Hyde v. University of Michigan Bd. of Regents, s. 74541

CourtSupreme Court of Michigan
Citation426 Mich. 223,393 N.W.2d 847
Docket Number77213 and 77815,Nos. 74541,s. 74541
PartiesJames P. HYDE and Marcia Hyde, Plaintiffs-Appellants, v. UNIVERSITY OF MICHIGAN BOARD OF REGENTS, Defendant-Appellee. Neil FAIGENBAUM, as Guardian of the Person of Anita Katz, M.I., Plaintiff- Appellant, v. The OAKLAND MEDICAL CENTER, Defendant-Appellee. Kathleen POWERS, Administratrix of the Estate of Frank R. Powers, and Kathleen Powers, individually, Plaintiff-Appellant, v. PEOPLES COMMUNITY HOSPITAL AUTHORITY, a Michigan corporation, Defendant and Cross-Plaintiff-Appellee, and N. Jahan, M.D., Defendant and Cross-Defendant.
Decision Date03 October 1986

Lopatin, Miller, Freedman, Bluestone, Erlich, Rosen & Bartnick by Richard E. Shaw, Detroit, for plaintiffs-appellants in No. 74541.

Kitch, Saurbier, Drutchas, Wagner & Kenney, P.C. by Mark D. Willmarth, James D. Zazakis, Richard Baron, Detroit, for defendant-appellee in No. 74541.

Fieger & Fieger, P.C. by Geoffrey N. Fieger, Southfield, for plaintiff-appellant in No. 77213.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., George L. McCargar, Alan Hoffman, Asst. Attys. Gen., Dept. of Atty. Gen., Mental Health Div., Lansing, for defendant-appellee in No. 77213.

William S. Stern, Southfield, for plaintiff-appellant in No. 77815.

Charles C. Cheatham, Detroit, for defendant Jahan in No. 77815.

Cozadd, Shangle, Smith & Andrews by B. Ward Smith, and John R. Day, Dearborn, Lee Estes, Birmingham, for defendant-appellee P.C.H.A.

Sommers, Schwartz, Silver & Schwartz, P.C. by Richard D. Toth, Southfield, for amicus curiae.

The Michigan Trial Lawyers Ass'n by Susan E. Lister, Richard M. Goodman, P.C., Detroit, amicus curiae.

CAVANAGH, Justice.

In Ross v. Consumers Power Co. (On Rehearing), 420 Mich. 567, 363 N.W.2d 641 (1984), this Court attempted to clarify the parameters of sovereign, governmental, and individual immunity from tort liability granted by the governmental tort liability act, M.C.L. Sec. 691.1401 et seq.; M.S.A. Sec. 3.996(101) et seq., and common law. In particular, we redefined the term "governmental function," which appears in Sec. 7 of the act, M.C.L. Sec. 691.1407; M.S.A. Sec. 3.996(107), as we believed the Legislature intended it to be defined. 1 None of the nine consolidated cases decided in Ross involved the tort liability of a public general hospital, however.

In each of these cases, the plaintiffs seek to hold a public general hospital or medical facility vicariously liable for the negligent diagnosis, treatment, or care rendered by the hospital's employees or agents. Plaintiffs maintain that such hospitals can be held liable in a tort cause of action pursuant to Parker v. Highland Park, 404 Mich. 183, 273 N.W.2d 413 (1978). Two common questions are presented:

1) Should Ross be given prospective effect only or retroactive effect?

2) Did Ross impliedly overrule that portion of Parker, which held that the day-to-day operation of a public general hospital is not a governmental function?

We must also decide whether, and under what circumstances, the operation of a public general hospital or medical facility constitutes a proprietary function, which is not entitled to immunity from tort liability under Sec. 13 of the act, M.C.L. Sec. 691.1413; M.S.A. Sec. 3.996(113).

We hold that the rules articulated in Ross apply to all cases commenced after January 22, 1985, the date our opinion was issued, and to those cases pending either in trial or appellate courts on January 22, 1985, in which a governmental immunity issue was properly raised and preserved.

We further hold that to the extent that the diagnosis, treatment, and care of patients at a public general hospital or medical facility are activities which are expressly or impliedly mandated or authorized by constitution, statute, or other law, the hospital or facility is entitled to immunity from tort liability under Sec. 7. To the extent that Parker held that such activities do not constitute the exercise or discharge of a governmental function, it was impliedly overruled by Ross. In light of 1986 P.A. 175, however, a governmental agency can be held liable for torts arising out of the ownership or operation of a hospital or county medical facility where the cause of action accrues on or after July 1, 1986.

Finally, we hold that only activities which are conducted primarily for the purpose of producing a pecuniary profit, and which are not normally supported by taxes or fees, are proprietary functions under Sec. 13. The fact that a governmental agency produces a pecuniary profit may be evidence that the agency is engaged in a proprietary function, but it is not conclusive evidence. The focus instead should be on the primary intended purpose of the governmental activity and how the activity is normally funded.

I. FACTS
A. Hyde

Plaintiff Marcia Hyde was treated at the University of Michigan Hospital on July 8, 1974. On June 28, 1976, plaintiffs filed a medical malpractice suit in the Court of Claims, alleging that the hospital employees' negligent diagnoses and medical treatment caused Ms. Hyde to develop a serious postsurgical infection. Defendant Board of Regents asserted governmental immunity as an affirmative defense in its answer. Following a pretrial conference, a pretrial summary was filed on March 30, 1977. The summary indicated that the trial court had given plaintiffs permission to amend their pleadings to allege that the injury had arisen out of the performance of a proprietary function. 2 Further proceedings apparently were held in abeyance pending this Court's decision in Parker.

After Parker was decided, defendant moved for accelerated judgment in April, 1979. Although Parker had held that public general hospitals are not immune from tort liability, defendant argued that this holding should not be given retroactive effect. Before a decision was rendered, this precise issue was resolved by Murray v. Beyer Memorial Hospital, 409 Mich. 217, 293 N.W.2d 341 (1980). Murray held that Parker was to be applied to all cases pending on December 27, 1978, in which an express challenge to governmental immunity had been made and preserved.

Plaintiffs did not file an amended complaint alleging that defendant had been engaged in a proprietary function until October 29, 1982. Defendant moved again for accelerated judgment, claiming that plaintiffs had not made or preserved an express challenge to its governmental immunity until the amended complaint was filed. Since the filing occurred long after Parker was decided, defendant argued that Parker was inapplicable. Plaintiffs countered that they had expressly challenged defendant's immunity prior to Parker at the pretrial conference and the challenge had been preserved by the pretrial summary.

The trial court accepted defendant's argument and entered a judgment for defendant in an order filed February 9, 1983. A majority of the Court of Appeals affirmed. 3 Plaintiffs' application for leave to appeal was pending in this Court when Ross was issued. We thereafter granted leave to appeal. 424 Mich. 858 (1985).

B. Faigenbaum

Plaintiff is the guardian of his mother, Anita Katz. Ms. Katz has a long history of mental illness and has been hospitalized several times. On November 20, 1976, she was admitted to Clinton Valley Center, a state psychiatric facility, exhibiting abnormal twitching and movements of her mouth, face, limbs, and tongue.

In February, 1977, Ms. Katz was referred to Oakland Medical Center for a physical examination. The center was administered by the Department of Mental Health and provided general medical services to psychiatric patients. Dr. Joseph Chandler, a neurologist at the center, concluded that Ms. Katz was suffering from a degenerative nerve disease known as Huntington's chorea. Dr. Chandler prescribed Haldol for the condition. Ms. Katz had previously been treated for her mental illness with Haldol and other neuroleptic drugs, such as Thorazine, Stelazine, and Mellaril. When Ms. Katz' condition did not improve, her family insisted that the Clinton Valley Center discontinue administering any neuroleptic drugs. However, her condition did not substantially improve.

In 1979, plaintiff sued eleven doctors, two hospitals, and three drug companies in the Wayne Circuit Court, alleging inter alia malpractice and products liability. A suit was also commenced in the Court of Claims against the Oakland Medical Center and Clinton Valley Center. Plaintiff alleged that the doctors had failed to diagnose and treat Ms. Katz for tardive dyskinesia, a motion disorder caused by neuroleptic drugs such as Haldol. 4 It was further alleged that a psychiatrist or neurologist should consider tardive dyskinesia as a possible diagnosis when presented with a patient exhibiting abnormal bodily movements who has a history of exposure to neuroleptic drugs. Proper treatment requires discontinuation of all neuroleptic drugs to prevent the condition from becoming permanent. Plaintiff maintained that Ms. Katz had sustained severe and permanent brain damage and irreversible motor disturbances from repeated administrations of Haldol.

The two actions were joined for trial. Clinton Valley Center was granted summary judgment on the ground of governmental immunity. 5 Several doctors employed by the center were dismissed either on governmental immunity grounds or because plaintiffs failed to show at trial that the doctors were responsible for Ms. Katz' care. A contract claim against the Oakland Medical Center was struck as being duplicative of plaintiff's tort claim. Plaintiff eventually settled with six doctors (including Dr. Chandler), the two hospitals, and the drug companies for $378,000. The only defendant remaining at the close of proofs was Oakland Medical Center. A key issue at trial was whether the center was immune from tort liability under Perry v. Kalamazoo State Hospital, 404 Mich. 205, 273 N.W.2d 421 (1978), because...

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