Dattilo v. Tucson General Hospital

• Decision Date: 08 April 1975
• Docket Number: No. 2,CA-CIV,2
• Citation: 23 Ariz.App. 392,533 P.2d 700
• Parties: , 74 A.L.R.3d 1259, 1975-1 Trade Cases P 60,257 Phillip J. DATTILO, Appellant, v. TUCSON GENERAL HOSPITAL, a nonprofit corporation, Frank Stuart, Gordon Sweet, R. E. Dennis, H. L. Myers, Ken Wagner, T. P. McWilliams, Individually and as members of the Board of Trustees of Tucson General Hospital, and I. Y. Hallaq, T. B. Struse, R. W. Rente, and R. B. Kring, Appellees. 1672.
• Court: Arizona Court of Appeals

Page 700

533 P.2d 700

23 Ariz.App. 392, 74 A.L.R.3d 1259,

1975-1 Trade Cases P 60,257

Phillip J. DATTILO, Appellant, v. TUCSON GENERAL HOSPITAL, a nonprofit corporation, Frank Stuart, Gordon Sweet, R. E. Dennis, H. L. Myers, Ken Wagner, T. P. McWilliams, Individually and as members of the Board of Trustees of Tucson General Hospital, and I. Y. Hallaq, T. B. Struse, R. W. Rente, and R. B. Kring, Appellees.

No. 2 CA-CIV 1672.

Court of Appeals of Arizona, Division 2.

April 8, 1975.

Rehearing Denied May 7, 1975.

Chandler, Tullar, Udall & Richmond, by Robert S. Tullar, Tucson, for appellant

Merchant, Lohse & Bloom, by Ashby I. Lohse, Tucson, for appellees Tucson General & Members of Board of Trustees.

Bilby, Thompson, Shoenhair & Warnock, P.C., by Richard M. Bilby, Tucson, for appellees Hallaq, Struse, Rente and Kring.

OPINION

HOWARD, Chief Judge.

This litigation arises out of a contract between appellee Tucson General Hospital and Drs. Hallaq and Struse whereby the said doctors were given the exclusive right to provide nuclear medicine services at the hospital. The position of Drs. Rente and Kring in this case will be divulged as the facts are disclosed.

Appellant, Dr. Dattilo, an internist, sued for damages on the theory that the appellees unlawfully combined to prevent him from practicing his specialty at Tucson General Hospital and that the exclusive contract constituted an unreasonable restraint of trade in violation of the common law and A.R.S. § 44--1401 et seq. (repealed Laws 1974, Ch. 26, § 7). The case was tried to a jury which returned a $40,000 verdict in appellant's favor, but only against the hospital. The trial court, after submission of legal memoranda and forms of judgment by the parties, construed the verdict as requiring a judgment in favor of all the appellees and entered judgment accordingly. The material facts are not in dispute. There are immaterial facts which are in dispute and we will so indicate in our recitation of the facts.

Tucson General Hospital is the only osteopathic hospital in the City of Tucson. During the period of late 1968 and early 1969, the hospital was in dire need of internists since Dr. Dattilo was the only one available and he was not board-certified. In the search for a qualified internist, Dr. Myers contacted Dr. Hallaq who was then practicing outside the State of Arizona. Dr. Hallaq made it clear to Dr. Myers that he was only interested in coming to Tucson if he were given an exclusive contract for the nuclear medicine services at the hospital. During that period, Drs. Rente and Kring were the hospital radiologists, their contract with the hospital covering the field of nuclear medicine. These doctors had made several requests of the Board of Trustees to purchase equipment for a nuclear medicine department but no money was available on those occasions.

Dr. Myers informed the Board of Dr. Hallaq's interest and the condition he had imposed. At a meeting of the Board of Trustees on May 6, 1969, the Board adopted a resolution to enter into an agreement with Dr. Hallaq. On May 15, 1969, the chairman of the Board, Gordon Sweet, sent the following letter to Dr. Hallaq:

'The Board of Trustees agrees that, upon your arrival in Tucson, you will be in complete charge of the Nuclear Medicine area, and any other Physician working in that area will do so by your permission, and is to be responsible to you, but, personnel requirements (employee) will be decided upon jointly with the Administrator. You will be solely responsible for the work done in that area.'

There was a question as to whether Mr. Sweet's letter conformed to the resolution of the Board but in any event, as will be seen, the terms of the letter were ratified by the Board when it issued a written contract to Drs. Hallaq and Struse. Dr. Struse, a qualified doctor in the field of nuclear medicine, had contacted Dr. Hallaq when he learned that Hallaq was coming to Tucson and Struse's name was added to the contract.

During this period of time Dr. Dattilo was studying nuclear medicine under qualified medical doctors in the City of Tucson. There was a conflict in the evidence as to whether the Board members knew he was studying nuclear medicine. However, Dr. Dattilo had received a license from the Arizona Atomic Energy Commission on December 3, 1969 and had commenced administering doses of radioactive material to patients in Tucson General Hospital who were then transported to St. Mary's Hospital for nuclear medicine procedures. In April of 1970, the Board members, when they learned of this, instructed Dr. Dattilo to stop such practice because there was no malpractice coverage for this particular work and Dr. Dattilo had no privileges in this area.

During March and April of 1970, at numerous meetings of the Board, the question of finalizing the contract for the development and operation of a nuclear medicine laboratory, ws discussed. In the meantime, Drs. Rente and Kring had agreed to void that part of their contract, which they interpreted as being an exclusive contract but which gave them the right to administer radioactive isotopes at the hospital.

Dr. Dattilo appeared on two separate occasions, April 7th and April 21, 1970, and, by letter dated April 13, 1970, submitted a proposal relative to the nuclear medicine department. His proposal was as follows:

'Complete responsibility for operating a department of Nuclear Medicine with interpretation of all tests performed for a fee of 30 percent of gross business after bad debts.'

Finally, on April 28, 1970, the Board voted to grant to Drs. Hallaq and Struse an exclusive contract for a period of five years to develop and be responsible for the Department of Nuclear Medicine at Tucson General Hospital. There were two dissenting votes, one by a doctor who was a close personal friend of Dr. Dattilo and another by a lawyer who had done legal work for Dr. Dattilo in 1969 and 1970.

Nuclear medicine emphasizes radioisotopes (radionuclides) in diagnosis and therapy. Under the exclusive contract given by Tucson General Hospital, nuclear medicine services had to be performed by Drs. Hallaq and Struse at Tucson General Hospital for a patient in Tucson General Hospital. The expensive and sophisticated equipment used to treat and diagnose patients in the nuclear medicine field was purchased by Tucson General Hospital. The department of nuclear medicine employed a technician who actually operated the equipment. The main work of Drs. Hallaq and Struse consisted of reading 'scans' which are the tracings of radioactive material injected into the body. Although Drs. Hallaq and Struse had the exclusive contract for nuclear medicine, they were also qualified internists and had staff privileges as such.

Appellant contends that the Arizona antitrust statutes govern the contract in question, and if not, the contract constitutes a violation of the common law prohibitions against restraint of trade. Appellees contend that our statutes do not apply, citing Goldfarb v. Virginia State Bar, 497 F.2d 1 (4th Cir. 1974), cert. granted 419 U.S. 963, 95 S.Ct. 223, 42 L.Ed.2d 178 (1974), and Willis v. Santa Ana Community Hospital Ass'n., 58 Cal.2d 806, 376 P.2d 568, 26 Cal.Rptr. 640 (1962).

The Goldfarb case held, inter alia, that the State Bar of Virginia was exempted from the provisions of the Sherman Antitrust Act, 15 U.S.C. § 1, under the so-called 'learned profession' exception to the Act. This exception is not contained in the Act but has evolved from the concept that the 'learned professions' are not engaged in 'trade or commerce'. The viability of the 'learned profession' exemption is in doubt. See, United States v. Oregon State Bar, 385 F.Supp. 507 (D.Or.1974).

The Willis case involved an interpretation of the California Anti-trust statutes. California prohibited contracts in restraint of 'trade or commerce' and provided treble damages for violations of the Act. A.R.S. § 44--1401 prior to its repeal in 1974, prohibited restraints of trade or commerce and restraints in the 'full and free pursuit of any business authorized or permitted by law.' It did not provide for treble damages. ¹ The Willis court interpreted the California Act narrowly because of the allowance of treble damages and held that it did not apply to 'learned professions'. Willis did, however, hold that an action will lie at common law where a right to pursue a lawful business, calling, trade or occupation is intentionally interfered with by unlawful means or by means otherwise lawful where there is a lack of justification. Willis was followed in Blank v. Palo Alto-Stanford Hospital Center, 234 Cal.App.2d 377, 44 Cal.Rptr. 572 (1965).

We need not decide whether the subject contract is governed by our antitrust statutes or common law precepts since in either case, the rule of reason applies except for certain per se violations which...