Madsen v. Audrain Health Care Inc.

• Decision Date: 18 July 2002
• Docket Number: No. 01-3252.,01-3252.
• Parties: Kurt R.E. MADSEN, D.O., Appellant, v. AUDRAIN HEALTH CARE, INC., doing business as Audrain Medical Center, Joseph A. Corrado, M.D., Michael D. Jones, M.D., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

297 F.3d 694

Kurt R.E. MADSEN, D.O., Appellant, v. AUDRAIN HEALTH CARE, INC., doing business as Audrain Medical Center, Joseph A. Corrado, M.D., Michael D. Jones, M.D., Appellees.

No. 01-3252.

United States Court of Appeals, Eighth Circuit.

Submitted: April 18, 2002.

Filed: July 18, 2002.

Rehearing and Rehearing En Banc Denied: September 5, 2002.

COPYRIGHT MATERIAL OMITTED

Mark D. Murphy, argued, Overland Park, KS, for appellant.

Charles J. McPhetters, argued, Jefferson City, MO (Ronald R. McMillin, on the brief), for appellee.

Before WOLLMAN, BEAM, and LOKEN, Circuit Judges.

BEAM, Circuit Judge.

Appellant Dr. Kurt Madsen appeals the order of the district court dismissing each count in his complaint. Upon review de novo, we affirm in part and reverse in part.

I. BACKGROUND

For purposes of our review, we accept as true the factual allegations in Madsen's complaint. Botz v. Omni Air Int'l, 286 F.3d 488, 490 (8th Cir.2002). Dr. Madsen is a licensed physician specializing in orthopedics medicine who worked in Mexico, Missouri, for Audrain Health Care, Inc. In his complaint, Madsen alleges that on August 14, 1997, he entered into a contract ("Physician Agreement") with Audrain, which provided for Madsen to establish an orthopedic medical practice in Mexico in return for a guaranteed minimum income paid by Audrain. On September 1, 1998, Madsen applied for and was granted medical staff privileges at the hospital. On September 24, 1998, Madsen alleges that Dr. Corrado and Dr. Jones, Chief of Staff and Chief of Surgery at Audrain respectively, contacted him with concerns they had regarding Madsen's practice and skills. Madsen further alleges that on November 19, 1998, he was again called to meet with Corrado, Jones, and Garf Thomas, Audrain's administrator, to further discuss these concerns. Following these communications, the hospital brought a complaint against Madsen before the Medical Staff Executive Committee. Madsen alleges that the Executive Committee made certain adverse recommendations in response to the complaint and forwarded its report to Audrain's Medical Staff Board of Directors for approval.

When Madsen received notice of the Executive Committee's adverse recommendations, he requested a hearing before an ad hoc committee of Audrain's Medical Staff, as provided for in the Medical Staff Bylaws. At this hearing, held February 25, 1999, the only evidence presented by Jones, Corrado, and the hospital, was Jones' statement. Madsen points out in his complaint that he presented several witnesses, including a Board Certified Orthopedic Surgeon who reviewed every patient chart at issue and found no indication of any need to reduce Madsen's privileges. Following this hearing, the Executive Committee's recommendation remained adverse to Madsen. Madsen sought appellate review before the Board, which concluded that the recommendations were "justified and not arbitrary or capricious" and therefore adopted them as a final decision. Madsen was notified on May 5, 1999. This final Board action was reported to the Missouri State Board of Registration for the Healing Arts and the National Practitioner Data Bank.

Madsen alleges that as a direct result of the defendants' wrongful acts, he was forced to close his profitable practice in Missouri and relocate to Indiana. Count I of Madsen's complaint alleges that Audrain breached the Physician Agreement by causing his privileges at Audrain to be adversely impacted, thus terminating Audrain's obligation to guarantee compensation to Madsen. Madsen brings Count II against all defendants alleging that they tortiously interfered with his business relationships and expectancies with his patients. Count III, against Audrain, alleges that Audrain's Medical Staff Bylaws constitute a contract between Audrain and Madsen and that Audrain breached this contract. Count IV, against Jones and Corrado, alleges that they conspired to cause Audrain to breach and terminate the Physician Agreement. In Count V, Madsen alleges that Jones and Corrado conspired to cause Audrain to breach and terminate the Medical Staff Bylaws, which Madsen claims support a contractual relationship between the parties. Madsen seeks a declaratory judgment in Count VI, declaring that the adverse decision is unjustified, arbitrary, and capricious. Madsen further requests that this declaratory judgment be communicated to the Missouri Board of Registration for the Healing Arts, the National Practitioner Data Bank, and all other persons or entities to whom such adverse decision was communicated. Finally, in Count VII, Madsen alleges that all of the defendants maliciously communicated false information about him to others, including actual and potential patients and state and federal agencies, damaging his reputation and earning potential.

II. DISCUSSION

We review de novo the district court's grant of the defendants' 12(b)(6) motion to dismiss. Omni, 286 F.3d at 491. We construe Madsen's complaint in the light most favorable to him and determine whether he can prove any set of facts that would entitle him to relief. Id.

A. Count IV

Before we reach the merits of this appeal, we must first resolve the unique procedural posture created by the district court's dismissal of Count IV at Madsen's request. Count IV, which survived the defendants' motion to dismiss, alleges that defendants Jones and Corrado individually conspired to cause Audrain to breach and terminate the Physician Agreement with Madsen. Although this count was not dismissed by the district court in its December 7, 1999, memorandum and order, Count IV was later dismissed without prejudice per Madsen's suggestion at a hearing concerning Madsen's motion to alter or amend judgment.¹ Although the district court did not clearly articulate the basis for the dismissal of Count IV in its order, we presume that this dismissal was entered pursuant to Federal Rule of Civil Procedure 41(a)(2), which allows for dismissal of actions by court order. Madsen's intentions with respect to Count IV are unclear.

Clearly Madsen sought dismissal of Count IV to allow immediate appeal of the court's otherwise interlocutory order when the district court denied Madsen's request to amend the earlier dismissal of all other counts. During briefing and at oral argument, Madsen only sought reinstatement of Counts I, II, III, V, VI and VII. The question before us is whether the district court abused its discretion when it dismissed Count IV without prejudice for the purpose of allowing Madsen to appeal the dismissal of the remaining claims. See Great Rivers Coop. v. Farmland Indus., Inc., 198 F.3d 685, 689 (8th Cir.1999). Our precedent in this type of case does not bode well for Madsen. In fact, "[i]n most cases ... a district court does abuse its discretion when it frustrates the limitations on federal appellate jurisdiction by entering a Rule 41(a)(2) order dismissing remaining claims without prejudice for the purpose of facilitating the immediate appeal of an earlier interlocutory order." Id. at 689-90.

Under these circumstances, the question of remedy looms. "In most cases, the proper remedy will be to reverse the Rule 41(a)(2) order and remand for completion of the case, without considering the merits of the earlier interlocutory order(s)." Id. at 690. We may also deem the ambiguous voluntary dismissal of Count IV to be with prejudice and go on to consider the appeal from the district court's dismissal of all remaining claims. Id.; see also Minnesota Pet Breeders, Inc. v. Schell & Kampeter, Inc., 41 F.3d 1242, 1245 (8th Cir.1994). Madsen may not evade the final judgment requirement of Federal Rule of Civil Procedure 54(b) by seeking a non-prejudicial dismissal of Count IV. Minnesota Pet Breeders, 41 F.3d at 1245. Under this rubric, we choose the latter remedy, discussed at oral argument,² and deem Madsen's request for dismissal of Count IV to be with prejudice.

B. Counts I and II

In addressing Counts I and II of Madsen's complaint, the district court turned to Cowan v. Gibson, 392 S.W.2d 307 (Mo. 1965). In Cowan, a physician who had been denied reinstatement to a hospital's medical staff alleged a wrongful conspiracy to exclude him and to injure him in the practice of medicine. Id. at 308. The Missouri Supreme Court reiterated the general rule that "`the exclusion of a physician or surgeon from practicing [in a private hospital] is a matter which rests in the discretion of the managing authorities.'" Id. (quoting Annotation 24 A.L.R.2d 850, 852). However, Cowan was not "a suit between the doctor and the hospital or its governing board or staff alone in their hospital character and capacities." Id. at 309. Because the physician named two doctors in their individual capacity alleging "that the two doctors in their personal professional capacities conspired with hospital board members to the end and for the purpose of interfering with Dr. Cowan and his contractual rights with his patients all to their financial advantage-all of which [was] outside the operation and government of the hospital," the allegations fell outside of the general rule and the case was remanded. Id.

In Count I, Madsen alleges breach of contract by the hospital with respect to the Physician Agreement. Count II alleges tortious interference with business relationships against all defendants. As explained by the district court, nothing in Madsen's complaint removes it from the general rule that the exclusion of a physician from practicing in a private hospital is a discretionary matter resting with the managing authorities. Id. at 308. This is a suit between a doctor and the hospital and its governing staff in their hospital character and capacities. Further, contrary to Madsen's argument, no factual determination is required. The construction of an unambiguous contract is a question of law for the court. Contract Freighters, Inc. v. J.B. Hunt Transport, Inc., 245 F.3d 660, 663 (8th Cir.2001) (applying...