Martin v. Memorial Hospital at Gulfport

United States Court of Appeals,

Fifth Circuit.

No. 97-60254

Summary Calendar.

James P. MARTIN, Plaintiff-Appellant,

v.

MEMORIAL HOSPITAL AT GULFPORT, Wray Anderson, Mitchell Salloum,

Edward Reid, and Myrtis Franke, Defendants-Appellees.

Dec. 30, 1997.

Appeal from the United States District Court for the Southern

District of Mississippi.

Before JOLLY, BENAVIDES and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

I.

FACTS & PROCEDURAL HISTORY

For the second time this case has found its way to this Court

on appeal.1 The appellant Dr. James P. Martin brought this action

challenging a certain monopoly created over the provision of

out-patient, kidney dialysis in Harrison County, Mississippi.

Mississippi law prohibits the operation of an End Stage Renal

Disease ("ESRD") Unit without first obtaining a certificate of need

from the state department of health. Two certificates of need were

issued for ESRD units in Harrison County. MHG acquired control of

1

This Court's disposition of the first appeal in this case may

be found at Martin v. Memorial Hospital at Gulfport (Martin I), 86

F.3d 1391 (5th Cir.1996). For the most part, the factual and

procedural summary presented here is borrowed from Martin I.

those units from Singing River Hospital System and began offering

out-patient kidney dialysis in 1981. Thereafter, MHG entered into

an exclusive medical director contract with Dr. Douglas Lanier,

whereby only Dr. Lanier or his designated representative could

perform chronic, out-patient dialysis in the hospital's ESRD units.

In 1986, Dr. Martin, a nephrologist, was successfully recruited by

MHG and Dr. Lanier, and he became associated with Dr. Lanier. Dr.

Martin was granted full medical staff privileges at MHG and all of

its clinics. It appears, however, that, even before being granted

full medical privileges by MHG, Dr. Martin already had access to

the hospital's ESRD units, because he was Dr. Lanier's designated

representative under the exclusive medical director contract. This

meant that Dr. Martin could treat his chronic dialysis patients in

the hospital's ESRD units without having to refer them to Dr.

Lanier for dialysis.

In November, 1988, Dr. Lanier and Dr. Martin separated their

practices. Thereafter, in March, 1989, Dr. Martin attempted to

admit a patient for chronic, out-patient, kidney dialysis at MHG's

ESRD unit. MHG refused to allow Dr. Martin to perform the dialysis

based on its exclusive contract with Dr. Lanier. Dr. Martin then

wrote the MHG board of trustees asserting his alleged right to

render dialysis to his patients at MHG's ESRD unit. On June 26,

1989, MHG's board of trustees considered the question of Dr.

Martin's access to its ESRD unit. The board passed a resolution

reaffirming the exclusive medical director contract with Dr. Lanier

and interpreting that contract to mean that only a physician in

practice with and under the supervision and control of Dr. Lanier

could perform chronic, out-patient, kidney dialysis in the

hospital's ESRD units. In November, 1990, Dr. Martin's medical

staff privileges at MHG were renewed with the exception of the

privilege of providing chronic, out-patient dialysis in the ESRD

unit. Therefore, Dr. Martin retained the authority to admit

patients to the hospital and perform in-patient dialysis, but he

must refer patients to the medical supervisor or his designated

representative for out-patient dialysis at MHG's ESRD units.

When the board passed this resolution, no certificates of need

had been issued by the state department of health for any ESRD

units in Harrison County aside from those owned and operated by

MHG. Therefore, any nephrologist not associated with Dr. Lanier,

had to refer his patients to Dr. Lanier for chronic, out-patient

dialysis or send them to a clinic in another county, unless the

nephrologist could obtain a certificate of need from the state

department of health and start her/his own ESRD unit.

Faced with this dilemma, Dr. Martin filed suit in the district

court in 1990 against MHG and its board of trustees alleging that

they had violated federal antitrust laws, violated his

constitutional due process rights, interfered with his contractual

relationships with his patients, and violated Mississippi antitrust

law. MHG and the board moved for summary judgment claiming:

immunity from federal antitrust law under the state action

doctrine; immunity from damages for anticompetitive conduct under

the Local Government Antitrust Act, 15 U.S.C. §§ 34, 36; that Dr.

Martin was not deprived of a property or liberty interest without

due process of law; that they acted in accordance with Mississippi

law and therefore did not violate Mississippi antitrust law; and

that the board members are entitled to qualified immunity on Dr.

Martin's constitutional due process and state law claims. The

district court held that the defendants were immune from money

damages but not from injunctive relief, attorney's fees and court

costs under the Local Government Antitrust Act. 15 U.S.C. § 35.

The district court rejected the defendants' claim of immunity from

federal antitrust law under the state action doctrine. The

district court rejected MHG's motion for summary judgment on Dr.

Martin's due process claims, state law antitrust claims and

tortious interference claims. However, the district court granted

the individual board members' motion for summary judgment on Dr.

Martin's due process claims and state law claims, based on their

defense of qualified immunity.

MHG and the board members appealed assigning the following

errors: the district court's refusal to grant summary judgment on

the federal antitrust claims under the state action doctrine of

Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943);

the district court's refusal to grant summary judgment on Dr.

Martin's § 1983 due process claims and Dr. Martin's state antitrust

and tortious interference claims. Dr. Martin cross-appealed

challenging: the district court's grant of limited immunity under

the Local Government Antitrust Act; the district court's holding

that the individual board members enjoyed qualified immunity from

Dr. Martin's constitutional due process claims and his state

antitrust and tortious interference claims. This Court reversed

the district court and held that MHG and the board members were

shielded from federal antitrust law by the state action doctrine.

Martin v. Memorial Hospital at Gulfport (Martin I), 86 F.3d 1391,

1398-1400 (5th Cir.1996). This Court did not reach any of the

other issues decided by the district court, as they were

interlocutory in nature. Id. at 1401.

On remand, MHG filed a renewed motion for summary judgment on

all remaining claims.2 The district court reversed itself and held

that summary judgment was appropriate on the remaining claims

against MHG. Dr. Martin takes this appeal asserting the following

errors:

1. The district court erred by granting summary judgment against

Dr. Martin on his § 1983 due process claims against MHG;

2. The district court erred by holding that the individual board

members enjoyed qualified immunity from Dr. Martin's

constitutional due process claims;

3. The district court erred by holding that the individual board

members were immune from Dr. Martin's state law claims.

4. The district court erred by granting summary judgment against

Dr. Martin on his state law antitrust and tortious

interference claims;

2

Specifically, MHG asked the district court for summary

judgment on Dr. Martin's constitutional due process claims, and

state law antitrust and tortious interference claims.

II.

STANDARD OF REVIEW

This Court reviews a district court decision to grant summary

judgment de novo, applying the same standard as the district court.

Wynn v. Washington National Insurance Company, 122 F.3d 266, 268

(5th Cir.1997), citing Bodenheimer v. PPG Indus., Inc., 5 F.3d 955,

956 (5th Cir.1993).

III.

LAW & ANALYSIS

A.

Procedural Due Process

The due process clause provides a mechanism by which a

persons property or liberty may not be permanently diminished or

abrogated without first being accorded that procedural protection

designed to ensure a principled and even-handed examination of the

basis for any such deprivation. Cleveland Bd. of Educ. v.

Loudermill, 470 U.S. 532, 542, 105 S.Ct. 1487, 1493, 84 L.Ed.2d 494

(1985); Board of Regents of State Colleges v. Roth, 408 U.S. 564,

569-70, 92 S.Ct. 2701, 2705, 33 L.Ed.2d 548 (1972); Perry v.

Sindermann, 408 U.S. 593, 599, 92 S.Ct. 2694, 2698, 33 L.Ed.2d 570

(1972). By its own terms, the due process clause is not implicated

unless an individual's property or liberty interests are

threatened.

i.

Property Interest

The district court correctly recognized that procedural due

process is a positivist notion, designed to protect property

interests, existing not by force of the due process clause itself,

but established by reference to some independent source, such as

state law or contract. Roth, supra, 408 U.S. at 577, 92 S.Ct. at

2709; Perry v. Sindermann, supra, 408 U.S. at 601, 92 S.Ct. at

2699. The extent to which an individual interest is a property

interest protected by the due process clause must be determined by

an examination of the source of the interest. In cases such as

this, where the interest is created by some state law or contract,

the limitations of the interest are determined by examination of

the state law or contract. Loudermill, supra, 470 U.S. at 538, 105

S.Ct. at 1491, citing Roth, supra, 408 U.S. at 577, 92 S.Ct. at

2709, and Paul v. Davis, 424 U.S. 693, 709, 96 S.Ct. 1155, 1164, 47

L.Ed.2d 405 (1976).

Appellant has argued that the source of his property interest

in continued access to MHG's ESRD units lies in MHG's extension to

him of full medical staff privileges, when he became associated

with Dr. Lanier. MHG's own by-laws require notice and a hearing

before a physician's previously granted or extended medical staff

privileges may be taken away. Therefore, if Appellant's continued

access to MHG's ESRD units may be considered part of the full

medical staff privileges accorded to him when he first became

associated with Dr. Lanier, then by hospital policy and by

constitutional guarantee he may not be deprived of that access

without notice and a hearing. Loudermill, supra, 470 U.S. at 541,

105 S.Ct. at 1493, citing Arnett v. Kennedy, 416 U.S. 134, 167, 94

S.Ct. 1633, 1650, 40 L.Ed.2d 15 (1974) (Powell, J., concurring in

part and dissenting in part).

However, Appellant misconceives the source of his property

interest in access to MHG's ESRD units. The source of that

interest is not the full medical staff privileges accorded

Appellant. Indeed, there is no evidence that anyone with full

medical staff privileges at MHG has access to the ESRD units to

perform chronic, out-patient, kidney dialysis on their own

patients. The grant of full medical staff privileges to Appellant

must be construed in light of the pre-existing exclusive medical

director contract with Dr. Lanier, and therefore, must be

understood not to include access to the ESRD units for out-patient,

kidney dialysis.

The true source of Dr. Lanier's access to the ESRD units for

chronic, out-patient, kidney dialysis of his own patients was the

exclusive medical director contract with Dr. Lanier. As we have

previously pointed out, property interests are "created and their

dimensions are defined by existing rules or understandings ..."

Roth, supra, 408 U.S. at 576, 92 S.Ct. at 2709. The exclusive

medical director contract with Dr. Lanier provided that only Dr.

Lanier or his designated representative (Dr. Martin) could perform

chronic, out-patient, kidney dialysis in MHG's ESRD units.

Therefore, we may say that the scope of Dr. Martin's property

interest was limited to his association with Dr. Lanier.3

Constitutionally, what this means for Dr. Martin is that he could

not be deprived of continued access to MHG's ESRD units without

notice and a hearing, so long as he was Dr. Lanier's designated

representative. Once Appellant's association with Dr. Lanier

ended, the property interest created by the contract and the

concomitant constitutionally guaranteed procedural safeguards were

extinguished. Therefore, Appellant has suffered no deprivation of

a property interest protected by the due process clause, and

summary judgment was appropriate on that claim.

ii.

Liberty Interest

"The Due Process Clause ... protects an individual's liberty

interest which is viewed as including an individual's freedom to

work and earn a living and to establish a home and position in

one's community." Cabrol v. Town of Youngsville, 106 F.3d 101 (5th

Cir.1997), citing Roth, supra, 408 U.S. at 572, 92 S.Ct. at 2706-

07. "It requires no argument to show that the right to work for a

living in the common occupations of the community is of the very

essence of the personal freedom and opportunity that it was the

purpose of the [fourteenth] Amendment to secure." Phillips v.

Vandygriff, 711 F.2d 1217, 1222 (5th Cir.1983), quoting Truax v.

Raich, 239 U.S. 33, 41, 36 S.Ct. 7, 10, 60 L.Ed. 131 (1915). See

3

Nothing in this record compels the illogical conclusion that

Dr. Martin could end his association with Dr. Lanier but continue

to be Dr. Lanier's designated representative.

also: Meyer v. Nebraska, 262 U.S. 390, 399, 43 S.Ct. 625, 626, 67

L.Ed. 1042 (1923) ("Without doubt, ["liberty' in the fourteenth

amendment] denotes not merely freedom from bodily restraint but

also the right of the individual to contract, to engage in any of

the common occupations of life ..."); and Schware v. Board of Bar

Examiners, 353 U.S. 232, 238-39, 77 S.Ct. 752, 756, 1 L.Ed.2d 796

(1957) ("A state cannot exclude a person from the practice of law

or from any other occupation ... for reasons that contravene the

Due Process or Equal Protection Clause of the Fourteenth

Amendment.").

Therefore, loss of access to MHG's ESRD units might deprive

Appellant of a constitutionally protected liberty interest if that

loss "effectively foreclose[d] [Dr. Martin from] practicing in the

area ..." Daly v. Sprague, 675 F.2d 716, 727 (5th Cir.1982),

quoting Christhilf v. Annapolis Emergency Hospital Ass'n, Inc., 496

F.2d 174, 178 (4th Cir.1974). The cases reveal three forms of

state action that might result in this type of foreclosure from

practicing in the area. First, Appellant might be foreclosed from

practicing in the area, if the loss of access to MHG's ESRD units

stigmatized him and so damaged his reputation in the community that

he could not earn a living as a nephrologist. See Roth, supra, 408

U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548; Paul v. Davis, supra, 424

U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405; Codd v. Velger, 429 U.S.

624, 97 S.Ct. 882, 51 L.Ed.2d 92 (1977). That is not the case

here, nor is this permutation urged by Appellant. Second,

Appellant might be foreclosed from practicing as a nephrologist in

Harrison County, Mississippi, if he were de jure or de facto denied

a license for practicing as a nephrologist. See Schware, supra,

353 U.S. 232, 77 S.Ct. 752, 1 L.Ed.2d 796, and Phillips v.

Vandygriff, 711 F.2d 1217 (5th Cir.1983). This case presents no

licensing question. Finally, Appellant might be foreclosed from

practicing as a nephrologist in Harrison County, Mississippi, if

such foreclosure is the natural consequence of "denying [Appellant]

collateral credentials necessary for pursuing [his] occupation ..."

Phillips v. Vandygriff, 711 F.2d at 1223, citing Greene v. McElroy,

360 U.S. 474, 79 S.Ct. 1400, 3 L.Ed.2d 1377 (1959) (denial of

security clearance practically necessary for employment as defense

contractor), and Sosa v. Board of Managers of Val Verde Memorial

Hospital, 437 F.2d 173 (5th Cir.1971) (exclusion of physician from

hospital staff privileges).

Recognizing the general principle that the right "to engage in

the common occupations of life" is a protected liberty interest, we

decline to find that Dr. Martin was deprived of any right to

procedural due process. In the case of all such state-created

monopolies for the provision of specialized health care services,

some specialists will be "effectively foreclose[d] [from]

practicing in the area" by "denying [them] collateral credentials

necessary for pursuing [their] occupation." That is the nature of

a monopoly. Since the right to be a nephrologist is a liberty

interest, every time the State of Mississippi or one of its

political subdivisions creates a monopoly over chronic,

out-patient, kidney dialysis, as permitted by state law and by

Parker v. Brown, supra, it will necessarily deprive certain

nephrologists of their liberty interests. The Fourteenth Amendment

would generally require the state to provide a due process hearing

to an excluded local nephrologist.

However, an exception to the procedural due process

requirement is recognized under these circumstances. Generally

applicable legislative and quasi-legislative decisions, wherein the

competency or integrity of the individual appellants is not in

question, are not subject to procedural due process constraints,

even though they result in a deprivation of a recognized liberty

interest. Rather, such decisions are subject only to substantive

due process analysis. Nolan v. Ramsey, 597 F.2d 577, 580 (5th

Cir.1979), citing Bi-Metallic Investment Co. v. State Board of

Equalization, 239 U.S. 441, 36 S.Ct. 141, 60 L.Ed. 372 (1915);

Nordgren v. Hafter, 616 F.Supp. 742, 756 (S.D.Miss.1985). As the

Supreme Court noted, "[t]here must be a limit to individual

argument in such matters if government is to go on." Bi-Metallic,

supra, 239 U.S. at 445, 36 S.Ct. at 142. This rule reflects a

judgment that the liberty interests of the individual, otherwise

protected by due process, must not stymie the practical ability of

legislative bodies to govern. Therefore, we choose not to saddle

the State of Mississippi or its political subdivision with the

burden of preemptively providing a hollow procedural mechanism for

challenging an otherwise valid anti-competitive practice. We

conclude that, even if Dr. Martin was deprived of a liberty

interest, he is not entitled to procedural due process, because

that deprivation occurred as a result of a quasi-legislative

decision not based on his individual competency or qualifications

as a nephrologist. Hence, summary judgment was appropriate on this

issue.

B.

Substantive Due Process

In cases such as this, where no fundamental right is

implicated, the due process clause, of its own force, requires at

a minimum that state action be supportable by some legitimate goal

and that the means chosen for its achievement be rational, i.e., it

is of no consequence that the state's method is over-inclusive or

under-inclusive, so long as its legitimate goal may be attained by

the means chosen. Daniels v. Williams, 474 U.S. 327, 331, 106

S.Ct. 662, 665, 88 L.Ed.2d 662 (1986) ("Due Process Clause ... was

intended to secure the individual against arbitrary action of

government"); Brennan v. Stewart, 834 F.2d 1248, 1255 (5th

Cir.1988) ("The conceptual essence of "substantive' due process is

the notion that the Due Process Clause—in addition to setting

procedural minima for deprivations of life, liberty, or

property—bars outright "certain government actions regardless of

the fairness of the procedures used to implement them'."). See

also Neuwirth v. Louisiana State Bd. of Dentistry, 845 F.2d 553,

558 (5th Cir.1988).

MHG has offered numerous reasons for the decision to enter

into an exclusive arrangement with Dr. Lanier. For the most part

they depend on the benefits to be obtained from uniformity or

standardization of patient care and clinical administration. If

nothing else, having a single doctor administer all the chronic,

out-patient dialysis is logistically and legally desirable. As

with most large service providers, centralization of power is

essential to quality control and to limitation of potential

liability. The temptation to make a single individual responsible

for patient care and in turn responsible to the hospital's

administration was too great to resist and in this case was

perfectly legitimate. At least in part the goal of this exclusive

arrangement was to ensure that all patients received the same high

quality dialysis treatment. It is certainly rational to believe

that such uniformity of care can be better achieved if the care is

delivered to each patient under the control of the same doctor.

Therefore, the exclusive arrangement between MHG and Dr. Lanier is

not arbitrary or capricious and does not violate Dr. Martin's right

to substantive due process.

C.

Immunity

The Appellant argues that the individual board members did not

enjoy immunity from his constitutional due process claims or his

state law antitrust and tortious interference claims.

i.

Due Process Claims

We have determined that the evidence does not make out a

material issue of fact as to whether Appellant has suffered an

impermissible deprivation of a protected property or liberty

interest. Furthermore, we are convinced that the exclusive

arrangement between MHG and Dr. Lanier, as a matter of law, does

not violate Appellant's right to substantive due process.

Therefore, the question of the individual board members' immunity

from Appellant's due process claims is moot.

ii.

State Law Claims

When the events at the center of this case occurred, under

Mississippi law, "[p]ublic officials [had] qualified immunity in a

civil action when they ... perform[ed] functions which [were]

discretionary in nature." Webb v. Jackson, 583 So.2d 946, 949

(Miss.1991). However, a public official

has no immunity to a civil action for damages if his breach of

a legal duty causes injury and (1) that duty is ministerial in

nature, or (2) that duty involves the use of discretion and

the governmental actor greatly or substantially exceeds his

authority and in the course thereof causes harm, or (3) the

governmental actor commits an intentional tort.

Mohundro v. Alcorn County, 675 So.2d 848 (Miss.1996), quoting

Grantham v. Mississippi Dept. of Corrections, 522 So.2d 219, 225

(Miss.1988). Hence, "[t]he "ministerial/discretionary' distinction

remain[ed] intact in [Mississippi]." Barrett v. Miller, 599 So.2d

559, 567 (Miss.1992). Appellant and Appellees seem to be in

agreement that the functions performed by the members of the board

were discretionary, and rightly so. Therefore, the board members

enjoyed immunity unless they "greatly or substantially exceeded

their authority" or "commit[ted] an intentional tort".

As this Court recognized in Martin I, the Mississippi

legislature "authoriz[ed] a hospital to enter an exclusive contract

with a single individual to operate any aspect, division or

department of its operations, including its ESRD facility ..." 86

F.3d at 1399. Therefore, we cannot say that the board members

exceeded their authority, since they did exactly what they were

authorized to do by statute. See Miss.Code Ann. § 41-13-35 (1972).

The board's entry into an exclusive contact with Dr. Lanier

and its subsequent reiteration of the terms of that contract do not

amount to intentional tortious interference with contract. Under

Mississippi law, to show intentional interference with contract one

must prove:

(1) that the acts were intentional and wilful; (2) that they

were calculated to cause damage to the plaintiffs in their

lawful business; (3) that they were done with the unlawful

purpose of causing damage and loss, without right of

justifiable cause on the part of the defendant (which

constitutes malice); and (4) that actual damages and loss

resulted.

Irby v. Citizens Nat'l Bank of Meridian, 239 Miss. 64, 121 So.2d

118, 119 (1960).

In this case, Appellant cannot show that the exclusive

contract with Dr. Lanier was calculated to cause him harm, because

the contract pre-dates his association with Dr. Lanier and MHG.

Appellant insists that, although the contract itself did not

exclude him by name, the board's interpretation of the contract was

made to exclude him specifically. Appellant therefore argues that

the board acted intentionally with Appellant in mind. It is true

that the contract does not exclude him specifically. The contract

excludes all but Dr. Lanier's designated representative.

Therefore, Appellant was excluded by force of the contract alone,

when he separated from Dr. Lanier, because he could not continue to

be Dr. Lanier's designated representative. Hence, we cannot say

that the Board committed an intentional tort toward Appellant by

reiterating the effect of a contract entered into by the board long

before Appellant was in the picture. Since the board members

performed discretionary functions without malice toward Appellant

and within their statutory authority, they enjoy qualified immunity

from Appellant's state law claims.

D.

Summary Judgment on Appellant's State Law Claims

i.

Tortious Interference

As we have noted above, Appellant cannot, on these facts, make

a case for intentional interference with contract, because the

alleged interference (exclusion), generally applicable in nature,

occurred before Appellant was even associated with MHG or Dr.

Lanier.

ii.

State Antitrust Law

The district court granted summary judgment on this claim,

because it realized that allowing liability here under Mississippi

antitrust law would be inconsistent with the Mississippi statutes

which, according to this Court, "demonstrate that the state

legislature clearly contemplated anticompetitive conduct ..."

Martin I, 86 F.3d at 1399. The district court is correct. It

would be counter-intuitive to allow liability under one state law

for doing the very thing that this Court has held to be within the

contemplation of another law of the same state. Until the

Mississippi Supreme Court says otherwise, this Court will treat

this example of anticompetitive conduct contemplated by Mississippi

law as an exception to Mississippi's antitrust law.

IV.

CONCLUSION

Finding no error in the district court's summary judgment in

favor of Appellees, we therefore affirm.

AFFIRMED.