United States District Court, Southern District of New York
September 10, 1991
FLETCHER J. JOHNSON, M.D. AND BENJAY REALTY CORP., PLAINTIFFS,
NYACK HOSPITAL, KENNETH STEINGLASS, M.D., DANIEL BERSON, M.D., JAMES DAWSON AND ROCKLAND THORACIC ASSOCIATES, P.C., DEFENDANTS.
The opinion of the court was delivered by: Sweet, District Judge.
Defendants Nyack Hospital ("Nyack"), Daniel Berson, M.D.
("Berson"), James Dawson ("Dawson"), Kenneth Steinglass, M.D.
("Steinglass"), and Rockland Thoracic Associates, P.C.
("Rockland") have moved pursuant to Rule 56, Fed.R.Civ.P. for
summary judgment dismissing the complaint of plaintiffs
Fletcher J. Johnson, M.D. ("Johnson"), and Benjay Realty
Corporation ("Benjay"), as well as for attorneys' fees and
costs. For the reasons set forth below, the summary judgment
motions are granted. The motions for attorneys' fees are
denied, but the motions for costs are granted.
Johnson, a New York resident, is a physician licensed to
practice in the states of New York and New Jersey. In 1972,
Johnson was granted privileges to perform vascular and thoracic
surgery at Nyack, a voluntary not-for profit hospital located
in Nyack, Rockland County, New York.
Benjay is a New York corporation with its principal place of
business in Upper Nyack, New York. At all relevant times,
Benjay was owned and controlled by Johnson.
Steinglass, a New York resident, is chief of thoracic and
vascular surgery at Nyack. Berson was the director of the
Department of Surgery during the period relevant to
the complaint. Dawson served as Nyack's administrator during
the relevant period.
Rockland is a New York professional corporation owned by
Steinglass and Alfred Moscarella, M.D.
On February 8, 1990, Johnson and Ben-jay filed their
complaint alleging violations of the federal antitrust laws and
tortious interference with economic advantage. The complaint
alleged that Steinglass and Dawson conspired to revoke
Johnson's privileges to perform thoracic and vascular surgery
at Nyack in order to eliminate Johnson as a competitor in the
market for thoracic and vascular surgery services.
The complaint alleged Johnson competed in the relevant market
with other doctors at Nyack and had privileges to perform this
type of surgery at other hospitals in Rockland County as well
as plans to establish a "medical mall" in the area. According
to the complaint, Johnson in 1984 announced plans for the
"medical mall" — a treatment center that was to provide in a
single location services from various specialists.
On August 30, 1990, Steinglass and Rockland filed their
summary judgment motions. On October 18, 1990, Nyack, Berson
and Dawson filed their summary judgment motions. A series of
adjournments agreed to by the parties postponed the return date
of the motion until May 30, 1991, as of which date the motion
was considered fully submitted.
The Steinglass Review
On January 1, 1985, Steinglass began his first three year
term of service as chief of the Section of Thoracic and
Vascular Surgery at Nyack (the "Section").
Under Nyack's by-laws (the "By-Laws"), a section chief is
"accountable for all professional . . . activities within his
department." By-Laws Art. V, § 3(1). Shortly after being named
section chief, Steinglass met with Berson and Dawson to discuss
quality of care in the Section and agreed to conduct a review
of all cases performed by Section members. The review consisted
of an examination of all 222 cases performed by the nine
Section members over the period from December, 1984 through
June 1985. The review analyzed each surgeon's technique,
judgment and documentation skills.
Steinglass concluded from the review that Johnson's
performance fell below minimally acceptable standards.
Steinglass recommended to Berson the revocation of Johnson's
medical staff privileges to perform thoracic and vascular
The Experts' Review
Before taking any further action, Nyack retained two
independent experts in thoracic and vascular surgery — Dr.
E.F. Conklin ("Conklin") and Dr. Graham W. Knox ("Knox") — to
review Johnson's thoracic and vascular cases. The experts, in
separate and independent reports, also found that Johnson
provided substandard care.
Nyack's Revocation Decision
On January 28, 1987, Berson informed Nyack's Credentials
Committee that the Department of Surgery recommended that
Johnson's thoracic and vascular surgery privileges not be
On February 10, 1987, Nyack's Credentials Committee held a
special meeting to consider Berson's recommendation. At this
meeting, Steinglass presented the conclusion reached in his
report. The Steinglass, Knox, and Conklin reports were made
available for the Credentials Committee members' review. The
Credentials Committee recommended the revocation of Johnson's
thoracic and vascular surgery privileges, based on the Surgery
Department's recommendations, the reports of Steinglass and the
two experts, and its own review.
In accordance with procedures required under the By-Laws,
Nyack's Medical Executive Committee met on February 10, 1987 to
consider the matter. Under the By Laws, the Medical Executive
Committee consists of the directors of each department; the
President, past President, and Secretary-Treasurer of the
medical staff; and three active members of the medical staff
elected by the medical staff. Twenty-four
members of the Nyack medical staff attended this meeting as
members of the Medical Executive Committee. Of that group
— which represented the full range of specialties at Nyack —
all but two voted in favor of rescinding Johnson's thoracic and
vascular surgery privileges.
According to the minutes of the meeting, Steinglass again
presented his report, the chairman of the Credentials Committee
sent a letter setting forth its decision, and Berson summarized
the expert opinions from Conklin and Knox. The Medical Ethics
Committee members also received copies of the expert reports.
The minutes further report that:
Upon motion, after lengthy discussion, the
recommendations that Dr. Fletcher Johnson's
privileges in thoracic/vascular surgery be
rescinded be approved. There was 1 opposed and 1
abstention. This will become effective
immediately. A letter will be sent to Dr. Johnson
informing him of this and advising him of what
options are now available to him.
By letter of February 10, 1987, the chairman of the Medical
Ethics Committee informed Johnson of the Medical Executive
Committee's action. In that letter, he stated that the
revocation of Johnson's privileges to practice thoracic and
vascular surgery at Nyack would take effect the next day. The
letter further stated that the Medical Executive Committee's
action had been referred to the Peer Review and Ethics
Committee for an investigation to commence within ten days and
that Johnson would be contacted about receiving, pursuant to
the By-Laws, a formal interview in front of that committee.
On February 24, 1987, Nyack's Peer Review and Ethics
Committee reviewed and voted to uphold the Medical Ethics
Committee's decision to revoke Johnson's privileges. Johnson
was present at the February 24 meeting.
At the meeting, Steinglass made an oral presentation of his
findings and of the reports of Knox and Conklin. Johnson raised
claims of bias and incomplete records with regard to the
previous proceedings. The decision to revoke Johnson's
privileges was effective immediately.
The State Court Action
Johnson subsequently commenced an action in New York State
Supreme Court for Rockland County seeking a preliminary and
permanent injunction reinstating his thoracic and vascular
The Supreme Court dismissed Johnson's complaint for failure
to exhaust administrative remedies, i.e., the intra-hospital
due process hearing — to which he was entitled under the
By-Laws — and the statutorily required proceeding before the
New York State Public Health Counsel, an agency specifically
charged with ruling on physicians' staff privilege grievances.
The Independent Officer Hearing
Pursuant to the By-Laws, Johnson requested a review of the
Peer Review and Ethics Committee's decision before an
independent hearing officer. Under Article III § 8(2) of the
By-Laws, Nyack appointed Dr. Julius Jacobson ("Jacobson"), a
practicing surgeon at Mt. Sinai Hospital and a professor of
surgery at Mt. Sinai Medical School as the independent hearing
When informed of Nyack's selection of Jacobson, Johnson's
counsel objected on the grounds that Jacobson had some prior
familiarity with the case. Nyack responded that the appointment
of a hearing officer is "within the province of the Hospital."
The hearing was held on December 17, 1987, from 8:00 a.m.
until 3:30 p.m. Before the hearing, Nyack supplied Johnson and
his counsel with copies of Steinglass' report, copies of the
reports by Conklin and Knox, as well as medical records
relating to the thoracic and vascular surgery cases to be
reviewed at the hearing.
Under the procedures set forth in the By-Laws, Johnson was
represented by counsel at the hearing. Pursuant to his rights
under the By-Laws, he presented expert testimony on his behalf
and he was given the opportunity to cross examine Nyack's
Testimony proceeded on a case-by-case basis: Steinglass
presented each case. After Steinglass' presentation, either
or Knox would present its opinion as Nyack's expert. Then
Johnson and his expert witness were given the opportunity to
present their testimony. Johnson testified concerning each
case, and presented expert testimony from both a thoracic
surgeon and a vascular surgeon on many of these cases.
Article III, Section 8(2) of the By-Laws provides that:
The hearing shall proceed with the Medical
Executive Committee's position, then the
practitioner's position followed by any rebuttal
on the part of the Medical Executive Committee and
any rebuttal on the part of the practitioner.
Jacobson asked for and received from Nyack records pertaining
to Johnson's 20 most recent abdominal aortic aneurysm cases.
By letter of January 22, 1988, Jacobson reported his
conclusion to Nyack:
. . My opinion is that [Johnson]'s privileges to
practice Vascular Surgery and Thoracic Surgery
should be revoked.
Post Hearing Proceedings
Under the By-Laws, any appeal from a determination of a
hearing officer appointed pursuant to Article III, Section 8,
is to be made to Nyack's Joint Conference Committee. Johnson
took such an appeal and, in accordance with the By-Laws, both
Nyack and Johnson submitted written memoranda setting forth
their positions. In his memorandum to the Joint Conference
Committee, Johnson asserted that Jacobson was not impartial,
based on Johnson's contacts with Jacobson before the hearing,
in which he asked Jacobson to review his case to determine
whether Jacobson could supply expert testimony on Johnson's
Jacobson submitted an affidavit in which he stated that
Johnson had indeed asked him to review some of his cases many
months before the hearing and that Jacobson had no recollection
of this when Nyack asked him to serve as Hearing Officer.
Nyack decided to offer Johnson another hearing. After several
attempts to designate a new hearing officer, Johnson, in a
letter through counsel of June 16, 1989, told Nyack that in
light of the "utter futility of the process" Johnson refused to
go forward with a new hearing.
In a letter of July 6, Nyack responded that it would still be
willing to schedule a hearing, but would wait for a response
from Johnson before doing so.
Johnson did not pursue this right to a review by Nyack's
Joint Conference Committee, nor has he sought relief from the
New York State Public Health Council (the "PHC").
I. Summary Judgment Standard
Under Rule 56, a motion for summary judgment shall be granted
when the moving party demonstrates as a matter of law that he
is entitled to that remedy because there are no genuine issues
of material fact present in the action. H.L. Hayden Co. v.
Siemens Medical Systems, Inc., 879 F.2d 1005, 1011 (2d Cir.
1989). The moving party, however, has the burden of
demonstrating the absence of any genuine issue as to all the
material facts, and the non-moving party is entitled to all
favorable inferences that may be drawn from the evidence. Quinn
v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 444-45 (2d
II. The Antitrust Claims
A. Exhaustion of Administrative Remedies
Section 2801-b of the New York Public Health Law (McKinney's
1991) ("§ 2801-b") provides, in pertinent part, that:
(1) It shall be an improper practice for the
governing body of a hospital to . . . terminate or
diminish in any way a physician's . . .
professional privileges in a hospital, without
stating the reasons therefor, or if the reasons
stated are unrelated to standards of patient care,
patient welfare, the objectives of the institution
or the character of competency of the applicant.
(2) Any person claiming to be aggrieved by an
improper practice . . . may, by himself
or his attorney, make, sign and file with the
public health council a verified complaint . . .
The New York Court of Appeals has held that § 2801-b requires
doctors aggrieved by a hospital's denial of privileges to
present their claims to the PHC before pursuing a judicial
remedy. Guibor v. Manhattan Eye, Ear & Throat Hospital, Inc.,
46 N.Y.2d 736, 413 N.Y.S.2d 638, 386 N.E.2d 247 (1978); accord
Cohoes Memorial Hospital v. Dep't of Health, 48 N.Y.2d 583, 424
N YS.2d 110, 399 N.E.2d 1132 (1979).
Federal Courts, moreover, have applied the exhaustion rule as
set forth in Guibor to dismiss federal antitrust actions.
Rockland Physician Assocs., P. C. v. Grodin, 616 F. Supp. 958
(S.D.N.Y. 1985). In Rockland, plaintiff, an anesthesiologist,
commenced an antitrust action after the hospital granted to a
separate group of anesthesiologists the exclusive right to
practice anesthesiology. The plaintiff neither invoked the
hospital's internal hearing procedures nor the PHC's
administrative remedies before commencing the antitrust action.
In granting the defendants' motion to dismiss, the court held
that plaintiff should exhaust any administrative remedies under
the Public Health Law before commencing an action. Id. at
Moreover, the instant case is perhaps an even more
appropriate case than Rockland in which to require exhaustion
of administrative remedies in as much as the antitrust claims
in the instant case arise not out of an alleged exclusive
dealing contract, but rather from a competency determination,
which type of determination the PHC makes on a daily basis. See
Litman v. A. Barton Hepburn Hospital, 1982-83 Trade Cas. (CCH)
¶ 65,161, 1983 WL 1780 (N.D.N.Y. 1983) (dismissing antitrust
claim arising out of denial of privileges for failure to
exhaust administrative remedies).
Johnson cites Giannelli v. St. Vincent's Hospital and Medical
Center, 160 A.D.2d 227, 553 N.Y.S.2d 677 (1st Dep't 1990) for
the proposition that application of an exhaustion requirement
to the instant case is inappropriate where, as here, the claim
for relief arises outside of § 2801-b. In Giannelli, however,
the plaintiff's claims were for breach of contract and for
defamation, which the court held exist under common law aside
from the procedure set forth in § 2801-b. Id.
Johnson also cites one federal case, Furlong v. Long Island
College Hospital, 1984-1 Trade Cas. (CCH) ¶ 65, 994 (E.D.N Y
1984) for this same proposition. However, there the exclusion
of a physician resulted from the operation of an exclusive
contract, and not from medical peer review findings of
incompetence. Moreover, the court in Furlong relied on the
proposition that a state legislature cannot proscribe the
federal question jurisdiction of the federal courts. Here,
however, it is not argued that the PHC remedy entirely divests
this court of jurisdiction to hear Johnson's antitrust claim,
but rather that this court's jurisdiction of the antitrust
claim requires prior exhaustion of administrative remedies.
Indeed, the Honorable David N. Edelstein considered this same
question in a recent opinion. In Purgess v. Sharrock, No. 89
Civ. 8096, slip. op., 1990 WL 104024 (S.D.N.Y. July 18, 1990),
the court dismissed plaintiff physician's antitrust claims,
based upon defendants' termination of his medical staff
privileges, for failure to exhaust his administrative remedies
before the PHC, on the grounds that if a plaintiff can avoid
the exhaustion requirement by including federal claims in his
complaint, such plaintiff "could then render § 2801(b)
meaningless . . ." Id. Likewise in the instant case, Johnson's
termination forms the basis for his antitrust claims.
Finally, even assuming, as Johnson argues, that § 2801-b does
not strictly require administrative exhaustion before bringing
an antitrust claim in federal court, the PHC's investigation of
Nyack's decision pursuant to § 2801-b(3) would serve judicial
economy by considering the reasonableness of Nyack's decision
in the first instance, see Fried v. Straussman, 41 N.Y.2d 376,
381, 393 N.Y.S.2d 334, 338, 361 N.E.2d 984, 988 (1977) (PHC
charged with responsibility to determine whether there
existed objectively reasonable grounds for hospital's
decision), possibly saving this court from making a similar
determination under the Health Care Quality Improvement Act of
1986, 42 U.S.C. § 11101 et seq. (the "Act").*fn1
As Johnson has not yet exhausted his administrative remedies
before the PHC, and as Johnson is required as a matter of law
to exhaust such remedies, the summary judgment motions
dismissing the antitrust claims must be granted.
III. Tortious Interference Claim
For the reasons stated above, Johnson's tortious interference
claims also require administrative exhaustion. Moreover, in the
absence of the antitrust claims, this court has no pendent
jurisdiction to hear the state law claims. Accordingly, summary
judgment dismissing the tortious interference claims must also
IV. Motions for Attorneys' Fees and Costs
Nyack, Berson, Dawson, Steinglass, and Rockland have also
moved for attorneys' fees and costs pursuant to the Act,
42 U.S.C. § 11113.
Section 11113 provides:
In any suit brought against a defendant, to the
extent that a defendant has met the standards set
forth under section 11112(a) of this title and the
defendant substantially prevails, the court shall,
at the conclusion of the action, award to a
substantially prevailing party defending against
any such claim the cost of the suit attributable
to such claim, including a reasonable attorney's
fee, if the claim, or the claimant's conduct
during the litigation of the claim, was frivolous,
unreasonable, without foundation, or in bad faith.
In the instant case, Nyack, Berson, Dawson, Steinglass, and
Rockland have substantially prevailed insofar as their summary
judgment motions have been granted. The court has not found it
necessary to determine for the purposes of the summary judgment
motions whether Nyack, Berson, Dawson, Steinglass, and Rockland
met the standards set forth in § 11112(a) of the Act. For the
purposes of the attorneys' fees and costs motions, however,
Nyack, Berson, Dawson, Steinglass and Rockland have made a
showing of compliance with the reasonableness standards as set
forth in the Act based on the undisputed facts relating to the
review procedures accorded Johnson and on those undisputed
facts from which it can be inferred that Nyack, Berson, Dawson,
Steinglass and Rockland acted in the reasonable belief that
they were furthering quality health care. However, the
undisputed facts also show that the complaint was not frivolous
or entirely without foundation. Therefore, the motions for
attorney's fees is denied, but the motions for costs are
For the reasons set forth above, the summary judgment motions
are granted and the complaint is dismissed. The motions for
attorneys' fees are denied, but the motions for costs are
granted. Settle judgment on notice.
It is so ordered.