Milo v. Cushing Mun. Hosp., 86-1519

Decision Date22 April 1988
Docket NumberNo. 86-1519,86-1519
Citation861 F.2d 1194
PartiesEmil B. MILO, M.D., and Donald L. Reid, M.D., Plaintiffs-Appellants, v. CUSHING MUNICIPAL HOSPITAL, an Oklahoma non-profit corporation, d/b/a Cushing Regional Hospital, et al., Defendants-Appellees.
CourtU.S. Court of Appeals — Tenth Circuit

D. Gregory Bledsoe (Cameron M. Spradling, of W.C. Sellers, Inc., Sapulpa, Okl., with him on the brief), Tulsa, Okl., for plaintiffs-appellants.

Dale Reneau (Robin A. Wiens, of Fenton, Fenton, Smith, Reneau & Moon, Oklahoma City, Okl., with him on the brief), of Fenton, Fenton, Smith, Reneau & Moon, Oklahoma City, Okl., for defendants-appellees.

Before HOLLOWAY, Chief Judge, and McKAY and TACHA, Circuit Judges.

TACHA, Circuit Judge.

This case involves the question whether a hospital's suspension of a physician's medical staff privileges constitutes the requisite state action to support a claim under 42 U.S.C. Sec. 1983. The City of Cushing (City) owns Cushing Municipal Hospital (Hospital). The City leases the Hospital to the Cushing Hospital Authority (Authority), a public trust created pursuant to Oklahoma law. The Authority has entered into an operating agreement with the Masonic Hospital Association, Inc. (Association), a private corporation which provides hospital management services. Under the contract, the Association operates the Hospital, including handling medical staff privilege and discipline matters.

The Hospital summarily suspended Drs. Milo and Reid. The physicians allege that the Hospital took this action because they reported misconduct by a fellow staff physician. In their section 1983 suit, the doctors claim that the Hospital's action infringed their rights to free speech and due process under the First and Fourteenth Amendments. The defendants are the Hospital, the Association, various members of the Boards of the Hospital and the Association, and the Hospital's administrator. The defendants claim that there was no requisite state action to support plaintiffs' section 1983 claims because the action was taken by the Association, not the City or the Authority. The district court granted the defendants' motion for summary judgment. Plaintiffs appeal. We reverse.

In deciding the state action issue, the district court applied the test set out by this court in Gilmore v. Salt Lake Community Action Program, 710 F.2d 632 (10th Cir.1983). Application of the Gilmore test, however, is inappropriate because that case involved a different issue than the one presently before the court. Gilmore involved an employment decision by a community action agency organized under state law as a private nonprofit corporation. Thus the Gilmore court was called upon to determine whether the activity of a nominally private entity constituted state action; it was not necessary for the court to decide the preliminary question of whether the agency was a public or a private organization.

In the present case, the issue before the court is whether the hospital is public or private. In deciding whether an entity is public or private, we examine the structure of the entity and its relationship to a governmental unit. Burton v. Wilmington Parking Auth., 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). In the present case, the City, the Authority, and the Association are all involved with the Hospital. The district court thoroughly examined the record and accurately described the relationship between the City, the Authority, and the Association regarding the Hospital.

In this case, it cannot be disputed that some kind of relationship exists between the City of Cushing and Cushing Municipal Hospital. There is evidence that the City of Cushing has substantially participated in the funding, creation, and financial structure of the Hospital. In 1973, the City of Cushing issued bonds to fund improvements and enlargement of the Cushing Municipal Hospital. In 1978, the City of Cushing issued bonds to retire the principal and interest on the bonds issued in 1973. The Cushing Hospital Authority ("Authority") was created pursuant to a Trust Indenture for the benefit of the City of Cushing and is governed by five Trustees. The Authority is a public trust and an agency of the State of Oklahoma pursuant to 60 O.S.A. Sec. 176, et seq. (1981). The five Trustees governing the Authority are three City Commissioners and two members of the Masonic Association. The Hospital is leased by the City to the Authority for the operation and maintenance of the Hospital. Simultaneously with the creation of the leasing agreement the Authority executed an operating agreement with the Masonic Association. However, although the Masonic Association is responsible for the operation of the Hospital, it must utilize its revenues from operations according to the terms set forth in the 1978 Bond Indenture.

The City and the Authority have the typical, financially rewarding, lease/purchase agreement. The Hospital is leased by the City for a specified term or until all indebtedness of the Authority has been retired or a provision for payment made. To insure the financial stability of the Hospital, the City required the Authority to covenant in the 1978 Bond Indenture to establish rates and fees to attain net revenues in each fiscal year at a percentage of the average annual debt service requirements on all bonds issued for the City's initial funding of the Hospital. Further, upon an event of default under the terms of the leasing agreement, the bondholders would appoint a trustee or receiver; neither the bondholders, Trustee Bank, nor...

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  • Dubbs v. Head Start, Inc., No. 01-5098.
    • United States
    • U.S. Court of Appeals — Tenth Circuit
    • July 21, 2003
    ...government regulations, CAP does not challenge its status as a person "acting under color of state law." See Milo v. Cushing Mun. Hosp., 861 F.2d 1194, 1196-97 (10th Cir.1988) (finding private corporation which managed hospital liable as a state actor because liability ran with delegation o......
  • Moore v. Wyoming Medical Center
    • United States
    • U.S. District Court — District of Wyoming
    • July 1, 1993
    ...to a governmental unit" to determine whether a private entity is a state actor under 42 U.S.C. § 1983. Milo v. Cushing Mun. Hosp., 861 F.2d 1194, 1196 (10th Cir.1988) (citing Burton v. Wilmington Parking Auth., 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961)). See also, Yeager v. City of Mc......
  • Beedle v. Wilson
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    ...services, are state actors for § 1983 purposes. See Carnes v. Parker, 922 F.2d 1506, 1509 (10th Cir.1991); Milo v. Cushing Mun. Hosp., 861 F.2d 1194, 1196-97 (10th Cir.1988); Tarabishi I, 827 F.2d at 652. Moreover, as detailed in the Oklahoma Governmental Tort Claims Act (GTCA), municipal a......
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    • April 10, 1997
    ...11. Dennis v. Sparks, 449 U.S. at 27, 101 S.Ct. at 186. 12. Jackson, 419 U.S. at 352, 95 S.Ct. at 454. 13. See Milo v. Cushing Mun. Hosp., 861 F.2d 1194 (10th Cir.1988) (Finding state action on behalf of two doctors who were suspended from a municipally owned hospital that was managed by a ......
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