Elizabeth Hospital, Inc. v. Richardson

• Decision Date: 10 July 1959
• Docket Number: No. 16187.,16187.
• Citation: 269 F.2d 167
• Parties: ELIZABETH HOSPITAL, INC., Appellant, v. Fount RICHARDSON; Friedman Sisco; Ruth Ellis Lesh; Stanley Applegate, Individually and As President of Washington County Medical Society; and Washington County Medical Society, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

269 F.2d 167 (1959)

ELIZABETH HOSPITAL, INC., Appellant, v. Fount RICHARDSON; Friedman Sisco; Ruth Ellis Lesh; Stanley Applegate, Individually and As President of Washington County Medical Society; and Washington County Medical Society, Appellees.

No. 16187.

United States Court of Appeals Eighth Circuit.

July 10, 1959.

James R. Hale, Fayetteville, Ark., for appellant.

Eugene R. Warren, Little Rock, Ark. (Warren & Bullion, Little Rock, Ark., were on the brief), for appellees.

Before SANBORN, VOGEL and VAN OOSTERHOUT, Circuit Judges.

VOGEL, Circuit Judge.

Elizabeth Hospital, Inc., plaintiff, (appellant here) is a Delaware corporation authorized to do business in Arkansas, where it maintains and operates a hospital at Prarie Grove, Washington County. Its stockholders are Frank Riggall, Eva E. Riggall, Cecil Riggall and Robert Douglas Manning, each of whom owns 25% of the capital stock. The defendants are Fount Richardson; Friedman Sisco; Ruth Ellis Lesh; Stanley Applegate, individually and as president of Washington County Medical Society; Washington County Medical Society; and American Medical Association. The individual defendants are all physicians and surgeons and all defendants excepting the American Medical Association are citizens and residents of the State of Arkansas. The Washington County Medical Society is an unincorporated organization with at least 36 dues-paying or active members. The defendant Stanley Applegate is a member and president of such society and the other individual defendants are members thereof. A motion for dismissal as to the American Medical Association, a corporation organized under the laws of the State of Illinois, was granted by this court and it is accordingly not involved herein. For convenience, the parties will be designated as they were in the court below.

Plaintiff brought this action to recover treble damages in the total amount of $300,000.00 for alleged violations of the Sherman Anti-Trust Act, 15 U.S.C.A., §§ 1, 2, 12 and 15, and to obtain an injunction requiring the Society and Association to admit Dr. Frank Riggall to membership therein. Plaintiff also alleged a violation of the constitution, statutes and common law of Arkansas, attempting thereby to create two grounds for federal court jurisdiction: First, under the Sherman Act; and, second, because of diversity of citizenship and amount involved.

In brief summary, plaintiff's complaint alleged that it was authorized to and did engage in the operation and maintenance of a hospital of which Dr. Frank Riggall was Chief of Staff; that it purchased medical equipment and supplies, etc., for its use in operating its hospital from outside the State of Arkansas. It alleged a conspiracy on the part of the defendants which interfered with the referral of patients to the plaintiff hospital from outside the State of Arkansas. The conspiracy was based upon the refusal of the Washington County Medical Society to admit Dr. Frank Riggall to membership therein, resulting in denial to him of membership in the Arkansas Medical Society and the American Medical Association.

Excepting for the fact that Elizabeth Hospital, Inc., is the named plaintiff in the instant case and here alleged violations of the law of Arkansas as well as violations of the Sherman Anti-Trust Act, the complaint is virtually the same as that contained in a recent case wherein the plaintiff was Dr. Frank Riggall and wherein the defendants included all those named as defendants herein and in which this court, in Riggall v. Washington County Medical Society, 8 Cir., 1957, 249 F.2d 266, certiorari denied 355 U.S. 954, 78 S.Ct. 540, 2 L.Ed.2d 530, sustained the District Court's dismissal of the complaint. The same District Court granted motions to dismiss here — Elizabeth Hospital, Inc. v. Richardson, D.C.W. D.Ark.1958, 167 F.Supp. 155.

To sustain jurisdiction in the federal court it must be found that the allegations of the complaint, which for present purposes we must assume to be true, establish a claim under the law of Arkansas or that the complaint states a claim under the Sherman Anti-Trust Act. It has already been noted that the allegations of the instant complaint are, for all practical purposes, the same as the allegations contained in the complaint filed by Dr. Riggall in what might be termed the earlier case, Riggall v. Washington County etc., 249 F.2d 266. Therein, Dr. Riggall was the sole plaintiff. He sought to recover treble damages in the same amount as is sought by Elizabeth Hospital, Inc., in the present case. There, Dr. Riggall sought recovery because of alleged wrongful refusal of the Washington County Medical Society to admit him to membership. The alleged damage to the plaintiff here is likewise based on the Society's refusal of membership to plaintiff's Chief of Staff — the same Dr. Frank Riggall. In addition to the allegation of a conspiracy or combination in violation of the Sherman Anti-Trust Act, it was alleged that there was a conspiracy under the law of Arkansas to injure or damage the plaintiff by refusing Dr. Riggall and certain members of his staff membership in the Washington County Medical Society. Dr. Riggall's application for membership in the Society was rejected by the membership by a secret vote of 34 to 2. The by-laws of the Society are set forth in plaintiff's complaint. Among other things, they provide that the Society shall be the judge of the qualifications of its members. They also provide that the members shall vote upon all applications and that the elections shall be by secret ballot and that three-fourths of the votes of the membership present and voting shall be necessary to elect. The opinion of the District Court ably demonstrates that under neither the common nor statutory law of Arkansas was there a right of action spelled out in plaintiff's complaint, 167 F.Supp. 155. Citing Arkansas statutes dealing with monopolies, combinations and attempts to regulate or fix prices, it concluded, at page 162:

"Since no monopoly or attempt at monopoly is alleged or shown by the facts in the complaint, and since it is likewise apparent that the plaintiff is not being driven from competition, these statutes have no application."

And at page 163:

"The action of the medical society and its individual members, whatever their motive may have been, was not action to attain an unlawful purpose or to use unlawful means in attaining a lawful purpose, absent some specific statutory requirement that all persons be admitted to membership.

"It is true that the plaintiff alleges that the refusal of the defendants to admit Dr. Riggall to membership has resulted in a number of other conditions unfavorable to the plaintiff hospital as well as to Dr. Riggall. It may be seriously doubted whether any of the numerous conditions alleged to have been caused by the denial of membership are proximate results of that action by the medical society. Compare Robinson v. Lull, D.C.Ill.1956, 145 F.Supp. 134, at page 137, where the court considered a series of facts similar to those presented here, and found no proximate connection between the acts of the defendants and the alleged injury.

"Assuming, however, that the conditions and injuries allegedly resulting from the medical society\'s denial of membership to Dr. Riggall were all proximate results of that action of the medical society, there is nevertheless no showing of any violation of state law in that action or any conspiracy to violate any state law. Most of the

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