Sisters of Providence v. AA Pain Clinic

• Decision Date: 19 December 2003
• Docket Number: No. S-10419., No. S-10390
• Citation: 81 P.3d 989
• Parties: SISTERS OF PROVIDENCE IN WASHINGTON, d/b/a Providence Hospital, Anchorage, a Washington nonprofit corporation, and Providence Anchorage Anesthesia Medical Group, Appellants, v. A.A. PAIN CLINIC, INC., an Alaska corporation, Michael T. Borrello, M.D., and Alaska Pain Management Clinic, LLC, Appellees. A.A. Pain Clinic, Inc., and Michael T. Borrello, M.D., Cross-Appellants, v. Sisters of Providence in Washington, d/b/a Providence Hospital, Anchorage, a Washington nonprofit corporation, Providence Anchorage Anesthesia Medical Group, and Alaska Pain Management Clinic, LLC, Cross-Appellees.
• Court: Alaska Supreme Court

81 P.3d 989

SISTERS OF PROVIDENCE IN WASHINGTON, d/b/a Providence Hospital, Anchorage, a Washington nonprofit corporation, and Providence Anchorage Anesthesia Medical Group, Appellants, v. A.A. PAIN CLINIC, INC., an Alaska corporation, Michael T. Borrello, M.D., and Alaska Pain Management Clinic, LLC, Appellees.

A.A. Pain Clinic, Inc., and Michael T. Borrello, M.D., Cross-Appellants, v. Sisters of Providence in Washington, d/b/a Providence Hospital, Anchorage, a Washington nonprofit corporation, Providence Anchorage Anesthesia Medical Group, and Alaska Pain Management Clinic, LLC, Cross-Appellees.

Nos. S-10390, S-10419.

Supreme Court of Alaska.

December 19, 2003.

John A. Treptow, Jeffrey J. Jarvi, Dorsey & Whitney LLP, Anchorage, for Appellants and Cross-Appellees.

Richard W. Maki, David H. Shoup, Tindall Bennett & Shoup, Anchorage, for Appellees and Cross-Appellants A.A. Pain Clinic, Inc., and Michael T. Borrello.

Before: FABE, Chief Justice, MATTHEWS, EASTAUGH, and CARPENETI, Justices.

OPINION

MATTHEWS, Justice.

Sisters of Providence in Washington, d/b/a Providence Hospital Anchorage ("Providence"), entered into an exclusive contract with Providence Anchorage Anesthesia Medical Group ("the Group") for chronic pain management services. Leon Chandler, M.D., and Michael Borrello, M.D., are anesthesiologists who were excluded by the contract and claim to have been harmed by it. They sued for anti-competitive conduct and received a jury award that was in part set aside by the trial court. This case involves a number of challenges to the verdict and to the trial court's rulings.

BACKGROUND

The following facts appear to be uncontested. In 1989 Dr. Leon Chandler launched A.A. Pain Clinic, Inc. ("A.A.Pain")¹ to devote more of his practice to pain management.² Within the relevant time periods Chandler has also had medical staff privileges at Providence.

On August 25, 1992, Providence and the Group finalized an agreement ("1992 exclusive") granting the Group exclusive rights to provide "anesthesia services" at Providence for two years. The 1992 exclusive defined "anesthesia services" as "the practice of medicine dealing with the management of procedures for rendering a patient insensitive to pain and emotional stress during surgical, obstetric, and other medical procedures and the support of life functions under the stress of anesthetic and surgical procedures." Nothing in the contract indicated that chronic pain management and treatment, as opposed to acute pain treatment, was within its range of services—a possibility previously considered but apparently not adopted by the Group.

In April 1994 the Group hired Dr. James Laidler, an anesthesiologist trained in chronic pain management. Also around that time, the Group opened up its own chronic pain treatment facility, the Alaska Pain Management Clinic, LLC ("APMC").

Providence and the Group renewed and amended their exclusive contract in 1994 ("1994 exclusive"), for the first time including "pain management" within the professional services definition. Also new to this definition was a provision stating, "[n]otwithstanding the above, this agreement is not intended to reduce or limit the existing practice of Dr. Leon Chandler."

Though expressing concerns about the impact the exclusive would have on his practice, Chandler chose not to join the Group before or after either the 1992 or 1994 exclusive. He did however communicate his concerns in at least two letters in 1994 to Dr. Michael Norman, Chief of Anesthesia Department at Providence, and a prominent shareholder of the Group. In those letters Chandler asked for an assurance in writing which would delineate his established privileges at the hospital, as it was his understanding that he was being "grand-fathered in to do pain management at Providence." He also inquired about the privilege status of his colleague, Dr. Swift, suggesting that Swift was needed to cover any problems that might arise when Chandler was out of town.

In January 1995 Providence and the Group signed a "Letter of Understanding," indicating that it came in direct response to questions raised by Chandler: "He is specifically concerned about whether his privileges are being reduced and whether he will be able to obtain coverage for his patients during his absence." The Letter of Understanding purported not to affect Chandler's existing privileges at Providence and further stated that doctors having "the appropriate medical staff privileges" would be allowed to cover for Chandler during his absence.

In August 1995 A.A. Pain hired anesthesiologist Dr. Michael Borrello. Borrello immediately applied for clinical privileges for both anesthesia and pain management at several hospitals, including Providence. Providence granted him limited privileges confined to covering Chandler's patients when Chandler was out of town.

Meanwhile, APMC had problems retaining the services of its chronic pain management physicians and twice had to shut down operations for lack of specialists. During the closures some pain management patients were referred to Chandler.

In February 1998 Chandler's patient S.H., a "more or less" comatose woman suffering from severe spasticity, required a treatment intended to reduce her condition. Because he was leaving on vacation the next day, Chandler referred S.H. to Borrello. Borrello scheduled the procedure at Providence, but because Chandler had by that time returned from vacation, Providence canceled the procedure in response to objections from the Group's Dr. Norman. Chandler (through A.A. Pain) and Borrello immediately filed a complaint together with a motion for a temporary restraining order. The motion was granted and the procedure was performed at Providence after at least a one-day delay. The initial complaint was then twice amended, pleading the claims that are the subject of this appeal.

In October 1998 Providence and the Group removed the clause regarding chronic pain management from their exclusive contract, and since November 1, 1998, both Borrello and Chandler have had full privileges at the hospital.

PROCEEDINGS

Borrello and Chandler (through his professional corporation A.A. Pain Clinic, Inc. ("Chandler")) sued Providence, the Group and APMC for various types of anti-competitive conduct. Their amended complaint included common law claims for intentional interference with a contract, intentional interference with prospective economic advantage, breach of contract, and breach of the implied covenant of good faith and fair dealing. They also pleaded two state anti-trust claims, one for unreasonable restraint of trade in violation of AS 45.50.562, and one for attempted monopolization in violation of AS 45.50.564.

A jury trial ensued. On a special verdict form the jury reached a verdict that was generally favorable to the plaintiffs. The jury found that the defendants had unreasonably restrained trade and that as a result Chandler had been damaged in the sum of $44,958 by Providence and in the sum of $89,916 by the Group. The jury found that Chandler had not been damaged by APMC by an unreasonable restraint of trade, and that Borrello had not been damaged by any of the defendants by reason of an unreasonable restraint of trade. The jury also found that at least one of the defendants had engaged in predatory or exclusionary conduct with a specific intent to achieve monopoly power, but there was no probability that such a defendant would achieve its goal of monopoly power in the relevant market. In view of this, the jury did not assess damages under the attempted monopolization claim.

As to the tort claims, the jury found that all three defendants had intentionally interfered with a contract between Chandler and patient S.H. The jury also found that the Group, but not APMC, had intentionally interfered with a contract between Borrello and Providence. As to the claim of intentional interference with prospective economic advantage, the jury found that only the Group had intentionally interfered with Chandler and Borrello's prospective economic advantages. Three contract claims were presented. The jury found Providence did not breach its medical staff agreement with Borrello, nor did it breach the covenant of good faith and fair dealing in a contract with Borrello. The jury found that Providence breached the covenant of good faith and fair dealing in a contract with Chandler.

The jury assessed damages on the tort and contract claims as follows: in favor of Chandler against Providence, $292,480; in favor of Chandler against the Group, $292,480; in favor of Chandler against APMC, $146,240; in favor of Borrello against the Group, $365,600.

Subsequent to the verdict the defendants moved for judgment notwithstanding the verdict ("j.n.o.v."). The court granted their motion in part. Specifically, the court granted j.n.o.v. as to the award of $292,480 in favor of Chandler against Providence for breach of the covenant of good faith and fair dealing. The court concluded that there was no evidence that A.A. Pain, as distinct from Chandler personally, had a contract with Providence. That same damages award also included Chandler's successful claim against Providence for intentional interference with the S.H. contract. The superior court vacated this claim as well because it found that Chandler had not presented any evidence as to the monetary loss arising from interference with this contract. For the same reason, the court also granted j.n.o.v. on the verdict for Chandler against APMC for $146,240 for intentionally interfering with the contract between Chandler and S.H. But the court did not grant j.n.o.v. as to Chandler's $292,480 award against the Group based on intentional interference with the S.H. contract. The court found that even though this particular claim lacked evidentiary support as to damages, the monetary award also included Chandler's claim against the Group for interference with prospective economic...