Philips v. Pitt County Memorial Hosp.

Decision Date13 July 2009
Docket NumberNo. 07-1996.,No. 07-1986.,07-1986.,07-1996.
Citation572 F.3d 176
PartiesSherif PHILIPS, M.D., Plaintiff-Appellant, v. PITT COUNTY MEMORIAL HOSPITAL; Paul Bolin, M.D.; Ralph E. Whatley, M.D., Defendants-Appellees. Sherif Philips, M.D., Plaintiff-Appellant, v. Pitt County Memorial Hospital; Sanjay Patel, M.D.; Paul Bolin, M.D.; Ralph E. Whatley, M.D.; Cynthia Brown, M.D., Defendants-Appellees.
CourtU.S. Court of Appeals — Fourth Circuit

Karin Marshall Zaner, Kane, Russell, Coleman & Logan, Dallas, Texas, for Appellant. Charles David Creech, Harris, Creech, Ward & Blackerby, New Bern, North Carolina, for Appellees.


Lisa M. Schreiner, Deborah N. Meyer, Meyer Law Offices, P.A., Cary, North Carolina, for Appellant. W. Gregory Merritt, Jay C. Salsman, Harris, Creech, Ward & Blackerby, New Bern, North Carolina, for Appellees.

Before WILLIAMS, Chief Judge,1 MICHAEL, Circuit Judge, and JOHN T. COPENHAVER, JR., United States District Judge for the Southern District of West Virginia, sitting by designation.

Affirmed by published opinion. Judge COPENHAVER wrote the opinion, in which Judge MICHAEL joined.


COPENHAVER, District Judge:

Dr. Sherif A. Philips instituted two civil actions challenging the suspension of his practice privileges at Pitt County Memorial Hospital ("the Hospital"). In addition to supplemental state law claims, he alleged violations of 42 U.S.C. § 1983 based upon putative infringements of his Fourteenth Amendment due process rights surrounding the proceedings that resulted in his suspension. He contends that Pitt County Memorial Hospital, Inc. ("PCMHI"), a nonprofit corporation, is a state actor.

The defendants moved to dismiss both actions. They contended principally that Dr. Philips could not show they acted under color of state law. The district court agreed and Dr. Philips appeals. We affirm.


From 1953 until June 1998, Pitt County owned all of the property representing the Hospital, which it apparently leased to PCMHI, a non-profit formed in 1953 under the general nonprofit incorporation laws of North Carolina. On June 1, 1998, at a time when PCMHI was operating the Hospital under a long term lease from Pitt County dated December 1, 1989, Pitt County and PCMHI entered into an "AGREEMENT TO CHANGE STATUS OF PITT COUNTY MEMORIAL HOSPITAL" ("Agreement"). (JA 47).

The Agreement was designed "to change the status of.... [Pitt County Memorial Hospital] from a Public Hospital to a Private Not For Profit Hospital" pursuant to the Municipal Hospital Act, North Carolina General Statutes § 131E-8 ("Act"). (Id.) Accompanying the change over was the filing by PCMHI with the North Carolina Secretary of State on September 18, 1998, of Restated Articles of Incorporation ("Restated Articles"), submitted for the purpose, in part, of reflecting PCMHI's "reorganization from an agency of Pitt County to a private not-for-profit corporation."2

The change was accomplished by the sale of the Hospital to PCMHI, at a price of $30 million spread over two years. The Agreement includes further terms indicative of some measure of retained control by Pitt County over its former agency, PCMHI:

PCMHI must make annual payments to Pitt County "in lieu of taxes...." (JA 48); and it must continue annually to contribute $452,000 toward reimbursing Pitt County for Medicaid payments, with annual increases to account for inflation.

PCMHI cannot sell or encumber the Hospital real property without Pitt County's prior written approval; and PCMHI's "Permitted Indebtedness" is limited as set forth in an attachment to the Agreement.

If the Hospital is sold or merged, with Pitt County's required consent, all net proceeds go to Pitt County.

Pitt County approval is required for any annual asset disposition exceeding a stated benchmark.

PCMHI is prohibited from allowing a substantial portion of the Hospital system to be managed by an entity not controlled by PCMHI.

PCMHI must continue an existing school nurse program for the Pitt County Board of Education.

PCMHI must continue to serve as the primary teaching hospital of East Carolina University School of Medicine and maintain the Affiliation Agreement between the medical school, Pitt County and PCMHI.

PCMHI is to comply with the North Carolina Open Meetings Law; and the Commissioners of Pitt County are to receive notice of, and access to, all meetings of the PCMHI Board of Trustees, including closed sessions.

PCMHI is governed by a 20-member Board of Trustees, with Pitt County appointing 11 members, and the remaining 9 members appointed by the Board of Governors of the University of North Carolina. These two governmental entities can remove their respective appointees only "for cause."3 (Id.)

Noteworthy are the Agreement's automatic reversionary provisions under which all Hospital assets, real and personal, revert to Pitt County if PCMHI fails in any of the following respects:

Fails to make payments to Pitt County in accordance with the Agreement;

Fails to maintain a level of indigent care consistent with historical practice and expenditures;

Loses its accreditation;

Dissolves without a successor nonprofit corporation approved by Pitt County.

The contemplated reversion would divest PCMHI of all ownership rights in the real and personal property of which the Hospital is composed.4 It is noted that reverter is one of the required provisions for a nonprofit corporation receiving ownership from a municipality of a hospital facility under North Carolina's Municipal Hospital Act.5

In dismissing these actions, the district court observed:

[T]he ... Agreement expresses an intent to create a private hospital and does not provide Pitt County officials with control of the administration of hospital services or personnel procedures. Pitt County officials are not involved in PCMH's day-to-day operation and Plaintiff has not alleged that Pitt County officials, or any Government actors, were involved in the suspension of his hospital privileges.

Philips v. Pitt County Mem'l Hosp., Inc., 503 F.Supp.2d 776, 782 (E.D.N.C.2007).

The district court relied significantly upon our decision in Modaber v. Culpeper Memorial Hospital, Inc., 674 F.2d 1023 (4th Cir.1982), which provides that

[a] state becomes responsible for a private party's act if the private party acts (1) in an exclusively state capacity, (2) for the state's direct benefit, or (3) at the state's specific behest. It acts in an exclusively state capacity when it "exercises powers traditionally exclusively reserved to the state(,)" for the state's direct benefit when it shares the rewards and responsibilities of a private venture with the state, and at the state's specific behest when it does a particular act which the state has directed or encouraged.

Id. at 1025.

A. Standard of Review

We review de novo a district court's dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Greenhouse v. MCG Capital Corp., 392 F.3d 650, 655 (4th Cir.2004). In considering such a motion, we accept as true all well-pleaded allegations and view the complaint in the light most favorable to the plaintiff. Mylan Labs., 7 F.3d at 1134. In counterbalance to this plaintiff-centered analysis, we recently stated:

To survive a Rule 12(b)(6) motion, "[f]actual allegations must be enough to raise a right to relief above the speculative level" and have "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 1974, 167 L.Ed.2d 929 (2007). Moreover, the court "need not accept the [plaintiff's] legal conclusions drawn from the facts," nor need it "accept as true unwarranted inferences, unreasonable conclusions, or arguments." Kloth v. Microsoft Corp., 444 F.3d 312, 319 (4th Cir.2006) (internal quotation marks omitted).

Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 616 n. 26 (4th Cir.2009).

In reviewing a Rule 12(b)(6) dismissal, we may properly take judicial notice of matters of public record. Hall v. Virginia, 385 F.3d 421, 424 (4th Cir.2004) (noting it was proper during Rule 12(b)(6) review to consider "publicly available [statistics] on the official redistricting website of the Virginia Division of Legislative Services.") (citing Papasan v. Allain, 478 U.S. 265, 268 n. 1, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)) ("Although this case comes to us on a motion to dismiss ..., we are not precluded in our review of the complaint from taking notice of items in the public record...."). We may also consider documents attached to the complaint, see Fed. R.Civ.P. 10(c), as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic. See Blankenship v. Manchin, 471 F.3d 523, 526 n. 1 (4th Cir.2006).

B. Analysis

Title 42 U.S.C. § 1983 is a federal statutory remedy available to those deprived of rights secured to them by the Constitution and, in a more sharply limited way, the statutory laws of the United States. Section 1983 provides pertinently as follows:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress....

42 U.S.C. § 1983.

One alleging a violation of section 1983 must prove that the charged state actor (1) deprived plaintiff of a right secured by the Constitution and laws of the United States, and (2) that the deprivation was performed under color of the referenced sources of state law found in the statute. Adickes v. S.H. Kress & Co., 398 U.S. 144, 150, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Mentavlos v. Anderson, 249 F.3d...

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