Baptist Health v. Murphy

• Decision Date: 02 February 2006
• Docket Number: No. 04-430.,04-430.
• Citation: Baptist Health v. Murphy, 226 S.W.3d 800, 365 Ark. 115 (Ark. 2006)
• Parties: BAPTIST HEALTH, Appellant, v. Bruce E. MURPHY, M.D., Scott L. Beau, M.D., David C. Bauman, M.D., D. Andrew Henry, M.D., David M. Mego, M.D., and William A. Rollefson, M.D., Appellees.
• Court: Arkansas Supreme Court

226 S.W.3d 800

BAPTIST HEALTH, Appellant, v.Bruce E. MURPHY, M.D., Scott L. Beau, M.D., David C. Bauman, M.D., D. Andrew Henry, M.D., David M. Mego, M.D., and William A. Rollefson, M.D., Appellees.

No. 04-430.

Supreme Court of Arkansas.

February 2, 2006.

The Health Law Firm, by: Harold H. Simpson and Seth Ward III, Little Rock, for appellant.

Blair & Stroud, by: H. David Blair, Batesville; and Griffin & Block, PLLC, by: Clifford P. Block, Little Rock, for appellee.

JIM HANNAH, Chief Justice.

Appellant Baptist Health appeals an interlocutory order of the Pulaski County Circuit Court, Thirteenth Division, granting a preliminary injunction enjoining Baptist from preventing appelleesBruce E. Murphy, M.D., Scott L. Beau, M.D., David C. Bauman, M.D., D. Andrew Henry, M.D., David M. Mego, M.D., and William A. Rollefson, M.D., from practicing medicine at its hospitals.This is the second such interlocutory appeal.In the first appeal, we reversed and remanded to the circuit court for further findings.SeeBaptist Health v. Murphy,362 Ark. 506, 209 S.W.3d 360(2005).Pursuant to our remand, the circuit court entered a more detailed order, again granting a preliminary injunction, and this appeal followed.On appeal, Baptist argues that the circuit court abused its discretion in issuing a preliminary injunction.Specifically, Baptist argues that the circuit court abused its discretion in concluding (1) that appellees have a likelihood of success on the merits of their underlying request for permanent injunction, and (2) that absent the requested preliminary injunctive relief, the appellees would be irreparably harmed.We find no reversible error and, accordingly, we affirm.

I.Facts

Baptist is a private, charitable, nonprofit corporation that operates several full-service community hospitals throughout Arkansas.Appellees are cardiologists and are partners in Little Rock Cardiology Clinic, P.D. (LRCC).Appellees hold indirect interests in Arkansas Heart Hospital (AHH) through their direct ownership in LRCC, which owns 14.5% of AHH.Additionally, appellee Murphy directly owns three percent of AHH, and appellee Henry also directly owns a percentage of AHH.Appellees are on the medical staff of AHH and admit patients there.Appellees are also on the professional staff at Baptist Medical Center in Little Rock and admit patients there.

Baptist's Board of Trustees adopted the Economic Conflict of Interest Policy (Policy), which is the subject of this litigation, at its quarterly meeting in May 2003.The Policy mandates denial of initial or renewed professional staff appointments or clinical privileges at any Baptist hospital to any practitioner who, directly or indirectly, acquires or holds an ownership or investment interest in a competing hospital.¹

Appellee Murphy's and appellee Beau's terms of appointment at Baptist expired on February 26, 2004.Because both appellees Murphy and Beau hold, either directly or indirectly, ownership or investment interests in AHH, both were deemed ineligible for reappointment by Baptist pursuant to the Policy.The remaining appellees also hold ownership or investment interests in AHH, and they will be similarly affected by the Policy upon the expiration of their respective terms of appointment.

On February 10, 2004, appellees sued Baptist in U.S. District Court for the Eastern District of Arkansas, alleging that the actions of Baptist violate the federal anti-kickback statute, the Arkansas Medicaid Fraud Act, the Arkansas Medicaid Fraud False Claims Act, and the Arkansas Deceptive Trade Practices Act.Appellees further alleged that Baptist's Policy tortiously interfered with the doctor-patient relationship.Baptist moved to dismiss for lack of federal jurisdiction, and U.S. District JudgeJames Moody entered an order granting the motion on February 24, 2004.SeeMurphy v. Baptist Health,No. 4:04CV00112, 2004 WL 1474655(E.D.Ark.Feb.24, 2004)(unpublished opinion).

Appellees filed the instant lawsuit, almost identical in form to the federal lawsuit, in the Pulaski County Circuit Court on February 25, 2004, and they requested preliminary and permanent injunctive relief to enjoin Baptist from enforcing the Policy.After a hearing on February 26, 2004, and further briefing by the parties, the circuit court granted appellees' motion for preliminary injunction, finding that appellees would ultimately prevail at trial on all points, and that absent an injunction, appellees would suffer harm.Baptist then appealed to this court.

By a per curiam order entered on June 2, 2005, this court remanded this case to the circuit court to make specific findings, pursuant to Ark. R. Civ. P. 65, on the issue of appellees' likelihood of success on the merits.SeeBaptist Health v. Murphy, supra.Further, we noted that Baptist failed to abstract the February 26, 2004, hearing before the circuit court on appellees' motion for preliminary injunction and ordered Baptist to submit a revised abstract and substituted brief.²Seeid.

In its subsequent order submitted to this court after remand, the circuit court found that the physicians would likely prevail on their claim of tortious interference.Specifically, the circuit court found that the plaintiffs have a substantial likelihood of success in establishing at trial on the merits that the Policy (1) constitutes a conferral of economic benefits, a remuneration, in consideration for the referral of patients to Baptist's facilities, which practice is prohibited by the federal anti-kickback statute, 42 U.S.C. § 1320a-7b(b), and comparable Arkansas statutes, Ark.Code Ann. §§ 5-55-111and20-77-902; and (2) is contrary to the Arkansas Department of Health Rules and Regulations for Hospitals and Related Institutions§ 5(A)(10) and the Arkansas Deceptive Trade Practices Act, Ark.Code Ann. § 4-88-107(a)(10).Further, the circuit court found that the Policy results in termination of the physicians' privileges at Baptist and that the loss of privileges will cause the physicians to suffer reputational injury because in the future, the physicians must attempt to explain to patients, other institutions, or liability insurance companies that termination of their privileges was not due to their training, competency, or fitness as cardiologists.Finally, the circuit court found that Baptist's economic interest, as advanced by the Policy, is substantially outweighed by the irreparable harm arising out of the disruption of the physicians' relationships with their patients and with referring physicians, and with the physicians' ability to provide proper healthcare to their patients, to the detriment of the doctor-patient relationship.

II.Standard of Review

In determining whether to issue a preliminary injunction pursuant to Rule 65, the trial court must consider two things: (1) whether irreparable harm will result in the absence of an injunction or restraining order, and (2) whether the moving party has demonstrated a likelihood of success on the merits.Three Sisters Petroleum, Inc. v. Langley,348 Ark. 167, 72 S.W.3d 95(2002).This court reviews the grant of a preliminary injunction under an abuse-of-discretion standard.AJ & K Operating Co., Inc. v. Smith,355 Ark. 510, 140 S.W.3d 475(2004).The standard of review is the same for the two essential components of a preliminary injunction: irreparable harm, and likelihood of success on the merits.Seeid.(citingDavid Newbern & John H. Watkins, Civil Procedure§ 29-2, at 437 (3d ed.2002)).There may be factual findings by a circuit court that lead to conclusions of irreparable harm and likelihood of success on the merits, and those findings shall not be set aside unless clearly erroneous.Seeid.(citingAmalgamated Clothing & Textile Workers Int'l Union v. Earle Indus., Inc.,318 Ark. 524, 886 S.W.2d 594(1994)).But a conclusion that irreparable harm will result or that the party requesting the injunction is likely to succeed on the merits is subject to review under an abuse-of-discretion standard.Seeid.

When an appeal reaches a court via an order granting a preliminary injunction, the appellate court will not delve into the merits of the case further than is necessary to determine whether the circuit court exceeded its discretion in granting the injunction.Villines v. Harris,340 Ark. 319, 11 S.W.3d 516(2000)(Villines v. Harris I)(citing Special Sch. Dist. v. Speer,75 F.2d 420(8th Cir.1935)).The sole question before the appellate court is whether the circuit court"departed from the rules and principles of equity in making the order," and not whether the appellate court would have made the order.Villines v. Harris I(quoting Special Sch. Dist.,75 F.2d at 421-22).

As an initial matter, Baptist argues that the circuit court improperly switched appellees' single cause of action from declaratory judgment to the tort of intentional interference.This argument is without merit.Appellees' complaint expressly stated that they were seeking both declaratory and injunctive relief, and that they were seeking to enjoin Baptist from acts that "tortiously interfere with the relationships plaintiffs hold with their patients."We now turn to Baptist's remaining arguments on appeal.

III.Likelihood of Success on the Merits

As previously stated, the circuit court found that the physicians would likely succeed on their claim of tortious interference.To establish a claim of tortious interference with business expectancy, the plaintiff must prove: (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted.Stewart Title Guar. Co. v. Am. Abstract & Title Co.,363 Ark. 530, 215 S.W.3d 596(2005);Vowell v....