LAWNWOOD Med. Ctr. INC. v. SADOW

• Decision Date: 24 March 2010
• Docket Number: No. 4D08-1968.,4D08-1968.
• Citation: 43 So.3d 710
• Parties: LAWNWOOD MEDICAL CENTER INC., Appellant, v. Samuel H. SADOW, M.D., Appellee.
• Court: Florida District Court of Appeals

43 So.3d 710

LAWNWOOD MEDICAL CENTER INC., Appellant, v. Samuel H. SADOW, M.D., Appellee.

No. 4D08-1968.

District Court of Appeal of Florida, Fourth District.

March 24, 2010.

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Arthur J. England Jr., Edward G. Guedes and Kerri L. McNulty of Greenberg Traurig, P.A., Miami, and William A. Kebler of Banker Lopez Gassler, P.A., St. Petersburg, for appellant.

Major B. Harding, John Beranek and Ruth E. Vafek of Ausley & McMullen, Tallahassee, and Richard H. Levenstein of Kramer Sewell Sopko & Levenstein, Stuart, for appellee fostered the expectation that Dr. Sadow would become a member of the Lawnwood staff for CVS when it became available.

The process for approval took nearly three years. It was not until midyear 1996 that Lawnwood's CON was finally approved. At about the same time, the corporate owners of Lawnwood changed CEOs, appointing Cantrell as the new chief administrator. With the approval in hand, Lawnwood and its new CEO began work on designing and constructing new facilities for CVS, which would not be completed until 1999.

Several years before this approval, Lawnwood had adopted a set of rules of governance for its Medical Staff, as required by law.³ Under these Medical Staff Bylaws, staff physicians had the right to elect, retain, and remove medical staff officers, the members of the Medical Executive Committee (MEC), and the various department chairs and vice chairs. These rules specified that the medical staff would recommend which doctors should be allowed to practice in which medical areas. They also provided that exclusive privileges would be limited to only four specified areas. Cardiovascular surgery was not a specialty designated for exclusive privileges.

The Bylaws provided for a Credentialing Committee to recommend initial grants of staff privileges, and a Re-credentialing Committee to recommend renewals of privileges previously granted. The medical staff elects members of these committees in annual elections. The committees make the initial decisions on all applications for first-time grants of privileges and renewals, and then forward their recommendations to the MEC.⁴ The MEC in turn makes the final recommendations and forwards them to the Board of Trustees for approval.

The corporate entity operating Lawnwood is directly governed by a Board of Trustees with its own separate bylaws. The Medical Staff Bylaws specified that the Board of Trustees of the corporate entity owning the Hospital could not "unreasonably withhold" approval of final credentialing recommendations of the MEC. In short, the Board of Trustees agreed that it would approve recommendations by the MEC as to privileges unless it could state a reason with just cause.

The trial evidence as to Dr. Sadow's competence as a surgeon was substantial and unchallenged. From the late 1980s through 1999, Dr. Sadow had been doing an average of about 150 surgeries per year at Palm Beach Gardens and Jupiter Hospitals, the majority of which were high risk, open heart procedures. He demonstrated a constant mortality rate in the area of 3-4%, which is low for these high risk procedures. Moreover the evidence was that he had been sued only once for medical malpractice, and that suit had resulted in a verdict in his favor (which this court declined to disturb on appeal).⁵ 1998 the MEC decided that CVS should be open to all qualified staff surgeons at Lawnwood and not limited to a single provider. Dr. Sadow promptly filed another application for CVS.

In refusing to consider Dr. Sadow's pending requests for CVS privileges, the Board of Trustees adopted a resolution barring further applications from its current staff, an action pointedly directed at Dr. Sadow. Pentz wrote the Staff Committees and MEC that the search for candidates for CVS privileges was now closed, while simultaneously telling Dr. Downing to file his application with the Credentials Committee. Pentz "tabled" Dr. Sadow's. In fact the burial of his application for CVS lasted for several years, long after the new cardiac surgical facility opened.

In late 1998 the MEC met once again to consider the CVS issue. Pentz attended the meeting and sought to force the MEC to reject Dr. Sadow's application in accordance with the resolution of the Board of Trustees. The Chair of the MEC repeatedly ruled Pentz out of order, that Pentz was attempting to interfere on a matter of medical qualifications. Pentz heatedly retorted that the Chair was obstructing the CEO. The MEC again recommended that Dr. Sadow be approved for CVS privileges.

Shortly thereafter, the Board of Trustees wrote the MEC and the two credentialing committees that it had granted Pentz the sole authority to contract for exclusive CVS privileges and to negotiate with Dr. Downing for that purpose. It added that the moratorium on CVS privileges had been modified to that extent only and the committees should begin to review and recommend Dr. Downing and his group. Meanwhile the Board of Trustees requested its corporate parent to investigate the physicians in charge of the credentialing committees at Lawnwood, and especially the Chair of the MEC, to determine whether they had violated their "fiduciary duty" to the stockholders of Lawnwood.

As provided in the Medical Staff Bylaws, in March 1999 the medical staff held its regular annual elections for staff officers, who ex officio determine the compositions of the credentialing committees and the MEC. The Chair of the MEC now became elected President of the medical staff. The Board of Trustees of Lawnwood responded to the election by passing an emergency resolution removing all these newly elected officers, department chairs and members of the credentialing committees. In their place the Board of Trustees appointed its own choices for all these medical staff positions to govern the medical staff until the next regularly scheduled election. The Board of Trustees justified its unprecedented action by asserting that a "crisis" existed, caused by an alleged failure of the medical staff to engage in "good faith peer review," a failure to apply credentialing standards properly, a failure to comply with applicable federal and state law, and failure to comply with the standards required by accrediting entities.

In response, the recently elected medical staff officers filed an action in the circuit court for an injunction against the corporate action. They sought an order requiring the Board of Trustees to rescind its action and to reinstate the elected officers. They specifically requested that the injunction require the Board of Trustees to refrain from taking any action restricting, reducing, or impeding the full exercise of authority possessed by the Elected MEC under the provisions of the Medical Staff Bylaws, from exercising or attempting to exercise any powers or authority as Medical Staff Officers or members of the MEC; and for the corporate appointees to relinquish their respective offices to the Elected Officers and the Elected MEC.

The circuit court held an evidentiary hearing on the injunction and essentially granted all of the relief sought.⁷ This court affirmed the injunction, subject to a new hearing on the amount of the bond.⁸ While that injunction was on appeal, Dr. Sadow filed the present action, initially claiming only breach of contract.

As a result of the refusal of the Medical Staff to submit to corporate control of credentialing decisions at the hospital, Lawnwood convinced the Florida Legislature to enact the "Hospital Governance Law" applying only to hospitals in St. Lucie County. In disregard of the contract with the medical staff that had by then been in force for several years, the statute gave the Board of Trustees of Lawnwood full authority to override credentialing decisions. The Medical Staff officers sued for a declaratory judgment that the statute unconstitutionally impaired the contract between the Medical Staff and the corporation. The trial judge agreed with the medical staff and was affirmed on appeal. See Lawnwood Med. Ctr., Inc. v. Seeger, 959 So.2d 1222 (Fla. 1st DCA 2007). Lawnwood persisted in trying to salvage its legislative victory, but the Florida Supreme Court found the statute unconstitutional. See Lawnwood Med. Ctr., Inc. v. Seeger, 990 So.2d 503 (Fla.2008).

While Dr. Sadow's lawsuit was pending, in November 2001 Lawnwood hired Dr. Pinon as a new emergency room physician to staff Lawnwood's Walk-In Clinic in Fort Pierce, several blocks from the hospital. A few weeks after he arrived, Lawnwood arranged for an "open house" reception at the Clinic to introduce Dr. Pinon and its remodeled Walk-In Clinic facilities to the community. The occasion was held in the early evening hours after work. Just a day or two before the open house, however, another new CFO of Lawnwood, Dunwoody, then made these statements to Dr. Pinon: that Dr. Sadow was a bad doctor, that he had been suing the hospital, that he was not a good person, and that he was not someone to whom he should refer patients.

At the open house, there were "a lot of people" at the Clinic for the occasion. Some were patients, some were referring physicians, and there were others. It was on this occasion that Dr. Pinon met Dr. Sadow for the first time. He had stepped into Pinon's office at the Walk-In Clinic during the reception, accompanied by other physicians to introduce himself. At that point, Pentz and Dunwoody (CEO and CFO) also approached Dr. Pinon in the same area. Dr. Sadow left, crossing paths with the two corporate officers.

Now inside the office—having just encountered Dr. Sadow leaving the area— Dunwoody stated to Dr. Pinon: "this is part of the problem that we've discussed to [sic] you about ... Dr. Sadow and doctors in the community."⁹ Pinon responded that he was new to the area and didn't know the doctors in the community. Pentz and Dunwoody then...