.3d at 785. A materiality requirement
holds that only a subset of admittedly false claims is subject to False Claims
Act liability. Cf. United States ex rel. Cantekin v. Univ. of Pittsburgh,
192 F.3d 402, 415 (3d Cir. 1999), cert. denied, 531 U.S. 880 (2000) (finding
that Hopper held that not every regulatory violation is a "knowingly
false statement" and distinguishing this holding from a materiality requirement).
We rule simply that not all instances of regulatory noncompliance will cause
a claim to become false. We need not and do not address whether the Act contains
a separate materiality requirement.

A. Express False Certification

We analyze first plaintiff’s argument that
defendants’ claims contained an express false certification. An expressly false
claim is, as the term suggests, a claim that falsely certifies compliance with
a particular statute, regulation or contractual term, where compliance is a
prerequisite to payment.

Plaintiff contends that by submitting claims
for Medicare reimbursement on HCFA-1500 forms or their electronic equivalent,
defendants expressly certified that they would comply with the terms set out
on the form. Form HCFA-1500 expressly says: "I certify that the services
shown on this form were medically indicated and necessary for the health of
the patient and were personally furnished by me or were furnished incident to
my professional service by my employee under my immediate personal supervision."
Both the form, which further provides "No Part B Medicare benefits may
be paid unless this form is received as required by existing law and regulations,"
and the Medicare Regulations, see 42 C.F.R. §424.32, state that
certification is a precondition to Medicare reimbursement. We agree that defendants
certified they would comply with the terms on the form and that such compliance
was a precondition of governmental payment. Cf. United States ex rel.
Piacentile v. Wolk
, Civ.A.No.93-5773, 1995 WL 20833, at *2-3 (E.D. Pa. Jan.
17, 1995) (finding False Claims Act violation where defendant altered Medicare
Certificates of Medical Necessity without doctor’s authorization, because the
forms contained a certification that the claims represented the physician’s
judgment).

Yet plaintiff’s objections to defendants’
spirometry tests do not implicate the standard set out in the HCFA-1500 form
that the procedure was dictated by "medical necessity." The term "medical
necessity" does not impart a qualitative element mandating a particular
standard of medical care, and Mikes does not point to any legal authority requiring
us to read such a mandate into the form. Medical necessity ordinarily indicates
the level ­- not the quality ­- of the service. For example, the requisite
level of medical necessity may not be met where a party contends that a particular
procedure was deleterious or performed solely for profit, see United
States ex rel. Kneepkins v. Gambro Healthcare, Inc.
, 115 F. Supp. 2d 35,
41-42 (D. Mass. 2000) (procedures chosen solely for defendants’ economic gain
are not "medically necessary" as required by claim submission form),
or where a party seeks reimbursement for a procedure that is not traditionally
covered, see Rush v. Parham, 625 F.2d 1150, 1156 (5th Cir. 1980)
(upholding state’s exclusion of experimental medical treatment from definition
of "medically necessary" services under Medicaid).

This approach to the phrase "medically
necessary" ­- as applying to ex ante coverage decisions
but not ex post critiques of how providers executed a procedure
­- would also conform to our understanding of the phrase "reasonable
and necessary" as used in the Medicare statute, 42 U.S.C. §1395y(a)(1)(A)
(1994) (disallowing payment for items or services not reasonable and necessary
for diagnosis or treatment). See New York ex rel. Bodnar v. Sec’y
of Health & Human Servs.
, 903 F.2d 122, 125 (2d Cir. 1990) (acknowledging
Secretary’s authority, in determining whether procedure is "reasonable
and necessary," to consider type of service provided and whether service
was provided in appropriate, cost-effective setting); Goodman v. Sullivan,
891 F.2d 449, 450-51 (2d Cir. 1989) (per curiam) (affirming exclusion of experimental
procedures from Medicare coverage pursuant to requirement that procedures be
"reasonable and necessary"); see also Friedrich v.
Sec’y of Health & Human Servs.
, 894 F.2d 829, 831 (6th Cir. 1990) (noting
that the Health Care Financing Administration, when determining whether a procedure
is "reasonable and necessary," considers the procedure’s safety, effectiveness,
and acceptance by medical community).

Moreover, the section of the Medicare statute
setting forth conditions of participation has separate provisions governing
the medical necessity of a given procedure and its quality. Compare 42
U.S.C. §1320c-5(a)(1) (1994) (practitioner shall assure that the service
"will be provided economically and only when, and to the extent, medically
necessary"), with id. §1320c-5(a)(2) (1994) (practitioner
shall assure that the service "will be of a quality which meets professionally
recognized standards of health care"). This statutory design supports the
conclusion that the medical necessity for a procedure and its quality are distinct
considerations.

Inasmuch as Mikes challenges only the quality
of defendants’ spirometry tests and not the decisions to order this procedure
for patients, she fails to support her contention that the tests were not medically
necessary. Nor has she proffered evidence to support an allegation that the
defendants did not "personally furnish" the spirometry tests as required
by the HCFA-1500 form. The form allows for reimbursement when a procedure is
"rendered under the physician’s immediate personal supervision by his/her
employee," which covers the medical assistants’ performance of spirometry
at defendants’ direction. Thus, plaintiff’s cause of action insofar as it is
founded on express false certification is without merit.

B. Implied False Certification

1. Viability of Implied Certification
Theory

Plaintiff insists that defendants’ submissions
to the government for payment were impliedly false certifications. An implied
false certification claim is based on the notion that the act of submitting
a claim for reimbursement itself implies compliance with governing federal rules
that are a precondition to payment. See Phelps, supra, at 1015.
Foundational support for the implied false certification theory may be found
in Congress’ expressly stated purpose that the Act include at least some kinds
of legally false claims, see S. Rep. No. 99-345, at 9, reprinted in
1986 U.S.C.C.A.N. 5266, 5274, and in the Supreme Court’s admonition that the
Act intends to reach all forms of fraud that might cause financial loss to the
government, see Neifert-White Co., 390 U.S. at 232.

The implied certification theory was applied
in Ab-Tech Construction, Inc. v. United States, 31 Fed. Cl. 429 (Fed.
Cl. 1994), aff’d, 57 F.3d 1084 (Fed. Cir. 1995) (unpublished table decision).
The Court of Federal Claims held that the defendants’ submission of payment
vouchers, although containing no express representation, implicitly certified
their continued adherence to the eligibility requirements of a federal small
business statutory program. See id. at 434. The failure by defendants
to honor the terms of this certification rendered their claims for payment false,
resulting in False Claims Act liability. See id. at 433-34.

But caution should be exercised not to
read this theory expansively and out of context. The Ab-Tech rationale,
for example, does not fit comfortably into the health care context because the
False Claims Act was not designed for use as a blunt instrument to enforce compliance
with all medical regulations ­- but rather only those regulations that
are a precondition to payment ­- and to construe the impliedly false certification
theory in an expansive fashion would improperly broaden the Act’s reach. Moreover,
a limited application of implied certification in the health care field reconciles,
on the one hand, the need to enforce the Medicare statute with, on the other
hand, the active role actors outside the federal government play in assuring
that appropriate standards of medical care are met. Interests of federalism
counsel that "the regulation of health and safety matters is primarily,
and historically, a matter of local concern." Hillsborough County v.
Automated Med. Labs., Inc.
, 471 U.S. 707, 719 (1985); accord Medtronic,
Inc. v. Lohr
, 518 U.S. 470, 475 (1996).

Moreover, permitting qui tam
plaintiffs to assert that defendants’ quality of care failed to meet medical
standards would promote federalization of medical malpractice, as the federal
government or the qui tam relator would replace the aggrieved
patient as plaintiff. See Patrick A. Scheiderer, Note, Medical Malpractice
as a Basis for a False Claims Action?
, 33 Ind. L. Rev. 1077, 1098-99 (2000).
Beyond that, we observe that the courts are not the best forum to resolve medical
issues concerning levels of care. State, local or private medical agencies,
boards and societies are better suited to monitor quality of care issues. See
Fabrikant & Solomon, supra, at 156-57.

For these reasons, we think a medical provider
should be found to have implicitly certified compliance with a particular rule
as a condition of reimbursement in limited circumstances. Specifically, implied
false certification is appropriately applied only when the underlying statute
or regulation upon which the plaintiff relies expressly states the provider
must comply in order to be paid. See Siewick, 214 F.3d at 1376
(holding that court will "infer certification from silence" only when
"certification was a prerequisite to the government action sought").
Liability under the Act may properly be found therefore when a defendant submits
a claim for reimbursement while knowing ­- as that term is defined by the
Act, see 31 U.S.C. §3729(b) ­- that payment expressly is precluded
because of some noncompliance by the defendant.

2. Plaintiff’s Allegations Under the
Implied Theory

Mikes asserts that compliance with §§1395y(a)(1)(A)
and 1320c-5(a) of the Medicare statute is a precondition to a request for federal
funds and that submission of a HCFA-1500 form attests by implication to the
providers’ compliance with both of those provisions.

a. §1395y(a)(1)(A). Section
1395y(a)(1)(A) of the Medicare statute states that "no payment may be made
under [the Medicare statute] for any expenses incurred for items or services
which … are not reasonable and necessary for the diagnosis or treatment
of illness or injury or to improve the functioning of a malformed body member."
42 U.S.C. §1395y(a)(1)(A) (emphasis added). Because this section contains
an express condition of payment ­- that is, "no payment may be made"
­- it explicitly links each Medicare payment to the requirement
that the particular item or service be "reasonable and necessary."
The Supreme Court has noted that this section precludes the government from
reimbursing a Medicare provider who fails to comply. See Heckler v.
Ringer
, 466 U.S. 602, 605 (1984); see also United Seniors
Ass’n v. Shalala
, 182 F.3d 965, 967 (D.C. Cir. 1999) ("If a service
is deemed not to have been reasonable and necessary, Medicare will not make
payment and the doctor generally is prohibited from charging the patient.");
Mount Sinai Hosp., Inc. v. Weinberger, 517 F.2d 329, 334 (5th Cir. 1975)
(explaining that §1395y controls whether particular services are covered
by Medicare). Since §1395y(a)(1)(A) expressly prohibits payment
if a provider fails to comply with its terms, defendants’ submission of the
claim forms implicitly certifies compliance with its provision.

Yet, Mikes’ insistence that defendants’
performance of spirometry was not reasonable and necessary is without support.
As set forth in our discussion of express certification, the requirement that
a service be reasonable and necessary generally pertains to the selection of
the particular procedure and not to its performance. See Goodman,
891 F.2d at 450-51. While such factors as the effectiveness and medical acceptance
of a given procedure might determine whether it is reasonable and necessary,
the failure of the procedure to conform to a particular standard of care ordinarily
will not. See id. at 450 (noting that under §1395(y)(a)(1)(A)
the Secretary of Health and Human Services prohibits "payment of benefits
for any experimental, investigational, or unproven treatment or diagnostic method
not yet generally accepted in the medical profession"). Since plaintiff
contends only that defendants’ performance of spirometry was qualitatively
deficient, her allegations that defendants falsely certified compliance with
§1395y(a)(1)(A) may not succeed.

b. §1320c-5(a). Plaintiff’s
implied false certification claims rely more heavily upon §1320c-5(a).
That section does mandate a qualitative standard of care in that it provides

It shall be the obligation of
any health care practitioner … who provides health care services for which
payment may be made … to assure, to the extent of his authority that services
or items ordered or provided by such practitioner …

(1) will be provided economically
and only when, and to the extent, medically necessary;

(2) will be of a quality which
meets professionally recognized standards of health care
; and

(3) will be supported by evidence
of medical necessity and quality … as may reasonably be required by a reviewing
peer review organization in the exercise of its duties and responsibilities.



42 U.S.C. §1320c-5(a) (emphasis added).

Mikes avers that the ATS guidelines comprise
a "professionally recognized standard of health care" for spirometry,
and that defendants’ failure to conform to those guidelines violates the Medicare
statute. She believes defendants, by submitting HCFA-1500 forms for spirometry
tests that did not comply with the ATS guidelines, engaged in implied false
certification. But plaintiff’s allegations cannot establish liability under
the False Claims Act because ­- unlike §1395y(a)(1)(A) ­- the
Medicare statute does not explicitly condition payment upon compliance with
§1320c-5(a).

Instead, §1320c-5(a) simply states
that "[i]t shall be the obligation" of a practitioner who provides
a medical service "for which payment may be made … to assure" compliance
with the section. Hence, it may be seen that §1320c-5(a) acts prospectively,
setting forth obligations for a provider to be eligible to participate in the
Medicare program. See Fischer v. United States, 529 U.S. 667,
672 (2000) (describing §1320c-5(a) as a statutory obligation to qualify
to participate in the Medicare program); see also Corkill v.
Shalala
, 109 F.3d 1348, 1350 (9th Cir. 1997) ("In order to qualify
for reimbursement under the Medicare program, a physician must comply with three
statutory requirements [including §1320c-5(a)].").

The structure of the statute further informs
us that §1320c-5(a) establishes conditions of participation, rather than
prerequisites to receiving reimbursement. The statute empowers peer review organizations
to monitor providers’ compliance with §1320c-5(a). See 42 U.S.C.
§1320c-3(a) (1994). If a peer review organization determines that a provider
has "failed in a substantial number of cases" to comply with the requirements
of §1320c-5(a) or that the provider has "grossly and flagrantly violated"
the section, the organization may ­- after reasonable notice and an opportunity
for corrective action ­- recommend sanctions. See id. §1320c-5(b)(1)
(1994 & Supp. V 1999). If the Secretary agrees that sanctions should be
imposed, and further finds the provider unwilling or unable substantially to
comply with its obligations, the Secretary may exclude the provider from the
Medicare program. See id.; see also Doyle v.
Sec’y of Health & Human Servs.
, 848 F.2d 296, 298 (1st Cir. 1988) (explaining
statutory and regulatory procedures).

The fact that §1320c-5(b) permits
sanctions for a failure to maintain an appropriate standard of care only where
a dereliction occurred in "a substantial number of cases" or a violation
was especially "gross[] and flagrant[]" makes it evident that the
section is directed at the provider’s continued eligibility in the Medicare
program, rather than any individual incident of noncompliance. See Fabrikant
& Solomon, supra, at 122-23 (arguing that quality of care standards
are conditions of participation in the Medicare program and not conditions of
payment). This conclusion is reinforced by the ultimate sanction provided by
§1320c-5(b)(1): exclusion of the provider from Medicare eligibility. Further,
the section explicitly provides that the Secretary may authorize an alternate
remedy ­- repayment of the cost of the noncompliant service to the United
States ­- "as a condition to the continued eligibility" of the
health care provider in the Medicare program. 42 U.S.C. §1320c-5(b)(3).
Accordingly, §1320c-5(a) is quite plainly a condition of participation
in the Medicare program.

Since §1320c-5(a) does not expressly
condition payment on compliance with its terms, defendants’ certifications
on the HCFA-1500 forms are not legally false. Consequently, defendants did not
submit impliedly false claims by requesting reimbursement for spirometry tests
that allegedly were not performed according to the recognized standards of health
care.

Finally, our holding ­- that in submitting
a Medicare reimbursement form, a defendant implicitly certifies compliance with
§1395y(a)(1)(A), but not §1320c-5(a) ­- comports with Congress’
purpose as discussed earlier in this opinion. Section 1395y(a)(1)(A) mandates
that a provider’s choice of procedures be "reasonable and necessary";
it does not obligate federal courts to step outside their primary area of competence
and apply a qualitative standard measuring the efficacy of those procedures.
The quality of care standard of §1320c-5(a) is best enforced by those professionals
most versed in the nuances of providing adequate health care.

III Worthless Services Claim

The government in its amicus brief
and plaintiff at oral argument argue that the district court erred by not considering
whether the defendants’ submission of Medicare claims for substandard spirometry
essentially constituted requests for the reimbursement of worthless services.
An allegation that defendants violated the Act by submitting claims for worthless
services is not predicated upon the false certification theory. Instead, a worthless
services claim asserts that the knowing request of federal reimbursement for
a procedure with no medical value violates the Act irrespective of any certification.

The Ninth Circuit’s recent decision in
United States ex rel. Lee v. Smithkline Beecham, Inc., 245 F.3d 1048
(9th Cir. 2001), is the leading case on worthless services claims in the health
care arena. In Lee, the relator alleged that defendant, an operator of
regional clinical laboratories, falsified laboratory test data when test results
fell outside the acceptable standard of error. Id. at 1050. The Ninth
Circuit held that the false certification theory addressed in Hopper,
91 F.3d 1261, was only one form of action under the Act, and that the district
court should have considered the distinct and separate worthless services claim.
Lee, 245 F.3d at 1053. As the Ninth Circuit explained, "[i]n an
appropriate case, knowingly billing for worthless services or recklessly doing
so with deliberate ignorance may be actionable under §3729 [of the False
Claims Act], regardless of any false certification conduct." Id.

We agree that a worthless services claim
is a distinct claim under the Act. It is effectively derivative of an allegation
that a claim is factually false because it seeks reimbursement for a service
not provided. See Fabrikant & Solomon, supra, at 111-12. In
a worthless services claim, the performance of the service is so deficient that
for all practical purposes it is the equivalent of no performance at all.

We nevertheless find no liability in the
instant case because plaintiff makes no showing that defendants knowingly ­-
as the Act defines that term ­- submitted a claim for the reimbursement
of worthless services. We have adopted the Ninth Circuit’s standard that the
"requisite intent is the knowing presentation of what is known to be false"
as opposed to negligence or innocent mistake. Hagood v. Sonoma County Water
Agency
, 81 F.3d 1465, 1478 (9th Cir. 1996) (quoted in United States ex
rel. Kreindler & Kreindler v. United Techs. Corp.
, 985 F.2d 1148, 1156
(2d Cir. 1993)).

Plaintiff fails to substantiate that defendants
knew their Medicare claims for reimbursement were false. At best, plaintiff
urges that defendants submitted Medicare claims knowing they did not conform
to the ATS guidelines. This allegation alone fails to satisfy the standard for
a worthless services claim. The notion of presenting a claim known to be false
does not mean the claim is incorrect as a matter of proper accounting, but rather
means it is a lie. See id. Defendants have presented such overwhelming
evidence of their genuine belief that their use of spirometry had medical value,
we conclude as a matter of law they did not submit their claims with the requisite
scienter.

Initially, the defendants claim to have
relied upon the spirometers’ instruction manual which ­- contrary to the
ATS guidelines ­- indicates that daily calibration is not required. Beside
the heading "calibration," the manual provides that "[t]he equipment
is properly calibrated at the time of shipment so that no calibration is required
except for periodical checks." Norman Levine, the defendants’ former chief
medical assistant and a non-party to this action, testified that he reviewed
the spirometers’ instruction manual at the time of purchase. A separate product
information booklet states without qualification that the spirometer conforms
to the ATS guidelines and controlling federal regulations. The booklet identifies
a three liter calibration syringe as only an "optional item."

Moreover, Levine testified that the individual
spirometers were sent out for periodic servicing, at which time the practice
would use loaner machines. Defendant Friedman confirmed that on occasion he
would direct Levine to send a spirometer out for recalibration. Levine also
averred that he received practical training on the operation of the machine
from the sales technicians who sold the spirometers. Finally, defendant Straus
claims that, shortly after the confrontation with plaintiff, he requested that
Levine pursue Mikes’ complaints regarding the spirometers to see if anything
could be done to rectify the alleged problem. Levine asserts that in response
he thoroughly reviewed the practice’s spirometry procedures and found no fault.

Defendants have thus proffered ample evidence
­- most of which derives from disinterested non-party witnesses ­-
supporting their contention that they held a good faith belief that their spirometry
tests were of medical value. In light of this evidence, plaintiff’s unsupported
allegations to the contrary do not raise a triable issue of fact sufficient
to bar summary judgment. See Lipton v. Nature Co., 71 F.3d 464,
472 (2d Cir. 1995) (summary judgment is appropriate even when mental state is
at issue, so long as there are sufficient undisputed material facts); see
also Skouras v. United States, 26 F.3d 13, 14 (2d Cir. 1994) (per
curiam) (record justified district court’s determination at summary judgment
stage that defendants acted willfully).

IV Attorneys’ Fees

Both parties appeal aspects of the district
court’s award of attorneys’ fees to the defendants on plaintiff’s withdrawn
MRI claims. Mikes challenges the court’s holding that the MRI claims were frivolous,
while defendants object to the decision to limit the award to a default fee
of $5000. We review for abuse of discretion both the decision to grant attorneys’
fees under §3730(d)(4) of the False Claims Act and the amount. See
Orchano v. Advanced Recovery, Inc., 107 F.3d 94, 99 (2d Cir. 1997) (reviewing
award of attorneys’ fees under 42 U.S.C. §1988); Caisse Nationale de
Credit Agricole-CNCA v. Valcorp, Inc.
, 28 F.3d 259, 264, 266 (2d Cir. 1994)
(holding that abuse of discretion standard applies to all aspects of a decision
to impose sanctions under Fed. R. Civ. P. 11). In our review, we bear in mind
that an award of attorneys’ fees is well suited to the daily operations of the
district court because such a decision may ultimately combine extensive factfinding
ability with a large degree of discretion. Dague v. City of Burlington,
976 F.2d 801, 803 (2d Cir. 1992), rev’d in part on other grounds, 505
U.S. 557 (1992).

A. Decision to Award Attorneys’ Fees

Plaintiff’s principal objection derives
from the court’s decision to preclude all testimony regarding "Mrs. D,"
defendants’ former patient who Mikes alleged was improperly examined by use
of an MRI rather than by x-ray. Mikes had contended that defendants ­-
who held a financial interest in an MRI facility ­- received illicit remuneration
through referrals to this facility in violation of §1320a-7b of the Medicare
statute and in turn the False Claims Act. Mikes apparently sought to proffer
evidence regarding Mrs. D ­- mistakenly believing she was a Medicare patient
­- to prove that Mikes’ MRI claims were brought in good faith. But the
district court reasoned that Mrs. D’s testimony should be disallowed because,
as a patient under 65 years of age, she was not Medicare eligible and thus plaintiff
could not rely upon Mrs. D’s treatment to plead a violation of the Medicare
statute.

We have not had occasion to analyze §3730(d)(4)
of the Act, which provides that a district court may award a defendant reasonable
attorneys’ fees against a qui tam relator "if the defendant
prevails in the action and the court finds that the claim of the person bringing
the action was clearly frivolous, clearly vexatious, or brought primarily for
purposes of harassment." Any one of these three conditions is sufficient
for an award of attorneys’ fees.

The Act’s legislative history suggests
that the standard of §3730(d)(4) is analogous to that used for claims for
attorneys’ fees brought under 42 U.S.C. §1988. See S. Rep. No. 99-345,
at 29, reprinted in 1986 U.S.C.C.A.N. 5266, 5294. It is noteworthy that
a plaintiff’s subjective bad faith is not an element under §1988. See
Davidson v. Keenan, 740 F.2d 129, 132-33 (2d Cir. 1984). Accordingly,
there could be an award for attorneys’ fees upon a finding that the MRI claims
were objectively frivolous, irrespective of plaintiff’s subjective
intent. A claim is frivolous when, viewed objectively, it may be said to have
no reasonable chance of success, and present no valid argument to modify present
law. See Caisse Nationale, 28 F.3d at 264; see also
Maglione v. Briggs, 748 F.2d 116, 118 (2d Cir. 1984) (per curiam) (whether
claim is frivolous under §1988 is an objective inquiry).

The district court was well justified in
finding that plaintiff’s MRI claims were objectively vexatious. The consulting
agreement between the defendants and the MRI facility in which they held a financial
interest provided for a flat consulting fee. Mikes, 98 F. Supp. 2d at
524. As the defendants’ remuneration would not vary with the number of patients
they referred, little incentive existed to refer extra patients to the facility.
Further, Judge McMahon found no evidence that any Medicare patient inappropriately
received an MRI and rejected plaintiff’s reliance on the case of Mrs. D, finding
such reliance objectively unreasonable. See id. at 524-25 ("Mrs.
D … was in fact in her late forties when she was seen at [defendants’ office]
­- a fact that should have been apparent to Dr. Mikes, and that could easily
have been ascertained during discovery."). Since plaintiff’s allegations
were bereft of any objective factual support, they clearly had no chance of
success. Hence, an award of attorneys’ fees to defendants was fully justified.

B. Amount of District Court’s Award

Defendants challenge the directive from
the trial court that they differentiate between those legal services expended
on the MRI and the spirometry claims. They further argue that the default attorneys’
fee award of $5000 was grossly inadequate in light of the alleged $437,000 spent
to defend against Mikes’ action.

It was not an abuse of discretion to limit
the award. The Supreme Court has held that where a lawsuit presents "distinctly
different claims for relief that are based on different facts and legal theories"
the claims should be parsed out and attorneys’ fees granted to a plaintiff only
on successful claims. Hensley v. Eckerhart, 461 U.S. 424, 434-35 (1983).
Similarly, a defendant is entitled to attorneys’ fees for only those particular
claims of a plaintiff deemed to be frivolous. See Simon DeBartolo
Group, L.P. v. Richard E. Jacobs Group, Inc.
, 186 F.3d 157, 177-78 (2d Cir.
1999).

Plaintiff’s MRI claims are severable from
her spirometry claims. They do not have the same factual core and are not premised
on related legal theories. See Quaratino v. Tiffany & Co.,
166 F.3d 422, 425 (2d Cir. 1999). The MRI claims alleged that defendants improperly
referred patients to a facility in which they held a financial interest, relying
principally upon the Medicare statute’s self-remuneration provisions. The spirometry
claims, conversely, alleged substandard performance of a medical procedure,
relying principally upon §1320c-5(a) of the Medicare statute. The fact
that both claims were brought pursuant to the False Claims Act does not justify
treating them as one for purposes of an award of attorneys’ fees.

Since defendants were entitled to attorneys’
fees only on the MRI claims, they were required to provide those contemporaneous
time records that would allow the district court to determine the amount of
time spent litigating those claims. These records are required to specify the
name of each attorney working on the file, the date the work was done, the hours
spent, and the nature of the work performed. See New York State Ass’n
for Retarded Children, Inc. v. Carey
, 711 F.2d 1136, 1147-48 (2d Cir. 1983).

Instead, defendants’ documentation calculated
their attorneys’ fees by taking the total costs of the litigation to date and
subtracting those billing entries that specifically referred to spirometry.
This figure was then divided in half, reflecting the district court’s holding
that, of the two types of claims, only the MRI claims were frivolous. As the
district court ruled, defendants failed to establish that their attorneys actually
expended half of their efforts on the MRI claims. If defendants’ attorneys spent
the great majority of their time on the spirometry claims, they clearly would
be entitled to receive less than half of the legal expense incurred. Consequently,
awarding the $5000 default attorneys’ fee was not an abuse of the district court’s
discretion.

CONCLUSION

We have considered the remainder of the
parties’ arguments on appeal and find them unpersuasive. Accordingly, the judgment
of the district court is affirmed.


—- Begin EndNotes —-


1
In addition to the extensive briefs submitted by the parties, we have before
us a number of amicus briefs submitted by the American Association for
Respiratory Care and Taxpayers Against Fraud in support of plaintiff, by a coalition
of Medical Societies (including the American Medical Association) in support
of defendants, and by the United States urging vacatur and remand. In the discussion
that follows we have considered the various arguments raised in these briefs.





 

Millan v. Hosp. San Pablo

Millan v. Hosp. San Pablo

EMTALA

Millan v. Hosp. San Pablo, No. Civ. 02-2687(DRD) (D.P.R. Sept. 8, 2005)

Parents
of a deceased infant filed claims under the Emergency Medical Treatment and
Active Labor Act (EMTALA) against two hospitals, alleging that each hospital
had failed to provide appropriate screening and that the infant was discharged
before being stabilized in the days before the child’s death. The District
Court of Puerto Rico found that each hospital had met its duty to provide appropriate
medical screening under EMTALA. However, the court did not find sufficient
evidence to show the hospitals had met their duty to stabilize the infant,
and therefore denied each hospital’s motion for summary judgment.