Jain v. Northwest Community Hospital

• Decision Date: 29 December 1978
• Docket Number: No. 77-1326,77-1326
• Parties: , 24 Ill.Dec. 341 Kanakmal JAIN, Plaintiff-Appellant, v. NORTHWEST COMMUNITY HOSPITAL, a Not-for-Profit Corporation, and Malcolm D. MacCoun, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 108

385 N.E.2d 108

67 Ill.App.3d 420, 24 Ill.Dec. 341

Kanakmal JAIN, Plaintiff-Appellant, v. NORTHWEST COMMUNITY HOSPITAL, a Not-for-Profit Corporation, and Malcolm D. MacCoun, Defendants-Appellees.

No. 77-1326.

Appellate Court of Illinois, First District, Second Division.

Dec. 29, 1978.

James J. Flynn, Lynch & Flynn, Chicago, for plaintiff-appellant.

Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago, for defendants-appellees; Rudolf G. Schade, Jr., Stanley J. Davidson, Chicago, of counsel.

STAMOS, Presiding Justice:

This is an appeal from an order entered by the Circuit Court of Cook County, granting defendants' motion to dismiss plaintiff's complaint with prejudice. The issue is whether plaintiff's complaint, seeking injunctive relief and damages against a private, not-for-profit hospital and its chief executive officer for their refusal to admit plaintiff to the hospital's medical staff, stated a cause of action.

Because this is an appeal from the granting of a motion to dismiss, all well pleaded allegations of fact in the complaint will be taken as true. (E. g., Clay v. Chicago Board of Education (1st Dist. 1974), 22 Ill.App.3d 437, 318 N.E.2d 153.) The facts alleged are as follows:

Plaintiff, Kanakmal Jain, is a physician licensed to practice medicine in Illinois. Plaintiff has been admitted to membership in the Chicago Medical Society and the American Medical Association. For many years plaintiff has specialized in the field of general surgery; he is a Diplomat of the American Board of Surgery and has been admitted to fellowship in the Royal College of Surgeons of Canada. By reason of his good conduct, skill, and competence, plaintiff has acquired an excellent reputation in his profession.

Plaintiff's complaint, filed January 27, 1976, alleged that he is and has been engaged in the practice of medicine and general surgery in Arlington Heights, Hoffman Estates, Palatine, Schaumburg, and Elk Grove Village, Illinois, and in areas contiguous thereto for more than two and one-half years. In March, 1974, plaintiff submitted his application for membership on defendant Northwest Community Hospital's medical staff and requested privileges in the Department of General Surgery. The hospital is a not-for-profit corporation organized under State law. Defendant MacCoun is its president and chief executive officer. Plaintiff alleged that the hospital "is dedicated to the vital public use of serving the acutely sick and injured" and that it "derives its funds directly and indirectly in good measure from public sources, including funds from the State of Illinois." The hospital is located in Arlington Heights, Illinois, and serves communities located in the northwest suburbs of Chicago, including those in which plaintiff practices.

Plaintiff alleged that his application was in full compliance with the hospital bylaws, which were not set out in the complaint and which do not appear in the record. Plaintiff alleged that even though his application demonstrated his professional competence and character so as to entitle him to admission to the hospital medical staff, defendants, acting through the Department of Surgery, the Credentials Committee, the Medical Executive Committee, and the Board of Directors of the hospital, wrongfully and without due process of law refused to admit plaintiff to the hospital medical staff, in that: (1) the application for admission was not fairly considered; (2) the application was rejected without a specification of the reasons for the rejection; (3) the application was rejected without first affording plaintiff a meaningful hearing; (4) the application was rejected through the use of ex parte communications that were unknown to plaintiff; (5) the application was rejected for insubstantial reasons and for reasons that did not pertain to plaintiff's professional competence and character; and (6) plaintiffs' professional competence and character were not evaluated in accordance with a reasonable and objective standard and in accordance with those guidelines and standards theretofore employed for the admission of persons to the hospital's medical staff.

Plaintiff alleged that by reason of the above wrongful acts and omissions, he has suffered irreparable damage in that he has been unable to admit his patients to Northwest Community Hospital, on an emergency basis, and he has been substantially inhibited from expanding and developing his medical practice in, and among the residents of, Arlington Heights, Palatine, and Buffalo Grove, Illinois. Plaintiff further alleged that he has no adequate remedy at law. Count I of plaintiff's complaint then prayed the court to enter an injunction against defendants, requiring them to afford plaintiff a fair and impartial hearing on his application for admission to the medical staff of Northwest Community Hospital. Count II of plaintiff's complaint realleged everything alleged in Count I except the reference to the inadequacy of the remedy at law. Count II further alleged that plaintiff had incurred damages as a result of defendants' wrongful conduct, in the amount of $150,000.

The defendant hospital and the defendant hospital administrator filed separate motions to strike and dismiss the complaint. The hospital moved to dismiss on the ground that it is a not-for-profit corporation and private hospital, that as a matter of Illinois law there is no judicial review of a private hospital's refusal to appoint a physician or surgeon to its medical staff, and that plaintiff's complaint therefore failed to state a cause of action either for an injunction or for damages. The hospital administrator moved to dismiss on the same theory and also on the ground that the complaint failed to state a cause of action as to him in that plaintiff alleged no individual responsibility on the part of defendant MacCoun in the reviewing and credentialling process at the hospital and alleged no specific misconduct on his part at all.

While memoranda in support of and in opposition to the motions to dismiss were filed, no supporting affidavits were submitted by either side. After hearing argument on the motions to dismiss, the trial court granted both motions and dismissed both counts of the complaint with prejudice. From this order, plaintiff appeals.

In his brief on appeal, plaintiff has argued two points: (1) that defendant Northwest Community Hospital, because of its dedication to service of the public and its receipt of significant public monies and benefits, was required to afford plaintiff a fair hearing and substantive and procedural due process of law in acting upon his application for admission to its medical staff; and (2) that judicial review of the staff decisions of a private hospital does not require substitution of the court's judgment, but rather the review required is akin to review of agency action.

In response, defendants have argued four points: (1) that the denial by a private hospital of plaintiff's application for appointment to the medical staff is not subject to judicial review, under the rule advanced in Mauer v. Highland Park Hospital Foundation (2d Dist. 1967), 90 Ill.App.2d 409, 412-13, 232 N.E.2d 776; (2) that the mere fact that a private hospital receives public monies does not require that it provide procedural or substantive due process to those applying for admission to its medical staff; (3) that plaintiff has waived the right to contest the dismissal of defendant MacCoun because plaintiff has failed to argue this point in his brief, citing, inter alia, Supreme Court Rule 341(e)(7) (Ill.Rev.Stat.1977, ch. 110A, par. 341(e)(7)); and (4) that plaintiff has waived the right to contest the dismissal of his count seeking money damages, for the same reason and based on the same authority.

We begin by noting, as defendants have pointed out, that the vast majority of federal circuits have held, and we agree, that the mere receipt of federal and state funds, the enjoyment of tax exemptions, and the presence of state licensing requirements do not transform private hospitals' staff appointment decisions into state action for purposes of invoking the fourteenth amendment. (See, e. g., Hodge v. Paoli Memorial Hosp. (3d Cir. 1978), 576 F.2d 563, 564, and cases cited therein.) Only the decisions of the Court of Appeals for the Fourth Circuit are to the contrary. (See, e. g., Christhilf v. Annapolis Emergency Hospital Assoc., Inc. (4th Cir. 1974), 496 F.2d 174; Sams v. Ohio Valley General Hosp. Assoc. (4th Cir. 1969), 413 F.2d 826.) The majority rule has also been adopted by those state courts which have decided the issue. See e. g., Gotsis v. Lorain Community Hosp. (1974), 46 Ohio App.2d 8, 345 N.E.2d 641; Ponca City Hosp., Inc. v. Murphree (Okl.1976), 545 P.2d 738.

However, our inquiry does not end there. Another possible basis for review lies in the power of courts to regulate private businesses or industries impressed with a public interest and to see that their discretionary powers are exercised reasonably and for the public good, and in accord with minimal common law requisites of fair procedure. The seminal case involving hospital staff selection is Greisman v. Newcomb Hospital (1963), 40 N.J. 389, 192 A.2d 817, which in turn derived from the landmark case of Falcone v. Middlesex County Med. Society (1961), 34 N.J. 582, 170 A.2d 791 (despite arbitrary bylaw requirement to the contrary, court would compel admission of plaintiff into private medical society, membership in which was a necessary prerequisite to the maintenance of staff privileges in local hospitals). In Greisman, the court held that a private hospital, which received public funds, enjoyed tax benefits, and constituted a virtual monopoly in providing health care to the public in the area, was in no position to claim immunity from public supervision. Rather, the court stated that the hospital's powers relating to selection of staff members were fiduciary powers...