Delbon Radiology v. Turlock Diagnostic Center

• Decision Date: 03 November 1993
• Docket Number: No. CV-F-93-5232-REC,CV-F-93-5232-REC
• Citation: 839 F. Supp. 1388
• Court: U.S. District Court — Eastern District of California
• Parties: DELBON RADIOLOGY and Albert Joe Beardsley, Plaintiffs, v. TURLOCK DIAGNOSTIC CENTER et al., Defendants.

839 F. Supp. 1388

DELBON RADIOLOGY and Albert Joe Beardsley, Plaintiffs, v. TURLOCK DIAGNOSTIC CENTER et al., Defendants.

No. CV-F-93-5232-REC

United States District Court, E.D. California.

November 3, 1993.

Michael I. Spiegel, Spiegel Liao and Kagay, Richard D. Rosenberg, Law Office of Richard D. Rosenberg, San Francisco, CA, for Delbon Radiology and Albert Joe Beardsley.

Michael A. Duncheon, Hanson Bridgett Marcus Vlahos and Rudy, San Francisco, CA, for Emanuel Medical Center, Turlock Diagnostic Center.

Daniel Oliver Jamison, Stammer McKnight Barnum and Bailey, Fresno, CA, Arthur F. Godwin, Griffith and Masuda, Turlock, CA, for defendants Arakelian, James, Eisenberg, Clark, Herman, Andrew, etc. medical doctors and limited partners of Turlock Diagnostic Center.

ORDER RE DEFENDANTS' MOTION FOR SUMMARY JUDGMENT OR SUMMARY ADJUDICATION

COYLE, Chief Judge.

On October 4, 1993, the Court heard defendants' Motion for Summary Judgment or Summary Adjudication. Upon due consideration of the written and oral arguments of the parties and the record herein, the motion is denied for the reasons set forth herein.

II. BACKGROUND

Plaintiffs Delbon Radiology ("Delbon") and Dr. Albert Joe Beardsley ("Beardsley") sue defendants Turlock Diagnostic, Emanuel, and thirty-eight individuals¹ on four counts: (1) violation of Section 1 of the Sherman Act; (2) violation of California's Cartwright Act; (3) violation of Section 2 of the Sherman Act; and (4) conspiracy to interfere with prospective economic advantage.

Plaintiff Delbon is a California partnership composed of plaintiff Beardsley and defendant Dr. David Hendrick ("Hendrick"), each of whom have a fifty percent ownership and control interest in Delbon. (Hendrick Decl. ¶ 1; Ex. 1 ¶ 12.) Delbon was organized for the purpose of conducting the general business of an outpatient radiology facility. (Hendrick Decl. Ex. 1 ¶ 1.) Defendant Turlock Diagnostic is a California partnership. Defendant Emanuel, a hospital, is general partner of Turlock Diagnostic, and all thirty-five individual defendants, except Hendrick, are medical doctors and limited partners of Turlock Diagnostic.

Plaintiffs allege or concede the following facts. Delbon opened in July 1983 to provide outpatient radiology services in Turlock, California. At that time, the only other clinic providing outpatient radiology services in Turlock was operated by Emanuel. Plaintiffs allege that Delbon owed its beginning success to its provision of outpatient radiology service which was superior to that offered by Emanuel, for a substantially lower price. In 1987, Emanuel proposed a joint venture to several local referring physicians in Turlock to open an outpatient radiology and physical therapy office. The physicians rejected this invitation and made a failed attempt to open their own radiology office without Emanuel's participation. The physicians then proposed to buy out Delbon, but were unable to reach a buyout agreement.

The physicians subsequently formed a partnership with Emanuel — the Turlock Diagnostic Center. Emanuel became general partner, and fifty limited partnership shares at $12,000/share were sold only to doctors who referred patients for radiology services in Turlock. Moreover, nearly every physician in Turlock who refers patients for radiology services became a partner of Turlock Diagnostic, buying one or one-half share. Each of the thirty-five individual defendants, except defendant Hendrick, is a partner of Turlock Diagnostic.

Plaintiffs allege that the only source of business for a radiology clinic is the referral of patients by physicians. Patients generally do not shop for radiology services and nearly always acquiesce in the physician's referral, even though patients or their insurance carriers pay for the radiology service. Because nearly all physicians who made radiology service referrals were Turlock Diagnostic partners and profited from referring patients to Turlock Diagnostic, Delbon's business dropped precipitously when Turlock Diagnostic opened in January 1989. By May 1992, Delbon was forced to close because it had lost so many referrals.² Delbon now has no offices, no employees, and no equipment. (Beardsley Decl. ¶ 4) The only remaining assets of the partnership, besides this lawsuit, include $1,500 in the bank and a few declining outstanding accounts which generate about $150-200 per month.

In June 1992, Hendrick and Beardsley arranged for the partnership's attorney to draft dissolution papers. Although Beardsley was willing to sign, Hendrick refused.

Parties stipulate that Hendrick, Beardsley's partner, is also president and sole physician employee of Turlock Radiological Medical Group ("Turlock Radiological"). Turlock Radiological entered into a currently effective contract with defendant Turlock Diagnostic on January 3, 1989, at about the same time that Turlock Diagnostic opened. In exchange for use of Turlock Diagnostic's facilities, Hendrick provides radiological services; both parties maintain independent contractor status. (Stip. Facts for Summ.J.Mot. Ex. A at 7.) Each is responsible for billing patients separately for its own services. (Stip.Facts Ex. A ¶ 4.2 at 6).

Beardsley brought this action for antitrust violations and interference with prospective economic advantage on April 6, 1993, in his own name and in the partnership's name.³ Beardsley's attorney, Richard Rosenberg ("Rosenberg") notified Hendrick of his intention to file this suit in October 1992. (Rosenberg Decl. Ex. A.) Hendrick made no response to this news until after the suit began, nearly one year later. Hendrick opposes the lawsuit, requesting dismissal of Delbon's claims, and has been named a defendant. However, plaintiffs specifically allege that Hendrick is not responsible for any of the purported illegal conduct giving rise to the claims. (Complaint ¶ 17.) Hendrick has waived and released any interest which he might have either as an individual or as a partner of Delbon in this lawsuit. (Hendrick Decl. ¶ 4.)

Defendants Turlock Diagnostic Center ("Turlock Diagnostic") and Emanuel Medical Center ("Emanuel")⁴ move for summary judgment, or alternatively, for summary adjudication under Fed.R.Civ.Proc. 56(b).

II. DEFENDANT'S MOTION FOR SUMMARY JUDGMENT UNDER FED R.CIV.PROC. 56(b)

Defendants argue that they are entitled to summary judgment because plaintiff lacks the necessary authorization by the partnership to bring this action at all. This court may grant summary judgment if it finds there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ. Proc. 56(c). Although the parties' stipulation to facts is limited, the parties essentially agree on the events that led to this suit. Defendants' motion for summary judgment is appropriate because defendant raises questions of law, the resolution of which does not involve disputed "material" facts. See Schwarzer, Tashima & Wagstaffe, California Practice Guide: Federal Civil Procedure Before Trial § 14:207, at 14-51.

Defendant raises a question of law: Does Beardsley have authority to enforce a partnership claim in spite of Hendrick's opposition to the suit?

Defendants correctly assert that plaintiffs' causes of action are partnership claims because the complaint seek damages for injuries to Delbon's business.⁵ Bromberg & Ribstein, Bromberg and Ribstein on Partnership § 5.04(d), at 5:32 (1991). Lawsuits to enforce partnership claims are generally only instituted in the name of the partnership, Cal.Civ.Proc.Code § 388(a), or by all of the individual partners in their capacity as partners by common law. Bromberg & Ribstein, supra, § 5.02(b), at 5:8.

Defendants argue that although Delbon has the capacity to sue in its common name under both Cal.Civ.Proc. § 388(a) and Fed. R.Civ.Proc. 17(b)(1), Beardsley alone does not have the management authority to cause Delbon to bring suit. The Delbon partnership agreement does not specifically address the authority of a partner to institute a suit to enforce partnership claims. (Hendrick Decl. Ex. 1.) Nor does the agreement offer a solution to partner disputes. It only provides that "each partner shall have an equal voice in the management of the partnership." In cases of disagreement, Section 18(h) of the Uniform Partnership Act ("U.P.A.") or Cal. Corp.Code § 15018(h) provides:⁶

Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners; but no act in contravention of any agreement between the partners may be done rightfully without the consent of all partners.

U.P.A. § 18(h); Cal.Corp.Code § 15018(h) (emphasis added).

Defendants argue that this lawsuit is an extraordinary matter and falls outside § 18(h), thus requiring unanimous consent of Delbon's partners for authorization. Bromberg and Ribstein equate an "ordinary matter" under § 18(h) to a matter "for apparently carrying on the usual way of the business of the partnership" as described in U.P.A. § 9(1). Bromberg & Ribstein, supra, § 5.03(c), at 5:20-21. The treatise repeatedly points out, however, that "given the prevalence of American litigation, enforcement of a partnership's claim will often be an ordinary matter and subject to § 18(h)." Id. Defendants weakly assert that (1) a complex antitrust suit is not a claim a radiology clinic can expect to file; and (2) this suit "involves substantial risk and will consume significant partnership time and resources."

Even if this was only an ordinary business matter, however, defendants point out that Beardsley alone does not constitute a "majority." Defendants also casually mention that there are no exceptional circumstances in this case that would permit this lawsuit to proceed over Hendrick's objections.

Plaintiffs' rebuttal first attacks defendants' standing to assert the defense that the lawsuit is unauthorized:

Third-party defendants are naturally concerned with

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