The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
NO.: 5:18-CV-540-H
HARITHA NADENDLA, M.D., )
)
Plaintiff, )
)
)
v. )
) ORDER
WAKEMED d/b/a WAKEMED CARY )
HOSPITAL, )
)
Defendant. )
)
This matter is before the court on defendant Wakemed’s motion
to dismiss for lack of subject matter jurisdiction, or in the
alternative, for failure to state a claim upon which relief may be
granted [DE #10]. Plaintiff has responded, and defendant has
replied. This matter is ripe for adjudication.
Plaintiff’s corrected complaint [DE #6] alleges the following
claims for relief: (1) breach of contract, (2) breach of covenant
of good faith and fair dealing, (3) discrimination under 42 U.S.C.
§ 1981, (4) arbitrary and capricious conduct, and (5) negligence.
Plaintiff seeks compensatory and punitive damages as well as an
injunction.
Plaintiff Haritha Nadendla, M.D. (“plaintiff”) is a physician
who is board certified in the fields of obstetrics and gynecology
and duly licensed to practice medicine in the State of North
Carolina. (Compl. DE #6, ¶3.) She was a member of the medical
staff of defendant hospital, WakeMed Cary Hospital in Cary, North
Carolina (“Wakemed”) beginning in 2010 and had clinical privileges
until June 30, 2017, when she alleges her privileges were
arbitrarily and wrongfully denied by defendant. (Compl. DE #6,
¶¶ 4-5.) She was notified that her privileges would not be renewed
in a letter dated May 31, 2017, citing “clinical concerns.”
(Compl. DE #6, ¶ 24.) She also alleges that she timely requested
a hearing to contest the decision. (Compl. DE #6, ¶ 25.)
She alleges that the terms of defendant’s Medical Staff
Bylaws, Policies and Procedures (“Bylaws”) form a valid and
enforceable contract between plaintiff and defendant. (Compl. DE
#6, ¶ 13.) She brings this action for breach of that alleged
contract as well as for alleged intentional racial discrimination
infringing on contractual rights pursuant to 42 U.S.C. § 1981 and
other claims. She additionally requests an injunction directing
defendant to reappoint her to the Medical Staff or, in the
alternative, to provide her with a new hearing on her application.
Plaintiff alleges that defendant’s actions violated the
Bylaws. (Compl. DE #6, ¶ 14.) She specifically alleges that the
hearing procedure exhibited a lack of fairness and violated her
due process rights guaranteed by the Bylaws. (Compl. DE #6, ¶ 26.)
She alleges the decision to deny her reappointment was not based
on credible or reliable evidence and did not include evidence from
any providers or patients involved in any of the events about which
defendant criticized plaintiff’s medical care. (Compl. DE #6,
¶ 29.) She alleges defendant instead relied on a three-page
summary of peer-reviewed patient case reports prepared by another
physician. (Compl. DE #6, ¶ 36.) The physician who performed the
peer review did not testify during the proceedings. (Compl. DE
#6, ¶ 36.)
Plaintiff alleges that at the hearing she presented credible
evidence by an outside, independent medical expert in OB/GYN
medicine, Dr. Brad Jacobs, who opined that plaintiff’s patient
care was appropriate and consistent with the standard of care and
expectations for an OB/GYN physician privileged at a North Carolina
hospital. (Compl. DE #6, ¶ 42.) Additionally, plaintiff herself
testified along with two of her colleagues, on her behalf. (Compl.
DE #6, ¶ 44.)
Plaintiff alleges the process was conducted in bad faith and
did not attempt to determine whether plaintiff is, in fact,
qualified and competent to be a member of its medical staff.
(Compl. DE #6, ¶ 46.) The loss of staff privileges at defendant
hospital have had other implications for plaintiff, affecting her
ability to obtain staff privileges at other hospitals and causing
her to lose payer contracts. (Compl. DE #6, ¶ 105.)
Plaintiff, a citizen of the United States who is of Indian
origin and a member of a racial minority group alleges that prior
to her losing her clinical privileges, defendant similarly forced
out one or more other physicians of Indian origin and unjustifiably
removed their clinical privileges. (Compl. DE #6, ¶ 89, 117.)
COURT’S DISCUSSION
I. 12(b)(1) Motion
A motion to dismiss under Rule 12(b)(1) of the Federal Rules
of Civil Procedure challenges subject matter jurisdiction. The
plaintiff bears the burden to establish subject matter
jurisdiction. “When a defendant challenges subject matter
jurisdiction pursuant to Rule 12(b)(1), ‘the district court is to
regard the pleadings as mere evidence on the issue, and may
consider evidence outside the pleadings without converting the
proceeding to one for summary judgment.’” Evans v. B.F. Perkins
Co., a Div. of Standex Int'l Corp., 166 F.3d 642, 647 (4th Cir.
1999). If the material jurisdictional facts are not in dispute,
and the moving party is entitled to judgment as a matter of law,
then the court should grant the Rule 12(b)(1) motion to dismiss.
Id.
Here, plaintiff’s basis for jurisdiction is her
discrimination claim under 42 U.S.C. § 1981. Section 1981 protects
individuals against racial discrimination in making and enforcing
contracts. However, defendant argues that plaintiff’s complaint
is devoid of any facts to support her contention that her dismissal
from the medical staff was the result of discrimination. Defendant
argues all her allegations of discrimination are conclusory and
that she has not stated a claim sufficient to establish federal
jurisdiction.
In response, plaintiff notes that she has alleged that (1)
she is of Indian origin and a member of a racial minority group
(Compl. DE #6, ¶ 117.); (2) that defendant discriminated against
her on the basis of her race and national origin (Compl. DE #6,
¶ 120, 122.); and (3) that defendant continues to deprive her of
her right to make, perform and enforce contracts (Compl. DE #6,
¶ 119.) Additionally, plaintiff alleges that prior to forcing her
out, defendant similarly forced out another physician of Indian
origin (Compl. DE #6, ¶ 89.), while continuing to grant privileges
to non-minority physicians. (Compl. DE #6, ¶ 136.) She alleges
that minority physicians are scrutinized more harshly by defendant
than Caucasian physicians. (Compl. DE #6, ¶ 134.) She also
alleged that she has suffered damages to her business and
reputation. (Compl. DE #6, ¶ 105.)
The court finds plaintiff has stated a claim under § 1981.
Additionally, therefore, the court finds it has jurisdiction over
this matter. While the facts may not ultimately make out a claim,
at this stage of the litigation, the plaintiff has alleged enough
facts to move forward in the litigation. Therefore, the motion to
dismiss is denied as to jurisdiction.
II. 12(b)(6) Motion
a. Standard of Review
A federal district court confronted with a motion to dismiss
for failure to state a claim should view the allegations of the
complaint in the light most favorable to the plaintiff. See Ibarra
v. United States, 120 F.3d 472, 474 (4th Cir. 1997). The intent
of Rule 12(b)(6) is to test the sufficiency of a complaint.
Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999).
A Rule 12(b)(6) motion “‘does not resolve contests surrounding the
facts, the merits of a claim, or the applicability of defenses.’”
Id. (quoting Republican Party v. Martin, 980 F.2d 943, 952 (4th
Cir. 1992)). “[O]nce a claim has been stated adequately, it may
be supported by showing any set of facts consistent with the
allegations in the complaint.” Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 563 (2007).
“[A] complaint need not ‘make a case’ against a defendant or
‘forecast evidence sufficient to prove an element’ of the claim.”
Chao v. Rivendell Woods, Inc., 415 F.3d 342, 349 (4th Cir. 2005)
(quoting Iodice v. United States, 289 F.3d 270, 281 (4th Cir.
2002)). Rule 8 of the Federal Rules of Civil Procedure provides
“for simplicity in pleading that intends to give little more than
notice to the defendant of the plaintiff’s claims and that defers
until after discovery any challenge to those claims insofar as
they rely on facts.” Teachers’ Ret. Sys. of La. v. Hunter, 477
F.3d 162, 170 (4th Cir. 2007). A complaint is generally sufficient
if its “‘allegations are detailed and informative enough to enable
the defendant to respond.’” Chao, 415 F.3d at 349 (quoting 5
Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure, § 1215 at 193 (3d ed. 2004)). Thus, a complaint
satisfies the Rules if it gives “fair notice” of the claim and
“the grounds upon which it rests.” Twombly, 550 U.S. at 554-55
(internal quotation marks omitted).
b. 42 U.S.C. § 1981 Claim
For the reasons discussed supra, the court already found that
plaintiff has stated a claim under § 1981. Therefore, defendant’s
12(b)(6) motion is also without merit as to this claim.
c. Breach of Contract
North Carolina courts have held that a hospital’s offer of
privileges, if accepted by the physician, may be a contract that
incorporates the terms of the hospital bylaws. Virmani v.
Presbyterian Health Services Corp., 127 N.C. App. 71, 76-77, 488
S.E.2d 284, 288 (1997). Here, plaintiff has alleged that she
entered into a valid and enforceable contract with defendant,
“wherein both parties agreed to follow and be bound by the terms
and procedures outlined in the Medical Staff Bylaws and policies
and procedures.” (Complaint at ¶ 13). Plaintiff also alleged
that defendant breached the contract with plaintiff and that those
breaches proximately caused damages and irreparable harm to her.
(Id. at ¶¶ 108-11). Accordingly, defendant’s motion to dismiss is
denied. Defendant’s motion seeking dismissal seems to make
arguments more akin to summary judgment, using phrases like
plaintiff fails to “establish” certain elements. The court finds
plaintiff has alleged sufficient facts upon which relief may be
granted as to a breach of contract claim. Whether discovery will
bear out those facts remains to be seen.
d. Breach of Covenant of Good Faith and Fair Dealing
Defendant argues that plaintiff’s breach of the covenant of
good faith and fair dealing claim provides no facts distinguishing
it from her breach of contract claim. Plaintiff alleges that
WakeMed did not act in good faith in applying the Bylaw procedures
to her reapplication and the resulting hearing. “[T]he weight
of North Carolina authority holds that a claim for breach of the
covenant of good faith and fair dealing based on facts identical
to those supporting a breach of contract claim should not be
pursued separately.” BioSignia, Inc. v. Life Line Screening of
Am., Ltd., No. 1:12-CV-1129, 2014 WL 2968139, at *5 (M.D.N.C.
July 1, 2014). Because this claim is indistinguishable from the
breach of contract claim, defendant argues it should be dismissed.
Plaintiff’s response simply says that she has “clearly”
alleged defendant acted in bad faith regarding her contract and
by wrongfully denying her clinical privileges. Finding these
claims “rise and fall with the underlying claims for breach of
contract,” the separate cause of action for breach of the covenant
of good faith and fair dealing is dismissed as duplicative. Id.
Plaintiff’s theories of bad faith may be asserted in support of
its claim for breach of contract. Id. (citing Performance Sales
& Mktg., LLC v. Lowes Cos., No. 5:07-CV-140, 2010 WL 2294323, at
*11 (W.D.N.C. June 4, 2010)).
e. Arbitrary and Capricious Conduct
North Carolina General Statute Section 131E-85 requires a
hospital to grant or deny medical staff privileges “based upon the
applicant’s education, training, experience, demonstrated
competence and ability, and judgment and character of the
applicant, and the reasonable objectives and regulations of the
hospital.” N.C. Gen. Stat. § 131E-85(a). “[T]he right to enjoy
staff privileges is not absolute, but is subject to the standards
and objectives set by the hospital’s governing body.” Claycomb
v. HCA-Raleigh Cmty. Hosp., 76 N.C. App. 382, 385, 333 S.E.2d 333,
336 (1985). As long as the hospital’s criteria are reasonably
related to the operation of the hospital and fairly administered,
the courts should not intervene. Cameron, 58 N.C. App. at 449,
293 S.E.2d at 922; Lohrmann v. Iredell Mem. Hosp., 174 N.C. App.
63, 77, 620 S.E.2d 258, 266 (2005). However, the “statute does
allow the reasonableness of a hospital’s actions to be reviewed.”
Claycomb, 76 N.C. App. at 386, 333 S.E.2d at 336.
Plaintiff has brought a claim pursuant to N.C. Gen. Stat
§ 131E-85, and case law interpreting this statute, seeking an
injunction requiring that defendant review its decision denying
her staff privileges and reach a new decision that is “based on
the other criteria provided in the statute such as [her] education,
training, experience, demonstrated competence and . . .
character.” N.C. Gen. Stat § 131E-85; Claycomb v. HCA-Raleigh
Cmty. Hosp., 76 N.C. App. 382, 386, 333 S.E.2d 333, 336 (1985),
disc. review denied, 315 N.C. 586, 341 S.E.2d 23 (1986).
Here, plaintiff has properly stated a claim of arbitrary and
capricious conduct by alleging, among other allegations, that
defendant’s decision to deny her staff privileges was: (1)
“arbitrary and capricious, not based on reason, and accordingly,
unlawful” (Complaint at ¶ 143); (2) “not reasonably related to
the hospital’s operation” (Id. at ¶ 144); “not reasonably
compatible with the hospital’s responsibility” (Id. at ¶ 145);
and “was based on irrelevant considerations.” (Id. at ¶ 146).
Plaintiff has alleged that discriminatory reasons were used as
the basis of the decision.
Defendant argues that because plaintiff’s facts are
insufficient to allege discrimination and that her allegations
regarding improper financial motives are not plausible, this claim
fails. However, having already found sufficient facts to state a
claim for discrimination, defendant’s argument also fails as to
this claim at this stage of the litigation.
f. Negligence
Plaintiff also claims that WakeMed was negligent in review of
her application. Defendant WakeMed argues plaintiff’s negligence
claim arises wholly out of her contract claim, there being no other
duty alleged, and is therefore barred. The issue is “whether the
defendant has breached some duty other than a contractual duty,
such that the tort claim is ‘identifiable and distinct’ from the
breach of contract claim.” Legacy Data Access, Inc. v. Cadrillion,
LLC, 889 F.3d 158, 166 (4th Cir. 2018). In response, plaintiff
says she has alleged that WakeMed owed her a duty of reasonable
care. However, plaintiff’s negligence allegations are, at their
core, that WakeMed negligently failed to comply with the
contractual and statutory standards. Finding plaintiff has
alleged no duty other than those already captured in the claims
for breach of contract and arbitrary and capricious conduct, the
court must dismiss plaintiff’s negligence claim. See Mecklenburg
Cty. V. Nortel Gov’t Sols, No., CIV A. 3:07-CV-320, 2008 WL 906319,
at *5 (W.D.N.C. Apr. 1, 2008) (finding that “negligent or
intentional actions, relating to contract performance, do not
transform contract claims into independent torts.”) Therefore,
plaintiff’s negligence claim is dismissed.
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss [DE
#10] is GRANTED IN PART and DENIED IN PART. Defendant’s motion to
dismiss for lack of jurisdiction is denied. Plaintiff’s state law
claims for breach of the covenant of good faith and fair dealing
as well as her negligence claim are dismissed. Remaining before
the court is her claim pursuant to 42 U.S.C. § 1981 as well as her
breach of contract claim and her claim for arbitrary and capricious
conduct pursuant to N.C. Gen. Stat § 131E-85. This matter is
hereby referred to United States Magistrate Judge Kimberly A. Swank
for further case management.
This 29th day of October 2020.
Malcolm J. Howard
Senior United States District Judge
At Greenville, NC
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