Samaritan Health Sys. v. Superior Court of State

• Citation: 981 P.2d 584,194 Ariz. 284
• Decision Date: 24 September 1998
• Docket Number: 1CA-SA97-0386.
• Parties: SAMARITAN HEALTH SYSTEM, d/b/a/ Thunderbird Samaritan Medical Center, an Arizona nonprofit corporation, Petitioner, v. SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of Maricopa, the Honorable Donald Daughton, a judge thereof, Respondent Judge, Edward L. Schwartz, M.D., Real Party in Interest.
• Court: Court of Appeals of Arizona

981 P.2d 584

194 Ariz. 284

SAMARITAN HEALTH SYSTEM,d/b/a/ Thunderbird Samaritan Medical Center, an Arizona nonprofit corporation, Petitioner, v. SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of Maricopa,

the Honorable Donald Daughton, a judge thereof, Respondent Judge,

Edward L. Schwartz, M.D., Real Party in Interest.

No. 1CA-SA97-0386.

Court of Appeals of Arizona, Division 1, Department D

Reconsideration Denied December 8, 1998

Review Denied May 25, 1999

September 24, 1998

Attorney(s) appearing for the Case

Mariscal, Weeks, McIntyre & Friedlander, P.A. by Gerald Gaffaney, Anne L. Tiffen, Phoenix, for Petitioner.

Ulrich, Kessler & Anger, P.C. by Donn G. Kessler and Marton & Hall, P.A. by Kraig J. Marton, Phoenix, for Real Party in Interest.

Coppersmith & Gordon P.L.C. by Andrew S. Gordon, Phoenix, for Amicus Curiae Arizona Hospital and Healthcare Association.

Teilborg, Sanders & Parks, P.C. by Kari B. Zangerle, Phoenix, for Amicus Curiae Hospital Corporation of Northwest, Inc., d.b.a. Columbia Northwest Medical Center.

WEISBERG, Judge.

¶ 1 Samaritan Health Systems ("Samaritan") filed this special action after the trial court denied its motion for summary judgment which was based, in part, on its alleged statutory immunity from this lawsuit. Dr. Edward L. Schwartz ("Schwartz") brought the underlying suit seeking damages for breach of contract and wrongful interference with prospective contractual relations ("wrongful interference"). His claims were based upon Samaritan's failure to afford him either notice or a hearing, as required by the Samaritan Health Systems Peer Review Bylaws ("Bylaws"), when it summarily suspended him from the emergency room call list ("ER-Call").¹ Samaritan responded by arguing that: (1) the Bylaws are not a contract; (2) if they are, it did not breach that contract, and (3) that it is statutorily immune from any action for damages, even if it failed to comply with its own bylaws, because it was conducting peer review. See Ariz.Rev.Stat. Ann. ("A.R.S.") § 36-445.02 (Supp.1997) ("§ 36-445.02").

¶ 2 We accept special action jurisdiction and grant relief in part.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 Schwartz is a cardiologist who has been a licensed physician for thirty-two years and was a staff member at Thunderbird Samaritan Medical Center, a hospital run by Samaritan, for more than twelve years. In 1994, Schwartz applied to renew his staff membership. "While evaluating his renewal application through its peer review process, Samaritan's Medical Committee expressed concerns about the quality of Schwartz's patient care. As a result, his renewal application was denied, and he was suspended from ER-Call as of February 16, 1994. No administrative review or hearing was held regarding this suspension.

¶ 4 On July 1, 1994, Schwartz sent a letter to Samaritan requesting an "appeal" of the suspension of his membership privileges, including ER-Call. No appeal was granted. On August 1, 1994, Samaritan began a formal investigation into Schwartz's practice patternsand suggested that possible corrective action might be taken. After negotiations between Schwartz and Samaritan, Samaritan's in-house counsel wrote a letter stating that Samaritan did not believe ER-Call was a privilege of membership and therefore Schwartz was not entitled to a hearing. But, on April 6, 1995, Samaritan informed Schwartz he could address the ER-Call suspension before a fair hearing panel, which would consider his membership.

¶ 5 On November 15, 1995, the fair hearing panel recommended that Schwartz retain his medical staff membership and privileges but that he undergo a psychological evaluation for burnout. The Medical Executive Committee subsequently voted to reinstate Schwartz but recommended that his skills be evaluated by the University of Arizona College of Medicine. On March 27, 1996, the Hospital Appeals Panel recommended that Schwartz's privileges be reinstated with the only corrective action being the review of his charts. A few weeks later, the Samaritan Board of Directors, in an ex parte proceeding, voted to require an evaluation of Schwartz's skills and a psychological assessment for him to retain membership. Schwartz responded by resigning from the hospital and filing a complaint² claiming that, by not affording him an expedited hearing regarding his suspension, Samaritan breached the terms of the contract as set forth in the Bylaws. He also claimed that Samaritan committed wrongful interference with prospective business relations.

¶ 6 Following discovery, both sides moved for summary judgment: Schwartz asking for judgment on liability; Samaritan arguing that the Bylaws are not a contract, that ER-Call is not a privilege of membership, and that it is statutorily immune from this suit. The trial court granted Samaritan's motion, finding that ER-Call is not a privilege of membership.

¶ 7 Schwartz, however, filed a motion for new trial and the trial court vacated the previous summary judgment. The court held that the Bylaws constitute a contract and that membership at Samaritan includes the right to participate in ER-Call. Further, it found that the failure to provide Schwartz a hearing could constitute a breach of that contract. Samaritan then filed another motion for summary judgment, asserting, among other issues, that it is statutorily immune from damages. The court denied the motion and set this matter for trial.

¶ 8 Samaritan filed this petition for special action, arguing that it is immune from the lawsuit because Schwartz's suspension occurred during peer review and that Samaritan will suffer irreparable harm if forced to go to trial. See § 36-445.02. Schwartz responds that this lawsuit is for breach of contract, not a challenge to results of the peer review process, and thus falls outside the parameters of § 36-445.02. Further, he argues that such application of the statute would violate Article 18, section 6 of the Arizona Constitution ("the anti-abrogation clause"). After reviewing the initial briefs, we requested additional briefing on the following issue: Does the anti-abrogation clause apply exclusively to tort claims or does it extend to common law contract claims?

¶ 9 For the following reasons, we conclude that the breach of contract damage claims are barred by § 36-445.02, but that, because of the paucity of the record before us, the tortious interference claim may proceed at this time. We therefore accept jurisdiction and grant relief in part.

DISCUSSION

I. Special Action Jurisdiction

¶ 10 Denial of a motion for summary judgment is inappropriate for special action jurisdiction except in very unusual cases. See Salt River Valley Water Users' Ass'n v. Superior Ct., 178 Ariz. 70, 73, 870 P.2d 1166, 1169 (App.1993). One of those unusual cases is when a defendant has claimed immunity from suit. See id. "[I]f one is 'erroneously forced to stand trial, he has lost the benefit of immunity, even if he is found not liable.'" Id. (citations omitted).

Section 36-445.02(B) grants such immunity from suits for damages: "The only legal action which may be maintained by a licensed health care provider based on the performance or nonperformance of such [peer review] duties and functions is an action for injunctive relief." Furthermore, peer review is statutorily required for all hospitals in the state, see A.R.S. § 36-445; therefore clarification of hospitals' exposure to suit from the peer review process is of statewide importance. Because appeal is not an adequate remedy for Samaritan, and because the issue is one of statewide importance, we exercise our discretion and accept jurisdiction.

II. Standard of Review

¶ 11 We review a denial of a motion for summary judgment for an abuse of discretion. See id. at 74, 870 P.2d at 1170. In reviewing a motion for summary judgment, we assume that all facts alleged by the party opposing the motion are true and make all reasonable inferences in favor of that party. See id.

III. The Bylaws Are A Contract

¶ 12 In arguing that the Bylaws constitute a contract, Schwartz finds support in Bock v. John C. Lincoln Hospital, 145 Ariz. 432, 437-38, 702 P.2d 253, 258-59 (App.1985), wherein this court held that hospital bylaws can constitute a contract between a hospital and doctor. In Bock, a doctor brought an action seeking injunctive relief for breach of contract because the hospital did not follow its Fair Hearing Plan. See id. We found that the hospital bylaws were sufficient to warrant a breach of contract action. See id.

¶ 13 Further, Arizona courts have allowed members of private associations that fail to abide by their own bylaws to bring actions for breach of contract. See Rowland v. Union Hills Country Club, 157 Ariz. 301, 304, 757 P.2d 105, 108 (App.1988) ("The rights of members of a private organization are governed by the articles of incorporation and by-laws, which constitute a contract between the members and the organization..."); Savoca Masonry Co. v. Homes & Son Constr. Co., 112 Ariz. 392, 395-96, 542 P.2d 817, 820-21 (1975).³ We therefore agree with the trial court that these Bylaws constitute a contract.⁴

A. Samaritan's Actions Breached The Contract

¶ 14 Contract interpretation is a question of law we review de novo. See Arizona Biltmore Estates Ass'n v. Tezak, 177 Ariz. 447, 448, 868 P.2d 1030, 1031 (App.1993); Barry v. Alberty, 173 Ariz. 387, 389, 843 P.2d 1279, 1281 (App.1992). Section 1.1 of the Fair Hearing Plan provides that "[a]ny practitioner whose membership and/or privileges are denied, revoked, suspended, reduced, or otherwise limited shall be entitled to a hearing ... unless such limitation constitutes nonreviewable action as defined in the Medical Staff Bylaws." (emphasis added).⁵

¶ 15 Under section 3.2-11, "[e]ach Staff member, regardless of assigned staff category... shall ... [p]articipate in mandatory call coverage." See also Bylaws §§ 3.1 ("Staff membership is a privilege extended to practitioners who continuously meet standards and requirements set forth in...