Appendix — Nanavati v. Burdette Tomlin Memorial Hospital

Srey, _ ope

F. SPANIOL, JR.

CLERK

Supreme Court

of the Gnited States

OCTOBER TERM, 1988

SUKETU H. NANAVATI, M.D.,

Petitioner,

V.

BURDETTE TOMLIN MEMORIAL HOSPITAL and

EXECUTIVE COMMITTEE OF THE MEDICAL STAFF

OF THE BURDETTE TOMLIN MEMORIAL HOSPITAL,

Respondents.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

APPENDIX TO THE PETITION

DAVID H. WEINSTEIN*

WILLIAM B. LYTTON

DOUGLAS A. ABRAHAMS

KOHN, SAVETT, KLEIN & GRAF, P.-C.

1101 Market Street, Suite 2400

Philadelphia, PA 19107

(215) 238-1700

Attorneys for Petitioner Suketu H. Nanavati, M.D.

*Counsel of Record

TABLE OF CONTENTS

Opinion of the United States Court of Appeals for the

Third Circuit, August 24, 1988 (857 F2d 96) ....

Opinion of the United States District Court for the

District of New Jersey, October 2, 1986, including

appendices thereto (645 F. Supp. 1217) ........

Judgment of the United States Court of Appeals for

the Third Circuit, dated August 24, 1988 ......

Order Sur Petition for Panel Rehearing, United States

Court of Appeals for the Third Circuit, dated Sep-

poy.

Order Sur Petition for Panel Rehearing and Sug-

gestion for Rehearing In Banc, United States

Court of Appeals for the Third Circuit, dated Sep-

RI eg ety pu ake yawns s

Order, Superior Court of New Jersey, Chancery Divi-

sion, Cape May County, November 15, 1988 ....

Excerpts from Trial Transcripts ...................

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A-101

A-103

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RE eRe 1 bees I Cr ee

Suketu H. NANAVATI, M.D.,

Appellant in 86-5778,

V.

BURDETTE TOMLIN MEMORIAL HOSPITAL, and

Executive Committee of the Medical Staff of Burdette Tomlin

Memorial Hospital and Robert J. Sorensen, Appellants in

86-5819.

Robert J. SORENSEN, M.D.

Suketu H. NANAVATI, M.D.

Nos. 86-5778, 86-5819.

United States Court of Appeals, Third Circuit

Argued July 13, 1987.

Decided Aug. 24, 1988.

Petitions for Panel Rehearing and Suggestion for Rehearing

In Banc Denied Sept. 26, 1988.

David H. Weinstein (argued), William B. Lytton, Kohn,

Savett, Klein & Graf, P.C., Philadelphia, Pa., for appellant

Suketu H. Nanavati, M.D.

F. Emmett Fitzpatrick, III (argued), F. Emmett

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Fitzpatrick, Philadelphia, Pa., for appellee Robert J. Sorensen,

M.D.

Nina Wisznat Chase (argued), Carl J. Valore, Valore,

McAllister, Westmoreland, Gould, Vesper & Schwartz, P.C.,

Northfield, N.J., Robert E. Paarz (argued), William M. Honan,

Horn, Kaplan, Goldberg, Gorny & Daniels, Atlantic City, N_J.,

for appellees Burdette Tomlin Memorial Hosp.

Before HIGGINBOTHAM, BECKER and HUNTER, Cir-

cuit Judges.

OPINION OF THE COURT

BECKER, Circuit Judge.

I. INTRODUCTION

This case arises out of a bitter and quite public personal

feud between Suketu H. Nanavati, M.D., and Robert J. Soren-

sen, M.D., two physicians at Burdette Tomlin Memorial Hos-

pital (“the Hospital”), a small Cape May Court House, New

Jersey hospital. The feud has spawned two actions with nu-

merous Claims: (1) federal antitrust claims (each has sued the

other on an antitrust theory); (2) reciprocal slander suits

involving the hospital as well as the physicians; (3) race

discrimination claims under Title VII of the Civil Rights Act of

1964, 42 U.S.C. §§ 2000e to 2000e-17, and under 42 U.S.C. §

1981 (Dr. Nanavati is an American citizen born in India); and

(4) reciprocal tortious interference with business claims. The

litigation has raged in state as well as federal courts, trial and

appellate, and has presented an extraordinary number of diffi-

cult legal issues in the fields of procedure, judgments, defa-

mation, and antitrust. The jury, following a lengthy trial, left

the opposing parties, whom it apparently thought “deserved

each other,” in a virtual wash: it awarded Dr. Nanavati a

substantiai antitrust verdict against the hospital which, when

trebled, was almost equivalent to the substantial defamation

and tortious business interference verdicts it awarded Dr.

Sorensen. However, the district court set aside the antitrust

award by a judgment n.0o.v., and these cross-appeals followed.

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The procedural history of the case is extraordinarily com-

plex, and problems of subject matter jurisdiction flowed from

the odd manner in which the case was pleaded. Technically,

the parties brought two separate consolidated actions, and

arguably the viability of certain pendent state claims in one

action depended upon their relationship to federal claims in

the other action. However, any putative jurisdictional prob-

lems were solved by the healing effect of Fed.R.Civ.P. 15(b)

under which pleadings may be deemed amended to conform

to proof. Given the liberal construction of Rule 15(b) and our

assessment that all parties treated the consolidated actions as

one unified action, we shall do the same. We therefore con-

clude that we have jurisdiction.

Turning to the defamation claim (and tortious inter-

ference claims, which have no independent basis and stand or

fall with the defamation claims), we conclude that the award

in Dr. Sorensen’s favor cannot stand. First, we hold that four

of the five allegedly slanderous statements made by Nanavati

were protected statements of opinion. This conclusion follows

from the fact that these statements were made to newspaper

reporters (it is the publication to the reporters and not the

republication in the newspapers that is in issue) who were

fully conversant with the facts on which they were based, and

who understood that Nanavati was presenting his own opin-

ion on the question of the quality of medical care. Even

outrageous statements of opinion are protected, and we will

set aside the award in Dr. Sorensen’s favor. Furthermore, we

hold that the fifth statement, which was made to a hospital

technician, who did not believe it and who passed it on to her

superior solely for the purpose of protesting such scandalous

remarks would not be recognized by New Jersey as inflicting

sufficient injury to sustain an action for slander.

However, we will affirm the judgment n.o.v. on the anti-

trust claim. We must reach the antitrust claim because we

hold that the plaintiff’s antitrust and discrimination claims

are not, as defendants contend, barred under the principles of

res judicata by a state court judgment ordering Dr. Nanavati’s

hospital staff privileges restored. We will affirm because we

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conclude that only the Executive Committee's revocation rec-

ommendation meets the contract, combination or conspiracy

requirement of § 1, and that Nanavati failed to present evi-

dence of damages for the five-day period during which the

revocation decision excluded Nanavati from the Hospital.

Referring first to the jury’s findings, the jury rejected the

two principal premises of Nanavati’s case, first by exonerating

Sorensen, the alleged mastermind of the conspiracy and

Nanavati’s sole competitor in Cape May County, from any

complicity; and second by concluding that Nanavati’s expul-

sion from the Hospital staff was due to his unprofessional

conduct (inability to get along with hospital staff, etc.). In

legal terms, we conclude that: (1) Nanavati has presented no

viable theory that would render the Hospital a co-conspirator,

particularly in view of our decision in Weiss v. York Hospital,

745 F.2d 786 (3d Cir.1984), cert. denied, 470 U.S. 1060, 105

S.CT. 1777, 84 L.Ed.2d 836 (1985); and (2) given that his

staff privileges were reinstated by a state court injunction

within five days of his ouster, Nanavati simply failed to pre-

sent evidence of damages resulting from the recommendation

by the Executive Committee (the sole remaining antitrust

defendant) to revoke his staff privileges.

II. BACKGROUND FACTS AND PROCEDURAL OVER-

VIEW

Dr. Nanavati was born and reared in India and came to

the United States in 1970 to continue his medical education.

He became board certified in cardiology in 1977. After serving

in a hospital in DuBois, Pennsylvania, he received medical

privileges at Burdette Tomlin Memorial Hospital in Cape May

Court House, New Jersey, moved to Cape May in 1979, and

continued his practice there. At the time he arrived at the

Hospital, its chief (and sole) cardiologist was Dr. Sorensen.

Dr. Sorensen was board certified in internal medicine though

not in cardiology.

As the Hospital's chief cardiologist, Sorensen had ex-

clusive control over allocating electrocardiograms (“EKG’s),

which were a substantial source of revenue. Soon after arriv-

|

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ing at the Hospital, Nanavati demanded to share in these EKG

readings, but was unsuccessful. Nanavati thereupon sought

assistance from the Executive Committee of the medical staff.

Then, only three weeks after his arrival, Nanavati launched a

verbal attack upon Sorensen at a staff meeting, demanding to

know why an “inferior{ly] qualified” physician should control

the EKG readings. J.A. at 5159.

Nanavati was allocated EKG readings several days per

week, but he remained unsatisfied. He proceeded to make

internal complaints about Sorensen’s handling of patient care

and to demand more EKG readings. Eventually Nanavati

made public his complaints about the quality of patient care at

the Hospital. In his most serious accusation, he stated that

Sorensen’s incorrect reading of EKGs had led to the death of at

least one patient. Nanavati also engaged in numerous quar-

rels with nursing personnel and members of the medical staff,

arousing the ire of members of the staff by allegedly stealing

patients, overbilling and prescribing unnecessary treatments.

Nanavati’s comments touched off insulting comments by

Sorensen. To the hospital staff, he referred to Nanavati, who is

dark-skinned, as a “nigger,” J.A. at 4029, and as “the Indian.”

J.A. at 4013. To the press, he accused Nanavati of being

arrogant, backbiting and “nasty.” J.A. at 3114. In addition,

Sorensen resisted orders from the Executive Committee that

he provide Nanavati with more days to read EKGs. The strug-

gle between Nanavati and Sorensen not only became a cause

celebre in the local newspapers but also received publicity in

the Philadelphia Inquirer.

As we have intimated, a colossal legal struggle, both in

the Hospital and outside, followed these verbal battles. In

June of 1982, Nanavati filed a charge against the Hospital

with the Equal Employment Opportunity Commission

(“EEOC”) alleging discrimination because of national origin.

In August of that year, charges were filed with the Executive

Committee seeking Nanavati’s dismissal from the staff. The

Executive Committee, comprised of several members of the

medical staff, was empowered under the Hospital's medical

staff constitution and by-laws to make staff privileges recom-

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mendations to the Hospital Board of Governors. In September

1982, Nanavati filed a second charge with the EEOC against

the Hospital, this time alleging unlawful retaliation.

On November 12, 1982, after evidentiary hearings at

which Nanavati was unrepresented by counsel, the Hospital

Board of Governors terminated Nanavati’s staff privileges for

violation of hospital bylaws.! On November 17, 1982,

Nanavati filed a complaint in New Jersey Superior Court,

Chancery Division, which promptly issued a temporary re-

straining order reinstating Nanavati to the staff, on the

ground that the Hospital had failed to follow its own bylaw

procedures in terminating him. On April 15, 1983, the Board

of Governors’ Hearing Committee, appointed for the occasion

in the wake of the court decision, recommended that the

November 12 termination of Nanavati’s staff privileges be

affirmed. As part of its report on Nanavati, the Hospital com-

piled a “Black Book,” which included numerous reports, let-

ters and testimony on issues arising from the dispute be-

tween Nanavati and the Hospital staff. The Hospital released

the Black Book to the press. In July 1983, the New Jersey

court denied the Hospital's application to dissolve the re-

straining order, found that the Hospital had held ex parte

hearings that “violated fundamental fairness,” and entered an

order remanding the case to the Hospital Board of Governors

for further proceedings in which Nanavati could have the

assistance of counsel.

The Hearing Committee conducted new hearings on July

15 and August 5, 1983. On October 21, 1983, the Hearing

Committee again recommended termination of staff priv-

ileges and the full Hospital board approved that recommenda-

1. The bylaw provision in question requires a staff doctor to:

be of a temperament and disposition that will enable him to work in

harmony with his colleagues on the Medical Staff; with the profes-

sional, technical, and other personnel in the hospital, and with the

administration, accepting criticism without resentment and offering it

in a spirit and manner that is constructive and devoid of offense and

malice. . . .

J.A. at 3010.

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tion. The litigation then resumed in state court with another

motion by the Hospital to vacate the injunction against dis-

missal. Nanavati charged that the Hospital's new decision a!so

was procedurally invalid because the Board was biased. After

discovery and a hearing, the Superior Court again held for

Nanavati. J.A. at 2485. The court concluded that the Board

had been biased and that the hearing “was a nullity from

beginning to end.” Id. at 2502. It therefore refused to accord

the Board’s decision any deference, and proceeded to deter-

mine the merits of the Nanavati exclusion de novo.

The court found that Nanavati had indeed been disrup-

tive at the Hospital. But it held that state law permitted

termination of hospital privileges only if the disruption had an

actual, negative impact on patient care. Under that standard,

the court found dismissal from the staff inappropriate. It

therefore entered an order permanently enjoining Nanavati’s

dismissal on the misconduct charges at issue. The order

eventually was appealed to the New Jersey Supreme Court,

which, although finding a great need for deference to the

decisions of hospital administrators, affirmed.?

In addition to these state court and Hospital Board pro-

ceedings, Nanavati initiated federal court proceedings, filing

a complaint on March 8, 1983 in the district court for the

District of New Jersey. In this complaint, No. 83-0794,

Nanavati pleaded several claims against the Hospital under

the Civil Rights Act of 1866, 42 U.S.C. § 1981, and Title VII of

2. The Supreme Court modified the Superior Court's statement of the

applicable rule, holding that it is unnecessary for disruption to cause actual

harm to patients, and that conduct that “‘will probably have an adverse

effect on patient care’” was required to uphold a termination. Nanavati v.

Burdette Tomlin Mem. Hosp., 107 N.J. 240, 526 A.2d 697, 704 (1987) (quot-

ing Sussman v. Overlook Hosp. Ass’n, 92 N.J.Super. 163, 182, 222 A.2d 530

(Ch.Div.1966) affd, 95 N.J.Super. 418, 231 A.2d 389 (App.Div.1967)).

Moreover, because of turnover of the Board of Governors’ membership since

the time of Nanavati’s initial staff privileges revocation, the court decided

that the Hospital should have one more chance to decide the matter impar-

tially. Modifying the trial court's order in this one respect, the Supreme

Court affirmed. However, the record does not reveal any additional action by

the Hospital.

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the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e to 2000e-17.

The parties dispute whether the complaint also asserted

these claims against Sorensen. In a separate count, Nanavati

asserted state tort claims of defamation and tortious inter-

ference with business relations against Sorensen.

On May 10, 1984 Sorensen filed a federal court com-

plaint against Nanavati, and the district court consolidated

the two actions. This complaint, No. 84-1790, also included

several claims for alleged antitrust violations, for slander, and

for malicious interference with business relations. Nanavati

thereupon counterclaimed, pleading similar claims against

Sorensen. At trial, Nanavati amended his antitrust complaint

to include the Hospital and the Executive Committee of the

medical staff as defendants on the antitrust claim.

During pretrial proceedings, the district court granted

partial summary judgment for Nanavati, dismissing Soren-

sen’s antitrust claims and some of Sorensen’s defamation

claims. At the final pretrial conference, Nanavati withdrew

his own defamation claims. During trial, the court dismissed

Nanavati’s Title VII claims on the ground that Nanavati, as a

physician, was an independent contractor, not an employee

covered by the Act. The surviving claims went to the jury in

the form of a special verdict with questions labelled “special

interrogatories” by the district court. See Fed.R.Civ.P. 49(a).

The jury returned the following verdicts:

(1) in favor of the Hospital and the Executive Committee

on Nanavati’s § 1981 discrimination claim;

(2) in favor of Nanavati on his antitrust claims against

the Hospital and the Executive Committee, but against him

on his antitrust claim against Sorensen;

(3) in favor of the Hospital on the Hospital’s defamation

claim against Nanavati; damages were fixed in the amounts of

$100,000 compensatory and $50,000 punitive damages;

(4) in favor of Sorensen on Sorensen’s defamation claims

against Nanavati; damages were fixed in the amounts of

$100,000 compensatory and $500,000 punitive damages;

(5) in favor of Sorensen on Sorensen’s tortious business

interference claim against Nanavati; damages were fixed in

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the amounts of $100,000 compensatory and $300,000

punitive damages; and

(6) in favor of Sorensen on Nanavati’s tortious inter-

ference with business claim. The total damage verdicts were

thus $1,050,000 in Nanavati’s favor and $1,150,000 against

him. Of the damages against him $1,000,000 were in favor of

Sorensen and $150,000 were in favor of the Hospital. On

motions for judgment notwithstanding the verdict, the dis-

trict court set aside Nanavati’s antitrust award. However, it

upheld the defamation and business interference verdicts for

the Hospital, the Committee, and Sorensen. These cross-

appeals followed.

Nanavati appeals: 1) the denial of Nanavati’s motion for

judgment n.o.v. on Sorensen’s defamation and tortious inter-

ference with business relations verdict; 2) the denial of

Nanavati’s motion for new trial on his § 1981 claim against

the Hospital; 3) the denial of Nanavati’s motion for new trial

on his tortious interference claim against Sorensen; and, 4)

the grant of the judgment n.o.v. in favor of the Hospital and

the Executive Committee on Nanavati’s antitrust claims. The

Hospital, Executive Committee and Sorensen filed a cross-

appeal, No. 86-5819. Because they are completely satisfied

with the final judgment and object only to interlocutory rul-

ings of the district court, we lack jurisdiction over their ap-

peal. Dalle-Tezze v. Director, OWCP, 814 F.2d 129 (3d

Cir.1987). However, we have treated the issues raised in the

cross-appeal as alternative grounds for affirmance of the dis-

trict court’s judgment.

Ill. THE SLANDER CLAIMS

A. The Allegations

Sorensen and the Hospital received jury verdicts for

slander based on Nanavati’s remarks to the press and to an

EKG technician, Anne O’Neil. Sorensen relied upon five such

statements at trial. Four of the statements stemmed from

press interviews referring to a 1981 incident in which a

patient, Elsie Steinmeyer, died from an ailment that had been

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diagnosed incorrectly. The fifth statement stemmed from

Nanavati’s 1985 conversation with O’Neil.

Several doctors read Mrs. Steinmeyer’s EKG, including

both Sorensen and Nanavati. The original EKG apparently

were difficult to read and had suggested to all the doctors,

except Nanavati, that Mrs. Steinmeyer suffered from a myo-

cardial infarction. This was the more common and therefore

the more “conservative” interpretation. Nanavati alone read

the EKG as suggesting that the patient suffered from a pul-

monary embolism, although he was not certain. Nanavati was

the consulting physician, and was on call at the time she died.

Despite his diagnosis, however, he had not prescribed treat-

ment for a pulmonary embolism, and was criticized in a

subsequent medical investigation of the whole affair, pub-

lished in the Hospital’s Black Book, for failing to press his

diagnosis.

A third doctor, Mrs. Steinmeyer’s treating physician, was

primarily responsible for her care, and made the choice to

follow the “conservative” interpretation. Sorensen’s only in-

volvement with the patient was his reading of one of her early

EKG. An autopsy after Mrs. Steinmeyer’s death reveaied that

the cause of her death had indeed been a pulmonary embo-

lism. In a later independent review of the EKG, Dr. Meister, a

cardiological expert, concluded that Sorensen in no way had

been negligent in reading the EKG. The Meister report ap-

peared in the Hospital’s Black Book.

The following specific statements, made by Nanavati to a

reporter inquiring about Dr. Meister’s support of Sorensen’s

reading of the EKG, are at issue in Hospital's and Sorensen’s

slander claims against Dr. Nanavati:

1. “The conservative interpretation probably cost the pa-

tient her life.”

2. “The correct interpretation [of the EKGs] would have

saved her life because a pulmonary embolism is fully

treatable if it is diagnosed and quickly handled”

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3. “How can Dr. Meister be right when the patient is

dead?”

Moreover, referring generally to the entire incident, Nanavati

stated:

4. “I was concerned about everyone's life after that, I saw

that man [the patient’s husband] and I had to cover up for

this doctor [Sorensen].”

5. “I never knew medicine could be so shallow”

O’Neil testified at trial that Nanavati, in 1985, in a private

conversation between the two, had referred to Sorensen as a

[6.| “senile old doctor that had been there [at the Hospi-

tal] for twenty years killing patients.”

The Hospital also sued Nanavati for slander, citing two

statements made by Nanavati to the reporters in its slander

claim. The defamation claim made by the Hospital against

Nanavati relied in part on statement #1 (the “conservative

interpretation” statement) and statement #5 (the “Shallow

medicine” statement).

As a result of Nanavati’s allegedly slanderous remarks, an

article appeared in the Atlantic City Sun on May 11, 1983.

However, Sorensen and the Hospital sued for slander only,

basing their claims on what was said to the reporters and not

for libel based on the published report.

B. Jurisdiction

The procedural history of the defamation claims is com-

plex. Technically, the case is comprised of two separate con-

solidated actions.* See supra page 99. Although consolidation

was perfectly appropriate here, we note that few of the formal

3. Fed.R.Civ.P. 42 provides in relevant part:

(a) Consolidation. When actions involving a common question of law cr

fact are pending before the court, it may order a joint hearing or trial of

any or all the matters in issue in the actions; it may order all the actions

consolidated; and it may make such orders concerning proceedings

therein as may tend to avoid unnecessary costs or delay.

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requirements of maintaining two separate actions were ob-

served by the parties. As a general rule, consolidation is a

procedural device, not a means for joining new parties or

claims to old actions. It does not serve the purpose of circum-

venting the established procedures for amending complaints

or joining new parties. See Cole v. Schenley Industries, 563

F.2d 35 (2d Cir.1977). However, it is apparent that all parties

and the district court did indeed treat the consolidated cases

as one large case.4

In the interests of fairness and efficiency, given the un-

contested treatment in the district court, we likewise consider

this case as a unified action. See Fed.R.Civ.Pro. 1 (rules of

procedure “shall be construed to secure the just, speedy, and

inexpensive determination of every action”). We therefore will

construe Fed.R.Civ.P. 15(b), which allows for amendment of

pleadings to conform to the evidence, quite broadly and con-

form the pleadings of Civil Action No. 83-0794 (Nanavati's

initial suit against Sorensen, the Executive Committee and

the Hospital) to refiect the nature of the action and proofs.

Given our determination infra that the district court pos-

sessed the power to have tried this case as a single action, and

that at least for jurisdictional purposes the parties treated it as

such, liberal treatment seems appropriate. See In Re Meyer-

tech Corp., 831 F.2d 410, 422-23 (3d Cir. 1987) (treating issue

tried by consent, squarely presented and foisting no surprise

on any party, as included in constructively amended com-

plaint even though no technical amendment was ever made);

6 C. Wright & A. Miller, Federal Practice and Procedure, §

1494 (1971); cf. Schultz v. Cally, 528 F.2d 470, 474-75 (3d

Cir.1975) (refusing to apply Rule 15(b) to constructively

4. Perhaps the best evidence of this tendency to accrete the two sepa-

rate actions is Nanavati’s attempt, once the trial was already underway, to

join the Hospital and Executive Committee as defendants to the antitrust

claim. Although the Hospital and the Executive Committee protested on

the grounds of prejudice (see infra n. 19 for a discussion of the last minute

addition of these defendants to the antitrust claim), no one complained that

the Hospital was not even a party to the second suit in which the antitrust

claim was presented.

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amend pleadings where doubt existed as to whether defen-

dants would have agreed to the existence of federal question

jurisdiction and where case was tried in district court under a

mistaken theory of diversity).

[1, 2] Nanavati contends that the district court lacked

subject matter jurisdiction over Sorensen’s slander claim. He

argues that because the state claims were not properly con-

nected to any federal claim in the action and because all the

parties are residents of New Jersey, federal jurisdiction is

lacking.® Given our willingness to consider the actions below

as constructively amended, we find no jurisdictional defect.®

We hold that Sorensen’s defamation claims were properly

pendent and ancillary to federal claims in the action.’

In Ambromovage v. United Mine Workers of America, 726

F.2d 972, 989-91 (3d Cir.1984), this court set out a tripartite

5. We note that in the district court, Nanavati advocated just the op-

posite, claiming that the existence of subject matter jurisdiction existed

over all the state claims. See J.A. at 159-161. Nanavati’s strategy, however, is

of no consequence given our mandate to determine independently our own

subject matter jurisdiction. See Bender v. Williamsport Area School Dist.,

475 U.S. 534, 541-42, 106 S.Ct. 1326, 1331-32, 89 L.Ed.2d 501 (1986);

Lovell Mfg. v. Export Import Bank of the United States, 843 F.2d 725, 729

(3d Cir.1988).

6. We note that this disposition obviates the need to address the many

intricate and tantalizing procedural questions (including the recognition of

pendent party jurisdiction) presented by Nanavati’s clever attempts at this

late stage to revivify the separate natures of the two actions.

7. Pendent jurisdiction allows the plaintiff to append related state

claims to his federal causes of action. See United Mine Workers v. Gibbs, 383

U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Ancillary juris-

diction typically involves a claim other than that of the plaintiff, such as a

claim by a defending party or another whose rights are in jeopardy. See

Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 98 S.Ct. 2396, 57

L.Ed.2d 274 (1978). Although many courts and scholars question whether

there is in truth any real distinction between ancillary and pendent juris-

diction (the Supreme Court specifically avoided answering this question in

Owen) the functional difference stems from the fact that whereas pendent

claims supplement plaintiffs claims, ancillary claims, supplement coun-

terclaims and cross claims. In Ambromovage v. United Mine Workers of

America, 726 F.2d 972, 989-90 (3d Cir.1984), this court held that the two

tests are identical, at least for the purpose of federal question jurisdiction.

A-14

test by which such supplemental (ancillary and pendent)

jurisdiction should be judged. First, pursuant to United Mine

Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed. 2d

218 (1966), the court must possess constitutional power to

hear the claim. Second, the extension of jurisdiction cannot

contravene or undermine federal statutory law. Third, the

court must examine whether, in the exercise of its appropriate

discretion, the claim is of the type to which supplemental

jurisdiction should be extended. Ambromovage, 726 F2d at

989-91.8

[3] Our inquiry here revolves soley around the first prong

of the test. The question of power is constitutional, governed

by the limitations of Article III. To satisfy the constitutional

prong of the test, we must determine whether a substantial

federal claim is present and whether the state and federal

claims derive “from a common nucleus of operative fact” such

that a plaintiff “would ordinarily be expected to try them all in

one judicial proceeding.” Gibbs, 383 U.S. at 725, 86 S.Ct. at

1138.

In trying to set out standards for supplemental jurisdic-

tion and to apply them consistently, we observe that, like

unhappy families, no two cases of supplemental jurisdiction

are exactly alike. The principle that we glean from the cases is

that mere tangential overlap of facts is insufficient, but total

congruity between the operative facts of the two cases is

unnecessary.? See Skevofilax v. Quigley, 810 F.2d 378, 385 (3d

Cir.) (in banc) (district court has ancillary jurisdiction over a

cross-claim for garnishment by a judgment creditor against a

nonparty to the original lawsuit, where the non-party may

8. This last prong does not implicate the court's power to entertain the

suit, but rather addresses the question whether the district court, as a mat-

ter of convenience, fairness and federalism should address the state law

claims. See Sparks v. Hershey, 661 F.2d 30 (3d Cir.1981).

9. We note that this case has been through a long trial and that the

parties, as well as the federal court system have expended much time and

resources. Obviously, however, arguments based on efficiency cannot over-

come a lack of constitutional power to hear the case, see, e.g., Tully v. Mott

Supermarkets, Inc., 540 F.2d 187, 196 (3d Cir.1976).

NN

A-15

owe the judgment debtor an obligation to indemnify against

the judgment) cert. denied, U.S. , 107 S.Ct. 1956,

95 L.Ed.2d 528 (1987); Ambromovage, 726 F.2d at 992 (hold-

ing that the district court had power to hear defendant's

counterclaim raising a state law set-off in conjunction with

plaintiffs federal question claim because a key factual ques-

tion which “implicate[d] the entire factual matrix” of the case

was common to both the federal claim and the ancillary

counterclaim); Cf: PAAC v. Rizzo, 502 F.2d 306 (3d Cir.1974),

cert. denied, 419 U.S. 1108, 95 S.Ct. 780, 42 L.Ed.2d 804

(1975) (holding that a defamation claim by a city agency

director against the mayor was insufficiently related to the

federal question of the mayor's ability under the federal anti-

poverty law to terminate the agency director, but providing no

indication of the facts in that case or its factual relationship to

the termination claim, other than to conclude that it was

distinct).

We conclude that Sorensen’s slander claim (which arose

out of five statements made by Nanavati) emerges from the

same nucleus of operative fact as the federal claims. As in

Ambromovage, a critical background fact (the enmity between

the two physicians) is common to all claims. For instance,

Sorensen’s slander claim is ancillary to Nanavati’s antitrust

claim. In his antitrust claim, Nanavati challenged the revoca-

tion of his staff privileges and alleged that the defendants had

engaged in a group boycott. Nanavati’s discussions with the

press as well as the substance of his allegations against Soren-

sen would constitute relevant facts for both sides. Nanavati

could use the Steinmeyer incident as evidence of defendants’

unconcern for patients (thereby exposing defendants’ as-

serted motive for excluding Nanavati as pretextual). In de-

fense of the antitrust claim, Sorensen, the Hospital, and the

Executive Committee would be expected to present evidence

demonstrating the propriety of their motivation for excluding

Nanavati—that Nanavati was impossible to work with and

that he disrupted the amicable and supportive environment

conducive to high quality patient care. Sorensen, the Hospi-

tal, and the Executive Committee could use Nanavati’s state-

ments to the press to argue that Nanavati was subversive and

difficult.

A-16

[4] We therefore believe that the district court was emi-

nently reasonable in perceiving that all the facts of the slander

incidents would be before it in any case and that Sorensen’s

claim was properly related to the federal questions. !°

C. Fact/Opinion

[5] Having found that jurisdiction exists, we must reach

the merits of Sorensen’s slander claim. We conclude that

Nanavati’s comments to the reporters fall within the realm of

constitutionally protected opinion.!! The Supreme Court of

10. Furthermore, we hold that Sorensen’s and Nanavati’s tortious in-

terference with business claims were properly appended to this action. As

noted infra in Part IV, Sorensen’s tortious interference claim is merely du-

plicative of his slander claim. Because we have jurisdiction over the slander

claim, we have jurisdiction to address the claim of tortious interference.

Although the question was raised by no party, we hold that Nanavati’s tor-

tious interference claims were pendent to his antitrust claim because they

clearly arose out of a common nucleus of operative fact.

11. In deciding this question of defamation we must explore the

murky boundary between state tort law and federal constitutional law. In an

oft-quoted passage, this court explained in Marcone v. Penthouse Interna-

tional Magazine for Men, 754 F.2d 1072 (3d Cir. 1985), cert. denied, 474 U.S.

864, 106 S.Ct. 182, 88 L.Ed.2d 151 (1986):

Although replete with First Amendment implications, a defamation

suit fundamentally is a state cause of action... . An adjudication of a

defamation case involves both state and federal law inquiries. A court

must determine: (1) whether the defendants have harmed the plain-

tiffs reputation within the meaning of state law; and (2) if so, whether

the First Amendment nevertheless precludes recovery.

Id. at 1077 (quoting Steaks Unlimited v. Deaner, 623 F.2d 264, 269-70 (3d

Cir. 1980)). See Jenkins v. KYW, 829 F.2d 403, 405 (3d Cir.1987) (quoting

Marcone). Therefore, we first must consider whether New Jersey would al-

low a defamation action under the circumstances of this case. If we believe

that New Jersey would recognize a defamation action, then we may exam-

ine whether constitutional protections nevertheless would defeat that ac-

tion. In the case of New Jersey, which has consciously adopted constitu-

tional principles in deciding this question, see Dunn v. Gannett New York

Newspapers, Inc., 833 F.2d 446 (3d Cir.1987) (noting that New Jersey has

intertwined the fact/opinion distinction with federal constitutional law, and

has relied upon the Restatement approach to draw the distinction), the two

inquiries may tend to collapse. Because we prefer not to reach the constitu-

tional question unnecessarily, and at all events because we are bound by

Dunn, discussed infra, we will decide this case on the basis of New Jersey

CO

i aah Ni i ll tae

Sh ad be

A-17

New Jersey has held that “statements of opinion are entitled

to constitutional protection no matter how extreme, vi-

tuperous, or vigorously expressed they may be.” Kotlikoff v.

The Community News, 89 N.J. 62, 444 A2d 1086, 1091

(1982). The Kotlikoff court cited the famous dicta of the Su-

preme Court:

Under the First Amendment there is no such thing as a

false idea. However pernicious an opinion may seem, we

depend for its correction not on the conscience of judges

and juries but on the competition of other ideas.

Gertz v. Robert Welch, Inc., 418 U.S. 323, 339-40, 94 S.Ct.

2997, 3006-07, 41 L.Ed.2d 789 (1974). See also Diary Stores,

Inc. v. Sentinel Pub. Co., 104 N.J. 125, 516 A.2d 220, 231

(1986) (citing Kotlikoff and Gertz).

The decision to shield opinion from liability for defama-

tion represents an attempt to balance the constitutional pro-

tection of speech with the rights of individuals not to be

defamed. New Jersey favors the interests of free speech even

though statements of opinions may cause injury, because,

unlike false statements of fact, opinions are more likely to

contribute to a robust debate. See Kotlikoff, 444 A.2d at 1091

Recognizing this doctrine is, of course, only the begin-

ning; the harder task is actually differentiating potentially

unprotected false statements of fact from protected opinion.

The district court recognized that opinion is protected but

rejected Nanavati’s arguments that his statements constituted

opinion. Instead, relying heavily on the Restatement (Second)

of Torts § 566, comment b (1977), the district court held that

Nanavati’s statements were unprotected “mixed” opinions be-

cause they implied the existence of undisclosed facts. For the

reasons that follow, we will reverse that determination.

Recently, this court confronted the question of how New

Jersey differentiates between fact and opinion. We deter-

mined that New Jersey would follow the approach of the

Restatement (Second) of Torts in determining the distinction.

defamation law.

A-18

See Dunn v. Gannett New York Newspaper, Inc., 833 F.2d 446

(3d Cir. 1987).

According to the Restatement approach that we applied

in Dunn, and which the New Jersey Supreme Court has

approved in Kotlikoff, 444 A.2d at 1089, and Dairy Stores, Inc.

v. Sentinel Publishing Co., 104 N.J. 125, 516 A.2d 220, 231

(1986), “pure” opinions are either statements which provide

the underlying factual assumptions of the speakers or state-

ments made where those assumptions are known to the lis-

tener. Such “pure” opinion is fully protected. Mixed opinions,

however, “imply the existence of defamatory unknown facts

that justify the opinion expressed.” R. Smolla, Law of Defama-

tion, § 6.04[3], at 6-17 (footnote omitted); See Restatement

(Second) of Torts § 566, comment c (1977). Where facts upon

which the opinion is based are not disclosed and the listeners

have no basis for knowledge, such “mixed opinion” does not

merit absolute protection.

In applying the Restatement approach, therefore, the

court must examine a statement in context.!? The examina-

tion of context itself looks at many factors. Relevant here are

considerations of the nature of the discussion in which the

allegedly defamatory statements were made. In Kotlikoff, the

court analyzed a letter to the editor of a newspaper and con-

cluded that allegations of a “huge coverup” and a “conspiracy”

were not, in context, allegations of criminal activity, but

merely “pejorative rhetoric.” 444 A.2d at 1091. Statements

surrounded by other statements of opinion (such as a debate

on a controversial topic) are also likely to be understood as

opinions.

12. We note that the Restatement'’s approach is not the only means of

analyzing the fact/opinien dichotomy, and the New Jersey Supreme Court

has so recognized. See Kotlikoff, 444 A.2d at 1090-91. In Dunn, we applied

the Restatement because it answered the fact/opinion question completely.

See 833 F.2d at 453 (“the Restatement format is the appropriate route to

follow here”) (emphasis added). However, we also noted that New Jersey has

incorporated many constitutional principles and decisions in ascertaining

the distinction between fact and opinion. Id. Here, as in Dunn, we find that

we need not, however, venture beyond the Restatement, which New Jersey

has adopted, to determine that the statements are indeed protected opinion.

<a aloha ih i hi agian

A-19

The key factor in analyzing the statements at issue are

the nature of the listeners’ understanding. The circumstances

of Nanavati’s conversation with the reporters strongly favor

treating Nanavati’s statements as protected “pure” opinion. It

is essential to emphasize that this is an action for slander for

speech to reporters, and not libel for the published article.

The reporters to whom the alleged slander was spoken

knew of the facts regarding this long standing and well-pub-

licized feud. When Nanavati spoke to the reporters, the con-

troversy between Nanavati and Sorensen had been raging in

public for several years and the Hospital recently had released

a comprehensive report of its investigation of Nanavati (the

Black Book). That report included a discussion of the allegedly

misread EKG, and a copy of Dr. Meister’s report. The report

also included a lengthy discussion of Nanavati’s troubles with

the Hospital and Nanavati’s complaints about Hospital prac-

tices. That the reporters to whom Nanavati made his state-

ments were aware of the existence of the Black Book and its

contents is evidenced by their discussion of it in the articles.

Thus, Nanavati addressed knowledgeable listeners who were

aware that Dr. Meister had absolved Sorensen of any negli-

gence. The reporters were obviously aware that the speaker

was presenting his opinion of Mrs. Steinmeyer’s death and

that other doctors and the Hospital held firmly opposing

views. Nanavati’s interpretation of events contributes to a

robust debate on matters of public importance, namely the

competence of medical care at the hospital.

We will briefly discuss each allegedly defamatory state-

ment in turn. Statement #1, that “conservative interpretation

|of the EKG] probably cost the patient her life,” and Statement

#2, that the “correct interpretation would have saved the

patient’s life because a pulmonary embolism is fully treat-

able,” on the facts of this case are both protected opinions

under New Jersey law. Both statements assert exactly the

same proposition: that had Sorensen diagnosed a pulmonary

embolism, the patient would have lived. It is undisputed that

Sorensen did not diagnose a pulmonary embolism, and

Nanavati’s statement provides the factual basis for the conclu-

sion that a correct diagnosis would have saved the patient's

life; namely that “a pulmonary embolism is fully treatable”

A-20

Beyond this, the only possible assertion in the statement is

that a correct diagnosis by Sorensen, as opposed to a correct

diagnosis by Nanavati, would have been acted upon. This is

simply not defamatory. Furthermore, because the reporters

were familiar with the long running dispute among the par-

ties and knowledgeable about the underlying facts, the Re-

statement approach would protect these two statements as

opinion.

Nanavati’s question. statement #3 “[h]ow can Dr. Meister

be right when the patient is dead?” refers only to whether

Meister was right to conclude that Sorensen was not at fault,

and its rhetorical quality smacks of opinion. It also states

explicitly the undisputed fact, the death of the patient, on

which Nanavati based the view that Meister was wrong. How-

ever silly the statement may be as a refutation of Meister'’s

judgment, the statement is clearly opinion.

Nanavati’s statement #4, that the Steinmeyer affair made

him concerned about the lives of other patients and forced

him to “cover-up” in discussions with the patient’s husband

seems at first blush, the most problematic of all the state-

-ments. Yet, all the statement conveys (albeit histrionically) is

Nanavatis opinion that Sorensen was negligent. As noted

above, the facts surrounding the incident were well known to

the listeners, as evidenced by the articles.

Finally, we consider Nanavati’s statement, “I never knew

medicine could be so shallow,” assigned as a basis of liability

only by the Hospital. To the extent Nanavati’s meaning can be

discerned from the context of the conversation, it appears that

Nanavati was conveying his disgust for the pettiness of his

adversaries, and his factual basis for believing his colleagues

lacked depth had been disclosed to the listeners.

In sum, we find that New Jersey would not allow recovery

for slander for the aforementioned statements, given the cir-

cumstances under which these statements were uttered.

D. The O’Neil statement

[6] While testifying at trial, an EKG technician, Ann

O’Neil, provided surprise testimony that Nanavati called

A-21

Sorensen a “senile old doctor that had been there [the Hospi-

tal] for 20 years killing patients.” Trial Transcript 6/30/86 p.

160. The statement was uttered in the course of a November

1985 conversation in which Nanavati complained to O’Neil

that Sorensen had a locked drawer in which to keep his

prescription pads but that he, Nanavati, did not. O’Neil testi-

fied that she was the only one to hear the comment alleging

Sorensen’s incompetence and senility and did not believe it.

Additionally, she testified that when she challenged Nanavati,

he asserted: “That's not opinion, that’s facts.” Id. at 159. Fi-

nally, O’Neil testified that she wrote the statement down and

two days later gave it to her superior at the Hospital.

Upon hearing O’Neil’s testimony, Sorensen successfully

moved for leave to amend, over objection, to add this staie-

ment as a ground for his defamation claim. Nanavati claims

that the mid-trial amendment was an abuse of discretion. He

also submits that the statement to O’Neil caused no injury. In

our view, the injury alleged here borders on the metaphysical.

The facts indicate that no one who heard the slander believed

it, and those who repeated the slander did so only to express

outrage at the speaker. The entire situation seems more like a

fiendish law school hypothetical gone amok than a compensa-

ble claim for slander. We believe that New Jersey would not

compensate for slander under these facts. See Sisler v. Gan-

nett New York Newspaper, Inc., 104 N.J. 256, 516 A.2d 1083

(1986). Therefore we need not reach the question whether the

court abused its discretion by permitting Sorensen to add this

claim for slander so late in the proceedings.

In sum, we hold that statements #1-5 constitute pro-

tected opinion and that New Jersey would not permit recovery

upon them under the circumstances of this case. The defama-

tion awards will therefore be set aside.

IV. IS THE TORTIOUS INTERFERENCE WITH BUSI-

NESS RELATIONS CLAIM DUPLICATIVE OF THE

SLANDER CLAIMS?

We next consider Sorensen’s judgment against Nanavati

for tortious interference with Sorensen’s business relations.

A-22

Nanavati argues that the tortious interference claim was en-

tirely duplicative of the slander claims. He relies upon the

Joint Final Pretrial Order, in which Sorensen explained that

Nanavati had caused the interference “by making repeated

false allegations of discrimination, improper patient care, im-

proper practices, and inadequate qualifications.” Joint Final

Pretrial Order, May 12, 1986, at 52. Sorensen responds that

the interference claim was based on far more than the specific

acts of slander which constititued the slander claim. Sorensen

does not deny, however, that the entire tortious interference

claim was based on allegedly false statements of fact.

[7| We conclude that the judgment on Sorensen’s tortious

interference claim must be set aside. If Sorensen wished to

include in the claim acts of false allegations beyond those in

the slander claim, he had a duty to set those forth with

particularity. New Jersey courts have emphasized that the

defenses applicable to defamation claims retain their full sta-

tus for tortious interference claims if such tortious inter-

ference claims are based on verbal conduct. See, e.g., Rainier’s

Dairies v. Raritan Valley Farms, Inc., 19 N.J. 552, 117 A.2d

889, 894-95 (1955); Middlesex Concrete Products v. Carteret

Ind. Ass’n, 68 N.J.Super. 85, 172 A.2d 22 (App.Div.1961).

Similarly, the United States Supreme Court recently indicated

that the constitutional guarantees protecting speech against

libel claims retain their full force regardless of the nature of

the cause of action. Hustler Magazine v. Falwell, — U.S. —,

108 S.Ct. 876, 99 L.Ed.2d 41 (1988). If those privileges and

constitutional protections are to have meaning, a plaintiff

must be required to set forth allegedly actionable statements

with particularity. See J.A. 146, 152-54 (district court’s Memo-

randum Opinion dated 4/8/86 granting summary judgment

in favor of Nanavati, partly because Sorensen failed to plead

his defamation claim with specificity; grant of summary judg-

ment later reconsidered to allow Sorensen to allege defama-

tion claims arising out of May 11 article. J.A. at 190.) See, e.g.,

National Bowl-O-Mat Corp. v. Burnswick Corp., 264 F.Supp.

221 (D.N.J.1967).

Here, Sorensen set forth no actionable statements either

Pe eee ee ee ee ee ee

ee eee ee ee ee

A-23

in his pleading or in his proposed pretrial order beyond those

set forth in the slander claim. We conclude that he thereby

limited his tortious interference claim to the same statements

he set out in his defamation claim. Cf. Bainhauer v. Man-

oukian, 215 N.J.Super. 9, 520 A.2d 1154, 1175

(App. Div.1987) (“the malicious interference count ... is ex-

pressly predicated on precisely the same facts as are alleged in

the defamation count. Proof or failure of proof of the operative

facts of the defamation count would, therefore, completely

comprehend the malicious interference cause.”)!3 Our rejec-

tion of liability for those statements therefore applies also to

the tortious interference claim, and the judgment in favor of

Sorensen on that claim therefore must be reversed.!4 Any

other result would impermissibly allow Sorensen to circum-

vent the statute of limitations and, more importantly, the

constitutional protections for defamation.

V. CLAIM PRECLUSION

A. The Discrimination Claims

In his initial complaint, Nanavati charged the Hospital

and Executive Committee with discrimination based on his

race and national origin, asserting claims under Title VII of

the Civil Rights Act, 42 U.S.C. §§ 2000e to 2000e-17, and the

Civil Rights Act of 1866, 42 U.S.C. § 1981. The district court

dismissed the Title VII claim on the ground that Nanavati was

an independent contractor, and hence was not covered by

Title VII. The jury found against Nanavati on his § 198]

13. In special interrogatories to the jury, the district court attempted to

avoid duplication of damages between the defamation and interference with

business relations claims. This initiative, however, did not cure the funda-

mental defect of reliance on statements not specifically set out in the plead-

ings and therefore not subject to constitutional protection.

14. Nanavati also presented a tortious interference with business rela-

tions claim, which the jury rejected. Nanavati seeks a new trial because of

allegedly faulty evidentiary rulings by the district court in connection with

these claims. We hold that the district court did not abuse its discretion in

making those rulings. See Nanavati v. Burdette Tomlin Memorial Hosp., 645

F.Supp. 1217 at 1228 (1986).

A-24

claim. Nanavati has not appealed the district court's dismissal

of the Title VII claim, but he has appealed the district court's

refusal to grant a new trial on his § 1981 claim, maintaining

that the evidence of discrimination is uncontradicted. How-

ever, before reaching the merits of Nanavati’s appeal, we must

confront the contention of the Hospital and Executive Com-

mittee that his claim is barred by the doctrine of res judicata.

Nanavati’s original complaint in state court alleged that

his dismissal was “the result [inter alia] of discrimination,

Following the filing of his federal complaint, Nanavati sought

to remove the discrimination claim from state to federal court.

After originally granting Nanavati’s request and subsequently

recognizing that a plaintiff has no right of removal, the district

court reconsidered and denied the petition nunc pro tunc. In

the meantime, Nanavati had moved in state court to amend

the complaint to drop the claim of discrimination. The Hospi-

tal and Executive Committee responded to Nanavati’s motion

to dismiss that fairness required dismissal only with preju-

dice. The record does not indicate that Nanavati objected.

Without holding a hearing, the state trial court agreed with

the Hospital and Executive Committee and entered an order

dismissing the case with prejudice. Nanavati never appealed

that order.

The elements of the § 1981 claim are, undoubtedly, sub-

sumed within the state law discrimination claim. The district

court nonetheless rejected the Hospital and Executive Com-

mittee’s claim of res judicata on the grounds that Nanavati

had not had a “full and fair opportunity to litigate the caim or

issue” in the New Jersey courts. Nanavati attempts to buttress

this rationale with the somewhat cryptic comment that the

state court finding was unfair.

In Kremer v. Chemical Construction Corp., 456 U.S. 461,

480-82, 102 S.Ct. 1883, 1896-98, 72 L.Ed.2d 262 (1982), the

Supreme Court indeed recognized the general common law

rule that res judicata does not apply to judgments which the

party did not have a fair opportunity to litigate. The Court also

recognized the longstanding principle that, whatever the con-

tours of this common law doctrine, a federal court’s decision

A-25

to give preclusive effect vel non to a state court judgment is

not discretionary. Id. at 482, 102 $.Ct. at 1898. The Court held

that under 28 U.S.C. § 1738 a court can refuse to afford claim

preclusive effect to a state court judgment only if the state

itself would not afford preclusion or if error in the prior

judgment rises to the level of a violation of the constitutional

right to due process. See also Allen v. McCurry, 449 U.S. 90,

96, 101 S.Ct. 411, 415, 66 L.Ed.2d 308 (1980).

[8] In this case, Nanavati has not contended either that

New Jersey would not itself recognize the prior judgment or

that the New Jersey court's procedures rise to the level of a

constitutional violation. At all events, New Jersey accords full

claim preclusive effect to default judgments, see Joan Ryno,

Inc. v. First National Bank, 208 N.J.Super. 562, 506 A.2d 762,

766 (App. Div. 1986), so that the mere failure of the court to

hold a hearing in this case is not dispositive. Furthermore,

Nanavati did not object to the dismissal of the complaint with

prejudice. Even if the action of the New Jersey court was in

error or an abuse of discretion, New Jersey provided Nanavati

with a remedy for this error in the form of an appeal or a

motion for reconsideration, thus we do not perceive that a due

process violation occurred. This case is squarely controlled by

Kremer. We therefore hold that Nanavati’s § 1981 claim is

barred by res judicata; hence we will affirm the district court's

denial of Nanavati’s new trial motion directed to that point.

B. The Antitrust Claims

1. Introduction

In a counterclaim and through subsequent amendment

to the counterclaim at trial, Nanavati alleged that Sorensen

conspired with the Executive Committee and the Hospital to

boycott Nanavati’s services in two ways: first, they allegedly

conspired to revoke his hospital staff privileges; and second,

they allegedly discouraged doctors from referring car-

diological patients to Nanavati. The Hospital and Executive

Committee contend that Nanavati’s antitrust claims should

have been precluded because of his earlier action in state

court. Underlying the contention is New Jersey’ antitrust

A-26

statute, which is virtually identical to that of federal law,

providing the same availability of treble damages and attor-

neys’ fees. New Jersey Antitrust Act, N.J. S.A. §§ 56:9-1 to

56:9-19 (1986). The statute even provides on its face that

courts should construe it “in harmony with ruling judicial

interpretations of comparable Federal antitrust statutes.”

§ 56:9-18. The only significant difference between the federal

and state antitrust laws is New Jersey's lack of an interstate

commerce requirement, which could only benefit Nanavati.

(9, 10] Res judicata bars not only claims that were raised

in a previous proceeding but also claims that could have been

raised. See Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394,

398, 101 S.Ct. 2424, 2427, 69 L.Ed.2d 103 (1981); Gottdiener

v. Roxbury Township, 2 N.J. Tax 206 (1981) (citing Bowers v.

American Bridge Co., 43 N.J. Super. 48, 127 A.2d 580 (1956),

aff'd, 24 N.J. 390, 132 A.2d 28 (1957) (applying Pennsylvania

law)); see generally 18 C. Wright, A. Miller & E. Cooper,

Federal Practice and Procedure § 4470, at 687-88 (1981). In

determining the claim preclusive effect of a prior state court

judgment in federal court, 28 U.S.C. § 1738 requires that a

federal court look to the judgment’s claim preclusive effect in

state court. Kremer, 456 U.S. at 481-82, 102 S.Ct. at 1897-98.

This rule applies even when the claim that might be pre-

cluded is within the exclusive jurisdiction of a federal court,

such as federal antitrust claims. See Marrese v. American

Academy of Orthopaedic Surgeons, 470 U.S. 373, 379-86, 105

S.Ct. 1327, 1331-35, 84 L.Ed.2d 274 (1985).

However, a state court may never have an opportunity to

address the question whether an exclusively federal claim is

barred by a prior state judgment because a state court has no

jurisdiction over such a claim. In Marrese the Supreme Court

held:

[w|ith respect to matters that were not decided in the

state proceedings, we note that claim preclusion gener-

ally does not apply where “[t|he plaintiff was unable to

rely on a certain theory of the case or to seek a certain

remedy because of the limitations on the subject matter

A-27

jurisdiction of the courts....” Restatement (Second) of

Judgments § 26(1)(c) (1982). If state preclusion law in-

cludes this requirement of prior jurisdictional compe-

tency, which is generally true, a state judgment will not

have claim preclusive effect on a cause of action within

the exclusive jurisdiction of the federal courts.

Id. at 382, 105 S.Ct. at 1333 (footnote omitted) (emphasis in

original). Because we determine that New Jersey claim pre-

clusion does not apply to claims over which the initial New

Jersey court lacked jurisdiction, i.e., to claims which could not

have been brought in New Jersey state court, we need not

reach the question whether the factual nexus of Nanavati's

federal antitrust claim is sufficiently related to the claims

tried in state court that New Jersey’s res judicata-based “entire

controversy doctrine” would apply. ©

2. Does New Jersey Claim Preclusion Contain a Jurisdic-

tional Requirement?

Following the Supreme Court's direction in Marrese, we

must consider whether New Jersey's claim preclusion rules

would apply where, as here, the first court lacked jurisdiction

-over the claim advanced in the second court. See Marrese, 470

U.S. at 382, 105 S.Ct. at 1332-33; Eichman v. Fotomat Corp.,

759 F.2d 1434, 1437 (9th Cir.1985) (determining that federal

courts must apply California preclusion law after Marrese and

concluding that in California “the court rendering the prior

judgment must have had jurisdiction to hear such claims” in

order to preclude them); id. at 1440 (Kennedy, J., concurring)

(maintaining that the jurisdictional requirement “is a rule of

near universal application”).

Because the exact question (involving a claim of ex-

clusive federal jurisdiction) could not have been presented to

the state court, this question has been described as “nearly

metaphysical” in nature, Marrese v. American Academy of

Orthopaedic Surgeons, 628 F.Supp. 918, 919 (N.D.Ill. 1986)

(on remand from the Supreme Court); see 18 C. Wright, A.

Miller & E. Cooper, Federal Practice & Procedure § 4470, at

A-28

675 (1981 & Supp.1987)!5 Nevertheless, we must examine

the relevant case law to glean an understanding of whether

New Jersey’s claim preclusion law includes a jurisdictional

requirement.

The general rule to which we have adverted is expressed

in § 26(1)(c) of the Restatement (Second) of Judgments, viz.,

that claim preclusion does not apply where “t]he plaintiff was

unable to rely on a certain theory of the case or to seek a

certain remedy ... because of the limitations on the subject

matter jurisdiction of the courts. . . ” Restatement (Second) of

Judgments § 26(1)(c) (1982). Although the Hospital and Ex-

ecutive Committee concede that there is no New Jersey case

on point, they argue forcefully that New Jersey would not

follow the Restatement rule on the basis of New Jersey cases

that demonstrate the breadth of that state’s entire controversy

doctrine, a breadth sufficient, they submit, to override the

Restatement rule.

Giudice v. Drew Chemical Corp., 210 N.J.Super. 32, 509

A.2d 200 (App.Div.), certif. granted and remanded on other

grounds, 104 N.J. 465, 517 A.2d 448, certif: denied, 104 N_J.

465, 517 A.2d 449 (1986), provides an indication of the

breadth of the entire controversy doctrine. In Giudice, the

15. The impressive majority and dissenting opinions of the Seventh

Circuit in Marrese v. Am. Academy Ortho. Surgeons, 726 F.2d 1150, 1161-62

(7th Cir.1984) (opinion of Posner, J., for the court) (en banc); Id., at 1173-83

(opinion of Cudahy, J. dissenting), recount the policy reasons for and

against the use of res judicata in this context. See generally 18 C. Wright, A.

Miller & E. Cooper, Federal Practice & Procedure, § 4470, at 241-46

(Supp.1987). Favoring application of res judicata is the policy that all claims

arising out of a single transaction should be resolved in a single suit, partic-

ularly where, as here, the state action is virtually identical to the federal

action. Militating against its application is the incentive this rule gives to

plaintiffs to bring all their claims in federal court, thus inappropriately bur-

dening federal courts with more cases and more decisions about state law.

In addition, although the rationale does not apply here, Judge Cudahy noted

that, because federal causes of action are often more complex than their

state counterparts, this rule may unfortunately require litigation of complex

claims when a dispute could be resolved more easily via the state courts. See

Marrese, 726 F.2d at 1182.

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plaintiff, who had been dismissed from his job, brought a

defamation action in New York, and then brought a wrongful

discharge suit in New Jersey. The court dismissed the later

suit on the basis of claim preclusion despite acknowledging

that New York probably would not recognize a‘ wrongful dis-

charge cause of action similar to that in New Jersey. Giudice

thus indicates the willingness of New Jersey courts to require

the plaintiff to select the forum with the widest possible relzef.

We note, however, that Giudice does not involve a ques-

tion of the jurisdictional competency of the 1-rmer court. The

New York court in Giudice was empowered to hear the wrong-

ful discharge suit, but would have dismissed the claim be-

cause the applicable New York substantive law had not abro-

gated the employment at will doctrine. Thus, the plaintiff was

not prevented from bringing the claim, but simply faced a

small prospect of succeeding in the New York court. Given

this forum shopping scenario, the New Jersey court's preclu-

sion of Giudice’s wrongful discharge claim is understandable.

It does not, however, indicate whether New Jersey would have

barred the claim if the New York court could not have exer-

cised jurisdiction over it.

Notwithstanding the apparent breadth of the New Jersey

entire controversy doctrine, we are not at liberty to use the

availability of the analogous state law claim to preclude the

federal claim here. The Supreme Court in Marrese noted that

in states that have a res judicata jurisdictional requirement,

an earlier action “based on a state statute analogous to a

federal statute, e.g., a state antitrust law, does not bar subse-

quent attempts to secure relief in federal court if the state

court lacked jurisdiction over the federal statutory claim.” 470

U.S. at 383 n. 3, 105 S.Ct. at 1333 n. 3. Although New Jersey

unquestionably applies broad claim preclusion, several factors

indicate that it nevertheless requires that any precluded claim

be within the jurisdiction of the first court: (1) the reliance of

New Jersey courts on the Restatement (Second) of Judg-

ments; (2) the language and application of the New Jersey

entire controversy doctrine; and (3) the historic application of

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res judicata to claims prior to the merger of law and equity.

We consider these factors in turn.

First, although we have found no instance in which a

New Jersey court has adopted § 26(1)(c), the provision setting

forth the jurisdictional requirement, New Jersey courts have

relied on the Restatement (Second) of Judgments generally in

determining the preclusive effect to be given to claims under

the entire controversy doctrine. See, e.g., Brown v. Brown, 208

N.J.Super. 372, 506 A.2d 29 (App.Div.1986). In Brown, al-

though the court did not have the opportunity to consider

whether prior jurisdictional competency is a requirement of

preclusion, the court indicated its approval of the jurisdic-

tional requirement by quoting the entire § 26(1), including

subsection (c), in a footnote.!® 506 A.2d at 35 n. 2.

Second, the tenor of the New Jersey courts’ approach to

claim preclusion indicates that the entire controversy doctrine

includes a jurisdictional requirement. For example, in Bates

Marketing Associates, Inc. v. Lloyd’s Electronics, Inc., 190 N.J.

Super. 502, 464 A.2d 1142, 1144 (App.Div. 1983), appeal

dismissed, 97 N.J. 703, 483 A.2d 211 (1984), the court stated

that preclusion applies to claims “which were not but should

have been raised in the initial litigation” Although this for-

mulation is somewhat tautological, presumably a claim over

which the earlier court lacked jurisdiction is not one which

should have been raised. Thus, New Jersey courts have de-

clared that only those claims that “could have been raised” are

excluded. Gottdiener v. Roxbury Township, 2 N.J.Tax 206

(1981) (citing Bowers v. American Bridge Co., 43 N.J.Super.

16. Section 26(1)(c) states that a claim is not extinguished when:

The plaintiff was unable to rely on a certain theory of the case or to seek

a certain remedy or form of relief in the first action because of the

limitations on the subject matter jurisdiction of the courts or re-

strictions on their authority to entertain multiple theories or demands

for multiple remedies or forms of relief in a single action, and the plain-

tiff desires in the second action to rely on that theory or to seek that-

remedy or form of relief.

A-31

48, 127 A.2d 580 (App.Div. 1956), aff’d, 24 N.J. 390, 132 A.2d

28 (1957) (applying Pennsylvania law)).!”

Third, at its inception, the entire controversy doctrine

included a jurisdictional requirement. Prior to the passage of

the Judicial Article of the New Jersey Constitution of 1947,

the courts of the state were divided between equity and law,

a situation which presents an opportunity to determine

whether the state would have given, albeit many years ago,

preclusive effect to claims that could not have been tried in a

court with limited (law or equity) jurisdiction. In Ajamian v.

Schlanger, 14 N.J. 483, 103 A.2d 9, 11, cert. denied, 348 U.S.

835, 75 S.Ct. 58, 99 L.Ed. 659 (1954), then-New Jersey Su-

preme Court Justice Brennan noted that a prior action in an

equity court in New Jersey

would probably not have barred the subsequent action at

law ... because the former Court of Chancery had no

jurisdiction to entertain a claim for the purely legal rem-

edy and it was rightly considered to be inordinately harsh

and unjust to conclude a complainant, denied the oppor-

tunity in the Chancery action, from seeking the only

remedy ... in fact available to him.

Id. 103 A.2d at 11 (citations omitted). Although Ajamian is

distinguishable because, before the merger of law and equity,

the legal and equitable claims could not have been tried

together in either court, the case nevertheless indicates that

when confronted by the question of the limited jurisdiction of

courts of equity and law, the New Jersey courts have declined

to apply claim preclusion.

It is also important to note that New Jersey courts, in

cases where a claim was first brought in federal court, have

17. Although distinguishable from the case sub judice because it ap-

plied to an issue actually litigated in another court, in Roberts v. Goldner, 79

N.J. 82, 397 A.2d 1090 (1979), the New Jersey Supreme Court adverted to

the res judicata jurisdictional requirement. The court stated that “[a] cause

of action once finally determined between parties on the merits by a tri-

bunal having jurisdiction cannot be relitigated by those parties . . . in a new

proceeding.” Id. 397 A.2d at 1091 (emphasis added) (citations omitted).

A-32

precluded state claims arising out of the same controversy,

but only after a careful determination that the federal court

had subject matter jurisdiction over the state claims. For

example, in assessing whether the entire controversy doctrine

barred the assertion of a state claim after a federal district

court's dismissal of related claims, the Appellate Division in

Blazer Corp. v. New Jersey Sports & Exposition Authority, 199

N.J.Super. 107, 488 A.2d 1025, 1028 (App.Div.1985), stated

that “|t]he single controversy doctrine is available to bar plain-

tiffs’ claims ... only if the federal court had the ‘power’ to

exercise pendent jurisdiction over those claims.” Because it

determined that the federal court did have subject matter

jurisdiction over the claims raised in the subsequent state

claim, the court precluded the state claims. Thus, the court

premised its application of claim preclusion on existence 6f

subject matter jurisdiction in the first forum. See also Ferger v.

Local 483, 94 N.J.Super. 554, 229 A.2d 532, 541 (Ch.Div.)

(where federal court declined to exercise pendent jurisdiction

over state claim arising from the same controversy, state claim

not precluded in subsequent state action), aff'd per curiam, 97

N.J.Super. 505, 235 A.2d 482 (App.Div. 1967), certif. denied,

51 N.J. 181, 238 A.2d 468 (1968).!8

{11} To summarize, Marrese sets up a two-part inquiry.

The first part concerns whether the factual nexus of the

antitrust claim is sufficiently related to the claims tried in

state court that New Jerseys entire controversy doctrine

18. We note that the application of res judicata to cases in which the

first tribunal was a state court of limited jurisdiction and the second was a

state court of general jurisdiction does not advance the analysis. Although

the cases indicate that New Jersey does not preclude claims following prior

decisions of such courts, the rationales offered therein for denying preclu-

sion rest only in part on the inability to bring certain claims in the court of

limited jurisdiction. See, e.g., East Hanover Township v. Cuva, 156

N.J.Super. 159, 383 A.2d 725, 727 (App.Div. 1978) (no preclusive effect

given to an earlier decision by a court of limited jurisdiction where: (1) the

court of limited jurisdiction applied a different standard of proof; (2) the

losing party was unable to appeal from the first judgment; and (3) “the

nature of the remedy available in the second suit in vindication of a public

interest |was| more expansive than that in the first suit”).

A-33

would apply. Because we conclude that the second part is not

met, however, we do not reach this question. We conclude

that the second part is not met because we determine that

New Jersey courts, if faced with the question, would follow

Restatement (Second) of Judgments approach and would de-

cline to preclude a claim over which the initial court lacked

jurisdiction. Our conclusion that Nanavati’s antitrust claims

are not precluded requires us to address his contention that

the district court erred in granting judgment n.o.v. as to those

claims.

VI. THE ANTITRUST CLAIMS

A. Procedural History; Problems and Contentions

Nanavati’s initial antitrust claim, which was included in

his counterclaim to Sorensen’s defamation action, was as-

serted against Sorensen alone. The counterclaim asserted

that, in violation of § 1 of the Sherman Act, 15 U.S.C. § 1,

Sorensen: (1) caused the revocation of Nanavati’s hospital

staff privileges; and (2) organized a doctors’ boycott of patient

referrals at the Hospital. The claim was premised on Soren-

sen’s putative desire to exclude Nanavati because of his com-

petitive threat to Sorensen’s lucrative cardiological practice.

As we have noted above, at the close of Nanavati’s case he

moved to amend the complaint and pretrial order to add the

Hospital and the Executive Committee as defendants. !9

The district court submitted the antitrust claim to the

jury on rule of reason and per se grounds. The court in-

structed the jury that if it found that a group boycott existed

and was motivated “in whole or in part by the legitimate

concerns for quality of patient care, such as lack of profes-

sional competence, unprofessional behavior and the like” the

conduct was to be judged (under the rule of reason) by exam-

ining the defendants’ actions to determine whether the boy-

cott was an unreasonable restraint of trade. J.A. at 4403. The

19. Because we will affirm the district court's grant of judgment n.o.v.

for the Hospital and Executive Committee, however, we need not address

the propriety of adding them as defendants.

A-34

court also instructed the jury that if it found a group boycott

without such motivation it should find that the conduct was

per se unreasonable.

The jury returned a special verdict as follows:

B1. Was there a contract, combination, or conspiracy in

restraint of interstate commerce?

Yes X_ No__

x x *

B2. Was the Hospital part of the contract, combination, or

conspiracy?

Yes X_ No

B3. Was the Executive Committee part of the contract,

combination, or conspiracy?

Yes X_ No__

B4. Was Dr. Sorensen part of the contract, combination,

or conspiracy?

Yes __ No X_

* * *

B5. Did any of the participants perform any act in fur-

therance of the contract, combination, or conspiracy?

Yes_X No

* * x

B6. Did the contract, combination, or conspiracy take the

form of a group boycott?

Yes_X No

*x x x

B7. Was Dr. Nanavati boycotted because of unprofes-

sional behavior or violations of public service or other ethical

norms?

Yes X_ No__

* * *

B8. Did the contract, combination, or conspiracy con-

stitute an unreasonable restraint on interstate commerce?

Yes X No

A-35

B9. Did the contract, combination, or conspiracy injure

Dr. Nanavati in his business or property?

Yes_X No

x * *

B10. Did Dr. Nanavati first sustain injury before June 5,

1980?

Yes__ No X_

B11. What is the amount of damages which Dr. Nanavati

sustained because of the cuntract, combination, or conspir-

acy?

$350,000

645 F.Supp. at 1237-39.

The verdict is confusing at best. Despite Nanavati'’s at-

tempt to prove that Sorensen was the ringleader in one over-

arching antitrust conspiracy—indeed that was the central

theme of his trial strategy--the jury exonerated Sorensen.

However, it found that the Executive Committee and the

Hospital, who were added as defendants after the close of

Nanavati’s case-in-chief, had engaged in a combination or

conspiracy that took the form of a group boycott of Nanavati’s

services. The jury found the Hospital and Executive Commit-

tee liable despite rejecting Nanavati’s auxiliary theme. that

the exclusion of Nanavati from the Hospital was motivated

solely by anticompetitive intent. Rather, the jury found that

these defendants had participated in the boycott because they

believed Nanavati had participated in “unprofessional behav-

ior or violations of public service or other ethical norms.” 645

F.Supp. at 1239. However, despite its finding of the defen-

dants’ (legitimate) motivations, the jury found the combina-

tion or conspiracy an unreasonable restraint on interstate

commerce and returned a verdict in favor of Nanavati and

against the Hospital and Executive Committee in the sum of

$350,000, which, when trebled in accordance with 15 U.S.C.

§ 15(a), increased to $1,050,000.

At the threshold level of analysis, the exoneration of

Sorensen and the finding that the Executive Committee and

the Hospital acted out of at least some legitimate motivations

A-36

leave the foundations for liability extremely vague. First, be-

cause the district court instructed the jury that the Hospital

could not conspire with the Executive Committee, its agent, it

is unclear who were the parties to the conspiracy. No inter-

rogatory regarding other possible conspirators was submitted

to the jury, and therefore there is no basis for a conclusion as

to who, if anyone, the Hospital's co-conspirators were.?° Sec-

ond, the very basis of liability is vague. The jury found that

the conspiracy had imposed an unreasonable restraint on

commerce with anticompetitive effects, despite its finding of

defendants’ good intentions. But we do not know whether the

jury believed that the defendants’ opinion of Nanavati simply

was mistaken or whether it believed that the boycott was an

unreasonable restraint of trade even if Nanavati had engaged

in unprofessional conduct or violations of accepted profes-

sional norms. We also do not know which of the two alleged

restraints (revocation of staff privileges or boycott of referrals)

actually existed in the jury’s view, and which of them the jury

believed to be unreasonable.

The district court granted judgment n.o.v. for the Hospi-

tal and Executive Committee because it concluded that the

record was “devoid of evidence to support a finding that either

the Hospital or the Executive Committee participated in any

conspiracy designed to stifle competition or engaged in any

unlawful restraint of trade that had an anti-competitive ef-

fect.” 645 F.Supp. at 1229. The parties now renew their argu-

ments over the district court's reasoning, and the Hospital and

Executive Committee attempt to raise additional grounds for

setting aside the jury's verdict.?!

Nanavati maintains that the district court erred in con-

20. The district court noted that the parties decided not to request a

special finding seeking that the jury determine whether non-defendants

participated in the alleged conspiracy. 645 F.Supp. at 1229 n. 20.

21. We note that defendants have not raised, and we do not here ad-

dress, the question whether the Hospital's peer review actions were im-

mune under the doctrine of Parker v. Brown, 317 U.S. 341, 350-51, 63 S.Ct.

307 313-14, 87 L.Ed. 315 (1943). See Patrick v. Burget, US. , 108

S.Ct. 1658, 100 L.Ed.2d 83 (1988).

A-37

cluding that the record lacked evidence to support the jury’s

finding of liability against the Executive Committee and Hos-

pital. He first contends that, under Weiss v. York Hospital, 745

F.2d 786 (3d Cir.1984), cert. denied, 470 U.S. 1060, 105 S.Ct.

1777, 84 L.Ed.2d 836 (1985), as a matter of law, the Executive

Committee comprised a combination in regard to the revoca-

tion of his staff privileges and bdoycott of referrals. He also

contends that the Hospital’s contract with Komansky for car-

diological testing constituted a contract in restraint of trade.

Perhaps recognizing that the Hospital's involvement in the

Komansky contract does not constitute a contract, combina-

tion or conspiracy relating to the two matters submitted to the

jury—the staff privileges revocation and the alleged boycott of

referrals—Nanavati contends that the Hospital is liable to the

extent it acted to further the Committee's unlawful combina-

tion and for the acts of individual physicians on its staff.

Moreover, implicitly conceding that the case does not impli-

cate a per se violation of the antitrust laws, Nanavati contends

that the Committee’s actions constituted an unreasonable

restraint of trade because they had an anticompetitive pur-

pose and effect.

The Hospital and Executive Committee contend that

Nanavati failed at trial to: (1) identify the participants in the

alleged conspiracy; (2) properly define the relevant product

and geographic market or prove anticompetitive effect within

that market; and (3) prove anticompetitive motivation on the

part of either the Hospital or Executive Committee, and that

these failures are fatal to his case.??

[12] Section 1 of the Sherman Act, 15 U.S.C. § 1 (1982),

provides in part:

Every contract, combination in the form of trust or other-

wise, or conspiracy, in restraint of trade or commerce

22. Our review of the district court's judgment n.o.v. is plenary. We

must “determine, as a matter of law, whether the record contains the ‘mini-

mum quantum of evidence from which a jury might reasonably afford re-

lief?” Smollett v. Skayting Dev. Corp., 793 F.2d 547, 548 (3d Cir. 1986) (quot-

ing Dennery v. Siegel, 407 F.2d 433, 439 (3d Cir.1969)).

A-38

among the several States, or with foreign nations, is

declared to be illegal ...

Under settled law, the jury must find three elements to prove

a violation of the Act: (1) a contract, combination or conspir-

acy; (2) in restraint of trade; and (3) an effect on interstate

commerce. The effect on interstate commerce is not at issue.

B. Contract, Combination or Conspiracy

1. Introduction: Summary Disposition of Certain Issues

The jury found that both the Hospital and the Executive

Committee participated in a combination or conspiracy, re-

garding either the revocation of Nanavati’s staff privileges or

the subsequent boycott of referrals (Nanavati’s two theories of

antitrust violation). Ruling upon the Hospital's and Executive

Committee’s motion for judgment n.o.v., the district court,

following our opinion in Weiss, 745 F.2d at 816, concluded

that the Executive Committee, having issued a recommenda-

tion that Nanavati’s staff privileges be terminated, comprised

a “combination” for antitrust purposes. However, the court

absolved the Hospital of liability arising from the staff priv-

ileges revocation on the grounds that, under Weiss, the Hospi-

tal could not legally conspire with its staff and that no other

potential conspirator was available.

[13] It was settled by Weiss that, when the Executive

Committee acts as a body, it constitutes a “combination.” In

Weiss, looking to the economic substance of the staff arrange-

ment, we determined that each medical staff member has an

independent economic interest separate from each other

member’ interest and thus that the medical staff cannot be

considered a single economic entity. 745 F.2d at 815. We held

“that, as a matter of law, the medical staff is a combination of

individual doctors and therefore that any action taken by the

medical staff satisfies the ‘contract, combination or conspir-

acy’ requirement of section 1.” Id. at 814. Because the Execu-

tive Committee members, as members of the medical staff,

are independent actors comparable to the members of the

medical staff in Weiss, we agree with the district court that

A-39

the Executive Committee is similarly a combination, at least

with regard to the Committee's recommendation regarding

the revocation of Nanavati’s staff privileges. See infra page 118

(discussing the beycott of referrals).

[14] Nor need we dwell upon the question whether

Nanavati satisfied the contract, combination or conspiracy

requirement as it bears upon the Hospital's alleged participa-

tion in a conspiracy to revoke Nanavati’s staff privileges. In

Weiss, we concluded that a hospital could not conspire with

_ its medical staff, as an entity, because the staff “operated as an

officer of a corporation would in relation to the corporation . . .

{and| had no interest in competition with the hospital.” 745

F.2d at 817. We therefore conclude that the district court

correctly held that the Hospital could not conspire with the

Executive Committee.

[15] Nanavati maintains, however, that individual doc-

tors’ actions regarding the boycott of referrals should be suffi-

cient to envelop the Hospital in a conspiracy since the emer-

gency room, where discussions regarding the boycott

allegedly took place, was operated under contract with the

Hospital. In Weiss, we did not reach the question whether

individual members of a medical staff, operating under con-

tract to a hospital, could ever conspire with the hospital.

Although the physicians in the Hospital's emergency room

here were not acting as officers of the corporation, they, like

the doctors in Weiss, had no interest in competition with the

Hospital. The doctors stood to gain or lose from the successful

operation of the emergency room as did the Hospital itself.

Moreover, Nanavati presented no evidence linking the alleged

boycott of referrals to the Hospital’s involvement in the revoca-

tion decision. We therefore conclude that evidence of emer-

gency room doctors’ alleged conspiratorial acts, even if they

had related to the revocation decision, would not support a

finding that the Hospital was a conspirator.

Turning to the Executive Committee and focusing solely

on the alleged boycott of referrals, because there is no conten-

tion that the Executive Committee itself took any action in

furtherance of the boycott, we must consider whether the

A-40

Executive Committee gua Committee is a combination for

this purpose, and we must also address the question whether

there is any evidence that the members of the Committee

participated in a conspiracy. We turn now to these questions.

2. Boycott of Referrals by the Executive Commit-

tee or Its Members

Nanavati theorized that Sorensen led a group boycott of

patient referrals. The district court rejected liability for the

alleged boycott on the ground that Nanavati had proven no

link between the doctors who allegedly declined to refer pa-

tients (who were not named as individual defendants) and

either the Hospital or the Executive Committee. We will

therefore consider whether the Executive Committee could

-comprise a combination in regard to the boycott of referrals

and, if not, whether there is any evidence implicating indi-

vidual members of the Committee in a conspiracy.

Nanavati maintains that because the actions of the Exec-

utive Committee are the actions of a combination under

Weiss, the Committee must be a combination in regard to the

boycott of referrals. However, Nanavati’s argument fundamen-

tally misconstrues our holding in Weiss, where the medical

staff of York Hospital, like the Executive Committee, had the

authority under the hospital’s corporate charter to make staff

privilege recommendations. In Weiss, because members of

the medical staff were independent economic actors, we held

that any action taken by the medical staff satisfied the “con-

tract, combination or conspiracy” requirement of section 1.

Thus, we held that when the medical staff acted, it comprised

a combination and “the absence of evidence of any other co-

conspirator(s) is irrelevant.” 745 F.2d at 814.

It does not follow, however, that where, as here, the

Executive Committee is not alleged to have acted as an entity

in furtherance of the conspiracy, it should be considered a

combination. Our conclusion in Weiss was premised on the

concept that where individual actors take actions as a group,

they are a combination for the purposes of those actions.

Where no group action is taken, no such combination can

228) SIE SEE ANID LES ONT NII aN

A-41

exist. In short, we did not hold in Weiss that because the

actions of the medical staff constitute the actions of a com-

bination, even where there is no allegation that the staff acted

as a group, the “contract, combination or conspiracy” require-

ment has been met. Such a group is a combination as a matter

of law only for the actions it takes as a group.

[16] Here, Nanavati does not maintain that the Commit-

tee took any group action. Thus, unlike Weiss, for the pur-

poses of the boycott of referrals, we conclude that the Execu-

tive Committee does not constitute a combination as a matter

of law. Instead of group action by the Executive Committee,

Nanavati points to the actions and motivations of medical staff

members who were not on the Committee. Nanavati main-

tains that because there is evidence of a boycott by members

of the medical staff, the district court erred in finding no

evidence that the Executive Committee participated in a con-

spiracy to boycott Nanavati. Nanavati’s conclusion does not

follow, however, because he has not shown that any members

of the Executive Committee—none of whom were car-

diologists—committed any acts in furtherance of the referrals

boycott.

We therefore must consider whether Nanavati intro-

duced sufficient evidence from which the jury could have

inferred that Executive Committee members were conspir-

ators in the boycott of referrals. In Monsanto Co. vs. Spray-Rite

Service Corp., 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775

(1984), the Supreme Court determined the standard for when

sufficient evidence exists to permit the inference of an anti-

trust conspiracy:

The correct standard is that there must be evidence that

tends to exclude the possibility of independent action.

.... That is, there must be direct or circumstantial evi-

dence that reasonably tends to prove .... a conscious

commitment to a common scheme designed to achieve

an unlawful objective.

Id. at 768, 104 S.Ct. at 1473. In Tunis Brothers Co. v. Ford

Motor Co., 763 F.2d 1482, 1491 (3d Cir.1985), vacated and

A-42

remanded, 475 U.S. 1105, 106 S.Ct. 1509, 89 L.Ed.2d 909

(1986), reinstated, 823 F.2d 49 (1987), cert. denied, —U.S.—,

108 S.Ct. 1013, 98 L.Ed.2d 979 (1988), we held that “[t]hose

who, with knowledge of the conspiracy, aid or assist in carry-

ing out the purposes of the conspiracy make themselves par-

ties thereto and are equally liable to or guilty with the original

conspirators.” (footnote omitted). However, Nanavati has pre-

sented neither evidence from which the jury could infer that

the Executive Committee actually participated in the conspir-

acy nor acts that aided or assisted the alleged boycott of

patient referrals.

Nanavati has pointed to the testimony of a Dr. Splitter

that several doctors agreed “on the Hospital floor and at a

restaurant meeting of the Staff, to take actions against ‘the

Indian?” Nanavati Br. at 16 (quoting J.A. at 4071). For us to

reverse the district court's determination, we must find some

evidence in the record from which the juty could have con-

cluded that these doctors conspired with ¢ither the Hospital

or the Executive Committee to boycott referrals of patients to

Nanavati. Of course, the mere fact that th¢ “agreement” took

place in the Hospital does not implicate “ Hospital itself in

the conspiracy. Nanavati does not maintajn that the Hospital

took official action in furtherance of the boycott. Moreover,

Splitter’s testimony does not indicate Executive Committee

involvement.

First, an examination of Splitter’s t-stimony reveals that

the “agreement” at the Hospital consisted of “a remark about

Indian doctors, that the Indian doctors are overrunning us

and we have to stop it,” J.A. at 4071, and that it was made by

Sorensen, who was exonerated by the jury. At trial, Splitter

could not recall who heard the remark, much less that any

members of the Executive Committee agreed to act on it.

Second, Splitter’s testimony indicates that the “meeting” that

took place at a local restaurant was a staff party, and that the

doctors involved included Sorensen, a Dr. Napoleon, Dr.

Joseph Furey, and “many others.” J.A. at 4072. Nanavati does

not maintain, and the record contains no evidence that would

lead us to the conclusion, that any of these individuals were

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A-43

members of the Executive Committee or that there was any

other Committee or Hospital involvement in these discus-

sions. See 6. P. Areeda, Antitrust Law § 1417B, at 98 (1986)

(“Mere conspiratorial opportunity is routinely and correctly

held insufficient to support a conspiracy finding.” (footnote

omitted) ). Moreover, to the extent Nanavati sought to demon-

strate that the Executive Committee members interacted with

the allegedly boycotting doctors, we note that, as the Court of

Appeals for the District of Columbia Circuit held in Kreuzer v.

American Academy of Periodontology, 735 F.2d 1479, 1488

(D.C.Cir.1984), “[t]he mere showing of frequent relations be-

tween alleged conspirators .... is insufficient to infer an il-

legal agreement.” (citations omitted).

Nanavati next maintains that there was evidence that

emergency room physicians were instructed to keep referrals

“in the family” and thus to boycott him. J.A. at 4076. The

testimony of Dr. DiRago indicated that the “in the family”

statement was made by Dr. Sorensen, however, and did not

implicate any Executive Committee members. In response to

a question from counsel about whether the statement re-

flected a policy of the Hospital, DiRago responded that “there

is no general policy” J.A. at 4077. Thus, these statements

provide no support for the assertion that either the Hospital or

the Executive Committee conspired with doctors who al-

legedly were boycotting Nanavati.

Nanavati also relies on statements by Dr. Napoleon that

“we have to fight” foreign doctors coming into the area, J.A. at

4335, and that “[w]e will bring in an American cardiologist”

after removing Nanavati. J.A. at 4336. Dr. Napoleon was not a

member of the Executive Committee, however.

Finally, Nanavati maintains that, “[t]o the extent the

Hospital acted to further the Committee’s unlawful combina-

tion, the Hospital is as liable as the Committee.” Nanavati Br.

at 16. However, because we conclude that the district court

correctly determined that the record contains no evidence of

involvement by the Committee or its members in the boycott

of referrals, we need not reach the question whether the

Hospital may be held liable for the Committee's actions. We

therefore conclude that the district court correctly deter-

A-44

mined that the evidence does not support a verdict against

either the Hospital or the Executive Committee based on the

boycott of referrals.2% |

3. Conclusion

In sum, we conclude that Nanavati failed to present a

case that the Hospital participated in a combination or con-

spiracy with respect to either its staff privileges revocation or

in the subsequent boycott of patient referrals. We therefore

wil affirm the district court’s grant of judgment n.o.v. for the

Hospital. Although the evidence is similarly lacking as to the

Executive Committee's participation in the alleged conspiracy

to boycott patient referrals, because the Executive Committee

is a combination for the purposes of the revocation of

Nanavati’s staff privileges, we turn next to whether the dis-

trict court properly granted judgment n.o.v. for the Commit-

tee on that claim, a consideration that turns on the sufficiency

of damages.

C. Evidence of Damages

[17] Our conspiracy analysis leaves one remaining claim at

issue: whether the Executive Committee’s recommendation

that Nanavati’s staff privileges be revoked comprised a re-

straint of trade in violation of § 1 of the Sherman Act. The

defendants have, with great force, asserted a number of sub-

stantive antitrust arguments as to why Nanavati did not make

out such an antitrust claim.24 However, we need not address

23. Nanavati also maintains that an exclusive contract with Dr. Henry

Komansky for the provision of stress and echocardiogram tests is sufficient

to implicate the Hospital in a conspiracy to exclude him, but Nanavati does

not indicate how the Komansky contract would demonstrate the Hospital's

involvement in either of the two anticompetitive acts sought to be proved at

trial—the staff privileges revocation or the boycott of referrals.

24. In light of the jury’s finding that he was excluded because of his

unprofessional behavior, Nanavati does not contend that the defendant's

conduct would support a finding of per se liability. But even under rule of

reason analysis Nanavati’s case is fraught with problems, especially consid-

ering a hospital’s need to control the quality of its staff and to ensure that

adequate patient care is provided. See Weiss, 745 F.2d at 821 n. 60.

As to anti-competitive motivation, the jury made a supported finding

eee PLES LIMES

A-45

that Nanavati was boycotted “because of unprofessional behavior or vio-

lations of public service or other ethical norms,” 645 F.Supp. at 1239, hence

Nanavati cannot dispute that he was boycotted, at least in part, because of

his unprofessional behavior. Because Sorenson was exculpated by the jury

and no members of the Executive Committee were cardiologists, Nanavati

has presented no rational theory of the economic gain that the Executive

Committee stood to receive, or of concomitant harm to competition, from

the revocation of Nanavati’s staff privileges. See Matsushita Electric Indus-

trial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89

L.Ed.2d 538 (1986) (citing First National Bank of Arizona v. Cities Service

Co., 391 U.S. 253, 280, 88 S.Ct. 1575, 1588, 20 L.Ed.2d 569 (1968)) (where

plaintiffs are unable to assert viable economic theory supplying a “rational

motive to join the alleged boycott,” simple refusal to deal cannot support a

finding of antitrust liability). Moreover, as the district court concluded,

nothing in the record supported an assertion that the staff privileges revoca-

tion was based on an actual desire “for personal economic gain,” or that

even “the existence of a potential for economic gain by the Executive Corn-

mittee members’ was present. 645 F.Supp. at 1231 N. 28 (emphasis in orig-

inal). Furthermore, the statement of a Dr. Napoleon that “we have to fight

|foreign doctors], because now there will be so many doctors around the

area and what happens to us[?],” J.A. at 4335-36, cannot be evidence of

anticompetitive animus by the Committee because Dr. Napoleon was never

a member of the Executive Committee.

As to anti-competitive effect, Nanavati’s failure to present evidence of

damages, as discussed in the text infra, parallels the failure here. The dis-

trict court concluded that although the Executive Committee's action would

have diminished Nanavati’s ability to treat patients, nothing in the record

indicated that the action “substantially impaired competition.” J.A. at 1231.

On appeal, Nanavati contends that “[t]here can be little doubt of the anti-

competitive effect,” Nanavati Reply Br. at 16, and refers us to an earlier

argument that “[o]uster of [him] from the Staff... would result in only one

cardiologist being available to the patients most in need of such specialty

service, those requiring hospitalization.” Id. at 12. Although revocation un-

questionably affected Nanavati, our review focuses on the effect on compe-

tition in the relevant market. See Northwest Wholesale Stationers, Inc. v.

Pacific Stationery & Printing Co., 472 U.S. 284, 297-98, 105 S.Ct. 2613,

2621-22, 86 L.Ed.2d 202 (1985).

But the impact on the supply of cardiological services was necessarily

limited because Nanavati’s absence lasted for only five days and the effect of

the revocation was limited to Nanavati’s ability to practice in the Hospital.

As we note infra, Nanavati performed stress and echocardiogram tests in

his office. Even though the temporary deprivation of staff privileges might

have had an effect, it was incumbent upon Nanavati to put on at least some

evidence of the impact of the exclusion on the market so that the jury, and

A-46

these arguments because we note that Nanavati has simply

failed to prove any damages from the revocation.25

Because the state court enjoined the revocation,

Nanavati’s absence lasted for only five days. Not only did the

revocation last for a short period, but its effect was limited to

Nanavati’s ability to practice in the Hospital, and, a fortiori,

did not restrict his lucrative office practice. The record is clear

that even sophisticated tests such as stress tests and echocar-

diograms were performed by Nanavati in his own office;

hence we must review the revocation in terms of its impact on

Nanavati’s ability to provide cardiological services that require

hospitalization. But this point was never quantified on the

record. Moreover, a review of the record reveals no evidence

from which the jury could have concluded that Nanavati lost

patients or EKG readings during the five day revocation pe-.

riod. We also note that Nanavati’s practice has, in fact, in-

creased from 1,200 patients at the time he initially filed his

complaint, to 4,000 at the time of trial; hence the jury could

not have simply inferred that Nanavati suffered long term

damages from the five day revocation. On these facts, we find

no basis for a jury verdict in Nanavati’s favor based solely on

the Executive Committee's revocation of Nanavati’s staff priv-

ileges.

D. Summary

In sum, because the Hospital could not conspire with

either the Executive Committee or individual members of its

staff, we conclude that the Hospital cannot be liable for its

revocation of Nanavati’s staff privileges or for the alleged

boycott of patient referrals. Similarly, because the Executive

Committee did not act as a body in regard to the boycott of

this court on appeal, would not be forced to speculate as to what the injury

might have been. However, he did not. Finally, not only was the impact on

the supply of cardiological services limited, but there was no evidence that

Nanavati’s revocation had an effect on the cost of cardiological services.

Although not required in all cases, evidence of higher prices is a relevant

consideration, particularly in the absence of other indicia of economic ef-

fect.

25. Nanavati also has sought to rely on an exclusive contract between

A-47

referrals, it did not comprise a combination as a matter of law,

and because there is no evidence in the record that its mem-

bers participated in the boycott, the Committee cannot be

liable under that theory.

The Executive Committee does comprise a combination

insofar as it recommended that the Hospital terminate

Nanavati's staff privileges. However, absent some evidence of

damages resulting from the Executive Committee's revocation

recommendation, we are unable to conclude that the district

court’s judgment n.o.v. for the Executive Committee was in

error. We therefore will affirm the grant of judgment n.0o.v. for

both the Hospital and the Executive Committee.

VII: CONCLUSION

For the foregoing reasons, we will: (1) affirm the district

court's denial of the new trial motion on Nanavati’s § 1981

claim; (2) affirm the judgment n.o.v. on Nanavati’s antitrust

claims; (3) affirm the district court’s determination that it had

subject matter jurisdiction over the state law defamation and

tortious interference with business claims but reverse the

judgment for Sorensen on both claims; and (4) dismiss the

cross appeal of the Hospital, Executive Committee and

Sorensen.

Ironically, despite years of vexatious litigation, the parties

will be where they were before the suit began. “Durum valde

durum, sed sic lex est.” Penhallow v. Doane’s Administrators, 3

U.S. (Dall.) 54, 88-89, 1. L.Ed. 507, 521-22 (1795) (“Hard

very hard, but such is the law’).

the Hospital and Dr. Komansky for the provision of stress tests and echocar-

diograms. However, Nanavati did not advance in his complaint, in his pre-

trial memorandum, or on appeal that the exclusive contract with Komansky

itself comprised an illegal practice, (presumably either an exclusive dealing

or a tying arrangement) and has not linked the contract to the sole remain-

ing defendant, the Executive Committee.

oi

Suketu H. NANAVATI, M.D., Plaintiff,

V.

BURDETTE TOMLIN MEMORIAL HOSPITAL; Executive

Committee of the Medical Staff of Burdette Tomlin Memorial

Hospital and Robert J. Sorenson, M.D., Defendants.

Robert J. SORENSON, M.D., Plaintiff,

v.

Suketu H. NANAVATI, M.D., Defendant.

Civ. A. Nos. 83-0794, 84-1790.

United States District Court, D. New Jersey.

Oct. 2, 1986.

Schwartz & Fioretti by Stacey L. Schwartz, Cherry Hill.

N.J. and Kohn, Savett, Klein & Graf, P.C. by David H. Wein-

stein, William B. Lytton, Philadelphia, Pa., for Suketu H.

Nanavati, M.D.

Horn, Kaplan, Goldberg, Gorny & Daniels by Robert E.

Paarz, William M. Honan, Atlantic City, N.J., for Burdette

Tomlin Memorial Hosp., The Executive Committee of the

Medical Staff, and Robert J. Sorenson, M.D.

Valore, McAllister, Westmoreland, Gould, Vesper &

Schwartz by Carl J. Valore, Nina Chase, Noxthfield, N.J. for

Burdette Tomlin Memorial Hosp.

Brad J. Spiller, Camden, N.J. and F. Emmett Fitzpatrick,

P.C. by F Emmett Fitzpatrick, Jr., F. Emmett Fitzpatrick, III,

Philadelphia, Pa., for Robert H. Sorenson, M.D.

Rubins, Waldron & Barry by James A. Waldron, Wild-

A-49

A-50

wood, N.J., for Executive Committee of the Medical Staff of

Burdette Tomlin Memorial Hosp.

COHEN, Senior District Judge:

This complex, multi-issue case, which included claims

and counterclaims among Dr. Suketu H. Nanavati, Dr. Robert

J. Sorenson, the Burdette Tomlin Memorial Hospital (“BTMH”

or “the Hospital”)! and the Executive Committee of the Hospi-

tals Medical Staff (“the Executive Committee”)? was tried

before a jury for nine weeks. Sixty-five witnesses were pre-

sented, nine lawyers and their staffs participated in the case,

and eleven separate opinions, 4 before trial and 7 during trial,

were filed by this Court. Forty-five special interrogatories

were submitted to the jury. The jurors deliberated for 4 days,

and, during this time, communicated with the Court on 8

occasions.

Presently before the court are post-trial motions by plain-

tiff/counterclaim—defendant, Dr. Nanavati, defen-

dant/counterclaim—plaintiff, Burdette Tomlin Memorial

Hospital, and defendant, the Executive Committee. Dr.

Nanavati moves for a judgment notwithstanding the verdict

(“j.n.o.v.”) pursuant to Fed.R.Civ.P. 50(b), and, in the alter-

native, for a new trial pursuant to Fed.R.Civ.P. 59(a). BIMH

and the Executive Committee also move herein for j.n.o.v.

and, alternatively, for a:new trial.°

1. Burdette Tomlin is a small non-teaching community hospital. It had

171 beds in 1979, and 239 beds as of January 1984. It is located in Cape

May Courthouse, New Jersey, and is the only hospital in Cape May County.

2. Two separate cases, Civil Action Nos. 83-0794 and 84—1790 were

consolidated for trial by this court. Dr. Nanavati is the plaintiff in Civil

Action No. 83-0794 and the defendant-counterclaimant-plaintiff in Civil

Action No. 84-1790. Dr. Sorenson is the plaintiff in Civil Action No.

84-1790 and the defendant-counterclaimant-plaintiff in Civil Action No.

83-0794. The Hospital and the Executive Committee are the defendants-

counterclaimants-plaintiffs in Civil Action No. 83-0794.

3. BTMH and the Executive Committee, by motion filed July 25, 1986,

request this Court to “mold” the antitrust verdict. Since, however, judgment

was entered on the jury’s verdict on July 23, 1986, two days prior to the

filing of this motion, said motion shali be denied as moot.

A-51

I. BACKGROUND

The factual predicate for this case is somewhat difficult

to summarize, as it consists of events taking place over a

number of years. Without purporting to illuminate every

nuance of the matter, we shall set forth a brief account of the

facts.

Dr. Nanavati, who speaks English with an Indian accent,

is a dark-skinned native of Ahmedabad, India. He was edu-

cated in India and, in 1970, came to this country to continue

his medical education. He was eventually naturalized as a

United States citizen, and was Board Certified in Cardiology

in 1977. Thereafter, he served as Chief of Cardiology in a

hospital at Debois, Pennsylvania, for about a year and a half,

at which time he sought to move his practice to New Jersey.

In March of 1979 Dr. Nanavati began working at BTMH,

having gained admission to the medical staff without diffi-

culty. Prior to his admission and shortly after his arrival at

BTMH, Dr. Nanavati discussed the opportunities for reading

Electrocardiograms (EKG’s)—a privilege which earns the

reading physician $5.00 for each EKG—with the Chief of

Cardiology at BTMH, Dr. Robert Sorenson. Dr. Sorenson, who

is Board Certified in Internal Medicine, but not in the sub-

specialty of Cardiology, had exclusive control over allocating

these reading privileges.

Approximately three weeks after his arrival at BTMH, Dr.

Nanavati, having encountered resistance to his attempts to

share immediately in the reading of EKGs sought assistance

in attaining the privilege from the Executive Committee of

the Medical Staff. A few days later, evidently angered upon

being told that he must await Dr. Sorenson’s decision regard-

ing the date he could expect to begin reading EKGs, Dr.

Nanavati verbally inquired, at a meeting of the entire medical

staff, why an “inferiorly qualified” physician controlled the

EKG readings. Trial transcript of June 2, 1986 at pp. 81-84.4

4. To be noted is that Dr. Nanavati was, some time thereafter, at the

urging of the Executive Committee, granted one day’s reading of EKG’s and

at present has 3 davs readings, as much as anyone else.

A-52

Thus was fired the opening shot of an economic battle—a

competitive fight—between these two doctors for the control

of medical care of cardiac patients in Cape May County.

Subsequent to this incident, with the apparent achieve-

ment of a complete alienation of Dr. Sorenson, Dr. Nanavati

proceeded to challenge a variety of matters concerning hospi-

tal practices and patient care within Cape May County. These

challenges included public accusations that Dr. Sorenson was

incorrectly interpreting EKGs, quarrels with nursing person-

nel, and confrontations with members of BTMH’s Medical

Staff. Eventually, purportedly because the Hospital deter-

mined that he was disruptive, overly aggressive, and incapa-

ble of working harmoniously with others, attempts were made

to revoke Dr. Nanavati’s staff privileges. A brief litany of some

of the key occurrences follows.

In June of 1982, Dr. Nanavati filed a charge against

BTMH with the Equal Employment Opportunity Commis-

sion (“EEOC”) alleging national origin discrimination. In Au-

gust of 1982, charges were filed with the Executive Commit-

tee seeking Dr. Nanavati’s termination from the medical staff.

On September 9, 1982, Dr. Nanavati filed a second charge

against BTMH with the EEOC alleging unlawful retaliation.

On November 12, 1982, Dr. Nanavati’s staff privileges at

BTMH were deemed terminated. Five days later, on Novem-

ber 17, 1982, pursuant to a complaint filed in the Chancery

Division of the Superior Court of New Jersey, a temporary

restraining order was issued which reinstated Dr. Nanavati to

the BTMH staff. On March 8, 1983, Dr. Nanavati filed his

complaint in the instant case. On March 17, 1985, pursuant

to its holding, on January 14, 1985, that the Hospital and the

Executive Committee violated the medical staff bylaws by the

manner in which they handled the disposition of the charges

against Dr. Nanavati, the Chancery Division of the New

Jersey Superior Court entered a judgment permanently en-

joining BTMH and the Executive Committee from attempting

to terminate Dr. Nanavati’s staff privileges based upon the

earlier charges.°

5. The Chancery Division's finding that Dr. Nanavati had not been ac-

A-53

The legal claims advanced by the parties in the present

case included a claim by Dr. Nanavati against the Hospital

and the Executive Committee for an alleged violation of the

1870 Civil Rights Act, 42 U.S.C. § 1981;° a claim by Dr.

Nanavati against the Hospital, the Executive Committee and

Dr. Sorenson pursuant to the Sherman Antitrust Act, 15

U.S.C. § 1 et seq., and the New Jersey Antitrust Act, N.J.S.A.

56:9-1 et seq.; claims under New Jersey law for tortious inter-

ference with prospective economic business advantage by Dr.

Nanavati and by Dr. Sorenson, each against the other; and

defamation claims by the Hospital and Dr. Sorenson against

Dr. Nanavati.

These claims were presented to the jury for decision by

use of a set of 45 special interrogatories, which were drafted

by the parties and the Court and submitted with the consent

of all counsel.’ The jury’s determination, as molded by this

Court, was as follows:

A verdict of “No Cause for Action” on Dr. Nanavati’s §

1981 claim, see special interrogatory questions A1-A7; a ver-

dict of “No Cause for Action” in favor of Dr. Sorenson on Dr.

corded his rights with respect to a full hearing of the charges was affirmed

by the Appellate Division of the Superior Court of New Jersey. Nanavati v.

Burdette Tomlin Memorial Hospital et al., No. A~-3702—84T7, slip op. at 2

(AppDiv. March 7, 1976) (per curiam).

6. Dr. Nanavati’s discrimination claim originally also included a claim

for discrimination due to race or national origin, pursuant to Title VII of the

Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. At the conclusion of Dr.

Nanavati’s proofs, a motion for a directed verdict on this Title VII claim was

made by the Hospital. In an opinion and order filed June 23, 1986, this

Court granted the motion on the ground that Dr. Nanavati, as a physician,

was an independent contractor rather than an employee, and as such, his

discrimination claim was not within the ambit of Title VII. In that same

opinion, the Court, pursuant to Fed.R.Civ.P. 50, took the defendants’ motion

for directed verdict with respect to Dr. Nanavati’s § 1981 claim under ad-

visement, thereby affording Dr. Nanavati the opportunity of demonstrating,

to the jury’s satisfaction, that his contractual rights were impaired by the

defendants’ intentional racial discrimination.

7. A copy of these special interrogatories and the jury’s responses

thereto is attached to this opinion as appendix A.

A-54

Nanavati’s antitrust claim, but against the Hospital and its

Executive committee, in the amount of $350,000.00, which,

tripled pursuant to the Sherman Act totalled $1,050,000.00,

(B1-B11); a verdict of “No Cause for Action” in favor of Dr.

Sorenson on Dr. Nanavati’s claim against him for tortious

interference with prospective economic advantage, (C1-C5);

a verdict in favor of Dr. Sorenson and against Dr. Nanavati on

Dr. Sorenson’s claim for tortious interference with prospective

economic advantage in the amounts of $100,000.00 as com-

pensatory damages and $300,000.00 as punitive damages,

(F1-F5); and, on the defamation claims by the Hospital and

Dr. Sorenson against Dr. Nanavati, verdicts in favor of the

Hospital in the amounts of $100,000.00 as compensatory

damages and $50,000.00 as punitive damages, and in favor of

Dr. Sorenson against Dr. Nanavati in the amounts of

$100,000.00 as compensatory damages and $500,000.00 as

punitive damages. (D1-D7([2d] & E1-E8).

II. DISCUSSION

Motions for a judgment notwithstanding the verdict are

governed by Federal Rule of Civil Procedure 50(b), which

provides:

Whenever a motion for a directed verdict made at the

close of all the evidence is denied or for any reason is not

granted, the court is deemed to have submitted the ac-

tion to the jury subject to a later determination of the

legal questions raised by the motion. Not later than 10

days after entry of judgment, a party who has moved for a

directed verdict may move to have the verdict and any

judgment entered thereon set aside and to have judg-

ment entered in accordance with his motion for a di-

rected verdict; or if a verdict was not returned such party,

within 10 days after the jury has been discharged, may

move for judgment in accordance with his motion for a

directed verdict.

The standard for granting a motion of j.n.o.v. is the same

as for a directed verdict. Skill v. Martinez, 91 F.R.D. 498, 503

A-55

(D.N.J.1981). Such a motion is to be granted only when the

evidence, exposed to the light which most strongly favors the

party against whom the motion is directed, supports but one

reasonable conclusion, and that conclusion contradicts the

jury’s verdict. E.g., Hild v. Bruner, 496 FSupp. 93, 97

(D.N.J.1980).

Motions for a new trial are governed by Federal Rule of

Civil Procedure 59(a). This rule provides, in relevant part:

A new trial may be granted to all or any of the parties and

on all or part of the issues (1) in an action in which there

has been a trial by jury, for any of the reaons for which

new trials have heretofore been granted in actions at law

in the courts of the United States ...

A district court may grant a new trial if doing so would

prevent injustice or would correct a verdict which is palpably

contrary to the clear weight of the evidence. American Bear-

ing Co., Inc. v. Litton Industries, 729 F.2d 943, 948 (3d Cir.),

cert. denied, 469 U.S. 854, 105 S.Ct. 178, 83 L.Ed.2d 112

(1984); 6A J. Moore, Moore’s Federal Practice {| 59.08[05], at

59-140, 59-152 (2d ed. 1982). In deciding whether the jury’s

verdict was against the weight of the evidence, a court should

be careful not to substitute its judgment for that of the jury. A

court is not free to reweigh evidence and set aside a jury

verdict merely because it thinks another result is more rea-

sonable. E.g., Litman v. Massachusetts Mutual Life Ins. Co.,

739 F.2d 1549 (11th Cir.1984); Lanza v. Poretti, 537 F.Supp.

777 (E.D.Pa. 1982). To do so would usurp the jury’s prime

function, Borbely v. Nationwide Mutual Ins. Co., 547 F.Supp.

959, 980 (D.N.J.1981), thereby eroding the party's Seventh

Amendment and common law right to a trial by a jury of his

peers. Shushereba v. R.B. Industries, Inc., 104 F.R.D. 524, 527

(W.D.Pa.1985). The authority to grant a new trial, however, is

within the broad discretion of the trial court. Allied Chemical

Corp. v. Daiflon, Inc., 449 U.S. 33, 36, 101 S.Ct. 188, 190, 66

L.Ed.2d 193 (1980) (per curiam); American Bearing, supra, at

948.

A-56

A. Dr. Nanavati’s Motions for a Judgment Notwithstanding the

Verdict or a New Trial

Dr. Nanavati contends that certain legal errors, and a

record which shows that the jury's verdicts were against the

weight of the evidence, require either entry of a j.n.o.v. or

granting of a new trial on the defamation claims against him,

Dr. Sorenson's tortious interference claim against him, and

his own claim for race discrimination. We shall address each

of these contentions in turn.

1. Defamation Claims

Before delving into the specifics of Dr. Nanavati’s conten-

tions regarding the defamation verdicts, it is important to

present some chronicle of the procedural history of the defa-

mation claims against him.

On May 10, 1984, Dr. Sorenson filed a complaint against

Dr. Nanavati alleging, inter alia, that Dr. Nanavati had de-

famed him. On April 8, 1986, this Court granted Dr.

Nanavati’s motion for summary judgment with respect to Dr.

Sorenson’s defamation claim on the ground that Dr. Sorenson

had not pled his defamation claim with sufficient particu-

larity, despite the passage of a significant period of time and

the concurrent opportunity to supplement or amend his origi-

nal complaint. Slip op. of April 8, 1986 at pp. 7-10. Shortly

thereafter, Dr. Sorenson moved this Court to reconsider that

decision to grant summary judgment. In so doing, he specifi-

cally requested that the defamation count be restored so that

he might pursue a claim based on the allegedly defamatory

statements contained in an article entitled “Nanavati: diag-

nosis led to death,” which had been published in The Sun, an

Atlantic County Newspaper, on May 11, 1983. See Dr. Soren-

son’s memorandum in support of motion for reconsideration

at p. 4. We granted Dr. Sorenson’s motion, ordering that the

summary judgment granted in favor of Dr. Nanavati on Dr.

Sorenson's claim be vacated insofar as it precluded Dr. Soren-

son’s action based on statements contained in the article

entitled “Nanavati: diagnosis led to death.” Slip op. of May 12,

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1986. The alleged defamatory statements in the article, attrib-

uted to Dr. Nanavati, were as follows:

I was concerned about everyone's life after that. I saw

that man (the patient’s husband) and I had to cover up for

this doctor (Sorenson).

[T]he “conservative interpretation” (referring to Dr.

Sorenson) probably cost the patient her life.

How can Dr. Meister (the expert who reviewed Dr. Soren-

son’s reading of the EKGs) be right when the patient is

dead[?]

The correct interpretation (of the EKGs) would have

saved her life because a pulmonary embolism is fully

treatable if it is diagnosed and quickly handled.

In addition to allowing an action on the above statements,

this Court permitted Dr. Sorenson to supplement his plead-

ings, at trial, to assert an additional defamation claim. The

statement upon which the additional claim was based was

allegedly made in November of 1985 by Dr. Nanavati to a

nurse, Anne O’Neil. Ms. O’Neil testified, on June 30, 1986,

that Dr. Nanavati had referred to Dr. Sorenson as a “senile old

doctor that had been there [at the Hospital] for twenty years

killing patients.”8 Trial Transcript of June 30, 1986 at p. 160,

lines 14 & 15.

BTMH filed a defamation claim against Dr. Nanavati on

May 10, 1983 as a counterclaim to Dr. Nanavati’s complaint

against it. This defamation claim, as it went to the jury, was

8. Dr. Nanavati urges that we improperly allowed Dr. Sorenson to sup-

plement the pleadings to assert a defamation claim based on the alleged

statement to Ms. O’Neil. We ruled upon this issue in our ad litem opinion of

July 10, 1986, a copy of which is attached hereto as appendix B, and we rely

upon the discussion therein in rejecting Dr. Nanavati’s contention here. We

conclude now, as we did then, that the pleadings were properly supple-

mented to include the alleged statement to Anne O'Neil as part of Dr.

Sorenson's defamation case.

A-58

based on the following statements allegedly made by Dr.

Nanavati:

The correct interpretation of EKGs would have saved her

life because pulmonary embolism is fully treatable if it is

diagnosed and quickly handled.

I never knew medicine could be so shallow (referring to

the practice of medicine at BTMH).

Evidence was presented at trial that, with the exception

of the statement allegedly made to Anne O’Neil and the al-

leged “so shallow” statement, which was apparently made

only to Mr. Watson,? Dr. Nanavati made all of the above

statements both to William Watson, a reporter for the Atlantic

City Press, and to Don Russell, a reporter for The Sun. The

articles which ensued from the conversations between Dr.

Nanavati and these reporters were admitted into evidence in

this case without objection.!° The article by Mr. Watson,

published on May 10, 1983 in the Atlantic City Press, entitled

“Nanavati: Faces $1M. Countersuit,” was admitted as Defen-

dants’ Exhibit 1297, and the article by Mr. Russell, published

May 11, 1983 in The Sun, entitled “Nanavati: Diagnosis led to

9. The “so shallow” statement was contained in an Atlantic City Press

_article published on May 7. 1983 entitled “Dr. To Fight Until Reinstated,”

written by William Watson, and admitted as Defendants’ Exhibit 1296.

10. More than three weeks after the verdict was returned in this case,

counsel for Dr. Nanavati informed the Court that Exhibit 1297, the May 10,

1983 Atlantic City Press article, mistakenly had attached to it a page of the

May 11, 1983 Sun article which contained the above-noted alleged defama-

tory statements. See transcript of August 14, 1986 at pp. 4-8, Counsel for

Dr. Sorenson, at oral argument on the present motions, explained that this

mistake was of no consequence because the sole bases for Dr. Sorenson's

defamation claims were the allegedly slanderous statements to reporter

Watson, reporter Russell, and nurse O’Neil. Transcript of August 14, 1986

at pp. 22 & 29. Counsel siressed that Dr. Sorenson did not pursue, as part of

his defamation claim, the allegedly libelous statements contained in the

May 10, 1983 Press article or the May 11, 1983 Sun article. Id. We shall hold

Dr. Sorenson to the representations of his counsel, and we shall proceed

with the understanding that Dr. Sorenson's defamation claim is an action

for slander.

A-59

death,” was admitted as Defendants’ Exhibit 2153. In addi-

tion, the jury heard the testimony of William Watson, the

recipient of the alleged slanderous statements and the author

of the May 10, 1983 Press article.

As previously stated, after four days of deliberation, the

jury found that Dr. Nanavati had, in fact, defamed both Dr.

Sorenson and the Hospital. The jury’s verdict in favor of Dr.

Sorenson awarded him $100,000.00 as compensatory

damages and $500,000.00 as punitive damages. See special

interrogatory questions E7 & E8. With respect to the Hospi-

tal, the jury awarded $100,000.00 as compensatory damages

and $50,000.00 as punitive damages. (D7 & D7[2d]).

a. Listener’s Understanding

[1] On his post-trial motions, Dr. Nanavati first contends

that the defamation plaintiffs, Dr. Sorenson and BTMH, failed

to prove that the actionable defamatory words were under-

stood in their defamatory sense by the listeners. He urges that

the evidence in this case with respect to the listeners’ under-

standing is so deficient that no rational jury could have infer-

red that the statements were understood in their defamatory

meaning. !!

After reviewing the evidence presented to the jury, we

must reject Dr. Nanavati’s contention. The jurors were clearly

presented with the requisite minimum quantum of evidence

from which they could infer that the listeners understood the

statements made to them as defamatory. With regard to the

statements made to the newspaper reporters, Mr. Watson and

Mr. Russell, we hold that there was sufficient evidence in the

11. The statements at issue here, by reason of the fact that they im-

pugn the defamation plaintiffs in their business and profession, constitute

slander per se. See Restatement (Second) of Torts § 573 (1981); W. Page

Keeton, Prosser and Keeton on the Law of Torts, § 112, pp. 788, 790-92 (5th

ed. 1984). The fact that they are defamatory per se, however, does not obvi-

ate the need to establish, to the jury's satisfaction, that the statements were

understood to be defamatory. See Restatement (Second) of Torts, § 563. In-

stead, characterizing the statements as slander per se merely relieves the

defamation plaintiffs from having to prove special damages. Restatement

(Second) of Torts, §§ 570 & 573.

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record to support an inference regarding the reporters’ under-

standing of the defamatory nature of the words used by Dr

Nanavati. Mr. Watson was called as a witness in this case, and

his testimony presented the jury with a reasonable basis for

inferring his understanding of Dr. Nanavati’s statements.

Similarly, although Mr. Russell did not testify at the trial, his

article published in The Sun on May 11, 1983, quoting Dr.

Nanavati’s allegedly slanderous siatements, which was admit-

ted into evidence, displayed his understanding of the alleged

slanderous statements in their defamatory sense. The jury's

findings as to the meanings of the slander uttered to the

reporters thus had sufficient support in the evidence.

With respect to the statement allegedly made by Dr.

Nanavati to Ms. O’Neill, we also find ample support in the

record for the jury’s inference that the statement was under-

stood to be defamatory. Although Ms. O’Neil’s testimony with

respect to this statement reveals that, upon hearing the state-

ment, she verbally objected thereto, and even protested to Dr.

Nanavati that such a view was only his opinion, see trial

transcript of June 30, 1986 at p. 159, this evidence does not

render unreasonable the jury's inference that Ms. O’Neil un-

derstood the words to be defamatory. Indeed, this evidence

can Clearly be said to support an inference that Ms. O’Neil

fully understood the statement made to be defamatory, since

she apparently felt that some protestation was appropriate. At

the very least, a jury question was presented regarding Ms.

O’Neil’s understanding of the statements.

b. Expression of Opinion

Dr. Nanavati has argued extensively that the statements

made to reporters Watson and Russell are protected ex-

pressions of opinion. With respect to the statements made

which resulted in the articles published on May 10, 1983 in

the Press, and on May 11, 1983 in The Sun, we reject Dr.

Nanavati’s argument without further discussion.!2 In our ad

12. Dr. Nanavati also contends that the allegedly defamatory state-

ments made to these reporters, as reported in The Sun article, are not ac-

:

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A-61

litem opinion filed July 10, 1986, we held that these state-

ments were not protected expressions of pure opinion, see op.

of July 10, 1986, infra, at p. 1249, and we have not been

persuaded that this holding was erroneous.

[2] With regard to the allegedly defamatory statement

made to Mr. Watson to the effect that Dr. Nanavati “never

knew medicine couid be so shallow,” Dr. Nanavati urges this

Court to hold that this statement was improperly submitted to

the jury, both because it was not asserted in the Joint Final

Pretrial Order and because it is a protected expression of pure

opinion. Although we recognize that this statement, in con-

trast to the other statements made to reporters which were

submitted to the jury, was not asserted as a ground for defa-

mation until the trial was underway—and therefore was not

included within the Joint Final Pretrial Order and was not

considered by the Court in our ad litem ruling regarding the

actionable nature of the statements—we nonetheless cannot

accept Dr. Nanavati’s contention that a j.n.o.v. or a new trial is

therefore required. Assuming, without deciding, that the

statement at issue here would have been held to have been a

protected expression of opinion, had it been submitted to this

Court for ruling,'* we shall not set aside the jury's verdict in

favor of the Hospital on this basis. Dr. Nanavati'’s failure to

timely raise this defense with respect to the “so shailow”

statement, after having been on notice that the Hospital

intended to assert a defamation claim based thereon, see

tionable because they are mere repetitions of earlier statements, which

statements are now not actionable by operation of the statute of limitations.

We find this argument unpersuasive. Each republication of a defamatory

statement constitutes a separate publication, and gives rise to a separate

cause of action. See Restatement (Second) of Torts § 578, com. b. See also id.

at § 576; Toanone v. Williams, 405 F.Supp. 36, 38 (E.D.Pa. 1975) (applying

Pennsylvania law); W. Page Keeton, Prosser and Keeton on the Law of Torts,

§ 113 at p. 799 (5th ed. 1984).

13. A very substantial question regarding the “opinion” status of the

statement at issue is raised with respect to whether or not the statement

can fairly be said to imply the existence of undisclosed defamatory facts. See

op. of July 10, 1986, infra, at pp. 1248-50.

A-62

transcript of July 15, 1986 at p. 66-67, can be said to con-

stitute a waiver of this defense. Moreover, after a thorough

search of the record, we are convinced that no prejudice

accrued to Dr. Nanavati by virtue of the submission of this

statement to the jury. The evidence in this case is sufficient,

without regard to the “so shallow” statement, to support the

jury's verdict in favor of the Hospital on the defamation claim.

c. Constitutional Malice

Dr. Nanavati next argues that there was insufficient evi-

dence in the record to establish that he had the requisite

constitutional malice at the time he made the statements

found by the jury to be defamatory. Because such a state of

mind was lacking, he argues, the award of punitive damages

was improper.

[3] It is hornbook law that in a defamation action a jury

must find by clear and convincing evidence that the defama-

tion defendant made an allegedly defamatory statement with

knowledge of its falsity or in reckless disregard of its truth or

falsity before it may award punitive damages, e.g., Gertz v.

Robert Welch, Inc., 418 U.S. 323, 348-50, 94 S.Ct. 2997,

3011-12, 41 L.Ed.2d 789 (1974), and this Court so instructed

the jury.!4 It was then the responsibility of the jury, having

14. The jury was charged, in pertinent part:

Now, with regard to awarding punitive damages, members of the

jury, | must inform you that the defamation claims made against Dr.

Nanavati require a special showing of the strength of the evidence be-

fore you may award punitive damages. To award punitive damages to

either the hospital or Dr. Sorensen [sic] based on what Dr. Nanavati

said about them which you find to be defamatory, you must find by

clear and convincing evidence that Dr. Nanavati made the defamatory

communications |sic| knowing that it was false or in reckless disregard

for its truth or falsity.

Clear and convincing evidence is that evidence which produces in

the minds of the jurors a firm belief or conviction as to the truth of the

allegations sought to be established. That is evidence so clear, direct

and convincing as to enable the jury to come to a clear conviction with-

out hesitancy of the truth of the precise facts in issue.

With respect to reckless disregard of the truth of [sic] falsity, if you

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heard the testimony and observed the manner and demeanor

of the witnesses in order to assess credibility, to weigh the

evidence and ultimately to reach a determination regarding

whether Dr. Nanavati possessed the requisite state of mind to

be held responsible in punitive damages. The jury clearly

found that he did, awarding the defamation plaintiffs a total of

$550,000.00 in punitive damages. See special interrogatory

question D7[{2d] & E8. We are now called upon to review the

record to assure that sufficient evidence exists to support that

finding. Having done so, we hold that there was ample evi-

dence presented from which the jury could rationally find

that Dr. Nanavati’s statements were made in reckless dis-

regard of the truth or falsity thereof.!° Accordingly, we reject

Dr. Nanavati’s argument that he is entitled to have the

punitive damage awards set aside.

d. Falsity and Abuse of Privilege

[4] Dr. Nanavati also urges that the record lacks the

minimum quantum of proof to support the jury’s findings that

the alleged defamatory statements contained in the May 11,

1983 Sun article (which were orally conveyed to reporters

find that Dr. Nanavati entertained serious doubts about the truth of his

statements about the hospital or Dr. Sorensen {sic] then you must find

that he made them with reckless disregard as to their truth or falsity.

Tr. of July 15, 1986 at pp. 55-56.

15. The jury’s finding regarding the existence of “constitutional mal-

ice” obviates the need for protracted discussion of another of Dr. Nanavati’s

asserted bases for new trial. This Court, during trial, ruled that Dr. Soren-

son and the Hospital were not public figures for purposes of their defama-

tion claims against Dr. Nanavati. Dr. Nanavati claims, herein, that this rul-

ing constituted prejudicial error, requiring a new trial. The jury found,

however, that Dr. Nanavati made the defamatory statements with constitu-

tional malice—with knowledge of the falsity or in reckless disregard of the

truth or falsity of the statements. Thus even if the jury had been instructed

that Dr. Sorenson and the Hospital were public figures, liability would

nonetheless have attached. In short, accepting, arguendo, that our ruling

regarding the public figure status of these defamation plaintiffs was er-

roneous, it still cannot be said to have prejudiced Dr. Nanavati in defending

the claims against him.

A-64

Russell and Watson by Dr. Nanavati) were false, see special

interrogatory questions D1 and E1, and that he abused his

qualified privilege in making said statements.!® (D5, D6, E5

& E6). Again, our review of the record leads us to disagree. We

‘conclude that there is sufficient basis in the record for the

jury to find that the alleged defamatory statements were false

and that Dr. Nanavati, in making the statements, abused his

qualified privilege.

e. Entire Controversy Doctrine

Dr. Nanavati next contends that the Hospital's defama-

tion claim against him should not have been heard in this

federal action by virtue of the New Jersey state court “entire

controversy” doctrine, which provides that all matters in con-

troversy between parties are to be disposed of in a single

action. E.g.,New Jersey Highway Authority v. Renner, 18 N.J.

485, 492, 114 A.2d 555 (1955). In support of this argument,

however, Dr. Nanavati cites no authority for the proposition

that this Court is required to apply that New Jersey doctrine,

and nothing has been presented which suggests that a federal

court is precluded from hearing a pendant state law claim by

operation of such a doctrine. Although of course it is true that

there is a federal policy in favor of judicial economy and

against claim splitting, we have determined that such judicial

economy was best served in this case by disposing of all

outstanding claims by the parties in this federal forum. Noth-

ing presented upon these motions persuades us that some

other treatment of the state law claims was more appropri-

ate.!7

2. Dr. Sorenson’s Tortious Interference Claim

Dr. Nanavati also seeks a judgment notwithstanding the

16. Dr. Nanavati has also asserted, on this motion, that the Hospital

failed to prove special damages on its defamation claim. We held, in our ad

litem opinion of July 10, 1986, that such proof was not required and there-

fore we do not address this contention here.

17. Indeed, there is some cause for doubt whether the Hospital's defa-

mation claim had even accrued at the time the Hospital filed its coun-

terclaim in the state court action.

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verdict on Dr. Sorenson’s tortious interference claim. He

urges that the jury's verdict, as to both liability and damages,

is legally insufficient and should be set aside. The elements

for the tort of tortious interference, discussed in Zippertubing

Company v. Teleflex, Inc., 757 F.2d 1401, 1409-12 (3d

Cir.1985), were set forth in the jury charge as follows:

In order for ... Dr. Sorensen [sic] to recover damages on

this claim, first, he must prove existence of a reasonable

expectation of economic advantage or benefit belonging

to him. Second, that the other doctor had knowledge of

that expectation of economic advantage. Third, that the

other doctor wrongfully and without justification inter-

fered with his reasonable expectation of economic advan-

tage or benefits. Fourth, that in the absence of the alleged

wrongful act of the other doctor it is reasonably probable

that he would have realized his economic advantage or

benefit, and fifth, that he sustained damages as a result of

this activity.

Transcript of July 15, 1986, at pp. 38-39, lines 18-7.

[5] Although Dr. Nanavati contends that there was no

evidence of a causal connection between his actions and the

subsequent harm to Dr. Sorenson's business, our review of the

record reveals that this argument is without merit. It was well

within the province of the jury to conclude that, despite other

possible reasons for Dr. Sorenson’s business decline, Dr.

Nanavati’s conduct was a proximate cause thereof. Sufficient

evidence was presented from which such an inference could

be drawn, and we shall not usurp the jury’s function by

concluding otherwise.

{6] Dr. Nanavati also contests the jury’s award of

$100,000.00 as compensatory damages on Dr. Sorenson's tor-

tious interference claim. Specifically, he urges that the record

lacked the minimum quantum of evidence from which the

jury could have found that Dr. Nanavati’s tortious behavior

caused Dr. Sorenson $100,000.00 in actual damages. The law

is quite clear, however, that when a party has been damaged

by the legal wrong of another, he shall not be denied recom-

pense merely because the exact amount of damage is uncer-

A-66

tain. E.g., Kyriazi v. Western Electric Co., 465 F.Supp. 1141,

1146 (D.N.J. 1979). A jury’s damage award will be sustained

if, though not mathematically precise, it constitutes a reason-

able estimate without speculation or conjecture. E.g., First

National Bank of Chicago v. Jefferson Mortage Co., 576 F.2d

479, 494-95 (3d Cir. 1978). Despite Dr. Nanavati’s protesta-

tions to the contrary, we are convinced that the jury’s award of

$100,000.00 in compensatory damages to Dr. Sorenson on his

tortious interference claim was not the product of guesswork,

but was a reasonable estimate of damages based on the evi-

dence presented. !®

3. Dr. Nanavati’s § 1981 Discrimination Claim

Dr. Nanavati urges that a new trial is mandated on his §

1981 claim because the jury’s finding that no racial discrimi-

nation occurred is against the clear weight of the evidence.

This assertion is wholly without merit. Having reviewed the

record, we hold that there was substantial evidence from

which the jury could have reasonably concluded that Dr.

Nanavati was not treated differently because of his race. It is

not our function, on these motions, to substitute our judg-

ment for that of the jury, and we decline to do so.

4. Evidentiary Ruling on Rebuttal Testimony

[7] Dr. Nanavati contends that it was prejudicial error to

preclude Dr. David Volpi, a former emergency room physician

and a rebuttal witness, from testifying as to his conversations

with Dr. Gus Engstrom, the director of the emergency room.

18. Dr. Nanavati also contends that the awards made to Dr. Sorenson

on his business interference claim, as well as those to Dr. Sorenson, the

Hospital, and its Executive Committee on the defamation claims, were so

excessive as to require a new trial. We cannot agree, and shall deny Dr.

Nanavati’s request for a new trial based on that contention. With respect to

the punitive damages awarded, testimony was adduced to show that Dr.

Nanavati has a net worth in excess of $1,622,410.00 tr. of July 7, 1986 at p.

65, and an annual gross income approaching $500,000.00. Tr. of July 7,

1986 at p. 30. On this record, we cannot say that the awards made are

excessive.

A-67

The offer of proof made by Dr. Nanavati was that Dr. Volpi

would testify essentially as follows: In or about August 1983,

Dr. Volpi was told by Dr. Engstrom that he was referring too

many patients to Dr. Nanavati, and that Dr. Sorenson had

discussed this with Dr. Engstrom. Dr. Nanavati’s attorney,

during his direct examination of Dr. Volpi, tried to elicit that

testimony in the following manner:

Q: And let me direct your attention to in or about August

of 1983. Did you have a conversation with Dr. Eng-

strom about your referral of cases to Dr. Nanavati?

A: Yes, I did.

Trial transcript of July 9, 1986 at p. 107 lines 19-23. Upon

objection, this Court ruled that the witness’ recitation of Dr.

Engstrom’s comments would constitute inadmissible hearsay

testimony. Counsel, as a result of the Court's ruling, pursued

the following line of questioning without objection:

Q: Asa result of this conversation with Dr. Engstrom, did

you change your referral patterns to Dr. Nanavati?

A: Yes, I did.

Q: What did you do?

A: I decreased the amount of patients I referred to him.

Trial transcript of July 9, 1986 at p. 108, lines 7-14.

For the first time, Dr. Nanavati contends that our ruling

sustaining the hearsay objection was “erroneous and preju-

dicial to [his] ability to tie Dr. Sorenson in to the group boycott

which the jury found involved the Hospital and the Executive

Committee.” Dr. Nanavati’s amended brief at p. 26.

Upon review of the ruling we conclude that Dr. Volpi’s

proffered testimony regarding Dr. Engstrom’s conversation

was properly excluded. While it is possible that Dr. Engstrom

may be an agent of the Hospital for some purposes, and as

such his statements would be admissible under Fed.R.Evid.

801(d)(2)(D), relaying messages from non-emergency room

physicians to emergency room physicians about emergency

room referrals was not an activity within the scope of Dr.

Engstrom’s agency. Further, the record did not demonstrate a

sufficient nexus between Dr. Sorenson and the “conspiracy”

to permit the introduction of Dr. Volpi’s hearsay testimony

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pursuant to Fed.R.Evid. 801(d)(2)(E) (admissibility of state-

ments by co-conspiratogs). Finally, to the extent that Dr.

Sorenson's alleged statement was merely cumulative of evi-

dence presented in the direct case, we find that no possible

prejudicial harm could have accrued to Dr. Nanavati.

B. BTMH and the Executive Committee’ Motions for Judg-

ment Notwithstanding the Verdict or a New Trial

(8] BTMH and the Executive Committee have moved for

judgment notwithstanding the verdict with respect to Dr.

Nanavati’s antitrust claims, alleging prejudicial legal error by

this Court! and proofs insufficient, as a matter of law, to

support the jury's verdict. For the reasons which follow, this

Court, cognizant of our obligation not to substitute our judg-

ment for that of the jury, feels constrained to agree with the

antitrust defendants that a judgment of “No Cause for Action”

must be entered against Dr. Nanavati on the antitrust claims,

notwithstanding the jury's verdict.

After hearing 8 weeks of testimony, deliberating 4 full

days, and requesting and receiving a complete recharge on

antitrust law, the jury found that Dr. Sorenson, the sole indi-

vidual charged with an antitrust violation, had not partici-

pated in any antitrust violation. Notwithstanding this finding,

the jury also found that a contract, combination or conspiracy

in restraint of commerce existed, special interrogatory ques-

tion B-1, and that the two remaining antitrust defendants,

BTMH and the Executive Committee, were participants

therein. (B2 & B3). Despite a thorough review of the record,

19. The most significant of these alleged legal errors was this Court's

decision, as set forth in our ad litem opinion of June 24, 1986, allowing Dr.

Nanavati to amend his pleadings, at the close of his case, to name the Hos-

pital and the Executive Committee as defendants on the antitrust claim.

Although we consider this allegation of error somewhat questionable, par-

ticularly in light of the antitrust defendants’ refusal to accept the opportu-

nity afforded them to cure potential prejudice at the time of trial, see slip op.

June 24, 1986 at pp. 6—7 (D.N.J.), we need not rule upon this issue. Because

we hold that judgment in favor of the Hospital and the Executive Commit-

tee must be entered, notwithstanding the jury's verdict, this assertion of

prejudicial error, like the others pertaining to the antitrust claim, is moot.

A-69

we are unable to find evidence in this case to support a

finding that the Hospital and the Executive Committee, the

defendants who were not exonerated by the jury, committed a

violation of the antitrust laws. Specifically, in light of the jury's

exoneration of Dr. Sorenson, the record is devoid of evidence

to support a finding that either the Hospital or the Executive

Committee participated in any conspiracy designed to stifle

competition or engaged in any unlawful restraint of trade

which had an anticompetitive effect.

Because we were extemely reluctant to set aside any

portion of the verdict in this enormously complicated case, we

have made every effort to preserve the jury’s findings and

decision. We have carefully searched the voluminous record

of this case in an effort to locate evidence to support a finding

that BTMH and the Executive Committee participated in a

conspiracy violative of the antitrust laws, and we have at-

tempted to discern, in the absence of more explicit jury find-

ings,2° the basis for the jury's apparent conclusion?! that a

contract, combination or conspiracy in restraint of interstate

commerce existed. Our attempts to locate evidence from

which a rational fact-finder could conclude that the Hospital

and the Executive Committee participated in such a conspir-

acy, while Dr. Sorenson did not, have been futile. We are

convinced that judgment must be entered in favor of BTMH

and the Executive Committee on the antitrust claim.22 There

20. Our authority to attempt such a determination, given the parties’

decision not to submit a special interrogatory which specifically asked the

jury whether persons who were not named as defendants in the action par-

ticipated in the alleged conspiracy, cannot seriously be disputed in light of

Fed.R.Civ.P. 49, which provides for express fact-finding by the trial court

when the parties have failed to properly submit any issue to the jury.

21. Of course, in light of the record here, we cannot help but consider

the possibility that the jury in this case, after 8 weeks of trial and 4 days of

deliberation, reached a compromise in the verdict.

22. Dr. Nanavati was permitted, when allowed to amend his com-

plaint, to include an antitrust claim under New Jersey law, N.J.S.A. §

56:9-1 et seq., as well as federal law. See slip op. of June 24, 1986 (D.N.J.) at

p. 2, n 2. For purposes of the present motion, however, no party has argued

that any difference exists between the state law and the federal law, and

therefore we need not differentiate between these claims.

A-70

is simply no evidence in this case which supports the imposi-

tion of liability for an antitrust violation against BTMH or the

Executive Committee, in light of the jury's rejection of Dr.

Nanavati’s original theory that Dr. Sorenson influenced or

masterminded the alleged anticompetitive activities.

In our effort to preserve the jury’s verdict, we have con-

sidered a number of alternative legal theories which might

support the imposition of liability against the defendants

herein, but have found that our attempts to locate factual

bases for these theories in the record have been unavailing.

We shall discuss each theory in turn.

The most obvious interpretation of the jury’s responses to

the antitrust special interrogatories, and the one which the

defendants urge upon the Court, is the finding that BIMH

conspired with the Executive Committee. Such a factual find-

ing, defendants contend, would result in the need for this

Court to “mold” the jury’s verdict to reach a verdict of “No

Cause for Action.” Defendants rely, in making this argument,

on Weiss v. York Hospital, 745 F.2d 786 (3d Cir.1984), cert.

denied, 470 U.S. 1060, 105 S.Ct. 1777, 84 L.Ed.2d 836

(1985), in which the Third Circuit held that the medical staff

of the hospital?3 and the hospital itself could not, as a matter of

law, “conspire” with one another. 745 F.2d at 817. The medical

staff involved in the Weiss case had been empowered to make

staff privilege decisions on behalf of the hospital, and in

making such decisions, the Third Circuit explained, the med-

ical staff therefore acted as an officer of the corporate hospital.

745 F.2d at 817. Since the medical staff, as an entity, had no

“interest in competition with the hospital,” id., there could not

be, as a matter of law, a conspiracy between the medical staff

and the hospital with respect to staff privilege decisions. In

keeping with the reasoning in Weiss,” the jury in the present

23. We have not identified, nor have the parties urged us to find, any

legally significant difference between the full medical staff, the defendant

at issue in Weiss, and the Executive Committee of the Medical Staff, the

defendant entity at issue here.

24. Although there is an apparent difference between the decision-

making process employed at the hospital involved in Weiss, where the med-

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case was charged that BTMH and the Executive Committee

could not, as a matter of law, conspire with one another.25 Not

having been persuaded that this charge was incorrect, we

hold that the jury's verdict with respect to the antitrust claim,

if indeed it is based upon a finding that the Executive Com-

mittee and the Hospital conspired, cannot stand. Particularly

in light of the fact that the jury was instructed twice on this

point, however, we are unwilling to assume that the jurors’

intent was to find a conspiracy between these two defendants

regarding the termination of Dr. Nanavati’s staff privileges.

Instead, on this motion, we have attempted to discern alter-

native interpretations for the jury’s interrogatory answers,

including considering the possibility that the jury found sepa-

rate or distinct antitrust violations for each defendant.

With respect to the Executive Committee, the single

ground asserted by Dr. Nanavati which presents even a color-

able antitrust claim is the Executive Committee's decision to

recommend that Dr. Nanavati’s staff privileges be terminated.

This decision, made as it was by a “combination” of individual

competitors, could, under Weiss, supra, at 814, support anti-

trust liability without regard to the involvement of any other

entity. In order to impose antitrust liability, however, more is

required than just proof of some action taken by the group.

The action taken must have been one which was anticom-

ical staff makes privilege decisions, and that at BTMH, where the Executive

Committee of the Medical Staff is empowered only to make recommenda-

tions regarding staff privileges, none of the parties has argued that Weiss is

distinguishable by virtue of this difference, and we attach no legal signif-

icance thereto. See generally, Kissam, Webber, Bigers and Holzgraefe, Anti-

trust and Hospital Privileges: Testing the Conventional Wisdom, 70

Calif.L.Rev. 595, 603-613 (1982).

25. The jury was charged, in pertinent part:

“In order to prove the first element Dr. Nanavati must prove that

two or more distinct entities agreed to take action against him. Bear in

mind that the hospital and its medical staff cannot conspire between

and among themselves in violation of the Sherman Act.”

Tr. of July 15, p. 29, lines 7-12; Tr. of July 16, p. 6, lines 6-11. No exception

was taken to this portion of the charge.

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petitive. If this were not so, every action taken by the “com-

bination” would be violative of the antitrust laws.26 Such a

result could not be countenanced, of course where, as here,

there are legitimate reasons for the existence of the organized

group of competitors.?’

In order for the action taken by an antitrust defendant to

be considered one which constitutes a violation of the anti-

trust laws, that action must be anticompetitive in purpose or

effect. E.g., McLain v. Real Estate Board of New Orleans, 444

U.S. 232, 243, 100 S.Ct. 502, 509, 62 L.Ed.2d 441 (1980). See

also Tose v. Pennsylvania Bank, 648 F.2d 879, 892 n. 17 (3d

Cir.), cert. denied, 454 U.S. 893, 102 S.Ct. 390, 70 L.Ed.2d

208 (1981). Thus, the Executive Committee’s recommenda-

tion that Dr. Nanavati’s staff privileges be revoked would

conceivably be an acceptable predicate for antitrust liability if

it were anticompetitive in purpose or effect. Nothing in the

record of this case, however, supports a finding that the Exec-

utive Committee's action, irrespective of how unreasonable

the jury might have believed it to be, was motivated by an

anticompetitive purpose or had an anticompetitive effect, as

these terms are defined in antitrust law.

There is a complete dearth of evidence to support an

inference that the Executive Committee, as an entity, had any

anticompetitive motive or purpose with respect to its recom-

mendation concerning Dr. Nanavati’s staff privileges. Fur-

thermore, there is no evidence that any of the individuals who

26. The language used by the Weiss court arguably suggests this re-

sult, since the court stated that “... any action taken by the medical staff

satisfies the ‘contract combination, or conspiracy’ requirement of section 1.”

745 F.2d at 814 (emphasis added). The present case is clearly distinguish-

able from Weiss, of course, in that the circumstances of Weiss, wherein

osteopathic doctors, as a class, were purportedly excluded from admission

to a medical staff by the allopathic doctors already on the staff, presented, in

contrast to the circumstances of this case, a situation rife with economic

competition.

27. The legitimacy of the formation of an executive committee of the

medical staff and the delegation of authority to that committee to recom-

mend decisions regarding staff privileges is beyond dispute.

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served as members of the Executive Committee were, as

individual physicians, motivated in any respect by any desire

for personal economic gain.2® On such a record there is ob-

viously no rational basis for concluding that the Executive

Committee acted with an anticompetitive animus.

Dr. Nanavati has argued, in opposition to defendants’

present motion, that proof of an anticompetitive effect is suffi-

cient to support the imposition of liability under the Sherman

Act even without a showing of anticompetitive purpose. Dr.

Nanavati’s amended brief in opposition to defendants’ mo-

tions at p. 18. Accepting as true the proposition that the

antitrust law requires proof only of either anticompet

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