Aspen Orthopaedics v. Aspen Valley Hosp.

• Decision Date: 22 December 2003
• Docket Number: No. 02-1022.,02-1022.
• Parties: ASPEN ORTHOPAEDICS & SPORTS MEDICINE, LLC, a Colorado limited liability corporation; Gary Brazina, M.D.; Steven Nadler, M.D., Plaintiffs-Appellees, v. ASPEN VALLEY HOSPITAL DISTRICT, a Colorado corporation, Defendant-Appellant, and Orthopedic Associates of Aspen and Glenwood Springs, P.C., a Colorado professional corporation; John Freeman, M.D., individually and as Chief Executive Officer and owner and member of Orthopedic Associates of Aspen and Glenwood Springs, P.C.; Robert Hunter, M.D.; Thomas Pevny, M.D.; Mark Purnell, M.D., individually and as owners and members of Orthopedic Associates of Aspen and Glenwood Springs, P.C.; Aspen Emergency Medicine, P.C., a Colorado professional corporation; John "Bud" Glissman, M.D., individually, as Chief Executive Officer, as an owner and member of Aspen Emergency Medicine, P.C. and as Director of the Emergency Department at Aspen Valley Hospital; J. Stevens Ayers, D.O.; Marion Berg, M.D.; Christopher Marinez, M.D., individually and as owners and members of Aspen Emergency Medicine, P.C., Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

353 F.3d 832

ASPEN ORTHOPAEDICS & SPORTS MEDICINE, LLC, a Colorado limited liability corporation; Gary Brazina, M.D.; Steven Nadler, M.D., Plaintiffs-Appellees, v. ASPEN VALLEY HOSPITAL DISTRICT, a Colorado corporation, Defendant-Appellant, and Orthopedic Associates of Aspen and Glenwood Springs, P.C., a Colorado professional corporation; John Freeman, M.D., individually and as Chief Executive Officer and owner and member of Orthopedic Associates of Aspen and Glenwood Springs, P.C.; Robert Hunter, M.D.; Thomas Pevny, M.D.; Mark Purnell, M.D., individually and as owners and members of Orthopedic Associates of Aspen and Glenwood Springs, P.C.; Aspen Emergency Medicine, P.C., a Colorado professional corporation; John "Bud" Glissman, M.D., individually, as Chief Executive Officer, as an owner and member of Aspen Emergency Medicine, P.C. and as Director of the Emergency Department at Aspen Valley Hospital; J. Stevens Ayers, D.O.; Marion Berg, M.D.; Christopher Marinez, M.D., individually and as owners and members of Aspen Emergency Medicine, P.C., Defendants.

No. 02-1022.

United States Court of Appeals, Tenth Circuit.

December 22, 2003.

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Katherine Taylor Eubank (Daniel M. Fowler, with her on the briefs), Fowler, Schimberg, & Flanagan, P.C., Denver, CO, appearing for Appellant.

Brian E. Bates, Antonio Bates Bernard Professional Corporation, (Sander N. Karp and Julie C. Berquist, Leavenworth & Karp, P.C., and Thomas P. McMahon, Powers Phillips, P.C., Denver, CO, with him on the brief), appearing for Appellee.

Before TACHA, Chief Circuit Judge, ANDERSON, and BRISCOE, Circuit Judges.

TACHA, Chief Circuit Judge.

Defendant-Appellant Aspen Valley Hospital District ("the Hospital") brings this interlocutory appeal of the district court's denial of its claim that the Colorado Governmental Immunity Act grants it immunity from suit. We consider two issues on appeal. First, do we have subject matter jurisdiction to hear interlocutory appeals from the denial of immunity from suit when state law creates the immunity? Second, did the district court correctly hold that the Colorado Governmental Immunity Act does not provide the Hospital with immunity from suit? We hold that this Court has subject matter jurisdiction to hear the appeal and we REVERSE in part and REMAND in part, pursuant to the notice provisions of the Colorado Governmental Immunity Act.

I. Background

This case comes to us from a motion to dismiss. The facts as stated in the Amended Complaint follow.¹ Doctors Brazina and Nadler relocated to the Aspen, Colorado area in 1996 to establish an orthopedic practice. At that time, only two emergency medical facilities existed in the Aspen area: the Hospital, which is a governmental entity of the State of Colorado, and the Snowmass Clinic, which is privately owned by Orthopedic Associates and Aspen Emergency Medicine, P.C. Orthopedic Associates, a defendant in the case below but not before us on appeal, was the sole provider of orthopedic services in Aspen prior to the Plaintiffs' arrival. Aspen Emergency Medicine, P.C., again a defendant in the case below but not before us on appeal, has an exclusive contract with the Hospital to run the Hospital's emergency room and to make patient referrals.

Resistance emerged to the opening of the Plaintiffs' practice in the summer of 1996. For example, a member of Orthopedic Associates stated at that time that the Plaintiffs would "`starve' in the Aspen area and ... `never' get referrals from the Emergency Department ... at the Hospital." In the fall of 1996, Doctors Brazina and Nadler sought staff privileges at the Hospital, which it only granted after an unduly extensive credentialing process.

After Doctors Brazina and Nadler obtained credentials, the Plaintiffs sought to obtain orthopedic referrals from the Snowmass Clinic and the Hospital. Because Orthopedic Associates partially owned the Snowmass Clinic, it refused to make referrals to the Plaintiffs. The Hospital's internal policy mandated that it refer patients to the orthopedic surgeon on-call. Nevertheless, the Aspen Emergency Medicine, P.C., doctors, who ran the Hospital's emergency room, referred all patients to Orthopedic Associates. On an unspecified date, A.O.S.M. registered a complaint with the Hospital regarding this failure to refer patients.

In the winter or early spring of 1997, the Hospital, using public funds, opened a new facility, the Midvalley Medical Center. The Plaintiffs attempted to rent space in this new facility, but the Hospital signed an exclusive lease with Orthopedics Associates and granted it management rights over the surgery center at the new facility. As manager of the Midvalley Medical Center, Orthopedics Associates refused to grant Doctor Nadler staff privileges. On April 29, 1997, "A.O.S.M. presented the issue of its exclusion from the [Midvalley Medical Center] to the Board of [the Hospital]."

The Plaintiffs subsequently filed a twenty-one count complaint alleging violations of the Sherman Act, state antitrust laws, breach of contract, and tort claims. The district court acquired subject matter jurisdiction over the Sherman Act claims pursuant to 28 U.S.C. § 1337 and took supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367.

Of interest to this interlocutory appeal, the Plaintiffs brought three tort claims against the Hospital. Count XIII alleges that the Hospital was negligent in not enforcing its patient referral policy. Count XVI alleges the Hospital was negligent in subjecting Doctors Brazina and Nadler to an overly burdensome credentialing process. And Count XVIII alleges that the Hospital tortiously interfered with prospective business relationships between the Plaintiffs and orthopedic patients.²

The Hospital filed a motion to dismiss on several grounds, which was referred to a magistrate judge. At issue here, the Hospital argued that, with regard to the three tort claims, it was immune from suit pursuant to the Colorado Governmental Immunity Act ("CGIA"). See Colo.Rev. Stat. § 24-10-101 et seq. The magistrate judge recommended denial of the Hospital's motion because the CGIA waived immunity for the claims alleged by the Plaintiffs. Upon de novo review, the district court agreed with the magistrate judge's analysis and denied the Hospital's motion to dismiss. This interlocutory appeal followed.

II. Discussion

A. Standard Of Review

"The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted." Sutton v. Utah State Sch. for Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir.1999) (quotation omitted). We accept all well-pleaded factual allegations in the complaint as true and view them in the light most favorable to the nonmoving party. Id. Since legal sufficiency is a question of law, we review the district court's disposition of a Rule 12(b)(6) motion de novo. Id.

B. Subject Matter Jurisdiction Over Interlocutory Appeals Challenging The Denial Of State Law Created Immunity From Suit

We find that we have subject matter jurisdiction to hear the Hospital's appeal from the district court's denial of its state-law immunity from suit. This conclusion derives from a combination of the teachings of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and the collateral order doctrine. Thus, "while state law governs the applicability of immunity to state law claims, federal law determines the appealability of the district court's order...." Sheth v. Webster, 145 F.3d 1231, 1236 (11th Cir.1998) (citations and internal quotations omitted). Every circuit to address this issue, either in pendent or diversity jurisdiction, applies the same analysis used in Sheth. See, e.g., Napolitano v. Flynn, 949 F.2d 617, 621 (2nd Cir.1991); Brown v. Grabowski, 922 F.2d 1097, 1106-07 (3rd Cir.1990); Gray Hopkins v. Prince George's County, Maryland, 309 F.3d 224, 231-32 (4th Cir.2002); Sorey v. Kellett, 849 F.2d 960, 961-62 (5th Cir.1988); Marrical v. Detroit News, Inc., 805 F.2d 169, 172-74 (6th Cir.1986). Although this Court has yet to adopt formally the reasoning employed in these cases, we have implicitly applied this analysis in our previous decisions. See, e.g., Decker v. IHC Hosps., Inc., 982 F.2d 433, 435-37 (10th Cir.1992) (applying this analysis to question of immunity under Utah law). We make our holding explicit in this case and adopt the reasoning of the other circuits.

Applying this analysis in the instant case is straightforward. Pursuant to the federal collateral order doctrine, we have subject matter jurisdiction to hear "appeals of orders denying motions to dismiss where the motions are based on immunity from suit." Decker, 982 F.2d at 435. State law governs the scope of the immunity at issue (i.e., whether the immunity is "immunity from suit" or merely "immunity from liability"). See Gray Hopkins, 309 F.3d at 231 ("We must look to substantive state law ... in determining the nature and scope of a claimed immunity."). The CGIA, as applied to governmental entities such as the Hospital, offers immunity from suit. Padilla v. School Dist. No. 1, 25 P.3d 1176, 1180 (Colo.2001) (en banc) (absent a statutory exception the "CGIA establishes immunity from suit for public entities"). Because the CGIA grants the Hospital immunity from suit, we have subject matter jurisdiction to hear this appeal pursuant to the federal collateral order doctrine.

The Plaintiffs' objections to this conclusion are unpersuasive. First, the Plaintiffs argue that hearing this interlocutory appeal would allow a Colorado statute to define this Court's subject matter jurisdiction. We disagree. As the Erie analysis above illustrates, federal, not state, law controls the appealability of the district court's order. Sheth, 145...